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Re: Innovative financing for agriculture, food security and nutrition

Etienne du Vachat Action contre la Faim - ACF (Action Against Hunger), France
09.07.2012
Etienne

Dear all,
Action contre la Faim - ACF (Action Against Hunger) would like to contribute to the consultation with the below inputs. Please do not hesitate to get in touch with us for any further information.
Regards,
Etienne du Vachat - ACF Food Security Advocacy Officer

Contribution from ACF (Action Against Hunger)

Q 1. What would be innovative sources (public and private) of financing for agriculture, food security and nutrition? New taxes are normally suggested, as can be seen in the annex. Without excluding them, we would like to explore other options.

R1. In terms of innovative sources of financing we would like to suggest three areas to be looked at:
- a tax on agricultural commodity derivatives markets, especially wheat, maize, soy and sugar, with a ‘double effect’ tax. The currently high and volatile food prices are strongly driven and accelerated by speculation on agricultural commodity markets. This is especially the case with derivatives markets where complex financial products (such as futures, swaps, etc.) are exchanged without any actual exchange of commodity in the physical markets. As for the Tax on Financial Transaction (TFF) in the currency and financial markets, a very low tax rate would decrease the profitability of the most speculative positions, which are often very short-term oriented. This first effect would contribute to lower the speculation opportunities in agricultural markets and could thus have a positive impact on price stability, with a first positive effect on the capacity of poor communities to access food at affordable prices throughout the year. The second effect will be the yearly generation of billions USD of additional innovative funding by the tax. The use of this money would contribute to increasing agriculture, food security and nutrition investments.
[Note: A “derivative‟ is a financial asset whose value is derived from the value of one or more underlying assets, such as commodities ; "Speculation" (as opposed to hedging) refers to transactions by financial participants (like investment banks and hedge funds) who do not have a commercial interest in trading the underlying commodity but, rather, are taking on risk in order to make a return on price changes. This can be contrasted with commercial participants (like food producers, processors or end users) who do have a real interest in trading the underlying commodity and can be described as ”bona fide” hedgers. Source: Oxfam]
- voluntary contributions from private agro-food companies. This is an option to increase private sector’s financial contribution and involvement in the development sector. Here we would like to suggest a “marketing” oriented approach with a logo and a label to be put on all kind of food products. This would fit the criteria of the focus on those economic sectors which have benefited the most from globalization. The companies (including restaurants, restaurant chains, distributors, whole sellers, food companies, etc.) would commit to giving a given percentage –e.g. 5 or 10%– of the income they make on those specific labeled products to the agriculture, food security and nutrition innovative funding mechanism (IFM). This label would be very visible for consumers but the contributions would not rely on the final consumers. The companies could also benefit from this initiative and gain an improved image in the public. The spectrum of products could be wide, however the logo and label should be easily distinguish from the fair trade’s ones.
- a specific tax on those food products whose role in or contribution to increasing children and adult over-nutrition is scientifically established and publicly recognized (especially fat- and sugar- rich products). This tax would help to make a link between the over-nutrition (both in rich and developing countries) and under-nutrition issues. In this mechanism, the tax will rely on the final consumer making it more expensive to consume processed food products, especially products that are rich in sugar or fat. The income generated by the tax will then be invested in the fight against undernutrition in developing countries, with a specific focus on the 36 high burden countries identified by the SUN movement.

Q 2. What would be innovative uses of funding generated by mechanisms of innovative financing ? What should be their core target(s)?

R2. In terms of use of the funding, the main goal and core target should be the 55 million of children threatened by acute malnutrition. The fight against child undernutrition is one the main scandal of our time and one of the most urgent causes worldwide. It is not debatable whether children suffering from severe acute malnutrition actually need help or not. They do. Innovative funding mechanisms to agriculture, food security and nutrition should primarily focus on this goal.
Under the SUN (Scaling Up Nutrition) framework, the international community has an outstanding opportunity to scale up funding to nutrition within an already existing, consensual, multi-actor and multi country framework.
SUN has identified 13 direct interventions that have proven their effectiveness in fighting undernutrition (see below). The costing exercice (World Bank report, 2010, ‘Scaling-up Nutrition: What will it cost?’) has resulted in an estimated need amounting at 12 billions USD per year needed to tackle undernutrition in the 36 countries with the higher undernutrition rates (“high burden countries”). The biggest advantages of this use of innovative funding is that there is an already existing initiative, quite consensual, with national platforms involving a wide range of actors including civil society.
The 13 key nutrition interventions the innovative funding mechanism to agriculture, food security and nutrition should focus on:
Behaviour change interventions
1. Breastfeeding promotion and support
2. Complementary feeding promotion
3. Handwashing with soap and promotion of hygiene behaviors
Micronutrient and deworming interventions
4. Vitamin A supplementation
5. Therapeutic zinc supplements
6. Multiple micronutrient powders
7. Deworming
8. Iron-folic acid supplements for pregnant women
9. Iron fortification of staples
10. Salt iodization
11. Iodine supplements
Complementary and therapeutic feeding interventions
12. Prevention or treatment of moderate malnutrition in children 6–23 months of age
13. Treatment of severe acute malnutrition

Q 3. What could be new and suitable innovative financing tools for leveraging private investments for agriculture, food security and nutrition? And what could be their advantages/drawbacks?

R3. In order to leverage more and better private investments for agriculture, food security and nutrition, the focus should be on the millions of small-scale family farmers (who are the main investors in developing countries’ agriculture) because they are the first hit by rural poverty, hunger and undernutrition. Innovative financing tools could act as complement, insurance or guarantee for their own investments in their own lands and livestock, to improve production and productivity, to reduce the risks they take and to support introductions of innovative methods of production. Other mechanisms such as drought and weather indexed insurance systems should also be looked at if they are primarily targeted at small scale farmers and pastoralists.

Q4. How could these identified tools or mechanisms be used for innovative areas of agriculture, food security and nutrition (e.g. climate smart agricultural practices, research, migration)?

R4. The legitimacy and transparency of innovative funding mechanisms (IFM) are crucial. For a stronger legitimacy of IFM to agriculture, food security and nutrition, it is important that the expense mechanisms (in terms of focus, governance, modalities, actors, programmes, etc.) are highly consensual, transparent and accountable (for instance through regular public accountability reports). The governance body of the initiative in particular should be multi-actor, rely on existing initiative and associate civil society organisations.
The CFS’ Global Strategic Framework (GSF) currently identifies many consensual topics in the field of agriculture, food security and nutrition policies, which have gained the common agreement of the various stakeholders (as opposed to the ‘gaps’ areas, still under debate at international level). In a sector where private companies’ interests are huge and where ongoing trends in research are highly debated, it is important that the “innovative areas” are defined and agreed upon in a legitimate, multi-actor recognized international arena such as the CFS.

Q 5. Which actors/stakeholders - at the various levels - would be relevant to mobilise and implement such instruments? What would be their roles and interactions with each other?

R5. The CFS (Committee on World Food Security) could host the governance of such a mechanism. Involvement of national governments (recipients as well as donors) is crucial, while civil society should also participate.
The SUN initiative would promote an existing frame to implement the innovative funding instruments. The funds should be channeled through transparent and accountable mechanisms, whether the States (especially in those countries where donors have a positive evaluation of their direct budget support) or non-state actors (local, international NGOs or private actors, as long as the same transparency and accountability criteria applies).