APRC/00/4


 

TWENTY-FIFTH FAO REGIONAL CONFERENCE FOR ASIA AND THE PACIFIC

Yokohama, Japan, 28 August-1 September 2000

SUSTAINABLE AGRICULTURAL DEVELOPMENT AND POVERTY ALLEVIATION IN THE NEW MILLENNIUM: REFLECTIONS AND LESSONS FROM THE ASIAN CRISIS

Table of Contents



 

I. INTRODUCTION

1. In the last three decades, countries in the region of Asia-Pacific (RAP) achieved high rates of economic and agricultural growth, which significantly reduced poverty incidence. The region, however, still has the largest number of the world's poor and food insecure people. Agriculture remains the single largest source of employment and livelihood for the majority of population in developing Asia-Pacific economies, particularly in rural areas.1

2. Major changes have emerged in the policy and external environment facing agriculture in recent years. There is today a growing convergence of national policies towards economic liberalisation, openness and export-orientation with increased inter-sectoral linkages and ties to the global economy. The implications of increasing globalisation, commercialisation, urbanisation and privatisation amidst depleting natural resources, growing population and environmental degradation have to be understood and worked into national policy formulation for sustainable food security and poverty eradication. The three Rio Conventions on Biodiversity, Climate Change and Desertification, which constitute new constraints and offer new opportunities for national agricultural planning and the economy, at the same time illustrate the globalisation of environmental and sustainability issue.

3. Lessons have to be derived from the experience with the macroeconomic instability that economies confronted during the recent Asian crisis. For decades, "tiger economies" in the region sustained economic prosperity and made remarkable progress in alleviating poverty and food insecurity. Yet they showed vulnerability to major economic shocks that threatened to wipe out the gains achieved over the years.

4. Against the above backdrop of increasing complexity of the difficulties facing the agriculture sector and recent experience from the Asian crisis, this document presents some perspectives on sustainable agricultural development and poverty alleviation as the new millennium dawns. In doing so, the document briefly reviews the patterns of economic growth, agricultural performance and poverty in the region, as well as the major recurring and emerging issues for sustainable agricultural development in the future.

II. ECONOMIC GROWTH, AGRICULTURAL DEVELOPMENT AND POVERTY ALLEVIATION

5. Most countries in the region experienced relatively high levels of growth in aggregate and per capita incomes in the 1980s upto mid-1990s. Over the period 1965-1996, national output increased at annual average rates, ranging from 4.6 percent in South Asia to 7.4 percent in East Asia and the Pacific, well above population growth rates. As a result, per capita incomes grew at 2.2 and 5.5 percent in the respective subregions.

6. Some factors have been associated with the differential growth performance. Growth was faster in economies that invested in human capital and physical infrastructure along with the adoption of market-oriented policies. These measures together enhanced economic competitiveness, brought greater flexibility in responding to changing economic circumstances and promoted private-sector participation, foreign investment and participation in the world market. Agricultural production growth was relatively rapid in open economies and transition countries, but sluggish in places with adjustment difficulties, structural bottlenecks or unfavourable weather.

7. The agricultural sector recorded high growth rates from 1971 to 1990. Although total arable and permanently cropped area in the region stagnated, improved technology, irrigation, inputs and pricing policies stimulated production. Livestock and fisheries outputs also expanded in response to increased demand and rising disposable income of consumers. There were large productivity gains in rice, wheat, maize and pulses across the region. As a result, cereal production grew more rapidly than the overall agricultural output substantially raising the per capita food output. From 1969/71 to 1990/92, per capita dietary energy supply increased from 2 060 kcal/day to 2 680 kcal/day in East and Southeast Asia, and to 2 290 kcal/day in South Asia.

8. Technology has been the cornerstone of progress in agricultural production, particularly with the growing scarcity of cultivable land and increasing population. It was harnessed to improve the productivity and production, e.g. in rice, maize, pulses, sugarcane, oil crops, rubber and horticultural crops. Crop diversification increased and brought stability to production. New technologies in post-harvest handling and processing of palm oil, cocoa beans and natural rubber were also developed and widely adopted. In many countries, rural electrification played an important role in enhancing agricultural productivity. While biotechnology is yet to be fully harnessed in the region, some applications can already be seen in the alteration of plants, animals and microbes.

