By Region

Total number of approved projects and programmes by region (1964-2012)

An analysis of FAO Investment Centre activity by region underscores an important issue in agriculture and rural development investment. While there are more projects in Sub-Saharan Africa (SSA), agriculture and rural development investment is much less there than in the Asia and Pacific region where agricultural development has played an instrumental role in lifting many people out of poverty.

Project size is smaller in SSA because these countries have less capacity to borrow on market terms, making them more dependent on the International Financing Institutions (IFIs). Included among the IFIs’ lending criteria is consideration of a country’s indebtedness, its capacity to implement investment and its overall policy environment. As a result, SSA countries qualify for less financing.

Each region has its own complex set of issues, challenges and opportunities affecting investment to agriculture. Understanding these issues enables the Investment Centre to help countries develop investment strategies that overcome obstacles and enhance the sustainability of their agriculture and rural development investments.

Asia and the Pacific
The Asia and Pacific region presents a mixed picture of successes and failures in the fight against hunger.

Investment to agriculture and rural development in this region is the highest in the world.  Southeast Asia is on track to achieve the Millennium Development Goal hunger reduction target by 2015.  China has seen significant poverty reductions through large government investment programmes in agriculture and rural development.  Building on the achievements of the Green Revolution, large scale investments continue in India, improving livelihoods, strengthening the infrastructure for agriculture – particularly in water management – and decentralizing and privatizing extension and research services.

Despite these successes, the region as a whole is still home to 64 percent of the world’s hungry.  Food security is actually worsening in parts of South and Central Asia and only Sub-Saharan Africa has a higher rate of poverty than the southern and eastern parts of the Asia and Pacific region.  Even in countries experiencing a decline in urban poverty, children in rural areas are twice as likely to be underweight than those in the city.

The challenges are many.  These include climate change, which is increasing the vulnerability of agricultural production in the Himalayas and along major river deltas, especially the Mekong, the Ganges-Meghna-Brahmaputra and the Irrawady.  They highlight the opportunities for greater and more effective investment in ARD to make a real difference in rural lives.  Destabilizing conflicts in Afghanistan, Pakistan, Nepal and Sri Lanka have affected large rural populations and compounded the crises for natural resources; these call for long-term strategies agriculture and rural development investment programmes are needed to build capacity on a very large scale for improved governance in these conflict and post-conflict situations, and throughout the region.   Across the Asia and Pacific, major investments are needed to improve irrigation and the management of natural resources; strengthen rural infrastructure for transportation, marketing and the development of small and medium-sized enterprises; and enhance food safety and quality control standards. Attention also needs to be paid to the emission of green house gases and mechanisms to minimise them. Effective implementation of agriculture and rural development projects targeting poverty reduction will allow the poorest to strengthen their livelihoods.

Europe and Central Asia
Comprised of countries-in-transition from East and Central Europe, the former Commonwealth of Independent States (CIS), the Balkans and Turkey, the region is making considerable progress as it transitions from a command economy to a market economy. 

The agricultural sector is emerging as a dynamic source of economic growth for the region.  Russia’s wheat production grew 27 percent 2007-2009, helping to make it the world’s third largest exporter of wheat.  Growth in agricultural production is higher in countries of the Trans-Caucasus and Central Asia, which have adopted decisive policies to put more land in individual use.  Agriculture and rural development investment from the World Bank jumped USD 4.5 billion in 2009.

Producers are becoming more market-oriented, increasing both their holding sizes and production levels.  Governments are beginning to see their role in encouraging private sector investments.  Domestic and regional markets are serving to consolidate the comparative advantages of agricultural producers, while the region awaits the tapping of its full export potential.

Yet challenges remain.  While the picture varies from country to country, there are some common factors.  The poverty of rural areas is sometimes tied to lower levels of education and inadequate farming skills.  Issues related to land ownership rights and privatization have been ill-managed, causing land fragmentation and unprofitable farm holding sizes. Prolonged underinvestment in agriculture and rural development by public and private sources has taken a toll.  Infrastructure has been poorly maintained.  Farm assets, equipment and storage facilities are obsolete.  Processing and value addition capacity has been dismissed.  Poor management of natural resources, especially in Central Asia, has resulted in exhausted soil fertility, widespread salinity and alkalinity, and land erosion.  Low productivity and lack of competitiveness are the consequences of these cross-cutting issues. 

Improved institutional oversight capacity and regulatory frameworks are necessary.  The region is striving to create a policy environment favourable to domestic and foreign investment in agriculture and agribusiness. (See FAO Investment Centre Division Policy Note: Agricultural Policy Framework and State Support for Agriculture in the Republic of Belarus)

Region-wide, new systems and infrastructure are needed to align agricultural produce to internationally accepted quality and food safety standards.  This is especially true of the Balkans and others targeting the European Union as an export market.  Producers and processors need better access to capital for their asset and productive investments. The public sector must enable the private sector to take the lead in increasing and improving capacity of farms and the processing industry. Agricultural research and development must address productivity constraints.  Education, training and advisory systems should be established to allow effective knowledge sharing that is specific to sites, production systems, and farmer categories.

