Address of the Director-General Islamic Development Bank
Washington, D.C., 12 October 2008
Your Excellency Brother Dr Ahmad Mohamed Ali, President of the Islamic Development Bank,
Mr Colleague President Lennart Båge,
Your Excellencies,
Ladies and Gentlemen,
1. The food crisis
The last three years have seen a marked increase in world food prices. The FAO Food Price Index first increased by 12 percent between 2005 and 2006, then by 24 percent in the following year, and subsequently by about 50 percent during the first part of 2008, up until July when good global prospects for wheat, maize and rice caused the prices of principal cereals to level off. However, the index is still 26 percent above its level in August 2007 and 60 percent up from August 2006. Over the next decade, international prices of food commodities are expected to fluctuate widely around averages that will remain above historic levels.
The consequences of this situation are very serious for the poorest populations - especially the small producers who cannot cover their food demand with their own production. In low-income countries, food expenditure often accounts for over 60 percent of household budget. FAO thus estimates that in 2007 the crisis has added an additional 75 million people to the 848 million who were already suffering from hunger and undernourishment.
The high prices are the results of inadequate supply to meet growing demand. There are several underlying factors: the negative impact of climate change on production, particularly droughts and floods; low cereal stocks (the lowest for 30 years at 421 million tonnes); a rapidly growing world population (an extra 78.5 million people each year); high demand in emerging countries (driven by annual GDP growth rates of 9 to 12 percent); the transformation of an increasing share of agricultural production into biofuels (100 million tonnes of cereals were diverted to biofuels in 2006); high oil prices; and speculation.
Soaring food prices have been very costly, especially to the poor and food-deficit countries. Total food imports amounted to 820 billion US dollars in 2007 and could reach 1 035 billion in 2008. This represents an increase in import bills of 26 percent globally and 25 percent for the developing countries as compared to the period 2006/2007.
This dramatic situation is the result of the low priority given to agriculture. The facts speak for themselves: public aid to agriculture fell from 8 billion dollars (2004 equivalent) in 1984 to 3.4 billion dollars in 2004, which represents a reduction in real terms of 58 percent. The share of agriculture in Official Development Assistance fell from 17 percent in 1980 to 3 percent in 2006. The international and regional finance institutions have posted a sharp decline in resources for an activity that is the main livelihood for 70 percent of the world's poor. In one noteworthy case, the loan portfolio of an institution to agriculture plummeted from 33 percent in 1979 to 1 percent in 2007.
2. The challenge and central role of investment
Food production must double by 2050 if we are to feed a world population expected to reach 9 billion people at that date. Almost whole of this population increase will take place in the developing countries. Moreover, by 2050, the urban population will grow by about 3.2 billion people, while the rural population will fall by some 500 million people. We will therefore have to raise agricultural productivity in the developing countries by investing in rural infrastructure (water management, rural roads, storage facilities, slaughterhouses etc.) but also by using modern factors of production.
On 17 December 2007, I launched an initiative to combat soaring food prices and invited bilateral and multilateral donors to allocate 1.7 billion US dollars to developing countries to enable their resource-poor farmers to obtain seeds, fertilizers, animal feed and other inputs. FAO's initial financing of this initiative in 79 countries should act as a catalyst and spur donors and national governments to support small-farmer access to inputs, on a broader scale. In this connection, I wish to state that, in the last 10 years, FAO has implemented 1 022 projects dealing with the distribution of agricultural inputs with a budget of about 931 million US dollars.
At the global level, the High-Level Task Force on the Global Food Security Crisis, set up last April by the UN Secretary-General, under his chairmanship, and the Vice-Chairmanship of the Director-General of FAO, has drawn up a global plan of action: the "Comprehensive Framework for Action". In addition, the Heads of State and Government of the G8 countries, in the final communiqué of their Summit last July, recommended the establishment of a Global Partnership on Agriculture and Food, involving all actors concerned: public and private sectors, international institutions, civil society and farmers' organizations. They have also proposed the set up of a global network of high-level experts on food and agriculture. A side event is being organized next week, on the occasion the Committee on World Food Security, to exchange views on these issues.
3. The issue of investing more in agriculture
Excellencies,
Ladies and Gentlemen,
The High-Level Conference on World Food Security, which was held in Rome from 3 to 5 June this year, clearly stated that investment in agricultural production was the basis for any sustainable solution to the global food crisis and that adequate resources were needed. Although this was not a pledging conference, some 11 billion US dollars were promised at the time. If we add this sum to other announcements made before and after the conference, the total pledges reach 22 billion US dollars. This is clearly a very encouraging figure, but these are only promises that still need to be fulfilled. We have made contacts at high-level to facilitate the mobilization of these resources which will be directed through the usual channels of Official Development Assistance.
In the framework of the commitments made at the FAO High-Level Conference on World Food Security and the G-8 Summit in July in Japan, 30 billion US dollars should be invested each year in agriculture (equivalent to 8 percent of the subsidies of OECD countries to their farmers and to 2.5 percent of world military spending) in order to combat hunger and to feed a growing population. This way, it will be possible to ensure world food security and to enable agriculture to become the engine of sustainable economic growth in the developing countries.
4. Conclusion - The role of the IsDB
In recent years, the Islamic Development Bank has allocated about 50 percent of its project financing and technical assistance to the social, agricultural and rural infrastructure sectors. Cumulative aid to agriculture has totalled 1.6 billion dollars, representing 10 percent of the Bank's total funding of projects.
I should like to thank the Bank for its interest in agriculture and for its action to mobilize resources to deal with the food crisis. At the FAO High-Level Conference on World Food Security held last June in Rome, the Bank announced a contribution of 1.5 billion US dollars. This is an exemplary initiative which will help increase production and improve the living conditions of many farmers in the developing countries.
I am very pleased to note that the Islamic Development Bank Group intends to adopt a long-term strategy for the sustainable development of agriculture in the member countries, based on three elements: the Initiative of the Jeddah Declaration on the World Food Crisis (1.5 billion US dollars over 5 years); the Islamic Solidarity Fund for Development (13.5 billion US dollars over 5 years); and the Special Programme for the Development of Africa (4 billion US dollars over the period 2008-2012). These initiatives are aimed at improving food security and reducing poverty in the member countries.
We now need to determine how we can support the Bank in its action, especially the programmes of access to inputs (seeds, fertilizers, animal feed and small tools and equipments), so that it can pursue under the best possible conditions its medium- and long-term activities of water control and management, marketing and storage, agribusiness and institutional development. We need to finance rural and agricultural infrastructures, from public resources, in those countries that do not have the means of realizing their potential in an effective and sustainable manner. In accordance with its mission and using its intervention mechanisms, the Bank could also develop programmes to foster greater private investment in the food and agriculture sector. This support could be directed at primary agricultural production and/or at the agrifood system. It could also take the form of core financing, credit lines and equity participation in joint ventures, for the large producers. It could also be focused on tailored programmes of start-up capital or rural micro-credit, for the small producers. For its part, FAO stands ready to cooperate closely with the Islamic Development Bank in the implementation of these programmes.
I should like to reiterate my thanks to President Mohammed Ali for the honour that he has bestowed upon FAO by inviting its Director-General to address this distinguished gathering of high-level personalities. I should also like to express my gratitude to the Heads of State of the member countries of your esteemed institution, and in particular to the Custodian of the Two Holy Mosques, King Abdullah Bin Abdul Aziz Al Saud, whose generosity has allowed the Islamic Bank to mobilize such significant resources for the benefit of the world's most deprived populations. Together we can rise to the challenge of combating hunger and food insecurity in the world.
Thank you for your attention.