Report No. 3810-SU h L iP uJIDrU Sudan Incentives for Irrigated Cotton - Progress Towards Reform May 20, 1982 Eastern AfricaRegional Office Northern Agriculture Division FOR OFFICIAL USE ONLY Documentof the Wbrld Bank This document has a restricted distribution and maybe used by recipients only in the performance of their officialduties. Itscontents maynot otherwise be disclosed without WorldBank authorization. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
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Report No. 3810-SU h L iP uJIDrU
SudanIncentives for Irrigated Cotton - ProgressTowards ReformMay 20, 1982
Eastern Africa Regional OfficeNorthern Agriculture Division
FOR OFFICIAL USE ONLY
Document of the Wbrld Bank
This document has a restricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may not otherwisebe disclosed without World Bank authorization.
1 Feddan (fd) = 0.42 ha = 1.04 acres.1 small Kantar (cotton lint) 45 kg = 100 lbs.1 large Kantar iseed cotton) 141.75 kg = 312 lbs.
ABBREVIATIONS
AC = Agricultural CorporationAGO = Auditor General's OfficeARC Agricultural Research CorporationARP = Agricultural Rehabilitation ProgramCPC = Cotton Public CorporationEAP = Export Action ProgramEDF = European Development FundEEC = European Economic CommunityEMC = Earth Moving CorporationIDA = International Development AssociationIFAD = International Fund for Agricultural DevelopmentIWC = Irrigation Works CorporationMAFNR = Ministry of Agriculture, Food & Natural ResourcesMAI Ministry of Agriculture and IrrigationMOI = Ministry of IrrigationSGB = Sudan Gezira BoardUNDP = United Nations Development Program
GOVERNMENT OF SUDANFISCAL YEAR
July 1 to June 30
FOR OFFICIAL USE ONLY
TABLE OF CONTENTS
Section Page
I BACKGROUND
A. General .......................................... .. 2
B. Production and Productivity Trends ...... ...... 3.... , 3
C. Constraints on Productivity .3-8
II SUB-SECTOR STRATEGY .. ......................... 9
III REFORM OF COTTON PRICES . . ......................,.,.,.10
IV COTTON PROCESSING AND MARKETING SYSTEMS ....... ........... 12
V COST RECOVERY AND ACCOUNTING SYSTEMS ............... ...... 13
VI SUPPORT AND SUPERVISION OF PARASTATALS . . . 14
VII PROSPECTS FOR THE PROPOSED REFORMS . . . .... 16
VIII SUMMARY OF PRESENT STATUS OF REFORMS .................. . 17
IX AGENDA FOR FURTHER WORK . . ......................,.,. . 18
TABLE 1 ....................... 21
I This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.
SUDANINCENTIVES FOR IRRIGATED COTTON - PROGRESS TOWARDS REFORM
Foreward
i. Sudan enjoys a strong comparative advantage in irrigatedcotton. However, a dramatic decline in domestic cotton production duringthe past decade has been a principal cause of the nation's current economicproblems. Revival of the cotton subsector is therefore central to anyeconomic recovery strategy. During the past three years, Government hastaken a number of actions to this end, focusing on problems relating toincentives, institutions, investment and technology. This paper reviewsthe measures for reform undertaken by Government and attempts to draw up anagenda for further action.
ii. Section I explains the role of cotton in the Sudanese economy andthe causes of production declines. These include problems facing thetenant and the producing corporations, deficiencies in cost recoverymechanisms and accounting, low producer prices which have discouragedproduction, and lack of coordination among government agencies involved incotton production. Section II describes the strategy employed to revivethe cotton subsector. The four major elements of this strategy arereviewed in the sections that follow. Section III deals with pricing ofcotton; Section IV covers improvements in the areas of cotton processingand marketing; Section V deals with improvements to the cost recovery andaccounting systems while Section VI reviews measures to strengthenGovernment-level support and supervision of the production parastatals anddevelopment of private sector capability. Section VII describes brieflythe human constraints on implementing these changes and Section VIIIsummarizes progress so far. An agenda for further work is set out inSection IX.
iii. Most of the actions taken by Government have stemmed fromrecommendations made by three studies carried out by Government under theIDA/EEC financed Agricultural Rehabilitation Program Credit. These covered(i) cost recovery systems, (ii) cotton marketing and pricing, and (iii)administrative arrangements for the irrigation subsector where the bulk ofSudan's cotton is grown. This paper therefore draws heavily from thereports of these studies.
iv. The cost recovery study was undertaken by a joint Bank-GovernmentCommittee, headed by a Sudanese economist, with an expatriate consultant ascoordinator. The cotton marketing study was carried out by a team headedby the Chairman of the Cotton Public Corporation, which included anindividual expatriate consultant and was serviced by a UNDP/World BankPlanning Advisory Team staff member. The administrative reform study wascarried out by a foreign consulting firm.
v. Government and the Bank have maintained a constructive dialogueon the areas covered by these studies. The purpose of this paper is totake stock of the progress made so far and to establish areas where furtherattention is needed.
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I. BACKGROUND
A. General
1.01 Sudan is currently facing a difficult economic situation. Theprincipal causes are an ambitious investment program during the early1970s which, largely financed by foreign borrowing, led to rising debtservice obligations, inadequate domestic resource mobilization, and a sharpfall in cotton exports, Sudan's main source of foreign.exchange. Exportshave fallen because of a dramatic drop in yields, and some decline in area,of irrigated cotton. Sudan's economic recovery strategy, evolved by theGovernment over the past three years, relies heavily on restoring vigortothe cotton subsector through action to resolve problems of incentives,investment, technology and institutional constraints.
Role of Cotton in the Economy
1.02 The agricultural sector dominates Sudan's economy: it providesthe livelihood of 80% of the population and contributes about 40% of GDPand 95% of exports. The economy's growth over the past 50 years has beenmainly derived from modern, capital-intensive irrigation development on theNile, in large part to promote the production of cotton. Naturalconditions of ample sunshine, favorable temperatures, fertile clay soilsand flat lands much of which can be irrigated by gravity and relativelylow-cost pumping from the Nile, are ideal for the cultivation of highquality long staple cotton. Just over 2 million feddans were cropped in1980/81 and the irrigated cotton covered about 900,000 feddans.
