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PROGRAMME OF WORK AND BUDGET 2006-07

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I. THE RATIONALE FOR REFORM

1. The Director-General’s Foreword sets out the reasons for the submission of the proposals in this document, following a series of developments of high relevance for FAO during recent months. The following section covers some major challenges and opportunities that assume even greater significance in the light of those developments.

2. During FAO’s 60 years of life, the world’s agriculture has undergone a dramatic transformation. It has been a period of extraordinarily rapid technological change which has included extensive farm mechanisation, the breeding and widespread adoption of new crop varieties, a massive intensification of livestock production systems, the accelerated development of aquaculture and a rapid expansion in the use of fertilizers and pesticides, initially in developed countries. This revolution spread into developing countries, especially in Asia and Latin America, but with only limited uptake in Sub-Saharan Africa where an increase in cultivated areas has been the main driver of growth. The changes which have taken place have confounded those who claimed that human food needs would outstrip the world’s production capacity. They have instead enabled farmers to raise food output to meet the demands of the global population which has tripled from 2 billion to over 6 billion since 1945, and to increase average food consumption per caput by 23 per cent in the same period.

3. The imperative facing FAO and its member countries is to ensure that benefits of this remarkable achievement spread to all of the world’s population – especially to the more than 850 million people who currently suffer from chronic food insecurity. In the short term, the Organization must do everything possible within its mandate and power to ensure that, at the very least, the World Food Summit (WFS) goal of halving the number of undernourished persons by 2015 and the related Millennium Development Goals (MDGs), especially those related to human health and the environment, are achieved. The hunger goal remains attainable, given the necessary will to take action on a scale relevant to size of the problem. This attention to food security and the MDGs, however, must not detract from the other vital work that FAO must undertake, to address the equal imperative of ensuring long-term sustainable global food supplies, as well as to respond to important changes taking place within global governance and trading systems which place new demands on the supply of public goods.

The Major Challenges

The World Food Summit and the Millennium Development Goals

4. Although the primary responsibility for bringing down the number of hungry people in the world rests with all its Members, the fact that so little progress has been made towards attaining the Summit goal in almost ten years suggests that the Organization must ask itself how it can improve its response in those areas where it was mandated to take action. What more must it do and what should it do better to enable its Members to achieve the Summit goal within the 10 years between now and 2015? Can it not, for instance, be more powerful in its advocacy for a world free from hunger, engage partners to amplify its impact and extend more effective policy and technical support to countries which demonstrate the political will to end hunger but are seeking advice on the design and implementation of programmes on a scale which matches the size of the food insecurity problem?

5. The Millennium Development Goals that resulted from the UN Millennium Summit of September 2000 have reinforced the sense of urgency. The MDGs offer a set of time-bound, measurable and achievable targets to which both developing countries and the international community can subscribe. The fact that the first MDG calls for halving the proportion of people living in poverty and hunger by 2015 is of immense significance for FAO, given the growing realization that hunger is both a cause and an effect of poverty. In many countries, bringing down the incidence of hunger opens the way for faster progress in reducing poverty. The report of the Hunger Task Force of the UN Millennium Project makes the point that “the challenge of halving hunger is ... closely linked with that of achieving the other MDGs. Reducing hunger will speed progress toward other Goals, and vice versa. ... It is particularly important that reducing hunger should be a major part of poverty reduction strategies, since little progress in reducing poverty is likely as long as large numbers of people suffer from malnutrition.” Yet many poverty reduction strategies have been formulated by member countries which fail to make this connection, raising the risk of underinvestment in hunger reduction.

Raising the environmental and social sustainability of food systems

6. Increases in total agricultural production may have kept up with the world’s rapidly rising demand for food and fibre, but this has been at vast, though uncounted environmental and human cost. Huge tracts of virgin forest have been put under the plough or converted to low-intensity grazing lands; millions of hectares of fertile lands have been irrigated but not adequately drained and hence have been affected by salinity; both surface and groundwater supplies have been polluted by nitrates and pesticides; marine fish stocks have been depleted through over-fishing; methane emissions from flooded rice cultivation and from intensive livestock enterprises as well as land clearance by burning have become major sources of greenhouse gases, and there has been a progressive and serious erosion in agro-biodiversity affecting both crops and animals. Simultaneously, while food production has increased, this has been accompanied by a drastic long-term decline in staple food prices which has left many farmers, especially in developing and transition countries, poorer – and more food insecure - than ever before, leading to economic and social collapse in many rural societies and to high rates of rural-urban migration.

7. FAO must greatly increase the attention which it addresses towards innovative agricultural, forestry and fishery production, processing and distribution systems which are truly sustainable in the sense that, while meeting future human needs, they no longer lead to the depletion of the world’s natural resources, to accelerating climate change processes and to the impoverishment of rural societies, associated, in many cases, with the increased marginalization of women.

