APRC/04/7

Table of Contents

I. INTRODUCTION

II. RESOURCES FOR AGRICULTURE DEVELOPMENT TO ADDRESS POVERTY AND FOOD SECURITY IN ASIA AND THE PACIFIC COUNTRIES

III. TRENDS IN INVESTMENT AND RESOURCE FLOW FOR AGRICULTURE IN ASIA AND THE PACIFIC DEVELOPING COUNTRIES

IV. RESOURCE NEEDS TO MEET THE WORLD FOOD SUMMIT GOAL

V. DOMESTIC RESOURCE MOBILISATION TO MEET THE WORLD FOOD SUMMIT GOALS

VI. ABSORPTIVE CAPACITY CONSTRAINTS

VII. CONCLUSIONS

I. INTRODUCTION

1. The World Food Summit 1996 (WFS) called for the political will of all governments to shift from the policies and inaction that had failed to defeat persistent high levels of hunger and resolved to halve the number of undernourished people to 400 million by 2015. The Rome Declaration on World Food Security was emphatic in stating that: "We consider it intolerable that more than 800 million people throughout the world, and particularly in developing countries, do not have enough food to meet their basic nutritional needs. This situation is unacceptable."

2. The World Food Summit (WFS) goals were further reaffirmed in the Millennium Summit in 2000 and in the World Food Summit: five years later (WFS-fyl) in June 2002. Despite these solemn commitments hunger persists, and any reduction of undernourishment remains far too slow. Projections for 2015 still set the expected number of undernourished for that date at 580 million people, with the WFS goal of a reduction to 400 million people not being achieved before 2030.

3. In 1999-2001, according to FAO’s estimate, the world had some 840 million people suffering from hunger and 60 percent of these people, nearly 500 million, were in Asia and the Pacific. Notwithstanding the success many countries in Asia and the Pacific have achieved in reducing poverty, improving food security and the overall welfare of the people, the region remains home to the majority of the world’s poor and hungry. Out of approximately 1.2 billion people in the world who are estimated to be living under one dollar a day, 768 million, nearly two-thirds, live in Asia and the Pacific.

4. A rapid assessment undertaken by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) of the progress made in the Asia-Pacific region toward achieving the UN Millennium Development Goals (MDGs) raises questions about the capacity of certain countries in the region to achieve all of the agreed targets. In target 2 of goal 1 – to halve the proportion of people who suffer from hunger – progress achieved by the Asia-Pacific countries is rated at only modest, while the likelihood of achieving the target is seen as only possible, but still short of assured.

5. The World Food Summit target can be achieved through coordinated action on a number of fronts, reflecting the multidimensional nature of the determinants of hunger, food insecurity and undernourishment. The action areas include the creation of an enabling political, social and economic environment, both nationally and internationally; the eradication of poverty; efforts to promote sustainable agriculture; disaster and emergency preparedness and prevention; investment in agriculture; and the monitoring of progress.

6. This paper focuses on investment in agriculture or, more precisely, the mobilization of resources for strengthening the productivity and productive capacity of the agriculture sector. It illustrates the role of agriculture in generating additional food supplies and incomes necessary for greater access to food in developing countries, especially the low-income food-deficit countries (LIFDCs), where agriculture is the principal sector in terms of national income, employment and exports, and argues that there can be no hope of meeting the Summit target if the political will to direct sufficient resources to hunger reduction is not strengthened.

II. RESOURCES FOR AGRICULTURE DEVELOPMENT TO ADDRESS POVERTY AND FOOD SECURITY IN ASIA AND THE PACIFIC COUNTRIES

Poverty and food security in Asia and the Pacific

7. Though Asia and the Pacific still harbour the highest number of poor in the world, there are, however, great variations in poverty across countries in the Asia-Pacific region. Some countries in East Asia and Southeast Asia have made tremendous progress and have achieved their poverty reduction goals. China is a notable example. Nearly 90 percent of the reduction in poverty across the Asia-Pacific region is accounted for by China alone. Indonesia accounts for another 9 percent, and Viet Nam has also made remarkable progress. The performance of South Asia has been modest, since some 30 percent of the populations of India and Pakistan still live in poverty. In the Pacific the assessment of country progress is hampered by the absence of baseline data.

