APRC/02/4

1. The previous three decades saw unprecedented agricultural and economic achievements in Asia-Pacific countries. Between 1969 and 1999, cereal production more than doubled to nearly one billion tonnes. Although regional population grew by 1.3 billion, food supply increased from an average of about 2 000 kcal/person/day in 1965/66 to over 2 600 kcal/person/day in 1999/00. Food consumption per capita increased in South and East Asia by 20 and 43 percent respectively, with the latter being the highest among various regions and sub-regions of the world. The prevalence of undernourishment declined between 1979/81 and 1996/98 from 29 to 13 percent in East and Southeast Asia and from 38 to 23 percent in South Asia. Agricultural growth underpinned the industrial progress and expansion of the rural economy in many countries. The average regional per capita GDP almost tripled during the period, while poverty incidence declined from about 60 to less than 30 percent.

2. Despite the impressive economic and social gains in Asia-Pacific economies, poverty incidence continues to be a major challenge to-date in the region. Nearly three-fourths of the poor in all developing countries still locate in the South and Southeast Asian subregions. Only East Asia managed to reduce the percentage and absolute numbers of malnourished people. With 37 percent of the world’s malnourished, South Asia witnessed a disturbing increase of over 10 million malnourished people between 1995/96 and 1997/98. The rate of poverty reduction decelerated as well in recent years.

3. Poverty indicators deteriorated in the wake of the Asian financial and economic crisis. It seriously compromised overall food security especially that of vulnerable groups. Currency devaluation and higher food prices proved to be very disruptive to the poor. The urban poor suffered from rising prices as they spend a large proportion of reduced income on food. In rural areas, where the poorest are net buyers of staple food, rising prices also adversely affected household consumption and welfare. In 1999, the number of malnourished rural population in countries most affected by the crisis was estimated to double that recorded in 1995/97. The adverse impact on the nutritional status of the poor was particularly worrying, especially in the case of pregnant and lactating women, infants and pre-schoolers.

4. The Asian economic crisis left adverse social consequences, although with less severity than originally expected at the height of the crisis. Absorption of displaced urban labour in agricultural pursuits along with informal social safety nets somewhat mitigated its debilitating negative effects. Despite the slow social recovery and lagging overall economic revival in many places, the episode has led to a re-discovery of agriculture.

5. Overall agriculture production growth declined, with annual growth rate averaging 3.2 percent during 1996/00 compared to 4.6 percent annual rate in the preceding five-year period. Weather-related production constraints contributed to the slowdown. Agricultural output growth dipped to 2.1 percent in 1998, 3.4 percent in 1999 and around 2.0 percent in 2000. Cereal production registered sharp declines in 2000, due to natural disasters in a number of countries. Falling international cereal prices and reduced domestic procurement of low quality grains caused a major contraction in harvested area. Furthermore, the spread of HIV/AIDS increases rural poverty and seriously undermines human capacity to ensure food security and nutrition, manage natural resources, and sustain the livelihoods of large numbers of rural people who are dependent on agriculture.

6. At the 1996 World Food Summit in Rome, more than 180 countries collectively pledged concerted actions towards "food security for all". While some progress has been made in reducing the incidence of hunger, Asia-Pacific countries still account for 64 percent of the 780 million hungry people in the developing world. They face a deficit in basic daily dietary energy ranging from 100 to 400 kilocalories. FAO’s 2001 State of Food Insecurity Report showed a disturbing slowdown in the 1990s in the reduction of the world’s undernourished population to approximately 6 million people a year, against the implicit target rate of about 20 million per year. Hunger incidence is not being reduced quickly enough to be able to cut by half the number of hungry people by the year 2015.

7. World leaders will soon gather again in June at the World Food Summit: five years later, which has been called by FAO member nations when it became clear that the original WFS goal would not be met without additional efforts. In the light of recent global events, their likely negative economic impact, and worsening plight of the hungry, a major commitment is required to press forward with renewed efforts to reduce poverty and hunger.

8. The potential in parts of Indochina to attain food security and sustain poverty reduction through agricultural land development is quite enormous. To-date only a small proportion of arable land is under irrigation while there is an abundance of surface and groundwater resources. Excellent opportunities in alluvial plains exist for developing cost-effective, short-gestation, small-scale and farmer-controlled irrigation systems.

9. At this juncture, a distinction may be made between (long-run or) growth-mediated food security and (short-run or) support-led or entitlement-mediated food security. Growth-mediated food security has to do with human capabilities to meet food and other basic needs. Broad-based economic growth enhances the attainment of such capabilities. Support-led food security recognises social concerns other than growth and reflects society's aversion to starvation and other less terminal forms of nutritional deprivation.

