agriculture for development chişinău, may 12 th, 2008

Agriculture for Development

Chişinău, May 12th, 2008

World Development Report 2008

22

Main WDR 2008 message

For sustainable development and poverty reduction, agriculture must be given a much more prominent place in the development agenda

Today there are improved opportunities to use agriculture for development

But not business as usualMore and better investmentsMultisectoral & decentralized approaches tailored to local situations


3

Agrarian structures — from collective to individual, from public to private (plots, farms, enterprises)

Role of state — from directing input & output allocations to providing public goods and a regulatory framework

Agricultural policy objectives — from food security & social service provision to food safety, quality & competitiveness

Heterogeneity across countries and within countries

Unique context of transitional countries


4

Agriculture based countriesMainly SS-Africa

Albania, Moldova, Kirghiz Rep

Transforming countriesMainly Asia, MENA

Tajikistan, Uzbekistan, Romania

Urbanized countriesMainly LAC,

Bulgaria, Hungary, Poland, Russia, Ukraine

Agr

icul

ture

’s s

hare

in g

row

th 1

990-

2005

Rural poor/total poor, 2002

Functions of agriculture differ in the three worlds of agriculture

0 100%

80%

0

50%

20%

Four Functions of Agriculture for Development

1. Lead sector for growth2. Source of livelihoods

Poverty reduction

3. Food security4. A way of better managing

natural resources


6

Large sector for GDP growth Affordable food and wage competitiveness Strong growth linkages

1. A trigger for overall growth in early stages

Accelerating agricultural growth in agriculture-based countries

Successes: China, India, Vietnam

Successes: China, India, Vietnam

2.7

3.4 3.5

0.0

1.0

2.0

3.0

4.0

1980-1990 1990-2000 2000-2004

Ave

rage

ann

ual g

row

th r

ate

(%)


7

2.5 billion people related to agriculture,

800 m smallholders

75% of poor are rural and the majority will be rural to about 2040

Global extreme poverty 2002, $1.08 a dayGlobal extreme poverty 2002, $1.08 a day

GlobalUrban poor

287 mill. South Asia rural

407 mill.

Sub-SaharanAfrica rural

229 mill.

East Asia rural

218 mill.LAC rural27 mill.

ECA rural5 mill.

MENA rural5 mill.

2. A source of livelihoods


8

Agriculture

Non-agriculture

-2

0

2

4

6

8

Low est 2 3 4 5 6 7 8 9 HighestExpenditure deciles

Exp

endi

ture

gai

ns in

duce

d by

1%

G

DP

gro

wth

(%

)

GDP growth from agriculture benefits the income of the poor 2-4 times more than GDP growth from non-agriculture (43 countries)

Growth from agriculture is especially effective for poverty reduction


9

Agriculture and poverty inEurope and Central Asia

Recovery in Eastern Europe and Central Asian agriculture is accompanied by a sharp drop in rural poverty


10

Agricultural growth and poverty reduction in Moldova

-25.4

0.21.7

-3.5

0.3

3.6

-30

-25

-20

-15

-10

-5

0

5

10

1991-95 1996-00 2001-06

Moldova

Europe & Central Asia0

10

20

30

40

50

60

70

80

2000 2001 2002 2003 2004 2005

National poverty

Rural areas

In Moldova too, restoration of agricultural growth, after a strong initial downturn, has been associated with declining poverty

Poverty rates Moldova

Agricultural growth


110

100

200

300

400

500

600

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

US

$/ to

n

Lilongw e

Addis Ababa

0

100

200

300

400

500

600

1994 1996 1998 2000 2002 2004 2006 2008

US

$/to

n

Rice

Maize

3. Agriculture and its key role for food security

Agriculture plays a key role in providing;

1. Food availability: globally, nationally and locally

Food prices and volatility

2. Access to food: a critical source of income to purchase food

3. Utilization of food: e.g., high nutritional status

Domestic and global shocks place additional strain on import capacity and therefore food availability

Domestic price shocks:Maize in Malawi and Ethiopia

Global price shocks:Rice and Maize


12

Important user of natural resources: 80% of fresh water resources40% of land area21+ % of greenhouse gas emissions

Contributions to greenhouse gas emissions

Developing country

agriculture & deforestation

21.4

Developing country

other sources

15.2

Industrialized countries

63.4

SuccessesWatershed management, and

environmental services

SuccessesWatershed management, and

environmental services

4. A way of managing natural resources and the environment

Improved Opportunities to Use Agriculture for Development

1. Incentives2. Markets3. Innovations


14

-40

-30

-20

-10

0

10

20

30

40

Agriculture-based Transforming(excluding ECA)

Urbanized ECA

Nom

inal

Rat

e of

Ass

ista

nce

%

1980-84 2000-04

1992-93

Improved opportunities--Incentives

Agriculture is now protected in ECA countries


150

50

100

150

200

250

300

350

1980 1990 2000 2004

Val

ue o

f exp

orts

(19

80=1

00)

Changing diets H high value products and non-traditional exports

Developing and transition country exports

Developing and transition country consumption

Meat

Cereals

Horticulture

Improved opportunities--Markets

0

50

100

150

200

250

1981 1984 1987 1990 1993 1996 1999 2002Kca

l con

sum

ptio

n/ca

pita

/day

(19

81=1

00)

Meat

Cereals

Horticulture


16

Moldova is shifting to high value exports

Note: Traditional products comprise tobacco and derived products, sugar, cotton, jute, coffee, tea, spices, and natural rubber latex.