9. Similar developments have also taken place in the livestock and fisheries (and to some extent forestry) sectors. Crossbreeding of adaptable indigenous cattle with productive exotic breeds increased animal production, particularly those used in the dairy industry. Selection and development of new forage crop varieties and cropping systems constituted important programmes in several countries. In fisheries, techniques were likewise developed for fish and brackish-water prawn culture, backyard hatchery, breeding of freshwater fish under captivity, cage cultures and integrated crop-livestock-fish systems. The new techniques were widely adopted by both the small fisherfolk and the farming community in general.

10. In RAP economies, the industrial and service sectors expanded faster than agriculture. Consequently, the share of agriculture in the national accounts declined rapidly over time. Its share fell during 1970-1990 from 39 to 20 percent in East Asia and the Pacific and from 44 to 28 percent in South Asia. At the same time, the proportion of labour force that remains dependent on agriculture did not decrease correspondingly. In 1990, 69 percent of the labour force in East Asia and the Pacific was engaged in agriculture, compared to 79 percent in 1970. In South Asia the reduction was from 73 to 64 percent.

11. The above structural imbalance has increased inter-sectoral disparity in incomes. Human resource, policy and institutional constraints impeded more rapid intersectoral transfers of labour outside agriculture and diversification of the rural economy. As agricultural households laid claim on a diminishing share of national income, they became poorer than their non-agricultural counterparts. Imbalances in growth performance across geographic areas within countries added another dimension to the gaps in income levels and opportunities. In fast growing economies, growth in the industrial and service sectors increased factor prices. Capital and labour became relatively scarce for agriculture. Agricultural labour shortages were seen in some places, along with the employment of migrant workers. It is worthwhile to note that as the process of structural transformation attracted the educated, younger and productive labour force to employment outside agriculture, the women, the old and the unskilled labour constituted a majority of those left behind to tend the farms.

12. The episodes of growth contributed significantly to poverty reduction in the region. The growth increased the earnings of the major asset (labour) of the poor and enhanced their access to social services such as education, health and nutrition. There were areas however where widespread poverty and deprivation persisted because of inability to participate in the growth process. Some people were hurt in the transition to sustained growth due to lack of assets or appropriate skills, physical disability and other mobility problems to take advantage of opportunities. Still, there were others for whom the public actions chosen to move economies to sustained growth reduced entitlements and brought adjustment shocks.

13. Poverty remains mainly a rural phenomenon in the region. Even urban poverty is partly an indirect effect of rural poverty. About three-fourths of the poor live in rural areas. Agrarian and landless rural households have the highest concentration of the poor. With over 3.44 billion people, the region includes several of the most populous countries of the world. Although the region's population growth rate decelerated from 2.36 percent per year in the 1960s to 1.43 percent during the 1990s, some countries have population growth rates of over 2 percent per year and high population densities. Thus, in some cases, the absolute number of poor people increased although the proportion of population under the poverty line declined.

14. While fast growing economies need to enhance rural incomes to reduce the intersectoral disparity and achieve balanced human development, low-income countries have more formidable problems in solving poverty and food insecurity. They have to contend with low levels of human resources, institutional and infrastructure bottlenecks impeding productivity, limited access to capital and modern technology as well as marketing constraints.

15. Food insecurity and poverty are closely related for poor, small and marginal farmers. Lack of sufficient and reliable income lies at the core of food insecurity and the inability to achieve sustainable livelihood. Inadequate or lack of access to health services and sanitation and to food supply and to modern energy sources make the poor susceptible to malnourishment and illnesses, which prevent them from being fully productive. Disasters have also caused food insecurity among vulnerable population groups in the region.2 Rising population densities, migration to vulnerable areas and associated environmental degradation magnify the effects of such disasters. Large and devastating impact in terms of price upswings and instability of food access often pushed people from transitory poverty to poverty traps. The current trends in global environmental changes, as well as recent increases in climate variability triggered by El Niņo, will constitute additional stresses, and may contribute to further weakening the resilience of traditional food production systems.