8. Likewise, persistence of large numbers of undernourished should not be taken as a lack of recognition of the significant successes achieved by agriculture in providing food to an ever-increasing population. Since 1990-92, the population of Asia and the Pacific countries has increased from 2.8 billion to 3.2 billion in 1999-01, while during the same period the relative incidence of undernourishment, defined as the percentage of undernourished people, declined from 20 to 16. In East Asia the decline was from 16 to 11. It was from 17 to 13 in South East Asia and from 26 to 22 in South Asia.

9. Such progress is also reflected in the increases in per capita food availability for direct human consumption, which is one of the key variables used to measure the extent of food insecurity at the country level. Expressed as dietary energy supply (DES)¹ in kcal per capita per day, it increased from around 2 000 in the 1970’s to 2 920 in the late 1990’s in East and South East Asia and from 2 060 to 2 400 during the same period in South Asia.

10. The achievements of Asia and the Pacific, however commendable, are still not adequate for meeting the WFS and the Millennium Development Goals, to which all the countries of Asia and the Pacific have committed. For example, the number of undernourished people in the region declined by 61 million over the nine-year period or approximately 6.8 million people annually. It is approximately half of the annual requirement of 13 million to meet the WFS goal.

Why focus on resources for agriculture, food security and poverty?

11. Overall, some 70 percent of the poor in Asia and the Pacific developing countries live in rural areas. This is particularly true in those countries with high levels of undernourishment. The majority of the labour force in these countries depends on agriculture, directly or through related activities, and the sector accounts for a high proportion of their national economic output and export earnings. On average, 62 percent of the labour force in East and Southeast Asia in 2000 was employed in agriculture. The corresponding figure for South Asia was 59 (see Table 1).

TABLE 1
The Dimensions of Agriculture in Asia

12. Most of the rural poor depend on agriculture to produce the food they eat or to generate income. Rural households generate income from agricultural activities (in the form of revenue from the sale of agricultural products or paid employment in agriculture) and/or from 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 agriculture sector, including the production of inputs, repairs of agricultural implements and 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. Given the extent to which poor people’s livelihoods depend on agriculture, growth in this sector is an essential component of poverty reduction and food security strategies. The role of resource mobilization for agriculture is critical because such investments are considered to be essential for increasing productive capacity and hence employment and income generation in areas where the majority of the poor and food-insecure are to be found.

13. Allocation of adequate resources to public goods in agriculture, such as research, extension and rural infrastructure, is vital for the growth of the sector and must be supplemented by investment in infrastructure, health and education. Conflict reduction, democracy and good governance, education and health, safe water and market openness are essential targets for official development assistance (ODA) and for action to reduce hunger. Evidence demonstrating the high returns to investments that enhance human capital has made a major contribution to the understanding of economic development and its relationship to human development. The role of such investments is at the root of development strategies that have received recognition from the international community, for example at the 1995 Copenhagen Social Summit, in the 1996 OECD Development Assistance Committee (DAC) strategic orientations for development cooperation, in the World Development Report 2000 and in the United Nations Millennium Declaration.

14. Promoting agriculture to fight hunger should be part of a multidimensional strategy by national governments, regional organizations, international donors, multilateral lending agencies and the private sector. The fight against hunger and the promotion of agricultural development, furthermore, should be integrated in coordinated development instruments such as the Poverty Reduction Strategy Papers (PRSPs), the United Nations Development Assistance Framework (UNDAF) and the Administrative Committee on Coordination (ACC) Network on Rural Development and Food Security.

III. TRENDS IN INVESTMENT AND RESOURCE FLOW FOR AGRICULTURE IN ASIA AND THE PACIFIC DEVELOPING COUNTRIES

Agricultural investment

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

16. 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 to induce the investments necessary for sustained productivity and production increases. Improved investment incentives also require policies that create the requisite agrarian institutions. These include transparent and functioning markets, access to financing and extension, and adequate legal and regulatory frameworks. At a more general level, 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 of importance to the public good – research, extension, infrastructure (particularly water control, roads, storage and marketing facilities), education and norms and standards.

