Poverty is the Real Threat to Global Security

I am grateful to the President of IFAD for inviting me to participate in this Panel discussion on the overall theme of this session of the Governing Council – “Financing Development: The Rural Dimension”.

In my view, the main parameters for a meaningful discussion of this theme are provided by the following paradoxes and challenges:

The goal of halving, by the year 2015, the proportion of the poor people living on less than one dollar a day was adopted first by the Social Summit held in Copenhagen in 1995 and then by the UN Millennium Summit in September 2000, but in actual fact, the number of poor people has been increasing in the past few years. Unless the main determinants of poverty reduction are tackled in a coherent and sustained manner within the next five years, this goal will become impossible to achieve.
Official Development Assistance (ODA) is a vital and indispensable source of support for agricultural development and poverty reduction, particularly in low-income countries, but in the past 10 years, ODA for agriculture has declined from USD 5 billion to USD 3 billion on the basis of narrow definition. Even in terms of the broad definition, total ODA commitments for agriculture and rural development have declined from USD 15 billion in 1990 to USD 12 billion in 1999.

There has been a corresponding decline in domestic resources for agriculture and other activities that affect the rural poor, including programmes for agricultural research, land reclamation, water development and agricultural credit. Paradoxically, agricultural research by private corporations is also shifting its attention to crops and problems of rich farmers in Europe and USA where agricultural subsidies of USD 350 billion a year have made agriculture a profitable sector for investment. This is in stark contrast to the experience of the 1960s and 1970s when the world’s top agricultural scientists spearheaded the green revolution in wheat and rice in the developing world.

While globally the focus on poverty reduction has sharpened, support for international agencies like IFAD, which was created in 1977 exclusively to finance projects that reduce hunger and poverty, has been declining. IFAD’s latest replenishment, for example, provides in real terms less than one third of the initial resources of USD 1 billion, pledged to IFAD for the period 1978-1980.

The events of September 11 have not only added a new sense of urgency to the Millennium goals but have also created a very positive political and psychological environment for a determined attack on global poverty. As Secretary General Kofi Annan said recently at the World Economic Forum in New York, “poverty is the real threat to global security”. US Secretary of State Mr Colin Powell echoed the same theme when he declared that “the United States stands committed not only to fighting terrorism but also battling poverty and hopelessness that tend to breed terrorism. As we fight terrorism using military means, legal means, law enforcing and intelligence means, we also wish to put hopes back in the hearts of the people who might move in the direction of terrorism that there is a better way”. The Swiss President said, “Two thirds of the world’s population has yet to reap the benefits of globalization. We must accelerate efforts to harness the growth potential of globalization”. Prime Minister Tony Blair said before his recent visit to Africa, “There will be more terrorism in the world if the issue of poverty is not tackled effectively”. Many prominent observers have already underlined the irony so visible in the recent crisis in Afghanistan. If the Western Alliance had provided in the early 1990s even one third of the amount it is now spending on the war in Afghanistan (USD 1 billion a month) for the reconstruction of Afghanistan, it may not have degenerated into the kind of anarchy that made September 11 possible.

In converting these historic truths into meaningful actions, the Governing Council of IFAD has an important responsibility and a unique opportunity to play a significant role. As the highest governing body of the only UN agency devoted exclusively to the reduction of poverty and hunger, it can make a strong plea to the forthcoming International Conference on Financing Development (Monterrey, Mexico – 18-22 March 2002) to:

• accord higher priority to the millennium goal of halving the proportion of poor people by 2015;
• recognize the rural dimension of poverty reduction by highlighting the importance of agricultural and rural development;
• include a specific recommendation to increase, and if possible double, ODA for agricultural and rural development.

Many distinguished representatives, who may have had a chance to see the agreed draft text of 27 January 2002, which has been finalized for presentation to the Conference (“the Monterrey Consensus”) will share the growing disappointment in the developing world that another valuable opportunity to make globalization work for everyone is being lost. While the preamble of the report contains a good statement on global challenges and development goals, the operative part is very disappointing because it does not contain any new initiative or specific commitment or recommendation on the three main subjects, i.e. ODA, debt relief and new and innovative sources of financing. As in several previous conferences, it merely “recognizes that a substantial increase in ODA and other resources will be required if the developing countries are to achieve the internationally agreed development goals and objectives including those contained in the Millennium Declaration”. It then “urges developed countries that have not done so, to make concrete efforts towards the target of 0.70% of GNP as ODA and 0.15 to 0.20% of GNP to least developed countries”. On the debt issue, it only “encourages exploration of GNP to least developed countries”. On the debt issue, it only “encourages exploration of innovative mechanisms to comprehensively address debt problems of developing countries”. Similarly on the important subject of new approaches to development financing such as the carbon tax or the tobin tax, the conference only “recognizes the value of exploring innovative sources of finance, provided these sources do not unduly burden developing countries”.

Unless the heads of state and government who will assemble in Monterrey on 21 March can greatly improve the final outcome, the expectations of evolving a more equitable and coherent framework of policies and institutions to promote sustainable development, it seems, will not be realized at this conference.

In the face of such dismal prospects, renewed emphasis on the objective of poverty reduction, on the importance of dealing with the rural dimension of global poverty and the urgency of expanding ODA for agricultural and rural development as proposed above, may at least provide a stronger motivation and a sharper focus to those donor countries who wish to give high priority to the objective of reducing poverty.

In this context, it is very important to highlight IFAD’s performance in channeling resources to the poor. Several independent assessments of IFAD’s work have confirmed that despite the limited resources provided to IFAD, it has done remarkably well in maintaining a sharp and consistent focus on the poor as its true clients and provided a leadership role in promoting participatory development. Given additional financial resources, IFAD will not only be able to replicate its successful projects but also build on its valuable store of knowledge and innovative approach to poverty reduction. It can also assist its member countries in formulating and implementing their national poverty reduction strategies.

IFAD has already formulated a new strategic framework for its activities in the period 2002-2006. This framework is both innovative and realistic since, building on IFAD’s experience, it focuses on promoting more rapid and broad based economic growth by accelerating the pace of participatory rural development through improving poor people’s access to land, water, technology, markets, micro-credit and supportive institutions. IFAD’s approach is realistic because its projects and programmes are designed around the problems and potentiality of its target groups. IFAD has the capacity to double its annual lending from the present level of USD 400 million to USD 800 million, thus reaching almost 3.0 million households every year (or 15 million people), if co-financing by partner organizations is taken into account.

The realization of IFAD’s potential as an important development agency will largely depend on a more dynamic approach to the issue of its replenishment. The growing international consensus on the importance of reducing poverty coincides with a basic change in the burden sharing formula between OPEC and OECD countries, which had effectively capped the level of successive IFAD replenishments. As donor member countries of IFAD begin to implement their plans to expand ODA and to channel a larger proportion of their ODA to agriculture and rural development, they will find IFAD as one of the most cost effective instruments in achieving the Millennium target of halving the proportion of poor people by the year 2015.