Journal Issue

Bank activity: Urban task force reports; new view of project analysis; IDA credits to Lesotho, Pakistan; world economic indicators

International Monetary Fund. External Relations Dept.
Published Date:
June 1976
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Task force defines strategy to alleviate urban poverty

The urban poor are hundreds of millions of human beings who live in cities, but do not really share the good and productive life of cities. Their deprivations exclude them. It is within the power of governments to change that. We in the Bank can help, and we propose to do so in the future on a scale far greater than that of the past.

Robert S. McNamara, September 1, 1975

Some three months before Mr. McNamara’s statement, made to the Boards of Governors of the Bank and the Fund in Washington, D.C., work had begun within the Bank on the definition of a strategy against urban poverty. Mr. McNamara’s speech signaled that the Bank was prepared to take a more active role in helping to alleviate this problem. In July 1975, an interdepartmental task force, chaired by the Director of the Bank’s Transportation and Urban Projects Department, had been established to develop an “urban poverty action program.”

This task force published in March 1976 an interim report containing tentative conclusions on the dimensions of the problem, and on the possible strategy the Bank might use to deal with urban poverty.

Distribution of urban poor

The task force estimated that roughly 25 per cent of the urban population of developing countries that are members of the Bank—some 150 million people–live in absolute poverty. These 150 million people lack access to safe water and public or private sewerage systems, and they are also severely undernourished. Some 46 per cent of these urban poor live in South Asia, 24 per cent in Latin America, 13 per cent in North Africa and the Middle East, 10 per cent in East Asia, and 8 per cent in Sub-Saharan Africa.

Generalizing from several recent studies on selected cities, the task force found that the employment profile of the urban poor was marked by considerable diversity within countries, and by a fair degree of similarity among countries. In larger cities, the distribution of the poor was found to be similar to that of the distribution of occupations in the cities as a whole—about 50 per cent in services, 20 to 25 per cent in manufacturing, and the rest in transportation, construction, and miscellaneous categories. Surprisingly, it was noted that migrants from rural areas did not stand out as more likely to be unemployed or to be confined to employment in certain sectors.

No one sector could be singled out as containing the urban poor in overwhelming numbers. Therefore, the Bank study concluded, since the poor were usually a minority within each sector, there was room for a redistribution of productivity and income within each sub-sector, for example, by equalizing access to capital and skill.

Defining the “target group” upon which the Bank might focus its energies in terms of income was rejected by the task force because it felt that income distribution estimates were basically statistical abstractions. The task force, therefore, proposed that the urban target group be defined as those persons—some 190 million-without access to a safe water supply. This was, the task force reported, “an obvious choice” because of the great likelihood of a strong overlap between the absolute poor and those without access to safe water. It was also considered likely that those who lacked access to safe water would also not have access to other basic requirements, such as adequate nutrition, security of location, sanitation, and education.

The Bank working group cautioned that “the fact that we may find it convenient to define the boundary of the target population in terms of access to safe water does not imply, however, that the [Bank’s] operational strategy for dealing with urban poverty is to concentrate entirely, or even primarily, on the provision of basic services.”

In order to reduce urban as well as rural poverty, the interim report recommended an acceleration in the creation of productive employment opportunities in nonfarm production. Growth of modern, large-scale enterprises was not the answer. It was clear, the task force reported, that “the incomes of a large part of the nonfarm work force will depend on the growth of earning opportunities in the small-scale, industrial, construction, trade, transport, and other service sectors.”

However, the report added, “it is also clear that any efforts to increase the absorptive capacity of urban areas and the productivity/welfare of the urban poor will not be effective unless there are significant changes in the attitudes of governments toward self-help activities, the acceptability of low-standard, low-cost solutions to water supply, sanitation, shelter, transportation, and health care, the management of urban land, and the pricing of urban services in general.”

The task force noted that almost 50 per cent of past Bank lending could be characterized as urban oriented. It added, however, that there was “little evidence” that Bank lending had directly benefited the poor or that it had led to direct increases in the capacity of cities to absorb the poor.

Changes in lending

The task force therefore recommended that important changes be made in the sectoral targeting of Bank lending. As there would be no change in the current program, which envisages a rapid expansion of rural lending—especially to the rural poor—changes in sectoral targeting would involve the redirection of that part of the overall program which has an urban orientation.

Sites and services programs and slum upgrading programs would be expanded; lending for water supply and sewerage systems would be increased, with as large a portion as possible of new investments in the sector being diverted toward those with the greatest social needs.

More emphasis also needed to be placed on increasing the productivity of the urban poor through the design of Bank lending to the industrial and small enterprise sectors. “The objective is not merely to increase employment per se, but rather to increase the productivity of employment, and thereby the incomes earned as well.”