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

18. In order to take into account the varying capital intensity and technology levels of the agriculture sectors in the different groups of countries, data on capital stock per agriculture worker are presented in Table 2. As we can see from the Table, there has been very little increase in the capital stock per agricultural worker in both the subregions of Asia.

TABLE 2
Capital Stock per Agricultural Worker

Resources for agricultural development

19. Resources at the national level for agricultural development and the promotion of food security may be private or public, domestic or external. In countries with a high incidence of undernourishment, private savings are likely to be limited by low per capita incomes. For the same reason, the tax base from which governments derive revenues is likely to be small. Although some governments can raise additional domestic resources through fiscal reforms, a number of countries will still have to rely on external resources to generate funds for agricultural development. In the following sections, the role of public expenditure in the agriculture sector and the role of foreign finance for agricultural development and food security are examined.

Public expenditures on agriculture

20. The role of government in support of economic activities in general, and agriculture in particular, has been drastically revisited and often scaled down over a decade of reforms, liberalization and move towards a market economy in most Asian countries. The tendency in the new development paradigm is for governments to concentrate their resources on delivering indispensable public goods and services and providing an environment where private initiative can flourish, instead of endeavouring to replace or compete with private enterprise. Yet, government expenditure remains an indispensable condition for economic and social development. Examples of public functions that continue to be required from the public sector, often increasingly in a decentralized fashion and in partnership with the private sector and civil society, include agricultural research and extension, public infrastructure and services, safety nets against transitory shocks and programmes to facilitate adjustment of particular sectors or regions and to enable innovations that may involve risk but that ensure environmental sustainability and food security.

21. Time series data on government expenditures by sector are scarce. Available data at the aggregate level for East and Southeast Asia and South Asia are given below in Tables 3 and 4. The Tables show that government expenditure on agriculture both as a share of total expenditure and as a share of agricultural GDP have declined in both the subregions.

TABLE 3
Government Expenditure on Agriculture as a Share of Total Expenditure

TABLE 4
Government Expenditure on Agriculture as a Share of Agricultural GDP

22. Country specific available data for 13 countries in the Asia-Pacific region show that in two countries of East Asia public expenditure for agriculture as a ratio of GDP declined from nearly 1 percent in 1990 to 0.8 percent in 2000 and as a ratio of total expenditure declined from 8.4 percent to 3.8 percent.

23. The share of agriculture in total public expenditure declined more drastically in four countries of Southeast Asia, from approximately 1.6 percent to 0.8 percent of GDP and from 8.4 to 3.8 percent. In three countries of South Asia, public expenditure for agriculture declined from 1.9 percent to 1.2 of GDP and agriculture’s share in total expenditure dropped from 9.2 to 5.2 percent. In four developing countries in the Pacific, while public expenditure as percent of GDP declined only marginally and was maintained at around 2 percent, its share in total expenditure declined from approximately 4.6 percent in 1990 to 3.6 percent in 2000.

External financial resources

24. External financial resources provide an important part of the overall resources available for promoting economic and social development and food security, especially in LIFDCs. Resources flows can be from either official or private sources.

25. The net flow of external financial resources to developing countries increased from nearly US$142 billion to US$248 billion between 1990-92 and 1999. During this period, the largest share of commitments went to Asia (47 and 46 percent, respectively). At the same time, there has been a dramatic change in the composition of these resources in terms of their source. By the end of the period, ODA (the overall net flow from official sources) stagnated at about US$85 billion (in current prices), while private flows increased almost threefold from US$58 billion to US$160 billion during the same period. A small residual component is made up of export credits. As a result of the shift in the composition of external flows, ODA declined from 39 percent of net total external flows in 1990-92 to 20 percent in 1999.

