Transcript Agriculture and Poverty Reduction

Agriculture and Poverty Reduction
Part of the Problem; Part of the Answer?
Luc Christiaensen, World Bank, Presentation at George
Washington University, Washington D.C., 11 February 2008
World Development Report 2008
Agro-pessimism reigned during the
1990s
14
40
5.6
3.5
2
3.8
30
3.6
5.1
4
5.5
6.5
60
50
6.8
7.8
7.8
8.8
6.6
7.2
8
6
80
70
9.2
10
90
% poor in rural areas
12.1
12
100
10
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
0
1990
0
20
% of poor in rural areas
ODA to Ag as % of total ODA
Development partner support for agriculture declined
consistently during the 1990s
2
World Development Report 2008
While poverty is concentrated in rural
areas …
POVERTY
RURAL
75%
Agriculture as main livelihood
3
World Development Report 2008
… public expenditures are concentrated
outside agriculture
OFFICIAL
DEVELOPMENT
ASSISTANCE
AGRICULTURE
4%
(12% in 1990)
POVERTY
96%
AGRICULTURE
4%
PUBLIC SPENDING
(Sub-Saharan Africa)
RURAL
75%
96%
Agriculture as main livelihood
4
Stunning contrasts
- yields and poverty
World Development Report 2008
3500
50 3500
1500
1000
10 1000
3000
Poverty (right axis)
2500
40
30
2000
Yields (left axis)
20
60
Poverty (right axis)
3000
50
40
2500
30
2000
20
1500
Poverty incidence (%)
60 4000
Poverty incidence (%)
4000
Cereal yields (Kg/Ha)
Cereal yields (Kg/Ha)
Cereal yields up and poverty down in South Asia;
cereal yields and poverty unchanged in Sub-Saharan Africa
10
Yields (left axis)
500
0 500
1984 1987 1990 1993 1996 1999 2002
1984 1987 1990
0
1993 1996 1999 2002
5
World Development Report 2008
Agriculture for development
in the headlines
6
World Development Report 2008
Agriculture for developoment in
the headlines: why?
End of cheap food which may affect growth
 New demands on agriculture: animal feed,
biofuels, quality/health, environmental services
 New supply uncertainties: rising water and land
constraints, high energy cost, climate change
Pandemics linked to agriculture
Rising rural-urban disparities especially in
Asia
7
Agriculture for Development
www.worldbank.org/WDR2008
Overall messages
World Development Report 2008
To meet the MDG of halving poverty by 2015,
governments and donors must invest more and
better in sustainable agriculture.
Successful implementation requires
decentralized, participatory and multi-sectoral
approaches redefining the relative roles of
state, market, civil society.
9
World Development Report 2008
Three functions of agriculture in
development
1. A contributor to overall growth
2. A distributor of growth
3. A steward of the environment
10
The three worlds of agriculture
Agriculture’s share in growth 1990-2005
World Development Report 2008
80%
Agriculture based countries
(mainly SS-Africa.
417 million rural people)
20%
Transforming countries
Urbanized countries
(mainly Asia, MENA.
2.2 billion rural people)
(mainly LAC, ECA.
255 million rural people)
0
0
50%
Rural poor/total poor, 2002
100%
11
World Development Report 2008
Agriculture, a source of
environmental services
Important:
80% of fresh water resources
21% of greenhouse gas
emissions
It can succeed:
Sustainable farming systems
and environmental services
Contributions to greenhouse gas
emissions
LDC agriculture &
deforestation
21.4
Industrialized
countries
15.2
63.4
LDC other
sources
12
Agriculture in agriculture based
economies
World Development Report 2008
No sustainable development in Africa
without a buoyant agriculture
1.
Agriculture is the lead sector for overall growth and
poverty reduction.
2.
It can be done given new opportunities, and has
started to happen
3.
But it won’t be easy (or cheap) given new challenges
and the need for tackling both under and misinvestment.
4.
The focus must be on brokering a smallholder
productivity revolution.
5.
Approach different to Asia’s Green Revolution
 highly diverse conditions and rainfed farming
14
Agriculture as trigger of growth
World Development Report 2008
 Structural features
 Arithmetic - ignoring agriculture (29% of the economy) is like
walking on one leg
 65% of labor force - agriculture especially poverty reducing
 Productivity growth in non-tradable food sector
lowers food prices, keeping the tradable non-food
sector competitive
 Staple crops largest subsector (60-70% in Malawi, Zambia)
 Local preferences (sorghum, millet, roots and tubers) &high
transaction costs (landlocked, remote regions) make food
nontradable
 Low food prices keep wages low and nonfood tradable sector
competitive
 Poverty reducing effects depend on net food marketing position of
the poor - many of the rural poor are net food buyers
15
(Madagascar).
Net selling smallholders are a minority
World Development Report 2008
Share of the poor (%) w ho are smallholder net sellers
100
80
60
40
20
ia
Bo
l iv
Ba
ng
lad
es
h
Vi
etn
am
dia
Ca
mb
o
Et
h io
pi a
Ma
da
ga
sc
ar
Za
mb
ia
0
16
Agriculture as trigger of growth (2)
World Development Report 2008
The tradable agricultural sector
generates foreign exchange
 Traditional (e.g. coffee) and nontraditional
exports (fish in Uganda, flowers from Kenya,
vegetables from Senegal)
 Poverty reducing effects depend on
participation as smallholder or laborer
 Countries & poor participate despite
globalization and integrated chains
17
Agriculture as trigger of growth (3)
World Development Report 2008
 Substantial growth linkages from ag growth
 Consumption and production linkages;
 1 US$ in agriculture generates 0.3-0.5 US$ outside
agriculture (econometric evidence – Irz and Tiffen)
 Size of multiplier :
• At least as large as the reverse effects from nonag to ag
• Small country with large tradable sector (Lesotho) smaller
multipliers; large country with large nontradable sector
(Cameroon, Tanzania), larger multipliers
• Depends on resource availability &f avorable investment
climate to foster supply response of nontraded nonfarm
goods
• Linkages mainly occur through rural commerce and services
(limited threat from import of cheap manufactured goods)
18
Agriculture as trigger of growth (4)
World Development Report 2008
 Comparative advantage in agriculture, at least in
short to medium term
 Food mostly nontradable & frequent foreign exchange
shortages
• food demand doubles to 100 billion by 2015 from 2000 (pop
growth and high income elasticity
 Growth in manufactured exports slow (excl Mauritius)
due to comparative advantage in (processed) and
unprocessed primary based exports (incl. tourism):
• Factor endowments (rich in natural resources, poor in skilled
labor)
• Poor business environment, which is more important for
manufacturing and high value services
• Economies of scale – Africa largely missed the boat
19
World Development Report 2008
Agricultural growth has unique powers
for poverty reduction
dPi  dPi Yi  dYi

