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Integrated Regional Development: A heavy concentration of agricultural, educational, and infrastructure projects in one backward region can help to overcome a heritage of rural poverty and underemployment.

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
June 1973
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Hans-Joachim Lell

A regional development project is a relatively cheap but effective instrument for sparking development of a backward region.

A regionally oriented development scheme consists of a package of integrated projects which cut across different economic sectors but are concentrated in one particular region (i.e., a province or district). The purpose of this approach, which relies heavily on qualified manpower and, to a lesser extent, on capital inputs, is to overcome economic stagnation and to ease social problems in backward areas by increasing productivity, employment, and income.

The situation in many developing countries is that per capita gross national product is much higher in urban areas than in rural areas; industrial development is heavily concentrated in a few urban areas; and unemployment and underemployment in rural areas result in increasing migration and emigration. Productivity in agriculture and the level of exports of processed agricultural products are low partly because agricultural extension and marketing services and agro-industries in the countryside are not sufficiently developed. This low productivity increases rural underemployment and widens the gap between urban and rural incomes; resulting migration often causes urban unemployment.

Of course, many of the more traditional agricultural, industrial, and infrastructure projects sponsored by the bilateral and multilateral agencies have already made a strong contribution to solving such problems in some backward areas of the developing countries. Nonetheless, greater emphasis on more comprehensive and systematic regional development schemes might often help such countries in their efforts to overcome regional economic bottlenecks and to ease increasing regional disparities in income and employment possibilities.

The prospects for regional development appear to be improving since several projects have already been implemented and financed with bilateral technical assistance and capital aid—for example, the Paktia project in Afghanistan, the Mandi project in India, and the Chilalo project in Ethiopia. The small Turba/Hugariah project in the Yemen Arab Republic is particularly remarkable because private, local initiative has started the development of this rural area. The World Bank itself has also recently helped to finance comprehensive rural development projects—in Wolamo, Ethiopia; in Lilongwe and Karonga, Malawi; and in Casamance, Senegal.

In addition, several donor countries and international aid agencies have indicated that they intend to give greater priority to regional projects in the Second Development Decade. The World Bank, for example, stated in its 1971 Annual Report:

  • An increasing proportion of the Group’s funds and staff’s efforts devoted to agriculture have been channeled into comprehensive rural development projects embracing many subsectors such as credit, training and extension services, conservation, forestry, livestock, irrigation, drainage and flood control, and often cutting across major sectoral lines to include elements of transport, industry, utilities or education.

How integrated regional development works

Integrated regional development usually focuses on agricultural projects which rely heavily on extension services, supplemented by agro-industries, marketing services, and credit cooperatives. However, some intensive regional development projects do focus on industrial estates for small-scale, labor-intensive industries. Others are based on forestry and wood processing, mining, or fishery projects, or on tourist centers. In order to make the-combination of projects in different sectors effective, the regional development will often require the construction of basic infrastructure facilities—for example, feeder roads, communications networks, and small power plants. In addition, an important role is often given to education, family planning, and other health projects. Despite the diversity of such activities, it is quite often possible to combine several of them into an integrated sequence of projects.

Self-help

All such regional projects aim at improving social and economic conditions in rural areas through the systematic promotion of local interest and self-help. The local population can help to finance and build some of the planned investment, e.g., small-scale irrigation and drainage systems, school buildings, and feeder roads. However, these activities often require outside help in the form of overall guidance, technical assistance, and financial support from the central government, foreign donor countries, or international agencies. In particular, experience has shown that a central requirement for effective regional development is a small but efficient working team of technicians, agriculturalists, and economic advisors—whether nationals of the country or foreign experts. Since they are operating in a small area they can cooperate closely with the local population and thereby increase local initiative substantially. Such a combination of outside assistance and self-help provides the local farmers with the opportunity of learning-by-doing and subsequently helps to improve social and economic conditions in the area. An additional important requirement for a regional development program is an effective working executive authority with a considerable degree of autonomy and wide-ranging powers. This is necessary not only to ensure that the numerous activities are effectively coordinated and carried out but also to obtain the active support of the central government and province administration.

