Rural development: key to reaching the Millennium Development Goals

Published in Agriculture in the Commonwealth
by Lennart Båge

More than 1.2 billion people live in extreme poverty. That’s one in every five people. As the world’s economies become more interdependent, solving a problem as big and as difficult as poverty demands international alliances. Public, private and civil sectors must work together not only to finance development, but to create policies and conditions that enable poverty eradication.

Today, the Millennium Development Goals are a guiding light for

international cooperation for development, in particular the target to halve the proportion of hungry and extremely poor people by 2015. But the starting point to achieve this target must be the recognition that poverty is predominantly rural. Three quarters of the world'rsquo;s poor, about 900 million people, live in rural areas where they depend on agriculture and related activities for their livelihoods. The reality is that the Millennium poverty target can't be met unless the world addresses rural poverty.

An engine for economic growth

In most poor countries, agriculture is the largest employer, job creator and export earner. Historically, reforms in this critical sector have been the foundation for overall economic development and poverty reduction. Whether you consider Europe and the United States in the 19 th Century, or Japan and the miracle economies in South East Asia in the twentieth century, agriculture has been the engine that has driven economic growth in many countries. For every dollar invested in agriculture, another two dollars is generated for a developing country'rsquo;s national economy. It has been the often dramatic progress in agricultural development, translated into increases in productivity, that has generated increased income, which leads to savings and investments, and finally to greater demand for goods and services.

Yet, despite these obvious connections, the share of official development assistance for agriculture and the rural sector has fallen steadily since 1988. Today, only about eight percent of bilateral official development assistance (ODA) goes to rural development.

This situation must be reversed. Fortunately, there are clear indications that both developing countries and donor countries are recognizing the importance of rural and agricultural development in the fight to end hunger and poverty.

Rising global commitment

At its June 2003 summit, the G8 group of countries recognized the need to increase investment in rural and agricultural development to achieve lasting food security. It pledged to reverse the decline in ODA for agriculture and to increase trade opportunities for developing countries. Individual countries are already responding with increased funding. Canada , for example, announced in 2003 a five-fold increase in its funding to agricultural development in poor countries. USAID is also reversing the declining trend. European countries are revising their policies. This is a good beginning.

Indeed, discussion from the 2002 World Summit on Sustainable Development in Johannesburg, the Monterrey Conference on Financing for Development in Mexico and the World Food Summit - five years later in Rome have all generated commitments to invest in rural development and agriculture, as an important step to eradicating poverty.

The new emphasis on rural development was also seen at the 2003 sessions of the High-Level Segment of the United Nations Economic and Social Council, which focussed on promoting an integrated approach to rural development in developing countries for poverty eradication and sustainable development.

Developing countries, for their part, also need to assign a higher priority to rural and agricultural development, and this must be reflected in both policy and investment. The declaration on agriculture and food security in Africa , made by the African Union at its July 2003 summit in Maputo , is an encouraging sign of greater commitment to poverty eradication in rural areas. African leaders resolved to allocate at least 10 percent of their national budgets to implement sound policies for agricultural and rural development within five years.

The commitment is there. The challenge now is to ensure that it translates into more resources for rural development and poverty eradication and more effective use of these investments.

A coherent approach

While higher productivity and output are prerequisites for sustained poverty reduction, without access to efficient markets, small-scale farmers and entrepreneurs in developing countries are at an enormous disadvantage. Today, many markets are hostile or inaccessible to the rural poor. And the efforts of poor farmers in some of the most remote areas of the world can be undone by international processes far beyond their control. It is now widely recognized that subsidies and protectionist trade policies of the industrialized countries are damaging for developing countries. For example, cotton farmers in Western and Central Africa lost US$ 301 million in 2001 because they could not compete in world markets against cotton producers in the US , who received US$ 3.4 billion in subsidies. Small farmers are hardest hit when these subsidies encourage over-production and drive down world prices, even though they can produce cotton at one-fourth of the cost to their US counterparts.

A 25 percent increase in cotton prices, which corresponds roughly to the effect of eliminating US cotton subsidies, would lift 250,000 people out of poverty in Benin alone.

Industrialized countries' export subsidies also lead to distortions in the domestic markets of developing countries and create difficulties for local producers. In the Dominican Republic , for example, European Union export subsidies for skimmed milk powder have forced more than 20,000 poor farmers out of the dairy industry. EU milk powder costs 25 percent less than local fresh milk.

That'rsquo;s why the success of the latest round of World Trade Organization's negotiations on trade, known as the Doha Development Round, is so important. Creating a level playing field for trade is an important step the international community could take to fight poverty. The Cancun ministerial meeting was a setback. The Doha Round must be brought back on track.

Broad-based agricultural and rural development in developing countries must be founded on higher productivity by small-scale farmers. More secure access to land, water, technology, financial and other institutions that support and reward efforts of poor farmers are essential. At the same time, better transport and communication infrastructure and facilities for storage, crop processing and marketing are needed so that higher yields and good harvests are not followed by a collapse in prices. Perhaps most important, small-scale farmers need to be able to organize themselves so that they can access markets and gain a stronger voice in decision-making processes.

In Indonesia , for example, an IFAD project is giving some of the poorest people in the country the opportunity to make real change in their lives, by giving them the support they need to develop and strengthen their own organizations. More than 2000 self-help groups have been formed, with about 450,000 members in some of the poorest and most remote areas of Indonesia . Through these groups, rural poor people are managing their own savings and group resources, and are being empowered to take the lead in their own development.

Vibrant rural economies are vital not only to eradicating poverty in rural communities, but to economic growth in poor countries as a whole. Furthermore, poverty eradication is the foundation for global peace and security and quality of life for all. The public, private and civil sectors must work together, coherently and efficiently, to translate their commitment to rural development into policies, action and investments that improve the daily lives of the rural poor and enhance their power to chart and lead their own development into the future.

March 2004

Lennart Båge is the President of the International Fund for Agricultural Development (IFAD). Since it began operations in 1978, the Rome-based UN agency has invested US$ 8.1 billion in 653 rural development projects and programmes in 115 countries and territories throughout the world. A further US$ 14.8 billion in cofinancing was contributed by partners including governments, bilateral and multilateral donors, and non-governmental organizations. Over the past 25 years, 18 percent of IFAD's total investment has been in eastern and southern Africa, 18 percent in western and central Africa, 32 percent in Asia and the Pacific, 16 percent in Latin America and the Caribbean, and 17 percent in the Near East and North Africa reaching over 200 million rural poor.