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5. Strategic options for improving food security under water scarcity

As discussed above the ability of many NE countries to increase food production is constrained by water scarcity and sharp annual rainfall fluctuations. FAO projections indicate that water shortage will remain a major constraint for the expansion of irrigated land, at least in the medium term, as only a modest increase of 5 percent (2 million hectares) is expected between 2000 and 2010, provided that adequate capital is available.

Irrigation development during the last four decades significantly enhanced food security, although it was not always economical as it was highly subsidized. Growing food security crops (cereals) without subsidy would not be economically feasible for most countries of the region. Given the above policy diagnosis, what can be done to enhance food production under water constraint and is virtual water a policy option for countries facing budgetary and marketing constraints and expected rise in world costs of grains?

The region needs to chart a new irrigation strategy, marked by departure from previous approaches, and to address the underlying causes of the problems rather than manifest symptoms. Often policy reforms are highly politically charged as different interest groups see the modality of approach differently. The success of reforms will depend on how actual implementation takes place.

Water demand management refers to improving both productive and allocative efficiency of water use. In practical terms, it calls for an integrated use of conservation practices and pricing to influence water use - both the total level of water use and the pattern of use. Adopting demand management policies of water use replaces the need for additional water supplies and can forestall certain supply costs. However, water demand management programs also have their limitations. Therefore, the appropriate use of water demand management is not to replace supply-side sources and investments but rather to encourage a cost effective mix of supply and conservation resources2. This mix comprises the following aspects which are explained in the following sections:

5.1 Enhancing water conservation and productive efficiency

Improvement of water productivity, through adequate water demand management, should constitute the basis of any integrated regional strategy aimed at improving living standards of the populations, poverty alleviation and ensuring a certain level of food security in the region. Water deficit and the reliability level of water supply, associated with competition between sectors, constrain food security in nearly all countries of the region which economies rely essentially on agriculture, and constitute a real hindrance to their development and social stability. In addition to the efforts for mobilizing the remaining available water resources, the focus should be on the adoption of policies and accompanying measures aimed at optimizing agriculture water productivity. The supply management policy, based on investments in infrastructure, subsidies and management by the public sector, should lead way progressively to demand management policies, based on more efficient irrigation, enforced technical support services and involvement of farmers in water management and maintenance of their irrigation schemes.

The regional water demand management strategy would be based on the following domains or axes of intervention:

5.1.1 Improving water use efficiency under irrigation

Countries of the region have invested in irrigation over the past half century, with varying levels between countries. Where land and water are available, large irrigation schemes have been established requiring heavy investments, such as in Pakistan, Iran, Turkey, Egypt, Syria and Morocco. Small and medium schemes were also established in all countries. However, recent assessments show that performance of irrigation in terms of water productivity and irrigation efficiency is low, as a result of bad irrigation water management. Surface irrigation methods still prevail and account for 80-90% of the irrigated area (98% in Iran, 96% in Tajikistan, 87% in Morocco, etc.) Surface irrigation methods coupled with bad practices are resulting in the loss of large amounts of the applied water. Modern irrigation methods such as sprinkler and localized have been introduced in the region, but they still account for limited areas with the exception of Cyprus and Jordan where the total irrigated areas are small. The Gulf countries, particularly Saudi Arabia also have more than 2/3 of their irrigated areas equipped with modern systems, particularly central pivots. However, even where these systems have been introduced, their efficiency is generally low in comparison with the potential because of bad on-farm management. The overall irrigation efficiency in the region is estimated at 45-50%, inferring to the loss of nearly 50% of the amounts of water used for irrigation (table 8). Although part of this water loss is recycled, the rest is lost irreversibly; in addition, it results in lowering of water quality, degrading the environment (soil and water), and decreasing profits for farmers.

The total water loss from irrigation in the nine countries is more than 110% of the total actual renewable water resources in Pakistan and around 28% of the total annual renewable water resources (885 bcm) in the Near East region.

The cost of water and the adoption of modern technology constitute a real issue in many countries of the region. The adoption rate of a system will depend to a large extent on the rate of return on each technology. The financial returns of new technology are function of the amount of water saved and the cost of water to the farmers. For instance, in Yemen, the high investment cost of $ 3,100 to $ 4,000 per ha is difficult to recover with a low value of saved water resulting from high diesel subsidies. The cost of produce is the other factor determining the level of investment in modern irrigation technology. When the profit made by farmers from selling their production is low, they are less inclined to invest.