A nationwide program of many simultaneous regional development projects would probably not be workable because of the serious administrative problems it would raise. Thus, integrated regional development is likely to be most effective when the project is relatively small and concentrated in one area. Such concentration is, in any case, usually necessary because supplies of foreign and domestic finance and skilled manpower (including foreign experts and local administrators) are limited. Although such concentration in one particular area can lead to political difficulties and create some degree of economic imbalance, the successful development of one region can stimulate and guide subsequent projects in other regions.

The actual process of choosing the particular area for a regional development is complex. Economic criteria (such as satisfactory benefit-cost rates, availability of natural and human resources, and access to markets) and social criteria (such as diminishing underemployment) are nearly always equally important. Thus, the decision whether to develop a region with high resources or a depressed backward region is necessarily often a political one. Consequently, the first regional development in a given country may take place in an area where its siting is economically less justified than is desirable for a pilot project.

Planning regional projects

From the World Bank’s operational point of view, analysis of the feasibility of a regional development project is conducted in a similar manner to the more traditional type of projects for which loans are made. Regional projects are first identified, then prepared and appraised, the loan negotiated, and the project’s implementation supervised. The appraisal of the technical, economic, commercial, financial, managerial, and organizational aspects of the regional project is a particularly important “stage in the cycle because it is a comprehensive and systematic review of all aspects of the project.” (See Warren C. Baum, “The Project Cycle,” Finance and Development, June 1970.)

In more general terms, the project cycle might be subdivided into the planning and implementation phases. The planning phase consists of

• A preliminary comprehensive survey of the basic data of the selected region covering everything from climate to employment and incomes.

• Overall planning of the development scheme taking into consideration both the national development plan and the suggestions and goals of the local population.

• Detailed planning of the different individual projects—in agriculture, forestry, fishing, manufacturing, infrastructure, and education. This detailed planning includes feasibility studies and coordinated operation plans.

The implementation phases are

• Project preparation such as staffing and procurement and transportation of machines, vehicles, seeds.

• Project realization in the field. The overall project might be broken down into several subprojects which can either be executed simultaneously or in stages.

• Project follow-up and control.

Advantages and disadvantages

Perhaps the major advantage of a well-designed regional development project lies in the integration of the constituent parts—the individual project units. In such a package the project units mutually reinforce each other, increasing the effectiveness and likelihood of success of each individual project unit. In addition, integrating several different sectoral projects avoids the major disadvantage of an isolated project which—although successfully fulfilling its own objectives—may at the same time impose negative economic and social costs on other sectors. Concentrating such interrelated activities in one selected region of the country also reduces problems associated with the implementation and management of projects.

Nonetheless, regional development projects have problems of their own. They are nearly always situated in backward areas with economic and social disadvantages resulting in high external costs. The project may, of necessity, include project units which have a high priority in satisfying social and infrastructural needs but whose measurable economic benefits will either be low or take some time to appear. Hence, the cost-benefit analysis of the total regional development project may show a relatively low internal rate of return on the investment. However, even if there were no regional development, many such social and infrastructural project units which are not directly productive would have to be carried out and would thus burden the budget anyway. It might be possible to eliminate such project units by transferring them to the budget, but this would certainly not be advisable if the full economic advantages of the integrated regional project are to be realized. In any case, a subsequent development in another region might have lower incremental costs—because of the experience gained in the pilot project—and consequently the cost-benefit analysis might show a more satisfactory result.

Another negative aspect of a regional development project is the lengthy time to maturity of the total project—it might take at least ten years to overcome a region’s heritage of stagnation and underdevelopment. However, individual activities within the overall project will certainly have shorter yield periods, so that regional development could be broken down into smaller self-contained units, which could be completed simultaneously or at intervals. Not only would this procedure facilitate the long-term implementation and financing of the project but it would yield important psychological advantages: the local people would see the benefits of some investments—which they have partly helped to finance—in a relatively short period of time.