16. In accord with the pattern of economic growth, the incidence of undernutrition drastically declined in the last decades in the region. Between 1979/81 and 1995/97, the proportion of undernourished population in the region was almost halved from 32 to 17 percent. However, the battle against hunger is far from over. Large sections suffer from acute malnutrition; the region has (over 525 million) almost two-thirds of all undernourished people in developing countries. The incidence of undernutrition is highest in South Asia at 19 to 37 percent of its population, or more than one-third (284 million) of the world's undernourished people. Half the children under five are underweight, compared with 33 percent in Africa and 21 percent in East and Southeast Asia. The large nutritional deficiencies are manifestations of the low income and widespread poverty that hinder adequate food consumption and healthy living environment.

17. The Asia-Pacific region's remarkable progress in previous decades as well as the limited achievements in some cases underscore the crucial importance of sustained and broad-based income growth to poverty alleviation. The experience shows why agricultural and rural development is central to any strategy aimed at alleviating poverty and food insecurity.

III. THE ASIAN ECONOMIC CRISIS AND ITS IMPLICATIONS FOR THE AGRICULTURE SECTOR AND THE POOR

18. Against the backdrop of rapid economic growth and seemingly robust macroeconomic indicators, the Asian crisis began in mid-July 1997 rather unexpectedly. It brought drastic adjustment measures under situations of considerable volatility. Its depth would later surprise many economic analysts. Certainly, the crisis is a graphic example of instabilities that may confront the agriculture and rural sector with its growing intersectoral and world market linkages. The crisis raised the fear of market liberalisation and globalisation particularly in the context of poverty and food insecurity. What can be done to mitigate, if not avert, the debilitating shocks of similar instabilities which can occur just as suddenly as the Asian crisis?

19. The macroeconomic indicators in directly affected countries indicate that the crisis had abated and recovery began in 1999. Positive economic growth is back and even pre-crisis level of growth has been reached in a couple of cases. The whole region's prospects are improving. Hope has resurfaced and renewed optimism has replaced the gloomy outlook. The following paragraphs briefly revisit the genesis of the crisis and its implication for sustainable agricultural development and poverty alleviation. Lessons from the experience hopefully will contribute towards a strategy for sustained, "good-quality" growth in the twenty-first century.

20. The origins of the Asian crisis are, to a large extent, financial. Reliance on short-term loans to finance investments was excessive and debt-equity ratios were high. Other factors hastened the crisis: technological advance in global finance, severe drought and natural calamities and political uncertainty. Large current account deficits and weak financial and regulatory framework made currencies vulnerable to speculative attacks. Short-term measures to defend exchange rates failed as international credit ratings slumped and inflows of private lending and investment virtually halted. Widespread pessimistic outlook pervaded and set in motion an exodus of foreign investments. Integration of financial markets and modern information technology greatly influenced the depth of economic contraction and the speed at which the instability spread throughout the economies with similar macroeconomic situations in the region.

21. The Asian economic crisis posed a number of challenges to the agriculture, fisheries and forestry sector. More than ever, it was left to absorb displaced labour, contribute foreign exchange revenues, increase domestic food supply to mitigate upward pressure in wages and prices and generate resources for domestic investment. The main effects of the economic crisis on agricultural and rural households came via two channels: exchange rate and employment.

22. Currency depreciation tended to correct the exchange rate distortion i.e. overvaluation of the national currency and enhanced the relative prices of tradable agricultural goods, creating favourable incentives for increased farm production and revenues. Since factors of production in agriculture are primarily home goods, it could continue to contribute foreign exchange earnings and thus help economic recovery. Actual realization of this potential in various countries, however, depended on the capacity of farming households to respond to relative price changes. Structural rigidities in poor areas hampered rapid production responses. The constrained response reflected to a large extent the under-investment in the past in rural infrastructures, appropriate technology and support services again emphasising the need for an enhanced policy framework for self-managed farmers' organizations, especially marketing and improved response to market opportunities. Restraints on government spending also reduced, at least in the initial stages of the crisis, the resources available for the provision of public goods to farmers.

23. Agricultural supply response was restricted also by high interest rates and the credit squeeze on operating capital especially for essential inputs (e.g. seeds, fertiliser), marketing and distribution of agricultural produce, including export and import activities. With sluggish supply response, prices of consumer goods rose sharply and rapidly with currency devaluation. Steep rise in food prices in crisis-affected sectors threatened household food security and partially eroded the gains in poverty alleviation achieved in the last three decades. In selected cases, the poverty incidence sharply increased. As the contagion spread and national currencies depreciated in a domino fashion, the substantive gains from relative export competitiveness would have accrued only to the more efficient producers.

