Regional Office for Asia and the Pacific

Hiroyuki Konuma

FAO Regional Representative for Asia-Pacific

STATEMENT
by
Hiroyuki Konuma
Assistant Director-General and
Regional Representative for Asia and the Pacific
delivered at the

Public Forum on “Responsible Agricultural Investment: The Path of Thailand”

13 September 2010
Bangkok, Thailand




Dear participant in this Forum,

        It is my pleasure to address you today in this discussion forum looking into responsible agricultural investment and the path of Thailand.

        Last year the total world chronic hunger population exceeded one billion, the first time in the history of mankind, 63 percent of which 642 billion live in Asia and the Pacific. The first time since the green revolution started, the percentage of chronic hunger out of the total population in the region turned to upwards in 2008 to above 17 percent from 16 percent in 2006. The percentage of increase of chronic hunger in 2009 in Asia and the Pacific was about 11 percent from previous year which was almost the same increase in Sub-Saharan Africa of 12 percent.

        Till recently, everybody said that hunger problem is the problem of Africa, especially Su-Sahara Africa.  Asia which holds two third of the total chronic hungry population in the world was not given a serious attention as many people thought that the hunger population in Asia would be reduced naturally  in accordance with rapid economic growth in the region. 
However, the situation turned to different direction in past two years. Why? Because the multiple crisis started in 2008 resulted from food price crisis and financial crisis is affecting the poor and the vulnerable population in the region who were left behind from the mainstream of economic growth. This is the evidence that rapid economic growth in Asia and the Pacific was led by those who had resources and capital which benefitted the rich more, but created wider disparity and inequality between the rich and the poor.

        The food price (including cereal price) remains about 40 percent high if compared with that of in 2002, and remains about 20-30 percent higher than the price in 2007 (before the crisis started) in many countries. Recent FAO and OECD’s projection is that next 10 years, food price would remain 15-40 percent high in real term.

        But real problem on food security lies on medium and long-term.

        To feed growing population, which would reach 9.1 billion in 2050, the world has to increase food production by 70 percent, but if we look at only developing countries, we would have to double increase the production by 100 percent, under existing constraints of availability of natural resources, especially land and water in the regional and their competition with bio-energy crops.  FAO projects that by 2050 the net increase of the arable land area would be just 70 million hectares, or about 5 percent of the current area.  Agriculture is just one of many users of water, however, it (especially  for irrigation) accounts for 84 percent water withdrawal in this region, while climate change is expected to account for 20 percent of  the global increase in water scarcity , in addition to its negative impact to extreme of drought and floods.  Bio-ethanol and bio-diesel production is expected to be doubled in 10 years between 2008/9 and 2018, for which considerable amount of arable land and water resources originally earmarked for food production would be sifted to bio-energy crop production.

        In medium-term (2000-2030), we project that cereal production be increased about 43 percent by year 2030, which require about 1.2 percent average annual growth in cereals during the period. Otherwise, the world may face food shortage and may result in social conflict and political unrest, especially in developing countries where the vast majority of population growth would occur.  This has to be done against the fact that the average annual  production growth in past 10 years from 1997 to 2007 in Asia could only attain 0.2 percent for wheat (0.5 percent yield growth) and 0.8 percent for rice (0.8 percent yield growth), with an exception of maize reflecting a wide availability of hybrid maize and growth of urban and semi-urban poultry production for which maize is a major part of feed formulation. 

        The situation posed a serious concern. In fact, is alarming. The yield growth has slowed considerably if compared with the time of green revolution at which 3.9 percent annual growth was achieved during 1970-90.

        Why this has happened?

        The green revolution tripled (300 % increase) the cereal production in 40 years between 1961 and 2000 in Asia as a result of introduction/adoption of modern varieties of cereals, especially wheat and rice, expansion of irrigated areas, rapid increase of chemical fertilizer use and farm mechanization. This was resulted in the decline of world market price of cereals in real term by 40 percent and benefitted consumers, especially the poor. As a consequence, world hunger population fallen from 35 percent in 1970 to 17 percent in 2000.