10. This distinction highlights potential trade-offs between the short- and long-run benefits (and costs) of public sector intervention to enhance food security. The scarcity of fiscal resources in Asia-Pacific developing countries requires serious consideration of such trade-offs. Failure to do so can erode the initial gains from public action programmes. Excessive reliance on support-led measures may induce unintended incentive (behavioural) effects, including rent-seeking activities and/or may crowd out public investments that are critical to the generation of long-term sources of productivity and growth. Inappropriate and poor designs of support-led or entitlement-mediated measures too often lead to excessive leakage of benefits to unintended beneficiaries, unsustainable operations, and dissipation of scarce resources, which can otherwise be employed to improve the very foundation of long-term food security.

11. Food insecurity in Asia-Pacific developing economies is essentially a poverty problem, reflecting in large part a failure of food entitlements due to low returns to assets owned by the poor. Thus the bulk of the food insecure are also largely the rural poor. The prevalence of undernourishment correlates well with poverty incidence. With 522 million or 44 percent of the world’s poor in 1998, South Asia correspondingly had the largest incidence of undernourishment (294 million) or more than 39 percent of the world’s hungry people. National incomes (measured by per capita GNP) are lowest in countries where undernourishment is pervasive. In this regard, it is thus of great concern that countries with over 20 percent undernourishment showed only a negligible improvement of per capita incomes during the last decade.

12. Poverty and food insecurity are so inter-twined that they constitute two sides of the same coin. Food insecurity can usher chronic poverty through the nutrition-health-productivity link. Risks in the access to a stable food supply make vulnerable households highly susceptible to falling into poverty traps. Likewise, improved nutrition leads to increased human capital and labour productivity by improving health and education, which in turn enhance household incomes. Improving the health of women benefits the families and communities today as well as the productivity and poverty reduction in the next generation.

13. While population exerts pressure on food supply, access to food can be an instrument to influence demographic transition. Declining population growth in recent decades bodes well for the fight against poverty. Improved food security can accelerate the transition to lower fertility rates in developing countries. Falling dependency ratio or increased share of economically active population in East Asia, for example, enhanced the growth in aggregate savings, a sine qua non for sustained economic growth. This in turn constituted a major dependable source of poverty alleviation in the long run.

14. There is clear cut evidence that rapid income growth sustained over a period of time can lead to poverty reduction and strengthen food security and nutrition. First, incomes derived from owned assets and factors of production together with net income transfers from public and private sources directly enhance the household's long-term food security. Second, the prices households pay for consumption goods and services are not invariant to growth and, hence, to access to food and basic services. Growth generates resources for the provision of market infrastructure and other public goods. Such facilities lower transport costs and consumer prices and thus effectively raise the purchasing power of given nominal income of households.

15. Significant variations within and across countries in the response of poverty to growth can be traced to differing conditions prior to growth including infrastructure, human capital, and mean income and inequality levels. Weak response of poverty reduction to growth was observed where inward-looking policies favoured capital-intensive pursuits at the expense of labour-intensive sectors including agriculture. Highly unequal access to land and infrastructure also prevented many deprived isolated areas from responding favourably to pockets of growth elsewhere in the economy.

16. Where growth was rapid and sustained for a considerably long period, poverty incidence invariably improved. So did other indicators of human development. Fast growth in East Asia was associated with rapid reduction in absolute poverty and improvement in income distribution. The response was stronger than the average for developing countries as a whole due to favourable physical infrastructure and relatively low levels of income inequality. In the newly industrialised economies, poverty response strengthened in the course of economic transformation when considerable emphasis was given to human capital development, infrastructure, and to some extent governance, that permitted broad-based participation in growth. In other cases, rising inequality accompanied economic growth, but the absolute improvement in command over basic goods and services in the entire range of the income distribution more than offset the negative effect of inequality on the poor.

17. Agricultural and rural development is the key to poverty reduction and food security in developing countries. A comprehensive strategy for such advancement must focus on accelerating food and agricultural production as well as expanding non-farm rural employment. Three-fourths of the world’s farming households are located in the Asia-Pacific. Most are small and marginal farmers who produce the bulk of the food in the region. Likewise, three-fourths of the hungry and poor live in rural areas and most of them rely on agriculture and related industries for livelihood. They tend to migrate to big cities in search of higher income and they form the bulk of the underfed in urban areas.