24. Changes in the prices of basic goods are most disruptive especially for the poor. Even modest increases in food prices adversely affect the nutritional status particularly of pregnant and lactating mothers, infants and pre-school children. The increase in agricultural prices during the Asian crisis negatively affected the welfare of the urban poor as they spend a large proportion of their income to buy food. Workers in the informal sector rendered jobless by the crisis suffered in addition from a lack of social security coverage. In rural areas where the poorest tend to be net buyers of food staples and access to safety net programmes usually limited if not absent, rising food prices likewise brought adverse effects.

25. The effects on farm households through the employment channel were mostly negative. Urban demand fell particularly for agricultural products with high income elasticity such as livestock and horticulture products. Rural nonfarm employment and remittances from family members in non-agricultural sectors declined. The reverse labour migration from urban areas as a result of the crisis depressed rural wage rates and partially offset any income gains through the exchange rate channel. Moreover, the reduced labour costs did not have salutary effects in the rural context, where the supply response as noted above was sluggish owing to structural rigidities and other pre-existing factors.

26. Evidence from ex-post analyses indicated that producers of tradable commodities using less imported inputs might have benefited, or at least did not suffer much, from the crisis. Devaluation of currencies favoured the tradable goods as domestic prices increased. By the same token, the prices of non-tradable goods fell in relative terms and production factors shifted away from them. Since non-tradable goods are usually associated with the poorer segments of the society, they suffered from reduced consumption levels and production revenues.

27. Insulating the agriculture and rural sector from potential instabilities such as the Asian crisis in ways that distort domestic prices is counterproductive. It would make the agriculture and rural sector less dynamic, less resilient and more susceptible to economic and external shocks.

28. In a FAO ministerial policy roundtable on the Asian crisis in Bangkok in June 1999, the experience in 95 countries was cited. In 88 countries with episodes of economic expansion, the income of the poor increased in an overwhelming majority (77) and income equality improved in over half the cases. In sharp contrast, both the income level of the poor and income equality deteriorated in the remaining 7 countries which suffered from economic contraction. In the region, the responsiveness of poverty indicators to economic growth is well documented.

29. What was also evident from the Asian crisis was the capacity to protect consumption and welfare levels during transitory shocks through dis-savings in cases where increases in incomes were sustained by economic growth over prior decades. Given the dynamics of growth and poverty, the lessons from the Asian crisis suggest that the measures which promote sustainable poverty alleviation constitute the fundamental elements of the insurance to avert the dire impacts of transitory instability and economic shocks on the poor and food insecure people. Moreover, the special role of targeted employment and social sector programmes was amply demonstrated in alleviating the transitory hardships faced by the poor in a recessionary situation and in preventing them from falling into the poverty trap through distressed sale of assets, dropping out of children from school or deprivation of essential medical care.

IV. RECURRING AND EMERGING ISSUES FOR SUSTAINABLE AGRICULTURAL DEVELOPMENT AND POVERTY ALLEVIATION

30. The problems RAP countries face to sustain economic growth for long-term poverty alleviation are enormous. Recurring issues on population pressure and demographic transition and natural resource degradation appear to be more pressing now than ever before. New challenges are likewise emerging, resulting partly from the same factors that have fuelled recent growth and partly from global developments in trade and finance. In view of their important implications for sustainable agriculture and poverty alleviation, it is crucial that they get the attention they deserve. The issues raised are not meant to be exhaustive but only to focus on strategic concerns vis-ā-vis sustainable agriculture and poverty alleviation at the onset of the new millennium.

