LDCs Need New Paths to Food Security

The UN Conference on Trade and Development (UNCTAD), in its latest policy brief, has called for agriculture to be put at the centre of a more integrated development strategy in the Least Developed Countries (LDCs). The article below highlights the main points of the policy brief. The article was published in the South-North Development Monitor (SUNS) #6955 on 30 June 2010 and is reproduced here with permission.

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South-North Development Monitor (SUNS)  #6955 Wednesday 30 June 2010

United Nations: LDCs Need New Paths to Food Security

Geneva, 29 Jun (Kanaga Raja) -- The failure of policies since the early 1980s of reduced government involvement in the agricultural sector and greater reliance on price incentives to stimulate private investment and boost efficiency calls for a rethink, and for a policy to put agriculture at the centre of a more integrated development strategy in the Least Developed Countries (LDCs).

This is the main message of the latest policy brief (No. 15) by the UN Conference on Trade and Development (UNCTAD).

According to UNCTAD, the LDCs are in a race against time to bolster food security, given their rapidly expanding urban populations and declining agricultural productivity.

Despite an easing of food prices since their peak in summer 2008, the number of chronically hungry people is on the rise, and now exceeds one billion. Of the 33 countries in a permanent state of food insecurity, 22 are least developed.

More worrying still, says the policy brief, many LDCs continue to risk being trapped in a vicious cycle of poverty, food insecurity and external shocks, both man-made and natural.

UNCTAD notes that declining per capita food production has been a longstanding problem in LDCs - a problem compounded by a projected near-doubling of their population, from 670 million in 2000 to 1,300 million by 2030, mostly in urban areas.

The situation is particularly worrying in Africa where farmers have lost 25% of their purchasing power over the last 25 years, and average farm incomes are below $200 per capita.

UNCTAD stresses that breaking the macroeconomic and structural constraints on raising agricultural output will be essential to tackling food insecurity. More expansionary fiscal and monetary policies are essential.

But this also requires building virtuous linkages between agriculture and non-agricultural sectors with the potential to stimulate growth and create jobs. The potential is certainly there: estimates for Africa suggest that for every dollar increase in rural incomes, other sectors could see an additional $1.50, and in some countries, the figure could be two or three times higher.

However, says UNCTAD, realising these gains is particularly difficult in LDCs where most farms are under two hectares, many significantly so. Boosting production in these units is hampered by imperfect factor markets, high input prices, poor infrastructure, restricted access to credit and inadequate research and development (R&D).

"As a result of these constraints on raising agricultural output, an increasing number of countries have become steadily more dependent on food imports, making them vulnerable to import surges and price shocks and raising the spectre of food-driven indebtedness," says the brief.

With food accounting for 40-80% of household expenditure in LDCs, macroeconomic and microeconomic vulnerabilities are closely connected and mutually reinforcing.

UNCTAD suggests that the creation of an international lending mechanism dedicated to this problem could ease the liquidity constraints on net food-importing developing countries and facilitate emergency imports of food.

But affordable, predictable and long-term support will be required to break the vicious circle facing producers in the sector.

"Improving access to global markets will be vital to sustained agricultural growth in LDCs. But that is not an instant panacea given their supply rigidities. Policy makers need also to be sensitive to the real possibility of a damaging trade-off between food security and export earnings. The key to expanding options for LDCs lies in closing the chronic investment gap facing the rural sector."

UNCTAD says that increased investment is needed: to enhance farmers' productive capacities, foster uptake of new technologies and innovations, develop public infrastructure (roads, irrigation, etc.) and expand related market services.

The policy brief cites the UN Food and Agriculture Organization as estimating that $40-50 billion per year is needed for agriculture-related public investment in all developing countries over the next two decades.

Just to meet Millennium Development Goal 1 (of eradicating extreme poverty and hunger) in sub-Saharan Africa will require increased agricultural investments of some $8 billion a year according to a UN estimate.

Boosting investment in transport infrastructure and water management will be especially important. While this will be led by the public sector, the private sector, NGOs and international foundations can also contribute.

Pro-investment macroeconomic policies will need to be combined with improved access to credit on affordable terms, particularly for farmers with small- and medium-size holdings.

Noting that under the African Union Maputo commitment, governments in sub-Saharan Africa have promised to channel, on average, 10% of public spending into agriculture and rural development, UNCTAD however finds that the figure is currently less than half of that, and the sector is still taxed at relatively high levels.

Moreover, the proportion of total official development assistance (ODA) to agriculture declined from a high of about 18% in 1979 to 5% in 2008.

"Meeting the investment challenge in LDCs will necessitate scaling-up development assistance along with innovative sources of development financing. The G8 L'Aquila Summit 2009 was a step in the right direction, but more will be needed."

