Your Excellencies,
Ladies and Gentlemen

First let me thank Director General Yumkella for inviting me to speak at UNIDO’s General Conference today. It is my great pleasure to be here.

Your choice of theme – “green industries” – unites very succinctly two issues of critical importance today. Namely, the need for greater productivity – or “industry” – on the one hand. And the need for sustainable – or “green” – production on the other.  

This twin concept is one which guides IFAD’s constant efforts to enable poor rural people to overcome poverty and hunger. The recent food and financial crises as well as the constant threat of climate change have made our efforts both more imperative and more challenging.

Global challenges

International food prices may have come down from their historic peaks of a year ago, but they remain high. Indeed, in more than three quarters of developing countries, domestic prices are higher than a year ago.

As a result, more than 100 million people joined the ranks of the hungry – pushing the total to more than 1 billion.

And with climate change an additional 49 million people are at risk of hunger by 2020 and an additional 132 million people by 2050. And each one degree rise in temperature will cause a 25 per cent increase in food prices.

On top of this, environmental degradation, through the mismanagement of water, soil and forest resources, is contributing to the growing scarcity of these vital resources as well as their deteriorating quality.

In other words, as things stand, we are not in a position to raise productivity levels, let alone in a sustainable way. And we are a long way off having the capacity to expand food production by the required 70 per cent, to allow us to feed our 9 billion plus population in 2050. Indeed, agriculture itself risks worsening the very environmental problems that need to be overcome if we are to achieve global food security.

What this points to is an urgent need to strengthen the resilience of agriculture to the challenges of climate change and land degradation while improving the productivity of agriculture in the face of growing demand for food. And we need to do all this without damaging the environment. 

Supporting the greening of rural industries

It’s a fact that approximately one-fifth of humanity is employed in agriculture. And yet the sector contributes only 4 per cent of the global GDP. That is why we need to work together to ensure that agriculturalists’  share of the global income increases not just with value addition, but also by exploring new agro-industry opportunities, such as biofuels and bio-degradable plastics, as these markets are much larger than the traditional agricultural basket of food, feed and fiber. 

By doing so, we can better employ and feed poor rural people, who might otherwise feel compelled to resort to deforestation to meet their energy and food needs, or migrate to urban areas where, as we all know, there are increasing social problems.

Investment in agriculture is critical. But our investment needs to be smart.

We need to invest in research and development to intensify production. We need to invest in natural resource management to conserve the environment. We need to invest in the provision of water to all and its conservation to increase food production and other uses. We need to invest in the development of infrastructure to facilitate access to markets, and in the development of technologies that enhance productivity with fewer resources.

The key to successfully addressing many of these issues is through partnerships. Partnerships between IFAD and UNIDO as well as with other UN agencies; partnerships with governments and civil societies; and partnerships with the private sector. It is the private sector in particular that is best placed to facilitate poor rural people’s access to markets, and which has the capital to invest in agro-industrial enterprises.  

That is why a relatively recent focus of IFAD’s work is public-private partnerships. For example, IFAD is a member of the Africa Enterprise Challenge Fund and is working with key partners to establish the African Agriculture Equity Fund. Through such partnerships, IFAD – and the UN more widely – will be able to improve food sustainability and make greater progress towards achieving the Millennium Development Goals.  

Attracting private sector investment is not straight forward, however. Rural areas are often remote, have poor infrastructure and supply is not assured. Consequently, industries are often reluctant to invest in these areas unless and until these issues are resolved. And yet their investment is often critical to resolving these very problems.

The solution lies in investment in value chains. Such investment allows agro-industrial development to go hand in hand with the development of smallholder farmers’ production.  

Over 50 per cent of IFAD projects today have a value chain component or are value chain projects. One example is an IFAD-supported public private partnership in Uganda to develop the oil seeds sector. The objective in promoting such partnerships is to lower the marketing risks of smallholder farmers and enhance their incomes.

Excellencies
Ladies and Gentlemen,

IFAD and UNIDO are committed by agreement to the common goal of developing technologies, developing value chains and promoting energy. We now need to commit our resources and our expertise to support value chain development in order to reduce global poverty and hunger.

Recognising this common vision and the need to increase private sector investment in rural areas, IFAD joined UNIDO and FAO at the Global Agro-IndustriesForum in New Delhi, in April last year and more recently at the Regional Agro-Industries Forum in Yangling in China. However, both IFAD and UNIDO need to recognize that developing partnerships between smallholder farmers on the one hand, and the private sector, which finances and develops the agro-industries, on the other, is a partnership of unequals and some modicum of parity needs to be attained in promoting them.