18. Rising income inequality has become a growing concern in recent years. Pronounced regional income disparities are sensitive issues particularly when they reflect inequalities by ethnic or social groups. So too are perceptions of widening rural-urban income levels. Moreover, the favourable effects of growth on poverty reduction and food security can be blunted by inequitable income distribution. Empirical evidence indicates that a link exists between inequality and subsequent growth. First, undue concentration of wealth and resources leads to policies that protect sectarian interests, obstruct growth for the rest of society and make growth less broad-based and unsustainable. High income inequality may fuel social discontent and increase socio-political instability which, in turn, reduces investment. Since investment is a primary engine of growth, income inequality and growth are thus inversely correlated.

19. Another line of reasoning not unrelated to the first one above focuses on how imperfect credit markets may inhibit inter-temporal financial intermediation and pose as poverty traps for vulnerable groups. They often cause the poor to pawn and lose their productive assets when bridge financing basic household needs during times of instability or dire economic need. Lack of access to credit prevents the poor from investing in human capital and in productivity-enhancing technologies with high fixed costs. Indeed, withdrawal of children from schools is a widespread response among poor households during times of economic crisis.

20. Some regional rural development experience offers insights on the significant role of policies on the character and pattern of rural poverty reduction. For example, in the late 1960s and throughout the 1970s, Philippine agriculture performed remarkably well vis-เ-vis that of other developing Asia-Pacific countries. During this period, however, the ranks of unemployed and underemployed continued to swell. Real wages persistently fell. Poverty incidence remained high and unaffected by the rapid agricultural growth then taking place.

21. Before and during this high-growth period, small farmers received little attention and support from the government when compared to large farms and agri-business enterprises. The latter benefited disproportionately from public investment in agricultural research, input and output subsidies, and infrastructure. Public spending was heavily biased towards urban areas. The unfavourable effects of foreign trade restrictions, low interest rate policy, and effective rationing of institutional credit impinged heavily on small farmers. Subsequent analysis associated such conditions with the failure to translate rapid agricultural growth into sustained economic development and poverty reduction.

22. How would poverty reduction have fared during the green-revolution period if conditions were more favourable for small-farm agriculture? This issue was rigorously evaluated using a modified social accounting matrix framework that interrelates production and urban-rural household expenditure-income to macro linkages of sectoral activities. The results obtained supported the conclusion that government investments and subsidies, if redirected to small farms, would have raised their productivity and income. Poverty reduction and economic growth would have been substantially greater than what was actually achieved. Even more remarkable was the finding that incomes would also have been higher for other rural and urban households.

23. Indian states with substantial farm yield increases from the late 1950s to the early 1990s achieved faster rural poverty reduction than those with sluggish yield growth performance. Initial endowments of infrastructure and human resources together with the size of state development spending also explained the relative success or failure in rural poverty reduction across India. Specifically, greater irrigation intensity, higher female literacy, and lower infant mortality at initial stages contributed to higher long-term rates of consumption growth and poverty reduction in rural areas.

24. The Indian experience demonstrates the quantitative importance of rural economic growth to national poverty reduction. During the last three decades, growth within the rural economy was the main factor contributing to national poverty reduction. Rural development, led by agriculture, benefited the poor in both rural and urban areas. In contrast, urban growth was found to have adverse distributional effects within urban areas, which nullified the gains to the urban poor. Urban growth also did not benefit the rural poor.

25. In this regard, the case of China is instructive, where sustained economic growth continues to this day. Agricultural growth since the late 1970s has been the main engine for economic expansion and rapid poverty reduction. The combined effects of research investment and agricultural and institutional reforms (aimed at relaxing government restraints on market behaviour in the rural sector and permitting markets to develop), caused agriculture to expand at unprecedented average rates of 7.7 percent per year from 1978 to 1984 and 4.1 percent in later years. In contrast, growth averaged 2.9 percent during the period that preceded rural reforms (1952-1978). Research investment and institutional reforms, in particular, the introduction of the household responsibility system, were estimated to contribute to the bulk (more than 5 percentage points) of observed growth in crop production in the southern region during the early-reform period. The figure from northern China was about 3.8 percentage points of the 7.6 percent annual growth rate for wheat during the same period.

