IFAD Asset Request Portlet

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Statement by President Lennart Båge

Location: United Nations, New York

31 October 2004

Statement to the Group of G77
United Nations, New York - 1 November 2004

Mr. Chairman, Ambassador Nassir Abdulaziz Al-Nasser,

Your Excellencies, Colleagues and Friends,

I am very pleased to have the privilege of addressing the Group of 77. I am particularly pleased because it was developing countries that provided the inspiration at the World Food Conference of 1974 for the establishment of IFAD. The Fund was set up as a partnership between OPEC and OECD, developing and developed countries, joining hands to overcome the age-old scourge of poverty and hunger. The value of such a partnership, I believe, is now even greater.

Mr. Chairman,

The world today faces a deeply paradoxical situation. After the adoption of the Millennium Development Goals by world leaders in September 2000, there are great hopes for accelerating development and eradicating poverty. The Monterrey Consensus of 2002 provides the basis for combining strong domestic policies by developing countries with substantially enhanced external assistance to halve poverty and hunger by 2015. ODA has indeed risen significantly over the last three years.

Other changes are also creating fresh opportunities: The rapid developments in information and communication technologies and the opening up of borders for trade in goods and services, have led to a great expansion of economic potential. This process of globalization has allowed some countries to make extremely rapid progress. Take the case of Vietnam. Within a decade the country has managed to expand export and import linkages with the outside world, and integrate with the global economy. As a result, economic growth has averaged 7 to 8% over the last decade, and poverty has been reduced from 70% of the population in 1990 to 29% in 2002. Vietnam has achieved the Millennium goal to reduce poverty by half in 12 years, instead of 25.

At the same time, great challenges and risks confront us in the present situation. The continuing scale of poverty and deprivation has fuelled civil strife and conflicts in a number of countries. These challenges, combined with mass diseases, have caused the efforts of many countries to be compromised. Such conditions of deprivation and alienation have also provided the breeding space for growth in terrorism, which poses a danger not only to peace and stability but to development in many parts of the world.

Mr. Chairman,

The Millennium Project reports have highlighted both the achievements and the shortcomings of the last four years. The overall goal to reduce poverty by half by 2015 is on track, in significant measure due to the sharp reduction of poverty in Asia, particularly in China, South East Asia and India. But the other MDGs seem unlikely to be reached in many countries, even in Asia. In sub-Saharan Africa, the situation is particularly bleak, with progress in reducing poverty far below the level required, with droughts, civil strife and the AIDS pandemic gravely aggravating conditions.

What is striking is that countries where progress has been lagging are mainly low income countries where a majority of the population live in rural areas, dependent on smallholder agriculture and related activities. Agriculture accounts for the bulk of the national employment in such countries, as well as for a substantial proportion of exports and GDP. This is especially true of most countries in sub-Saharan Africa.

These trends underline that reducing rural poverty and promoting more rapid rural development are central to making more rapid progress in sub-Saharan Africa and in other countries which are furthest from achieving the MDGs.

These are precisely the areas of IFAD’s focus. The rural poor, smallholder farmers, herders, fishermen – and across all of these groups, poor rural women – account for three-quarters, 900 million, of the world’s 1200 million of the world’s extreme poor. They lack neither skills nor enterprise nor application. What they lack is secure access to land and water, to more productive technology, to efficient markets and supportive institutions. Their voice is weak in decision-making and their needs and priorities are often by-passed in resource allocation.

They also face material difficulties that limit their productivity. The rural sector is usually even more deficient than urban areas as regards infrastructure, especially for power, transport, communication and water management. Moreover, rural financial systems are under-developed and the availability and quality of health and education services are weak. Economic and social indicators in terms of literacy, life expectancy and infant and child mortality are almost always worse in the rural areas of poor countries. It is not a coincidence that in sub-Saharan Africa there are now more rural victims of HIV/AIDS than there are in urban areas.

Unfortunately, during most of the 1990s, domestic investment as well as external support for agriculture and rural development declined sharply. ODA to agriculture fell by nearly half over the decade. Under these conditions, it has also been difficult to attract private investment into poor rural areas.

Fortunately, over the last three years the situation has been changing. Developing countries have recognized the importance of faster rural development for sustainable and balanced development. The African Union for example, pledged at its Maputo Summit to increase allocations for agriculture to at least 10% of national budgets. In parallel, NEPAD has given high priority to promoting agriculture and rural development.

Developed countries, for their part, are also beginning to realize the centrality of rural poverty. The G-8 Summits in 2003 and 2004 pledged to increase investment in agriculture, and individual donors have adopted policies to raise assistance to the rural sector. The Millennium Project reports also highlight the imperative need to accelerate rural development to achieve the MDGs.

