Report No. 13167-CM Cameroon Diversity, Growth, and Poverty Reduction April 4, 1995 Population and Human Resources Division Central and Indian Ocean Department Africa Regional Office Documnt of te World Bank FL C CURRENCY EQUIVALENTS Currency Unit = CFA Franc (CFAF) * US$1 = CFAF 577 (1994) US$1 = CFAF 290 (1993) US$S = CFAF 380 (1983) WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS ASAFE Association pour la Promotion de la Femme Entrepreneur CAMSUCO Cameroon Sugar Development Company CDC Cameroon Development Corporation CDHS Cameroon Demographic and Health Survey (1991) CRAN Center for Food and Nutrition Research DSCN Directorate of Statistics and National Accounts ECM Yaounde Consumption Survey (1993) ELSR Enquete Legere de Suivi des Revenus (Yaounde), 1994. ERC Economic Recovery Credit FAFCAM Federation of Cameroonian Womens Associations FIMAC Fonds d'Investissements pour les Micro-Realisations Agricoles et Communautaires (Agricultural and Community Micro-Project Fund) FNE Fonds National de l'Emploi (National Employment Fund) HEVECAM Rubber Plantation Company HIV/AIDS Human Immunodeficiency Virus/Acquired Immunodeficiency Syndrome HBS Household Budget Survey (1983/84) IUCN International Union for the Conservation of Nature MINAGRI Ministry of Agriculture MINASCOF Ministry of Social and Women's Affairs MINDIC Ministry of Industry and Commerce MINEF Ministry of Environment and Forests MINPAT Ministry of Planning and Territorial Management NRM Natural Resource Management OCISCA Observatoire du Changement et de l Innovation Sociale au Cameroun ONCPB National Agricultural Product Marketing Board PIP Public Investment Program PIRIPER Public Investment Review/Public Expenditure Review PPA Participatory Poverty Analysis PTA Parent-Teacher Association(s) RGPH Population/Housing Census, 1976, 1987. SDA Social Dimensions of Adjustment SEMRY Rice Development Company of Yagoua SOCAPALM Palm Oil Company SODECOTON Cotton Development Company STD Sexually Transmitted Disease UDEAC Central African Economic and Customs Union WRI World Resources Institute WWF World Wide Fund for Nature FISCAL YEAR July I - June 30 * The CFA Franc (CFAF) is tied to the French Franc (FF) at the ratio of FF1 = CFAFIOO (prior to January 1994, the ratio was FFI = CFAF 50). The French Franc is currently floating. Cameroon: Diversit, Growth, and Poverty Red1ction TABLE OF CONTENTS Preface Acknowledgments Executive Summary ........................................i PART I POVERTY IN CAMEROON: A COMPILATION OF EVIDENCE Chapter 1 Economic Performance in Historical Perspective .I Introduction: The Country Context .1 Economic Performance: The Quest for Growth .2 The Past as Prologue: Learning from the Past .4 Fiscal Policy: Unbalanced Spending Cuts and Priorities . 9 Conclusion: Uneven Effects of Recession .11 Chapter 2 An Income/Expenditure Profile of Poverty.13 Introduction .13 Poverty in 1983/84 .13 Poverty Trends, 1983-1993 .16 Developments in 1994 .25 Conclusion .27 Chapter 3 Coping With Crisis: The Viewpoint of the Poor .33 Introduction .33 Principal Poverty Issues .33 Linking Findings to Policy Recommendations: .43 Conclusion .44 PART II THE PERSISTENCE OF POVERTY: SYSTEMIC ISSUES Chapter 4 Food: Pervasive Insecurity .49 Introduction .49 Nutrition and Food Consumption .49 Agricultural Production and Marketing .53 The Agro-Industrial Sector .59 Conclusion .60 Chapter 5 Environment: Land, Law, and Livelihood ........................................ 62 Introduction ............................................ 62 Environmental Issues and Linkages to Poverty ..................................... 62 Land Tenure: Ownership and Use Rights ........................................... 66 Conclusion ............................................ 71 Chapter 6 Human Resources: The Nexus of Health, Education and Employment .......................................... 73 Introduction .......................................... 73 Demographic Dynamics .......................................... 73 Health .......................................... 74 Education and Schooling .......................................... 76 Employment .......................................... 78 Conclusion .......................................... 87 Chapter 7 Giving Voice to the Poor: Public Policy and Institutions ........... .... 90 Introduction .......................................... 90 Systemic Issues .......................................... 92 Supporting Local Initiatives and Participation by the Poor ............ ...... 98 PART III TOWARD A POVERTY REDUCTION STRATEGY Chapter 8 Poverty Reduction: A Question of Priority .................................... 103 Introduction .......................................... 103 Listen to the People .......................................... 104 Economic Policy from a Poverty Perspective ..................................... 106 Public Finance Policy .......................................... 112 Poverty Monitoring .......................................... 114 Chapter 9 Food Security: Building on Synergies .......................................... 116 Introduction .......................................... 116 Food Security: Cornerstone of Poverty Reduction .............................. 117 Nutrition .......................................... 120 Infrastructure .......................................... 122 Labor-Saving Technology Development and Application .................. 123 Chapter 10 Sustainability: Elements of a Long-Term Agenda ........................ 125 Introduction .......................................... 125 Sustaining Poverty Reduction in the Long-Term ................................ 125 Institutional Dimensions of Poverty Reduction .................................. 129 Environmental and Natural Resource Management Policies .......... .... 130 Land Tenure .......................................... 132 Conclusion: Back to Fundamentals .............................. ............ 134 ANNEXES Annex I: Statistical Annex .................................................. 137 Annex Il: Statistical Instruments for Monitoring Poverty ................................... 148 Annex III: Notes on Methodology .................................................. 152 Annex IV: Bibliography .................................................. 168 AnnexV: Maps .................................................. 179 LIST OF TEXT TABLES Table 1.1 Change in Share of Public Expenditures ................................................. 11 Table 2.1 Basic Data by Poverty Group, 1983/84 .................................................. 14 Table 2.2 Indicators of Poverty and Extreme Poverty ............................................. 15 Table 2.3 Consumption Budget Shares by Region .................................................. 16 Table 2.4 Trends in per capita Consumption, 1983 - 1993 ..................................... 17 Table 2.5 Consumption Budget Allocations, Yaounde, 1993 ................................. 18 Table 2.6 Trends in per capita Consumption by Type of Household, 1983-1993 ..19 Table 2.7 Poverty Level by Type of Household .................................................. 20 Table 2.8 Structure of Household Income by Poverty Level ................................. 20 Table 2.9 Household Income per capita by Employment Status ........................... 21 Table 2.10 Trends in Cash Crop Producer Prices, 1983-1993 ................................. 23 Table 2.11 Trends in Food Crop Producer Prices, 1984-1990 ................................. 24 Table 2.12 Trends in Earned Incomes in Yaounde .................................................. 26 Table 2.AI Urban and Rural Poverty Index by Province .......................................... 30 Table 3.1 Health Service Providers: Pros and Cons ............................................... 34 Table 4.1 Food Expenditure Per capita 1983 - 1993 .............................................. 52 Table 4.2 Consumption and Food Budget Shares, by Poverty Level ..................... 53 Table 6.1 Percent of Youth 15-24 without Schooling, 1987 .................................. 76 Table 6.2 Labor Force Participation Rates .................................................. 78 Table 6.3 Unemployment Rate in Relation to Education Level 1983-1993 .......... 80 Table 6.4 Salaried Employment in Relation to Education Level 1983 - 1993 ....... 81 Table 6.5 Weekly Hours Spent on Employment and Household Work ................. 84 Table 6.6 Job Creation and Job Plans of Young People Aged 15-29, 1992 ............ 85 Table 6.7 Monthly Earnings by Type of Employment in Yaounde ....................... 87 Table 6.8 Level of Meeting Selected Basic Needs by Region, 1991 ...................... 88 LIST OF TEXT BOXES Box 1.1 The Challenge of Diversity ...................................................1 Box 2.1 Expenditure Adjustment in Rural Areas .................................................. 25 Box 2.2 Pay Cuts in the Government .................................................. 26 Box 3.1 Poverty: A Self Assessment .................................................. 34 Box 3.2 Reasons for Enrollment and Retention of Girls in School in Douala ........... 39 Box 3.3 Transport Bias? .................................................. 41 Box 3.4 Isolation - The Case of Akwaya .................................................. 42 Box 4.1 Inadequate Breast Feeding Practices .................................................. 51 Box 4.2 Household Expenditures .................................................. 57 Box 4.3 Taxation of Cash Crop Farmers ............................................. 59 Box 5.1 The Population, Agriculture, and Environment Nexus ................................. 63 Box 5.2 Indigenous Peoples ............................................. 64 Box 5.3 Forest Taxation ............................................. 65 Box 5.4 Who Gets the Land? ............................................. 68 Box 5.5 Women and Land in Nso, North West Province .......................................... 70 Box 5.6 Conflict between Desirable Objectives ............................................. 70 Box 6.1 Labor Market Conditions in Yaounde ............................................. 79 Box 7.1 Information Inequalities, Poverty and Gender ............................................. 98 Box 7.2 Tontines .............................................. 100 Box 8.1 Broad Elements of a Strategy for Sustainable Poverty Reduction ............ 103 Box 8.2 The Action Plan of the Poor ............................................. 104 Box 8.3 Cameroonian Priorities ............................................. 105 Box 8.4 A Broad Reform Package........ ........ 107 Box 8.5 Boosting Labor Demand ................ 110 Box 8.6 Improving Agricultural Response to Price Changes .................................. 111 Box 8.7 Differential Incentives: Rational Economic Woman! ............................... 112 Box 8.8 Fiscal Strategy .................................... 112 Box 9.1 Livestock Production and Utilization .................................... 118 Box 9.2 Building a Cameroonian Food Industrial Sector .................................... 119 Box 9.3 The Micro-Enterprise Investment Program (FIMAC) ................................ 120 Box 9.4 "Enriching Lives" ..................................... 120 Box 9.5 "Enriching Lives": Priority Actions .................................... 121 Box 9.6 Early Warning and Emergency Relief .................................... 122 Box 9.7 Transports of the Mind .................................... 123 Box 9.8 Technology, Women's Time, and Productivity .................................... 124 Box 10.1 Growing Out of Poverty - How Long Will it Take? ................................... 126 Box 10.2 Investing in Girls' Education ..................................... 128 Box 10.3 Institutional Measures for Poverty Reduction .................................... 130 Box 10.4 National Environmental Management Plan .................................... 131 Box 10.5 Forest Management .................................... 132 Box 10.6 Land Tenure .................................... 133 LIST OF TEXT FIGURES Figure 1.1 Long-Term Movements in Output and Consumption .2 Figure 1.2 Long-Term Trends in Exchange Rate and Terms of Trade .3 Figure 1.3 Banking System Credit to the Public and Private Sectors .8 Figure 1.4 Wage Bill: A Growing Burden .10 Figure 2.1 Average per capita Consumption in Yaounde (in constant 1983 CFAF) 18 Figure 2.2 Distribution of Households and Income Levels by Poverty Groups. 22 Figure 2.3 Recent Consumer Price Trends by Product Type .27 Figure 2.AI Prevalence of Malnutrition by "Possession Index" . .30 Figure 3.1 Use of Health Services in the South-West Province, Cameroon .35 Figure 3.2 Eastern Province: Ranking of Most Common Health Ailments .35 Figure 3.3 The Medical Route in Five Regions for Two Time Periods .36 Figure 3.4 Problems Affecting Schools in the South West Province .38 Figure 3.5 The Impact of Poor Infrastructure on the Rural and Urban Poor .40 Figure 4.1 Stunting by Residence 1978 and 1991 .................................................. 50 Figure 4.2 Prevalence of Stunting by Occupation of the Mother, 1991 .........................5 1 Figure 4.3 Contribution to Various Sectors to Food Availability ................................. 54 Figure 4.4 Weekly Hours of Labor by Activity and Gender .......................................... 57 Figure 4.5 Gender Difference in Time Allocation .................................................. 58 Figure 6.1 Age Structure of the Population, 1991 .74 Figure 6.2 Changes in Prevalence of HIV Among Pregnant Women 1989-92 .75 Figure 6.3 Distribution of Health Personnel and Population by Province, 1989. 76 Figure 6.4 Unemployment Rate by Age 1983-1993 .80 Figure 6.5 Level of Activity of Women by Age 1983-1993 .83 Figure 7.1 Participation of Men and Women in Public Life, 1992 .97 LIST OF TEXT MAPS Map 2.A1 Poverty Index by Province ........................................ 31 Map 2.A2 Poverty Index by Province (Urban and Rural) ........................................ 32 Map 6.1 Illiteracy Rates by Province ........................................ 