26. The process endowed the rural areas with its sheer number of farmers with increased incomes that fuelled a continuing chain of increased rural sector consumption and investment spending and creation of non-farm rural employment. The multiplier effects through the supply-demand linkages induced the emergence and expansion of town and village enterprises and other labour intensive manufacturing activities that further enhanced non-farm rural employment opportunities. Additional increases in incomes led again to greater consumption and investment spending. So this cycle continued, with the strong response of the rural non-farm sector to agriculture growth nurtured carefully by public policies which engendered continuing market and incentive reforms, improving the supply of public goods and services and promoting incentive-compatible arrangements and institutions among stakeholders in the agriculture and rural sector.

27. The above experiences vividly illustrate that rural development is an effective strategy in poverty reduction/eradication. Thus, redirecting attention to the rural poor and small farmers, who constitute the bulk of the Asia-Pacific’s agriculture sector, is of paramount importance for tackling the problem at its roots as well as focusing on the area where real opportunities exist.

28. Three decades of agricultural growth – of which the food subsector, particularly cereals, was an important component – in the Asia-Pacific demonstrate a potent link between growth and poverty alleviation. Unleashing the potential inherent in the vast majority of the rural poor who rely on agriculture for employment and incomes can accelerate poverty reduction. Productivity in agriculture is still low despite the recent advances in technology. Access to basic human needs - education, drinking water, health care, and sanitation - is far less available in rural than in urban areas. A steady step towards eradicating poverty in a sustained manner begins by empowering the rural poor in redressing glaring rural disadvantages.

29. Empowerment is about bringing the rural poor into the mainstream of economic growth and development. It is about how public policies and programmes can assure them of access to productive resources such as land, credit, water, technology, information, and markets, and rural non-farm as well as urban employment opportunities. Empowerment relates to how, with labour as a main asset, the rural poor can obtain a food-secure existence, and thus vigorously participate in and contribute towards the fight against poverty. A few selected elements associated with empowerment relating to the provision of enabling environment and supply public goods and services are briefly discussed below. Germane to all these elements is the cross cutting issue relating to the process of organization of the rural poor and the small farmers as well as the establishment of a decentralised institutional framework which allows these groups to voice their concerns and interests and participate in the policy making and programming process. Neither can this short document sufficiently chronicle nor draw clear lessons from the numerous and varied experiences in the wide ranging socio-economic and political milieu of the Asia-Pacific region on this complex aspect. The key is to find how the rural poor may be assisted through changes in institutions that are normally under the control of the non-poor and run for their own interests?

30. Land distribution is an essential instrument in poverty eradication programmes. Small farms provide steady employment for the poor, use labour intensively, and are highly productive. Secure property rights create incentives for long-term investment and sustainable land use. Equitable distribution of land, by improving access to credit and alleviating malnourishment, reduces poverty and boosts productivity. In this regard, gender bias and obstacles to women’s access to land as well as agricultural inputs and services deserves priority attention and prompt action.

31. Despite lingering constraints and difficulties, agrarian reform programmes are considered generally effective in directly and indirectly distributing land in the Asia-Pacific region. Whenever implemented efficiently, they contribute to rapid reduction of poverty. Beneficiaries achieve higher household incomes than comparable households not covered by such reform.

32. In recent years, fragmentation of holdings is viewed as a competitive disadvantage in the new open trade paradigm vis-เ-vis land-surplus food and agricultural exporters. Some suggest relaxing existing land ceilings to encourage increased capital investment in agriculture. There is hardly any empirical evidence to support this proposition. On the other hand, evidence abounds in the Asia-Pacific developing region to indicate that greater productivity can be derived from small rather than from large farms. Small farms account for more than a proportionate share in national foodgrain, horticulture crop, and animal production. The removal of land ceilings may bring highly regressive social effects without enhancing efficiency.

33. Unfreezing the lease market, removing the constraints to land use shifts and restoring the collateral values of re-distributed lands with adequate safeguards should be examined and placed in the economic reform agenda. Tradability of land and land use rights gives the rural poor the much needed access to credit, helps them manage transitory economic shocks and avoid poverty traps, and provides them with the flexibility to decide on how to allocate family labour among farm, rural non-farm and urban employment. In some transition economies, land is regarded in effect as a safety net for vulnerable groups, recognising that intersectoral labour shifts is a long-term process and social security coverage exists only largely in the formal sector.

34. Problems and issues associated with water resources are varied and complex. Water access is unevenly distributed across regions, seasons, gender and income or ethnic groups. Its competing demand by urban households, industries and agriculture gives rise to increasing social tension. Conflicting interests sometimes even spill over national boundaries. Direct and implicit subsidies distort water use. Low efficiency in water use prevails despite the high cost of developing new supply sources. Growing water resource degradation, such as groundwater mining and water pollution, in recent years has brought greater threats to food security ever closer to reality.

