Despite remarkable progress made over the last decade by developing countries in overall economic growth and improved living conditions, food insecurity is still widespread and shows insufficient signs of decline. FAO estimates the incidence of under-nourishment in the developing countries at some 792 million persons (18 percent of their population) in 1996-1998. Although their number amounted to 960 million in 1969-71 (37 percent of the population) and has declined over the last decades, the absolute number of undernourished remains stubbornly high. If trends continue, then the WFS target of halving the number of food insecure by 2015 won't be met. In order to accelerate improvements in the food security situation, immediate action has to be taken to mobilise and effectively utilise additional resources in order to improve access to food particularly by the poor and vulnerable groups.

Mobilising resources towards strengthening the productivity and productive capacity of the agricultural sector is of essential importance for food security in developing countries. Agriculture is the principle sector in terms of national income, but especially in terms of employment and exports in most developing poor countries. Moreover, the majority (estimated at 70 percent) of the poor live in rural areas and earn their livelihoods in the agricultural sector directly as farmers and agricultural labourers, or from employment in the off-farm rural sector. The latter, in turn, consists mainly of activities upstream or downstream of primary production and, therefore, heavily depends on agricultural activity and incomes for its survival and growth.

The attention in this paper is on resource requirements for agriculture in support of food security in developing countries. It is in these countries, indeed, that nearly all of future population increases will be concentrated, and where alleviation of extreme poverty, in particular hunger, needs to take place. The role of agriculture, in generating additional food supplies and incomes necessary for access to food, is paramount in the developing countries, especially the low-income food deficit countries (LIFDCs). However, it is recognised that sustainable agricultural development has to be suplemented with other indispensable components of a strategy to alleviate poverty and in particular, food insecurity

Resources for agricultural investment come from private or public sources, external or internal. Although most investments are primarily mobilised by the farmers themselves, the public sector has a critical role through its expenditures on agriculture, forestry and fisheries sectors in creating a conducive environment for such private investment (economic incentives) and in ensuring sufficient availability of public goods (basic infrastructure, rules of law, peace and security). Most countries with high levels of undernourishment are characterised by low and stagnant per caput incomes. This implies a low savings capacity, and is often accompanied by a high external debt burden that absorbs a substantial amount of resources that could otherwise be used to develop rural productive sectors and alleviate food insecurity. For countries in this category, external resources and/or debt relief are essential.

Investment data in this paper are examined on a regional basis, and by groups of countries experiencing similar prevalence of undernourishment levels. The data indicate that the capital stock in agriculture per agricultural worker in the group of countries belonging to high undernourishment prevalence categories is very low when compared to the group with low levels of undernourishment. The wide divergence among capital-labour ratios in agriculture is reflected in labour productivity differences across prevalence categories: As in the case of the capital-labour ratio, a sharp divide is evident between labour productivity in the lower prevalence categories, and the others. Thus, the value added per worker in agriculture in the lowest prevalence category was 14 to 17 times that of the highest prevalence category in the period between 1990 and 1998, which is much higher than the difference in capital-labour ratios. This result points to higher productivity of resources in countries with low levels of undernourishment. The pattern of the relationship between productivity and nutritional status of the various groups suggests that differences in efficiency may themselves be at least partly explained by the prevalence of undernourishment. Indeed, there is increasing evidence from recent research that high levels of undernourishment reduce overall growth of countries directly (through reduced productivity of those who are undernourished) and indirectly (through the negative effect of undernourishment on health).

Even though the role of government in economic activity (including in agriculture) has been drastically scaled down over a decade of structural reforms, government expenditure remains an indispensable element in promoting agricultural development. Public infrastructure, transfer of knowledge through agricultural research and extension, services in facilitating storage, transport and marketing are examples of expenditures that continue to be required from the public sector, often increasingly in a decentralised fashion and in partnership with the private sector and civil society.

The share of public expenditures on agriculture in total government expenditures shows wide variation, with the observations ranging from 0.015% to 23%, and the share being lower than 10% in 90% of the countries for which data are available. Despite the dependence of poor countries on agriculture for incomes and food security, public expenditure for agriculture, whether measured in relation to agricultural GDP or to agricultural labour force, is lower in the category of countries with highest prevalence of undernourishment.