1.03 In 1979/80 cotton accounted for about 22% of total agriculturaloutput and 56% of all exports, a contribution to annual foreign exchangeearnings which has remained more or less constant since 1972/73. However,the volume of cotton exports declined sharply through the 1970's, from280,000 tons in 1971 to 180,000 tons in 1980. Until the mid-1970s, 75-80%of cotton production in Sudan was long staple, which has commanded apremium on international markets, but for which further substantialincreases in demand are unlikely. By 1980 the proportion of long staplecotton production had substantially declined. Egypt has been able toexpand her share of the market as Sudanese production has fallen. HadSudanese production expanded through the 1970s, further orientation towardsmedium staple would probably have been necessary.
1.04 World prices for cotton have shown a strong upward trend since1970/71. Prices for medium staple cotton have increased at about 11% perannum and prices for Sudanese long staple cotton have increased at anannual average rate of about 13%. These increases should have causedSudan's export earnings from cotton to rise rapidly, but decliningproduction and higher prices for imported inputs counteracted much of theeffect of rising prices.
The History of Cotton Cultivation
1.05 Irrigated cotton production in Sudan started with theintroduction of pumps at the turn of the century. The first large scale
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gravity irrigated agricultural project was started in the 1920s in Gezira,which is now, with an area of over 2 million feddans, the world's largestirrigation scheme under a single management. The irrigated schemes wereinitiated for the cultivation of cotton as an export crop, and fodder wasintroduced in rotation to maintain soil fertility and complement cotton.Dura (sorghum) was initially cultivated on marginal lands for subsistencepurposes. Over the years, however, groundnuts and wheat have beenintroduced as new cash crops, partly displacing fodder and expanding ontoland previously allocated to fallow. Dura was also included in therotation in order to meet the felt needs of the tenants.
1.06 More than 4 million feddans have been developed using Nilewaters, a process spurred by negotiation of water sharing agreements withEgypt in 1929 and 1959. There are five major irrigation schemes producingcotton: Gezira-Managil (2 million feddans), New Halfa (0.4 millionfeddans), Rahad (0.3 million feddans), and the Blue and White Nile pumpschemes, made up of private schemes nationalized in the late 60s andcovering around 0.4 million feddans each. Five sugar producing schemes andseveral other small schemes cover the rest of the area. The designedcropping intensity ranges from 100% in the Managil extension of Gezira andRahad to 66% in the pump schemes.
B. Production and Productivity Trends,
1.07 There has been a sharp decline in cotton productivity since theearly 1970s. Production was only 259,000 tons of seed cotton in 1980/81;in 1970/71 it was 712,000 tons (Table 1). The area cropped fell from 1.0million to 0.87 million feddans. The most significant decline, however,was in yields, which were only 0.3 tons per feddan in 1980/81; they hadaveraged 0.43 tons per feddan in the late 1970s and 0.61 tons per feddan inthe early 1970s. These figures compare very poorly with those obtained inother countries: Egypt, for example, in 1979/80 had long staple yields of1.2 tons of seed cotton per feddan.
1.08 At the same time, the total area under other crops increasedsubstantially over the same period, from an average of 1.1 million feddansin the first half of the 1970s to 1.5 million feddans in the second half.Production of groundnuts averaged 317,000 tons 1975-80, 28% higher than inthe 1970-75 period; wheat, at 230,000 tons, was 22% higher. Sorghum fellslightly from 261,000 tons in 1970-75 to 234,000 tons in 1975-80 because ofdeclines in yields.
C. Constraints on Productivity
1.09 Institutional and Organizational. All irrigated cotton schemesare managed by public agricultural corporations (ACs) which provide mostinputs and services. The Irrigation section of the Ministry of Agricultureand Irrigation, formerly the MOI*, is responsible for water delivery and
* There has recently been a number of ministerial changes. The Ministryof Irrigation (MOI) and of Agriculture, Food and Natural Resources (MAFNR)has been combined into one Ministry, the Ministry of Agriculture andIrrigation (MAI). It is not yet clear how this will reflect the operatingautonomy of the two old ministries. The first part of this paper discussesthe responsibilities of the two ministries as they operated until November1981.
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operation and maintenance of headworks and canal systems up to the fieldoutlet pipes(except in the case of pump schemes,where responsibility forthe canal system was transferred to the ACs in December 1980). Usually, theACs prepare the land, apply fertilizer, plant seed, apply pesticides, andgin the cotton. They also maintain infrastructure and operate field levelirrigation. Farmers do not own the land but are tenants with only limitedresponsibilities for agricultural operations. They supply the labor, tendthe crop, apply irrigation water, pick seed cotton and transport it to theginnery or collection centers. The ginned cotton is handed over to theCotton Public Corporation (CPC) by the ACs for export. The MAFNR untilNovember 1981, now the MAI, through the ACs, is responsible forcoordination and technical guidance.
1.10 The present arrangements for distribution of responsibilitiesbetween the Government, the ACs and the tenants have, with some changes,been in existence since the first irrigated cotton schemes were establishedover 50 years ago; they are based on Egyptian irrigation practices.However, as social and technical developments have evolved, thesearrangements have become unsatisfactory in many ways. In particular, theJoint Account System (para. 5.01), which served as the basis forprofit-sharing between Government, the ACs and tenants until it wasabolished in 1980, created serious disincentives to cotton cultivation.
1.11 Role of Tenants. Tenancies were allocated when the schemes werefirst developed as far back as the 1920s in the case of Gezira. Tenantsmay not transfer or sell any part of their land; it is passed on fromparent to child. However, over two generations, with rising livingstandards and opportunities for education, those holding tenancies nolonger have much interest in farming the land, having developed off-schemebusiness interests. A recent survey in Gezira revealed that 41% of tenantshad retired from direct involvement in their tenancies; most receivedremittances from sons working in towns. One third of such tenants werewomen. Besides, a further 13% who had inherited their tenancies were eitherfollowing full-time education or working full-time in towns. In New Halfa,tenants resettled from Wadi Halfa also have substantial freeholdings whoseuse is not controlled.
1.12 Tenants rely heavily on hired labor, which may be 70% to 80% oftotal requirements. Livestock, partly because of its low laborrequirements, has become an increasingly attractive alternative to cropproduction on irrigation schemes. Many of the nomads settled on the NewHalfa scheme have retained a primary interest in pastoralism. In someareas animals graze on the growing cotton crop, causing heavy losses.
1.13 In fact, many tenancies have been informally subdivided; a 1972Gezira survey indicated that 75% of all tenancies were half-tenancies. Inaddition there are widespread sharecropping arrangements, commonly withfarmers who first came to the scheme as laborers, frequently from WesternSudan or West Africa. Thus the original tenant lists are far fromaccurate, and government policies aimed at de jure tenants may not directlyaffect those who actually work the land.