35. Finding the right solutions to the urgent water problems is not a simple task. Additional analytical work is required in order to design and implement specific policy and institutional reforms that promote efficient and sustainable water use, without compromising the food security of vulnerable groups. Available evidence so far indicates that access to water through small-scale, private-sector led, farmer controlled and cost-effective irrigation technologies such as shallow tubewell and portable low-lift pumps is a significant and effective instrument for pro-poor agriculture growth. Such technologies allow greater flexibility and decision making and response of individual farmers.

36. Access to water facilitates agricultural development, generates employment and promotes sustainability of natural resources. Irrigation improves land quality and enhances the management of risks to agricultural production. As a land-augmenting technology, access to irrigation improves the quality of scarce land resource base of small farmers and makes possible a more intensive use of farm family labour. Studies have indeed found a high degree of diversification in irrigated lands, particularly in small farms. The existence of a range of available technology options enables small farmers to make frequent enterprise changes to increase income and employment in response to market stimulus. Diversification in agricultural production and in sourcing other incomes have also been found as coping mechanisms for the rural poor.

37. With per capita land availability at one-sixth that of global average and nearly three-fifths of anticipated increase in world’s population, the Asia-Pacific region is under pressure to expand food and agricultural output out of shrinking and generally deteriorating land, water and other production resources. Intensification, however, is often associated with environmental degradation such as topsoil erosion, salinization, depletion of soil fertility, receding water table, pollution of water bodies, eutrophication, build-up of greenhouse gases, ecosystem acidification and loss of biodiversity.

38. Modern science and technology have a central role to play in sustainable agriculture. They must be fully harnessed to boost pro-poor growth, and at the same time bequeath an un-degraded environment to future generations. Scientific and technological advancements must give the rural poor options that improve farm profitability, competitiveness and income so that their access to food is assured. Modern science and technology is not only the major source of output growth as the supply of and/or access to more land has become difficult, particularly for the rural poor and small farmers but it also provides a hope for finding ways to more intensive agriculture that preserves the environment from further damage. Technological advances for agriculture in arid and marginal resource poor environment are certainly crucial for poverty reduction. Equitable access to viable technologies for all, particularly rural women, must also be ensured. Otherwise, agricultural growth may falter, employment and income expansion cease, health and nutritional status deteriorate, thereby impeding demographic transition and making the conditions ripe for a vicious inter-generational transfer of poverty.

39. Research and development (R&D) are vital sustenance to agricultural development. Its economic rate of return is quite high. Studies report rates of about 40 percent as being common in many countries, and even exceeding 70 percent in the case of China. Such returns are remarkably better than those which can be realised from most other public sector investment. Yet, public R&D expenditure is on the decline. Admittedly, private investment may have risen as implied by the advent of new bio-technology. Even if this is so, this public sector should not neglect investment in agriculture R&D. The private sector focus on technology generation may differ from that which meets the public sector’s social goals such as poverty alleviation and food security. The public sector has to continue to perform its appropriate role in steering R&D and guiding the development of agricultural technologies towards empowering the rural poor and reducing poverty incidence.

40. Biotechnology can usefully benefit small farmers, if the needed products such as varieties resistant to insect pests, diseases and other biotic stress are made readily available at affordable prices. Plants tolerant to drought, waterlogging and soil toxicity can increase productivity, reduce costs, and avert pollution and health hazards. Genetically engineered crops are in fact already being used mainly by developed economies for commercial production. The "golden rice", a transgenic variety rich in vitamin A, and others rich in protein, essential amino acids, minerals and other nutritional qualities offer promising solutions to widespread nutritional deficiency among the poor. Other pro-poor applications of biotechnology include the introduction of nitrogen-fixing ability in cereals and improvements in the durability of produce during harvest and storage. However controversies about genetic modification need to be kept in perspective. Careful assessment of the inherent risks of genetic modification need to be objectively carried out in weighing the risks and benefits from prospective technologies.

41. Article 27 of the TRIPS Agreement requires WTO Members to "provide for the protection of plant varieties either by patents or by an effective sui generis system or by any combination thereof". Governments therefore have a choice in the nature and scope of the regulatory instruments they may use to meet their obligations. In this context, they need to analyse the possible effects of their decisions upon the development of their agricultural sector, and in particular, upon small farmers and the access to the genetic resources they will need for sustainable development, and proceed accordingly.

