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Mobilizing resources for agriculture in support of food security



Despite remarkable progress made over the last decade by developing countries in overall economic growth and improved living conditions, poverty and food insecurity are still widespread and show insufficient signs of decline. FAO estimates the number of people suffering from undernourishment1 in developing countries in 1997-99 to have been 777 million (17 percent of the total population of these countries). Although this represents a decline from the 830 million estimated for the period 1990-92 (20 percent of the population), a high absolute number of undernourished persists. If current trends continue, the number of undernourished people is projected to fall to 580 million in 2015, well short of the World Food Summit target of halving the number to 400 million by that year.


Nearly all population increases in the future will be concentrated in developing countries, where the alleviation of extreme poverty, and particularly hunger, needs to be targeted. Although food insecurity is concentrated in the developing world, some 38 million people living elsewhere are undernourished, principally in transition countries, with pockets of hunger found in higher-income countries. Immediate action must be taken to mobilize and utilize additional resources effectively in order to improve access to food, particularly by the poor and vulnerable groups.


In recent years, poverty has received renewed attention in the development discourse. The number of people living on less than US$1 per day in the developing regions2 was about 1.2 billion in 1998,3 meaning that, on average, about one-quarter of the population of this country grouping was poor.


Hunger, or lack of access to adequate food, is one of the direst traits of poverty. Fighting hunger should thus form a fundamental part of any strategy to eradicate poverty. The concept of food security constitutes an effective tool with which to target, design and monitor policies and initiatives for poverty reduction. The resources required to put an end to hunger do exist, and their price is in fact lower than the human and economic costs of allowing hunger to persist. The latter include the costs of ill health which is often generated by undernourishment (expenditure on health care and welfare), low labour productivity and, ultimately, lower economic growth. There is increasing evidence from research that high levels of undernourishment compromise the overall development of countries directly (through the reduced productivity of the undernourished) and indirectly (through the negative effects of undernourishment on health).4 Reducing hunger is a necessary condition for the reduction of poverty. Achieving the World Food Summit target as an intermediate objective towards complete hunger eradication is not only a moral imperative, it makes good economic sense.


The World Food Summit target can be achieved through coordinated action on a number of fronts, reflecting the multidimensional nature of the determinants of hunger, food insecurity and undernourishment. These determinants include poverty and the unequal distribution of assets; low levels of human capital; stagnant economic growth; low productivity and financing constraints in agriculture; the bias of the international financial system; gender and racial discrimination; weak institutions and governance; disease (particularly HIV/AIDS); and conflict and natural disasters. The World Food Summit acknowledged the multidimensional nature of food security in its seven commitments (see Box 1.1), each of which addresses an area of action and therefore requires resources. The action areas identified include the creation of an enabling political, social and economic environment, both nationally and internationally; the eradication of poverty; efforts to promote sustainable agriculture; disaster and emergency preparedness and prevention; investment in agriculture; and the monitoring of progress.


This chapter focuses on Commitment Six, concerning investment in agriculture or, more precisely, the mobilization of resources for strengthening the productivity and productive capacity of the agriculture sector. The role of agriculture in generating additional food supplies and incomes necessary for greater access to food is paramount in developing countries, especially the low-income food-deficit countries (LIFDCs), where agriculture is the principal sector in terms of national income, employment and exports. The majority (approximately 70 percent) of the poor live in rural areas and earn their livelihoods in the agriculture sector directly as farmers and agricultural labourers, or from employment in rural non-farm activities. The rural non-farm sector consists in part of activities upstream or downstream from primary production and, therefore, depends heavily on agricultural activity and incomes for its survival and growth. The poverty-alleviating impact of agriculture-driven economic growth, coupled with growth in rural non-farm incomes, is mitigated by the extreme inequality of asset ownership, particularly land. Furthermore, without access to foreign markets, and in the absence of good governance and appropriate institutions, most investment is likely to be severely compromised.


The 1995 Quebec Ministerial Declaration committed FAO and its member countries to "promoting appropriate investment in agricultural, forestry and fisheries sectors".5 In the context of the World Food Summit, FAO6 estimated the future volume of investments required in agriculture and supporting infrastructure and services to meet the goal of reducing the number of undernourished to 400 million by no later than 2015. Current investment levels fall some US$30 billion short of the US$180.4 billion needed annually to reach the Summit target.