1.14 The tenants have only limited control over what they grow and howthey grow it. The area to be planted with cotton is determined by
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Government each year. Crop rotations are fixed by the ACs, as are thetiming and method of major agricultural operations. The ACs may be late inland preparation, seed or fertilizer delivery, and poor timing of theseoperations may have a critical effect on yields, however diligently thetenant discharges his responsibilities. Thus, for the tenant, the relationbetween effort and output is diluted.
1.15 Agricultural Corporations. There are many inefficiencies in theprovision of services by the ACs and the rate of application of availabletechnology is low. The causes of these inefficiencies can be summarized asdecapitalization (deterioration in plant and equipment) and increasingmanagement problems. The ACs are constrained in their operations, policies,staffing and administration by civil service regulations and scarcity offunds. Furthermore, incentives for management are not tied toperformance. As in other sectors of the economy, the flight ofskilled manpower to neighboring oil producing countries, where salaries aremuch higher, has increased the problems of the parastatals, while theincreasingly serious economic problems of the Sudan have reducedavailability of foreign exchange for purchase of new equipment and spareparts and import of current inputs, including fuel. In turn, theseproblems have reduced staff morale.
1.16 A further difficulty is that the ACs, as corporations responsiblefor increasingly complex operations, have not developed any analyticalaccounting, monitoring or evaluation systems. For example, insecticidespraying by air, which, in the early 70s was carried out four or five timesper season, is now undertaken 12 to 13 times. The ACs lack the capabilityto analyze whether this is cost effective in terms of the value ofincreased output. Nor are the ACs able to estimate tractor operation andpumping costs accurately. Usually fuel and operator costs are the onlyones measured; provision is not made for maintenance, depreciation orinterest charges. MOI charges for its services but such charges do notreflect accurately the financial cost of the services provided. It hasbeen very difficult to isolate the costs of each agricultural andirrigation operation on a crop and feddan basis; thus it has been difficultto identify the areas where improvements are most needed.
1.17 Expenditure is classified by type of resource (e.g. salaries)rather than by output. This is standard practice in civil serviceorganizations, but it does not help semi-autonomous and supposedlyfinancially independent ACs to budget and program efficiently; neither doesit enable their activities to be effectively scrutinized. For tenants andfor AC staff alike, the link between effort and increased production isweak. Furthermore, the accounts are not up-to-date. As of March 1981 theaudit reports were two to three years behind; the accounts, one to twoyears behind. In 1981 there was only one qualified Sudanese accountant.For all the ACs, there are large numbers of accounting clerks responsiblemostly for making up salaries (in Gezira, there are 450, one quarter of allstaff).
1.18 Tenants' accounts are kept at block level and are relatively wellmaintained with costs debited within a month of their being incurred.However, as described above, there is no reliable means of costingoperations; tenants are not given a copy of their accounts, and there is
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little management follow-up on defaulters. Furthermore, tenants' accountshave in the past not been finalized for one or two years after harvest,because of the delay in receiving cotton proceeds.
1.19 Production Relationships. A Joint Account System operated inmost irrigation schemes in the Sudan until 1980. Under this system, mostof the items of expenditure incurred by AC's on the different crops grownon the tenancies were deducted from the total revenues received from cottonsales by the AC concerned. The net revenues from cotton were thendistributed in Gezira (and along a similar pattern in other schemes) asfollows: 36% to the Government for land use, dam and canal maintenance andprovision of water; 10% to the ACs for meeting overheadcosts; and 47% tothe tenants. A further 2% was set aside for a form of local governmenttax, 3% for a Social Services Fund and 2% for a Tenants' Reserve Fund. Thetenants' share was then divided by total scheme production of seed cottonto arrive at a price per kantar of seed cotton payable to each tenant. Ineffect, therefore, input costs were recovered per kantar of cotton producedrather than per feddan of area planted. This penalized the more productivecotton growers, whose actual per kantar costs were lower.
1.20 Over the years the tenants' share had increased from 40% to 47%although increasing responsibilities, for instance, sowing and fertilizerapplication, been transferred to the ACs. Nevertheless, their share ofrevenue had fallenfrom 20% to 10%. Government's share was higher than thecosts of the services it provided warranted, while the ACs increasinglylacked revenue to discharge their responsibilities effectively. Thetransfer of cotton marketing functions from the Sudan Gezira Board (SGB) tothe CPC also eroded SGB's ability to exercise influence at the Governmentlevel over foreign and domestic budgetary allocations.
1.21 The most serious consequences of the Joint Account System,however, were felt when cotton yields fell at the same time as other cropshad gained importance in the rotation. Groundnuts, sorghum, forage cropsand, more recently wheat have become increasingly important. These crops,however, are privately marketed and input costs cannot be recovered atsale. Land and water costs for these crops were recovered from cottonrevenues. Cotton, bearing the burden of these other charges, had thereforebecome less and less attractive to tenants. Consequently, theyconcentrated their efforts on the other crops and livestock, while cottonwas neglected. Yields and Government revenues both fell to levels whichwere insufficient to cover cultivation costs. For example, in New Halfa,it was estimated that on 1981 yields of under 3 kantars of cotton perfeddan, tenants made a negative income of LSd 9 per feddan, while incomefrom groundnuts and wheat was LSd'89 and LSd 60 per feddan respectively.It was also estimated that even with a higher cotton yield of 4 kantars perfeddan, returns would only be LSd 1.15 per manday, little higher than theminimum wage. The returns per manday for cotton would almost double to LSd2.05, even without price revision, provided land and water charges wereapportioned among different crops and not set off against cotton revenues.
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1.22 As a result of the strong disincentives to cotton production,iprivate capital has shifted from irrigated cotton to irrigated groundnuts,rwheat and sorghum and from the irrigated subsector generally to the rainfedmechanized subsector. Tenant labor has likewise shifted from irrigatedcotton to other crops on the tenancy. Furthermore, traditional labormigration to irrigated areas for cotton picking is weakening, partlybecause the ACs and tenants cannot pay enough and the shortage of cottonpickers is acute. This shift of both labor and capital out of cottoncultivation has had severe effects on production and productivity. Giventhe low yields, tenants grow cotton only because they must in order toretain their tenancies and avail themselves of the cash advances made forcotton operations.