26. Worldwide foreign direct investment (FDI) inflows reached US$1.3 trillion in 2000, an increase of 18 percent from 1999. Developing countries accounted for 19 percent of FDI flows, with a total of US$240 billion, an increase of 8.2 percent over 1999. Compared with the stagnation in 1998, this increase is encouraging, but it is still concentrated in a small number of countries. Most of the increase in FDI in the developing world occurred in countries of South, East and Southeast Asia, where FDI inflows rose by 42 percent to reach US$137 billion in 2000. This increase was mainly in East Asia, as FDI in the subregion of South Asia declined in 2000 by 11 percent.

27. Data on external resource flows to agriculture in the form of loans by the principal international and regional financing institutions shows that World Bank lending for agriculture declined from US$3.656 billion in 1990 to US$1.337 billion in 2000. While lending to agriculture represented 18 percent of total lending by the World Bank in 1990, by 2000 this figure had been reduced to 9 percent. Except for the International Fund for Agricultural Development (IFAD), where all lending is to agriculture, and the European Bank for Reconstruction and Development (EBRD), where the shares of lending to agriculture vary substantially by year, all financing institutions have reduced lending to agriculture, including the Asian Development Bank (Table 5).

TABLE 5
Lending for Agriculture, by Principal Financing Institutions

IV. RESOURCE NEEDS TO MEET THE WORLD FOOD SUMMIT GOAL

28. Estimated resource requirements for food and agriculture are dependent on the targets to be achieved. The World Food Summit considered the limited reduction in world hunger that was expected under projections available at the time to be unacceptable, and it therefore set the more ambitious target of halving the number of undernourished people to 400 million by no later than 2015.

29 FAO has estimated the level of investment required to reach the World Food Summit goal. This estimate, initially calculated by FAO in preparation for the Summit, was subsequently updated and provided to the Committee on World Food Security (CFS) at its 25th session in 1999. The total annual gross investment required for the agriculture sectors of Asia to meet the summit goal was estimated by an FAO study to be $53.3 billion for primary agriculture and $26.4 billion for storage and processing.

30. The same study, using a comparable estimate of actual investment in primary agriculture for 1986-95, showed that a continuation of these annual investment rates until 2015 would be insufficient to achieve the World Food Summit goals. The expected shortfall for Asia was estimated as 12 percent of estimated requirement.

Investments for transitional assistance to the food-insecure

31. In order to reduce poverty and food insecurity, more attention must clearly be paid to investments that can improve the capacity of people to better their living conditions on a sustainable basis. As an example, the importance of the agriculture sector and the problem of rural poverty have led many countries to pursue strategies focused on reducing chronic food insecurity by increasing the productivity of small farmers. Such strategies require the availability of financial resources and institutional capacity, access by the rural poor to productive land and affordable inputs, and the capacity of the non-farming poor to express their unsatisfied food needs in terms of effective demand. In most LIFDCs, however, the feasible scale of such a strategy is constrained by the lack of domestic and external resources as well as institutional capacity.

32. Since adequate nutrition, health and elementary education are prerequisites for inclusive economic growth, investments ensuring the broadest possible access to essential food needs, safe water, primary health care and primary education may well be the most effective use of scarce resources available to achieve the World Food Summit target. Therefore, direct interventions aimed at reducing current malnutrition and at creating conditions for healthy living should be accompanied by policies (including public investment priorities) aimed at overall development. Indeed, the 20/20 target (20 percent of national budgets and 20 percent of international assistance directed towards social goals), agreed at the World Summit on Social Development, is premised on these twin requirements.

33. This twin-track approach to addressing food insecurity (at once a humanitarian and developmental goal) has been recognized as necessary in the technical documentation prepared by FAO for the World Food Summit, as well as in the World Bank’s paper Rural development: from vision to action, IFPRI’s² document 2020 vision for food, agriculture and the environment, and IFAD’s³ Rural Poverty Report 2001. Translating this approach into reality in all the LIFDCs, however, will require the mobilization of resources, as well as institutional capacities that far exceed those currently committed to addressing food insecurity.