77 Summary Table of Principal Data Sources Type of Survey 7 Geographical Abbreviation used Year/Period of Coverage in Text References Implementation Income Siurvey Yaounde | ELSR _ April 1994 Price Survey P Principal Towns | 1993-1994 1-2-3 Survey (Employment + Informal Sector + aounCde 1-2-3 1992-1993 Consumption) (ELA/ECM1 OCISCA Douala OCISCA/ 1993 DSCN Demographic and Health Survey i National CDHS _ _ Agriculture Survey National _ _AG_1990 1989/1990 Agriculture Survey National AG1991 1990/1991 General Population and Housing Census National RGPH(87) 1987 Agricultural Census National AG84 1984 Household Budget Survey National HBS 1983/1984 Nutrition Survey National NNS 1978 General Population and Housing Census National RGPH(76) 1976 I-Standard of LivinR Surve Yaounde RI -%IA A Source: Annex 111. Acknowlegments Many people have contributed to the preparation of this poverty assessment (PA). The PA received direct financial support from the Government of France (SDA Trust Fund) for the preparation of the poverty profile, and from the Government of the Netherlands (Poverty Assessment Trust Fund) for the Participatory Poverty Analysis (PPA). The PPA also received financial support from the Population and Human Resources Division of the former Occidental and Central Africa Department (Ok Pannenborg, Division Chief), and from CARE Canada and CARE Cameroon. The PPA was carried out in Cameroon by local researchers during the period March- September 1994. The teams which carried out the PPA are as follows: Ajaga Nji (Coordinator), Severin C6cile Abega (Technical Adviser). Eastern Province: Florentin Mpol Zalang, RADEF, Team Leader, Mendouka Mbele, Bikoi Achille; Far North Province: S. Abega, CARE Cameroon, Team Leader, Yvonne Njock Nje, Christianne Nyangono; South West Province: Jacob N. Ngwa, PAID, Team Leader, Emmanuel Gwan, Rebecca Ngeve, Banyong Fonyam Betha, Tata Robinson; Douala: Gisele Yitamben, ASAFE, Team Leader, Andre Pouassi, Beatrice Achaleke, Toukam Lydie-Claire, Fongang Kuete; Yaounde: Jean Mfoulou, University of Yaounde I, Team Leader, Valentin Nga Ngono, Cyrile Balla, Sidonie Zoa Ngaoundoua, Jacqueline Aboa Ngono. Throughout the PPA process, technical advice and backstopping was provided by CARE Cameroon, with support from CARE Canada. The guidance, pragmatism, and tireless support of Michel Larouche (then Director, CARE Cameroon) is especially appreciated, as is the support from Gail Steckley (CARE Canada), and Katharine Reid (Consultant-PPA Training). The core team which prepared the PA is as follows: C. Mark Blackden, AFTH-R (Team Leader), Antoine Simonpietri, AFTHR (Poverty Profile and Statistical Systems), Lawrence Salmen and Gibwa Kajubi, ENVSP (Participatory Poverty Analysis), Roger Key, AF4PH (Macroeconomics and Poverty), Elisabeth Shields, EDIDM (Institutional Issues), Thierry Brun, AFTHR (Food Security and Nutrition), Abdou Salam Drabo, AFTHR (Coping Mechanisms), Cyprian Fisiy, AFTES (Land Tenure), and Julia Clones, Consultant (Poverty and Environment). The assessment was coordinated at different times by Mark Woodward, AF5PH, and Qaiser Khan, AF3PH. The team benefited greatly from the support of the Resident Mission in Cameroon, notably Joe Ingram, Joe Ntangsi, Werner Roider, Helene Pieume, and Gina Bowen. The team also gratefully acknowledges the contributions of Andre Ngassam, Directorate of Statistics and National Accounts (DSCN)/Cameroon, and Francois Roubaud, DIAL (poverty profile), George Koppert (food security surveys), Pierre Romand-Heuyer (poverty mapping), Fabrice Bonnaire AF4PH (tables), and Daniele Jaekel, AFTHR (charts and graphs). The Lead Advisor for the Poverty Assessment is Gloria Davis, ENVSP. Peer reviewers are Helen Sutch, EC4C2, and Aubrey Williams, OPRIE. The Managing Division Chief is David Berk, AF3PH, and the Department Director is Andrew Rogerson (Michael N. Sarris, Acting). Preface SUSTAINABLE POVERTY REDUCTION IS THE OVERARCHING OBJECTIVE OF THE WORLD BANK. IT IS THE BENCHMARK BY WHICH OUR PERFORMANCE AS A DEVELOPMENT INSTITUTION WILL BE MEASURED. (LEWIS PRESTON, POVERTYREDUCTIONHANDBOOK). To be poor is to be deprived and vulnerable: deprived of adequate nutrition, rudimentary health care, basic education, a living income, and opportunities to escape being poor; vulnerable to hunger, disease, ignorance, destitution, and to opportunities slipping away. If poverty persists, children born into poverty grow to adulthood and bring into the world a new generation of impoverished children. The cost of persistent poverty is measured in deferred dreams and wasted lives. A society that fails to extend opportunity to all its members-young and old, women and men, rural and urban-is a society adrift. Cameroon has been an independent nation for three and a half decades. Yet poverty is still an ever-present reality of many of its citizens' lives. Indeed, the extent of poverty has spread in the second half of the third and at the start of the fourth decade. Official statistics and the voices of the poor alike point to a society that has, so far, not done enough to confront its poverty. This report is intended to spark a debate on poverty in Cameroon: what it means to be poor, who the poor are, why they are poor, and what can be done about it. The problems are complex, but can be overcome with commitment, as other countries have shown. Above all, this report is a call for action. Another generation of poor Cameroonians is growing up fast. It is time for Cameroon to make a strong and unequivocal commitment to poverty reduction. If not now, when? The report endeavors to reflect the deliberations of a technical workshop organized in November 1994 in Kribi, the objective of which was to provide a forum for Cameroonians (inside and outside Government) to discuss an earlier draft of this assessment and to formulate ideas and priorities for poverty reduction in the country. The report also endeavors to incorporate and reflect comments received from the Cameroonian Government in January 1995. EXecutive summary 1. Introdction 1. This poverty assessment (PA) was undertaken for Cameroon, as for other IDA-eligible countries, as part of the IDA mandate to focus Bank Group support on sustainable poverty reduction. The objective of the PA is: (i) to assess the extent, depth, characteristics, trends, and causes of poverty in Cameroon, and in so doing to draw attention to poverty in Cameroon, which affects more than 50% of the rural population and up to 30% of the urban population; (ii) to move poverty to the center of any sustainable development strategy by articulating a poverty reduction strategy for Cameroon, which could be recommended to the Government as an input into its own strategy formulation, and which could be supported by the Bank; and (iii) to initiate and structure a process of longer-term dialogue with Cameroon on poverty issues, while providing a basis for further poverty monitoring and assessment.' Poverty reduction is one of the key elements of the most recent Country Assistance Strategy, where it is stated that the dialogue on poverty reduction covers economic performance issues, resource mobilization and expenditure allocation issues, and policy actions aimed at improving coverage and efficiency of basic health and education services (World Bank 1994a). 2. Quantitative data, while not entirely absent, are both limited and in some respects out-of- date. The choice of the 1983-93 period for purposes of comparison is dictated solely by the availability of data from the 1983 Household Budget Survey (HBS) and the 1993 surveys in Yaound6 and Douala (1-2-3 Survey and OCISCA Survey), which provide the principal quantitative benchmarks for this assessment. It is important to note that the evolution between 1983 and 1993 in fact masks two sub-periods, which cannot be dated precisely owing to data limitations. The turning point occurred around 1986, with the period 1983-86 constituting the end of the boom period spurred by high petroleum revenues and high agricultural export prices. To avoid bias in interpreting the data, every effort has been made to place recent trends- economic (Chapter 1); income/consumption (Chapter 2); nutrition (Chapter 4); and human development (Chapter 6)-in a broader historical context, drawing, where possible, on data from the 1960s and 1970s. It is still too soon to assess the impact of the major events of end- 1993/early 1994, the cumulative 60% cut in public sector salaries, and the 50% devaluation of the CFA franc, though some initial trends can already be observed. II. The Dynamics of Poverty and impoverishmcnt in Cameroon 3. Cameroon is a country of striking diversity and tantalizing potential. Throughout the 1965-85 period, Cameroon enjoyed high-and at times very high-economic growth. Its performance was praised by outside observers, including the World Bank. Yet the 1983/84 1 An earlier draft of this assessment was presented at a technical workshop organized in November 1994 in Kribi Cameroon, the objective of which was to provide a forum for Cameroonians (inside and outside Government) to discuss the conclusions of the assessment and to formulate ideas and priorities for poverty reduction in the country. This report endeavors to reflect the deliberations of this workshop and to incorporate and reflect comments received from the Cameroonian Government in January 1995. ii Household Budget Survey found both a high degree of poverty in rural areas and a marked inequality in the distribution of incomes, and the situation has further deteriorated since then (Part III below). Little is known about levels of poverty or income distribution in the mid 1960s. What is clear is that the high rate of economic growth was not sufficient to eliminate rural poverty or to achieve a desirable distribution of incomes during this period. 4. Since 1985, there has been a sharp and well-documented reversal in economic performance. GDP per capita declined by 6.3% per year from 1985 to 1993 and this translated into a 6.0% rate of decline in private consumption per capita. Cumulatively, this represents a drop in average per capita consumption of over 40% in eight years-a collapse that has been one of the most painful that any country has suffered, particularly coming after the extended period of growth over the previous two decades. As a result, the structural poverty which predated the crisis has combined with the rapid impoverishment that has accompanied the economic decline in the 1985-93 period to become a serious problem for Camneroon, one requiring urgent and sustained attention. 5. The decline in Cameroon's economic situation can be attributed in part to highly unfavorable extemal factors, notably the drop in export prices, declines in petroleum exports and revenues, and the high level of foreign debt service. These factors were very important in precipitating and extending the downturn. Cameroon's extemal terms of trade fell by over a half in 1985-88, implying that export volume would have had to double to pay for a constant volume of imports. Since then, the terms of trade have declined even further, though not at the disheartening pace of the mid 1980s. The difficult external environment was compounded by a marked loss of economic competitiveness. In 1985, Cameroon's real effective exchange rate moved sharply upwards, and by 1992 stood at 162 (1985=100), while it would have had to fall to 38 to match the terms of trade movement. The main causes of the change were beyond Cameroon's control: the appreciation of the French franc vis-a-vis the US dollar, carrying with it the CFA franc which maintained the same parity with the French franc, and the decision of the Nigerian Government to devalue the naira in 1985/86. 6. Labor Market Performance. The loss of product markets was reflected in lower demand for labor, and this limited the employment and income possibilities for all Cameroonians. As argued in Chapter 2, the mode of entry into the labor market is a key factor in the structure of income received by different households. Employment data illustrate the slow growth in demand for labor in the formal sector from the mid-1980s. New hiring has been extremely limited, and personnel reductions have often occurred through attrition. There have also been mass lay-offs in some enterprises, especially in recent years, as a result of bankruptcies and plant closures. The only sector of the economy where employment grew during the period was the public administration, which expanded by about 10%. Expansion of public employment absorbed only a minute fraction of new labor force entrants, and in any case has proven to be fiscally unsustainable. 7. The corollary of formal sector decline, and a key indicator of labor market stress, is the massive regression in the share of salaried employment as the informal sector expanded. The proportion of salaried to total workers was over 65% in 1983, and was still at 63% in 1987, but fell to under 50% in 1993. As the economic crisis worsened, the informal sector became the chief provider of jobs. In 1992, more than four in five jobs created were in the informal sector. iii 8. The soaring unemployment Bo : Labor Market Conditions in Yaoundd rate is the primary indicator of the difficulties Cameroonians face trying Sharply diverging trends in labor supply and demand have led to to enter the labor market (Box 1). a large increase in unemployment which stood at about 7 pement Over a period of ten years this rate has in 1983. A 1993 study of the labor market in Yaounde provides risen from 7.3% of the active a grim view of contemporary urban labor rnaket conditions. Open unemployment was reported at close to 25 percent in population to 24.6%. Today, the urban 1993. Discouraged workers and underenployment add unemployment rate in Cameroon is significantly to this total. Whatever figure is accepted, it points one of the highest in Africa and well to a collapse of urban employment of catastrophic proportions. above the rates recorded in Latin The 1993 survey preceded the November 1993 cuts in civil service salaries and the January 1994 devaluation, both of which America and Asia, with youth have had a negative effect on employment opportunities in the unemployment (over 40% for the 20- short-term. 24 age group in 1993) particularly severe. Not only has unemployment risen sharply in recent years, but, in marked contrast to 1983, the rate of unemployment is now highest among tertiary graduates (Figure 1). Unemployment, and more specifically the labor market entry of young job seekers, has become a problem which economic policy can no longer afford to ignore. Figure 1 Unemployment Rates by Lew] of E&dcation, 1983-87-93 No schooling Primary 19 I I ~ ~ ~ ~ ~ ~~l~983 Secondary D 1 97 Higher 1993 0 5 10 15 20 25 30 36 (Percent) Source: HBS (1983); RGPH (1987); 1-2-3 Survey; own estimates. 9. Individuals and households, especially in Yaounde and Douala, have mobilized family labor and diversified activities in order to earn incomes. The labor market in Cameroon is overstretched, and even the informal sector is strained. Labor market stress has led to a pronounced decline in real wages. Even before the events of late 1993 and early 1994, average earnings in the informal sector were well below the 1993 poverty line. The informal sector is not leading the way out of poverty, but has to-date been sinking into ever lower equilibria. 