Please note - this article was originally published on the id21 website which has now closed. This and other articles produced by id21 were archived by Eldis in 2009 and are not actively maintained. If you find links and references which are no longer valid please email eldis@ids.ac.uk.

Encouraging private investment for agricultural growth in Bolivia

Bolivia is one of the poorest countries in Latin America with 63 percent of the population living in poverty. This rises to 80 percent in rural areas, where women and minority ethnic groups are particularly poor. Rural development is essential for poverty reduction in Bolivia and sustained growth in agriculture is central to this.

Research plays an important role in the development of appropriate agricultural technologies. However, investment in this area has fallen over the past decade, corresponding to a decline in agricultural production. Research from the Natural Resources Institute of the University of Greenwich, UK, examines a range of mechanisms for increasing private-sector investment in agriculture research, focusing on Bolivia. Three broad categories of potential mechanisms for increasing private-sector investment in agriculture research are examined: taxation schemes, co-funding arrangements and output-based approaches. The research also identifies ways to remove or lessen the existing limits on private sector investment.

A new organisation, the Sistema Boliviano de Tecnología Agropecuaria (SIBTA), has been set up in Bolivia to support the agricultural research and technology industry. SIBTA aims to increase competitiveness as well as production. SIBTA manages funds through a competitive grants scheme and has already generated some successful private sector involvement. However, high transaction costs, uncertainty over how to handle intellectual property rights and the complex legal and regulatory environment are constraining further private sector investment in agricultural research. The researchers also found limited awareness of SIBTA amongst research institutes and private sector companies.

The research argues:

High transaction costs deter both resource-rich and resource-poor organisations from participating in investment opportunities.
Some multinational companies are willing to make their products available for use in poorer countries, provided their commercial interests are protected.
There is little contact between university research departments and private research organisations.
Private sector organisations can be usefully classified into four broad groups, based on their resources and their motivations to invest in agricultural research for development.
There is a preference amongst private sector companies for compulsory tax schemes rather than voluntary ones.

Different approaches are required to encourage greater investment from the private sector. Compliance – the awarding of contracts based on meeting certain criteria – or a mixture of compliance and competitive co-funding schemes, is most suitable for Bolivia. A flexible approach to taxation, research projects, output-based mechanisms and intellectual property rights should be directed towards achieving pro-poor outcomes. The research suggests:

Application procedures should be made simple and transparent.
Payments for projects should be made quickly to maintain interest and involvement.
The promotion of links between SIBTA and microfinance institutions will identify those institutions that can provide fair loans to poor farmers, particularly women farmers.
Tax incentives should be considered for companies that invest in services targeted at poor people.
Promoting the opportunities and benefits of private investment will raise awareness of the scheme.
Financial support should be provided for co-funded schemes, emphasising employment opportunities for poor and marginalised groups.
Adequate attention should be given to the regulation of emerging industries and basic service provisions for workers.

Source(s):
‘How can the poor benefit from private investment in agricultural research? A case study from Bolivia’, Development in Practice, 15: 3 and 4, by Ana Marr and Tim Chancellor, June 2005 Full document.

Funded by: Greenwich University

id21 Research Highlight: 26 January 2006

Further Information:
Dr Ana Marr
Natural Resources Institute/Department of Economics
University of Greenwich
Greenwich Maritime
London SE10 9LS
UK

Fax: +44 (0) 1634 880 077
Contact the contributor: a.marr@gre.ac.uk

Natural Resources Institute, UK

Views expressed on these pages are not necessarily those of DfID, IDS, id21 or other contributing institutions. Articles featured on the id21 site may be copied or quoted without restriction provided id21 and originating author(s) and institution(s) are acknowledged. Copyright © 2009 IDS. All rights reserved.

id21 is funded by the UK Department for International Development. id21 is one of a family of knowledge services at the Institute of Development Studies at the University of Sussex. id21 is a www.oneworld.net partner and an affiliate of www.mediachannel.org. IDS is a charitable company, No. 877338.