1.23 Role of Ministry of Agriculture and Irrigation. The Boards ofDirectors of the ACs are directly responsible to the Minister (not theMinistry) of Agriculture and Irrigation (formerly to MAFNR). However,there is no established procedure or department within the MAI forscrutinizing their technical or financial performance. Their budgets areexamined by the Ministry of Finance; but the link between financial andtechnical performance is lacking. It would be difficult, in any case, todfiscern inefficiencies, given present monitoring and accounting practices.-his is unfortunate, given that the ACs are supposed to be financiallyaLutonomous, self-supporting agencies. In fact, their revenues have fallenso much in recent years that they have had to be shored up by subsidies and-write-off" of overdrafts with the Bank of Sudan in order to operate atall. At present, MAI does not have the staff to supervise the ACsadequately. Out of 25 planning officers in the Ministry as of March 1981,22 were following post-graduate courses or were seconded to otherorganizations, with no guarantee that they would return.
_ 24 Water Conveyance and Distribution. The former Ministry ofirrigation (MOI) (para. 1.09) one of the larger organizations in theIudanese Government, with long experience in design, construction andmaintenance of irrigation systems. With its parastatal, the IrrigationWorks Corporation (IWC), it has suffered somewhat less than otherM5inistries until recently from the flight of manpower to Gulf countries.
1.25 Since December 1980, Blue Nile, White Nile, Northern Gash andTPokar ACs have been entrusted with larger responsibilities for operating,maintaining and rehabilitating all pumps and canals. These ACs are unable,ho wever, to perform their responsibilities properly. On Gezira, Rahad, NewlHalfa and Suki, formerly MOI irrigation staff operate and maintain canalsup to field outlet pipes. Maintenance and repairs are carrried out by theEarth Moving Corporation on contract to the Ministry. Field waterdistribution is entrusted to the ACs. Water requests (indenting) are madethrough AC block inspectors to irrigation staff. Telecommunications andtransport problems delay the passage of information. Water management atfarm level, and maintenance of field channels are the responsibility of ACstaff with the cooperation of tenants but AC staff are not adequatelytrained in water distribution and measurement. Minor canals are used fornight storage; silting and weeds are problems. The division ofresponsibilities at minor canal level has been unsatisfactory andambiguous, sometimes leading to strained relationships between irrigation
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staff and the ACs, reducing staff incentives to perform well and resultingin considerable frustration to the tenants.
1.26 CPC's Marketing Performance. Ginned cotton is handed over to CPC(para. 1.09) which is responsible for selling it on the internationalmarket. Prices obtained are relatively good; however, the cotton sales maynot be completed until two years after harvest, and accounts are settledwith the producing corporations only then. Real revenues are reducedthrough inflation in the interim while the link betwen production andreceipt of revenues is weak.
1.27 Pricing and Payments for Cotton. Cotton prices received byparastatals and tenants have, until recently, been subject to severedistorting influences. The most important of these are:
(i) Application of the official exchange rate to cotton exportsand the parallel exchange ratesl/ to imported inputs forcotton has the effect of lowering income from cotton saleswhile increasing the price of inputs;
(ii) An export tax which reduces domestic cotton incomes;
(iii) A margin of about 14% between f.o.b. prices for cotton andprices paid by CPC to the parastatals, part of whichultimately accrues to the Government budget as CPC surplus;
(iv) Sharing of revenues by Government which, under the JointAccount System takes about 36% of net revenues, reducesincomes for tenants and parastatals; and
(v) Payments to tenants are delayed for as long as two years,destroying the link between effort and reward, and furtherreducing real incomes.
1/ A system of parallel and official exchange rates has been practiced atsome time or another by many countries. These dual exchange rates arefrequently maintained when the currency is over-valued at the officialrate, but there is resistance to devaluation. So that imports are notvalued too cheaply, and in order not to discourage money flows into thecountry, there may be a second "parallel" exchange rate, applied tocertain items, and which usually reflects more accurately the marketrate. The difference between the two rates has varied in Sudan overthe years: in 1980-81 the official rate was US$2 to the LSd , whilethe parallel rate was US$1.25 to the LSd. In November 1981, the rateswere unified at US$1.11 to the LSd and the distorting influenceeliminated.
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1.28 Low and declining real producer prices have probably been thesingle factor most responsible for the decline in cotton production.Government, always pressed for short-term revenue, has been reluctant toraise the share to be allocated to producing agents. This has led to acircle of declining production and Government revenues, tenant default inpayment of debt to ACs, and default in turn by the ACs on overdrafts withthe Bank of Sudan.
1.29 Meanwhile, tenants have sold their other crops through privatetraders for immediate cash, at prices which reflect their market value.The financial viability of parastatals responsible for operation ofirrigated schemes has been destroyed. This, in turn, has led to severeshortages of working capital and failure to maintain assets; it has alsocontributed to declining productivity and demoralization of parastatalstaff. This, and the joint account system, have resulted in tenant incomesfrom cotton which are toolow to justify cotton production- It has beenestimated that tenants receive only 21% of the export price of cotton. InNew Halfa, returns per manday for cotton were estimated to be only LSd 0.86in 1980-81 (less than the minimum wage), compared with LSd 2.19 forgroundnuts and LSd 3.50 for wheat.
1.30 Technical Problems. There are also severe technical problemsconstraining cotton production. Some of these are caused by an inabilityto apply known technology rather than any lack of technical solutions.Irrigation water supplies are insufficient and unreliable, distributioncanals are poorly maintained and therefore field water distribution isuneven while drainage is generally inadequate. Land preparation isfrequently late and done perfunctorily; cotton planting is delayed andyields suffer in consequence. Fertilizer application is often not timelyand supplies are unreliable. Aerial spraying is now carried out 12 to 13times per season, but despite the expense, it is not effective and honeydewfrom whitefly has been a serious problem. Cotton stalks are not alwaysadequately pulled and crop hygiene is poor as is weed control. There maybe only two pickings of cotton, and some goes unharvested because pickersare not adequately mobilized and rewarded. Most of the technical problemsare aggravated by the lack of interest of tenants in devoting much effortor cash to cotton cultivation, since there are alternative earningopportunities both within and outside agriculture and in livestock. Thesedifficulties are further compounded by the inability of the parastatals toperform adequately because of their financial and management constraints.
1.31 This paper does not discuss resolution of technical problems.Nonetheless, the proposed price incentives, cost recovery mechanisms andadministrative reforms will not be effective unless accompanied bytechnical improvements and better implementation since cotton will never bea financially viable crop in Sudan without substantial increases in yields.