10. Efforts by households to diversify income have resulted in greater recourse to all available sources of labor, and have translated into greater rates of participation of women and youth in the labor force. Participation by women in a low-earning and precarious informal sector, iv notwithstanding the flexibility it may afford in balancing domestic and economic activities, is by no means uniformly beneficial. Young people, increasingly combining school and employment, are also faced with a highly precarious future, characterized by limited job opportunities and a set of expectations about future employment that is completely at odds with the likely patterns of labor absorption in the foreseeable future (Figure 2). Meanwhile, the education and training system has not met the real demand of society in the area of skills development for self- employment. Figure 2 Gap Between Job Prefernce and Jobs Crested for Youth aged 15-29 in Yaoude, 1992 90 s 70 ~30 20 - 10 Public Public Private Sector Infonnal Administaon Enbrpris Sector So,*: Enqults 1-2-3 (93). diision sebmat. Cc`ted Jobs - _Desired Empioment] 11. For the coming decades, an explosion of the labor force is in prospect, driven by demographic dynamics (para. 20), and this represents a critical challenge for Cameroonian society. To avoid continuing downward pressure on real wages and earnings, labor demand must essentially rise sufficiently to absorb the increase in the labor force. To achieve buoyant and rising levels of earnings, as was the case in the early part of Cameroon's history, even more rapid growth of labor demand will be necessary. Growth will need to be rapid, and the focus on labor- intensity in long-term growth extremely sharp, if Cameroon is to avoid deepening poverty. 12. Public Finance Performance. The way in which fiscal adjustment was attempted in 1985-93 proved very harmful to the poor. Reflecting in part reduced economic activity, in part a slackening of tax collection, revenues declined steadily as a share of GDP throughout the 1985- 93 period. As a result, expenditures were under severe pressure, though some items were not easily compressed. The wage bill was stable or at times rising throughout the period, except in late 1993. Instead, cuts tended to be made in materials, supplies and counterpart funds for extemally financed development projects. It is now a rare exception to find public sector facilities -schools, hospitals, clinics-with adequate supplies to fulfill their tasks unless these are supplied by a foreign donor. The views of the poor confirm this finding (Chapter 3). 13. Analysis of limited available public expenditure data portrays a trend of increasing stress on public budgets. There has been a continued squeezing out of non-salary expenditures to cover salary costs. Data for 1989-92 confirm that salaries continued to rise as a share of total recurrent expenditures-the aleady negligible (and dwindling) share of non-salary expenditures precluded the effective provision of critical non-salary inputs, such as medicines, textbooks, and equipment. Actual non-wage expenditures in 1992/93, the last year for which data are available, represented only 5% of total expenditures for education, and 13% for agriculture and health. V 14. Regional differences in budget allocations and actual expenditures cannot be appreciated directly in budget data, though various proxies suggest a strong degree of centralization and marked regional disparities in resource allocations. Even recent trends in budget allocations do not indicate any shift in the composition toward priority development sectors, but rather the reverse. The trend of declining allocations to poverty-focused sectors was maintained in the budget allocations for 1993/94 and in the recently approved 1994/95 budget. Total recurrent expenditure budget allocations for 1994/95 have declined for agriculture, the social sectors, and other development sectors, while those for national sovereignty and environment ministries have increased. It therefore appears that budget allocations continue to favor sectors and activities which prima facie, and with the exception of the environment, are not focused on poverty reduction. III. A PrOfik of PoVet 15. The Situation in 1983/84. Data from the 1983/84 HBS suggest that previous patterns of economic growth in Cameroon were highly uneven, leading to considerable inequality among both socio-economic groups and regions in the country. Based on the 1983/84 distribution of consumption expenditures, a relative poverty line was defined to include as poor all households whose per capita consumption was at or below that of the 40th percentile of the income distribution, which corresponded to a consumption level of CFAF 78,000 (US$205 equivalent) (in 1983 prices). Poor and very poor households accounted in 1983/84 for only 20% and 8%, respectively, of total consumption. Per capita food consumption of poor households was four times less (and for the poorest, five times less) than that of non-poor households. Disparities were even greater for total consumption, as mean per capita consumption of non-poor households was CFAF 287,300, (US$756) compared with CFAF 36,700 (US$97) for the poorest and CFAF 50,500 (US$133) for the poor. The poverty status of households was (and still is) significantly affected by their age and gender structure, size, education level, and location (Table 1). Regional disparities in annual per capita consumption in 1983/84 were also marked. Geographic location was therefore a strong indicator of poverty. In 1983/84, poor households were concentrated in rural areas (Figure 3). 2 Table 1 Basic Data By Poverty Group, 1983/84 in CFAF and percent Poorest Poor Intermed. Non Poor Cameroon % households with 6+ members 64 59 44 30 45 Food consumption per capita 22800 30800 54600 119200 105000 Total consumption per capita 36700 50500 96000 287300 152000 % of infants 0-S 23 23 20 17 21 % of children 6-15 33 31 28 24 29 % who never attended school 64 62 54 44 55 Source: HBS(1983/14), own estimates. 2 The dearth of "poor' households in Yaounde and Douala is, of course, misleading, and should be interpreted only to signify that, using the relative poverty line, the 40%/ of households with the least resources did not live in the two largest cities. Undoubtedly, even in 1983/84 at the height of the oil boom, some households in Yaounde and Douala were not able to meet their basic needs, and thus fell below an absolute poverty line. vi Figure 3 Powerty Inicators by Region, 1983-84 so 450000 so - - 400000 } @0 l X / 335DO00 so - - ~~~~~~~~~~~~~~~~~~~300000 so- #> ** { v 250000 , 40 _ A C i _ _ _ 200000 30 15~~~~~~~~~~~~~~~00(0 20 w_oo ID ~~~~~~~~~~~~~~~~~~~~~~50000 0 ~~~~~~~~~~~l0 North South South North Douala Yaounde Rural Rural Urban Urban inPoorhmtlds(1q C%withnoahoO&V rk Icmkof povrty(tq ---Av.peffczPft.yMty Wpa1tw (CFAF) Source: HBS(1983/84). 16. Poveny Trends to 1993. The period since the mid-1980s has been one of rapid impoverishment in Cameroon, and there has been a very sharp decline in per capita consumption. Direct household survey data are only available for Yaounde and Douala. The increase in the incidence of urban poverty has been marked. While fewer than 1% of households in Yaounde and Douala fell below the poverty line in 1983, more than 20% of households in Yaoundd, and 30% in Douala, did so in 1993. Data for Yaounde suggest that mean per capita consumption has fallen in nominal terms from CFAF 454,500 (US$1,196) in 1983 to CFAF 305,000 (USS1,051) in 1993. Adjusting for changes in relative prices results in per capita annual consumption of CFAF 231,000 (US$608) (1983 prices), or a reduction in value terms of about 50%. In 1964, per capita consumption amounted to CFAF 56,000, or CFAF 336,000 in 1993 terms. In this light, the level of per capita consumption in Yaounde is about 10% lower than it was thirty years ago (Figure 4). 17. The burden of decline has also been uneven. Though all groups of households showed a substantial drop in consumption in the period to 1993, those who were the poorest at the outset have proven to be the most vulnerable.3 Households which remained in the ':formal" sector, notwithstanding the employment stagnation, were comparatively sheltered but nevertheless sustained a 20% to 30% reduction in per capita consumption. "Informal households experienced both a contraction in demand and lower prices for the goods and services they sold, and their consumption declined by about 40%. Lastly, "inactive/unemployed' households were hardest hit: incomes shrank and consumption plummeted by more than 60%. The earnings gap between the formal and informal sectors may have been narrowed by the 1993 civil service 3 In this analysis, households are classified in three groups, along two axes: first, as a function of their per capita consumption: (i) 'poor' households with consumption below the poverty line (20% of households in Yaounde); (ii) 'intermediate' households with consumption between I and 2 times the poverty line (30%); and (iii) "non- poor' households with consumption more than twice the poverty line (SO4); second, as a function of their employment status: (i) "formal" (private/public), where the household head earns a wage or salary; (ii) "iformal" where the head is not salaried; and (iii) "inactive/unemployed", where the head has no employment, this latter being, a priori, a disadvantaged and vulnerable group from a poverty perspective. vii salary cuts, but reduced demand from this group (representing about 22% of employment in Yaounde) has further depressed informal sector earnings. 18. Rural Poverty. The 1983 HBS data established that poverty was Figur 4: Mean Per Capita Consumptonh In overwhelmingly a rural phenomenon in Yaos (in constant 193 CFAF) Cameroon, estimating that I in 2 rural so households fell below the poverty line. 40 Rural areas have not been spared by 400 ~3B Cameroons economic collapse, and 30 rural poverty is estimated to have 2s increased considerably in the last 10 , 2c0 years. Producer prices for most crops i 100 have declined significantly over the so period. The drop in producer prices for o cash crops is estimated at 42% for the 1964 1983 1N3 period. The decline in real income from cash crop farming is estimated at some 60% over the period. For food crops, the fall in prices between 1985 and 1993 has been particularly steep. In per capita terms, production volumes have declined (from index 101 in 1981-3 to 86 in 1988-90). Total income from agriculture (cash and food crops, including own-consumption) shrank in value terms by 6% between 1985 and 1993. If demographic growth (estimated at 2% per year in rural areas) is taken into account, nominal per capita income fell by 25%. Assuming that the decrease in per capita consumption was uniform for all rural households, and that consumer prices increased by only 10% (as against 30% in Yaound6), the number of rural households below the poverty line would have risen from 49% to 71% during this period. These estimates suggest a considerable expansion of rural poverty in Cameroon over this period. Figure S compares the estimated number of households in poverty in Cameroon by region in 1983 and 1993. Figure 5: Incidence of Poverty by Region - 1983-1993 250 - South Rural North Rural South Urban North Urban Doumla Yewjft Source: HBS (1983); 1-2-3 Survey (1993); own estimates. 19. The Impact of the Public Sector Salary Cuts and the Devaluation. Over and above the cumulative decline of the 1986-93 period, and although data are provisional, it is already possible to assess the initial impact of the approximately 60% cut in public sector wages (January and November 1993) and the 50% devaluation of the CFA franc (January 1994) on household-level consumption and behavior, notably in Yaounde. Between December 1993 and March 1994, nominal salaries in the public sector remained roughly constant, not moving in the viii administration and declining slightly in the public enterprise and formal private sector. By contrast, the incomes of self-employed people in the informal sector have fallen sharply, by on average 35%. This is largely attributable to contraction of demand from public sector employees. Here too, the burden of adjustment seems to be falling disproportionately on the lowest, and least secure, income categories. Meanwhile, the rise in the general level of consumer prices between December 1993 and April 1994 was 29%. By end-December 1994, prices had risen by 48% over the period. As a result real urban "incomes" fell markedly during the year, by about 1/3 in the public sector, and by more than 1/2 in the informal sector. 20. Human Resource DevelopmenL Cameroon's population is estimated at around 12 million (1993), growing annually by close to 3%. If current demographic indicators remain constant, as is likely, Cameroon's population will reach 15.5 million by the year 2000 and 21 million by the year 2010. More than 30% of the population is under age 10, and nearly 60% is under 20. The demographic pressure resulting from the youth of the Cameroonian population poses significant problems for all economic and social services, notably education, health, and job creation. Cameroon's health indicators resemble those of low-income countries in SSA. Children under 5 are at a significant health risk in Cameroon. The infant mortality rate is estimated at 65 per 1,000 live births and the under 5 mortality rate is 126 per 1,000 live births. HIV/AIDS is a health risk throughout Cameroon, including in rural areas. Prevalence rates vary by risk group and by province. Census and CDHS data confirm a high correlation between health service use and the socio-economic (education and employment status) and regional classification of households, with education status of mothers having a strong positive effect on health and on reducing fertility. Urbanization increases the likelihood that health needs will be met. 21. The period up to about 1987 has seen an impressive increase in schooling levels in Cameroon. Between 1976 and 1987, illiteracy among those 11 years and older fell from 53% to 41%, while the enrollment rate for the 6-14 age group rose from 67% to 73%. This helped to reduce both male/female and urban/rural disparities, though important differences persist. Regional differences in access to schooling are significant. According to the 1987 census, adult illiteracy ranges from less than 20% in the Littoral, South, and Center provinces, through 30%- 45% in the South West, West, East and Adamaoua provinces, up to about 70% in the North and Far North. The latter two provinces also have the lowest school attendance rates, regardless of sex or age group, as fewer than 50% of children aged 6-14 attended school in 1987, as against 90% in the Littoral, South, West, and Center provinces. Trends in educational enrollments since 1987 are unclear, though there are some indications that school attendance is declining in response to the crisis. 22. Nutrition and Food Security. In spite of a marked improvement in average nutritional status since independence in 1960, relatively high levels of malnutrition persist in Camneroon. Twenty-five percent of all Cameroonian children under 5 suffer from stunting, indicating a high prevalence of chronic malnutrition and chronic illness. There are large regional differences in the prevalence and the trends of malnutrition with incidence higher in the North and lower in the Center and West of the country. From 1978 to 1991, the level of chronic undernutrition declined by 60% in the principal cities but only by 20% in rural areas. Chronic undernutrition declined in all provinces but considerably less so in the Adamaoua/Nordi/Far North region and East province than elsewhere. There is also a high prevalence of micronutrient deficiency diseases (iron and iodine deficiencies, causing goiter and anemia) affecting mainly children and women .x of low-income groups.4 Analysis of food consumption budget trends in 1983-93 shows that the level of food expenditure per capita has declined by 30% in 10 years. Changes in budget outlays for food items suggest that important shifts in dietary patterns have occurred, indicating a deterioration in the diet of Cameroonians. 