Table 8 - Estimated water loss under irrigation in selected during the year 2000

Country Irrigation withdrawal (bcm) Irrigation Requirements (bcm) Irrigation Efficiency (%) Water lost (bcm)
Algeria 3,94 1.45 37 2.49
Egypt 53,85 28,43 53 15,42
Sudan 36,07 14,43 40 21,64
Iraq 39,38 11,20 28 28,18
Syria 18,93 8,52 45 10,41
Turkey 27,86 11,27 40 16,59
Iran 66,23 21,06 32 45,17
Afghanistan 22,84 8,75 38 14,09
Pakistan 162,65 72,14 44 90,51
Total 431,75 177,25 41 254,5

Worldwide, irrigation accounts for 80 percent of freshwater withdrawals in developing countries. One way for such countries to expand their irrigation is by improving water use efficiency.

Box 1

Efficiency of water use

The concept of efficient water use in irrigation includes the conveyance efficiency, field efficiency, water use efficiency and economic efficiency of water (water productivity) amongst others. There is a tendency to consider water use and allocation in a holistic manner because of the highly integrated nature of water use systems involving different users. This entails establishing the water balance of river basins. This may require analysing systems' efficiency at different levels. Thus, measuring water use efficiency can be complex and the high degree of external effects may make it more difficult.

While the concept of efficient water use is complex (Box 1) and difficult to achieve in practice, improving the efficiency of irrigation water use can contribute significantly to meeting growing demands. (Seckler et al., 1998) estimate that the amount of water saved by achieving an irrigation effectiveness of 70 percent in total gross irrigated area by 2025 could meet about one-half of the increased demand for additional water supplies in the 1990-2025 period. However, the conceptual and practical challenges to achieving such efficient water use are equally large because water has multiple users, uses and externalities. Better irrigation scheme organization and management and the rehabilitation and upgrading of existing schemes are generating real gains.

Technical report (FAO, 2000a) estimates the irrigation efficiency of a group of 93 developing countries to range from 26 percent in areas of abundant water (Latin America) to 50 percent in the Near East/North Africa region where water use calls for higher efficiencies. The forecast is for irrigation efficiency for these countries as a group to rise from 43 percent in 1995/7 to 50 percent by 2030.

In the Near East region, most countries where irrigated agriculture is already important, water for expansion will have to come mainly from efficiency savings on existing schemes. Given the need to boost agricultural productivity and growth in these countries, the importance of investing in water saving technologies and practices is clear.

5.1.2 Rehabilitation and upgrading of irrigation schemes

Given the need to use irrigation water more efficiently on existing schemes, it follows that the bulk of new investment should focus on rehabilitation and upgrading rather than on new schemes. Indeed, it is now often difficult to distinguish between new development and the extension of existing schemes. Projects are usually a combination of the above aspects. This is of little consequence providing that investments are economically viable and enhance scheme functioning and sustainability. However, it is important to avoid misconstruing rehabilitation for deferred maintenance without correcting the problems causing unsustainable maintenance in the first place. If not, this could lead to repetitive funding of maintenance from external sources.

In order to maximize returns, scheme improvement should incorporate lessons from previous irrigation developments and not simply rehabilitate projects to old standards. Improving performance includes repairing and modifying structures and enhancing scheme management and associated institutional arrangements. Good planning and implementation are prerequisites for high investment returns. This is particularly relevant for complex, multi-dimensional irrigation schemes usually involving a number of interested parties. It is counterproductive to skimp on resources needed for the preparation, appraisal and implementation of such projects. Unforeseen problems that arise during implementation should be resolved promptly even at the expense of extending implementation. Confirmation comes from the evaluation of World Bank irrigation projects which showed that variations in implementation time (whether overall time or delay) had no effect on economic returns (Jones, 1995).

The emphasis on rehabilitation and upgrading can contribute to improving returns on new investments in irrigation in a number of ways. First, efficiency gains do not only make water available for new irrigation. By reducing over-irrigation, efficiency gains also attenuate the principal causes of land degradation on irrigation schemes, i.e. waterlogging and salinization. This is important as waterlogging and salinization significantly reduce irrigation performance in some countries. Second, because a considerable part of the extensive investments in irrigation during past decades are now regarded as sunk costs, incremental investment in improving scheme performance will yield high rates of return. Confirmation of this comes from the competitive economic rates of return obtained with irrigation projects that include a substantial portion of rehabilitation. Third, increased productivity and growth resulting from improving schemes will reduce the urgency to develop new irrigation to meet growing food needs. This will provide more time to thoroughly appraise and plan new irrigation development that will become economically less attractive if development costs increase and the prices of agricultural commodities stagnate or decrease. It will also allow more time to incorporate lessons from existing projects into new development.