Population pressure and demographic transition

31. Another 750 million, 22 percent more, people will be added to the region by 2020. Moreover, the region is expected to witness rapid rural-urban transformation with the ratio of urban population increasing from 36 to 48 percent in two decades. As people's income increase and they move from rural to urban areas, their dietary pattern becomes more diversified. Their demand for cereals changes from coarse to fine grains and they tend to consume more livestock products, fruits, vegetables and processed foods. If incomes also grow at rates resembling recent trends, RAP countries would account for more than half the increase in the global demand for cereals and an even larger share (57 percent) for meat products. While the demand for cereals for direct consumption (rice) is beginning to level off, the derived demand for cereals (maize for animal feed) is growing substantially, mainly driven by the rapidly growing demand for meat. Not only is the sheer size of demand for food and agricultural raw materials will increase, but the composition of demand will change substantially with growing income, urbanisation and nutritional awareness. Can the region meet these demands? The case for optimism is not lost. Past decades saw even more daunting food and agricultural products demand-supply situation than that now looming. Populous RAP countries have demonstrated a remarkable capacity to respond to the challenges of rising demand despite severe resource constraints. However, these projections have profound implications for the availability and adequacy of land, water and labour for agricultural purposes, as well as for the environment and technologies as the agricultural sector gradually adapts to the market forces.

32. Population pressure has adverse influence on poverty and food security. But poverty and food security also affect demographic transition to lower fertility rates in developing countries. Given such inter-relationship with health and fertility, poverty and food security should thus be an important element of strategies aimed to reduce population growth, minimise environmental degradation and promote socio-economic development.

Resource base degradation and water scarcity

33. Population pressure as well as inappropriate policies and institutional framework is exacting a heavy toll on the natural resource base. A good part of cropped lands in the region is in fragile, rainfed and semi-arid areas, with steep slopes or poor soils or both. Low and declining soil fertility is a growing problem. The situation calls for continuing efforts in the region to improve land tenure administration and institution building for improved access by the poor, on the one hand, and to protect and work with indigenous rights in natural resources on the other. Dwindling per capita resources and slow growth of productive nonfarm employment opportunities in many parts of the region intensified the pressure exerted by the poor on natural resources through unsustainable farming practices. Indeed, there exists discernible links between the natural resource base, agricultural productivity, health and nutritional status of the population, and poverty.

34. Related to resource degradation is water scarcity. In the face of severe limits on the expansion of cultivable land, water resource constraint slowed down the annual growth of irrigated area from 2.15 percent during 1965-1979 to 1.45 percent during 1980-1994. Water is distributed unevenly across countries, across regions within countries, across seasons and across income or ethnic groups. Given the degrading pressure exerted by rapidly rising populations on the resource base, this distribution pattern may have profound implications for long-term food security and for social stability in the new millennium. Another aspect is economic. Prices that users pay for water do not reflect its scarcity value. New sources of water to meet the rising demand are increasingly expensive to develop. The demand for water in urban areas and in industry increasingly conflicts with that in agriculture.

35. Finding solutions to the water problem will not be easy. Solutions will likely vary from country to country depending on underlying conditions, such as the level of economic development, state of resource base, cropping patterns and institutional capacity for and commitment to water policy reform. Careful analysis is required to determine policy and institutional designs for efficient and sustainable use of water without compromising vulnerable groups in society. Appropriate pricing policy, water rights and irrigation system design and management should be put in place to encourage efficient use, attract investment and promote sustainability of water use.

Financial crisis, structural adjustment and the impact on the poor

36. The late 1990s saw a wave of financial crisis and macroeconomic instability in many countries, with rising servicing cost on foreign debt and mounting fiscal and external imbalances. Prudent macroeconomic management is essential to restore growth and to prevent erosion of the gains in poverty reduction in the region.

37. Unless supply response to such measures is rapid, adjustment hurts at least some groups in society when prices of basic goods and services rise sharply and rapidly with currency devaluation. The attraction not to adjust is tempting, but only at the cost of a potentially hard landing in the future. The case for adjustment programme thus rests on showing that the stream of benefits over time is higher with adjustment than without.

38. Empirical evidence suggests that adjustment measures do not have to be systematically biased against the poor, even in the short term. Where adjustment hurt the poor, the reason was often not adjustment per se but the composition of policy instruments. How public expenditures are cut influences the poverty outcomes of adjustment.

39. In rural areas, the output response to the increase in prices of tradable goods (including food staples) is higher where there is better quality of rural infrastructure and human capital. Protecting public spending in rural infrastructure and basic social services from cuts during adjustment is thus essential to advancing both growth and equity goals.