23. Problems associated with hunger, dietary inadequacy, and high food expenditures Bo 2: PovertA SelfAssessment dominate the assessment made by the poor of The poor in all the regions distinguish themselves the distinguishing characteristics of poverty from the non-poor on five main criteria: (Box 2). Cameroon's cities are fed by complex chains of small producers and intermediaries. 4 the presence of hunger in their households; In both food production and marketing, women + fewer meals a day and nutritionally inadequate play a major role. Women have a diets; disproportionately heavy workload compared + higher percentage of their meager and with men. In a study close to Yaounde, the irregular income being spent on food; most striking contrast is between men's and 4 non-existent or minimal sources of cash women's total labor hours. Men's total weekly income; labor averages 32 hours, while women's is over 4 a feeling of powerlessness and inability to 64 hours, and much of this disparity results make themselves heard. from differences in domestic labor hours (Figure 6). If women are to have more time to Source: PPA Synthesis Report 1994. supply urban markets, they need reliable labor- saving technologies and credit. Fgure 6: Cameroon - Weekly Hours of Labor by Activity and Gender 70 50 _Other Productive Activsts 4 Paliine Production I!40 _ Cocoa Roduction ° 30 3 Food Transforrration 2Food Production 20 3 lDDa stic Labor 10 IVen Wornen Source: Henn 1988. 4 Prevalence of anemia is estimated at 400/o for rural women (25% for Yaound6); prevalence of goiter is high, but also highly localized, with prevalence ranging from about 3% to 75% depending on the region (Chapter 4). x IV. Toward a PoYvrt RedJction Stratejy 24. The problems of systemic and pervasive poverty presented in this assessment exceed the capacity of the Government alone, or of any other isolated actor, to address. Creating an "enabling environment" for poverty reduction in Cameroon will require forceful and inclusive policies and institutional reforms, mobilizing all civil society, with the Government playing a catalytic, policy-defining, and facilitating role. A prerequisite, therefore, is the need for the Government to demonstrate a strong and unequivocal commitment to poverty reduction. The poverty reduction strategy outlined in this assessment defines specific ways in which this commitment can be shown. At the same time, and as confirmed in the PPA (Chapter 3), it is essential to address institutional performance and management issues, including performance- based rewards and sanctions, aimed at re-establishing confidence and trust in both public and private institutions at all levels. Enhancing the quality, predictability and transparency of public administration is an essential dimension of sustainable poverty reduction. Performance improvement needs to be coupled with renewed focus on service to the poor. 25. The data and information for the poverty profile (Chapter 2) and the participatory poverty analysis (Chapter 3) were provided by Cameroonian experts and the poor themselves. As part of pursuing a broader dialogue with a wide range of people in Cameroon, both in Government and in civil society, the Government and the World Bank organized a technical workshop in Kribi and a national conference in Yaounde in November 1994, to provide fora for broad-based discussion of the assessment and for articulation of key priorities in the poverty reduction strategy. These consultative processes reveal that there is remarkable convergence between the views of "experts" and those of the poor themselves as to what Cameroon needs to do to reduce poverty. Key actions identified by poor people in the framework of the PPA (Chapters 3 and 8) emphasize institutional performance, greater local initiative, and provision of basic infrastructure, as essential components of the poverty reduction strategy. The strategy presented in this assessment endeavors to build on the insights from, and reflect the outcome of, this valuable process of in-country debate and dialogue. 26. The following principles, which cut across sectors and institutions, need to underpin and be integral to the poverty reduction effort in Cameroon: -.0. Commitment to economic reform and accelerated growth. Sustaining the economic reform program, and building on the potential gains of the devaluation to generate rapid growth is essential. Giving voice to the poor, strengthening local initiative and participation. Listening to the concerns and priorities of the poor needs to be a central component of the poverty reduction strategy, which can build on the initiative of the poor, with the Government serving in a facilitating role. Institutionalizing participatory approaches shows promise in helping Cameroon to address the strengths, while reducing the risks, of managing its own exceptional diversity. 4' Reducing regional disparities. Commitment to implement policies specifically aimed at reducing the marked regional inequalities both in income and economic opportunity, and in provision of social services and economic infrastructure, in part through targeting public sector investment and service provision explicitly toward those regions which are comparatively less well served, is essential. xi Reducing gender disparities. Reducing the systematic discrimination against women in access to economically productive resources (especially land and financial services), lowering their excessive labor time burdens through development of and improving access to domestic and productive labor-saving technologies, and affirmatively improving their access to basic social services, need to be at the core of the country's poverty reduction strategy if full supply response and economic growth potential are to be realized. 4 Sustainabk development. If Cameroon is to lay a firm foundation for sustainable development, a start must be made in addressing the longer term systemic issues related to land use and environmental management, and to institutional capacity and development, outlined in this report (Chapters S and 7): attention must be paid to land tenure, law reform, and environmental management issues, without which economic growth, agricultural supply response, food security, and poverty reduction cannot be sustained. Cameroon also needs to take forceful action to implement the national population policy and to ensure access to and delivery of family planning services. 27. Successful poverty reduction Box 3: Broad Elements of a Strategyfor Sustainable strategies in countries around the world have Poverty Reduction had at their core two essential economic components: rapid labor-intensive growth Equitable labor-using growth, accompanied by broad- that builds on the labor of the poor, and a based investment in basic health, education, and wvillingness to invest in human resources infrastructure, would have to be the pillars of any poverty willingness to inverstof sinehuma resourcThes reduction strategy. In order to encourage growth, throughout all layers of society (Box 3). The macroeconomic stability is necessary, as is agricultural strategy presented here for Government development and private sector development. consideration focuses on sustaining and Throughout-in health, education and agriculture, for strengthening the economic reform effort example-reducing gender inequities is crucial. Studies initiated with the devaluation of the CFA of recently successful development have confirmed these broad elements of the development agenda, but have also franc, including: (i) the pursuit of labor- emphasized the importance of the capacity of a nation to intensive growth policies which favor the manage its affairs in an intemal and extemal environment poor; and (ii) restructuring public finance- that is uncertain and volatile. Finally, environmental and particularly public spending (mindful of sustainability and the population dimension have now been brought firmly into the development agenda the limits Imposed by fiscal constraints)-to emphasize critical human resource and Source: World Bank. 1995. infrastructure expenditures especially benefiting the poor. The strategy places sustained attention to improving food security at the forefront, as promoting a small-scale food industrial sector captures critical cross-sectoral synergies, all of which contribute to labor-intensive growth and poverty reduction. Consistent with the systemic poverty issues raised in this assessment, the strategy also outlines elements of a longer-term agenda, in which to address environmental, land tenure reform, and institutional performance and capacity issues. 28. Participation: Building on the Efforts of the Poor. Process is every bit as important as what is done. The process of articulating (and acting on) specific policies to reduce poverty is necessarily iterative, involving, first and foremost, Cameroon's Government, civil society, and the poor themselves (Box 4). Poverty reduction can only succeed if it engages the energies of all Cameroonians to work together, as concerted action will be essential to address the magnitude of the country's recent impoverishment and its systemic poverty problems, and to mobilize the xii resources required. Rebuilding the partnership between the public sector and civil society at large will not only help to reduce poverty, but will also turn Cameroon's exceptional diversity and dynamism into an asset. Box 4: The Action Plan of the Poor The poor have the initiative, industry, interest, creativity, and energy to make meaningful contributions to poverty reduction in Cameroon. They have demonstrated this through self-help and community-based associations, and through the various coping mechanisms adopted within the last five years. In the participatory poverty analysis (Chapter 3), the poor identified the following priorities: 4 the efforts of individuals must be reinforced by strong, viable, and efficient institutions-this entails greater decentralization of institutions, capacity-building and performance improvement, and establishment of an enabling environment for the private sector to grow; 4 political will and commitment to reduce poverty, and to reduce regional imbalances-without these no amount of policy reforms can help in the present circumstances; 4 road infrastructure, lack of which is seen as a deterrent to personal and community initiatives in reducing poverty, so as to promote agriculture and other sectors of the economy; 4 create opportunities to increase household income; 4 reorientation of expenditures in the public sector to ensure provision of basic health services and drugs, road rehabilitation and maintenance, and education. Source: PPA Synthesis Report 1994. 29. Institutions involved in development and poverty reduction must hear the voices of both men and women because very often they will not be saying the same thing. It cannot be assumed that (male) community leaders fully understand, reflect, or speak for the needs of the entire community. Effective participation of both men and women as stakeholders in development requires that ways be found to capture their very distinctive voices, expressing-where and when they vary-their different needs, limitations, priorities, and aspirations. Though Cameroon is one of Africa's better performers with respect to women's participation in public life, women nonetheless hold a very small share of positions in public office (Figure 7). 30. Economic Reform and Labor-Intensive Growth. Countries that have been successful in reducing poverty over an extended period have almost invariably built this achievement on high and sustained economic growth, one of the essential prerequisites for any successful poverty reduction strategy. Cameroon is a rich and fertile country whose potential is not being realized. With its natural and human resource base, Cameroon has clear potential for restoring economic growth, especially in agriculture and through the private sector, and meeting the basic needs of its population. With the devaluation of the CFA franc by 50% in January 1994, a new economic strategy has been put in place that offers a foundation for rebuilding the economy. The Government has an outstanding, if not unique, opportunity to transform economic policies and, if it chooses, to reverse the process of impoverishment. From a poverty reduction perspective, the need for successful completion of the reforms that began with the devaluation cannot be stressed enough. Structural reforms that can hold prices down through competition, such as the deregulation of transport or agricultural marketing, are still incomplete and need to be accelerated. Measures to lower production costs and achieve greater efficiency in all sectors of the economy are essential, with the new parity of the CFA franc, to avoid a return to monetary xiii and fiscal repression and the forcing down of nominal wages and prices. Structural measures that increase efficiency in transportation or distribution, or that lower the costs of economic regulation, make sense for economic efficiency, and many of them can also help bring important gains for the poor. Figure 7: Cameroon, Participation of Men and Women in Public Ufe, 1992 00% 90% 60% 70% C 60%A 0Men 40% S~~~~~~~~Women 30% 20% 0%~~~~~~~~~~~~~ CATEGORY Source: FAFCAM. 31. The challenge of absorbing Cameroon's rapidly growing labor force is both massive and urgent, and will necessarily principally involve the private and informal sectors. Labor-intensive growth is the key to raising household incomes. There is a need to encourage investment in labor-intensive activities, both urban and rural, to ensure that the growth of demand for labor can be sustained. Despite the current problems of the urban informal sector (Chapter 6), promotion of inforrnal enterprises through regulatory reforms, and opening up access to credit and other business or financial services, show considerable promise for future labor absorption. The informal sector will also benefit from a revitalized formal sector and the attendant increased demand. Promoting the small-scale food production, processing and marketing sector (para. 37) crucially supports poverty-reducing, labor-intensive growth. An increase in public works, which strongly favor labor-intensive techniques and practices, which rely on locally produced and available materials, and which can be accompanied by greater reliance on sub-contracting at the local level to small-scale entrepreneurs, is the most immediate tool available to the Government to generate additional labor demand. Though the impact of such measures will be limited by implementation capacity and the overall availability of public finance, the focus on labor- intensiveness in public spending can bring immediate and tangible benefits and have important multiplier effects. The more effectively such measures are implemented, the greater will be their effect on employment. 