There is a need to develop markets that will provide finance, both equity and long-term for financing the development of MSMEs and many farmer-based organizations. This is an area where both IFAD and UNIDO can join hands in promoting the enabling environments to meet the many technical, financial and other needs of such ventures. 

There is also a need to develop technical and managerial talent and to identify social entrepreneurs who can combine entrepreneurial flair with social objectives. This is essential in rural areas, where there is critical shortage of managerial and technical talent.         

The full support of the domestic governments is essential. Only they can create the favourable investment climate needed to attract private sector capital, such as investment incentives, facilitated flow of long term capital at reasonable interest rates and even equity capital. Domestic governments also need to be willing to undertake targeted infrastructure development.

It also needs to be recognized that not all solutions lie in private sector investment in rural areas.  There needs to be equal emphasis on the development of local initiatives, both from the provision of energy to the development of local level value-added processing. For example, in India, the National Development Board has a membership of over 13 million small producers and is now producing not just for local markets but also for exports. 

A further area for investment is in alternative biomass usage, through organized local energy production. This would not only discourage deforestation, but also enhance food security, as energy is made available to intensify agricultural production. Organized local energy production would also have the effect of generating employment in rural areas, alleviating the burden of processing and gathering fuel wood.

Rural women, who make up between 60 and 70 per cent of smallholders in the developing world, often shoulder the main responsibility for providing for the food, water and fuel needs of their families. They are involved in food processing, storage and marketing.  Agro-business provides employment to millions of rural women and contributes to creating much needed household income in rural areas. What rural women need is a business climate that does not discriminate against them in terms of access to resources, property and commercial rights.

And finally, we need to introduce the right incentives and rewards for more sustainable agriculture and land management practices, including by removing carbon from the atmosphere to store it in agricultural soils.

IFAD’s experience

Since our founding over 30 years ago, IFAD has invested more than US$11.5 billion in loans and grants to fight rural poverty in developing countries. With cofinancing from partners, our total investment over the period amounts to over US$29 billion. During this time we have reached about 350 million people through the initiatives we support.

Specifically, through these partnerships:

we are investing in and improving access to locally adapted agricultural inputs and technology, related to food production, processing, and distribution;

we are investing in rural infrastructure, such as roads, transportation, new telecommunication technology, electrification, irrigation, and storage facilities;

we are improving food safety and nutrition;

we are strengthening market linkages and integrating local producers and smallholders farmers and rural businesses with knowledge and resources;

we are improving access to a broader range of new rural financial services and markets that support agricultural risk management in development;

and we are using environmentally-friendly business practices to preserve ecosystems and the sustainable management of natural resources.

IFAD also has experience of working together with UNIDO. For example, in Kenya, we are working on biogas and energy generation for smallholder farmers. I am particularly grateful to UNIDO for agreeing to assign two of their officers to work with us on biogas as well as micro, small and medium enterprise development, and I look forward to developing specific proposals to pilot these initiatives and jump start our joint programme.

Similarly, UNIDO assisted IFAD in the Preparation of the Convergence of Agricultural Interventions in Maharashtra’s Distressed Districts Project in India, which had a value chain component.

Finally, at IFAD we are also assisting pro-poor biofuel development, supporting research to enable poor rural people to take advantage of the huge market demand for biofuel production. If undertaken responsibly, this can contribute to the mitigation of greenhouse gas emissions.  The crops being promoted are either non-food crops or multiple use crops that can be grown in agro-ecological environments not suitable for food crop production.

In all our programmes and projects, we are taking special care to avoid unintended environmental consequences. We are being careful that the research we support in developing bio-fuel crops is limited to those that can be grown in marginal and saline lands unsuitable for food production, so as to avoid diverting much-needed water and land away from food production.

We urge UNIDO to join us in this important initiative as this endeavour has the potential to provide meaningful employment to so many, contribute to the reduction of greenhouse gas emissions and also improve food security.

Conclusion
Excellencies,
Ladies and Gentlemen,

Sustainable development is under threat from multiple global challenges, in the form of volatile food prices, climate change, environmental degradation and growing demand for food. I sincerely hope that the Climate Change Conference in Copenhagen, which also opens today, will be able to provide some answers. But that will only be possible if world leaders acknowledge the potential of sustainable agriculture to mitigate climate change, while contributing to poverty reduction.

For our part, IFAD and UNIDO must help develop innovative solutions to sustainable development, which can release the potential of those who are the focus of our efforts – those who are trapped in poverty and hunger.

Sustainable agriculture is a driver for sustainable economic development. It is therefore in our global interest to invest in smallholder farmers so that they have resources they need to feed the world while protecting the environment.

I thank you for your kind attention. 

Vienna, 7 December 2009