II. SUB-SECTOR STRATEGY
2.01 The reduction of Sudan's cotton exports during the 70s is thecritical factor behind its current balance of payments crisis. Recognizingthe problem, the Government, with the Bank, drew up an Export ActionProgram (EAP) in 1980 designed to restore production to the levels of theearly 1970's. The EAP contains provision for:
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(i) urgently needed investments aimed at satisfyingrequirements for spare parts, machinery andequipment in order to arrest decapitalization which hasplagued the subsector. These were financed by the ARP(Agricultural Rehabilitation Program approved by IDA and theEDF in March 1980), which financed US$75 million worth ofequipment and other critical inputs;
(ii) allocation of foreign exchange to finance larger imports ofcurrent inputs of which there has been a serious shortage;
(iii) a series of rehabilitation projects, to be carried out inthe 1980's, principally in the major agricultural schemeswhere cotton is grown, including three projects alreadyfinanced by IDA with IFAD and AfDF for New Halfa (US$105million), White Nile Pump Schemes (US$54-million), and BlueNile Pump Schemes (US$67 million). A project for theremaining major scheme, the Gezira, is under preparation;and
(iv) policy reform and other actions such as institutionalreforms and revision of the incentive systems intended tostimulate greater production; the ARP provided funds tofinance studies needed to accomplish such reforms.
2.02 Three reports of particular importance to irrigated cottonproduction have resulted from ARP financed studies. They are: (a)"Study of Cost Recovery in the Irrigated Agricultural Sector"; (b)"Study of Cotton Marketing"; and (c) "Administrative Review of theIrrigation Sector ". These studies drew up recommendations for policyreform which may be grouped under four main headings:
i) Reform of cotton pricing mechanisms;ii) Improvement of cotton processing and marketing systems;iii) Improvement of cost recovery and reform of accounting
systems; andiv) Improvement of Government support and supervision of
parastatals.
Progress towards implementing these reforms is described in the followingparagraphs.
III. REFORMS OF COTTON PRICES
3.01 In June 1980, Government announced two far reaching reforms. Thefirst was to announce publicly, each year before harvest, a producer pricefor cotton. The second was to pay tenants their cotton incomes promptly ondelivery of seed cotton through the installation of individual accounts foreach crop. As a result, tenants would, for the first time in over half acentury, be able to estimate incomes from cotton reliably since distortionscaused by uncertainty over prices, unpredictable cashflows and adjustment
of non-cotton charges against cotton sale proceeds would be eliminated.This is expected to give them the opportunity to make rational decisions onallocation of effort between tending the cotton crop and other competingclaims on their time. Besides, tenants would hereafter be in a positionto lobby for and negotiate a fair price for cotton. During the 70s,overvalued (and sometimes discriminatory) exchange rates compounded bycommodity imposts denied growers the benefit of high and rising worldprices of cotton. A negotiated price should provide adequate incentivesfor tenants to grow more cotton in the short-run and a growing productionand revenue trend in the longer term.
3.02 The first announcement of cotton prices was made in December 1980For 1980/81, Government also introduced a bonus system under which tenantsachieving better than standard yields received additional compensation forthe difference between the actual yield and the standard. The tenantreceived the full price for the marginal yield without deductions forprofit sharing. Cotton prices for the 1981/82 season were announced inearly December 1981. These prices (typically) for Grade IV cotton will beLSd 64 per kantar for medium staple and LSd 90 per kantar for long staple,compared to an average of LSd 50 per kantar for medium staple and LSd 70per kantar for long staple, of the same grade, in 1980/81. LSd 7 perkantar will be deducted for ginning costs, compared with LSd 4.5 in 1980.Nevertheless the price for medium staple is still a substantial 25% abovethe 1980/81 level. In addition, some of the surpluses obtained frommarketing operations will later be paid to the tenant. These pricesreflect recent exchange rate adjustments but also take account of lowerinternational cotton price trends in 1981%82. Nevertheless these pricesshould provide adequate incomes and incentives for tenants at currentlevels of productivity and cost recovery.
3.03 A number of further reforms to help remedy price distortions weresuggested in the Marketing Study:
(a) Institutional arrangements for advising the Government onthe suitable level of prices to be announced each year.
(b) Establishment of a sound basis for the determination ofthe cotton price.
(c) Establishment of a Price Stabilization Fund to be used asinsurance to support cotton growers' income in years of lowproductivity or low prices. Incomes could be supported bytwo mechanisms: (i) paying tenants relatively higherprices when world prices are low; and (ii) subsidizing landand water charges so that production costs are lower whenharvests are poor.
3.04 Sudan Cotton Board. Despite the importance of cotton to theSudanese economy, there is no national level body responsible for thecotton subsector. The Cotton Marketing Study recommended that such aboard, the Sudan Cotton Board, be established, to be responsible for allcotton policy and related matters, including research and establishment
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of the cotton price. The establishment of this body would be supportedunder a proposed IDA Cotton Marketing Project.
3.05 Basis for Cotton Price. The study has recommended that thestarting point for calculation of seed cotton prices should be the f.o.b.price for cotton lint. The estimation of the f.o.b. and seed cotton priceswould be entrusted to the Sudan Cotton Board and would be based on fivefactors: (i) international prices, (ii) costs of production of othercrops, (iii) Government revenues, (iv) producer incentives and (v)elimination of cross-subsidization between producers. The Sudan CottonBoard would also advise on price and income stabilization measures.
IV. COTTON PROCESSING AND MARKETING SYSTEMS
4.01 Many ginneries are over 50 years old, and lack up to dateequipment and spare parts. The lint recovery rate of 34% is poor byinternational standards. A number of technical improvements would beundertaken under the proposed cotton marketing project. These include:
i) modernisation of ginning facilities, including introductionof additional cleaning equipment, automatic humidifiers andmechanical handling;
ii) covered storage facilities at the ginneries, expanded storagecapacity and equipment at Port Sudan;
iii) improvement of the grading system to include definition ofstaple length and measurement of fiber quality, andestablishment of a cotton testing laboratory.
4.02 Cotton is exported by the CPC which generally obtains favorableprices for cotton exports. However, improvements are needed so that it canoperate on more commercial lines. The introduction of some competitionwith the private sector in cotton marketing activities might help in thisarea.
4.03 The ACs, primarily responsible for production, also haveresponsibility for cotton ginning. While most of the ginneries are ownedby the ACs, a few private sector ginneries also operate on contract withthem. The possibility of expanding private sector ginning capacity needsto be explored. The cotton marketing study has recommended that ginningbecome the responsibility of a new autonomous body, the Ginning and GradingBoard so that ACs can concentrate on their primary function.