40. One danger the Asian crisis has posed to future poverty alleviation is that it has, in some circles, cast doubt on the efficacy of economic growth to lead poverty reduction and human development. Past achievements in the region in reducing poverty, developing human capital and promoting investments have no parallel in recent history and cannot be simply erased, even if growth turned negative in the two or so years following the Asian crisis. It would thus be wise not to de-track from a growth-led poverty-alleviation strategy that has proven effective in the past.

Globalisation, inequality and poverty

41. Globalisation has aroused the fear that it exacerbates inequality, helps perpetuate poverty in some segments of the society, and contributes to the inability of developing countries to defend themselves from external shocks. Indeed, calls for a slowdown of efforts to embrace it intensified as economies that openly welcomed globalisation began to tumble in the wake of the Asian crisis. Such calls are akin to the regime of inappropriate controls that was quite popular in the 1950s and early 1960s but failed in delivering growth and poverty alleviation. In contrast, cross-country evidence indicates that opening up of goods markets and pursuing comparative advantage in line with factor endowments is advantageous for growth and equality in developing countries where low-skill labour is abundant and capital is scarce. However, subtle timing and sequencing of liberalisation are important. Appropriate compensatory and targeted policies may be needed. Moreover, institutional mechanisms to enhance the transparency and efficiency of international trade and financial transactions and to monitor and signal impending distress situations need to be promoted.

42. In recent years, there is a general feeling of acceptance of, if not resignation to, the globalisation of agriculture. The growing linkages of small farms through trade may not be obvious in a small farming village, but their importance is increasingly evident. Between 1970 and 1996, agricultural trade of the Asia-Pacific region (in nominal terms) expanded by about a factor of eight, almost the same rate as the growth of world agricultural trade. In 1997, the total share of agricultural trade (exports plus imports) of Asia constituted 18 percent of world agricultural trade.

43. Agriculture is now under the general World Trade Organization (WTO) disciplines on other goods, with specific exceptions. The WTO Agreement on Agriculture seeks to promote open, non-discriminatory trade relations based on principles of reciprocity, transparency and tariff reduction. Tarrification of non-tariff barriers and phased removal of subsidies and protection are key instruments of trade liberalisation agreed by the signatory countries. The agreements provide special and differential treatment for developing countries in order to enable their integration into the global trading system. These measures include longer time frames for implementation, lower reduction requirements and provisions for technical and financial assistance. WTO member countries have to abide by commitments, which have far-reaching implications for agricultural policies and institutions. Even non-member countries would not be left unaffected by the WTO framework or structure of reforms as they likewise face changing trade environments or have to fulfil certain requirements before they can join WTO.

44. In order to take advantage of new opportunities, countries must monitor and periodically assess their national circumstances in the context of the changing trading environment. Many countries in the region continue to face restricted access to export markets due to problems in fulfilling sanitary and phytosanitary requirements in destination markets. They would need to establish or upgrade capabilities, infrastructure and accreditation to meet world market standards. Many developing countries still lack the minimum critical mass of technical and legal specialists to be able to take advantage of the special and differential treatment available to them and to participate effectively in the coming negotiations to ensure that their interests are taken into account. Countries in the region may therefore wish to develop national expertise and analytical capacity on various agriculture-related agreements.

Modern science and technology

45. Modern science is a powerful stimulus to agricultural transformation and economic growth. Appropriate technology holds the key to sustained food security and poverty alleviation in resource-poor developing countries. Whatever its shortcomings, real or alleged, the "green revolution" has helped to avert widespread starvation and enabled millions of people to escape chronic food insecurity. Its impact on poverty and rural development has been greater in rural areas with more favourable "initial" conditions namely, state of human capital and physical infrastructure, asset distribution and quality of governance.

46. Growing concerns about environmental degradation and sustainability of intensive agricultural systems have given rise to consideration of alternative technologies. There is some advocacy to promote low input agriculture that aims to reduce the usage of chemical fertilisers and replace them with organic nutrients. These include use of crop residues, farmyard manure and compost for soil fertility improvement. Low input agriculture aims to rely heavily on farm labour as well as improved knowledge and farm management. Doubts arise about the adequacy of low input agriculture, particularly in relation to poverty and food insecurity issues in rural areas.

