Institutions – The Key to Development: Building Alliances to Empower the Rural Poor

German Parliament
GTZ-IFAD Forum
20-21 May 2003

Frau Vorsitzende,
Sehr geerhte Abgeordneten,
Meine Damen und Herren,

Ich freue mich sehr heute in Berlin mit ihnen zusammenzusein und uber gemeinsamme anligen zu sprechen. Ich freue mich immer in dieser grossartigen Stadt zu sein seit dem ich 1963 als student hier war.

Twenty-five years ago, when my organization, IFAD (The International Fund for Agricultural Development) was established to, and I quote: “provide financing for projects specifically designed to introduce, expand or improve food production systems” the looming global food deficit was the mobilizing force for action. Today, when we have a daily global food production of 2800 calories per person, and even subsidies to some OECD farmers not to produce, the challenge is a different one. What is now calling us to act is the fact that despite an abundance of food, poverty and hunger are rampant. 800 million people go hungry every day. 1.2 billion people live on less than one dollar per day, and half of the population of this earth lives on less than $2. Of 100 babies being born today, 94 are born in a developing country. The call to us today is about human dignity and equity, about poverty being fought with new opportunities for a better life.

The first prerequisite is a global consensus of the task ahead. The main element of such a consensus was put in place by the Millennium Summit in September 2000 – the greatest gathering of heads of state and government ever assembled – solemnly adopting the Millennium Declaration with its key goal of halving hunger and poverty by the year 2015. The so-called Millennium Development Goals are now considered the internationally recognised and legitimate framework for action.

The second element is yet to be put in place. Of the 1.2 billion poor, 75%, some 900 million, live in rural areas - depending on agriculture and related activities for their livelihoods. So, if we are to reach the Millennium Development Goals, we must make an impact on rural poverty. In most poor countries, agriculture is the main economic sector, the largest employer and job creator, and the biggest export earner. When we look at the history of the 19th century if we come from Europe or the US – or at the 20th century if we come from Japan or the miracle economies in South East Asia - or China in the last 20 years – we see that reforms in the agricultural sector have been the foundation for overall economic development and poverty reduction. It has been the often-dramatic progress in agriculture, translated into productivity increases that has generated increased production, income, savings, investments and demand for goods and services to create the virtuous circle of development. This is particularly important for poor, institutionally weak developing countries, where broad based agricultural development brings welfare gains and equity to large sections of the population – in a way that single-source commodities such as oil or diamonds rarely achieve.

Every dollar of increase in agricultural production generates more than two dollars for the national economy, according to the most recent studies – and every one percent rise in agricultural productivity cuts poverty by six-tenths of one percent. Despite the obvious relevance to overall development and poverty reduction of investments in rural and agricultural development, the share of overseas development assistance that goes to agriculture and the rural sector has been steadily falling, not rising. In fact, it has declined by nearly half since 1988. Today, only 8 percent of developed countries’ total overseas development assistance goes to agriculture. This has to change if we are to reach the MDG of halving world poverty by 2015.

Today we have the benefit of decades of experience of what works and what doesn’t. After engaging in more than 600 projects with a total value of over USD 20 billion, reaching some estimated 200 million rural poor, we know what is needed. Key factors for rural development are:

Firstly, secure access to assets, in particular to land and water. Water scarcity is the fastest growing problem in large parts of the developing world.

Secondly, markets, to buy and sell. We have to go beyond subsistence farming and make it possible for the poor to have greater and more efficient and equitable access to markets.

Thirdly, access to finance, access to opportunities to save and borrow and not be at the mercy of the village moneylender. Micro-finance is one proven successful approach.

Fourthly, access to technology and research that responds to their problems.

And fifthly, access to accountable and non-corrupt institutions. The poor need effective political representation, more bargaining power and organizations that represent their interests. Institutions and organizations for, of, and by the poor. Genuine democracy.

For us to meet these needs, we need to argue for greater attention by developing country governments for the centrality of rural development and agriculture for national development. The OECD countries have to reverse the declining trend in ODA funding for rural development and agriculture. We are now starting to see examples of this. Canada has just announced a plan to increase five-fold its spending on agricultural development in developing countries. USAID is also reversing the declining trend. Many European countries are revising their policies. G8 is taking an interest. It is a good beginning. More must follow. After 15 years agriculture is coming back on the development agenda.

Trade and opening markets must go hand in hand. The Doha development round must effectively address the agricultural subsidy and trade issues. OECD agricultural subsidies of USD 300 billion is equivalent to the total sub-Saharan GDP. For developing countries, export of agricultural products are key to development. Africa’s share of the world agricultural markets has declined from 9% to 3% over the last 40 years.

I believe that dealing with agriculture from a development point of view in the Doha Round of trade negotiations is perhaps the single most important action we can take to bring about widespread poverty reduction.

From this perspective, I am concerned that WTO members were unable to meet the March 2003 deadline for agreeing on modalities for reductions in support and protection in agriculture, which is so vital for the world’s poorest people. This compromises the momentum required to secure the success of the September Cancun meeting. Failure also undermines the multilateral system that is under stress on many fronts.

Poverty is a complex phenomenon. So much of what drives people into destitution and keeps them there lays hidden beneath the surface and beyond the control of individuals, communities and even countries – things such as the impact of HIV/AIDS, trade restrictions, war and civil strife, and weak institutions. I know that these are issues of concern to Germany. They are also high on IFAD’s agenda.

Germany is a valued supporter and partner of IFAD and has a strong record in engagement in development. More and more donor countries acknowledge that while ODA is important, it is the full effect of all policies and resource flows regarding poverty that counts. My own country, Sweden, has just put a bill to Parliament on Sweden’s Policy for Global Development that tries to establish a broad framework of policies on trade, environment, agriculture, migration and development cooperation – in which ODA is only one component.

In fact, as I am sure you aware, Germany was recently ranked sixth out of 21 of the world’s richest nations in an index that measures how well rich countries contribute to development in six areas – aid, trade, environment, investment, migration and peacekeeping. Germany was the only member of the G-7 group to make it into the top half.

I will leave it to my colleague, Mr. Klemens van de Sand, to outline in more detail Germany’s collaboration with IFAD.

Before I finish, I would like to take this opportunity to briefly address one key issue related to poverty, of concern to both Germany and IFAD.

We know that poverty is complicated by HIV/AIDS. This is far more than a health issue alone. In Africa an entire generation of farmers is disappearing. Seven million have died so far. 800,000 orphans in Zimbabwe alone make up for almost 10% of the population. The social and economic impact is catastrophic. Who will work the fields? Who will even know how to grow food? Who will care for the millions of orphans? HIV/AIDS is now more a rural problem than an urban one. There are teenage-headed households and grandparents with 20 children to care for.

We must re-think everything we do to incorporate a genuine understanding of the challenges that HIV/AIDS poses in rural areas. And while we engage in Africa, we must help prevent the same thing from happening elsewhere by building HIV/AIDS prevention and coping strategies into every project we design and fund.

Ladies and Gentlemen,

I know that all of you – like all of us at IFAD – are greatly affected by the levels of poverty and desperation we see in the world. I also know that as members of parliament you understand the connections between poverty and human security throughout the world.

On behalf of the rural poor, who have no voice, and the security and well being of all the world’s people, rich and poor, I urge you to advocate in your areas of influence for increased and more effective instruments in eradicating poverty.

I look forward to hearing your ideas today and to continuing IFAD’s successful working partnership with Germany.

Thank you.