42. Governments may also wish to consider how to implement, at a national level, the provisions of the International Treaty on Plant Genetic Resources for Food and Agriculture regarding the realisation of Farmers’ Rights in Article 9, which include the protection of relevant traditional knowledge; equitable participation in sharing benefits derived from the use of plant genetic resources for food and agriculture, and participation in national decision-making related to their conservation and sustainable use. Some governments in the region are already taking such steps.

43. Human resource development is a core approach that can equip the rural poor and small resource poor farmers cope with agricultural applications that are increasingly modern and knowledge-based and take advantage of non-farm employment opportunities. Access to basic schooling and health and nutrition services correlates well with economic growth. Education has conspicuous effects on income and calorie intake. Its impact, for example, is most visible on poverty reduction in marginal and sub-marginal farms in rural India where adoption of available new technologies, if facilitated by improved human capacity, can have relatively dramatic impacts due to low base productivity. Empirical investigations show that illiterates are the poorest and most undernourished.

44. In the Asia-Pacific region, however, wide gaps remain between the rural and urban sector’s access to basic education, health and nutrition services. Illiteracy rates are high in the former. Appropriate educational policies must be geared to eradicate illiteracy as soon as possible, since its incidence among farmers is as high as 50 percent. Moreover, some rural areas account for as much as 92 per cent of out-of-school child labour, most of whom come from small farms.

45. Recent studies also found that literacy is the main factor governing technology adoption and growth in total factor productivity. Success in attacking poverty occurred with rapid agricultural and broad based growth that made efficient use of labour and invested in human capital of the poor. The priority given to basic human capabilities of small farmers directly improves their well-being, income distribution and average incomes over the longer term. The allocation of resources to enhance the human assets of the rural poor, particularly women, increases cost effectiveness due to the reinforcing effects of health, nutrition, reduced fertility rates and higher productivity on poverty reduction.

46. A rapidly changing domestic and external environment calls for an accompanying adaptation on the part of rural institutions, support services and markets that serve the rural sector. Flexibility in responding to market changes is needed in a manner that is consistent with the specific conditions and endowments of small farmers. Farmers’ organizations and institutions can help reduce transport and transaction costs. Otherwise, the shift to market orientation in a globalised paradigm risks to marginalise and bypass small farmers. Knowledge-based production, a greater use of purchased inputs, the entry of high value crops and enterprises and a growing share of animal and fisheries in the farming mix are some of the features that are emerging in the world agricultural scene today.

47. Financing small farmers requires an integrated approach to cover various enterprises and consumption requirements. Declining rural credit delivery has to be reversed, and the viability and functions of rural credit mechanisms strengthened. For the assetless poor, the success with self-help groups especially among rural women and the application of micro-finance embody a suitable strategy, which can be reinforced with capacity building support.

48. New information and communication technology offers wide opportunities for improved information search and dissemination. This can benefit rural areas when new knowledge and techniques for improved farm productivity are speedily transmitted and widely disseminated. The advent of new technology has the potential of reducing asymmetry in market information, which is a source of inefficiencies that are inimical to the interest of the rural poor. New approaches and possibilities of technology dissemination can invigorate the currently flagging agricultural extension and information services.

49. Lagging and variable farm incomes in the context of global liberalisation cannot be addressed effectively by domestic agricultural protection measures alone. Support prices and subsidies have proven to be costly and unsustainable. Instead, the public sector can concentrate on spheres of activities where it enjoys an inherent comparative advantage, such as the supply of public goods and services, the provision of a conducive economic environment, and the prevention of market failures through transparent and efficient regulatory mechanisms and market-based instruments. In relative sense, marketing and credit delivery system improvements will make a lot of difference in alleviating the economic situation of the rural poor and small farmers who have not much to start with and cannot afford to sustain losses due to system inefficiencies.

50. Empirical evidence lends no support to the claim still often heard that small farmers in developing countries do not respond to economic incentives. Numerous studies point not to the lack of ability by small farmers to adapt to changing circumstances. Rather, it is the constraints they face along with a lack of technology options that limit the response to incentives. Significant supply responses do emerge when constraints are relaxed. How much agriculture responds to incentives, even in poor countries, should not be underestimated.

51. As seen from the experience in rural development in the Asia-Pacific region, the aggregate agriculture supply response tends to be high when public goods and services in rural areas are adequate. Besides removing physical and institutional constraints, raising rural productivity can focus on reforming the incentive system in agriculture (and in the rest of the economy) by allowing markets to function efficiently and promoting institutional arrangements conducive to long-term growth and rural development.