External assistance to overall resource mobilisation and economic activity is more important in countries where food insecurity is prevalent. For the countries with the highest prevalence of undernourishment, external assistance to agriculture still counts for as high as 86% of gross domestic investment and 51% of government expenditures. Developing countries are facing a decline both in the overall official development assistance (ODA) by the major bilateral and multilateral donors, and in the share of ODA directed towards the agricultural sector. Furthermore, private foreign direct investment (FDI) has so far bypassed most of the poor countries and, of the overall private investment going to the poorer countries, relatively little goes to the food and agriculture sectors of the LIFDC's.

The level of needed resource mobilisation for food and agriculture is, of course, dependent on the targets to be achieved. Thus, the stagnation of resources for agricultural development and food security needs to be confronted with investment levels required to reach the World Food Summit target. The WFS considered that the limited reduction in world hunger expected under projections available at the time ("business as usual") was not acceptable, and set the more ambitious target of halving, no later than 2015, the number of undernourished people. To achieve that goal the needed total gross investment in agriculture of the developing countries, including primary agriculture as well as storage, processing and support infrastructure, has been estimated by FAO at US$ 180.4 billion annually for the period up to 2015. In terms of gross investment in primary agriculture alone, the shortfall between a "business as usual " investment scenario and one in which the WFS target would be achieved, was 12 percent on the average for all developing regions, varying from 38 percent in Sub-Saharan Africa to zero in North Africa and the Near East.

In this context, FAO, over five years, has mobilised $230 million for the Special Programme for Food Security (SPFS). To be effective and achieve its goals in around 80 LIFDCs the programme requires an annual financing of about $1.4 billion, including $500 million from the FAO SPFS Trust Fund, $67 million from the recipient countries, $134 million from bilateral donors, and $670 million from multilateral financing institutions, which is equivalent to about $17 million per country.

But investment in productive sectors cannot address the immediate problem of alleviating hunger, and a twin approach to food security is needed. Thus, direct interventions aimed at reducing current malnutrition and creating conditions for healthy living should accompany policies (including public investment priorities) aiming at overall and agricultural development. Resources needed to improve the multi-dimensional health and nutrition conditions of the populations in those countries are of course difficult to quantify. The cost of providing the food required for those undernourished to be fed at a minimally adequate level has been notionally estimated at around 13$ per head per year - for 800 million persons, this means $10 billion per year, but the cost would decline to only $5 billion with the WFS target met.

Overall, the information and analyses presented in the paper do not provide enough evidence that changes to a new path have taken place, even though the necessary data to monitor the situation are scarce and preliminary. Nevertheless, even considering the dearth of information available, the analysis points to worrisome trends in agricultural investment in countries that most need it. Lack of sufficient investment, in turn, has contributed to the insufficient progress in the alleviation of hunger observed since the beginning of the 1990s. In addition, the analysis shows that countries which have made achievements in reducing undernourishment seem to direct more resources towards their agricultural sectors. The message therefore should be clear: to meet the WFS target the political will by both national governments and international foreign donors is needed to direct sufficient resources to food and agriculture in a way that will increase productivity, employment and access to food, in particular in the rural areas, and to lift the poorest of the poor from severe levels of undernourishment.

I. INTRODUCTION

1. Despite remarkable progress made over the last decade by developing countries in overall economic growth and improved living conditions, poverty, in particular food insecurity, is still widespread and shows insufficient signs of decline. It is evident by now that this situation will not really change unless action is taken immediately to mobilize the necessary additional resources and utilize them effectively in sustainable programmes of agricultural production, and in measures to improve access in particular by the poor and vulnerable groups (women and children). Resources devoted to agriculture and rural development are of prime importance since the rural economy plays an important role in the lives of the poor who are also the hungry.

2. World agriculture as a whole must sustainably increase food production in order to meet the needs of a growing population and respond to increasing demand. It is in developing countries that nearly all of future population increases will be concentrated, and where alleviation of extreme poverty, in particular hunger, need to take place. The role of agriculture in generating additional food supplies and incomes necessary for access to food is paramount in the developing countries, especially the low-income food deficit countries (LIFDCs).

