Increased investment in agriculture is the key to ending poverty

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Increased investment in agriculture is the key to ending poverty

Release number IFAD/43/07

IFAD President Lennart Båge to speak at high-level food policy conference in Beijing

Rome, 16 October 2007 – The power of agricultural development to transform societies is clearly seen in China, where a concerted push to combat rural poverty has helped the country become an economic powerhouse, says Lennart Båge, President of IFAD.

Båge is in Beijing to speak at a high-level international conference on poverty and hunger hosted by the International Food Policy Research Institute (IFPRI), in collaboration with the Chinese State Leading Group Office on Poverty Alleviation and Development, and the Chinese Academy of Agricultural Sciences.

Poverty is primarily a rural issue. Nearly one billion people in the world live on less than $1-a-day. About 75 per cent of them live in the rural areas of developing countries. Many depend on ecologically fragile lands and vulnerable sectors – agriculture, fisheries and forestry – for survival. The impact of climate change is potentially devastating for them because they lack the institutional and financial capacity to protect themselves.

Investment in agriculture has a high economic pay-off: it is, on average, four times more effective in increasing the income of poor people than investment in non-agriculture sectors.

If we are to reach the targets of the first Millennium Development Goal to halve the proportion of extreme poverty and hunger by 2015, we must enable poor rural people to increase their incomes and use natural resources in a sustainable way.

IFAD and China

China is a valued member of IFAD and a global leader in poverty reduction. China's poverty reduction drive has led to a dramatic drop in rural poverty. In 1978, 30.7 per cent of the rural population in China lived in absolute poverty. In 2005, this had dropped to 2.5 per cent, and it is continuing to decline.

IFAD and China have worked together to fight poverty for decades. In 1981, IFAD became one of the first international donors to operate in China. Since then, IFAD has provided 20 loans worth almost US$500 million to finance rural development projects.  Most IFAD-supported projects in China are in remote and mountainous regions with high populations of poor people, including ethnic minorities.

Projects supported by IFAD, in partnership with WFP, have reduced poverty in China. In some cases, they have virtually eliminated it. For example, a project in north-east Sichuan saw poverty rates drop from 90 per cent above China's poverty line to one per cent.

"This is an important example of how effective projects can be when they are well implemented and when they dovetail with government policy," says Thomas Rath, IFAD's country programme manager for China.

Despite China's strong and sustained economic growth, poverty is still widespread, especially in remote rural areas. Urban incomes are now more than three times higher than rural incomes. The government is acting to correct the trend by increasing investments in economic and social development in rural area.

Responding to the challenges of climate change

IFAD and China need to explore more ways of collaborating to meet the challenges posed by climate change. For example, we recently approved a grant to assist China in developing innovative weather index insurance for agriculture.

Projects in China have already introduced measures to mitigate the impact of climate change through such efforts as household-based biogas devices, tree planting, fixing soil and reducing wind erosion.

Biogas technology has been used in China for many years but only recently, with assistance from IFAD, this technology has been made available to poor farmers in remote parts of the country. At the end of 2006, an IFAD-funded project in West Guangxi had provided nearly 23,000 biogas tanks and helped nearly 30,000 poor households. As a result of the project, an estimated 56,600 tons of firewood are saved in the project area each year, equivalent to the recovery of 7,470 hectares of forest.

China is dedicated to addressing internal poverty issues and is also gradually increasing its development assistance to poor countries.  China's poverty reduction drive is an important part of global anti-poverty efforts. As China's poverty reduction activities increase, the cooperation between China and IFAD will grow.

IFAD is an international financial institution and a specialized United Nations agency dedicated to eradicating poverty and hunger in rural areas of developing countries. Through low-interest loans and grants, IFAD develops and finances programmes and projects that enable poor rural people to overcome poverty themselves. There are 191 ongoing IFAD-supported rural poverty eradication programmes and projects, worth a total of US$6.6 billion. IFAD has invested US$3.1 billion, with cofinancing provided by partners including governments, project participants, multilateral and bilateral donors. These initiatives will help about 82 million poor rural women and men to achieve better lives for themselves and their families. Since starting operations in 1978, IFAD has invested US$9.8 billion in 751 programmes and projects that have reached more than 310 million poor rural women and men. Governments and other financing sources in recipient countries, including project participants, contributed US$9.2 billion, and multilateral, bilateral and other donors provided another US$7.2 billion in cofinancing.