Supply of manpower

The final major problem is supplying the skilled and specialized manpower required by the intensive and demonstrative extension services. Available skilled nationals are usually quickly absorbed in the project and it takes time to train additional local manpower; because of this, much of the necessary special training will have to take place on the job. Unfortunately, it is also difficult to find suitable qualified foreign experts and to retain them over long periods in backward areas. However, this staffing problem can be satisfactorily solved by using the services of management consulting companies with experience in regional development.

In sum, however, possible problems associated with a package of integrated projects concentrated in one region appear to be outweighed by the possible advantages. Good results from regional development projects have been achieved in several backward areas even where the input of capital has been relatively small. Experience shows that such projects help to organize self-help in the local population, improve techniques, increase and diversify agricultural production, and establish small-scale processing plants for agricultural produce. The combination of such activities creates additional, and more productive, employment, stimulates higher incomes, and subsequently helps to overcome economic stagnation in backward rural regions. Furthermore, the existence of an efficient administration supervising a regional development project has, in some instances, stimulated other attempts at institution building in the area—for example, the establishment of marketing and credit cooperatives. It has also acted as an example to local and provincial administrations of improvements that can be made.

Success, however, has largely resulted from the concentration of a group of foreign experts and their counterparts in a relatively small area—key villages or one pilot province—where direct demonstrations of the benefits resulting from new techniques could be given to the local population. In particular, where the local people and their leaders were given an active part in defining project targets, the introduction of new techniques and the learning-by-doing process spread from the key villages not only to the rest of the province but also to the neighboring regions.

Examples of integrated regional development

Examples of the World Bank’s growing interest in comprehensive rural (regional) development are the Wolamo, Lilongwe, and Karonga projects. These activities have started relatively late and are using ideas and methods originated by some donor countries.

The Wolamo agricultural development project—with total costs of $5.1 million—received a $3.5 million credit in 1969 from the Bank’s soft-loan affiliate, the International Development Association (IDA). It comprises an integrated project to improve agriculture in Sidoma province in the southern highlands of Ethiopia. The Wolamo subprovince has a population of about 543,000 Wolamos who are almost exclusively agrarian and have developed a high standard of animal husbandry. The project provides for administrative reorganization, technical assistance to improve both the yields and quality of crops, and the construction of roads; it also encourages the development of additional water supplies, marketing centers, and coffee processing, and makes agricultural credit available. The Wolamo project has, in fact, borrowed much of the strategy and techniques of the successful Chilalo Agricultural Development Unit—a regional project which was established by the Swedish International Development Association in 1967 in the neighboring province.

Regional development in Lilongwe, in the central uplands of Malawi, has received financial help from IDA on two occasions: a credit of $6 million in 1968, for the first land development phase of the project, was followed up by a further $7 million in 1971 toward the total cost of $8.6 million for the second phase. The overall project expands a small pilot scheme originally financed in 1965 by the United Kingdom. The second phase of the Lilongwe project includes aerial and cadastral surveys, land registration, establishment of a produce market and fertilizer and seed stores, construction of roads linking farms and markets and of rainfall diversion channels to halt erosion, and installation of nearly 300 hand pumps to provide drinking water. The project also provides credit for on-farm investments, improved seeds and fertilizers, afforestation, and technical assistance for training staff and extension workers. (See T.A. Blinkhorn, “Lilongwe—A Quiet Revolution,” Finance and Development, June 1971; and International Bank for Reconstruction and Development, Annual Report, 1971.)

Karonga

The success of Lilongwe prompted the World Bank’s approval, in early 1972, of the Karonga development project at the northern end of Lake Malawi. The five-year project—to which IDA will contribute $6.6 million of the total cost of $7.8 million—is designed to help farmers increase their output of food and cash crops through the construction of flood control, irrigation and drainage works for rice schemes and through improved cultivation techniques for maize, cotton, and groundnuts. In addition, the project involves livestock development, provision of agricultural credit, rehabilitation of freight services on Lake Malawi, and an improved health scheme—featuring hospitals with rural health outposts—designed to increase agricultural productivity and control the serious bilharzia disease. Providing services of this nature—all interconnected and integrated under a single project—has come to be regarded by the World Bank as a crucial strategy in attacking rural poverty.