47. Low input technologies are labour intensive and require huge amount of biomass including animal manure to produce adequate quantity of compost to bring marginal agricultural yield increases. In effect, small farmers may find low input technologies insufficiently rewarding. Farm incomes may lag behind other modernised farm sectors except where there is a market niche for organically grown products for which consumers are willing to pay a premium. Such opportunities however are generally very limited for small subsistence farms away from urban areas or consumption centres. In fact, one of the main challenges confronting the agriculture sector is not how traditional agriculture can sustain productivity at low levels for future generations. Rather, it is how to transform traditional agriculture into a modern sustainable system, particularly in ecologically fragile and economically unfavourable upland areas to reduce poverty. Also, without technological change, agriculture will stagnate, productive employment and income expansion will cease and health and nutritional status will deteriorate, thereby impeding demographic transition in developing economies.

48. Other approaches to mitigate adverse environmental effects of high input use rely on science and technology. Examples are Integrated Pest Management (IPM) and Integrated Plant Nutrition System (IPNS). IPM is an environmentally safe and non-polluting approach to sustainable management of pest populations using appropriate combinations of pest control technologies. IPNS addresses the concerns for maintaining soil fertility, sustaining agricultural productivity and improving farmers' profitability by making use of all sources of plant nutrients - organic matter, green manuring, biological nitrogen fixation and other inoculants - to complement and supplement mineral fertilisers.

49. Because of their impact on production and on the environment, energy supply and demand patterns are another area of technological change. At present, in most rural areas of the region, traditional biomass provides a large proportion of the energy consumed, mainly for cooking. Rising economic levels and, in some cases dwindling wood-energy resources, will imply changes in these patterns. A transition to modern fuels such as kerosene, LPG and electricity is already taking place in millions of homes. In some countries coal will continue to expand its contribution. Agricultural intensification will require increasing amounts of direct and indirect energy inputs. Irrigation, mechanization, transport, processing and conservation will all demand higher levels of energy intensity and energy reliability. The double challenge of fulfilling these energy requirements without unduly and irreversibly affecting the environment will have to be faced by all countries of the region. Technological advances on the use of renewable energy sources such as solar, wind, biomass and hydro are opening opportunities for more sustainable energy systems. Crop, livestock and forestry residues and other forms of biomass could contribute considerably, with the agricultural sector becoming a major energy producer. The scientific and technological levels in the region in many of these fields should be mobilised to accelerate their widespread application.

50. Recent developments in biotechnology and information technology offer considerable potential benefits. Biotechnology can potentially reduce production risks through development of drought tolerance, pest resistance and nitrogen fixation capability of improved varieties. It can also enhance the micronutrient contents of food to mitigate problems of undernutrition among the poor. In a liberalised trading environment, increased productivity and lower cost of production to enhance farmers' competitiveness are prerequisites to improving farm income and to assuring better food security for the poor through lower prices. The recent revolution in Information and Communication Technology (ICT) has led to the tremendous decline in the cost of using ICT. It has made communication feasible and affordable particularly in rural areas. ICT and the Internet have opened great possibilities to provide agricultural extension, price information and other matters of interest to farmers at reasonable cost.

51. Taking advantage of the technological potentials requires corresponding public sector policy focus. The development of ICT has opened up new avenues for the public (and private) sector to facilitate the exchange and dissemination of information with respect to markets, new technologies and other extension messages. As to biotechnology, harnessing the potential benefits for sustainable agriculture and poverty alleviation calls for public sector commitments to adaptive research in the development of biotechnology suited for small farmers in developing countries. Concerns about the possible health and environmental risks associated with genetically modified organisms and their products and the equitable sharing of benefits derived from the application of biotechnology to genetic resources are fundamental issues which need careful public sector attention and actions, e.g. effective biosafety regulations, creation and enforcement of appropriate intellectual and common property rights systems and anti-trust legislation.3

52. Finding new applications of modern science to food and agriculture through research and development has to be sustained. Investment in agricultural research and development continues to offer high returns. After decades of sustained growth, however, the increase in resources devoted to agricultural research and development has slowed dramatically. Concerted efforts are required to reinvigorate the flagging institutional support to agricultural research and development.