Enhancing the prospects for investment in agriculture

34. The substantial investments made in agriculture so far have produced significant results. Despite the rapid increase in world population from approximately 2.5 billion in 1950 to 6 billion in 2000, fears of population growth outstripping agriculture’s ability to meet consumption needs has not materialised. In the past half century, China has quadrupled its agricultural output, overtaking the US as the world’s largest producer, and India has tripled its output. Agricultural investments also have had a substantial impact on poverty reduction. Increased supplies have led to food price declines in real terms which have benefited the poor. The price of rice, for example, is estimated to be 40 percent less than what it would have been in the absence of investments in rice-related technologies.

35. However, the growth experience has not been uniform and there have been areas of sub-optimal investment and under-performance. Traditionally, many countries have invested substantial public resources in agricultural marketing and input supply which have had the unintended consequences of distorting private investments, inhibiting growth of alternative institutions, and promoting unsustainable resource use. Analysis of what has worked reveals how pragmatic changes can trigger substantial private investments and economic growth. Reforms in China, which brought state purchase prices of agricultural commodities close to world prices, are believed to have played an important role in the dramatic reduction of rural poverty in the 1990s. Liberalization of policy with regard to groundwater irrigation led to substantial expansion of shallow tubewells in Bangladesh and a boost to agricultural output.

36. The vast experience of public interventions in agriculture can be used to provide guidance about policy changes and institutional and social interventions that create the appropriate conditions to induce relevant technical and economic changes in the agricultural sector. In the present context, there is not only pressing need but also substantial scope for enhancing agricultural investment based on expanded technical possibilities, economic opportunities and improved understanding of the workings of public policies and programmes. Economically, greater market integration and expanded trade, based on improvements in transport and communications infrastructure, increasingly create opportunities for value-addition and growth by moving from subsistence-focused to market-oriented production, based on comparative advantages. With regard to the appropriate nature and form of public support to agriculture, there is a growing consensus, based on a comparative analysis of successful interventions, which emphasises community involvement, institutional capacity building and greater attention to demand-side factors as key ingredients.

37. Technically, there is growing scope to unlock productivity gains. In developing countries the technical frontier for agriculture, which shows what is technically possible to produce, has over the decades expanded as a result of research and development work in national and international agricultural research centres. However, these advances in technology have not been adequately transferred at the farm level. Hence, there is substantial scope for investments in technology adoption to realize the full potential of the resources spent on research. Furthermore, the declining allocation of resources for agricultural research must be reversed so that up-to-date technologies to address current and emerging issues are on the shelf for propagation.

V. DOMESTIC RESOURCE MOBILISATION TO MEET THE WORLD FOOD SUMMIT GOALS

38. The constraints to the financing of agriculture and rural development with domestic resources are many and often complex. However, the critical constraint in general is lack of attractiveness vis-à-vis other alternative opportunities for investment. The agricultural sector must dramatically improve its attractiveness to investors in terms of profitability and sustainability, if it is to secure a larger share of domestic public and private resources.

Public expenditure

39. Public expenditure is funded by taxes, foreign and domestic borrowing, and grants. In the world after the debt crises of the 1990s, concerns about the sustainability of foreign borrowing and debt repayments place an absolute ceiling on the volume of external borrowing that an individual country can accept. In many cases, the development budget is largely funded from external sources, and the recurrent budget, at best, supports wages, salaries and the basic operating expenditures of government. The only way of increasing domestic resources for public expenditure is through broadening the tax base and increasing the efficiency of tax collection. Unfortunately, with the agricultural sector invariably playing a large role in the economy, almost any effort to increase taxes will adversely impact agriculture and heighten the tendency for there to be a bias in favour of urban areas in the taxation-expenditure equation.

40. Decisions about the sectoral allocation of public expenditure are made by ministries of finance and planning (MOF), responding to political imperatives (such as spending on arms) and the expressed priorities of donors. The MOF not only disposes domestic tax revenues, but also allocates the resources available from other sources, including foreign assistance. The coherence of programmes, and capacity to spend effectively in different sectors, determines where the impact of public expenditures is likely to be greatest. In this respect, ministries of agriculture tend to be at a disadvantage with respect to their peers in health, education and public works. Sector-wide programmes in health and education, for example, that directly address key development priorities, are able to include monitorable goals of the sort that are difficult to define or measure in agriculture. These biases are reflected in the inadequate representation of the agricultural sector in the programmes in PRSPs and in associated budget allocations. At the national level, the visibility of agriculture and rural development needs to be raised and “champions” are needed to give a fiscal “voice” to the rural poor and to make the case for extra budgetary resources for the sector.