Resources for agricultural investment can come from private and public sources, both external and internal. Although most investments are primarily mobilized by the farmers themselves, through its expenditures on agriculture, forestry and fisheries, the public sector plays a critical role in providing incentives and creating an environment conducive to such investments as well as in ensuring sufficient availability of public goods (basic infrastructure, rules of law, peace and security). Official development assistance (ODA) is an important complement to domestic resources, particularly for those countries plagued by high food insecurity. In this chapter, along with resources allocated specifically to agriculture, the estimated investment requirements for reaching the Summit goal are also reviewed (see Resource needs to meet the World Food Summit goal).


Countries with a high prevalence of undernourishment have lower income levels, lower capital-labour ratios and a lower level of labour productivity in agriculture than countries where the prevalence of undernourishment is low. With respect to resources allocated to agriculture, some countries are expected to be able to mobilize additional domestic resources to cover the substantial costs required to reduce the prevalence of undernourishment in their populations. Many others, however, especially LIFDCs, will need to draw on an expanded flow of external resources. In this regard, external development assistance to agriculture has been falling to historically low levels while, in terms of total resources, there has been some substitution of public by private sources. However, foreign direct investment (FDI) has so far bypassed most poor countries and, of the overall private investment flowing to poorer countries, relatively little is directed to the food and agriculture sectors. The issues of adequate mobilization and the optimal use of resources are therefore one of paramount importance.

Why focus on resources for food security and agriculture in developing countries?


Although the share of undernourished in the total population of developing countries has declined over the last decades, the absolute number of undernourished remains high. Emphasizing the persistence of large numbers of undernourished should not be taken as a lack of recognition of the significant successes achieved by world agriculture in providing food to an ever-increasing population. Since 1969-71, the population of developing countries has increased from 2.6 billion to 4.5 billion. The decline in the relative incidence of undernourishment (equivalent to half of the percentage of the population affected) constitutes a considerable achievement.


Such progress is also reflected in the increases in per capita food availability for direct human consumption, which is one of the key variables used to measure the extent of food insecurity at the country level. It is expressed as dietary energy supply (DES) in kcal per capita per day (see Table 3.1).7


As shown in the Table, the overall increase in world DES mainly reflects gains made by the developing countries, whose average per capita DES grew from 2 110 to 2 680 kcal (27 percent) between 1969-71 and 1997-99. Among countries, however, the gains are uneven. Progress in the aggregate of the developing countries has been decisively influenced by the significant improvements made by those with the largest populations. Of the seven developing countries with a population of more than 100 million, only one remained with very low levels of per capita food consumption during the period. Furthermore, between 1990-92 and 1997-99, only 32 countries were able to reduce their number of undernourished (by a total of 116 million people) while, in the remaining 67 developing countries for which data are available, the number of undernourished increased by about 77 million.


It is useful to note that the widely used reference to the number of people without access to a minimum dietary energy intake as a measure of food insecurity fails to capture all the dimensions of undernutrition (also caused by a poor health status) and malnutrition (where dietary imbalances, especially of micronutrients, can have deleterious health implications). However, a lack of sufficient food is itself a cause of deficiency in a variety of necessary nutrients, and not only of inadequate energy supplies. In addition, as illustrated by a comparison of the diets of a well-nourished and an undernourished adult (see Figure 3.1), diets tend to be less diverse at lower levels of food intake, thereby adding to the nutritional deficiency of the undernourished.


An example of the relationship between the quantity and quality of diets


Per capita dietary energy supply








(kcal per day)


2 410

2 540

2 700

2 780

2 800

Developed countries

3 130

3 220

3 270

3 240

3 230

Transition economies

3 320

3 390

3 160

2 890

2 910

Developing countries

2 110

2 300

2 520

2 650

2 680

Latin America and the Caribbean

2 470

2 700

2 710

2 810

2 820

 Near East and North Africa

2 360

2 820

2 980

2 970

3 010

Sub-Saharan Africa

2 100

2 070

2 120

2 200

2 190

East and Southeast Asia

2 010

2 320

2 640

2 850

2 920

South Asia

2 060

2 070

2 310

2 420

2 400

Source: FAO.