3. Food insecurity is one of the direst traits of poverty. The number of people living on less one than a dollar a day in the developing world¹ was about 1.2 billion in 1998², meaning that about a quarter of the population of these countries were poor on average. The figures for undernourishment, the most extreme condition³ of poverty, display a similar pattern. The latest figures from FAO show that in 1996/98 there were still 792 million undernourished people in the developing world, a number that is projected to fall to about 580 million in 2015⁴, implying that the World Food Summit (WFS) goal of halving the number of undernourished to 400 million by that date will not be met if the trends continue. Although food insecurity is concentrated in the developing world, it is important to note that hunger is also present in other countries, affecting some 34 million people. While most of these people are in transition countries (28 million) which are still undergoing a difficult stage of restructuring their economies, pockets of hunger exist even in higher income countries.

4. Poverty manifests itself in concrete ways, in particular through food insecurity (people not having reliable access to enough and adequate food), therefore, fighting hunger is a fundamental part of any serious strategy to eradicate poverty. The concept of food security constitutes an effective tool with which to target, design and monitor policies and initiatives for poverty reduction. This means that resources can be used effectively to target the food insecure in the short or long term. Adequate resources do exist and in fact, resources required to end hunger are lower than the human and economic costs of not ending it. The latter include the cost of ill-health often generated by undernutrition in terms of public expenditures for health and welfare programs, low labour productivity and ultimately, lower economic growth.

5. The 1995 Quebec Ministerial Declaration committed FAO and its member countries to "promoting appropriate investment in agricultural, forestry and fisheries sectors"⁵. In the context of the WFS, FAO⁶ estimated the future volume of investments required in agriculture and supporting infrastructure and services to meet the WFS objective of "reducing the number of under-nourished people to half their present level no later than 2015". It is estimated that current investment levels fall short by some $30 billion from the $180 billion needed annually to reach the Summit target.

6. Resources for agricultural investment come from private or public sources, external or internal. Although most investments are primarily mobilised by the farmers themselves, the public sector has a critical role through its expenditures on agriculture, forestry and fisheries sectors in creating a conducive environment for such private investment (economic incentives) and in ensuring sufficient availability of public goods (basic infrastructure, rules of law, peace and security). Official Development Assistance (ODA) is an important complement to domestic resources, particularly for those countries plagued by high food insecurity. In the paper, along with such resources devoted to agriculture, the investment requirements estimated to reach the WFS target are also reviewed.

7. Trends towards reaching WFS targets of halving the number of undernourished people by 2015 have been discouraging in the past decade. The reduction in the number of undernourished people has not exceeded eight million annually while a reduction of 20 million annually is needed to reach the WFS target. Under current trends, halving the undernourished population would be achieved only by 2030. Countries which have a high prevalence of undernourishment have lower income levels along with lower capital labor ratios and lower labor productivity in agriculture than countries where prevalence of undernourishement is low. With respect to resources allocated to agriculture, some countries are expected to be able to mobilise additional domestic resources to cover the substantial costs required to reduce the prevalence of undernourished in their populations substantially. Many others, however, especially those belonging to the group of low-income food-deficit countries (LIFDCs), will need to draw on an expanded flow of external resources. In this regard, external development assistance to agriculture has been falling to historically low levels, while in terms of total resources, there has been some substitution of public by private sources. However, Foreign Direct Investment (FDI) has so far bypassed most of the poor countries and, of the overall private investment going to the poorer countries, relatively little goes to the food and agriculture sectors of the LIFDC's. The issue of mobilising resources at an adequate level and making optimal use of them is therefore one of paramount and urgent importance.

II. WHY MORE RESOURCES FOR FOOD SECURITY AND WHY TO AGRICULTURE IN DEVELOPING COUNTRIES?

8. The latest FAO's "State of Food Insecurity in the World" estimates the incidence of undernourishment in the developing countries at some 792 million persons (18 percent of their population)⁷ in 1996-1998. Although their number amounted to 960 million in 1969-71 (37 percent of the population) and has declined over the last decades (Figure 2.1), the absolute number of undernourished remains stubbornly high. Emphasizing the persistence of large numbers of undernourished should not be taken as a lack of recognition of the significant success of world agriculture in providing food to an ever increasing world population. Over this period, the population of the developing countries increased from 2.6 billion to 4.5 billion. The decline in the relative incidence of undernourishment (a halving of the percentage of the population affected) has been a significant achievement.

