Investing in Agriculture and Rural Development as Keys to the Global Economy

Excellencies
Ladies and Gentlemen

It is an honour and privilege to have the opportunity to address the World Agricultural Forum on key issues confronting all of us, irrespective of where we work. I want to pay tribute to the important and unique role the Forum has in bringing together leaders from all sectors of society in addressing key agricultural issues.

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 live 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 first element of such a consensus is 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.

We have seen in the last 20-30 years how India, China, Bangladesh, Vietnam – just to mention a few examples – have gone into producing record harvests and become big exporters. Now what is lacking? Well, still the realisation of the centrality of agriculture for development by most aid donors and many governments. We have to re-establish in the general debate on development the fundamental knowledge that poor countries must increase productivity in small farmer agriculture to be able to fight hunger and poverty and to develop. But it is not enough that governments and aid donors re-engage. Small farmers actually constitute the core of the private sector in many developing countries. They need linkages to the established private sector to have a chance to develop and grow. They constitute the future producers and consumers of the modern world. Investments in this development is not just charity, it is enlightened self-interest.

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 250 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. This is compounded by the challenge of HIV/AIDS, in particular in Africa where a generation of farmers is disappearing. HIV/AIDS is now more rural than urban, and 7 million active farmers have already died. Teenage headed households are increasing and the number of orphans is daunting. Its impact on agriculture is devastating.

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. They must be allowed to be the actors, the subjects and not the objects of charity. We know that the poor seize every opportunity to get a better life for themselves and their families. Our role is to provide such an opportunity.

For us to meet these needs, we need to argue for greater attention by developing country governments for the centrality of agriculture for national development. The OECD countries have to reverse the declining trend in ODA funding for 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. 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. In increasing their exports they will also become expanding markets for OECD exports. FAO estimates increasing dependency by developing countries on cereal, milk and meat products. Much of this will have to be met by traditional OECD agricultural exporters.

Knowledge of what works, increased attention and funding from governments, good policies and institutions, and improved market access is not enough. This only creates the framework for action. The opportunities created have to be seized by millions of small farmers, traders and service providers, the core of the private sector in many developing countries. But the local farmer and the local private sector have to be linked up to the national and international private sector. The challenge is to establish a mutually reinforcing relationship between the smallholders and the private sector. This sometimes involves on part of the corporate sector foregoing short-term profits for the prospects of long term return on investments and sustained market presence. IFAD can catalyze small and large scale linkages between the smallholders, micro-entrepreneurs and the corporate sector.

We have developed pilot corporate sector collaborative projects with leading players such as Crop Life International, Syngenta and Deutsche Bank, to improve the livelihoods of more than 60,000 rural dwellers in Latin America, Asia and Africa. We are encouraged by these results and look for opportunities to do more.

The final realization must be that a strong economic development in development countries, which often can only come through agriculture, will not only give a more equitable and stable world, but also open markets for all countries. South East Asia, with China as the major economic power, is now the only economic engine driving the world economy. Without the impressive gains in agriculture, this would not have been possible. And with their recent WTO-membership they become, as they grow, an increasingly important market for the outside world – also for agricultural products. A clear illustration of the win-win situation that genuine development offers. We all have important roles to play to realise the potential of a more prosperous, equitable, just and safe world – a world where human dignity rather than widespread poverty is the defining characteristic.

Thank you.