Another advantage of rehabilitation is that project unit costs are usually low, a fact which increases the likelihood of economic viability (Jones, 1995).

The need to fund rehabilitation from external sources reflects low economic returns from first generation projects. At the same time the large volumes of sunk costs in these schemes offers the opportunity to place them on a sound economic, social and environmental footing while assuring rates of return comparable to other investments.

5.1.3 Improving operation and management

Inadequate operation and management of irrigation schemes is often a major cause of poor project performance and weak sustainability. Many governments have found it increasingly difficult to finance the costs of irrigation operation and management as well as being effective providers of water services to large numbers of small farmers. These factors have led to infrastructure deterioration, shrinkage of area irrigated, maldistribution and wastage of water, and advancing waterlogging and salinity.

Many governments are attempting to transfer management responsibility for irrigation systems from government agencies to farmers organized into water users associations (WUAs) (IWMI, 2000). Consensus is emerging that operation and management problems, scheme maintenance, irrigators' ownership of their systems and cost recovery are interrelated. Evidence is accumulating that comprehensive yet pragmatic approaches that include the above aspects can overcome organization and management problems.

The keys to these unusually complex, interrelated problems reside in the principles of financial autonomy and irrigator participation in organization and management by means of viable WUAs. The most promising route to improvement lies in making irrigators responsible for their own organization and management and in providing them with the requisite technical support particularly regarding group formation and the skills needed for effective scheme management. There is a considerable amount of experience about the circumstances that encourage irrigators to create effective and durable groups (Ostrom, 1992). One clear lesson seems to be the importance of recognizing that group members have to bear costs as well as receive benefits.

One of the prerequisites of such an approach is government willingness to devolve. Global experience suggests that irrigation management transfer on a large scale has been most successful where: the irrigation system is central to a dynamic, wealth-creating agriculture; the average farm size is large enough for a typical or a significant proportion of the command area farmers to operate like agri-businessmen; backward linkages with input supply systems and forward linkages with output marketing systems are strong and well-developed; and the costs of self-managed irrigation are an insignificant part of the gross value farming output (IWMI, 2000)..

An important principle underlying the privatization of irrigation schemes is that of water as an economic good. While water is an economic good in most cases, (Perry et al., 1997) point out that "the question is rather whether it is a purely private good that can reasonably be left to free market forces, or a public good that requires some amount of extra-market management to effectively and efficiently serve social objectives". The answer to this lies in value judgments and their application to different conditions of time and place. While privatizing water in the sense of giving farmers and markets a greater role in both the financing and management of irrigation may be a promising approach, it is also necessary to satisfy basic needs criteria before optimizing economic returns in terms of consumers' sovereignty. (Perry et al., 1997) propose a sequential set of preconditions for the beneficial introduction of market forces in water allocation and use.

The gradual and selective privatization of organization and management (and other aspects of irrigation) shows considerable promise as a way of improving scheme viability and sustainability. Investment in privatization measures has produced encouraging results.

5.1.4 Improving drainage and reducing salinity

Drainage management is key to sustainable irrigation, reduction or stagnant yields in many big irrigation schemes (Pakistan, Iran, and Syria) are attributed to poor drainage. Drainage of irrigated land serves two purposes: to reduce waterlogging and, equally important, to control and reduce salinization that inevitably accompanies water logging in the semi-arid and arid regions. Proper drainage also allows crop diversification and intensification, the growth of high-yielding varieties, effective use of inputs such as fertilizers, and mechanization and can be the main driver for enhancing productivity and food security situation in the medium to long term.


There is also a need to keep a minimum drainage flow for environmental reasons. In Egypt, the minimum drainage outflow can be reduced by about 4.5 bcm to about 8.0 bcm. Reducing drain flows below this will probably have unacceptable ecosystem, productivity, and/or human health consequences.