Figure 2.1: Past Trends in Undernourishment by Developing region

Undisplayed Graphic

LAC: Latin America, NENA: Near East and North Africa, SSA: Sub-saharan Africa, ESEA: East and South East Asia and SA: South Asia, DC's: Developing countries

Source data: FAO Statistics

9. Such progress is also reflected in the increases of one of the key variables used here to measure the extent of food insecurity at country level, i.e. the per caput food availability for direct human consumption expressed in kcal/person/day (the dietary energy supply or DES)⁸ (Table 2.1).

Table 2.1: Per caput dietary energy supply (DES) (kcal/person/day)

WORLD/REGION	1969-71	1979-81	1990-92	1996-98
	............... (kcals/day) ................
World	2410	2540	2700	2780
Developed countries	3130	3220	3270	3240
Transition economies	3320	3390	3160	2890
Developing countries	2110	2300	2520	2650
Latin America and the Caribbean	2470	2700	2710	2810
Near East and North Africa	2360	2820	2980	2970
Sub-Saharan Africa	2100	2070	2120	2200
East and Southeast Asia	2010	2320	2640	2850
South Asia	2060	2070	2310	2420
Source: FAO Statistics

10. As shown in Table 2.1, progress in the world average DES reflects predominantly gains by the developing countries whose average DES grew from 2110 to 2650 kilocalories per caput (26 percent) between 1969-71 and 1996-98. This progress in the aggregate of the developing countries has been decisively influenced by the significant gains made by the ones with the highest populations. Of the seven developing countries with a population of over 100 million, only one remains at very low levels in terms of per caput food consumption during that period. The unbalanced gains achieved towards food security can also be seen in the more recent history: between 1990-92 and 1996-98 only 40 countries have been able to reduce the number of their undernourished population (by a total of 100 million persons), while in the rest of developing countries where this assessment has been made (59 countries) no progress was registered and instead the number of persons undernourished increased by about 70 million. The reasons for hope and the reasons for concern are jointly illustrated by this comparison (see, The State of Food Insecurity in the World, 2000).

11. It is useful to note, at this point, that the widely used reference to the number of people not having access to a minimum daily dietary energy intake as a measure of food insecurity does not capture all the dimensions of under-nutrition (caused also by poor health status) and malnutrition (where dietary imbalances, especially of micronutrients, can have deleterious health implications). However, the absence of sufficient food is in itself a cause of deficiency of a variety of necessary nutrients, not only of energy. In addition, as illustrated by a comparison below of the diets of a well-nourished and an under-nourished adult the diversity of the diet is typically much lower at lower levels of food intake, adding to the nutritional inappropriateness of the food consumption of the undernourished (Figure 2.2).

Figure 2.2: Example of relationship between quantity and quality of diets

Source: FAO, The State of Food Insecurity in the World 2000

12. There are currently 33 developing countries that have per caput food consumption under 2200 kcal, and as consequence, a rather high prevalence of food insecurity. Halving the number of undernourished by 2015 in each and every one of these countries based on self reliant economic development, requires exceptionally high rates of growth in their aggregate demand for food along with a more equal distribution of income. The required combination of income growth⁹ and better distribution would be quite demanding, if at all feasible. Only in exceptional cases have countries achieved this kind of growth rates in total food consumption for extended periods in the past. Therefore, only through an exceptional effort at mobilising resources to the scale required and allocating them to attend to the most pressing needs of mass rural poverty and food insecurity can the lack of sufficient progress be reversed so as to meet the WFS target.

13. Overall, some 70% of the poor in developing countries live in rural areas where poverty is concentrated. This is particularly true in countries with high undernourishment (Annex Table 1). These countries depend on agriculture, directly or through related activities, for the largest part of the employment of the labour force, and for a high proportion of their economic output and export earnings. The percentage of labour force employed in agriculture in 1999 was 56% on the average in developing countries. In Africa where 34% of the population was undernourished¹⁰ in 1996-98, employment in agriculture is as high as 67% of the total labor force (Table 2.2).