There are currently 32 developing countries that have a per capita food consumption of less than 2 200 kcal and, consequently, a high prevalence of food insecurity. Halving the number of undernourished by 2015 in each of these countries with national resources alone would require exceptionally high rates of growth along with a more equal distribution of income. The required combination of income growth8 and better distribution would be demanding, if at all feasible. Only in rare cases in the past have countries achieved these levels of growth rates in total food consumption for extended periods. It is therefore unlikely that the poorest nations will be able to mobilize resources by themselves on the scale required.


Overall, some 70 percent of the poor in developing countries live in rural areas. This is particularly true in those countries with high levels of undernourishment (Annex Table 1). The majority of the labour force in these countries depends on agriculture, directly or through related activities, and the sector accounts for a high proportion of their national economic output and export earnings. On average, 56 percent of the labour force in developing countries in 1999 was employed in agriculture. For example, in sub-Saharan Africa, where 34 percent of the population was undernourished in 1997-99, as much as 66 percent of the total labour force was employed in agriculture in 2000 (see Table 3.2).


The dimensions of agriculture in developing countries


Rural population as a share of total population

Agricultural labour as a share of total labour force

Share of agriculture in total GDP










Developing countries







Latin America and the Caribbean







Near East and North Africa







Sub-Saharan Africa







East and Southeast Asia







South Asia







Source: FAO.


The rural poor depend on agriculture to produce the food they eat or to generate income. Rural households generate income from agricultural activities (in the form of revenue from the sale of agricultural products or paid employment in agriculture) and/or from employment in rural non-farm activities. The rural non-farm sector includes a wide number of goods and services, which are in most cases linked to the agriculture sector, including the production of inputs, repairs of agricultural implements and output processing). In addition, income earned from agricultural activities is spent on locally produced goods, and this demand is essential for the survival of the rural non-farm sector. Given the extent to which the poor people's livelihoods depend on agriculture, growth in this sector is an essential component of poverty reduction and food security strategies. The role of resource mobilization for agriculture - the subject of this chapter - is critical because such investments are considered to be essential for increasing productive capacity and hence employment and income generation in areas where the majority of the poor and food-insecure are to be found.


Mobilizing resources for agriculture is fundamental but must be supplemented by investment in infrastructure, health and education.9 Conflict reduction, democracy and good governance, education and health, safe water and market openness are essential targets for ODA and for action to reduce hunger. Other vital areas for resource mobilization are agricultural technology transfers, research, extension and rural infrastructure. Evidence demonstrating the high returns to investments that enhance human capital has made a major contribution to the understanding of economic development and its relationship to human development. The role of such investments is at the root of development strategies that have received recognition from the international community, for example at the 1995 Copenhagen Social Summit, and in the 1996 OECD Development Assistance Committee (DAC) strategic orientations for development cooperation,10 the World Development Report 200011 and the United Nations Millennium Declaration.


Promoting agriculture to fight hunger should be part of a multidimensional strategy by national governments, international donors, multilateral lending agencies and the private sector. In this respect, the role of civil society organizations (CSOs) in advocacy and in setting the policy agenda has become increasingly important in recent years. The fight against hunger and the promotion of agricultural development, furthermore, should be integrated in coordinated development instruments such as the Poverty Reduction Strategy Papers (PRSPs), the United Nations Development Assistance Framework (UNDAF) and the ACC Network on Rural Development and Food Security.

Trends in investment for agriculture in developing countries

The nature of the problem and resource needs


Estimated resource requirements for food and agriculture are dependent on the targets to be achieved. The World Food Summit considered the limited reduction in world hunger that was expected under projections available at the time12 to be unacceptable, and it therefore set the more ambitious target of halving the number of undernourished people to 400 million by no later than 2015. FAO's latest estimates of the number of undernourished in the world indicate that, under a "business as usual" scenario, this target will not be met (see Figure 3.2).