Peter C. Muncie

World Bank loans approved during third quarter of fiscal 1976(Ended March 31, 1976)

($ million)
BoliviaRural development*9.5
Brazil (2)Roads, industries140.0
Caribbean Development BankDFC*20.0
ChileCopper rehabilitation33.0
East African CommunityDFC15.0
Ecuador (3)Highways, seeds, rural development preparation17.5
FijiSugar development12.0
IndonesiaResource survey and mapping13.0
Korea (3)Highways, imports, rural infrastructure*225.0
Malaysia (2)Sewerage, urban transportation47.5
Mexico (3)DFC, agricultural credit, railways275.0
Morocco (3)Irrigation, tourism, education*76.0
Philippines (3)Livestock, education,* irrigation95.5
Senegal (2)Highways, feeder roads*21.6
Trinidad and TobagoHighways7.0
Total loans during third quarter of fiscal 19761,334.1
Total loans during first three quarters of fiscal 19762,748.7

$23 million IDA credit for Pakistan seed industry

Development of a modern seed industry in Pakistan will be assisted by a $23 million credit announced by the World Bank affiliate, the International Development Association (IDA), in March 1976. The credit is for 50 years, including 10 years of grace; it is interest free but carries an administrative service charge of 3/4 of 1 per cent.

This seed project is the fifth one to be financed by the World Bank and the IDA in Asia, and reflects the greater emphasis being placed by developing countries on improving the quality and distribution of seeds to support their efforts to increase food and cash crop production.

The IDA credit to Pakistan will help to finance the first phase of the development of a seed industry that will include research, variety release, seed multiplication, processing, certification, storage, and marketing. The project will cover cotton, wheat, rice, and maize, with lesser quantities of pulses, oilseeds, and fodder. Pilot operations for vegetable and potato seeds trials will lead to further expansion and diversification of Pakistan’s seed industry. At full production, more than 100,000 tons of quality seed will be produced annually and sold to farmers.

Operations on a commercial scale for cereals and cotton will be undertaken by two new Provincial Seed Corporations, one each in Punjab and Sind. Seed quality will be controlled mainly through two new national institutions, a National Seed Council and a National Seed Certification Agency.

IDA credits during third quarter of fiscal 1976(Ended March 31, 1976)

($ million)
AfghanistanAgricultural supplement10.0
Bangladesh (2)Irrigation, rural training34.0
BeninHighways supplement9.0
BurundiTechnical assistance1.5
CameroonRoad supplement15.0
India (3)Power, cotton development, imports368.0
NepalRural development8.0
SudanTechnical assistance4.0
Yemen, Arab Republic (2)Education, agricultural supplement18.3
Yemen, PDRAgriculture7.0
Total credits during third quarter of fiscal 1976524.4
Total credits during first three quarters of fiscal 19761,239.8

Increased yields

The main benefits of the project will be the higher crop yields obtained by the users of the improved seed produced by the project. At full production, users of improved seeds should obtain yield increases of 20 per cent for maize and 10 per cent for wheat, rice, and cotton. Quality improvements should result in higher prices for cotton. At full development, the annual increase in production of commercial grain will be about 640,000 tons valued at $120 million, while the incremental benefit from cotton is expected to be about $170 million.

Seeds produced will ultimately be used on 50 to 60 per cent of Pakistan’s cereal acreage, and on nearly all the cotton acreage. Most of the gains will accrue as foreign exchange through higher exports of rice and cotton and reduced imports of wheat.

As more than 2 million farmers are expected to achieve increased crop yields, the project will benefit some 13 million people, two thirds of whom are among the poorest 40 per cent of Pakistan’s population.

Five seed projects are now being financed in Asia by the World Bank and IDA which will eventually produce more than 200,000 tons of high-yielding seeds annually for rice, wheat, maize, sorghum, millet, barley, soya, cotton, and other crops.

Lesotho initiates labor-intensive project

A $5.5 million highway credit to Lesotho was approved on March 2, 1976 by the World Bank affiliate, the International Development Association (IDA). The IDA credit, which will help to create more jobs within the country is for 50 years, including a ten-year grace period; it is interest free but carries an administrative charge of 3/4 of 1 per cent a year.

Lesotho is landlocked within the Republic of South Africa and is particularly vulnerable to labor conditions in the Republic. Sixty per cent of Lesotho’s male labor force is employed in South Africa, mainly in the gold mines and on farms. In 1974 the migrant workers’ net earnings were about $75 million—almost equal to Lesotho’s total domestic income.

For the foreseeable future, 80 per cent of the national increase in Lesotho’s labor force is expected to look for work in South Africa because of the higher wages there and the limited opportunities offered by Lesotho’s economy.

The Lesotho Government is now seeking to create job opportunities at home that will attract would-be emigrant workers. The Second Development Plan (1976-80) stresses the continuation and expansion of rural development programs started in recent years. In this context the Government asked the World Bank to lead a UN interagency economic mission to the country to help find solutions to its migrant labor problems. The mission, financed by the United Nations Development Program (UNDP), recommended the establishment of a special unit to gain experience with labor-intensive methods for coping with future employment emergencies and for providing a basis for a long-term employment strategy.

Labor unit formed

The mission’s recommendations were adopted as a part of Lesotho’s Second Development Plan, and also resulted in the establishment of a labor-intensive construction unit that will be financed by part of the $5.5 million highway credit.

The credit will be mainly for the improvement and reconstruction of two road sections connecting Thaba Tseka, Matsonyane, and St. Michaels. The improved roads will substantially improve the link between Thaba Tseka, the commercial focus of the central mountain region, and the capital of Maseru.

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