 
Pi  Pi dYi  Yi
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 Pi dYai
 dYai  dPi Yni
s ai
 
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
 dYni
s ni
Yni

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a
at it 1
a
it
n
nt it 1
n
it
20
Agricultural growth has unique
powers for poverty reduction
Expenditure gains induced by 1% GDP
growth (%)
World Development Report 2008
7
6
Bravo-Ortega &Lederman, 2005
Agriculture
• GDP growth from ag labor
productivity 2.9 times more
effective in raising incomes of
poorest quintile
5
4
3
2
1
Christiaensen & Demery, 2007
0
-1
Non-agriculture
-2
Lowest
2
3
4
5
6
7
8
9
Expenditure deciles
Ligon & Sadoulet, 2007
Highest
• GDP growth from agric 2.7 times
more effective in reducing 1$ day
poverty headcount among the
poorest quarter of countries, and 2
times more effective among the
richest quarter
GDP growth from agriculture benefits the poor at least twice as much as
21
GDP growth originating in non-agriculture
It can be done…and is happening
World Development Report 2008
Agricultural growth in SSA has accelerated
Average Annual Percentage
Real Agricultural Growth
6
5
3.8
4
3
3.3
2.3
2
1
0
1980-1990
Source : World Development Indicators
1990-2000
2000-2005
22
Ghana – a breaking story on poverty
reduction
World Development Report 2008
Rural poverty halved with increased agricultural
productivity, higher cocoa prices, reduced food prices, and
income diversification
80
70
Poverty rate (%)