32. There is no quick fix for long-term poverty reduction in Cameroon (Box 5). Issues of sustainability must dominate any long-term strategy. For Cameroon, economic policies are important but not overriding. Investment in human resources is at least as important if significant xiv inroads are to be made in the long-tern health, nutrition, and education status of the poor. Raising the economic and social status of women is particularly crucial. Environmental issues, and evolving patterns of land tenure and use, which affect the sustainability and the quality of the environment in which the poor live, and the capacity of the poor to earn a livelihood, will assume increasing significance. Box 5: Growing Out of Poverty - How Long Will it Take? How much growth will be necessary for Cameroon to eliminate poverty? In 1983/84, 400/o of Carneroon's population were below the CFAF 78,000 poverty line. In the decade since then, average private consumption per capita has fallen by one-third in real terms. If the decline was proportionately shared, about 65% of Cameroonians would be below this line today. If growth is evenly distributed, so that the incomes of all-rich and poor-grow at the same rate, GDP growth at 5% would allow personal consumption to rise by 2-3% annually. At this rate, it will take 17 years to get back to a poverty incidence of 40%, and about 50 years to reduce the incidence to 10/. If growth can be pro-poor, so that consumption of the poor grows 2% faster than the average, poverty reduction would be much quicker. Incidence could be lowered to 400/o in only 10 years and to 10°/e in just over 25 years. The difference between neutral and pro-poor growth is a full generation. In the 1970s, labor supply and demand moved in parallel, but in the 1980s labor demand lagged and unemployment emerged, especially in urban areas. If labor supply grows in line with the working age population-about 2.7% annually-and even if employment were to increase in line with GDP at 5% a year, implying a degree of labor-intensiveness matched by few countries in the world, it would still take until 2010 to bring the emnployment situation back to its 1983 balance. For Cameroon, it will be necessary to make growth much more labor- intensive to give the poor a full share in growth. 33. The capacity of people to respond to opportunities provided by new economic incentives is significantly influenced by gender-based factors. In Cameroon, there is considerable evidence of imbalances in the gender division of labor, and in access to and control of economically pro- ductive resources, which define men's and women's differential economic opportunities and con- straints. Poor farmers in general, and women in particular, have virtually no access to formal financial services. Significant gender differentials in earnings (Chapter 2), in time allocation (Chapters 2 and 4), in land ownership and use rights (Chapter 5), in schooling and literacy (Chapter 6), and in participation in public life (Chapter 7), are highlighted in this assessment. Women's central position in Cameroon's food sector needs to be set against the systematic discrimination they face in accessing the basic technologies and resources they need to be economically productive and efficient. These differentials have important implications for the productivity and dynamism of the economy, where they contribute directly to sub-optimal resource allocation and a lower supply response to economic incentives than would be the case if these differentials were reduced (Box 6). Box 6: Differential Incentives: Rational Economic Woman! A study of the SEMRY rice project in Cameroon found evidence of household production decisions that led to sub- optimal production, and failure to maximize income. At issue is the compensation women received for their labor. There is frequent conflict between men and women over the division of income from rice production. Men traditionally have the right to income earned by their wives, and income from rice sales was controlled by men, though women were expected to contribute their labor. Women's willingness to contribute labor to rice production depended on their being compensated significantly above what they could earn from low-return subsistence crops. Otherwise, they chose to work on subsistence crops, even though this kept the family's total income below the potential maximum. Source: Adapted from Jones 1983. xv 34. Key measures to address the labor time burden of women include actions to promote household and community labor-saving and energy-saving technologies, particularly in northem provinces where fuelwood is available in limited quantities and is expensive for city dwellers; improved stoves and the establishment of rural/community forestry to reduce pressure on limited forest resources; and regional centers for appropriate technologies, run by associations of progressive farmers, assisted by NGOs, to undertake research and innovation, which could be funded by providing services at moderate cost, including locally made equipment and corresponding training. 35. Public Finance There is a wide gulf between the spending patterns in the public sector and the development (poverty reduction) needs of the country. It is essential to narrow this gulf. A substantial reorientation and restructuring of public expenditures within the available resource envelope is possible and should be undertaken to strengthen the development and poverty focus of public spending. Though such restructuring is neither easy nor likely to occur rapidly, it is essential that a start be made in addressing the harsh choices and trade-offs necessary to ensure sharper focus of public expenditures on the critical needs of the poor. Restoration of key sectors (education, health, rural roads, water supply) to their high priority poverty-reducing role is perhaps the most critical single action the Govermment can undertake, through public expenditure reform, to affirn and to sustain commitment to poverty reduction. 36. Underpinning any reform of public expenditure policy is the need to re-establish an appropriate balance between salary and non-salary spending, and to make explicit the Government's intention to favor those regions and population groups (notably in the northern half of the country), who heretofore have been less well served by public provision of basic services and infrastructure. The following areas require increased emphasis in public spending programs: 4 Expansion of basic education (primary and middle levels). Particular efforts will need to be made to reduce regional and gender gaps in education, as female education has significant poverty-reducing externalities (Chapter 6). 4 Increasing access to quality basic health care is a priority, with emphasis on vaccination, nutrition, and preventive programs. Vaccination coverage remains very low for the country as a whole, especially in the north, and should be a high priority. Nutrition interventions to address micronutrient deficiency are also critical (Chapter 9). 4 Development of the small-scale food industry sector needs to be favored in agricultural, trade, finance, and urban sector investment and expenditure decisions, and this must be done in ways that explicitly take account of the central role of women. The role of the public sector is principally to ensure a market-friendly business environment, including through appropriate legal and regulatory reforms, and to provide limited but catalytic support to key services. Research and extension should give additional emphasis to staple food crops, to development and application of intermediate technologies, and to issues of processing and storage. Credit support should be channeled through local-level cooperative structures, assisted by a national agency (Chapters 4 and 9). 4 Rural road maintenance and rehabilitation have been identified by the poor as a critical priority need, as improvements in transport infrastructure will enable them to participate in the growth process. This must be associated especially with providing market access xvi to isolated areas, strengthening producer/market linkages for a wide range of agro-food products, and improving or enabling greater access to basic social services (Chapters 3 and 4). The poverty focus can be intensified through public procurement policies favoring small firms and labor-intensive techniques. + Investments in rural water supply, rural/community forestry, and development of labor- saving technology for women (both for their productive and household responsibilities) assume particular importance, since women's excessive workload constitutes a binding constraint on poverty reduction (Chapter 4). 37. Food Security: Cornerstone of Poverty Reduction. The basis for a comprehensive food security' strategy consists primarily of appropriate agriculture, small enterprise, and infiatructure policies, aimed at raising incomes and employment, and improving the efficiency of the entire food system. The absence of public or private support to small-scale food producers is at the heart of Cameroon's present food insecurity (Chapter 4). Poverty reduction in Cameroon can be greatly accelerated by stimulating agricultural growth in the traditional smallbolder sector and the labor-intensive sectors of agro-industrial activities which absorb about 700/o of total agricultural land and labor. To promote micro-enterprises in the agro- industrial sector, there is a need to facilitate the emergence of profitable and labor-intensive processing and marketing activities, which link producers to suppliers of inputs, processing chains, and marketing agents. A significant increase in food production is a pre-requisite for food security in Cameroon. Specific actions could include the following: 4 make accessible to small-scale female farmers a "productivity-package" including fertilizers, improved seeds, pest and weed control chemicals-this could be undertaken by experienced NGOs to ensure appropriate targeting and minimum leakage of the program, while facilitating access by poor farmers to these critical inputs; 4 promote the use of animal traction in agriculture and use of ox-carts for trade and transport of organic fertilizers; make accessible small equipment, agricultural and veterinary extension, and institutionalized support for harvesting, processing, and marketing; 4 promote livestock production through the provision of basic veterinary services, pasture management and credit marketing facilities-fees for services as well as taxes from cattle markets and slaughterhouses could be used to improve livestock production. 38. Nurition. To offset the high prevalence of micronutrient deficiency diseases, nutrition interventions should have a very high priority (Box 7). Specific nutrition interventions should include actions to: promote breast feeding, iodization of salt, distribution of semi-annual mass dose of vitamin A, daily oral iron for pregnant women, and eradication campaigns for intestinal parsites; promotion of use of red palm oil to combat vitamin A deficiency; nutrition education in conjunction with income-generating projects; urban gardening for vegetable and fruit production for home consumption; and integration of growth monitoring into a national T The concept of food security at the national level is used in this assessment in a broad sense, and refcrs to the entire food system (production, marketing, processing), which should be able to supply affordable and predominantly locally grown food to urban centers, to ensure adequate nutritional intake for all the population at all times, and even develop food exports. This has been to-date, and should continue to be, principally undertaken by small-scale (mostly female) producers and processors of cereals, roots, tubers and pulses. xvii surveillance program. In addition, reorganization, equipment and funding of national and provincial institutions responsible for community nutrition are necessary, so as to promote support to research on the determinants of maternal and child malnutrition, baseline surveys before interventions, development of techniques for monitoring and evaluation of the impact of nutrition interventions, and poverty projects. 39. Environmental and Land Tenure Box 7. "Enriching Lives" Issucs. For an agro-pastoral country like Cameroon, having access rights to land and Micronutrient programs [arm among the most cost- land-based resources is a crucial factor in effective of all health interventions. Deficiencies of just determining how people will ensure their vitamin A, iodine, and iron could waste as much as 5 basic livelihood. In the context of a longer- percent of GDP, but addressing them comprehensively and sustainably would cost less than 0.3 percent of GDP. term perspective on poverty reduction in Probably no other technology available today offers as Cameroon, it is important to understand large an opportunity to improve lives and accelerate trends in land administration and to assess development at such low cost and in such a short time. whether the patterns that emerge provide consistent policies for sustaining the livelihood of poor people. In most local communities, land represents much more than an economic factor of production, and the attachment of rural populations to their land, no matter how fragmented, is the primary underpinning of their social status. 40. In its present form, land registration is leading to a situation where those who do not need the land for their livelihood are the In Nso, there is uneasiness that the "commoditization" of ones who register their shares. This pattern land and escalating prices will lead to the marginalization of landholding creates further scarcity for if not outright disenfranchisement of small nural rural people (Box 8). Over 50% of those producers, the majority of whom are women. Since women are viewed as competent to manage the crops but who registered land in 1974-1985 were not to own the fields, the trend toward privatization has public servants. Though about 65% of undermined women's secure rights of usufruct under the Cameroonians live in rural areas, only 5% traditional tenure scheme. The 1974 land ordinances, of registered land holders were farmers. though expressly instituted to clarify land use rights and . give small farmers security of tenure with a view to More striking is that women were virtually encouraging expansion, have instead created increasing absent from the land registers, with 3.2% of stratification between uneducated village farmers and the registered titles in the North West Province, better-educated rich farmers, by virtue of their ambiguous representing barely 0.1% of the registered content and relationship to customary tenure. land mass. Disturbingly, the practices of these new elites reduce the amount of land available to smaliholders and limit the amount of capital invested in food production. 