Table 2.2: The dimensions of agriculture in developing countries

	SHARE OF RURAL TO TOTAL POPULATION (percent)		SHARE OF AGRICULTURAL TO TOTAL LABOUR FORCE (percent)		SHARE OF AGRICULTURE IN TOTAL GDP (percent)
	1990	1999	1990	1999	1990	1998

DEVELOPING COUNTRIES	66	60	61	56	15	15

Latin America & Caribbean	29	25	25	20	8	7
Near East & North Africa	46	40	39	34	14	13
Africa South of Sahara	74	68	72	67	26	29
East & South East Asia	71	64	68	62	19	18
South Asia	75	72	63	59	27	26
Source: FAO Statistics

14. The poor in rural areas depend on agriculture to produce the food they eat or to generate income. Rural households generate income from agricultural activities (revenues from the sale of agricultural products or employment in agriculture) and/or by employment in rural non-farm activities. The rural non-farm sector includes a wide number of goods and services which are in most cases linked to the agricultural sector (input preparation, agricultural implement repair, output processing). In addition, income earned from agricultural activities is spent on locally produced goods and this demand is essential for the survival of the rural non-farm sector. Therefore growth of the agricultural sector is an essential component in reducing poverty and ensuring food security, given the dependence of the poor on the sector for their livelihoods. The emphasis of the present paper is on resource mobilisation for agriculture, as such investments are considered to be an essential component for increased productive capacity for employment and income generation where the majority of the poor and food insecure are living.

15. Mobilizing resources for agriculture is fundamental, but it has to be supplemented by investment in infrastructure, health and education¹¹. Conflict reduction, democracy and good governance, education and health, safe water, and market openness, are essential targets for Official Development Asssistance (ODA) resource mobilisation and for action to reduce hunger, alongside agricultural technology transfers, research, extension, and rural infrastructure. The evidence on the high returns to investments that enhance human capital has been a major contribution to the understanding of economic development and its relationship to human development. Their role in poverty alleviation is at the root of development strategies widely shared by the international community, as expressed in the 1995 Copenhagen Social Summit, the 1996 OECD/DAC strategic orientations for development cooperation¹², in the World Bank's World Development 2000¹³, and in the Millenium Declaration.

III. TRENDS IN INVESTMENT IN AGRICULTURE IN DEVELOPING COUNTRIES

A. NATURE OF THE PROBLEM AND RESOURCE NEEDS

16. The level of needed resource mobilisation for food and agriculture is, of course, dependent on the targets to be achieved. The WFS considered that the limited reduction in world hunger expected under projections available at the time¹⁴, was not acceptable, and set the more ambitious target of halving, not later than 2015, the number of under-nourished people. FAO's most recent projections of the number of undernourished in the world indicate that under a "business-as-usual" scenario, this target would not be met. In fact, the study indicates that instead of 400 million, the number of hungry might still be around 580 million and the WFS target might not be met before 2030. Figure 3.1 shows the prevalence of undernourishment and projections to 2030.

Figure 3.1: The Prevalence of undernourishment and perspectives of reduction in undernourishment until 2015 and 2030

LAC: Latin America, NENA: Near East and North Africa, SSA: Sub-saharan Africa, ESEA: East and South East Asia and SA: South Asia, DC's: Developing countries

Source data: FAO Statistics

17. Accelerating the fight against hunger in countries with high prevalence of undernourishment is not only dependent on political will¹⁵, but also on sufficient and available resources. Most countries with high levels of undernourishment are characterised by low and stagnant per caput incomes. This implies a low savings capacity, often accompanied by a high debt burden that absorbs a substantial amount of resources that could otherwise be used to develop productive sectors. The result is that countries with high incidence of under-nutrition are strapped for the resources needed for generating the growth of productive sectors. These issues are discussed below.

