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APPENDIX


Box 3
Assumptions underlying calculations of benefits and costs

It is emphasized that the investment cost estimates presented in the Anti-Hunger Programme are initial estimates of orders of magnitude that will be subject to review and eventual revision as part of, inter alia, the Millennium Development Project, which is a core element of the UN-led Millennium Development Goals Strategy. The estimates are for all developing countries. Readers are reminded that these are estimates of incremental public investments required for attaining the World Food Summit target of halving hunger by 2015. It is emphasized once again that the investments proposed here will only have the desired impact on hunger and poverty if complementary flows of private capital are forthcoming. This is most unlikely in the absence of a supportive policy framework.

While these investments are intended to promote agricultural and rural development, they are expected to have an impact on both rural as well as urban hunger and poverty. In particular, the cost estimates for Priority Area 5 below make no distinction between the rural and urban hungry.

CALCULATING THE BENEFITS OF HUNGER REDUCTION

The benefits are calculated as the value of additional "healthy life years" resulting from improved food intakes. The difference between the average food intake that is foreseen under a "business as usual" scenario (see Note 1), and the intake needed to attain the World Food Summit target is used to calculate the additional healthy life years that would be obtained if the target were achieved. This is done by deriving econometrically a relationship between healthy life expectancy and a number of variables representing food availability, access and utilization. Every additional healthy life year is valued at the 2002 equivalent of the projected per capita income of the developing countries in 2015 of US$563, the figure used in WHO’s report on macroeconomics and health. Data sources: World Bank. World Development Indicators 2001; FAOSTAT data 2002; and WHO data (healthy life expectancy by country).

CALCULATING THE COSTS OF PRIORITY INTERVENTIONS

Priority area 1. Improve agricultural productivity and enhance livelihoods and food security in poor rural communities

The investment cost estimates in this priority area are derived from the assumption that small, poor farm households can improve their productivity with a one-time injection of start-up capital. The target group consists of extremely poor, low-productivity households that cannot realize their productivity potential because of a lack of savings and credit. It is envisaged that 4.6 million such households would receive assistance initially. This would be repeated annually for a fresh group of households for the next 13 years, accumulating to a total of 60 million households by 2015. The average cost of US$500 per household has been derived from an analysis of costs incurred under FAO’s Special Programme for Food Security (see www.fao.org/spfs for further details).

Priority area 2. Develop and conserve natural resources

The investment estimates for land and water resources are derived from the assumption that meeting the WFS target will require limited expansion of both irrigated and rainfed areas as well as an increase in the productivity of existing land and water resources. The expansion needed would be in addition to that forecast under the baseline scenario of FAO’s perspective study World agriculture: towards 2015/ 2030 (see Note 1). The underlying assumption is that the additional average caloric intake in each country required to halve the number of hungry by 2015 is met through a combination of domestic production and imports. Additional calories from domestic production and imports are based on the self-sufficiency ratio projected for 2015 under the baseline scenario. Estimates of total cost were derived by multiplying physical quantities by FAO’s expert judgement of unit costs.

Investments are required for achieving sustainability in the exploitation of fisheries and forestry resources through a range of measures, including technical innovation, institutional reform and rehabilitation. The costs of these investments are derived from a similar procedure to the one described in the previous paragraph.

With regard to plant genetic resources, the costs of these investments are in line with the Leipzig Global Plan of Action on plant genetic resources and represent FAO’s expert judgement of the cost. The estimates for the animal genetic resources component is based on FAO’s expert judgement and cover the costs of conservation and improvement of the animal genetic resource base.

Priority area 3. Expand rural infrastructure and market access

The investment estimates for roads were derived from minimum requirements for road densities that would be consistent with achieving the WFS target. Minimum targets for 2015 (5 km/1 000 persons and 25 percent of all roads to be paved) were compared with population/road densities for 2000 to obtain an estimate, by region, of new road requirements by 2015. Rehabilitation and maintenance costs were calculated as percentages of the incremental road works value. Investment needs for market infrastructure were calculated on the basis of projected incremental supply required to achieve the WFS target, the procedure for which is explained in the notes for priority area 2. An additional component is the cost of measures to build capacity in meeting sanitary and phytosanitary standards.

Priority area 4. Strengthen capacity for knowledge generation and dissemination

Based on FAO’s expert judgement of relative needs and returns to research, communications and education, it was felt that the bulk of the investments in this priority area should go to agricultural research in view of the well-documented high returns to applied research for developing countries. It is envisaged that these resources would be shared equally between the National Agricultural Research Systems (NARS) of developing countries and the Consultative Group on International Agricultural Research (CGIAR). The remainder of the funds would go communications and education, as explained in the text.

Priority area 5. Ensure access to food for the most needy

The estimate was derived by calculating the cost of providing an adequate diet only to those parts of the population whose dietary energy intake is so low (lower than or equal to 1.2 times the basal metabolic rate) as to make them unable to work. The assumption is made that such individuals can be identified at a relatively low cost so that perfect targeting is possible. The cost of the basket of foods is estimated at about US$28 per person per annum. An additional US$10 is added for transaction costs related to the targeting of the individuals in need. The assumption is made that the total number of hungry people is falling by 22 million per year, so the number of people who need to be fed falls proportionately and so does the cost of providing direct access to food. The number of people being fed is projected to decline gradually from 214 million at the start to 110 million in 2015. For the school feeding programme, it is assumed that the average cost is US$1 per week and that the programme runs for 36 weeks per year. The cost of other programmes could not be estimated owing to a lack of data. Furthermore, there are no baseline estimates of the ongoing costs of existing programmes.


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