41455 world development report 2008 Agriculture for Development world development report 2008 Agriculture for Development world development report 2008 Agriculture for Development THE WORLD BANK Washington, DC © 2007 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: feedback@worldbank.org All rights reserved 1 2 3 4 5 10 09 08 07 This volume is a product of the staff of the International Bank for Reconstruction and Devel- opment / The World Bank. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. 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All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@worldbank.org. Cover design by Chris Lester of Rock Creek Strategic Marketing and Bill Pragluski of Critical Stages. Typesetting by Precision Graphics. Printed in the United States by Quebecor World. Cover photos by World Bank staff members, clockwise from top left: milk thermometer, Lillian Foo; wheat threshing, Alexander Rowland; Holstein cow, Lillian Foo; supermarket beans, Lillian Foo; Andean woman and baby at market, Curt Carnemark/World Bank Photo Library; cotton plant, Arne Hoel. Softcover Hardcover ISBN-13: 978-0-8213-6807-7 ISBN-13: 978-0-8213-6808-4 ISSN: 0163-5085 ISSN: 0163-5085 eISBN-13: 978-0-8213-6809-1 DOI: 10.1596/978-0-8213-7235-7 DOI: 10.1596/978-0-8213-7233-3 Contents Foreword xiii Acknowledgments xv Abbreviations and Data Notes xvii Overview 1 What can agriculture do for development? 2 What are effective instruments in using agriculture for development? 8 How can agriculture-for-development agendas best be implemented? 18 Part I What can agriculture do for development? 26 1 Growth and poverty reduction in agriculture's three worlds 26 The structural transformation 27 The three worlds of agriculture for development 29 Agriculture's development potential shortchanged 38 The political economy of agricultural policy 42 A new role for agriculture in development 44 focus A: Declining rural poverty has been a key factor in aggregate poverty reduction 45 2 Agriculture's performance, diversity, and uncertainties 50 Productivity growth in developing countries drove agriculture's global success 50 Growth across regions and countries has been uneven 53 Differences in performance reflect different underlying conditions 54 Opportunities for a new agriculture through diversification 58 Future perspectives: confronting challenges and rising uncertainties 61 Conclusion--a continuing production challenge 68 focus B: Biofuels: the promise and the risks 70 v vi CONTENTS 3 Rural households and their pathways out of poverty 72 Three complementary pathways out of rural poverty: farming, labor, and migration 73 The variation in rural households' income strategies 74 Rural occupations and income sources 77 Household behavior when markets and governments fail: rational, despite appearances 82 Rural household asset positions: often low and unequal 84 Pervasive risks and costly responses 89 Smallholder challenges to compete 90 Conclusions 92 focus C: What are the links between agricultural production and food security? 94 Part II What are effective instruments for using agriculture for development? 96 4 Reforming trade, price, and subsidy policies 96 Agricultural protection and subsidies in developed countries 96 Agricultural taxation in developing countries 98 Simulated gains from trade liberalization 103 Scope for achieving potential gains 110 Transitional support 112 Public investment for long-term development 114 Conclusions 116 5 Bringing agriculture to the market 118 Food staples: improving commodity trading and risk management 118 Traditional bulk export commodities: maintaining international competitiveness 122 Higher-value urban markets: linking producers to modern supply chains 124 Higher-value exports: meeting product standards 128 Conclusion 133 focus D: Agribusiness for development 135 6 Supporting smallholder competitiveness through institutional innovations 138 Land policies for secure rights and reallocating resources 138 Financial services for smallholders 143 Insurance to manage risk 147 Contents vii Developing efficient input markets 150 Producer organizations in a context of value chains and globalization 153 Institutional innovations--still a work in progress 157 7 Innovating through science and technology 158 Genetic improvement has been enormously successful, but not everywhere 159 Management and systems technologies need to complement genetic improvement 163 Investing more in R&D 165 Institutional arrangements to increase the efficiency and effectiveness of R&D systems 169 Using available technology better: extension and ICT innovations 172 Moving forward 176 focus E: Capturing the benefits of genetically modified organisms for the poor 177 8 Making agricultural systems more environmentally sustainable 180 Drivers of resource degradation 181 Improving agricultural water management 182 Greening the green revolution 188 Managing intensive livestock systems 189 Reversing degradation in less-favored areas 190 Payment for environmental services 197 Conclusions 199 focus F: Adaptation to and mitigation of climate change in agriculture 200 9 Moving beyond the farm 202 Rural employment: a daunting challenge 202 Agricultural wage employment 205 Rising rural nonfarm employment 209 Wages and earnings in the rural labor market 212 Labor supply: migration and the urban economy 214 Schooling, training, and transition to the labor market 216 Providing safety nets to reduce vulnerability 219 A final word on rural labor markets and migration: the need for policy attention 221 focus G: Education and skills for rural development 222 focus H: The two-way links between agriculture and health 224 viii CONTENTS Part III How can agriculture-for-development agendas best be implemented? 