Mr Ganesh Thapa, Regional Economist, IFAD,
Ladies and Gentlemen,
A very good morning to all of you.
First of all, on behalf of my FAO colleagues and myself, allow me to convey warm greetings and welcome you all to Bangkok and to this Inception Workshop on Pro-Poor Policy Approaches to Address Risk and Vulnerability at the Country Level. We are greatly honoured and privileged to have you all here in Bangkok attending this workshop.
As you know, this inception workshop is being held to mark the start of a new regional project on Pro-Poor Policy Approaches to Address Risk and Vulnerability at the Country Level, to be implemented in four countries – Cambodia, Lao PDR, Nepal and Viet Nam – by FAO with support from IFAD. This project aims to enhance the institutional capacity of these four countries of the Asia-Pacific region to analyze, formulate and implement public policies to help protect the rural poor from various risks, particularly some relatively new risks with which they may be unfamiliar. In order to do this, it also aims to achieve a better understanding of the importance of risk in the lives of the rural poor, and of the strategies available to them to mitigate and adapt to its effects.
As you will recall, among the eight Millennium Development Goals, halving the proportion of the population living in extreme poverty and hunger is the first and foremost goal to be achieved by 2015. It is particularly important to achieve MDG 1 – halving the proportion of the population that lives in poverty and hunger – as this goal underpins most of the other seven goals.
The Asia and Pacific region, as you all know, has achieved dramatic progress towards reducing poverty and hunger in the past three decades. In fact, the region as a whole is on track to halving the proportion of the population living in poverty. Indeed, the proportion of people living on less than USD 1.25 per day in this region was reduced from 50 percent to 22 percent (or from 1.57 billion to 871 million people) between 1990 and 2009, as per recent ESCAP, UNDP and ADB report. Economic growth in the region has far exceeded the average for all other regions.
However, let us not forget that the fruits of economic growth have not been shared equally across countries and within the countries of the region: there are still 871 million people living in absolute poverty. On the other hand, proportion of hunger in this region remains still high at 16 percent against MDG target of 10 percent with 578 million undernourished people in the region, the vast majority in rural areas. According to WHO, 148 million children are underweight. Most of the poor and undernourished in this region live in rural areas and depend, in one way or another, on agriculture for a living. The problems of women, especially pregnant and lactating mothers, children under five years of age and other disadvantaged groups call for special attention.
Regarding the achievement on hunger target, as the 2015 deadline for achieving the Millennium Development Goals (MDGs) draws near, the prevalence of such large-scale poverty and hunger in the region is unacceptable and calls for urgent measures.
It is well established by now that higher economic growth rates are generally followed by larger reductions in poverty, but not always. In other words, growth is a necessary, but not a sufficient, condition for poverty reduction. In order to achieve larger reductions in poverty, high overall growth rates must be accompanied by strong agricultural and rural growth, since the vast majority of the poor live in rural areas and depend on agriculture for their livelihoods.
Agriculture, however, is an inherently risky activity. The fact is that poor farmers have always been aware of the importance of risk in their lives, and have evolved various mechanisms for dealing with it over centuries. For example, farmers try to diversify their sources of income by keeping livestock in addition to growing crops, or by sending members of their families to urban areas, or even other countries so that they can receive remittances. They may also diversify their crops, or try to go crops on separate plots, thereby trying to ensure that even if one crop fails, there is something to fall back on. These are all examples of risk mitigation and adaptation strategies built upon local wisdom.
Yet such strategies require human and financial capital, which the poor lack by definition. For example, plot diversification is only possible if the farmer already possesses a sufficiently large amount of land to allow it. Because the poor lack capital, they cannot protect themselves fully against risk and the impact on them can be serious. For example, there is evidence that 20 – 50 percent of the people below a poverty line at the time of a typical household survey have been pushed into poverty by a severe income shock. Other evidence from this region shows that if e.g. 20 percent of the population is below a poverty line, another 10 to 30 percent is at substantial risk of falling below the poverty line. Moreover, once pushed into poverty, households tend to stay there for a long time.
Public policies to help reduce the vulnerability of the rural poor to various risks are therefore required, particularly when these risks are relatively unfamiliar, such as the risks posed by market integration, price volatility and climate change.