5.1.5 Improving water productivity under rainfed agriculture

About 70 per cent of the region's areas are arid or semi-arid where low and erratic rainfall severally restrict food crop productions and cause production instability. Rainfed lands, particularly in the 300 mm and above, offer considerable potential for increased wheat production. Typically, small farmers in these areas exhibit conservative attitudes and are prone to take very limited risks. Their perceptions are essentially influenced by their observations of the distribution and intensity of rainfall. Near East rainfed cultivable land with fluctuating annual rainfall less than 250 mm cannot be competitive, as shown by FAO recent work in Kazakhstan, to produce strategic crops such as wheat and barely without irrigation. Favorable conditions for wheat production exit in the regions where rainfall intensity is more than 350 mm per year. Wheat production in these regions is quite competitive, profitable and carries sizable comparative advantage under both semi-drought and favorable conditions.

In these les-favoured areas, farmers operate under low input/low output production conditions. Improving the production system and introducing water conservation techniques and supplementary irrigation can result in yields competitive with those under irrigation and at times more cost effective to farmers. Small-scale farming can be productive in marginal rainfed areas if supplementary irrigation is available to overcome short-term droughts which are critical to the crop and reduce yield considerably. If there are cost-effective ways to store water before critical crop stages and apply it when the rain fails in these critical stages, crop production can be considerably increased.

Land improvement techniques and integrated watershed development have shown promising results. They should be a key component of development strategies in less-favoured rainfed areas in certain countries. Such investments can yield acceptable economic rates of return with direct benefits for participants. Where the evaluation takes their social and environmental impacts fully into account their returns may exceed those of other agricultural investments. Nevertheless, because the shortage of water limits the production potential of most less-favoured areas, their contribution to overall food grain production and food security in most countries will remain relatively modest. High-potential areas with irrigation will continue to be the breadbaskets for most developing countries.

There are number of conclusions and policy recommendations that can come out of this analysis to support future policy to improve rainfed agriculture. The rainfed lands in the 250 mm and above rainfall offers considerable potential for increased wheat and other cereal production. For farmers to grow or not to grow, and invest in variable cost depends in essence on the reduction in risk factor to the minimum. The farmers need to be supported to reduce this risk and achieve production potential.

5.1.6 Using non conventional water for irrigation

Reducing the pollution loads of water used by farms, industries and urban areas would enable much more of it to be re-used in irrigation. There are enormous potential benefits to be gained from the use of wastewater for irrigation. As an example, a city with a population of 500,000 and a water consumption of 120 liters/day/person produces about 48 000 m3/day of wastewater (assuming 80 percent of the water used reaches the public sewerage system). If this treated wastewater were used in carefully-controlled irrigation at a rate of 5000 m3/ha/year, it could irrigate some 3 500 hectares.

The fertilizer value of the effluent is almost as important as the water itself. Typical concentrations of nutrients in treated wastewater effluent from conventional sewage treatment are: nitrogen, 50 mg/liter; phosphorus, 10 mg/liter; and potassium, 30 mg/liter. At an application rate of 5000 m3/ha/year, the fertilizer contribution per year of the effluent would be: nitrogen, 250 kg/ha; phosphorus, 50 kg/ha; and potassium, 150 kg/ha. Thus all the nitrogen and much of the phosphorus and potassium normally required for agricultural crop production would be supplied by the effluent. In addition, other valuable micronutrients and organic matter contained in the effluent would provide additional benefits. An added benefit is that because most of these nutrients are absorbed by the crop they are removed from the water cycle and hence play no further role in the eutrophication of rivers and the creation of dead zones in coastal areas.

Due to the different nature of this water (its load of mineral, organic and biological constituents), its reuse should be carefully administered and professionally monitored and managed to check its potential risks and threats to the soil, water, crops irrigated with it, as well as to the whole environment. Technology and management tools to eliminate all these risks and to allow safe re-use of the treated water are now available, but technical assistance and regional cooperation are still needed to transfer and adopt the technology.

5.2 Improving allocation efficiency

The problems of water scarcity, groundwater depletion, pollution, waterlogging and salinity are symptoms of a much deeper problem embedded in policy, institutional and market failures for the development and management of water resources in the region. Policy failure is attributed to low cost recovery used in producing a commodity. The institutional failure is due to lack of well-defined property rights, improper regulatory frameworks and open access that encourage depletion of natural resources such as groundwater for which the user does not pay the cost. Finally, market failure refers to the existence of natural monopoly and other external cost placed on agriculture and water sector. The policy instruments to correct these policy and market failure range from outright area restriction to letting market signals dictate the supply response. The most commonly used economic and non economic tools include institutional instruments (property rights, research/information), command and control, economic instruments (costs, taxes, subsidies) and innovative instruments (tradable permits/rights/quotas, differential fees, offsets, environmental charges/rebates, performance bonds).