41. Increasing land scarcity, changes in the patterns of land ownership and use, and the co-existence of multiple legal and customary frameworks for addressing land issues, present a critical long-term challenge for Cameroon. There is a risk of growing landlessness among the poor, and with it an incapacity to sustain livelihoods. Land policies need to be grounded in Cameroon's very diversity, and build at least initially on explicit recognition of functioning customary arrangements. This can be achieved if local institutions are identified as providing the framework for land administration at the local level. The principal task of the Government would be to define the general policy framework and to deternine the extent to which local institutional and regulatory frameworks are compatible with its wider vision for the sustainable management of natural resources. Specific issues and operational parameters would be developed by the local communities themselves. xviii 42. Decentralization of decision-making and daily administration of land matters to the local and regional levels would further strengthen accountability and stakeholder participation in regulating land use rights. Several measures can be taken by the Government to address the issues of land ownership and land use rights raised in this assessment. These include: 4 Urban Land, Since an important market has developed for urban and peri-urban lands, the Government should define certain priority urban areas for systematic identification of rights, cadastral survey, and registration. Land titling schemes in urban and peri-urban areas are a financially sustainable process which should allow the Government to obtain fiscal revenue from property taxation, while contributing to improving the progessiveness of the tax system. 4 Women's and Herders' Rights. The special case of the use rights of women and the grazing rights of herders should be given protection by refusing to validate any individual exclusionary claims over usufructs. 4 Family Land. Without prejudice to their rights of access as members of the family, the urban elite should only be given legal titles over family land if there is proof of effective occupation, which should be a pre-requisite for private registration of group-held lands, especially in rural areas. Specific group-held lands (such as ancestral graves and sacred groves), which carry spiritual connotations, should not be the subject of private land holding under state law. 4 Further Research. The different modes of acquisition of customary rights should be the subject of further analysis to understand more clearly the implications of the exclusion of some groups for sustaining the livelihood of the poor. This analysis should address the vexing question of how to reconcile the preferences for flexibility in use rights under customary law (which do not change the nature of claims on land) with the need for longer-term, stable investment, which new modes of land use such as tree planting represent, to strengthen the productive capacity of the land over time. 43. Poverty Monitoring. It is important that a systematic program for developing poverty monitoring capacity, including regular in-depth and follow-up surveys, be implemented (Annex II). The Household Budget Survey (ECAM) should be carried out in 1995/96 to provide a basis for more accurate measurement of consumption trends throughout the country and how households have responded to the economic crisis of recent years. This will also provide an important initial measure of the impact of the devaluation on household-level income and consumption. It is recommended that participatory poverty assessments become an integral part of the Government's institutional approach to poverty reduction, and a core instrument of partnership with local NGOs and interest groups. PPAs should be designed and implemented at the local level, so that local perceptions, preoccupations, and priorities can be articulated. Support could also be given to institutionalizing the organization of an annual review of the Government's poverty reduction strategy, including monitoring of progress in meeting established targets and objectives. A report and workshop on poverty trends in the country, based on local-level assessments, surveys, and observatories, could be organized annually with a view to formulating a synthesis of results and findings of relevance to policymakers in monitoring trends and in defining poverty reduction measures. ' \2t ;t l I Cl ist mw: * +A! I Economic Peronnlance in Historical Persyective I. Introduction: The country conteXt 1.1. Caneroon is a country of striking diversity and tantalizing potential. Its regions abound in variety-in geography, climate, people, culture, religion, language, education and economic structure. Despite its natural and human endowments, for the last few years the country has slipped into a profound crisis marked by economic collapse, political and social transition, and a silent crisis of deepening poverty. Early in 1994, the country embarked-along with the other countries of the CFA franc zone-on a new economic course that has begun to reverse the economic downturn. For policy makers concerned with poverty reduction, a unique opportunity and a daunting challenge lie ahead. They must answer the usual questions that policy makers face everywhere. Who is poor? In what ways are they poor? How do they gain their livelihood? How can they be reached? How can they be helped out of poverty? But these basic questions must be answered in a way that is alive to Cameroon's diversity, to the constraints imposed by past economic collapse, and to the overriding need for the new economic policies to achieve long-term success. Box 1.1: The Challenge ofDiversity Cameroon embraces vast ecological and climatic diversity, with the most visible differences displayed between south and north, and is endowed with exceptional bio-diversity. The country's ethnic tapestry is similarly complex, and represents both an opportunity and a challenge to the country's development. The population is one of the most ethnically, linguistically, and culturally diverse and complex in Africa with some 200 ethnic groups, each with distinct languages, customs and social structures. The largest group, the Bamileke (roughly 1.5 million), is based in the West and North West Provinces, and dominates commerce and industry. Another group, the Beti, in the Center and South Provinces, controls the Govermment. The north of the country is predominantly Muslim, with Sudanese, Foulbe, Hausa and Arab Choa peoples. Below the Bantu line live groups such as the Beti (Eton, Ewondo), Boulou and Fang, with the Bassa, Douala and Bakoko predominating in the coastal plains around Douala. In the south there are some indigenous forest dwellers, hunting-and-gathering societies. Of those who speak one or both of the official languages (the great majority of Carneroonians), about 80%o are francophone and 20% anglophone. Around 60% of the population is estimated to be animist, 35% Christian (20% Roman Catholic) and S% Muslim. 1.2. Finding policies that can trigger broad-based sustainable economic growth and create a climate for investment in human resources-the two mainstays of any successful poverty reduction strategy-will be a complex endeavor. Finding poverty reduction policies tailored to the sharply contrasted circumstances of men, women and children in Cameroon's many environments can only be done through a painstaking and sustained attention to the specificity of local conditions, and the distinctive characteristics and constraints faced by people in different regions and circumstances. To succeed in long-term poverty reduction, policy makers will be challenged to find approaches that respect the constraints and exploit the opportunities presented by diversity (Box 1.1), that learn from the sometimes disappointing lessons of the past, and that 2 contribute to the long term success and sustainability of newly-embraced economic policies. Above all, policy makers must find ways to put the poor themselves at the forefront of their concerns and actions. II. Economic Performance: Tie Questfor Growth 1.3. In its past, Cameroon has experienced episodes of sustained high growth, suggesting that a set of economic and social policies can be found to help achieve one of the main prerequisites for successful and sustained poverty reduction. From 1967 until 1978, GDP and national income growth averaged 5.7%, and even though annual population growth of 2.7% greatly eroded this result in per capita terms, it was still possible to achieve 2% annual increases in private consumption per capita, a buoyant resource base for Government, and a rising savings rate (Figure 1.1). Figure 1.1 Long Term Movements in Output and Consumption CFAF 400,000 CFAF 350,000 CFAF 300,000 CFAF 250,000 -5---- GDP per capita CFAF 200,000 E Private Consumption per CFAF 150,000 capita CFAF 100,000 . CFAF 50,000 CFAF 0 -n - O_ - es - - - t - n - - - - - 1.4. In the late 1970s, the terms of international trade moved in Cameroon's favor, and the pace of income growth was stepped up sharply, averaging to 10.1% until 1985. Population growth was a little higher at 2.9% annually, but the growth of private consumption per capita attained 5.4%, Government finances remained buoyant and the savings rate rose even higher. In many respects, Cameroon's economic performance matched that of the much-praised East Asian economies and came close to that of Indonesia and Malaysia. These last two countries are instructive comparisons for Carneroon: they have comparable natural resources and export potential to Cameroon and achieved rapid reductions in poverty since the mid 1960s. 1.5. From 1985 until 1993 there was a sharp and well-documented reversal in economic performance. GDP per capita declined by 6.3% per year from 1985 to 1993 and this translated into a 6.0% rate of decline in private consumption per capita. Cumulatively, this represents a drop in average per capita consumption of over 40% in eight years-a collapse that has been one of the most painful that any country, developing or developed, has ever suffered, particularly coming after the expectations raised by the extended period of growth over the previous two decades. 1.6. Investment dropped from 25% of GDP to 10%. The balance of payments moved from a surplus (current account) equivalent to 4.7% of GDP in 1985 to a deficit averaging over 9% in 3 1991-93. The tax base shrank along with GDP and revenues at the end of the period stood at below half their level at the beginning of the period. Because of the difficulty and delays in bringing expenditure into line with the diminished tax base, public debt was incurred at an unprecedented rate. 1.7. The decline in Cameroon's economic situation can be attributed in part to highly unfavorable external factors, notably the drop in export prices, declines in petroleum exports and revenues, and the high level of foreign debt service. Such factors were very important in precipitating and extending the downturn. From 1985 to 1988, Cameroon's external terms of trade fell by over a half, implying that export volume would have had to double to pay for a constant volume of imports. Since then, the terms of trade have declined even further, though not at the disheartening pace of the mid 1980s. For producers of agricultural export crops, the income effect of the decline in export prices has been two-fold. The direct loss of income from falling prices was compounded by lower output in response to reduced profitability. For Government, the decline in petroleum prices was an important element of the collapse of the tax base. Debt service was also a severe problem for the Government and caused disruption in the economy more generally. Most external debt service could not be paid, forcing the Govemment into rescheduling or other formal debt service reduction agreements. In parallel, there was also a large build-up of internal debt service arrears and of public sector payment arrears. This reduced access to financing and caused a general climate of uncertainty among potential private sector lenders and suppliers who are, not unexpectedly, very sensitive to such arrears and late payments. Figure 1.2 Long Term Trends in the Real Effective Exchange Rate and the Terms of Trade i80 160-P 140 120 100 o Terms of Trade someivns RIs8 Effective Exchange 60 40 20 o - e' ( c toa ?I t.0 a0 0 - an rtWo r, - 0 0 - ~.F - F- -= - - F- -s - - - - - - - - - - - -a - - 1.. The difficult extemnal environment was compounded by a marked loss of economic competitiveness. In 1985, Camneroon's real effective exchange rate--the weighted average exchange rate adjusted to allow for different rates of inflation in trade partners and competitors, thus a good proxy for measuring a country's competitiveness-moved sharply upwards (Figure 1.2). The main causes of the change were beyond Caneroon's control: the appreciation of the 4 French franc within the European Monetary System, carrying with it the CFA franc and the decision of the Nigerian Government to devalue the naira in 1985/86. The impact of the change was to raise the costs of production in Cameroon in foreign currency equivalent terms. This left exporters unable to compete in world markets, resulting in rapid losses of market share for the main exports, while producers for the domestic market found themselves less able to compete with imports. Coming at the same time as the decline in the prices of many of Cameroon's main exports-when a depreciation of the real effective exchange rate and a gain in competitiveness were warranted-the loss of competitiveness struck a sharp blow throughout the economy. 1.9. Within the CFA zone as a whole, the absence of prompt and effective adjustment measures to counteract the loss of competitiveness can be seen, in Cameroon's case, to have set in motion the long decline in GDP and in all other macro-economic aggregates, though the length and depth of the decline reflect the interaction of many other economic, social, and political variables. Despite the difficult external circumstances, it might have been possible to avoid such a prolonged down-turn if adjustment within the CFA zone had occurred sooner. This is evident in comparing the 1988-92 GDP (and per capita) growth experience of Cameroon and Nigeria, as Nigeria has a roughly comparable natural resource endowment and faces similar external conditions. The failure to stay competitive and grow now presents policy makers with a far greater poverty challenge than a decade ago, while the resource base available to them, and consequently the margins for maneuver, are greatly diminished. 111. ThC Past as Prologue: Learnin,gfrom the Past 1.10. Cameroon's economic history as an independent nation falls into two radically different periods: one of rapid and sustained growth, the other of prolonged and deep decline. Each period has valuable lessons for any future poverty reduction strategy. In addition, the evolution of labor market conditions over the past ten years and the dynamics of labor supply suggest a number of priorities for policy makers. These subjects are taken up in Chapter 6. When the Economy was Growing, What was the Poverty Outcome? 