4.04 Government has reviewed the recommendations of the CottonMarketing Study and has taken decisions on them. The major recommendationsof the Study have been accepted. However, the establishment of a separateGinning and Grading Board has been deferred pending indepth examination ofthe entire issue by the proposed Sudan Cotton Board.
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V. COST RECOVERY AND ACCOUNTING SYSTEMS
5.01 In June 1980, the Government announced that the joint accountsystem would be abolished and replaced by an individual accounting system.Tenants would be charged for each input for each individual crop. This isexpected to take several years to implement since it would requiresubstantial strengthening of the accounting system. Accounts would be keptseparately for each tenant, and debits would be recorded for cash advances,inputs, services and land and water charges on a per feddan or a per kantarbasis. With effect from 1981/1982, the individual account system has beenintroduced on all schemes.
5.02 In May 1979, a system of water and management charges oncrops other than cotton (excluding sorghum) was introduced but had to bewithdrawn because of tenant resistance. In 1981, the Government finallynegotiated land and water rates with tenants. These were announced inDecember 1981 and will apply until the 1982-83 cropping season (see below).
Land and Water Charges 1981/82-1982/83- LSd/feddan -
Gezira Other Schemes
Cotton 28.5 36Wheat 14.0 24Groundnut 18.0 30Sorghum 7 (3.5 in 1981/82) 12 (6 in 1981/82)Vegetables 25.0 48
5.03 These changes represent the full cost of supplying water bygravity at Gezira (subject to the accuracy of cost measurement/estimateswhich are probably understated), but contain a large element of subsidy forthe other schemes, supplied by pumping. However, at present, tenants'incomes are so low that rates cannot be raised. It is expected that fullcharges can be levied once productivity rises, producer prices improve, andcosts are controlled more efficiently by parastatals. Provision could bemade for varying these charges inversely with yield and price levels, so asto protect tenant incomes in bad years.
5.04 The introduction of the water and management charge systemincreases the volume of individual tenant debt, and though better cottonprices improve the tenants' ability to pay, the establishment of sound debtrecovery mechanisms is fundamental for the success of the new system.Debt balances for cotton would continue to be recovered by deductions atsource since cotton sale proceeds are routed through the ACs. The difficultissue of debt recovery for other crops has yet to be resolved byGovernment. Debts for others could be collected through a volume chargecollected by the harvesting agency (public or private) where mechanicalharvesting exists. This would require tenants to preregister theirharvesting agency, and private contractors to be licensed. Alternativelythey could be collected through merchants who would also have to belicenced. A further proposal is the establishment of tenant credit units;these are envisaged in the recent IDA projects for the irrigation
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subsector. For the time being, these costs must continue to be recoveredwhen cotton disbursements are made to tenants.
5.05 In order for input costs to be levied accurately, it is importantthat the tenant registration lists be updated, and that tenants enter intoa new lease agreement where necessary . Covenants on establishment oftenant leasing arrangements, cost recovery mechanisms and establishment, ifnecessary, of tenant credit units are included in the Credit Agreements forthe Blue and White Nile pump schemes and New Halfa projects.
5.06 Reform of the ACs' accounting systems will require substantialtechnical assistance over an extended period. This is being provided inNew Halfa, Rahad, the Blue and White Nile rehabilitation schemes, and isenvisaged for the proposed Gezira Rehabilitation Project. Despite thedifficulties, progress towards reform of accounting systems andintroduction of improved cost recovery mechanisms has been substantial.
VI. SUPPORT AND SUPERVISION OF PARASTATALS
6.01 The Administrative Review study has suggested a number ofimprovements which are summarized below. Administrative reform involveseven more complex issues than does reform of pricing and accountingmechanisms; thus, most reforms are still under consideration by Government.An important decision taken by Government in November 1981 was toamalgamate the MAFNR and MOI into a single Ministry for Agriculture andIrrigation. Another notable feature was the establishment, through theARP (para. 2.01), of strong procurement capability within the Ministry ofFinance and Economic Planning with the establishment of a ProgramProcurement Committee.
6.02 Ministry Supervision and Guidance. One of the problems withproper administration of the ACs is the poor quality of supervision andguidance given so far by MAI, which needs much strengthening. This, inturn, requires reorganization of the accounting system to develop budgetinformation by outputs and programs, rather than by type of resourcecommitted such as salaries or services. In addition, there is need toundertake better analysis of the information developed under the revisedaccounting system and to provide more technical assistance for the ACs.While the AC chairmen should continue to have direct access to theMinister, the Ministry would undoubtedly have to provide much more supportboth to the Minister and to the ACs. This would call for a unit in theMinistry of Agriculture and Irrigation, staffed with competent specialists,to review and revise ministry accounting, to monitor and evaluate theperformance of ACs, to provide guidance for ACs and to evaluate the impactof Government policies on them. Provision has been made in the Blue Nileproject for staffing and financing the unit and action to establish thisunit should be accorded high priority. The ACs need to establish annualwork programs, through which available resources could be channeled towardsphysical program goals. These should be scrutinized by a steeringcommittee composed of the ACs, and the concerned ministries and agenciesand serve as a basis for committing financial, manpower and physicalresources to the corporation for the coming year.
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6.03 Joint efforts between the agriculture and irrigation sections ofMAI, ACs and ARC to improve coordination, benefit from research efforts,and establish improved systems of water management have been identified.In addition, the irrigation section of MAI needs to strengthen itsoperations in certain areas including maintenance of, and technicalassistance to, the irrigation systems. The creation of a single Ministryfor both Agriculture and Irrigation augurs well for closer coordinationbetween agriculture and irrigation activities and should be followed up byinstalling administrative mechanisms at the field level. One suchmechanism would be a field water management unit attached to each AC. Thisunit would be manned by trained water management specialists and would havebroad responsibility for proper water management in the schemes and fosterclose working relationships with irrigation authorities on one hand andtenants on the other. Training for both AC staff and tenants would be animportant responsibility of this unit.
6.04 Operation of ACs as Commercial Organizations. There are seriousdifficulties in operating commercial organizations, such as the ACs andCPC, under civil service procedures and regulations (paras. 1.15-1.17).The close ties of the ACs and CPC to the civil service system should beloosened. Care should, however, be taken to safeguard against laxity inobservance of financial discipline, once civil service controls arerelaxed. Management of ACs should provide adequate services and inputs inthe light of cost effectiveness information, for which they should be heldaccountable. AC managers should have commercial experience and be givencommercial incentives to improve administration. Tenants should beencouraged to participate more directly in decision-making by ACs.