41. In order to secure a larger share of public expenditure, ministries of agriculture need to be more effective in the planning and implementation of their activities. An important step in this process is the definition of a set of core functions for support to the sector. In addition to withdrawal from direct production activities and marketing, ministries of agriculture need to define functions that enhance the environment for investment including regulatory functions, information dissemination, and services such as research and extension, although many aspects of the latter might be contracted out to the private sector, universities or non-governmental organizations (NGOs).

Private investment

42. The largest private investors in the agriculture sector are the ordinary farmers themselves. The commercialisation of small farmer agriculture, which is seen as the ultimate objective of development in the sector, depends upon the profitability of the products grown. For small farmers to invest in moving beyond mere survival and subsistence to commercial production, in a situation where markets are thin and where institutional and economic infrastructure is undeveloped, often involves an unacceptable level of risk for their meagre capital resources.

43. However big or small the resources mobilised for investment in agriculture, it is essential to cut the cost and improve the accessibility and reliability of loan funds to farmers, who are the primary producers in the system. It is also crucial to make sure that a larger part of those resources reach the primary producers – the farmers – in the form of support services for agriculture and loan funds for investment.

44. In view of the constraints upon both external and domestic public resource mobilisation, efforts should be focused on increasing the efficiency and performance of domestic capital and money markets. A number of direct and indirect strategies and policies to mobilise domestic savings and to increase the flow of funds for the rural sector may be considered.

VI. ABSORPTIVE CAPACITY CONSTRAINTS

45. Whatever level of externally and domestically funded public investment is achieved, it is crucial to improve the efficiency of that investment and the absorptive capacity of the countries. The aim of publicly financed interventions in the agricultural and rural sector is to increase production, productivity or incomes by stimulating complementary private activity from the target population. In other words, successful performance crucially depends upon associated private activity, both financial (e.g. expenditure on new inputs, assets, product development and marketing) and non-financial (e.g. time and effort spent in skill formation and land, water or other resource management). The generally poor performance of projects in agriculture reflects the associated failure to stimulate relevant private sector activity. For this reason, consideration of absorptive capacity problems must include examination of the constraints that exist to private investments.

Public sector interventions

46. Investment prospects in agriculture can be enhanced by actions to improve the nature and quality of public interventions and the enabling environment. By increasing the likelihood and scope for complementary private investments, such actions would increase the success of public investments. There is a clear need for fundamental reform of public expenditure processes, policies and structures, along with capacity enhancement in government and new approaches by donor agencies. Government public expenditure is often concentrated in a few sectors or activities (irrigation, commodity price support, export and subsidies, extension) as a result of historical trends, politics or the ease of lending to some subsectors, rather than by the needs of the sector. Public programmes also tend to be interventionist, crowding out or even supplanting market institutions and private and civil society organizations. For instance, support for market risk often takes the form of managing the markets themselves rather than managing risks. Similarly, there is often reluctance to give up inefficient, monopolistic and supply-driven provision of public services. The implementation of externally funded projects is often inefficient, resulting in delays and under-utilisation of funds, thus compromising the intended objective of providing an enabling environment for private activity (such as small farmer production). Not all the problems lie with governments, however, and international financing institutions (IFIs) and donor agencies often impose complex disbursement procedures and inflexibility of operation on their partners.