Box. 2.1: Methodological Note on Classification of countries

In order to illustrate the distinguishing characteristics of countries associated with different levels of undernourishment, the developing countries are grouped into five categories according to the prevalence of undernourishment, i.e. the proportion of undernourished in their population¹⁶. The proportion of undernourished in the population for countries under each prevalence category is as follows: less than 2.5% (Category 1), from 2.5 to less than 5% (Category 2), from 5 to less than 20% (Category 3), from 20 to less than 35% (Category 4) and above 35 % (Category 5). The list of countries in prevalence categories, their geographic region and degree of undernourishment in the population are given in Annex Table 2¹⁷. Relatively, undernourishment is characterized as "low" in Categories 1 and 2, "high" in Categories 4 and 5, and "intermediate" in Category 3.

The geographic distribution of countries are by region are shown in Figure 3.1. Of the 24 countries in Category 5, where undernourishment is 35% or more, 18 are in Africa South of the Sahara. Undernourishment is concentrated in South and South East Asia, Africa and Latin America. Countries in undernourishment prevalence category 1 have very low levels of undernourishment and include developed countries in the map below. There are 26 countries in Category 4 with 34 countries in Category 3.

It should be noted that variations in the values of economic indicators of countries belonging to a particular prevalence category may exist.

Figure 3.2: Prevalence of Undernourishment in Developing Countries

18. National incomes (measured by per caput GNP) (Figure 3.3) are lowest in the countries where undernourishment is high (categories 4 and 5); further, trends over the last decade show that in these categories per caput incomes have not improved significantly. Under such conditions, savings and investment rates are bound to be low. Moreover, savings of the vulnerable and food insecure, are likely to be channelled into assets which reduce their vulnerability to shocks rather than into investments to increase their resource productivity.

Figure 3.3: GNP per Caput by Prevalence of Undernourishment (in 1995 $US)*

Source: World Bank, World Development Indicators, 2000.

19. The high debt burden in countries with high prevalence of undernourishment constitutes an additional drain on resources, which could be invested in productive sectors. Figure 3.4 shows that among the Low Income Food Deficit Countries (LIFDC's) high indebtedness is more widespread among the countries with a higher prevalence of undernourishment. Among the 23 LIFDC's with the highest prevalence of undernourishment, 17 belong to the group of Highly Indebted Poor Countries (HIPC). The outlook is much more positive for countries with prevalence less than 20%. In that group, only six are highly indebted out of 21 LIFDC's.

Figure 3.4: Highly-indebted-poor countries among the Low Income Food Deficit Countries*

Undisplayed Graphic

Source: FAO, State of Food Insecurity 2000
* 14 LIFDC's for which information on undernourishment was missing were excluded .

20. Not surprisingly, the combination of low saving capacity and high indebtedness results in low investment capacity in the agriculture sector, particularly in these countries in which agricultural investments are most needed to enhance the income of the poor and thus to improve food security. This will be discussed in the next section.

B. AGRICULTURAL INVESTMENT

21. It is now widely understood that the concept of investment to augment the productive capacity of agriculture entails not only physical assets, but science and technology dissemination, human capital enhancement and social capital build-up. Creating a pro-investment climate to raise productivity levels and realise the necessary structural changes becomes a principal policy challenge. The whole policy and institutional environment needs to be conducive to investment by private agents, in particular the farmers.

22. In the last two decades, many governments addressed the anti-agricultural biases of the past by adopting policies to deregulate agricultural markets, reduce price distortions, and allow a greater role for private actors in economic activity. Such measures, although necessary, are not always sufficient in inducing the investments necessary for sustained productivity and production increases. Improved investment incentives also require policies that improve access to markets, ensure dissemination of information, set standards and provide adequate legal and regulatory frameworks. At a more general level, there is consensus that political stability and a well-defined and enforced institutional framework are needed in order to ensure adequate private investment. Strong complementarity between public and private investment is also necessary to sustain agricultural growth, with governments investing in sectors having an important public good element (research, extension, infrastructure - particularly water control, roads, storage facilities, marketing, education, norms and standards).

23. FAO has developed a comprehensive database on agricultural capital stock and investment based on FAOSTAT data, complemented by national accounts data from individual countries. These data include capital stock (including land, irrigation, tractors, livestock, plantations, structures) for primary agriculture in the major developing regions.