1.11. Throughout the 1965-85 period, Cameroon enjoyed high-and at times very high - economic growth. Its performance was praised by outside observers, including the World Bank. Yet the 1983/84 Household Expenditure Survey found both a high degree of absolute poverty in the rural areas and a marked inequality in the distribution of incomes, whether within rural areas, within urban areas, or in Cameroon as a whole. Little is known about levels of poverty or the distribution of incomes in the mid 1960s before the long period of growth began. Nonetheless, it is clear that a high rate of economic growth was not sufficient to eliminate rural poverty or achieve a more even distribution of incomes in the 1965-85 period. With Cameroon recently embarked on a new economic strategy that can potentially re-spark economic growth, it is important to understand why growth alone is not sufficient, and what might be done differently in future to ensure that growth translates into poverty reduction. 1.12. In retrospect, there are several striking features about economic performance during the two decades prior to 1985 that converged to reduce the impact of growth on poverty reduction. These mostly center on a perceptible and widening imbalance between rural and urban areas, an issue that was well known at the time. Contemporary economic documents discuss the problems arising from a rural exodus. A renewed awareness of the main shortcomings of this period can 5 offer valuable guidance for policy makers in charting a future course. Essentially, the key poverty reduction lessons of the period can be summarized as follows: < Need to maximize income opportunities for the poor from agricultural growth. Agricultural growth was strong throughout the period, averaging around 4.5% annually, but the distribution of the benefits of this growth was very uneven. Smallholder agriculture-the most labor intensive part of the sector, and the primary livelihood of many poor women-fared reasonably well, but could not match the growth of other parts of the sector or the economy. In the sector overall, the share of labor in agricultural value added declined and agricultural wages grew less rapidly than output. Moreover, there was high taxation of agriculture, especially toward the end of the period. Opportunities for off-farm employment were missed, too. The purchasing monopsony of ONCPB and the promotional activities of parastatals such as SODECOTON or SODECAO gave parastatals economic control over key activities or indeed the whole sequence from farn to port. In other cases, development was built around large public corporations such as HEVECAM, SOCAPALM, CDC, or CAMSUCO that engaged in direct production. The promotional activities of such parastatals helped raise production, but often they followed approaches that did not maximize demand for labor, using instead capital-intensive methods based on privileged access to credit. Moreover, the exclusion of private competitors from many of the marketing, processing and export activities for the main export crops meant that opportunities for employment generation were missed. 4 The focus on employment generation in the industrial sector benefited a narrow section of the labor force. The expansion of the industrial sector was rapid in 1964-85, averaging around 10% annually. Industrial employment grew rapidly from a small base, reaching around 9% of the labor force by the mid 1980s. Around 20,000 new workers joined the industrial labor force annually in the peak period of expansion from 1980-84. It is noteworthy that the industrial labor force was and is overwhelmingly urban and male, while poverty was concentrated in the rural areas and among women. The opportunity cost of industrial development was high, as the sector attracted a disproportionate share of investment resources and was thus relatively high-cost in terms of employment creation. 4 A tendency to favor capital-intensive methods over labor-intensive ones. Cameroon's overall incentive structure during this period tended to subsidize interest rates and other costs of credit and lower the taxation of capital goods, while adding to the costs of labor through labor market regulation. Incentives were intended to expand overall economic activity and thus employment. Regulations aimed at labor protection were well-intentioned, aimed at improving conditions and security of employment. The effect of structuring incentives in this way gave little impetus to employers to use labor- intensive methods or to expand hiring. It was noted at the time that industrial development, although rapid, could have led to even more rapid growth of employment, reflecting the bias in favor of capital-intensive technologies. In addition, the choice of technology in the construction of public infrastructure did not aim at maximizing the employment impact, especially in the years of the oil boom. 6 4 An urban preference in the choice of public investments. Cameroon's investment rate rose to above 25% in the 1980s, reflecting a willingness to defer current consumption in favor of future growth. The choice of investment projects and the share of total investment were tilted in favor of urban areas. Though the distinction between rural and urban populations is fluid, and significant changes in both migratory and resource flows are occurring, there is nonetheless a clear pattern in investmnents. Many of the investments responded to important community needs or demands, including water supply, sanitation, urban roads and the like. At the same time, similar needs in rural areas were not addressed. As a result, rural areas lagged in many basic social or other public services. 4 A lag in human resource investment in rural areas. There was a large build-up of public investment and public spending throughout the period, and in particular during the years of the oil boom. It is to Camneroon's credit that part of this build-up was directed towards improved health services and education. However, there was a lag in service provision in rural areas where most of the poor were to be found, while service provision was strengthened most in urban areas. This lag showed up clearly at the time of the 1987 population census, which found that 46% of rural women and 29% of rural men born between 1962 and 1972 (the 15-24 age group) had not completed primary school, whereas the respective rates for the urban areas were 15% and 8%. Much of the educational expenditure went into higher levels of education to meet the demands of the industrial sector.' 1.13. As all the above shortcomings were acknowledged at the time, it may come as no surprise now that there remained a high level of rural poverty. Nor should the history of the period be reinterpreted negatively because of this. The achievement of rapid and sustained growth did occur, it did benefit many Cameroonians, there was a buoyant demand for labor overall, and the demand pull of urban labor markets-part of the rural exodus equation-brought benefits to many. Education and health services were improved, and social indicators improved. The lesson for the future is simple: poverty reduction cannot be assured by growth alone; how and where growth takes place, where investment is channeled, and who benefits and who loses are equally important dimensions. What are the Lessons for Poverty Reduction from the 1985-93 Period? 1.14. International conditions made the late 1980s very difficult for many developed and developing countries alike, but particularly so for Cameroon. Poverty reduction during this period would have been more difficult whatever the choice of economic policies. For Cameroon, the difficulty of responding and adjusting economically to more difficult international circumstances proved disastrous at the macroeconomic level and this translated directly into deeper poverty and more difficult living conditions for Cameroonians at all echelons of society. In this section, it is argued that the extent of impoverishment was increased by the ways in which economic policy was implemented in the period. Moreover, the burden of impoverishment fell unevenly, thus afflicting some already poor households more seriously than other less vulnerable ones. Understanding the economic policies and mechanisms that lay behind this process is important for the design of future policies. Thus, the features of economic policy that contributed I Regional disparities in human development are the subject of Chapter 6 and Annex V. 7 to negative poverty outcomes are presented below not to highlight the difficulty of Cameroon's present situation, but to pinpoint areas where different approaches in future could lead to better poverty reduction outcomes. 1.15. Throughout 1985-93, economic policy was directed primarily toward the objective of economic adjustment by internal measures, that is to say, without use of the exchange rate as a policy tool. The collapse of commodity prices in 1985, the appreciation of the French franc, taking with it the CFA franc, and the gains in competitiveness by Nigeria since 1985, all necessitated that Cameroon respond purposefully to regain its competitive position in the world and in the regional economy. The collective unwillingness of the countries of the CFA zone to use the exchange rate mechanism until 1994 left little option for Cameroon but to apply strong internal adjustment policies. These implied forcing down nominal wages and prices through austere fiscal and monetary policies, while seeking to raise productivity through structural reforms. Poverty Reduction Requires Growth, Growth Requires Competitiveness 1.16. The choice of an internal adjustment strategy and the way in which it was implemented proved, in hindsight, to be extremely negative from a poverty perspective. The first point to note about the poverty impact of the strategy is that it failed in its main economic objective, namely to restore competitiveness. In part, this reflected inadequate focus directly on competitiveness in the early years of the period when subsidiary goals-fiscal balance and containment of inflation-were seen as the principal objectives, and there was not adequate attention to implementing accompanying structural reforms. By 1992, the real effective exchange rate stood at 162 (on the basis of 1985 = 100), though it would have been necessary for it to fall to 38 to match the terms of trade movement. The loss of competitiveness meant that agricultural export markets continued to be lost, while domestic food crops and industrial goods systematically were unable to compete with imports. The loss of product markets was reflected in lower demand for labor, and this limited the employment and income possibilities for all Cameroonians. The loss of export markets and reduced demand for agricultural labor were particularly painful for rural areas, while loss of manufacturing demand mostly affected urban areas. At the same time, falling demand for domestically produced food reduced income opportunities for farmers-often rural women already living in poverty-while the downward pressure on food prices lowered the cost of living for those in urban areas, including those whose incomes were sustained by the public payroll. 1.17. Second, it is questionable whether the strategy could have succeeded. For small corrections in competitiveness or to prevent erosion of competitiveness on a continuing basis, internal adjustments represent a feasible, perhaps even preferred, option over exchange rate adjustment. Internal measures consist ideally of a combination of demand compression and fiscal austerity to prevent inflation, coupled with structural measures to lower production costs. The effort to compress wages and prices in Camneroon sufficiently to make up the wide gap in competitiveness resulted in a protracted deep recession. The loss of internal economic activity and labor demand bore extremely heavily on the poor working in activities geared to intemal markets-trade and marketing, personal services, traditional cereals and other foods produced and sold locally. Again, these are activities where many of the poor-especially poor women- earn their livelihood. The strategy implied slack demand for labor, downward pressure on wages and prices across the board, as well as a risk of unemployment. Thus, demand for labor in both external and domestic product markets was compressed for an extended period when labor 8 supply was growing rapidly. The result was a reduction in income opportunities for those already living and working in poverty while creating a class of new poor among those who either lost or failed to gain employment as a result of internal adjustment efforts. Macroecononuc Policis Hindered Poverty Reduction 1.18. Monetary and Credit Policy: The Crowding-Out of Credit to the Productive Economy. As part of the intemal adjustment strategy, demand compression was implemented in large part through an austere monetary policy including tight ceilings on aggregate credit from the banking system. The way in which monetary objectives- particularly the need to contain credit-were implemented may have contributed further to the reduction in labor demand and the increase in poverty. During the 1985-93 period, domestic credit contracted from around CFAF 900 billion to less than CFAF 750 billion. Even if this contraction had been evenly shared across all credit recipients, it would have implied a difficult adjustment for the economy. However, within the total, the amount of credit to Govermment and Government agencies was allowed to rise, forcing the private sector to adjust not only to the overall reduction in credit but also to the increasing demand for credit by Government. (Figure 1.3) Figure 13 1.19. The reduction in credit to the private sector influenced the poor most through the trickle-down effect of s so X P s reduced economic activity and 120 employment. The poor had and still have almost no direct access to credit from the banking system throughout the period. 1000 -O tot Indeed, it is striking that in practically all s detailed analyses of the constraints faced so NCrdt to the by the poor-women farmers, new P P Setor informal enterprises, small holder export eoo crop producers, small traders-their | demand for credit is not met by the 400 banking system, but has instead to be met by own savings, family loans, 20 tontines, mutual savings associations, credit from traders or suppliers, or other o non-bank sources. Even in a setting where the private sector has been crowded out by the public sector, the -200 poor were generally further crowded out 1988/87 1992/93 by established enterprises and larger borrowers.2 2 According to one esfimate, infomual institutions account for more than one-quarter of domestic financial sector cedit nd more than one-half of total financial savings (Schrieder and Cueva 1992). 