Rapid urbanisation and the "urbanising" face of food insecurity

53. Recent decades witnessed rapid urbanisation in developing RAP countries. While poverty is largely in rural areas, more poor and undernourished will live in cities in the not-so-distant future. Varying conditions and causes of poverty and food insecurity among pockets in urban areas suggest that there is no universal solution to urban food insecurity problem. Neither is the nature of policy and programme interventions required to alleviate poverty in urban areas likely to be the same as those required in rural areas. Urban poor moves frequently, making targeting difficult. Also, the social support networks that oftentimes serve as important coping mechanisms in times of distress may not be as developed in urban as in rural areas.

V. CONCLUSION - TASKS FOR THE FUTURE

54. How to improve productivity and to diversify agriculture and the rural economy in order to create employment and income opportunities that alleviate poverty and deprivation will continue to occupy the minds of policy makers in the region. Broadly based sustained growth in the agriculture and rural sector constitutes the key strategy for addressing rural poverty in many RAP countries. In this strategic task, the sector faces a vastly changing landscape in a globally competitive environment. The sector is caught in a bind with increasing costs of capital and labour relative to output prices. Industrialisation draws the younger, better-educated and more productive labour force out of agriculture, while globalisation and trade liberalisation call for higher efficiencies through the application of modern science and technology in agriculture. Finding the right formula to sustain agricultural growth in a setting of rapid and dynamic change requires vision, forward-looking policy measures and innovative approaches.

55. The agriculture sector in this millennium must meet the growing and changing demand for food, energy and agricultural raw materials. How to do so and leave the shrinking natural resource base intact for future generations is another basic concern. Meeting this challenge requires the agriculture sector to continually search and adopt more productive and sustainable technologies. Investment in agricultural research to generate a range of adaptable technologies particularly for small farmers is thus a compelling public policy priority, along with the development of supporting institutions. Even so, national and international support to agricultural research and development and to the diffusion of technology has been on a decline. This is a matter of great urgency as the decline comes at a time when the issues to address (e.g. sustainability, improving rainfed agriculture and productivity of small farms) are quite complex and increasingly crucial.

56. Sustainable agricultural development and poverty alleviation calls for conducive policy and institutional environment that provide clearly defined and enforceable property rights, reduce transaction costs and encourage broad-based, decentralised development of economic activities in rural areas. Indeed, an institutional framework for the market system to operate efficiently must be created prior to, or concurrently with, policy reforms. The experience of the Asian crisis reinforced the notion that sustaining the benefits of economic openness requires the development of appropriate institutions and national capabilities.

57. Policy goals should include empowering rural producers individually and through organizations of their own choice with access to the means, knowledge and markets to respond to opportunities in a flexible and competitive manner. This requires investment in human and land resource development, improved information and extension, farm-to-market roads and related infrastructure. Improved human capability facilitates labour mobility and increases productivity. Small-scale private-sector led farmer-controlled irrigation technologies improve the resource base of small farms and give them options and flexibility to adjust to market conditions. Investment in rural infrastructure engenders efficient markets, reduces the cost of doing business in rural areas and promotes diversification of agriculture and the rural economy.

58. Experience shows that the design of policy reforms should take into account the country-specific comparative advantage of the private and public sectors for economic functions and support services. In particular, it has underscored that the public sector should focus its efforts in tackling cases of market failure to enhance efficiency of private operations, ensure competitiveness and quality of service, and to fulfil the long-term social welfare objectives of protecting the environment and common property resources and balanced regional development.

59. Asia-Pacific economies cannot turn their backs on market-friendly policy reforms. There are lessons to show that protecting the agricultural and rural sector in ways that distort domestic prices make the sector less resilient and more vulnerable to economic and external shocks. However, the Asian crisis also indicated that benefits from globalisation come with robust, transparent and well-regulated financial markets. This is yet another important goal that must be pursued with vigour in the future.

60. In rising to the challenges of sustainable agricultural development and poverty alleviation in the twenty-first century, countries have to periodically monitor and assess developments and appropriately adjust policies, institutions and technologies. In this regard, the Conference may wish to call upon FAO to provide, at the request of member states direct support and capacity building services in carrying out the required sector reviews and in examining various policy issues and options for food security and sustainable rural poverty alleviation in the region.

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1  Agriculture is defined to include crops, livestock, fisheries and forestry.

2  See document APRC/00/3 - Food insecurity and vulnerability in Asia and the Pacific: World Food Summit follow-up.

3  See also document APRC/00/5 - Implications and development of biotechnology.