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Re: Innovative financing for agriculture, food security and nutrition

Dr. Philipp Aerni FAO, Italy

Innovative financing for food security and environmental services Payments for Ecosystem Services (PES) have been proposed as one of a suite of tools to contribute to sustainable and productive agricultural practices as well as the restoration and rehabilitation of damaged ecosystems (see http://www.fao.org/fileadmin/templates/nr/sustainability_pathways/docs/F...) . In developed countries such as Switzerland eco-payment schemes for farmers have greatly contributed to the environmental, cultural and social dimension of sustainable agriculture, especially in mountain regions. The question is whether this approach can also be effective for developing countries that aim to reconcile the objective of national food security with sustainable agricultural practices. Bertrand Vincent is right to point out that there may be some difficulties in transferring environmental policy instruments from developed to developing countries, especially in view of the fact that developing countries do often not have the means available to ensure the successful implementation of PES projects. Funding for such projects in developing countries therefore mostly comes from affluent countries and, with it, also the political priorities of foreign stakeholders. In this context, it is not just the private sector, as Mr. Vincent assumes, that is driven by motives of self-interest, but also development organizations and government agencies in developed countries that tend to focus on the priorities of donors and taxpayers back home rather than those of the small-scale farmers and their local environment in the respective developing country that is supposed to benefit from its project funding. This explains why such projects often lack financial sustainability; they tend to be abandoned by the local stakeholders once the funding stops. Mr. Vincent further portrays agriculture as a sort of ‘loser’-business that needs government assistance to prevent it from becoming unsustainable. Many examples show however that farming can bridge the environmental-development divide in developing countries, if farmers have a chance to get integrated into the global knowledge economy and are embedded into a local institutional environment that encourages sustainable change. PES can be part of such an institutional environment. It can achieve financial sustainability if it leads to the creation of new markets for environmental goods. A market for environmental goods/services can emerge if innovative and entrepreneurial local actors find ways to provide farmers with cost-effective environmental solutions that allow them preserve the local ecosystem services while enhancing agricultural productivity. Small-scale farmers that would have difficulties to pay for such services or are unable to do the knowledge and labor-intensive work themselves could be supported by means of a voucher scheme that would also allow them to choose among different providers of such services. Such a scheme is likely to become financially sustainable because the private interests of the local actors are better aligned with the public interest to promote development and protect the environment. The creation of a new market for environmental services would then also attract more private sector funding and allow for the upscaling and continuous improvement of these services. It would be a bottom-up business that also contributes to local empowerment and therefore address the social and cultural dimension of sustainability. Unlike in developed economies where the government has sufficient funding available to implement PES without a great involvement of the private sector, the effective and sustainable introduction of PES in developing countries may have to count on public-private partnerships. The sustainable rural development program in micro-sheds of the government of the State of Rio de Janeiro in Brazil appears to be very successful in mobilizing financial support not just from the federal state and from the involved municipalities but also local NGOs and the private sector in its PES scheme applied to watershed management. It is a participatory design that proved to be able to reconcile community needs with government goals by creating not just solutions for the environment but also economic opportunities.