Million US$

-100

0

100

200

300

Cereals Trad.products

Meat Fruits & veg. Wine, otherbeverages

Oilseeds

1995

2005

Net agricultural exports


17

Technological innovations—much progress but underinvestment Conservation farming and sustainable practices, Bt

cotton ICT in financial, marketing and extension services

Institutional innovations—many at early stages Risk insurance Rural finance Marketing “software”—exchanges, information Stronger producer organizations Public-private-CSO partnerships

• Value chains, extension, rural finance

Improved opportunities--Innovations

Challenges to Effectively Use Agriculture for Development

1. Achieving higher agriculture growth2. Implementing through better

investment3. Promoting rural nonfarm pathways


19

Challenges—Growth

Supporting macro-policy environment and rural investment climate Consistency of agricultural policies to

suport private market development Property rights for market development

Redefined roles of the state Core public goods Regulation and standards Coordination


20

Real international commodity prices have been suppressed by current global trade

policies (% of price)

Trade share losses to developing countries due to current global trade policies

(% point loss to developing country trade shares)

Global trade distortions remain pervasive

Challenges—Growth

-9

-2

-18

-21

-5

-7

-34

-27

Sugar

Rice

Processed meat

Wheat

Coarse grains

Dairy products

Oilseed

Cotton

-3

-4

-4

-5

-7

-12

-15

-21

Sugar

Rice

Processed meat

Wheat

Coarse grains

Dairy products

Oilseed

Cotton


Challenges—Connecting small farmers to markets

Policies on agrarian structure Family farms usually more efficient Economies of scale in high value markets

Demands of high value markets SPS standards Integrated supply chains

Key role of producer organizations and labor markets Chile vs Central America

21


22

Agricultural-based countries spend too little on agriculture

Share of Agriculture in GDP (%)

Challenges—Public investment

Public spending on agric as a share of agricultural GDP (%)

29

22

16

10

0

5

10

15

20

25

30

35

Agriculture-based

Moldova Transforming Urbanized

4 4

11

12

0

2

4

6

8

10

12

14

Agriculture-based

Moldova Transforming Urbanized

Sources: WDR2008, data for Moldova from “Public Expenditures for Agricultural Development” Moldova Agricultural Policy Notes, World Bank. All data in figure is for 2004


23

Misinvestment and underinvestment in core public goods

Governance challenges● Political economy of

reforms● New roles of the

state● Vastly improved

capacity to implement

Governance challenges● Political economy of

reforms● New roles of the

state● Vastly improved

capacity to implement

Subsidies have risen at the expense of public goods in India

Challenges—Investment


24

Agricultural subsidies in Moldova

Farm subsidies but have been growing since 2001 Trade offs for investments in core public goods such as R&D?

Need clear objectives for subsidies such as: Overcome temporary market failures

Market development and innovation grants

Equity and poverty reduction

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

1998 1999 2000 2001 2002 2003 2004 2005

% o

f con

solid

ated

pub

lic s

pend

ing

Delivery of Services

Subsidies

Total Spending on Agriculture by type


25

Subsistencefarming

Subsistencefarming

Pathways out of poverty: farming, labor,

migration

Transitionto market

Demand for Ag products

Demand for Ag products

Efficient markets, value chains

Efficient markets, value chains

Commercial smallholdersCommercial smallholders

$ $

$ $

Social assistance

Transition to market:commercialization

Rural labor market:

Ag, Rural nnofarm, Migration

Rural labor market:

Ag, Rural nnofarm, Migration

Potential of agriculture for development : Multiple pathways out of poverty


26

0%

20%

40%

60%

80%

100%

ECA Male ECAFemale

LAC Male LACFemale

% a

du

lts

Nonactive

Nonag wage

Nonag selfemployed

Farm labor

Own farm

Improve nonfarm employment opportunities

Moving beyond agriculture


27

Average years of education of rural 18–25 yrs

ECA has a good base

0

2

4

6

8

10

12

SubSaharan

Africa

South Asia East AsiaPacific

Middle East& NorthAfrica

Europe &Central Asia

LatinAmerica &Caribbean

Men

Women

Moving beyond agriculture


28

Key Elements of a Policy Agenda for ECA

Policy objectives Raising competitiveness and value added of agriculture Making growth pro-poor and green Stimulating rural non-farm income growth and exit from

agriculture Key policy issues for agriculture

Improving the rural investment climate• Reducing risk from policy changes & policy reversals

Improving access to markets, including to the EU• Food safety, standards, certification• Reducing barriers to regional trade

Supporting institutions (e.g., credit, tenure security, mkts) Investment in core public goods (R&D, infrastructure) Reducing the environmental footprint from agriculture Fostering broader rural development

Postscript

Wine as a successful high value export

30

South Australia as a major wine exporter• From wool and wheat to wine

•80 percent plus exported• Exports over a billion dollars annually

• Rapid growth since 1990• Focus on increasing quality and price

Ingredients of success• Shared vision and strategy• Foreign investment and alliances• Branding and GI• R&D, training and education• Strong producer and trade associations• Public-private partnerships

Building of tourist industry


31

Postscript 2: Tapping Global Wine Markets

Rapid expansion of Australian exports and increasing unit value

Source: FAOSTAT

-

500

1,000

1,500

2,000

2,500

1990 1992 1994 1996 1998 2000 2002 2004

mill

ion

US

$

Australia

Moldova

Source: FAOSTAT

0

100

200

300

400

500

600

700

800

1990 1992 1994 1996 1998 2000 2002 2004

tho

san

d t

on

nes

Australia

Moldova

Thank you

www.worldbank.org/WDR2008

agriculture for development chişinău, may 12 th, 2008

Documents

development agenda

food utilization of

central asian agriculture

food safety

food securityagriculture

overall growth

gdp growthaffordable

south asia rural