The Asia and Pacific region is, par excellence, a land of small farmers. Nearly 80 percent of farmers in the region are small scale farmers who own an average size of 0.4 ha against world average of 1.2 ha per farm family. For centuries, these farmers produced food mainly for their own use using locally produced inputs, in isolation from sub-national, national, regional and international markets. Yet that pattern is changing dramatically. Like it or not, small farmers holders have to change, they have to use modern technology, and connect to markets and long value chains both for their produce and for their inputs if they are to increase food production in a sustainable manner and feed the growing populations of this region and the world.
In addition, they are exposed to new challenges and unfamiliar risks. Traditionally, small holder farmers did not have to worry too much about prices on world markets as they transacted in local markets which were not necessarily well integrated with national or regional or world markets. But that changes when local markets get integrated with world markets. Changes in demand in distant markets, or weather events on another continent can now cause price fluctuations in local markets, with possibly serious consequences for the livelihoods of small holder farmers.
Unfortunately, the volatility in international food prices since 2006 has been unprecedented since the mid 1970s. Food prices increased sharply from September 2006 to June 2008, when the FAO Food Price Index (FFPI) rose from 125 to 224 points. It then started to decline and reached 141 points in February 2009. In July 2010 it began to increase again, reaching 238 points in February 2011, its highest level since January 1990 in both nominal and real terms. Since then the FFPI has declined again – reflecting decreases in international prices of all the commodities included in the index – to an 11-month low of 216 points in October 2011, which was still 5 percent above its value a year earlier and more than doubled if compared with that of 10 years ago.
In most countries in the Asia-Pacific region, domestic food prices have been volatile in recent years. Moreover, food price indices have risen faster than the consumer price indices. For example, during the first half of 2011, most countries in the region experienced higher food inflation rates than overall inflation rates, except for the Philippines.
The OECD-FAO Agricultural Outlook 2011–2020 also projects high agricultural commodity prices in real terms during the next decade, compared with the previous decade. High and volatile food prices are likely to continue in this decade if the rate of growth of food production does not keep pace with demand and if other factors, including high crude oil prices, remain unchanged.
Large spikes in domestic food prices pose a serious threat to smallholder farmers, the majority of whom are net buyers of food. If there are no social safety nets a steep rise in food prices may force the poor to cut their food consumption, spend their precious savings and, if the situation is prolonged, sell their productive assets or skip educational and health care needs which could push them into poverty traps. Smallholders are also affected as producers since they find it difficult to plan production in an effective way because of uncertainty about future price movements.
Climate change also creates a new set of vulnerabilities for smallholders. The frequency of the occurrence of natural disasters was almost doubled in past decade and the highest in this region if compared with other regions. In particular, the fact that most smallholders in this region are located in the tropics, combined with the fact that the impact of climate change will be particularly severe in the tropics because of the likely increase in extreme weather events such as floods, heat waves and droughts, combined with increased unpredictability of rainfall patterns, combined with their limited ability to cope, will make it particularly difficult for smallholders to cope with the impact of climate change.
It is thus vitally important to achieve a better understanding of the impact of risk on the poor and of the strategies available to them to mitigate and cope with its effects, particularly when the risk is relatively unfamiliar. Without such an understanding it will not be possible to design and implement public policies to protect the rural poor from risk. The countries of this region have little experience with the identification, design and implementation of appropriate and coherent policies to protect the rural poor, especially smallholders from the consequences of these new risks. There is therefore an urgent need to strengthen institutional capacity for developing pro-poor policy solutions.
I am very pleased to note that this is the 2nd phase of a joint Programme to enhance institutional capacity to develop pro-poor policy solutions to be implemented by IFAD and FAO. I understand that in this Inception Workshop you will be briefed on the objectives, scope and proposed methodology of the project, and will discuss implementation arrangements. You will also clarify the basic concepts underlying this project and try to arrive at a shared understanding. Last but not least, this workshop provides an opportunity to share experiences, revive the regional pro-poor policy network set up in 2007-08 and explore linkages with other policy networks.
In closing, I wish to express our appreciation to IFAD for continued valuable partnership with FAO in implementing this workshop. I also wish to thank all the participants for their attendance despite of busy schedule.
This is a major new project and millions of poor and undernourished people in this region – and in other regions – stand to benefit if we can implement it well. Your wisdom and experience are required for this project to get off to a good start. I wish you all success in your deliberations.
Thank you very much.