Development of human capital and institutions is critical for achieving agricultural growth. Over the past decade there has been significant policy reform, and limited institutional reform. Many of the institutions that were created during central government control of markets and services were ill equipped to work in a liberalized market environment. Good policies and investments can go sour, not because they are poorly conceived but because the institutions that implement them do not work well.

Reform of public institutions must overcome vested interests; otherwise new forms of rent-seeking and corruption simply replace the old. New actions may be needed; increased donor support of key public sector investments could come from new financing arrangements that empower the users of public services (e.g., vouchers, user fees, and other co-financing mechanisms) with appropriate institutional reforms to improve mandates and performance.

It is critical to form new partnerships between the public, private, and ngo sectors for the provision of public services such as credit, extension and research. Even where governments must pay all or most of a service, this does not mean they necessarily have to supply it themselves. Contracting out arrangements with other parties can be much more cost-effective, and may offer better possibilities for involving local people and communities. The types of partnerships desired will vary by sector and function. It may be more opportune to diversify supply arrangements for education and health services, for example, than to provide rural roads and market regulation.

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