9 1.20. Incomplete Structural Measures Deferred Benefits. Many areas of Cameroon's economy required structural reforms in the 1985-93 period: agricultural policies and the role of the parastatals, banking reform and credit policies, trade policies, incentive policies, education sector policies, and labor market policies. Many of these areas had a key role in internal adjustment, both in lowering production costs and in refocusing the Government's priorities and service provision. To the extent that incomplete reforms impeded economic growth or failed to bring about an improvement in the quality of public services, they also fell short in contributing to a poverty reduction strategy. Thus, the continuing presence of, say, a non-competitive public enterprise in the marketing or transport of an export crop eroded the margin available for farmers and inhibited both the income potential of that crop and the supply of exports. Similarly, a protective tariff (or non-tariff barrier) may help one Cameroonian enterprise survive but at the expense of a generalized increase in the cost of the particular item for all consumers-a case that could have a negative poverty impact if the product is one consumed widely by the poor. IV. FiSCal Policy: unbalanced syendi& Cuts and Priorities 1.21. Consistent with the internal adjustment strategy, there was a need to contain Government's primary fiscal deficit throughout the 1985-93 period. In reality, this effort failed. There was a drop in the overall fiscal deficit early on as a result of a sharp cut back in investment spending. But from 1987/8 onwards, the overall deficit remained at or above CFAF 210 billion every year but one, and is targeted at approximately the same level (slightly higher) for 1993/94. Only toward the end of 1993, following two civil service wage cuts amounting to around 60% of salaries, was it possible to make a substantial reduction in the deficit. Overall, the weakness of the fiscal adjustment effort was a major factor in the failure of intemal adjustment and thus in circumscribing the scope for poverty reduction. 1.22. In addition to the overall impact of fiscal deficits, the way in which fiscal adjustment was attempted proved very harmful to the poor. Reflecting in part reduced economic activity, in part a slackening of tax collection, revenues declined steadily throughout the period.3 As a result, expenditures were under repeated pressure. However, within expenditure some items were not easily compressed. The wage bill was stable or at times rising throughout the period, except in late 1993 (Figure 1.4). Instead, cuts tended to be made in materials, supplies and counterpart funds for externally financed development projects. It is now a rare exception to find public sector facilities-schools, hospitals, clinics-with adequate supplies to fulfill their expected task unless these are supplied by a foreign donor. The views of the poor confirm this finding (Chapter 3). Local Government officials speak of extreme difficulties, and there is a widespread perception that services are less well supplied (and that salaries are less promptly paid) in the regions than in the main cities. This choice of spending priorities-perhaps forced politically- became a clear block to poverty reduction. It allowed public sector incomes-already well above those in other sectors-to be sustained in nominal terms (increased in real terms as food and other prices were falling). At the same time, it lowered the capability of the public sector to deliver essential services, especially in the more impoverished and isolated areas. 3 The understandable reduction in revenues at a time of economic crisis notwithstanding, the overall tax effort in Cameroon remains low, and compares unfavorably with other countries in the region. The principal problems of the current fiscal regime are the complexity of the system and the combination of high nominal tax rates and excessive exemptions. In the medium term, ... the objective should be to simplify the tax system and to enlarge the tax base while simultaneously reducing tax rates (World Bank 1990a). 10 Figure 1.4 1.23. Data on public expenditure allocations are incomplete, and though there has been some improvement in monitoring investment outlays, much remains to be done to develop a capacity for coherent budget 90 Revenues monitoring and analysis. From a poverty 800 R perspective, the incidence of expenditures on Q 700 _ Wage Bill different socio-economic groups identified in 2 600 the poverty profile (Chapter 2), as well as the U. U< 500 pattern of expenditures in different regions of u the country, provides a measure of the impact : 400 of public expenditure on the poor. Existing *- 30 budget systems in Cameroon do not permit m 200 analysis beyond broad trends and proxy 100 measures. A public investment review (PIR) 0 was carried out in 1990 (World Bank 1990a), LO co o X 0 0 N X and a tax reform strategy was articulated in X In a - a O o li0 co co coC oc m m 1991 (World Bank 1991b). The conclusions and recommendations of these studies remain largely valid today. More recently, the Bank undertook analysis of budgets aimed at estimating "minimum" budget allocations in four key sectors (agriculture, road maintenance, health, and education), and has articulated both the critical need for, and high priority to be given to, carrying out a public expenditure review (PER) in 1995. The summary analysis which follows is drawn primarily from these sources.4 1.24. Analysis of public expenditures portrays a trend of increasing stress on public budgets. Data from 1989/90 to 1991/92, reveal the significant trends in recent public expenditure patterns (Annex I Tables 2 and 3). The trend of declining allocations to poverty-focused sectors is maintained in the budget allocations for the 1993/94 budget and the recently approved 1994/95 budget. The principal characteristics of the public budget situation in Cameroon can be summarized as follows. Over the 1989-92 period, total expenditures increased in nominal terms by 21%, but capital expenditures fell by 68%, or from 6% to 2% of total expenditures. The share of expenditures for the social sectors, transport, and urban development fell sharply (Table 1.1). 1.25. There has been a continued squeezing out of non-salary expenditures to cover salary costs.5 Data for this period confirm not only that salaries continued to rise as a share of total recurrent expenditures, but that the already negligible (and dwindling) share of non-salary expenditures precluded the effective provision of, for example critical non-salary inputs, such as medicines, textbooks, and equipment. Actual non-wage expenditures in 1992/93, the last year for which data are available, represented only 5% of total expenditures for education, and 13% for agriculture and health. 4 Apart from these aggregate trends, and in view of the planned 1995 PER, this assessnent does not attempt to address public finance issues exhaustively. Instead, it aims to indicate areas of particular concern for poverty reduction, which, data permitting, should be a key focus of the planned PER and policy dialogue with the Govenmment. S The impact of the cumulative 60ff/ reduction in public sector salaries on this trend requires further analysis in the framework of the PER. I1 Table 1.1 Change in Share of Public Expenditures Selected Sectors, 1989/90-1991/92 (in percent) Sector Total Non-Salay Primary/Secondary Education -13 -38 Health -23 -70 Public Works and Transport -29 -66 Water and Energy 45 45 Urban Devt. and Housing -67 -83 Higher Education +26 +60 Source: AF3CI estimates. 1.26. Regional differences in budget allocations and actual expenditures cannot be appreciated directly through analysis of budget data, though various proxies (such as the share of "central" as distinct from "peripheral" services in budgets, and the regional distribution of, for example, health sector personnel) suggest a strong degree of centralization and strong regional disparities in resource allocations.6 1.27. Actual expenditures bear little or no relationship to initial budget allocations, especially as this applies to non-salary recurrent and investment expenditures. Even recent trends in budget allocations do not indicate any shift in the composition toward priority development sectors, but rather the reverse. Recurrent expenditure budget allocations for 1994/95 have declined for agriculture, the social sectors, and other development sectors, while those for national sovereignty and environment ministries have increased. Recurrent expenditures for primary and secondary education have fallen by 34% over the 1993/94 allocation, and, with the exception of environment and forestry (+25%), similar trends are observed in other development ministries: agriculture (-39%), health (-26%), transport (-37%), labor and social insurance (-40%), and social and women's affairs (-44%). It therefore appears that budget allocations continue to favor sectors and activities which, prima facie, are not focused on poverty reduction, thus reinforcing the urgency of substantial restructuring of public expenditures if progress is to be made in poverty reduction. 1.28. It is still too early to assess the impact of, and response to, the devaluation. Preliminary estimates suggest that agricultural exports, the primary beneficiary of the devaluation, rose by 11% in 1994, and that there have been increased exports of rice, millet, and cattle to Nigeria. However, inflation (Chapter 2) and the recent export taxes on coffee (25%), cocoa, rubber, and cotton (15%), tea and bananas, can be expected to dilute the positive impact of the devaluation. V. Concluson: Uneven EffeCtS Of Rccession 1.29. Although Cameroon's experience in 1985-93 was extremely painful for almost all its citizens, the pain was not evenly shared. In the absence of an effective strategy, adjustment was forced and disorderly, and there were harsh inequalities. By and large, the poor suffered first, while better-off groups suffered relatively late in the process. A small group may not have 6 For examnple, "central" services absorb 62% of the health and 47% of the education budget, and 'peripheral" services 38% and 53% respectively (SADEG 1994). 12 suffered at all. The overall picture is complex, but some of the key events of the period had a clearly differentiated impact: 4 Poverty in 1983/84 was concentrated in rural areas. Between 1985/86 and 1992/93, cocoa producer prices were cut by 51%, robusta coffee prices by 77%, arabica coffee prices by 58% and cotton prices by 34%. Together, these crops represent the major source of cash income for about 60% of rural households. Households without assets beyond labor and agricultural land-some of the poorest in Cameroon-saw their income possibilities shrink dramatically.7 + Food prices followed agricultural export prices down, though more gradually and not as far. This weighed most heavily on women, who produce most of the nation's food. + Workers in informal activities-whether in urban or rural areas-rely on the trickle- down of urban incomes to generate demand for their services, but are vulnerable to rural- urban migration if living conditions decline in rural areas. In the 1985-93 period, there was a systematic squeeze on their earnings, mitigated somewhat by the decline in food and other prices. Those without assets beyond their own labor and perhaps a small piece of land have been vulnerable, and women who have less than full discretion in their use of time were especially vulnerable. 4- aIndustrial workers, who are preponderantly male, experienced some drop in nominal wages during the period but benefited from the falling cost of living. 4 Civil servants, who are also preponderantly male, experienced no pay cuts until 1993. For most of the period they experienced rising real incomes as prices of foods, rents, and many services fell. 4 Some groups did not experience a loss of nominal income: employees of public enterprises and the military, for example, still receive unadjusted salaries, and have benefited in terms of real incomes as prices have fallen. Again, these forms of employment are dominated by male workers. 1.30. The above typology cannot fully capture the dynamics of the impoverishment process since 1985. Households adapt, and typically they have sought survival strategies to diversify their income options and reduce their vulnerability to known risks. Nonetheless, it is clear that the global loss of income has been overwhelming, especially for those with the least diversification options. A clear lesson from this experience is that economic downturns are not equal in their effect, that the poor may be among the first to suffer, and that there is a need not only to recognize the varying speed with which different groups are affected but also their ability to adapt to new and perhaps more difficult circumstances. The implications of these lessons of recent economic performance for a poverty reduction strategy in Cameroon will be addressed in Chapter 8. 7 There are many people in rural areas who either do not have access to land or who have insufficient resources (land, labor, capital) to produce export crops. These would typically be worse off than farmers who are able to produce export crops. 2 An Income/EXyenditure Profile of Povert I. Introductiopt 2.1. This chapter presents an income/expenditure poverty profile for Cameroon based on available data, and aims to offer some insight into how poverty has evolved over the last decade.' Part II will outline a poverty profile based on household-level consumption data from the Household Budget Survey (HBS) of 1983/84. This is the only national-level household data source available for the profile, and it provides a detailed, and regionally disaggregated, picture of poverty for the period when Cameroon was at the height of the oil-led economic boom. To take account of Cameroon's recent economic collapse, which was discussed in Chapter 1, Part III will examine poverty trends since 1983/84, and, within the limitations of available data, update the profile defined in Part II to 1993.2 Part IV provides preliminary analysis of the short-term effects of two recent economic policy measures that have far-reaching implications for households and for the economy: the November 1993 cuts (of about 40%) in Government salaries, and the January 1994 devaluation (by 50%) of the CFA franc. Further information on data sources and methodology is presented in Annex III. 2.2. Quantitative data, while not entirely absent, are both limited and in some respects out-of- date. The choice of the 1983-93 period for purposes of comparison is dictated solely by the availability of data from the 1983 Household Budget Survey (HBS) and the 1993 surveys in Yaounde and Douala, which provide the principal quantitative benchmarks for this assessment. It is important to note that, as indicated in Chapter 1, the evolution between 1983 and 1993 in fact masks two sub-periods, which cannot be dated precisely owing to data limitations. The turning point occurred around 1986, with the period 1983-86 constituting the end of the boom period spurred by high petroleum revenues and high agricultural export prices. To avoid bias in interpreting the data, every effort has been made to place recent trends-economic (Chapter 1); income/consumption (Chapter 2); nutrition (Chapter 4); and human development (Chapter 6}- in a broader historical context, drawing, where possible, on data from the 1960s and 1970s. Part 11 of this assessment, on 'systemic" poverty issues, also contributes to the "profile" of poverty in Cameroon. Food insecurity is the subject of Chapter 4. Environmental and land issues are the subject of Chqater 5. Basic ne