226 10 Emerging national agendas for agriculture's three worlds 226 New opportunities and challenges 226 The proposed approach 227 Agriculture-based countries--accelerating growth, poverty reduction, and food security 229 Transforming countries--reducing rural-urban income gaps and rural poverty 234 Urbanized countries--linking smallholders to the new food markets and providing good jobs 238 Political, administrative, and financial feasibility 242 Recognizing the policy dilemmas 243 11 Strengthening governance, from local to global 245 Changing roles: the state, the private sector, and civil society 246 Agricultural policy processes 248 Governance reforms for better policy implementation 251 Decentralization and local governance 254 Community-driven development 256 Aid effectiveness for agricultural programs 257 Progress on the global agenda 258 Moving forward on better governance for agriculture 265 Bibliographical note 266 Endnotes 269 References 285 Selected indicators 321 Selected agricultural and rural indicators 322 Selected world development indicators 333 Index 355 Contents ix Boxes 1 What is the future for the global food supply? 8 5.2 Innovative uses of information technology to link farmers 1.1 Rural population dynamics 29 to markets in India and West Africa 121 1.2 Cross-country evidence on the effect of agricultural growth 5.3 Price stabilization through international trade: saving $200 on poverty reduction 30 million in Bangladesh 123 1.3 Large countries have regional heterogeneity that replicates 5.4 Zambia and Burkina Faso: contrasting experiences in the three worlds of agriculture 33 liberalizing domestic cotton markets 124 1.4 Agriculture's comparative advantage in Sub-Saharan 5.5 Linking small farmers to high-value chains: Three Africa 34 approaches 129 1.5 A role for agriculture in Africa's mineral-rich 5.6 Employment gains and reduced poverty in rural countries 35 Senegal 131 1.6 Supporting farmers without a strong fiscal base: lessons 6.1 Benefits from community-driven land certification in from Thailand 36 Ethiopia 140 2.1 The green revolution in food staples that didn't happen: 6.2 Improving the efficiency of land administration services in Sub-Saharan Africa's variegated palette 55 Georgia 141 2.2 Population density and the definitions of "rural" 58 6.3 How land rentals can increase productivity and equity in China 142 2.3 Why are there lagging regions in countries with high agricultural growth? 59 6.4 Rental markets and the impact of restrictions in India 143 2.4 The global environmental footprint of expanding livestock 61 6.5 Banrural SA: from ill-performing agrarian bank to profitable public-private financial institution 146 2.5 Substantial potential for expanding irrigation in Sub- Saharan Africa--in the right way 65 6.6 Mongolia's index-based livestock insurance 149 3.1 Establishing the relative importance of the different 6.7 Is there a rationale for fertilizer subsidies? 152 pathways 75 6.8 Thriving rural input supply retailers as agrodealers in 3.2 Constructing comparable measures of income across Africa 153 countries 76 6.9 Producer organizations with international 3.3 The challenge of drastic demographic changes from memberships 155 selective migration 81 7.1 When zero means plenty: the benefits of zero tillage in 3.4 Returning to the farm in Zambia--subsistence agriculture, South Asia's rice-wheat systems 164 AIDS, and economic crisis 86 7.2 Using legumes to improve soil fertility 165 3.5 New technologies and positive discrimination policies 7.3 Stronger IPRs in developing countries: effect on small reduce social inequalities in India 88 farmers 167 3.6 Pastoralists' precarious livelihoods 89 7.4 Sub-Saharan Africa's agricultural R&D challenge 168 3.7 Are farms becoming too small? 