52. Agricultural policies and strategies tend to gloss over the fundamental cross cutting role of gender to sustained food security. Asia-Pacific has nearly 67 percent of the world’s malnourished children. This scourge must be reduced to relieve the region of "dwarfed" development, i.e., the failure of as such children to fully develop and thus relegate their contribution to society and economic growth to sub-optimal levels. The Asia-Pacific rural scene is marked by shifting population trends and a demographic phenomenon of migration, feminisation of agriculture and rural production, rural women’s lack of tenure to land and uneven access to support systems to ensure productivity and welfare. Little analytical understanding leads to a failure to articulate the strategic gender aspects of demographic transition. The absence of organised empirical evidence on the negative effects of gender bias – such as unpaid work of rural women within the family economy, child labour, poor mother and child nutrition, iniquitous access to credit, health and education services, etc. – add to the failure to influence agricultural policies, programmes and policy makers on the need to empower women in all spheres of normal life.

53. The vision to empower rural women must go beyond rhetoric and cease to be an unreachable aspiration. The information lacunae on this issue must be bridged. Research on the role of rural women must be conducted to assist policy formulation, to break the shackles of poverty and empower them in the overall rural economy. Under the circumstances, the gender dimension of the food-security-to-sustained-poverty-alleviation nexus should be fully understood. Some lessons from the Pacific subregion where food insecurity manifest in terms of dietary and malnutrition problems and increasing incidence of non-communicable diseases. Policy and programme components include emphasis on greater active involvement and empowerment of women and women groups and organizations through increased focus on nutrition education and health services, supplementary feeding of children, promotion of income earning opportunities.

54. The combined effects of population and income growth on aggregate consumption may not be as alarming as popularly believed. Growth in demand is slowing. Its income elasticity for grains is generally low and is expected to fall further as incomes rise. An anticipated slowdown in Asia-Pacific population growth to 1.6 percent can dominate the changes in demand due to income growth. At the heels of such slowdown is demographic transition, marked by falling dependency ratios or rising shares of economically-active people in the total population. This opportunity is rare when growth-mediated food security, by empowering the rural poor and integrating gender considerations in improving access to food, nutrition and health, can inject additional impetus to long-term poverty reduction. Improving food security at this specific juncture can trigger a sustained chain of accelerated demographic transition, growth and poverty reduction. This window of opportunity must not be missed.

55. Where rural areas are heavily populated and urban-rural links are nascent, as in many Asia-Pacific countries, the rural non-farm economy is very much linked to agriculture. Gains in agricultural productivity and farm incomes can induce an emergence in the local demand for goods and services and serve as a major stimulus for the rise of rural industries. Agricultural growth directly reduces rural poverty and food insecurity by increasing agricultural incomes. But, the indirect effects of agricultural growth on the rural non-farm economy via the multiplier effects through the supply-demand linkages represent even larger and more potent sources of food security and rapid poverty reduction in the long term. An equitable distribution of agricultural growth further strengthens the local demand for rural non-farm goods and services, and increases even more the employment opportunities in the rural sector.

56. The sub-contracting of urban production to rural agents at agreed prices, quantity and quality constitutes an important channel for the rural industrialisation of poor countries. Entrepreneurs however, weigh any advantages offered by rural labour against the high transaction costs arising from a general lack of well developed legal and regulatory framework. Prevailing transport and communication conditions may also substantially limit the extent for subcontracting, hence weakening the linkage between the urban and the rural areas and between agriculture and the rest of the rural economy. The availability of rural entrepreneurs is also crucial for rural industries to grow vigorously. In order to compete effectively with urban producers, rural enterprises must have the capacity to adapt to changing technologies and demands.

57. Thus, the need to invest in human capital and infrastructure in the rural areas cannot be overstated. A strong response of the rural non-farm areas (as well as urban areas) and, hence, of rural poverty reduction to the stimulus provided by agricultural growth, as well as to export and/or urban demand growth, requires investment in rural infrastructure to lower transaction costs, removal of public-spending biases against small farmers, adoption of commercial policies supportive of small- and medium-scale enterprises, improvement in access to land and technology, and macroeconomic and political stability.