The development of the Paktia province in southeast Afghanistan is an example of a regional project that has received bilateral aid. Paktia has a population of about 1.4 million—of whom about 500,000 are nomads—with at least 100,000 men unemployed in 1966. The province has, since 1965, been helped by the German Technical Assistance Service. A consulting company has been responsible for planning and coordinating several project units in, for example, agriculture, forestry, and small-scale industry, and for the development of some supplementary infrastructure.

Agricultural development of Paktia has relied largely on intensive demonstration and extension services, inputs of fertilizer, improvements of seeds, tools, and techniques, construction of small and medium-scale irrigation schemes, livestock development, and agricultural research and on successful marketing of the increased and improved output. The forestry development was, at least at the beginning, less successful because of tribal feuds and large-scale exploitation of the forest stock—the main source of income for a large part of the increasing local population. Nevertheless, training in improved techniques, and in wood processing and afforestation, are helping to raise forestry output in the long run.

The development of small-scale industries—the third project unit—was delayed, due partly to some reluctance by the donor country. Plans for an industrial estate where several private companies would process local raw materials (wood, leather) or produce agricultural tools had to be dropped. However, demonstration workshops and information services have been established to make local trade more effective by providing technical and business expertise. In addition, vocational education in a technical school in the provincial capital and on-the-job training on some projects have helped to reduce the shortage of skilled manpower. The improvement of the infrastructure centered on such projects as the construction of graveled highways, feeder roads, and small power stations.

Compared with the large-scale, capital-intensive irrigation projects being carried out elsewhere in Afghanistan, planned expenditures for the Paktia project—of about $10 million during the Third Five-Year Plan—are relatively low (about $6 million has been received in foreign grants). On the other hand, the results have been so promising—in spite of several delays—that similar regional development projects in other provinces will have a high priority in Afghanistan’s next Five-Year Plan. Results from the agricultural project units, which increased the population’s income by approximately $0.7 million in 1968 and by almost $2 million in 1969, have been particularly important to the success of this regional project.

An interesting example of the important role of self-help in regional projects can be seen in the integrated development of Turba, a rural region in Hugariah, the southernmost district of the Yemen Arab Republic. The Hugariah Development Board—set up by private initiative in 1970—depends mainly on private contributions from the local population, and on assistance from international agencies, but also receives support from the Yemen Government. The local people have voluntarily constructed health centers and feeder roads and have financed the employment of a foreign groundwater expert. The farmers, who have been extremely keen to obtain advice and on-the-job training from UN experts and foreign volunteers from charitable organizations, plan to use improved seeds, tools, and fertilizers.

Future objectives of the Hugariah Development Board include improvements in health and education, agriculture and livestock, rural handicrafts, the road system, and the supply of water and electricity. It is also hoped to improve the marketing of agricultural products and to begin manufacturing some agricultural tools, possibly in cooperation with an industrial estate planned for the provincial capital. It is expected that this integrated and regionally concentrated development will—if the present supply of initiative and goodwill can be coordinated into a systematic scheme—result in great benefit to the region. Already the concentration of activity in one small region has stimulated, not political jealousies elsewhere but imitation in other regions of the Hugariah initiative.

* * *

The preceding generalized discussion does not fully reflect the complexity of the process of integrated regional development, nor reveal the sophistication and refinements in techniques which have been developed to deal with it. Nor does it reflect the fact that, although the principles of regional development do not vary much, their application in particular cases is subject to adaptation and refinement since projects will yield their own individual problems. Nonetheless, integrated regional development is an important tool in the development of backward areas and should prove effective in meeting some of the Second Development Decade’s objectives—increases in overall economic effectiveness, an ending of regional stagnation, a lessening of rural underemployment and regional income inequalities, and economies in provincial administration.

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