5.2.1 Incentives to reallocate water

As agriculture and the rural sector use more than 90 percent of the water and as scarcity of water grows, increasing demand for agriculture to release water to other competing demands puts long term agricultural growth in question and the related food security issues. Among other solutions, this calls for improving the "allocative" efficiency of water use. There are two types of allocative efficiency: 1) "Inter-sectoral allocative efficiency", achieved by allocating water away from an economic sector or activity that has a "low return to water", usually agriculture, to another economic sector or activity that has a higher "return to water"; and 2) "Intra-sectoral allocative efficiency", achieved by allocating water within a given economic sector, usually at the level of the production unit (farm of factory), away from a productive activity with a low "return to water", to production with a higher "return to water".

Inter-sectoral allocative efficiency

Maximizing water productivity means not only maximizing agricultural production per drop of water but also maximizing the number of rural jobs that can be created with limited water resources. Broadly speaking, the situation in most countries is that, while by far the largest share of available water is utilized by agriculture, the benefit/cost ratios are in the opposite direction. Non-agricultural users draw much higher benefits from water use and are more willing, and often capable, to pay much higher costs. Agricultural users draw fewer benefits and resist higher water charges. The differences are very substantial: per unit of water used, industrial users, it is estimated, draw benefits up to 50 times as high as agricultural users. For each unit of water delivered to the end users, water charges generally recover a much larger share of the costs from non-agricultural uses, leading to cross-subsidization of some uses at the expense of others.

Yemen provides a good case where the current imbalance between demand and supply of water results in acute shortage of water for domestic use. As a result, the private sector (water tankers) is providing the service by transferring water from agriculture and selling it to consumers in the cities, particularly Sana'a and Taiz. The farmers are being encouraged to transfer their water rights to private water companies, with a compensation for the loss of their rights.

The enormous cost differential will continue to put additional pressure on agriculture to release water from low value use to high value use, such as for domestic and other purposes. This translates into the simple fact that, in the future, agriculture sector will have to use less water to grow more in meeting the food security needs.

The obstacles to applying these procedures on a wide scale include: 1) the lack of a clear definition of water rights and their marketability; 2) the lack of a widespread perception of the true value of water in the present circumstances of declining availability; and 3) the lack of clear policies on the long-term role of the private sector in supplying water to urban areas.

Intra-sectoral allocative efficiency

When water is used for crop production, low water costs may permit the cultivation of high water consuming crops, which cannot be economically grown if water commands a high cost. Thus the cost of water may be a factor which determines the cropping pattern of an irrigated area and farmers' capacity to produce certain crops, particularly popular food-crops. Crops such as rice, for example, require large amounts of water, and are often produced where the cost of irrigation water is low.

FAO has developed spreadsheet model that assesses possible crop shifts, when water is evaluated at its opportunity cost. The approach is used to assess the private and economic profitability with different water cost regimes, when policy (taxes or subsidies) and market distortion (government intervention) are removed in producing commodity. For instance, in Yemen (figure 1), when water is valued at its opportunity cost, it provides incentives to farmers to switch to crops that bring high return per cubic meter of water. The return on cubic meter of water is highest for qat, which resulted in expansion of its area from 8,000 ha in 1970 to 89,000 ha in 1995. The expansion of qat cultivation in some provinces of the Highlands has been entirely at the expense of grain, particularly wheat and barley, thereby necessitating increase in food imports and rising cost of providing food security at national and household levels. Many similar examples exist in the other countries where water tariffs are practiced and farmers are free to grow crops depending on the economic returns they get from them. In fact, as soon as water tariffs come in play or where farmers have to support pumping cost, crops which return do not allow for supporting water charges and generating a benefit start to be discarded from the cropping patterns.

The common feature of irrigation schemes throughout the world has been to subsidize the cost of water sold to farmers. This causes inadequate resources for system maintenance, on one hand, and excessive demand for water, on the other. If the cost recovery rate was raised, farmers would have to adjust their cropping pattern and their technologies, so as to demand less water and/or accept fewer benefits from irrigation. This may however have adverse effects on the production of some crops of national interest.