Coping better with globalization

8. The pace of globalization of agriculture and especially of food processing and distribution systems is accelerating and creating both positive and negative impacts on human welfare and livelihoods. As a global intergovernmental institution with broad convening powers, FAO is uniquely placed to take the lead in creating instruments designed to limit the potentially damaging effects of globalization processes on the sustainability of agriculture and on the health and livelihoods of vulnerable people. The Organization must direct increasing attention towards facilitating the implementation of international agreements, codes of conduct and standards aimed at conserving and protecting natural resources so that these are available to meet the needs of future generations.

9. Likewise, it needs to extend its activities in relation to biosecurity and consumer protection, through work on food quality and safety standards, and also through the promotion of healthy eating habits and follow-up to the approval of the Voluntary Guidelines to Support the Progressive Realization of the Right to Adequate Food, focusing its efforts on strengthening national capacities to apply international standards and agreements.

10. FAO also needs to strengthen its capacity to prevent, and respond in a timely manner to, the growing number of devastating animal and plant pest and disease outbreaks, the spread of which is being accelerated by rapid increases in long-distance travel and in the movement of goods across boundaries and oceans. While there is a general recognition by all familiar with transboundary diseases and pests that prevention is better – and much cheaper - than cure, this has not yet been reflected in the availability of the resources required to take effective preventive action before such problems, such as foot and mouth disease, locusts or avian influenza, build up to a scale requiring enormously expensive interventions and massive loss of earnings.

11. Beyond this, there is evidence of an increase in the number and severity of natural and human induced emergencies affecting developing countries and especially their rural populations. The globalization of communications is becoming increasingly effective in awakening the public to these disasters and the human suffering that they cause, compelling FAO to strengthen its early warning and intervention capacities.

Changing International Environment and Opportunities

12. Trends in the wider global environment both impact on FAO’s work and provide new opportunities to enhance its relevance and effectiveness. Many have been highlighted in the Strategic Framework, the Medium Term Plan and, most recently, in the discussion paper FAO and the challenge of the Millennium Development Goals: The road ahead. Those of particular relevance to the Director-General’s proposals for reform are highlighted below.

Commitments to expand resource mobilization, aid flows and debt relief

13. The commitment by the Heads of State of the members of the African Union, made in the Maputo Declaration on Agriculture and Food Security in July 2003, to allocate “at least 10 percent of national budgetary resources ..... within five years” for the implementation of the NEPAD Comprehensive Africa Agriculture Development Programme (CAADP) has been followed by a series of significant commitments by donor countries to raise aid flows and to cancel more debt, including debt owed to multilateral institutions as well as to Russia. These commitments are in line with the Monterrey Consensus that emerged from the International Conference on Financing for Development in March 2002. They involve a projected doubling of aid by several major donors, including the 25 countries of the EU, Japan and Canada, within the next 5 years, which has been written into the Gleneagles Communiqué in July 2005. Aid flows into Africa are expected to increase faster than those for other regions.

14. The Organization needs to be able to respond to these new opportunities and reform its structures and operational focus so as to increase its impact on expanding investment by developing countries in agriculture, rural development and food security. This will require a special emphasis on assisting countries in drawing up Poverty Reduction Strategies which build on a recognition of the link between hunger and poverty, in taking up policy reforms and in preparing National Food Security Programmes aimed at attaining the WFS goal by 2015. The best measure of success is not how much funding FAO is able to raise for its own programmes, but the extent to which member governments are able to mobilize additional domestic and international resources for in-country investment in sectors relevant to FAO’s mandate.

15. The long and constructive association between FAO and the World Bank and similar agreements with most other International Financing Institutions are a convincing demonstration of the value of such partnerships in mobilizing resources for investment in member countries. The emphasis of FAO’s relationship with multilateral and bilateral donors needs to be shifted away from raising extrabudgetary resources for its own programmes – however much these may be needed – towards a deeper partnership built around the common goal of raising additional resources for agricultural development and food security within member countries.

UN reform and harmonization processes

16. The concepts of partnership, coordination and harmonization lie at the heart of the ongoing reform of the UN as it attempts to lay down a truly global strategy for development, and are the primary focus of the Paris Declaration on Aid Effectiveness: ownership, harmonisation, results and mutual accountability adopted in March 2005. The Secretariat is committed to making sure that FAO’s future programmes and interventions are fully harmonized with the efforts of the agencies, funds and programmes of the UN system and other development partners. For this reason, the proposed reforms will provide the Organization with the means to engage more fully in UN-wide reform processes including in the work of the UN Development Group (UNDG), other specialized agencies and national level coordinating arrangements and processes, especially the Common Country Assessments (CCA) and UN Development Assistance Frameworks (UNDAF).

17. But the extent to which FAO can become an effective partner at country level also depends on its ability to ensure greater coherence in its own technical cooperation programmes. The budgetary proposals set out in this document reflect proposals made in the Secretariat’s response to the Independent Evaluation of FAO’s Decentralization and to the Review of the Policy and Operational Framework of the TCP. These address the need for improved priority setting at country level, within the context of the steps being taken by most major donors to focus their assistance on more integrated and harmonized approaches to supporting nationally-led programmes, including contributing to Poverty Reduction Strategies and Sector-Wide Approaches (SWAPs) rather than implementing stand-alone projects. This will ensure that FAO’s human and technical resources are used in the most effective way possible in support of the needs and priorities of governments and are fully aligned with the programmes of other members of the UNDG, other specialized agencies and international development partners.