This new recognition of the importance of the rural sector offers a real opportunity to reverse the trend of stagnation and decline in the smallholder economy in poor countries. But we must be careful not to repeat the mistakes made in top-down agricultural schemes of the past. We must start with the recognition that the smallholder farmer is productive and can be the key agent of change, rather than looking at the rural poor as objects of charity or welfare.

The rural poor for their part are ready to respond. IFAD’s experience across 114 countries in Asia, Africa and Latin America has repeatedly shown that poor farmers and other rural producers eagerly grasp opportunities to raise their productivity, output and incomes. IFAD now has over 200 rural poverty programmes under implementation at a total cost of about USD 6.5 billion – of which IFAD itself provided about USD 2.5 billion, with the remainder coming from external co-financing and domestic investment. These programmes, upon full development, are expected to reach about 100 million poor men and women, helping them build lives free from poverty and hunger.

IFAD programmes are community-based, with the active engagement of the beneficiaries and directed towards overcoming the main constraints that limit their productivity. Most IFAD projects include support for micro-finance, usually on the basis of self-help groups which reduce transaction costs and help poor borrowers learn to deal with financial institutions. Our experience shows that even the poorest borrowers, especially women, can make effective use of micro-loans and show repayment rates of nearly one hundred percent. Access to financial services can offer the rural poor a ladder out of poverty.

Other participative mechanisms, such as water user and herder associations, extension groups and farmer marketing groups, are characteristic of IFAD projects. Working through such mechanisms, smallholder farmers can join together for watershed management and small-scale irrigation, as well as promote sustainable use of common rangeland and forest resources.

Moreover, strengthening the local associations of the poor helps them not only to gain access to productive services but also empowers them to deal with bank and local government officials, traders and other market agents. As the rural economy becomes more market-oriented, such empowerment is essential for the rural poor to benefit from, rather than be further impoverished by, liberalization and globalization.

Mr. Chairman,

IFAD over its 26 years of operations has worked essentially as a headquarters-based institution, with our staff spending as much time as they can in countries where the Fund is supporting projects and programmes. At the initiative of its Member States, it has been agreed that on a pilot basis IFAD will enhance its field presence in a limited number of countries. The idea is not to have traditional representative offices. Rather we are trying to develop innovative arrangements depending on the local context that will allow us to follow implementation more systematically and take an active part in policy development. Through this initiative, we look forward to working with the host countries and our partners in the United Nations system to ensure that the needs of the rural sector are fully reflected in PRSPs and other country strategy programmes.

In addition to the Field Presence initiative, IFAD is undertaking a number of other reforms to enhance its efficiency and impact. One is to link the allocation of resources to effectiveness of implementation and performance. The development of more effective systems to manage knowledge on poverty reduction and share it with our partners is another important initiative. We are also adopting more modern approaches for human resource management and in this context, we are taking part in a pilot exercise to pioneer a new structure for the United Nations Common System.

Mr. Chairman,

Currently, IFAD provides funding of about USD 500 million per year to support poverty programmes – whose total investment cost is about USD 1 billion. These programmes reach an estimated 9 to 10 million poor people every year. IFAD is still relatively small compared to the large IFIs. Yet, in the rural sector in a number of countries, especially in sub-Saharan Africa, the Fund is a major source, sometimes the largest, of external support for the rural poor.

IFAD is financed on the basis of a three-year Replenishment cycle. Unlike the case of other IFIs, a substantial proportion of IFAD resources come from developing countries. OPEC countries who played a decisive role in setting up IFAD have long been large contributors to the Fund. More recently, other developing countries have emerged as significant contributors. Developing countries as a group, account for about 20% of current Replenishments.

IFAD is also the only IFI in which developing countries have a majority voice.

Next year, we will launch the negotiations on the Fund’s Seventh Replenishment. Here, I would like to underline the importance of the contribution of every IFAD Member State. The contributions that developing countries make, large and small, underline the value they place on IFAD operations and their commitment to our common goal of eradicating poverty and hunger. Your support also helps greatly in mobilizing larger contributions from other Member States, thus enhancing IFAD capacity to fight poverty and help achieve the MDGs.

Mr. Chairman,

The world today offers great potential but considerable challenges as well. We have collectively the opportunity, indeed the imperative, to take advantage of this potential and help the poor to raise their productivity and incomes and work their way out of poverty.

The poor it used to be said, are always with us. But that need not, and must not, remain so in the future. IFAD with your support stands ready not only to participate in this endeavour to bring about a world without poverty and hunger, but to be at the forefront of that effort.

Thank you.