5.2.2 Polluter should pay to clean water

Although water quality is not the focus of this presentation, clearly sustainability requires that water quality not be degraded to the point where it cannot be safely used. Externalities in the form of water pollution have been regulated by the state, as might be expected. The efforts to control pollution have largely been command and control in the most countries, but more economic and innovative approaches have been taken in some countries.

Command and control regulations have generally been in the form of either emission limitations or treatment specifications or both. In most cases, only point sources are regulated by these measures, since non-point sources are very difficult to identify and to monitor. Such controls have been relatively effective in the U.S. and elsewhere in limiting the amount of pollutants from point sources. Examples are the regulation of the emissions of pollutants from municipal treatment plants and industrial sources, as well as the requirements for specified levels or types of treatment. Whether the enforced treatment levels are economically efficient (that is, whether the benefits to treatment are equal to the costs) is not always clear. In fact, the cost of treatment technology imposed is so high that either the regulations are relaxed (as in the case of the U.S.) or ignored (as in many developing countries).

Taxes and fees: Effluent charges (taxes and fees) have been used in Europe with good results. However, these charges have also been levied on point sources only, because of the high transaction costs associated with regulating and monitoring non-point sources. This approach does however allow the polluter the choice between treating and paying the taxes or fees (so long as the taxes or fees are based on the pollutant[s] emitted), making maintaining water quality more cost effective than command and control approaches. Obviously, determining the amount of the social cost, to which the fee or tax is set, is a more difficult problem and one that has not been adequately addressed, even in developed countries.

5.3 Virtual water as policy option

The food security objectives as perceived in the past are in direct conflict with issue of resources use efficiency and based on its comparative advantages.

As mentioned before, past food security policies were based on area expansion to support the objectives of self-sufficiency and to enhance exports. The supply enhancement era witnessed unprecedented growth not only in canal irrigation but also in groundwater development with the advent of new technology, subsidy in credit and low electricity costs. That era seems to have peaked out and future increase in agricultural production must come from the increased land and water productivity, both in terms of higher yields and cropping intensities for which scope still exists. This will lead to greater water savings by reducing water losses and achieving more efficient water use and better agronomic practices.

The second question with regard to macro-water link is whether the region should produce food grain domestically or is it cheaper to import it. The analysis for a number of Near East countries shows that it depends on how water is valued.

The issue of virtual water is still very complex and cannot be fully analyzed at present to decide on what crops should be produced locally or imported. The prevailing incentive framework for agriculture in general has a strong anti-export bias. The production of import-competing products is highly subsidized while the production of exportable crops is heavily taxed. For instance, wheat, which is an import substitute, is taxed in Kazakhstan which is a major exporter of the commodity. Farmers receive prices far below the comparable international levels. So any reform in water policy area, such as increasing the cost of water has to be evaluated in the context of economy wide and sectoral policies.

The second point is the distortion that exists in international costs, which is often used as reference cost for wheat, to establish it comparative advantage and competitiveness. The cost transmitted to the farmer (always a cost taker) is highly distorted with domestic support to the agriculture sector in the developing countries at two levels, the production subsidies and export subsidies; the end result is that the farmer's comparative advantage is distorted and he cannot compete with cheap imports and high transaction cost to export. In such a case, it is simply not possible to know the exact value of the so called "virtual water". It does not let developing countries to establish its natural comparative advantage to base its competitiveness.

Countries facing food insecurity and water stress need to be assured that they can have fair and secure trade with water-abundant nations. Secure basic food trade conditions for water-poor countries should become a priority for the World Trade Organization. Some countries that are not food self-sufficient, however, cannot export enough to earn the foreign exchange required to purchase the food imports they need. Similarly, individuals may not have the cash to purchase food for themselves and their families, even though food is available in the market. This highlights the continuing need for agriculturally-based rural development programmes in the region.

In short, the concept of virtual water is well founded, provided countries have more transparent picture of its comparative advantage and accordingly they can translate it into a competitive advantage. The second issue pertains to the level of the economic base. i.e. whether the economy of the country is well developed and diversified to take the decision of reallocating water from cereals, which provide subsistence living to large sections of rural population. The experience in the region, perhaps globally, is that a number of economic, political and social factors come into play when resource allocation for valuable input like water are made and hence on the issue of virtual water.

2 "Incentive Pricing Handbook for Agriculture Water Distrct" Prepared by HYDRSHERE Resource Consultanrs, 1997

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