92 7.5 Long-term capacity development in Ghana 169 4.1 Types of instruments that distort trade 97 7.6 IPR options to give the poor access to modern 4.2 The political economy of agricultural reforms in developed science 171 countries 99 7.7 Mexican farmers lead research through PRODUCE 4.3 Nominal rates of assistance 100 foundations 172 4.4 Significant progress in reducing the antiagricultural bias in 7.8 Adding value to a poor farmer's crop: cassava in Colombia China and India 102 and Ghana 173 4.5 The political economy of agricultural reforms in developing 7.9 Private agribusiness and NGOs: leading ICT provision to countries 104 farmers in India 176 4.6 Simulating the effects of trade liberalization with global 8.1 Restoring the northern Aral Sea--by doubling the Syr models 105 Darya's flow 185 4.7 Net buyers and net sellers of food staples within a 8.2 Resource degradation in rice-wheat systems of South country 109 Asia 188 4.8 Examples of subsidies in India and Zambia 116 8.3 Integrated pest management to control the Andean potato weevil in Peru 189 5.1 Impacts of road infrastructure on markets and productivity 120 8.4 Managing poultry intensification in Thailand 190 x CONTENTS 8.5 Four trajectories: disappearing or rebounding forests, 10.4 Special features of agriculture in Europe and Central misery or growth 193 Asia 240 8.6 Agroforestry parklands in Niger turn back the desert and 11.1 Conflicts over land displace millions in Colombia 246 restore livelihoods 194 11.2 Translating vision into practice: a former minister's view of 8.7 Two tales of community-driven management, watersheds, Uganda's Plan for Modernizing Agriculture 249 and pastures 196 11.3 Empowering producer organizations and developing a 8.8 Managing drought and livestock in pastoral areas of the vision for agriculture in Senegal 250 Middle East and North Africa 197 11.4 Vietnam's progress in aligning budgets with sector 9.1 Horticulture development in Maharashtra 209 priorities 251 9.2 A women's cooperative in India 211 11.5 Regional integration: opportunities and challenges in West 9.3 Child labor: pervasive in agriculture 219 Africa 251 9.4 The gradual but incomplete move toward cash-based food 11.6 Making a green revolution through vision and aid 220 leadership 253 10.1 Four policy objectives of the agriculture-for-development 11.7 Delivering international public goods 262 agenda form a policy diamond 228 11.8 Global financing for climate change adaptation and 10.2 Comprehensive Africa Agricultural Development mitigation--the urgency of addressing the needs of Program 230 vulnerable countries and small-scale farmers 263 10.3 Middle East and North Africa--agriculture for jobs and as a safety net 235 Figures 1 The number of poor rose in South Asia and Sub-Saharan 1.1 Cereal yields are up and poverty is down in South Asia, but Africa from 1993 to 2002 ($1-a-day poverty line) 3 cereal yields and poverty were unchanged in Sub-Saharan 2 Agriculture's contribution to growth and the rural share in Africa 27 poverty distinguishes three types of countries: agriculture- 1.2 As countries develop, the shares of GDP and labor based, transforming, and urbanized 5 in agriculture tend to decline, but with many 3 GDP growth originating in agriculture benefits the poorest idiosyncrasies 28 half of the population substantially more 6 1.3 Agriculture-based, transforming, and urbanized countries 4 Public spending on agriculture is lowest in the agriculture- constitute agriculture's three worlds 31 based countries, while their share of agriculture in GDP is 1.4 Price and wage effects dominated the long-run elasticity of highest 7 rural poverty to cereal yields in India, 1958­94 33 5 Developing countries are taxing agricultural exportables 1.5 The ratio of food processing to agricultural value added less 11 rises with incomes 37 6 Domestic consumption and exports of high-value products 1.6 Labor productivity has been a more important source in developing countries are growing rapidly 13 of growth in agriculture than in nonagriculture, 7 The yield gap for cereals between Sub-Saharan Africa and 1993­2005 39 other regions has widened 15 1.7 Macroeconomic policy and agricultural growth have 8 Agriculture and deforestation are heavy contributors to improved in Sub-Saharan Africa 40 greenhouse gas emissions 17 1.8 Official development assistance to agriculture declined 9 The four policy objectives of the agriculture-for- sharply between 1975 and 2004 41 development agenda form a policy diamond 19 2.1 Cereal yields rose, except in Sub-Saharan Africa 51 10 Agricultural growth in Sub-Saharan Africa has increased as 2.2 Modern inputs have expanded rapidly but have lagged in macroeconomic conditions improved 20 Sub-Saharan Africa 52 11 The urban-rural income disparity has increased in most of 2.3 Growth in agricultural GDP per agricultural population is the transforming countries 21 lowest in Sub-Saharan Africa 53 12 Agriculture-based and transforming countries get low 2.4 Stagnation in Sub-Saharan African agriculture may be scores for governance 23 over 54 Contents xi 2.5 There are big differences across regions in agricultural 5.2 Wholesale prices in Ethiopia fluctuate within a wide potential and access to markets 57 import-export parity band 122 2.6 Per capita food consumption in developing countries is 5.3 World prices for traditional bulk exports continue to shifting to fruits and vegetables, meat, and oils 60 decline 123 2.7 High value exports are expanding rapidly in developing 5.4 Food consumption expenditures in Indonesia are shifting countries 61 from cereals to higher-value