The prevalence of undernourishment and perspectives for a reduction in the number of undernourished people by 2015 and 2030

BOX 3.1

Methodological note on the classification of countries

In order to illustrate the distinguishing characteristics of countries according to the prevalence of undernourishment, i.e. the proportion of undernourished in their total population, developing countries are grouped into five categories.1 The proportion of national population undernourished, by prevalence category, is as follows: <2.5 percent (Category 1); 2.5 to <5 percent (Category 2); 5 to <20 percent (Category 3); 20 to <35 percent (Category 4); and 35 percent (Category 5).

Annex Table 2 shows the percentage of undernourished population by country, geographic region and prevalence category.2 Undernourishment is characterized as "low" in Categories 1 and 2, "intermediate" in Category 3 and "high" in Categories 4 and 5.

The geographic distribution of undernourishment in developed and developing countries is shown in Figure 3.3, which reveals a concentration of undernourishment in South and Southeast Asia, Africa and Latin America. There are 23 countries in Category 5, 18 of which are in sub-Saharan Africa; there are 27 countries in Category 4 and 34 in Category 3. Category 1 comprises developed countries.

It should be noted that variations may exist in the values of economic indicators for countries belonging to a particular prevalence category.

1 The prevalence of undernourishment changes from year to year. The grouping referred to here is based on the prevalence of undernourishment in 1997-99.
2 The list does not include countries with a population of less than 1 million or those for which there are insufficient data. Annex Tables 4, 6 and 7 include a sixth category, which lists countries for which data on undernourishment are not available.


Most countries with high levels of undernourishment are characterized by low and stagnant levels of per capita income. This implies a low savings capacity, often accompanied by a heavy debt burden that absorbs a substantial amount of resources that could otherwise be used to develop productive sectors. The result is that countries with a high incidence of undernourishment are left with insufficient resources for fostering growth in productive sectors. These issues are discussed in the following sections.


National incomes (measured by GNP per capita) are lowest in countries that have high levels of undernourishment (Categories 4 and 5, defined in Box 3.1). Furthermore, trends over the last decade show that per capita incomes have not improved significantly in these categories. Under such conditions, savings and investment rates are bound to be low. Moreover, the savings of the vulnerable and food-insecure groups are likely to be channelled into assets that reduce their vulnerability to shocks rather than into investments that might increase their resource productivity.


The prevalence of undernourishment in the world (1997-99)


The large debt burden of countries with a high prevalence of undernourishment constitutes an additional drain on resources that could be invested in productive sectors. Figure 3.4 shows that, within the LIFDCs, heavy indebtedness is most widespread among countries that have a relatively higher prevalence of undernourishment. Among the 23 LIFDCs with the highest prevalence of undernourishment, 17 belong to the group of heavily indebted poor countries (HIPCs). The outlook is much more positive for countries with a prevalence of less than 20 percent; for this subgroup of LIFDCs, only six out of 21 countries are heavily indebted.


Heavily indebted poor countries within the LIFDC grouping


Not surprisingly, the combination of low savings capacity and heavy indebtedness results in a low investment capacity in the agriculture sector, particularly in those countries that are most in need of agricultural investments to enhance the incomes of the poor and thus to improve food security.

Agricultural investment


It is now widely understood that the concept of investment to augment the productive capacity of agriculture entails not only physical assets, but also science and technology dissemination and the enhancement of human and social capital. Creating a pro-investment climate to raise productivity levels and realize the necessary structural changes becomes a principal policy challenge. The whole policy and institutional environment needs to be conducive to investment by private agents, particularly farmers.


In the last two decades, many governments addressed the anti-agricultural biases of the past by adopting policies to deregulate agricultural markets, reduce price distortions and allow a greater role for private actors in economic activity. Such measures, although necessary, are not always sufficient to induce the investments necessary for sustained productivity and production increases. Improved investment incentives also require policies that create the requisite agrarian institutions. These include transparent and functioning markets, access to financing and extension and adequate legal and regulatory frameworks. At a more general level, political stability and a well-defined and enforced institutional framework are needed in order to ensure adequate private investment. Strong complementarity between public and private investment is also necessary to sustain agricultural growth, with governments investing in sectors of importance to the public good - research, extension, infrastructure (particularly water control, roads, storage and marketing facilities), education and norms and standards.