58. Lack of information about how markets and households respond to the adjustment process constitutes an impediment to sustained poverty intervention. For example, there is hardly any evidence on the speed of rural wage response, including migration, to structural adjustment and trade liberalisation adopted in developing countries. The poor quality and inadequate collection of household data constrain the effectiveness of targeted poverty intervention. The institutional capacity to develop and maintain a responsive poverty indicator and monitoring system, which is regarded as crucial in any effective poverty alleviation programme, should be strengthened. There is clearly a need to improve the understanding of the dynamics of poverty reduction during macroeconomic adjustment, globalisation and market liberalisation.

59. It is important to give due recognition to the consequences of trade and macroeconomic policies on the incentives in agriculture and rural areas. Farmers and rural population in developing countries respond to economic incentives in very much the same ways as their counterparts do in industry and services in urban areas. The response can be stronger when price reforms are complemented by investment in public goods and services, especially agricultural R&D and rural infrastructure. In this manner, agriculture growth can be sustained and lead to rapid overall poverty reduction.

60. A danger that episodes of external instability pose to the future of poverty alleviation is the doubt cast, by some circles, on the efficacy of economic growth to lead to poverty reduction and human development. Past achievements in reducing poverty, developing human capital, accumulating savings and promoting investments have no parallel in recent history, and cannot be simply erased even if growth in troubled economies were to turn negative over a couple of years. It would be unwise to insulate the economy from external linkages and to deviate from a growth-led poverty alleviation strategy that has proven effective in the past.

61. The advent of information and communication technology has created seemingly limitless opportunities for improving productivity and efficiency in support of economic growth and poverty reduction. For example, information technology can reduce transactions costs for the rural poor and small farmers. The speed and reduced cost of information search and dissemination can revolutionise the delivery of human resource and support services and thus work in favour of agricultural and rural development. A consensus exists that information technology has huge potential economic payoffs.

62. Its actual utilisation to advance the cause of rural development, however, entails substantial requirements in term of human capital and physical infrastructure. Recent literature on the observed patterns and variations in economic growth, existence of externalities and poverty traps may have important relevance in this regard. Evidence suggests that the application and adoption of information and communication technology may be characterised by increasing returns but they require a minimum quantum of inherent human capital and physical outlay, before sustainability can be achieved. Access to the technology is not possible below this quantum.

63. Given the prevailing initial conditions of a lack of overall human asset and physical infrastructure in rural areas, there is real danger that the advent of information and communication technology can create a technology divide between the rural poor and the non-poor. Such a situation can extend to income groups, areas, or regions within or even across countries, where great disparity exists in the ability to afford the initial human and physical requirements to gain access to the modern technology and enjoy the increasing benefits it can offer.

64. Therefore, the poor entities who are constrained by lack of necessary resources face the threat of being left farther and farther behind with the passage of time. Without the initial means to cross the threshold, the poor are trapped. In contrast, the rich can easily exploit such up-to-date technology and derive increasing and continuous returns from it, thereby enhancing their further investment in its even newer and better generations. This situation means that the rich is getting richer, while the poor remains poor, deepening the inequality that the information technology could otherwise bridge.

65. This issue merits urgent and careful attention by governments, considering its strategic implications to the success or failure of agricultural and rural development efforts. Existence of externalities makes public sector intervention necessary so that widespread and equitable adoption of information and communication technology can be achieved. Appropriate public policies and resources must be mobilised to tackle the quantum requirements for an equitable access to and distribution of growing benefits that can be derived from the revolution in information and communication technology.

66. Economic growth is essential for solving poverty and food insecurity problems but the quality of growth matters. It has to be pro-poor, sustained, and broad-based. Failure to include the majority of the deprived from the agriculture and rural sector will only negate poverty reduction and food security goals. Inequities will eventually rob economic growth of its steam and blunt its positive and beneficial impacts. The search for a feasible and appropriate paradigm of rural development must focus on empowering the rural poor through market-based policy instruments and the supply of public goods that enhance their access to productive resources. Redressing rural disadvantages and tapping the potentials of the agriculture and rural sector offer a pathway to unceasing progress towards the World Food Summit and the Millennium Development Goals of reducing by half the incidence of poverty and food insecurity by the year 2015.

67. A common thread running through the discussions on how to achieve rapid and marked poverty reduction is the synergy among the elements of empowerment. For example, schooling leads to greater poverty reduction when accompanied by increased access to productive assets, availability of new technologies, better road and transport facilities and employment opportunities. Evidence shows that poverty alleviation programmes are more successful when they link together food security, nutrition and access to health and social services than when they confront the problem independently of one another. In other words, a strategy that rests on a mix of complementary elements of empowerment will do much more for the rural poor and poverty reduction than a strategy that concentrates on one and has none of the others.