24. In order to take into account the varying capital intensity and technology levels of the agricultural sectors in the different groups of countries, data on capital stock per agricultural worker are presented in Table 3.1 by region and prevalence category. The two regions with lesser incidence of undernourishment, Latin America and the Near East - North Africa, show a clearly higher agricultural capital per worker compared with other regions.

Table 3.1: Capital Stock per Agricultural Worker (constant 1990 US $)

REGION	1975	1976-80	1981-85	1986-90	1991-1995	1996	1997
Latin America & Caribbean	7,335	7,626	7,891	8,371	9,024	9,223	9,364
Near East & North Africa	4,847	4,852	5,182	5,782	5,983	5,870	5,857
Africa South of Sahara	1,223	1,231	1,198	1,147	1,137	1,143	1,142
East & South East Asia	898	910	919	933	953	991	977
South Asia	1,032	1,025	1,027	1,036	1,047	1,051	1,053

PREVALENCE CATEGORY
Category 1	6,105	6,398	6,685	7,199	7,987	8,186	8,264
Category 2	5,139	4,758	4,980	5,681	6,454	6,670	6,796
Category 3	1,399	1,424	1,443	1,465	1,496	1,538	1,530
Category 4	1,139	1,137	1,140	1,138	1,147	1,151	1,152
Category 5	1,087	1,078	1,029	998	963	942	934
Source: FAO Statistics

25. Over time, the same two regions have also experienced a substantial increase in capital per worker, in contrast to the stagnation in other regions. Based on the grouping of countries by prevalence of undernourishment, there is a clear contrast in the capital intensity of the first two categories (low incidence of undernourishment) and the other three (high levels of undernourishment). Differences also exist in terms of changes over time: countries with lower prevalence of undernourishment show a stronger increase (base period 1986-90) in investment per worker while changes in the other categories have been very little or even negative (Figure 3.5). Thus, the lack of the needed build-up of physical capital for agricultural growth and alleviation of undernourishment becomes evident. It is worth noting that during the period considered, the capital-labour ratio of the lowest prevalence category has increased relatively from six to nine times that of the highest prevalence category (Table 3.1).

Figure 3.5: Capital Stock Per Agricultural Worker by Developing Region
(Annual increase from 1986-90 in 1990 US $)

Source data: FAO Statistics

Figure 3.6: Capital Stock per Agricultural Worker by Undernourishment Prevalence Category (Annual Changes from 1986-90 in 1990 $US)

Source data: FAO Statistics

C. AGRICULTURAL INVESTMENT AND AGRICULTURAL PRODUCTIVITY

26. Low capital stock per worker is reflected in low productivity per agricultural worker in agriculture, as is shown in Table 3.2 for the various undernourishment prevalence categories. As a matter of fact, the wide divergence among capital-labour ratios across categories is further amplified in terms of labour productivity, and so are the diverging trends through time. As in the case of the capital-labour ratio, a sharp divide is evident between the lower prevalence categories, and the others. Thus, the value added per worker in the lowest prevalence category was 14 to 17 times that of the highest prevalence category in the period between 1990 and 1998 (Table 3.2). The pattern of the relationship between productivity and nutritional status of the various groups suggests that differences in efficiency may themselves be at least partly explained by the prevalence of undernourishment. Indeed, there is increasing evidence from recent research that high levels of undernourishment compromise overall growth of countries directly (through reduced productivity of those who are undernourished) and indirectly (through the negative effect of undernourishment on health)¹⁸. It is possible that countries with high incidence of undernourishment are caught in a hunger trap: high incidence of undernourishment causes efficiency losses and constrains their ability to deal with undernourishment. Over the period 1990-1997, agricultural productivity has improved in most categories except at the highest undernourishment prevalence. ( Figure 3.7)

Table 3.2: Agriculture Value Added Per Agricultural Worker by Undernourishment Prevalence category *(Constant 1995 US$)