Rural
Savanah
60
50
40
30
Rural
Forest
20
Urban
10
0
1991/92
1998/99
2005/06
23
New opportunities
1.
Better incentives
2.
Institutional and technological innovations
3.
New markets
Better incentives
World Development Report 2008
10
Macro-economic env
improved since 1995
as did ag gdp growth
8
Macroeconomic score

6
4
2

From 30% taxation of ag
in 1980 to 10% in 2004
in ag-based countries
High food prices 
supply response?
6
5
Agriculture growth rate

0
1983 1986 1989 1992 1995 1998 2001 2004
1984-1995
1995-2005
4
3
2
1
0
-1
-0.2
0
0.2
0.4
Average annual change of macroeconomic score
0.6
25
Declining net taxation, largely following
declining taxation of exportables
World Development Report 2008
Developing countries are
protecting importables…
40
…but taxing exportables
less.
1980-84
1980-84
20
2000-04
2000-04
26
23
20
14
13
10
11
0
Agriculture Based
Transforming
Urbanized
Nominal Rates of Assistance,%
Nominal Rates of Assistance,%
2
0
-13
-20
-19
-14
-29
-40
-46
-60
Agriculture Based
Transforming
Urbanized
26
Innovations for production
World Development Report 2008
Institutional  reaching the frontier
Maize Yields in African countries
6
5
Ton per hectare
 Land (communal
certificates, Ethiopia)
 Credit (lending
ladders,Guatemala)
 Inputs (agro dealers
for fertilizers,Kenya)
4
3
2
1
0
Malaw i
(n=4566)
Ethiopia
(n=310)
Nigeria
(n=2501)
Average national yield
Uganda
(n=461)
Mali (n=163)
Mozambique
(n=508)
Average yield in farm demonstrations
Technological  expanding the frontier
 NERICA, GMO (Bt Cotton in China)
 IT
27
New markets
World Development Report 2008
 Staple crop demand in SSA expected to double by 2015
 Changing diets and globalization  rising demand for
high value products at home and abroad
Developing country exports
250
Meat
200
150
100
Horticultur
e
Cereals
50
0
1981 1984 1987 1990 1993 1996 1999 2002
Value of exports (1980=100)
Kcal consumption/capita/day
(1981=100)
Developing country
consumption
350
Horticulture
300
Meat
250
200
150
Traditional
exports
100
50
0
28
1980
1990
2000
2004
New challenges
1.
Constraints on growth
2.
Making growth pro-poor
3.
Implementation bottlenecks
World Development Report 2008

Constraints on Pro-poor
Growth
Constraints on Growth
 Soil degradation (e.g. soil erosion in Ethiopia,
desertification & agro-forestry in Niger)
 Uncertainties (climate change & high energy cost)
 High transaction costs (roads, poor market development)
Making growth pro-poor

Connecting smallholders to new markets (Senegal,Kenya)

Access to assets (land, water, human capital)
30
Implementation bottlenecks
World Development Report 2008

Weaknesses in governance (e.g. changing roles for the
state as in extension)
Demand Driven
Traditional
Farmer
Organizations
Farmers
Services
Extension
organization
$
Accountability
Ministry of
Agriculture