6.05 Improved Accounting and Auditing. Without proper accounting forthe utilization of inputs and services by crop and by individual tenant,there is little incentive for tenants and ACs to use resources in a costeffective fashion (para. 1.17). The proper assignment of costs by cropsand individual tenant would stimulate tenants and ACs to economize on theuse of resources which do not produce profits or where profits are small.The introduction of the individual account system is an important step inthis direction.
6.06 The ACs are audited by the Auditor General's Office (AGO). TheAdministrative Review suggests that AGO is better suited for this task thanthe independent audit firms in Sudan; there are no international auditfirms established in Khartoum. However, the introduction of modern dataprocessing techniques would present serious problems to AGO. It mighttherefore be necessary for the AGO to seek assistance from internationalaudit firms in training its staff.
6.07 Use of Private Sector. Even if the ACs are encouraged to operateon a commercial basis, their many responsibilities will continue to place astrain on management, as they have in the past. Certain activities couldmore profitably be carried out by the private sector. An example is landpreparation, which, in the case of food crops, is largely carried out bythe private sector already. It is important, however, that contractors beable to charge rates for land preparation which cover all costs. At
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present, rates are fixed so low that in order to break even landpreparation can be done only in a perfunctory way.
VII. PROSPECTS FOR THE PROPOSED REFORMS
7.01 The reforms summarized above are ambitious and involvefundamental changes in the operation of the ACs and the relationshipbetween the ACs, tenants and other Government organizations. It isimportant that changes take into account, and work with, the socio-economicsystems prevailing on the irrigation schemes. There are many areas ofuncertainty. Some of the difficulties foreseen are mentioned below.
7.02 The Effectiveness of the Price Incentive. A major assumption inthe proposed strategy is that tenants will respond to higher prices byproducing more cotton, a crop for which Sudan enjoys a comparativeadvantage. However, little is known about tenants' preferred patterns ofallocation of time or resources. Higher revenues from a given cottonproduction could be spent on off-scheme interests or on livestock, ratherthan on investing more into cotton. Furthermore, as indicated above(para. 1.11), tenants tend to work little on the land themselves; mostlabor is hired. Manpower problems will remain if the incentive of laborersthemselves to produce more remains little changed. M4ore needs to beunderstood about tenants', sharecroppers' and laborers' motives andperceptions of the proposed changes. The need for close monitoring oftenant and labor behavorial responses is therefore very important andcapability for this should be built into the new advisory unit to beestablished in the M4inistry of Agriculture and Irrigation (para. 5.04).The University of Gezira might also be involved in this activity.
7.03 Debt Recovery. The joint account system, while it had manyimperfections, at least ensured that land and water charges were recoveredthrough deductions in the price tenants were paid for their cotton whencentrally marketed through a Government agency. The mechanism forrecovering debt from crops marketed privately is much less clear.Agricultural credit institutions throughout Africa have had a mixedrecord. At Rahad, where an individual accounting system exists, the debtsof the 13,000 tenants on the scheme amounted to LSd 11.7 million in1980/81. There is little chance of recovering these debts. There is nostigma attached to default on debts to the ACs and-thus social sanctionsagainst debtors do not exist. Legal sanctions are very hard to enforcewhen not supported by the community.
7.04 Therefore it may be necessary, in the end, to adopt a "secondbest" individual accounting system, with some in-built distortions, butwhich nevertheless would ensure that costs were in fact recovered. Afirst, and very important step, would be to ensure that cotton prices areadjusted upward to a level that farmers receive enough revenues to be ableto pay these charges. In the initial period, therefore, cost recoveryshould take into account anticipated yield levels and the level at whichcotton prices are set. Without adequate cotton prices, no cost recoverysystem can succeed.
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7.05 Institutional Reforms. Proposals to "hive-off" certainactivities from the ACs have to be regarded with caution. Such actionstend to raise the unit cost of services through higher overheads. Thesechanges involve building up new institutions and would generally needadditional highly trained, experienced manpower, which is increasingly inshort supply in the Sudan as departures to the Gulf continue. The reformsin the accounting system too will also require increased trained manpower.It is important that the institutional reforms do not run ahead of thecapacity of the already overstretched Government bodies to implement them.Reforms should therefore lay stress on improving management of existinginstitutions rather than on creating new ones.
7.06 Building Up the Private Sector. There is scope for strengtheningprivate sector activities in operations such as land preparation. Itshould be noted that land preparation so far undertaken by the privatesector has often been inadequate; ridging has been too low, hardpans havedeveloped, aeration has been insufficient. There is a shortage in theprivate sector, too, of trained operators, spare parts and workshop skillsthough the problem is less acute than in the parastatals. Aerial spraying,contracted to international companies, is probably not cost effective inincreasing cotton production. Thus care must be taken to ensure that theprivate sector has the capacity to operate these activities effectively.Indeed, building up such capability should be accorded priority.
7.07 Limitations in Production Expansion. Even if producers respondto incentives, and production increases as hoped, economic problems willremain for the Sudan. An increase in seed cotton production from 259,000tons in 1980/81 to 520,000 tons hoped for by 1984/85 would increase exportrevenues from US$ 125 million in 1981/82 to US$ 420 million (1981 constantprices). Imports, however, were US$1.5 billion in 1980/81 and are likelyto continue to grow. Thus, increased cotton production can only play onepart in national economic recovery. Furthermore, the Sudanese economicpicture is constantly changing, particularly with further discoveries ofoil. It is important that exploitation of this limited resource is notmade at the expense of neglecting productive use of agricultural land.
7.08 These "notes of caution" emphasize that there must be a sensitiveapproach to reform. Trying to do too much too soon could becounterproductive. All proposals should be flexible to changingcircumstances, and a rigid approach on any of the proposed changes could beself-defeating. Furthermore the proposed reforms outlined above must beaccompanied by technical improvements in land preparation, water delivery,cultivation, harvesting and processing if there are to be lasting increasesin productivity.