PREVALENCE CATEGORY	1990	1991	1992	1993	1994	1995	1996	1997	1998
Category 1	3,580	3,656	3,875	3,833	3,876	3,999	4,151	4,181	4,300
Category 2	2,220	2,209	2,299	2,261	2,327	2,373	2,425	2,424	2,494
Category 3	528	534	553	563	584	606	631	635	547
Category 4	421	416	430	432	446	448	475	469	480
Category 5	248	249	239	239	230	233	239	242	245
Developed Countries^*	19,966	19,772	21,679	21,096	22,971	22,910	24,807	26,178	27,348
^{*Note: Israel, Luxembourg, Malta and Sweden are not included. Germany not included in 1990.} Source: FAO Statistics

Figure 3.7: Agricultural Value Added per Agricultural Worker by Undernourishment Prevalence Category

Source data: FAO Statistics

27. Two conclusions emerge from these observations: additional resources for promoting agricultural growth are especially needed in countries where undernourishment is more prevalent; and there is an important scope to improve productivity of capital and labour assets in countries with high prevalence of undernourishment. Furthermore, alleviation of undernourishment could be a decisive step to break the under-nourishment/low productivity trap faced by many countries in the developing world.

______________________

1 Including the transition economies of Eastern Europe and Central Asia. One dollar a day at 1985 prices using purchasing power parity exchange rates for that year.

2 World Bank

3 The threshold used by FAO/WHO for defining undernourishment corresponds on average - depending upon the sex, age and body mass of the concerned population - to 1800 kilocalories per day, much below the energy intake of the basic food ration used in defining the 1$ / day threshold of "extreme poverty".

4 FAO (2000) "The State of Food Insecurity in the World".

5 FAO (1995) Conference Report C95/REP, Rome.

6 WFS Technical Background Document (TBD) # 10 "Investment in Agriculture: Evolution and Prospects", FAO 1996; WFS TBD #14 "Assessing Feasible Progress in Food Security", FAO 1996; CFS/99/Inf-7 "Investment in agriculture for food security: situation and resource requirements to reach the World Food Summit objectives",FAO, June 1999, Rome.

7 FAO, State of World Food Insecurity, 2000)

8 The more correct term would be "national average apparent food consumption", since the data come from the national Food Balance Sheets rather than from consumption surveys. The term "per caput food consumption" is used in this sense here and in following sections.

9 Well above 5 percent p.a., according to FAO 1996 "Feasible progress towards food security" WFS-TBD #14

10 The term "undernourishment" is used to refer to the status of persons whose food intake does not provide enough calories to meet their basic energy requirements. The term "undernutrition" denotes the status of persons whose anthropometric measurements indicate the outcome not only of inadequate food intake but also of poor health and sanitation conditions that may prevent them from deriving full nutritional benefit from what they eat (FAO, "the State of Food Insecurity in the World", 2000)

11 USDA, US Action Plan on Food Security, Solutions to Hunger. March 1999, Washington, DC.

12 Shaping the 21st century- the contribution of development cooperation, OECD Paris 1996

13 World Bank, World Development Report 2000, Attacking Poverty. Oxford University Press, 2000.

14 The prospects for food and agriculture until 2010 had been presented by FAO in its study "World Agriculture: towards 2010" (WAT 2010).

15 see the document entitled Fostering the Political Will to Fight Hunger, FAO, 2001.

16 Prevalence of under-nourishment changes from year to year, and the grouping in this paper refers to prevalence of undernourishment in the period 1996-98.

17 The list does not include countries with population with less than one million and those that have insufficient data on undernourishment.

18 Arcand, J. L. Malnutrition and Growth: The Efficiency Cost of Hunger. FAO, 2000.

COMMITTEE ON WORLD FOOD SECURITY

Twenty-seventh Session

Rome, 28 May - 1 June 2001

MOBILIZING RESOURCES TO FIGHT HUNGER

Table of Contents

TABLES

FIGURES

EXECUTIVE SUMMARY

I. INTRODUCTION

II. WHY MORE RESOURCES FOR FOOD SECURITY AND WHY TO AGRICULTURE IN DEVELOPING COUNTRIES?

III. TRENDS IN INVESTMENT IN AGRICULTURE IN DEVELOPING COUNTRIES

A. NATURE OF THE PROBLEM AND RESOURCE NEEDS

B. AGRICULTURAL INVESTMENT

C. AGRICULTURAL INVESTMENT AND AGRICULTURAL PRODUCTIVITY