and prepared foods 125 2.8 Slower growth in cereal and meat consumption is projected 5.5 Rising per capita incomes drive supermarket for the next 30 years 62 growth 125 2.9 Developing countries will become even bigger markets for 5.6 Transport, handling, and packaging are major costs for cereals exported largely by developed countries 63 French bean exports in Bangladesh 129 2.10 Arable and permanent cropland per capita of the 6.1 Credit-constrained rural households use fewer inputs and agricultural population is falling in Sub-Saharan Africa and have lower incomes 144 South Asia 63 6.2 Transport costs make up about one-third of the farmgate 2.11 Water scarcity affects millions of people in Asia and the price of urea fertilizer in African countries, 2005 151 Middle East and North Africa 64 6.3 More than a third of Zambia's 2004/05 public budget for 2.12 Growth rates of yields for major cereals are slowing in agriculture went to fertilizer subsidies 151 developing countries 67 7.1 Improved varieties have been widely adopted, except in 2.13 Exploitable yield gaps are high for maize in Africa 67 Sub-Saharan Africa 159 3.1 Real per capita income varies widely for each livelihood 7.2 Estimated returns to agricultural R&D are high in all strategy 77 regions--averaging 43 percent 166 3.2 In most countries, the vast majority of rural households 7.3 Financing for extension services, the traditional and the participate in agriculture 78 new approach 175 3.3 Sources of income vary between poor and rich 79 8.1 Dependence on groundwater irrigation is highest in the 3.4 Women's reported participation in agricultural self- Middle East and South Asia 184 employment relative to men's varies by region 80 8.2 Groundwater aquifers in India are being depleted 186 3.5 Rural-urban gaps in educational attainment are 8.3 With PES, degraded pasture has been converted to large 84 sustainable land use in Nicaragua 198 3.6 Farm size distributions are often bimodal 87 9.1 Agriculture is not enough to absorb new rural 3.7 Yields on small farms lag behind large farms in staples in workers 203 Brazil and Chile 91 9.2 The share of wage workers in agricultural employment rises 4.1 Progress has been slow in reducing overall support to with per capita income 205 agricultural producers in the OECD, but there has been 9.3 The share of wage labor in agricultural employment is some move to less-distorting "decoupled" payments 97 rising in many countries 206 4.2 For agriculture-based countries, net agricultural taxation 9.4 Formal employment in Brazilian agriculture has become fell in 9 of 11 countries 100 more cyclical 207 4.3 Developing countries are taxing exportables less 101 9.5 Labor requirements are considerably higher for vegetables 4.4 For transforming countries, 9 of 10 either increased than for cereals 209 protection or reduced taxation 102 9.6 Retail trade and services dominate nonfarm wage 4.5 For urbanized countries, 6 of 7 either increased protection employment 210 or reduced taxation 103 9.7 Most rural nonfarm enterprises have only one or two 4.6 Estimated real international commodity price increases workers, mostly self-employed, Indonesia, 2005 210 following complete trade liberalization 106 9.8 Wages are much higher in rural nonfarm employment 4.7 The corresponding gain in the estimated trade shares of than in agricultural employment in India, Mexico, and developing countries 106 Uganda 212 4.8 Latin America and Sub-Saharan Africa are expected to 9.9 For workers with no education, wages in agricultural and have higher agricultural output growth under global trade rural nonfarm employment are not so different across reforms 107 sectors 212 4.9 Subsidies have risen while public goods investments have 9.10 Agricultural wages have been declining in most Latin declined in India 115 American countries 213 5.1 Layers of intermediaries characterize Ghana's maize 9.11 Agricultural wages have been rising in most Asian and markets 119 African countries 214 xii CONTENTS 9.12 Labor productivity in rural nonfarm self-employment is 10.2 Policy diamond for transforming countries 237 heterogeneous in Indonesia 215 10.3 Policy diamond for urbanized countries 241 9.13 Growth of manufacturing and service employment in 11.1 Agriculture-based and transforming countries get low Mexico is a function of distance to an urban center with scores for governance 245 more than 250,000 inhabitants 215 11.2 Good fits to country-specific conditions for demand- 9.14 Average years of education in rural areas, by age 216 side and supply-side approaches are needed to improve 10.1 Policy diamond for agriculture-based countries 231 agricultural sector governance 252 Tables 1 Characteristics of three country types, 2005 5 5.2 Public and private sector roles to enhance trade-related SPS 1.1 Demographic and economic characteristics of three country compliance and quality management capacity 132 types, 2005 31 7.1 Total public agricultural R&D expenditures by region, 1981 1.2 Poverty in three country types, 2002 32 and 2000 167 1.3 Public