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| Sunday, 7 November 2004 |
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Business |  |
| News Business Features Editorial
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Rural development - let's avoid a haphazard and hurried approach by Lloyd F Yapa The government has very wisely decided to develop rural areas and has launched a number of programmes for this purpose. The obvious reason for this decision is that over 70% of the people of this country live in villages and grinding and rampant poverty prevalent among them could be a drag on the economy due to the low demand for goods and services from such areas, besides being a hot bed of social tensions and so on. A recent TV discussion attempted to highlight the work contemplated. Some of the older listeners to the discussion may have got the sinking feeling, the disastrous DDC ( Divisional Development Council) experience of the seventies is in danger of being repeated, although a university professor present tried bravely to infuse some professional thinking into the discussion dominated by some pompous politicians. The DDC Effort of the seventies The intentions behind the DDC programme were quite sound and logical - create mainly non-farm employment opportunities in rural areas to enhance incomes to alleviate persistent poverty. Despite the enormous effort and resources expended by the then government, this laudable effort was a failure due mainly to the fact, it unintentionally ignored certain basic principles of conducting business. These include a) the existence of an unsaturated demand for the product or service selected, b) being customer responsive or the ability to meet an unsatisfied need of a group or segment of consumers and c) being technically and commercially feasible, which means that it should not only be possible to produce the products/services contemplated but also the sales should be able to generate a sufficient return to cover costs and a margin of profit to the owners over the life span of the assets. Waste of resources and much misery could be avoided by examining these aspects before the commencement of a project, preferably recording them in a business plan consisting of a) a section on demand/market analysis describing the quantity, quality and prices of the unsatisfied portion of demand, the characteristics of customers, distributors and competitors, b) an operations plan explaining the objectives of stakeholders including the owners, strategies and activities as to how products and services are to be developed/produced and marketed to realize the objectives and c) a financial section consisting of capital requirements, costs and benefits/profits. The DDC projects were implemented after approval of a simple project report. But they did not cover the first two areas; it was erroneously assumed government officials could run these projects. No thought was given to the commitment required to manage the projects profitably over its life span. Usually, this commitment comes only from the ownership of assets. Regional Development plans When projects of a commercial nature are to be artificially grafted on to a traditional setting in this manner, it is necessary go beyond this sort of preparation. The professor present at the discussion referred to the necessity of formulating a (regional) development plan (which should consist of objectives in quantitative terms, factors which help in realizing the objectives, factors which stand in the way, strategies to build on the impelling factors and to overcome the impeding factors as well as activities to implement the strategies, so that the plan can be effectively implemented and monitored). Such a regional plan should be prepared for a natural or geographical region like the arid zones, the perennially wet areas, the mountainous and the intermediate areas and so on before the development projects are conceived, especially to check whether certain inputs are available in abundance (and the outputs can be sold). If so, there may be a possibility of reaping economies of scale, which is necessary to reduce production costs and undertake further processing for value addition, to earn premium prices. The plentiful occurrence of 'kohomba' and 'kitul' trees in certain regions was mentioned at the discussion. It might also be possible to grow certain other high value crops like cashew and grapes in the dry areas and oranges/citrus in the intermediate zones like Bibile. These are crops, which lend themselves to further processing. It is necessary to prepare, what are called budgets or profiles indicating costs and returns with any export possibilities, for each of these crops. This applies to minerals, any intermediate materials/products and services with supply and market potential. Business plans can then be prepared for a few of the most profitable crops or materials. The academic present mentioned, that it is necessary to study the social set up as well in addition to the inputs, outputs and the economic activities practised in the area. This information is absolutely necessary, as the manner in which the projects are to be run ie the scale, institutional forms, incentives and so on will be determined by the findings of such an analysis. The analysis of this data may also indicate the possibility of inducing the small farmers of a region to form companies, so that cropping and further processing could be undertaken on a large scale by them on business lines or the occurrence of thriving urban centres with industries and services linked to the main activities of the area . The latter are natural clusters, that could be developed into growth nodes by the government through the provision of infrastructure and other relevant urban services, to heighten economies of scale and to motivate people to live close to their villages. A couple of farmer companies connected to a few urban clusters could be tried out on a pilot basis to demonstrate their feasibility. Scattering such well-located clusters could create ripples of development in rural areas. What this article pleads for is a professional and sequential approach utilizing the services of sociologists, economists, agronomists, urban planners, management/ marketing specialists etc towards the contemplated rural development programme, as a haphazard and hurried plunge could not only result in the waste of precious resources but also create a vicious social backlash. |
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