        On the other hand, food became available at a cheap price and affordable to almost everyone, less profit to producers, lack of incentives to agricultural growth and as a consequence, resulted in lack of interest in agriculture sector.

        As a result, the investment in agriculture declined sharply in past three decades.  Annual growth rate on agricultural research and development (R&D) decline to less than a half since 1976, and the share of agriculture in the total ODA declined from 19 percent in 1980 to 3.5 percent in 2005 and to 5 percent in 2007. Consequently the share of revenue budget to agriculture sector in many of developing countries declined as well.

        Food is not just a food available everywhere as it has been so far, but might become a source of conflict which influences social and political stability of the world, if we fail to attain production growth.

        We need to increase investment in agriculture. We need investment in agricultural research to increase agricultural productivity.

        FAO expects that 80 percent of growth in crop production in developing countries would come from crop intensification, in particular higher yields and increase in cropping intensity.  Only 20 percent would come from expansion of arable land.

        We are very pleased that the L’Aquila G8 Summit last year brought “agriculture” and ”food security” back to the top of the priority agenda of world community  and  resulted in the pledge of over 20 billion US dollars to support the sustainable food production in developing countries.

Ladies and Gentlemen,

        Recently, the world has witnessed a sharp increase in investment involving significant use of agricultural land, water, grassland, and forested areas in developing and transition economies. This trend is caused by a host of factors including:

  • the 2007/8 price spike in food. While prices decreased somewhat in 2009, (but still remain 20% higher than pre 2007 level) fresh tensions have arisen in the international wheat markets this summer in the wake of natural disasters in some major grain producers in the region.
  • the desire by countries dependent on food imports to secure food supplies in the face of uncertainty and market volatility,
  • speculation on land and commodity price increases,
  • search for alternative energy sources, and
  • possibly anticipation of payments for carbon sequestration.

        The actors involved in international investment includes enterprises in the agri-food, biofuels, and extractive industries, private equity firms and other financial institutions, government-linked companies including sovereign wealth funds, and individual entrepreneurs.

        The Asia-Pacific region has been at the forefront of this new trend. It plays a leading role on the global stage both as a destination and as a source of investment. It includes both countries that are major investors abroad and countries that are net recipient of international investments. Some Asian countries have actively invested in the agricultural sector of other countries in the region and beyond. On the other hand, several countries in the region have enjoyed substantial flows of international investment in agriculture and related sectors. Finally, some Asian countries have become both a significant source and destination of foreign direct investment. 

        Many studies show that investment to increase productivity of owner-operated smallholder agriculture has a very large impact on growth and poverty reduction. Thus any investment—public or private, domestic or foreign —in lower income countries and rural areas that can close this gap is desirable in principle. Private investment in the agricultural sector, including from foreign sources, offers significant potential to complement public resources.

        Benefits should arise from capital inflows, employment creation, technology transfers leading to innovation and productivity increase, upgrading domestic production, quality improvement, backward and forward linkages and multiplier effects through local sourcing of labour and other inputs and processing of outputs.

        On the other hand, where rights are not well defined, governance is weak, or those affected lack voice, there is evidence that such investment can carry considerable risks like:

  • displacement of local populations,
  • undermining or negating of existing rights,
  • increased corruption,
  • reduced food security,
  • environmental damage, and
  • loss of livelihoods or opportunity for land access by the vulnerable, nutritional deprivation, social polarization and political instability.

        This is the reason why FAO, IFAD, UNCTAD and the World Bank have joined forces and elaborated basic principles that can guide Member Countries in the development of policies, regulations and standards that can help maximize the benefits of investment in their agricultural sector while minimizing the risks. In addition, the principles could provide a framework to which international investment agreements, global corporate social responsibility initiatives and individual investment contracts might refer.

        The above organizations have launched a process of widespread consultation in order to obtain the views on the principles of all stakeholders including governments, farmers’ organizations, NGOs, the private sector and civil society more generally.

        As a major agricultural producer, as well as an importer and exporter of agricultural investments simultaneously, Thailand is in a strong position to contribute to the development of the principles for responsible agricultural investment. FAO welcomes Thailand’s contribution to the debates and looks forward to hearing your views.

        Thank you for your kind attention