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Statement by Gilbert F. Houngbo, President of IFAD, at the World Bank annual meetings

Inclusive Economic Growth: Poverty and Inequality

Location: Bali, Indonesia

10 October 2018

Dr Bambang Brodjonegoro, Minister of National Development Planning,

Others as appropriate,

Honourable Ministers,

Distinguished Colleagues,

Ladies and Gentlemen,

I would first like to express my deepest sympathy and condolences to the people of Indonesia for the tragic losses from the recent earthquake and tsunami.  Sulawesi has been the “heartland” of IFAD’s engagement in Indonesia for many years. 

Right now, it is hard to see beyond the immediate emergency, but for the survivors, the difficult job of rebuilding has not even begun.

If the natural disasters in Indonesia have taught us anything over this difficult year, it is that we must invest more in building livelihood resilience, especially for marginalized people living in remote areas, who are facing more frequent natural disasters.

With this in mind, today’s theme of inclusive economic growth could not be timelier.

For nearly 40 years, IFAD and the Government of Indonesia have invested more than US$1 billion to strengthen inclusive economic growth.

Together, we are helping smallholder producers become more resilient, to integrate into supply chains, and to gain access to services, technologies and finance. Our collaboration has directly benefited more than 3 million rural households.

This is truly a partnership to celebrate. But what do we mean exactly by “inclusive” economic growth? Who, or what, are we including, and why is it important?

Consider that, around the world, 3 billion people — around 40 per cent of the global population — live in the rural areas of developing countries. They grow the food that feeds their nations, but they are also disproportionately poor.

Here in Indonesia, as you know better than I, three out five live in rural areas. Most are farmers. And most are poor. While it's true that rural areas are making real progress and undergoing a remarkable transformation, they are still where poverty remains most concentrated.

Poverty is not just a state of low income. It is a condition of vulnerability, exclusion and powerlessness. Overcoming these condition in Indonesia and elsewhere requires empower marginalized groups, including smallholder farmers and small-scale fisheries. And within these groups, women, women-headed households, ethnic minorities and youth.Ladies and gentlemen,

We are truly in the midst of a paradigm shift in how we think about development. Today, rapid changes in regionalization and globalization are altering the food system. Urbanization and growth are transforming dietary patterns leading to greater consumption of meat, fruits and vegetables as well as more processed foods.

In a globalized world, goods can be produced and consumed anywhere on earth. Better transport and trade regimes mean that markets for agricultural products – including food, cash crops and animal products – are increasingly regional.

At the same time, global markets for agricultural goods are growing, thanks to low-cost communications and increased trade.

The result is that agriculture is shifting from a direct employer to a driver of rural transformation with greater opportunities in the farm and non-farm sectors alike, and with a greater role for the private sector. The set of opportunities are expanding in rural areas.

Experience shows that smallholder agriculture can be transformed into profitable rural businesses that can supply regional and international markets, as well as local and national.  These businesses are an integral part of rural transformation and by incorporating these smallholders into value chains economic growth can be inclusive.

IFAD finances projects that enable smallholders to acquire the resources, skills and technology to improve productivity, and connect to modern value chains and markets.

For example, here in Indonesia, the Coastal Community Development Project connected coastal producers to markets, often through partnerships with the private sector. Incomes tripled, or even quadrupled. It also empowered women in the community.

Apart from these socioeconomic impacts, the project also showed communities how to manage their coastal resources more sustainably. There has been a visible decline in illegal and destructive fishing practices, and the mangrove is being rehabilitated.

This project received international recognition as a best practice for how to combine coastal value chains with natural resource management and community empowerment. Delegations from various countries, including Pakistan and India, visited CCDP to learn from it.

IFAD has also facilitated successful partnerships between smallholders and large companies: between Pacific Island coconut oil producers and the Body Shop; between Kenyan tomato producers and Heinz; Nigerian smallholders and Olam; and between Indonesian cocoa producers and Mars – to name a few.

The challenge, now, is to create the right conditions for smallholders and agri-preneurs to engage with new business opportunities throughout the developing world. 

Inclusive, market-led partnerships make it possible for small rural producers to thrive. However, brokering such partnerships is not an easy task and does not happen automatically - not for us, and neither for the private sector. And often, we do not achieve the right scale that would make our interventions cost effective and profitable.

This is why we need to work with committed partners – in government, in the donor and NGO communities, and in the private sector alike – to increase our impact and bring successes to scale so that agriculture can become at once an engine for economic growth, an engine for poverty reduction and an engine for better nutrition and food security.

Ladies and gentlemen,

The world has more than 500 million small farms, supporting more than 2 billion people. We know their potential, but we also know the challenges they face.  One of the biggest challenges is building trusted relationships with the private sector, which requires developing and testing innovative solutions and scaling them up. 

But these are challenges we can and must overcome. Making special efforts for inclusive economic growth is the right thing to do, and it also makes good sense. Indeed, the OECD, and IMF economists have noted that income inequality can lead to slower or less sustainable economic growth. 

We live in a global community; our lives are increasingly connected and interdependent. For all our sakes, marginalized groups need to catch up and keep pace with new prosperity – not fall further behind.

Growth in itself will not be enough to meet the 2030 Agenda and create a world where no one is left behind. But the type of inclusive economic growth that makes a difference will not happen automatically.

We must make it happen. And working in partnership we can, and we will.

Thank you.