Latin America and the Caribbean
In past years, countries in Latin America and the Caribbean have undertaken economic reforms and made progress toward financial stability. The challenge now is to achieve sustainable growth and reduce poverty. For this, the role of rural economies is essential. Agriculture, agro-industry and non-agricultural activities are key sectors to sustain employment and income, produce foreign exchange reserves, and attain national and household food security. Two issues to be addressed are the proper allocation of investment resources and improvement of markets.

Steps must be taken to provide increased and efficiently allocated public resources. This includes a decrease in untargeted subsidies to the private sector and an increase in investments for technology, education, infrastructure, etc. In addition, partnerships between the public and private sector should be a priority to make agricultural investments more effective. Direct social expenditures to alleviate poverty should be planned on a decentralised basis and with community participation.

Improved functioning of markets is foundational for rural development. Appropriate and powerful public policies should be put in place with regard to land tenure and land administration; human capital development; technology services; financial resources; etc. Also, small-scale producers need to be supported to establish farm-to-market links with modern, higher-value markets within the framework of dynamic value chains.

Assuring good policies as well as sufficient and targeted investments are challenges for the governments and the international donor community.

Near East and North Africa
Most of the countries in this region have to import large quantities of their basic food stuffs and are thus susceptible to food price shocks in the world market. And, projections indicate that this vulnerability will likely increase, largely because some of the factors that increase demand for food – increasing population and income growth, rising urbanization – are higher here than elsewhere in the world. Moreover, the availability of water and land for increasing food production is more constrained here than elsewhere.

Countries in North Africa and the Near East can improve their food security by more effectively mitigating the effects of cereal price and quantity risks. This can be achieved through an integrated three-pillar approach, which will require substantial additional investment in the coming decades. First, countries will have to strengthen their safety nets in order to protect the poorest of the poor. Second, countries will have to make increasing investments in agricultural research and development and expand their efforts to support rural livelihoods. Third, countries will have to use better financial instruments to hedge risks, which can reduce exposure to market volatility and improve supply chains.

Improving water management and strengthening institutional engineering are key targets for agriculture and rural development investments in this region. Investing in climate change adaptation measures and sustainable land management practices, as advocated by serveral recent GEF initiatives, is also crucial. Improving the livelihoods of the inhabitants of the deserts and arid areas is to be considered a sustainable strategy to maintain and improve ecosystem services therein. People become empowered custodians of fragile environments.

Demand for water resources is nearing capacity in a number of countries. Efforts to increase supply are evolving into attempts to better manage demand. With increasingly fewer opportunities to build dams or create hill lakes, the key priority is to develop ways to harvest and use water more efficiently, especially in irrigation. Countries are elaborating national programs for maximizing water use. Investment is needed to finance projects in support of those programmes, mainly centred on the promotion of localized irrigation and of integrated water resources management (surface as well as underground). Managing climate change adaptation and mitigation is another regional imperative, with countries sharing experiences with adaptation techniques and seeking additional resources from international climate change financing sources.

Even in those countries where adequate technical skills are available, a dramatic modernization of sectoral institutions — mainly ministries of agriculture and irrigation— is needed. This requires upgrading of their central, regional and local structures; hiring and training of additional technical staff; and adopting more sophisticated methodological tools, such as geographic information systems and advanced systems for the integrated management of natural resources. Limited public funding is available for such “soft” investments, however, and the importance of these investments is only now beginning to be recognized.

Sub-Saharan Africa
Agriculture faces complex development challenges in Sub-Saharan Africa, where the majority of people rely on farming as their main livelihood. Conflict and insecurity, inequitable land tenure systems, weak agricultural support services and the increased effects of climate change are among the main challenges the region faces to feed its rapidly increasing population and reduce rural poverty. With rainfed farming accounting for roughly 95 percent of agriculture in the region, substantial investments are needed to improve water, land and soil fertility management, enhance irrigation and water harvesting efficiency, and increase irrigated area. Greater investments must also be made to strengthen agricultural research and extension services, capacity building and education, rural markets and communication infrastructures.

FAO estimates that the population in Sub-Saharan Africa will double by 2050. This will require the public sector to invest an additional USD 6 to 7 billion net annually in agriculture. Through the Comprehensive Africa Agriculture Development Programme (CAADP), there is a growing awareness and commitment from governments and donors alike to increase investments in agriculture throughout the continent. The urgency to achieve food security and all the Millennium Development Goals has been underscored by the global food and financial crises.

Supporting agricultural research for development organizations, at both national and regional levels, and strengthening producer organizations are crucial for the development of the Sub-Saharan agricultural sector. To achieve sustainable increases in small-scale farmer production, good practices must be scaled up. Examples are: linking smallholders to markets, promoting conservation agriculture, improving risk management and increasing the availability and use of participatory extension tools, such as Farmer Field Schools.