[After last weekend's Muskoka G8 summit, international civil society groups have charged the G8 of playing "shell games" in aid promises - without increasing the overall aid budgets - and merely shifting aid promises and focus from one heading to another at each summit. The Global Call to Action Against Poverty (GCAP), an anti-poverty alliance with coalitions in more than 100 countries, complained about the lack of mention of the Gleneagles commitments in the G8 Muskoka Declaration.

[In a press release, GCAP said that in 2005, the G8 promised to double overseas aid by 2010, from $25 billion to $50 billion. But the G8 spends $30 billion a year in overseas development assistance, a shortfall of $20 billion. "At this Canadian Summit, G8 Leaders want to wipe out the memory of the commitments made five years ago in Gleneagles," said Kumi Naidoo, co-chair of GCAP, adding: "They want to regurgitate old commitments and present them as if they are new. This is an old trick that we have seen year after year after year."

[In a press release issued following the conclusion of the G8 Summit in Muskoka, Oxfam criticized the G8 leaders for their failure to deliver on their promises and for trying to divert attention by cobbling together a small initiative for maternal and child health. With total G8 aid frozen, their $5 billion commitment to maternal health will likely be taken from vital areas such as education and food, said Oxfam.

["This year, the headline is maternal health, last year, it was food. With overall aid frozen, the G8 are just shuffling the same money around to different pots," said Mark Fried, Oxfam spokesperson. "The only promise that counts is the Gleneagles one to increase aid by $50 billion by 2010 and that is the one they have abandoned today."

[At the last G8 Summit, donors pledged $22 billion over three years to support agriculture in developing countries, but according to Oxfam, at most, $6 billion of this is new money and they are double counting it to pay for other initiatives. "There are a billion hungry people in the world but it seems that the G8 are out to lunch. Instead of new money for old promises, we got old money, re-pledged, recycled and renamed," said Fried.]

According to UNCTAD, recent experience has shown the dangers of relying too heavily on market forces to bolster agricultural development. The role of the State remains central not only in providing a supportive macroeconomic environment and efficient infrastructure services for the sector, but also in socializing risks and helping farmers to manage shocks. This will involve forging new partnerships with a focus, in particular, on strengthening small-holder farmers.

UNCTAD says that such farmers often face severe institutional constraints with respect to tenure arrangements, access to inputs and technological support services that restrict their ability to respond to external and internal shocks. In some countries, those partnerships will be built with appropriate private sector supply chain services, drawing initially on the expertise of foreign corporations.

"The State should also protect small-holders' rights to land and other assets while promoting sustainable use of natural resources. And it should support and engage with farmers' groups and cooperatives, and find ways to enhance the role of women, who play a major part in the agricultural sector in most LDCs."

Ensuring the availability of financing (both seasonal and longer-term) will require innovative institutional responses: soft loans and grants, seed-financing programmes, tax credits, micro-finance programmes, etc., all have a role to play. But dedicated agricultural development banks will have to provide a solid financing platform along with measures to encourage commercial banks to extend their services to the rural sector, adds UNCTAD.

The policy brief also notes that technological change in agriculture requires greater investment in research and development (R&D), as also adaptations of existing knowledge architectures to ensure that ongoing research and allied activities promote the kind of sustained agricultural development suited to local needs and conditions.

"There is an immediate need to reverse the declining trend for agricultural research in many LDCs. The international community has an important role to play given the generally small national budgets for R&D in the agricultural sector in LDCs."

It is also important that policy-makers in LDCs assess the intellectual property issue in light of the needs of their farmers. International capacity building to help better understand the norms, flexibilities and exceptions, as well as the threats, in this area would be helpful, stresses UNCTAD.

The policy brief also raises the issue of strengthening South-South cooperation. "Growing South-South trade can provide new market opportunities and help establish a more supportive environment where countries can improve market access without compromising on measures to build productive capacity in the sector, including through the targeted protection of strategic products," it says.

The Global System of Trade Preferences among Developing Countries (GSTP) offers a way forward, particularly if South-South cooperation can extend to effective trade financing, the creation of export consortia and the provision of collective marketing services.

Investment planning could also benefit from a strong regional and South-South dimension. Regional investment funds and development banks, possibly tapping into existing developing-country sovereign wealth funds, could be one way of scaling up the available resources for the private sector, adds UNCTAD.

"Increased public investment, public-private partnerships, and strengthened South-South cooperation in conjunction with the integration of regional agricultural policies into national development strategies, and the removal of OECD agricultural subsidies can provide a solid platform to promote improved growth and trade prospects for the LDCs."

Abolishing endemic food insecurity and chronic poverty will require the international community to forge a real partnership with LDCs to promote the necessary structural change and investment to develop their agricultural sectors.

Noting that in 2011, Turkey will host the Fourth UN Conference on the LDCs, UNCTAD says this will be an opportunity to promote new thinking on agricultural development and end the scourge of global hunger. +