Enabling Environment for Investment

47. A number of important factors affect the overall enabling environment for investment at the national level. Policy-induced distortions through intervention in the market have in the past blunted incentives to exploit comparative advantages and led to misallocation of resources. Reform measures to replace price interventions with support for market risk management, removing entry and trade barriers, and reducing market abusive and monopolistic practices through stronger regulation, can increase growth in the short- and long-term. Decentralization, and especially fiscal devolution, will allow more efficient revenue collection and better targeting and management of local expenditures. High transportation costs, resulting from poor quality roads and infrastructure, tolls and transport-related taxes, reduce profitability and the incentive to invest. Greater market integration and trading depth, through investment in marketing and storage infrastructure, reducing tariff and non-tariff barriers, trade treaties, and regional economic integration, would stimulate investment through more stable prices as well as better terms of trade. Partnerships between public, market-based and civic organizations need to be strategically forged to facilitate, for example, co-financing or contracting for infrastructure development and other public-type goods. Finally, predictable policy regimes, transparent business procedures, accountability in public decision-making, and balanced and efficient regulatory regimes are critical in creating an attractive investment climate.

48. A number of institutional support interventions can be proposed. The capacity, procedures and institutions involved in public expenditure management need to be strengthened, as well as the design, management and implementation of public projects. Success stories of public-private partnerships that bring in complementary investments from the private sector or increase the outreach, effectiveness and sustainability of public interventions through more participatory planning and implementation, could be part of the institutional learning process.

VII. CONCLUSIONS

49. Despite the solemn commitment made at the World Food Summit, there are no signs of a significant increase in the rate of reduction of undernourishment, which remains far too slow. Unless drastic actions are taken, current projections for 2015 still set the expected number of undernourished for that date at 580 million people, with the Summit goal of a reduction to 400 million people not being achieved before 2030. Having reached this intermediate target, the ultimate aim is to eradicate hunger in all countries.

50. Urgent action should be taken on several fronts, but it is indispensable that increased resources be mobilized for agriculture, which is of crucial importance for the livelihoods of the hungry and food-insecure in developing countries.

51. With respect to domestic public spending in the agriculture sector, the data point to the fact that governments’ allocation of public resources to agriculture remains well below the share of agriculture in income and employment generation. Yet, 70 percent of the poor and food-insecure in developing countries depend on agriculture, fisheries or forestry, directly or indirectly, for improving their livelihoods.

52. There is now ample evidence to support the fact that not only humanitarian considerations, but also economic reasoning, should lead to greater efforts being made to alleviate the plight of the poor and food-insecure. Hunger greatly compromises the productivity and health of individuals as well as the growth potential of nations.

53. Types of intervention and the specific areas of agriculture targeted for increased resources will depend on the needs of each priority country. The identification of priority areas for resource mobilization must be based on more detailed analyses of potential and constraints – analyses that must be carried out in a participatory manner at the national, regional and local levels. However, provision of productivity enhancing agricultural research and extension services are vitally important in all countries in general. Similarly, market information and regulation and rural infrastructure are essential for efficient resource allocation and competitiveness.

54. Enabling small-scale farmers to face the challenges of globalization will require special attention to rural capacity and institution building as well as efforts to improve rural infrastructure, including roads, communications, marketing, transport, storage and processing facilities. Appropriate agrarian institutions are essential, such as those that facilitate credit and technology transfer, as well as a legal framework to defend land and water claims and access rights. The key player in providing the commercial components of such infrastructure and the ensuing management of downstream activities is the private sector, itself highly responsive to an enabling macro environment and public investment in rural infrastructure.

55. The overall message is clear: there can be no hope of meeting the Summit target if the political will to direct sufficient resources to hunger reduction is not strengthened. It is essential that more resources be allocated to the food and agriculture sector so as to foster productivity gains and enhance employment generation and access to food, especially in the rural areas where most of the world ’s food-insecure people are located.

¹ It is useful to note that the widely used reference to the number of people without access to a minimum dietary energy intake as a measure of food insecurity fails to capture all the dimensions of undernutrition (also caused by a poor health status) and malnutrition (where dietary imbalances, especially of micronutrients, can have deleterious health implications). However, a lack of sufficient food is itself a cause of deficiency in a variety of necessary nutrients, and not only of inadequate energy supplies. In addition, as comparison of the diets of a well-nourished and an undernourished adult has shown, diets tend to be less diverse at lower levels of food intake, thereby adding to the nutritional deficiency of the undernourished.
² International Food Policy Research Institute
³ International Fund for Agricultural Development