$
$ Services
Accountability
Extension
organization
Ministry of
Agriculture
Under and misinvestment in national and international
public goods
31
Investing in core public goods pays
World Development Report 2008
 Average rate of returns to investments in
ag R&D in the range of 35 percent in SSA
and 50 percent in Asia
 High pay-off to investment in irrigation
 Returns to projects now in the 15-20% range
in SSA as elsewhere
Econometric evidence from rural Uganda,
China and India shows highest returns
(growth and poverty reduction) from ag
R&D, rural roads and rural education
32
More public investment required
World Development Report 2008
Ag GDP/ GDP
Public spending on Ag / Ag GDP
14
35
30
29
11
10
20
percent
25
percent
12
12
16
15
10
10
8
6
4
5
2
0
0
Agriculture-based
Transforming
Urbanized
4
Agriculture-based
Transforming
Urbanized
Priorities: research and extension, rural roads, irrigation,
human capital, institutions
33
World Development Report 2008
And better investment needed
Zambia’s public budget for agriculture 2004/05
Food Reserve
Agency (maize
marketing)
15%
Food security
and drought
relief
12%
Irrigation
investment
3%
Infrastructure
2%
Personal
emoluments
20%
Fertilizer
Support
Program
37%
Operational
funds
11%
34
World Development Report 2008
Better budgetary processes can
improve expenditure allocation
Detailed reviews of public expenditures in
the agricultural sector
Impact evaluation of public spending in
agriculture (beyond ag R&D)
Medium term expenditure frameworks
based on program budgets with clear
objectives and transparent allocation to
better align financial resources with
priorities
35
Moving forward
1.
Focus on staple crop productivity growth
2.
A smallholder productivity revolution
3.
Decentralized, multi-sectoral, and regional
Focus on productivity increase
World Development Report 2008
Yield expansion index
260
ASIA
220
180
140
100
100
AFRICA
140
180
220
Area expenasion index
260
37
World Development Report 2008
A smallholder-based productivity
revolution, with an eye on food security
 More commercial smallholders
 Producer organizations
 Stronger markets
 standards, institutions, infrastructure (warehousing, cold storage),
brokerage services (finding markets and finance)
 Better subsistence
 technology, soil and water management, safety nets
 Exit from the farm
 investment climate, attract remittances, secure land tenure and
functioning land markets
38
World Development Report 2008

… and address special features of the
African context
Approach will differ from Asian Green Revolution
 Differentiated and thus decentralized and
participatory to deal with huge heterogeneity
• Very diverse farming systems
• Food staples, traditional and nontraditional exports
• Particular attention to needs of women farmers
 Multisectoral to capture synergies
 Regional approaches to deal with “small
country problem” -NEPAD initiatives
39
Take away messages
Take away messages
World Development Report 2008
 A smallholder based agricultural productivity
revolution is necessary to trigger growth and poverty
reduction in agriculture based economies
 More and better public investment and policies
needed to do so (including ag R&D)
 The environmental agenda, incl. environmental
services, an integral part of ag-for-development agenda,
requiring better incentives and better regulation.
 Emphasis on decentralized, participatory, and
multisectoral approaches.
41
www.worldbank.org/WDR2008
Agriculture in transforming
economies
Occupational transformation lags
structural transformation
World Development Report 2008
1
BDI
0.9
ETH
NER
MWI
Share of GDP and labor in agriculture
0.8
0.7
NPLBFA
RWA
ZAR
TGO
GHA
0.6
ZAR
SDN
BEN
BGD
0.3
CHN
IND
YEM
CMR
CIV
Nigeria 1961-2003
THA
TUR
GTM
BOL
PHL
Brazil 1961-2003
MAR
KEN
VNM IND
BGD
GIN SEN
0.2
China 1961-2003
IDN
LKA
PAK
TZA
RWA
MLIUGA
GHA
NER
NPL TGOKHMBEN
NGA
TJK
NGA
SDN
MDG
TCD TJK
BFA
MOZ
MWI
0.4
Share of labor in agriculture
PNG
AGO
ZWE
LAO
BDI
ETH
0.5
Share of GDP from agriculture
GIN
MLIUGA TZA
MOZ
TCD
LAO
KEN
MDG
SEN
KHM ZMB
VNM
ZMB
0.1
EGY
PRY
HND
CMR
PER
SLV
PNG
SYR
UZB
ECU
IRN
UZB
AZE
PRY
TUN
DZA
CIV
HND SYR
GTM
IRN
PAK
COL
YEM
PHL
LKA
ROM DOM
CHN
IDN
UKR BOL
ZWE
COL
MAR
BLR
ROM
TUN
AZEUKR
BLREGY
SLV
DOM
ECU BGRDZA THA
AGO
PER
POL
MYS
BRA
MEX
CHL
TUR
HUN
ZAF MYS
SVK
VENCZE
BRA
CHL
SVK
MEX
POL HUN VENCZE
ZAF
ARG
ARG
0
90
150
245
400
670
1100
1800
3000
4900
8100
log scale
GDP per capita, 1990-2005 (constant 2000 US$)
44
Structural features
World Development Report 2008
Economic growth driven by nonagricultural
sectors
Labor transition out of agriculture is lagging
Increasing rural–urban divide with poverty
concentrated in rural areas for decades to come
Increasing calls for agricultural protection and
subsidies in transforming economies
45
Nominal rates of agricultural assistance (%)
World Development Report 2008
The politically expedient versus the
economically efficient
40
20
0
-20
1980-84
-40
2000-04
-60
China
Malaysia
Thailand
India
Philippines
Indonesia
46
World Development Report 2008
Accelerating poverty reduction through
rural income growth
Urban migration is part of the answer
 Urban migration accounts for 20% of decline in
1$/day poverty in EAP between 1993-2002
 Pace and nature of urbanization matter (Philippines vs
Thailand)
Rural income growth on and off the farm
provides most prospects
 Accounts for 75% of decline in 1$/day poverty in EAP
between 1993-2002
Growth in agriculture especially poverty reducing
 GDP growth from agriculture benefits the income of
the poor 2-4 times more than GDP growth from nonagriculture
47
Urban migration, yes; but especially
rural income growth
World Development Report 2008
Thailand
Rural diversification, rapid poverty
reduction
Philippines
Rapid urbanization, slower poverty
reduction
80
80
70
70
60
Share rural population
percentage (%)
percentage (%)
60
50
40
Share employment
in agriculture
30
20
Share employment
in agriculture
50
40
30
20
10
0
1980
Share rural population
10
1$day poverty
1985
1990
1$day poverty
1995
2000
2005
0
1980
1985
1990
1995
2000
2005
48
But also new challenges
World Development Report 2008
Constraints to growth
1.