FAO has developed a comprehensive database on agricultural capital stock and investment, based on FAOSTAT and complemented by national accounts data from individual countries. These data include capital stock (such as land, irrigation, tractors, livestock, plantations and structures) for primary agriculture in the major developing regions.


In order to take into account the varying capital intensity and technology levels of the agriculture sectors in the different groups of countries, data on capital stock per agriculture worker are presented in Table 3.3 by region and prevalence category. The two regions with a lesser incidence of undernourishment, Latin America and the Near East and North Africa, show higher agricultural capital per worker compared with other regions. Over time, the same two regions have also experienced a substantial increase in the capital-labour ratio, in contrast to the stagnation in other regions.


Capital stock per agricultural worker









(Constant 1995 US$)

Latin America and the Caribbean

6 537

6 841

7 202

7 751

8 407

8 711

Near East and North Africa

5 444

5 516

5 790

6 320

6 548

6 431

Sub-Saharan Africa

1 412

1 408

1 391

1 310

1 290

1 286

East and Southeast Asia

1 120

1 142

1 140

1 134

1 167

1 225

South Asia

1 207

1 204

1 215

1 226

1 244

1 252

Prevalence category


Category 1

5 688

6 037

6 591

7 328

8 080

8 463

Category 2

5 169

4 713

4 652

5 122

5 816

6 024

Category 3

1 621

1 649

1 642

1 638

1 687

1 737

Category 4

1 309

1 309

1 333

1 330

1 376

1 386

Category 5

1 189

1 192

1 165

1 114

1 027


Source: FAO.


Value added agriculture per agricultural worker by undernourishment prevalence category

Prevalence category












(Constant 1995 US$)

Category 1

3 846

3 919

4 160

4 100

4 164

4 277

4 458

4 502

4 576

4 619

Category 2

1 601

1 611

1 695

1 623

1 698

1 752

1 793

1 782

1 836

1 843

Category 3











Category 4











Category 5











Developed countries1

20 658

20 613

22 424

21 978

23 821

24 328

26 351

27 825

28 865

29 996

1Israel, Luxembourg, Malta and Sweden are not included throughout the period; Germany is not included in 1990.
Source: FAO.


Based on the grouping of countries by prevalence of undernourishment, there is a clear contrast in the capital intensity of the first two categories (low incidence of undernourishment) and the other three. Differences also exist in terms of changes over time: countries with a lower prevalence of undernourishment show a stronger increase (base period 1986-90) in investment per worker while changes in the other categories have been very little or even negative. During the period considered, the capital-labour ratio in the lowest prevalence category has increased relatively from six to nine times that of the highest prevalence category (Table 3.3). Not only did countries in the highest prevalence category begin with the lowest level of capital stock in 1975 but, precisely in those countries where capital is needed most to generate agricultural growth and reduce undernourishment, capital stock per worker has been decreasing.

Agricultural investment and productivity


Low capital stock per worker is reflected in low productivity per agricultural worker in agriculture, as is shown in Table 3.4 for the various undernourishment prevalence categories. What is more, the wide divergence among capital-labour ratios across categories is further amplified in terms of labour productivity, and so are the diverging trends through time. As in the case of the capital-labour ratio, a sharp divide is evident between the lower and higher prevalence categories. The value added per worker in the lowest prevalence category was 18 to 22 times that of the highest prevalence category between 1990 and 1999. These differences are likely, in part, to result from the greater use of other variable inputs in agricultural production. It is also probable that, given the pattern of the relationship between productivity and nutritional status, differences in efficiency may themselves be partly explained by differences in the prevalence of undernourishment. Countries with a high incidence of undernourishment may be caught in a hunger trap, as a high incidence of undernourishment causes efficiency losses and thereby constrains a country's ability to deal with the problem.


Three conclusions emerge from these observations. First, additional resources for promoting agricultural growth are especially needed in countries where undernourishment is more prevalent. Second, there is ample scope to improve the productivity of capital and labour assets in countries with a high prevalence of undernourishment. Third, alleviation of undernourishment could be a decisive step towards breaking the undernourishment-low productivity trap faced by many countries in the developing world.

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