Emergence of new institutions, growing competencies in developing countries

18. In the 60 years since FAO’s foundation, many institutions have emerged to work in areas relevant to the Organization’s mandate and in many cases have developed experience and skills in specialised areas which greatly outstrip the Organization’s own capacities. As a result, there are many topics in which FAO’s comparative advantage lies in developing substantive links with these centres of excellence, as well as between them, in order to bring the results of their work to bear on global food and agricultural issues.

19. This same philosophy must shape the relations of a reformed FAO with regional and sub-regional economic integration organizations (REIOs). In all continents these organizations are assuming a higher political visibility and are becoming important players in agricultural development, food security and trade facilitation, with a comparative advantage in addressing transboundary dimensions. FAO can greatly increase its impact by working in partnership with these organizations; the strengthening of liaison with them, as part of the decentralization process, as well as the increased focus on policy assistance, will provide a basis for extended cooperation.

20. One of the most significant changes to have taken place during FAO’s lifetime has been the narrowing of the role of the state and the emergence of new players in the agriculture, forestry, fisheries and the food industry in general. These include the very rapid growth of the multinational private sector in global food supply systems from production, through transport and processing to retail distribution. Within many developing countries, farmers’ associations play a major role as service providers to their members, and non-governmental organizations which were formerly mainly active in relief situations are extending their operations into the rehabilitation and development arena, often focusing their attention on gender issues and on mitigating the impact of HIV/AIDS on vulnerable populations. These changes require FAO to broaden its partnerships beyond the public sector and to team up with institutions which share the Organization’s commitment to end hunger and can magnify its impact. This calls for a deepening of links, not only with NGOs but also with parliamentarians, chambers of agriculture and commerce, local government entities, professional associations and religious leaders. Moves in this direction have found their expression in the creation of the International Alliance Against Hunger and in its support to National Alliances Against Hunger in both developing and developed countries.

21. Finally, there has been an impressive growth in technical skills and institutional capacities relevant to agriculture in almost all developing countries, but particularly in middle-income countries. This has opened up exciting opportunities for a rapid expansion of South-South Cooperation as well as for an increase in cross-country training opportunities and networking. The Organization is well placed to promote such cooperation.

Rapid expansion of information and communications technologies

22. The rapid growth in the power and speed of information and communication technologies (ICT) provides new opportunities for enhancing the efficiency and impact of the Organization, especially in its role as a knowledge institution. If it is not to be left behind in an ever more inter-connected world, FAO needs to do much more to take advantage of these opportunities which it has so far only partially exploited.

23. Some of the biggest opportunities for raising the impact of the Organization’s substantive work relate to the development of its capacity as a knowledge sharing organization. On the one hand, strengthened knowledge sharing capacities can deliver further efficiency gains and improve internal coordination, while on the other they can increase FAO’s ability to be responsive to changing situations in member countries and heighten its contribution to key policy debates. Modern communications systems would greatly facilitate development and nurturing of thematic networks to enhance communications between institutions and individuals working on common themes as well as to make advances in thinking rapidly available for application in member countries through, for example, local lesson learning networks. Increased connectivity opens possibilities for interactive communications that will make it possible for FAO, working with partner institutions, to provide rapid responses to requests for information, especially to queries of a technical nature. They would also enable it to extend the outreach of its training programmes by expanding the use of distance learning systems, such as those that FAO has successfully pioneered in Latin America.

Opportunities to transform business processes

24. Underpinning the reform proposals for the substantive areas of FAO is a determination to challenge and look afresh at the existing administrative processes to seek improved effectiveness and responsiveness to the Programmes of the Organization. This is reinforced by recommendations from recent audit reports, thematic evaluations and reports of management consultants, as well as signals given by the Governing Bodies. In addition, the Secretariat has learnt from its recent experiences in providing emergency assistance to countries facing desert locust invasions, the Asian Tsunami, and other emergencies. These provide an imperative for improved administrative, financial, procurement and human resources management processes which respond more readily to the needs of programme implementation.

25. In the past few years significant economies have been achieved, and despite resource constraints the Organization has managed to implement new financial and budget systems and replace other obsolete technologies. The effort is continuing with the Human Resources Management System project currently underway. This is in support of the HR Reform in FAO which seeks to improve staff motivation and performance, a prerequisite for ensuring effectiveness. However, FAO now needs to move beyond the technology aspects of efficiency gains in transaction processing and focus more on broad based business process transformation to eliminate redundant processes rather than to streamline them. This would enable FAO to take major rather than incremental steps in achieving efficiency gains. The need for vigorous pursuit of these measures would support the major shift in organizational culture called for by the Council in June 2005 and reinforce the rationale for the reform proposed in the following sections of this document.

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