Competition for land and water from urbanization

Closing of the yield frontier – no quick fixes

Rising uncertainties (climate change; high energy cost)
Environmental challenges from intensification
2.

Green the green revolution (pesticides; fertilizer runoff)

Intensive animal husbandry: water pollution & disease
Making growth pro-poor
3.

Participation of the poor in new markets (as
smallholder or laborer)
49
World Development Report 2008
Growth rates of cereal yields in
developing countries are slowing
6
Average annual growth rate (%)
maize
5
rice
wheat
4
3
2
1
0
1963
1967
1971
1975
1979
1983
1987
1991
1995
1999
2003
50
World Development Report 2008
A comprehensive rural development
approach to reduce rural poverty
 Move beyond the Green Revolution towards
sustainable and high value agriculture
• Invest in ag R&D and green the Green Revolution
• Connect smallholders to high value product markets
(contract farming; producer organizations, ppps)
 Assist subsistence farmers & lagging regions
• Extend modern agriculture (R&D&E) to areas with potential
• Invest in skills for successful migration
• Provide safety nets for those left behind
 Activate rural labor markets pathways out of poverty
• Regional development around agriculture or manufacturing
• Secondary town infrastructure, public private partnerships
51
Take away messages
Take away messages
World Development Report 2008
 More and better investment in agriculture needed to accelerate
poverty reduction and reach MDG 1
 Smallholder based agricultural productivity revolution to trigger
growth and poverty reduction in agricultural based economies
 A comprehensive rural development approach (incl RNFE)
needed to tackle growing rural urban divide in transforming countries
and avoid the agricultural protection trap
 Better natural resource management, including provision of
environmental services, must be an integral part of the ag-fordevelopment agenda. This requires better incentives and better
regulation.
 Emphasis on decentralized, participatory, and multisectoral
approaches that redefine the relative roles of the state, the market
and civil society.
53
www.worldbank.org/WDR2008
WDR messages on ‘current issues’
World Development Report 2008
 Doha must progress
 Emphasis on anti-poor policies such as cotton subsidies
 Need complementary supporting policies for transition and to respond to new
market signals
 Subsidies
 Role of market-smart subsidies for input market development (and sometimes
safety nets)
 GMOs have unrealized potential for the poor
 Offer promise but need public R&D (or private incentives) and efficient regulatory
frameworks
 Biofuels will be important, but require caution
 Improve efficiency, and recognize tradeoffs--food prices and the environment
 Climate change requires immediate attention
 Urgency of funding adaptation in poor countries
 Extend carbon financing to provide agriculture incentives (agroforestry, avoid
deforestation)
55