VIII. SUMMARY OF PRESENT STATUS OF REFORMS
8.01 Government has displayed remarkable courage and determination ineliminating constraints on cotton production. Measures taken so farinclude: elimination of dual exchange rates and adjustments to the valueof the Sudanese pound; abolition of export duty on cotton; announcement,before harvest, of adequate cotton prices; elimination of the Joint Account
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System and introduction of individual tenant accounts for each crop; promptpayment of cotton incomes to tenants on delivery of seed cotton; levy ofland and water charges for each crop; arrangement of all agriculture'andirrigation activities under a single ministry to foster coordination; heavyinvestments to arrest decapitalization on existing schemes through the ARPand projects for New Halfa, Blue and White Nile pump schemes; provision oftechnical assistance to improve efficiency of current operations onschemes; and the completion of a number of studies which would guide policyactions in the coming years.
IX. AGENDA FOR FURTHER WORK
9.01 It is important to recognize that most of the reforms introducedby Government require time to implement and call for systematic efforts tofoster an orderly transformation. After all, the areas covered are complexand involve changes in long established procedures and institutions. Closemonitoring of developments and quick responses to problems as they evolvehold the key to success in the 80s. Government and the Bank haveestablished a close and constructive dialogue on incentive andinstitutional issues during the past three years. Compromises might benecessary on many issues so that the momentum already gained is maintained.
9.02 Reforms in the accounting systems will take several years. Thosewhich should be foreseen include supplying annual statements to tenants ofcosts and revenues by crop, and establishing a mechanism for the efficientcollection of tenant debts from non-cotton crops without loading them ontocotton. As described earlier, this will be very difficult. Increasing theprovision of services to tenants by the private sector should help both tosolve the problem of debt recovery from the public corporations, and torelieve them of some of their responsibilities. Tenants should graduallyassume a more active role in the crop cycle. The ACs should be run on morecommercial lines; ties with the civil service should be relaxed andmanagers with commercial experience appointed. Better water management ofthe gravity system by both the irrigation sector of MAI and the AC's andbetter coordination between them will improve delivery of water, and othertechnical problems must be overcome.
9.03 With a shift in emphasis from policy formulation toimplementation, it is imperative that the Sudan Cotton Board (para. 3.04)and the advisory unit in the Ministry of Agriculture and Irrigation (para.6.02) be established without further loss of time. The former body is bestsuited to monitor progress in the area of incentives; the latter has acritical role to play as a catalyst in promoting institutional reforms andbringing about technical improvements.
9.04 Technical Improvements. Considerable emphasis should be given totechnical improvements during the next few years. Apart from a review ofpresent cropping patterns and systems, including development of mixedfarming systems, work should specifically focus on the following areas:
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i) Varietal improvement through research and modern breedingand agronomic practices, supported by seed production anddistribution programs.
ii) Improvement of cultivation, seedbed preparation, seedquality and crop establishment in order to ensure a correctplant population.
iii) Timely provision of fertilizers at correct dosages tomeet crop needs.
iv) Timely weed control by a combination of chemical, machineand manual techniques to ensure a cleaner crop up to the timeof close-in.
v) Development of pest management techniques based on regularpest inspection and a combination of available practices --agronomic, varietal, biological and chemical -- to reducedamage to economically acceptable levels and to reduceenvironmental degradation. This should also provide forenforcement to avoid effects of poor control on neighboringtenancies.
vi) Improvements of farm water management, in particular throughprovision of adequate drainage to remove surface water afterrains and also excess irrigation water.
vii) Staffing and training of support services in order to improverate of application of technologies adopted.
9.05 Gezira Rehabilitation and Modernization Project I. The aboveproject, now under preparation, is expected to finance and support a numberof studies on the technical improvements mentioned in the previousparagraph. Besides, under the project, a pilot farm is envisioned, wheretesting of technical improvements would be carried out under farmconditions. Again, activities funded by the project would also addressmatters such as study of tenancy reforms, enlargement of the role of theprivate sector in scheme operations, problems in the integration of
'livestock in the cropping system, the appropriate area-mix for long andmedium staple cotton on the schemes, mobilization of labor particularly forpicking of cotton, role of mechanization in cotton harvesting, comparativeadvantage of different crops and institutional changes involved in theprogressive transfer of decision making to individual tenants or groups oftenants. Further, the project would seek to establish a sound system andorganization for monitoring and evaluating sociological responses tovarious sectoral policies and project actions. And, of course, the projectwould lay emphasis on strengthening research programs. On presentindications the project can be expected to trigger technical and furtherinstitutional improvements just as the ARP, through studies and technicalassistance, provided the impetus for major reforms in the areas of bothincentives and institutions in the cotton sub-sector.
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9.06 Reinforcement of the Private Sector. The private sector isexpected to take over an increasing number of activities at present carriedout by the AC's, especially in land preparation and delivery of inputs.Mechanisms for strengthening the private sector and for ensuring thatservices are provided adequately need to be identified. There is alsoconsiderable scope for private initiative to be exercised throughdelegation of decision making in several areas to small groups of tenantsor individual tenants. Reform of the tenancy system could bring thisabout. The question of transfer of small pump schemes to privatemanagement also needs to be studied.
9.07 Development of Rainfed Cotton. As cotton production expands inthe irrigated sector, it will be possible to devote resources to therainfed sector, where cotton yields have been very poor. This averagedonly 0.1 to 0.2 tons per feddan through the 1970s. Nonetheless, withadequate yields and rational price relationships, cotton in the rainfedsector remains an economically attractive crop. Work will build on the"Study of Expansion of Rainfed Cotton in Sudan" produced by consultantsfinanced under the IDA Technical Assistance I project and could includedevelopment of technical packages, establishment of the institutionalframework and possibly, identification of a rainfed cotton project.Government is according priority to the formulation of a comprehensivestrategy for the development of the rainfed sector and development ofrainfed cotton will have to fit into such a strategy.
Concluding Remarks
9.08 Since embarking on the Export Action Program, designed to doublecotton production during the 80's, Sudan has taken remarkable strides inreforming the incentive framework and arresting decapitalization. The
focus now shifts to mobilization of external capital assistance, efficientimplementation of new price-cost-income policies, elimination of managementand organizational slack in order to benefit fully from new investments andimprovement of technical packages. Even through cotton productionincreased in 1981/82 by more than 25% over the previous year's level, it istoo early to assess EAP's production impact. Macroeconomic constraints,reflected in shortages of fuel, other essential imported inputs and anacute lack of domestic currency resources, could impede progress. Whileprogress of reforms during the past three years should give rise tooptimism, the formidable macroeconomic and implementation problems yet tobe resolved should not be underestimated.
Trends in production in Irrigated Agriculture, 1970-80