spending in agriculture-based countries is 7.2 Assets of public and private sectors in agribiotechnology low 41 research 171 3.1 Changing market participation among farming households 7.3 Ways of providing and financing agricultural advisory in Vietnam 74 services 174 3.2 Typology of rural households by livelihood strategies in 8.1 Agriculture's environmental problems onsite and three country types 76 offsite 181 3.3 Changes in farm size and land distribution 87 9.1 Rural households' diverse sources of income 204 4.1 Nominal rates of assistance by commodity in developing 9.2 Rural employment by sector of activity, selected countries 101 countries 205 4.2 Estimated cost distribution of current trade 9.3 Average years of education of rural 18­25 year olds, selected policies 105 countries 217 4.3 Illustrative poverty effects from agricultural trade reform in 11.1 Types of global organizations and networks relevant for developed and developing countries 108 agriculture 261 5.1 Public and private options for strengthening farmer links to the market 128 Maps 2.1 Agroecological zones in agricultural areas 56 8.1 Overexploitation has caused severe water stress in many 2.2 Market access in agricultural areas of Africa, Asia, and river basins 183 Latin America 56 8.2 Many deforestation hotspots are in tropical areas 192 Foreword Agriculture is a vital development tool for achieving the Millennium Development Goal that calls for halving by 2015 the share of people suffering from extreme poverty and hun- ger. That is the overall message of this year's World Development Report (WDR), the 30th in the series. Three out of every four poor people in developing countries live in rural areas, and most of them depend directly or indirectly on agriculture for their livelihoods. This Report provides guidance to governments and the international community on designing and implementing agriculture-for-development agendas that can make a difference in the lives of hundreds of millions of rural poor. The Report highlights two major regional challenges. In much of Sub-Saharan Africa, agriculture is a strong option for spurring growth, overcoming poverty, and enhancing food security. Agricultural productivity growth is vital for stimulating growth in other parts of the economy. But accelerated growth requires a sharp productivity increase in smallholder farming combined with more effective support to the millions coping as subsistence farm- ers, many of them in remote areas. Recent improved performance holds promise, and this Report identifies many emerging successes that can be scaled up. In Asia, overcoming widespread poverty requires confronting widening rural-urban income disparities. Asia's fast-growing economies remain home to over 600 million rural people living in extreme poverty, and despite massive rural-urban migration, rural poverty will remain dominant for several more decades. For this reason, the WDR focuses on ways to generate rural jobs by diversifying into labor-intensive, high-value agriculture linked to a dynamic rural, nonfarm sector. In all regions, with rising land and water scarcity and the added pressures of a globalizing world, the future of agriculture is intrinsically tied to better stewardship of natural resources. With the right incentives and investments, agriculture's environmental footprint can be lightened, and environmental services harnessed to protect watersheds and biodiversity. Today, rapidly expanding domestic and global markets; institutional innovations in markets, finance, and collective action; and revolutions in biotechnology and information technology all offer exciting opportunities to use agriculture to promote development. But seizing these opportunities will require the political will to move forward with reforms that improve the governance of agriculture. Ultimately, success will also depend on concerted action by the international develop- ment community to confront the challenges ahead. We must level the playing field in inter- national trade; provide global public goods, such as technologies for tropical food staples; help developing countries address climate change; and overcome looming health pandem- ics for plants, animals, and humans. At stake are the livelihoods of 900 million rural poor, who also deserve to share the benefits of a sustainable and inclusive globalization. Robert B. Zoellick President World Bank Group xiii Acknowledgments This Report has been prepared by a core team led by Derek Byerlee and Alain de Janvry and comprising Elisabeth Sadoulet, Robert Townsend, and Irina Klytchnikova. The team was assisted by Harold Alderman, Beatriz Avalos-Sartorio, Julio Berdegué, Regina Birner, Lynn Brown, Michael Carter, Luc Christiaensen, Marie-Helene Collion, Klaus Deininger, Peter Hazell, Karen Macours, Michael Morris, Paula Savanti, and Dina Umali-Deininger, all of whom drafted parts of the Report. The team was assisted as well by Noora Aberman, Jorge Aguero, Shahrooz Badkoubei, Sarah Baird, Leandre Bassole, Benjamin Davis, Nango Dem- bele, Ashok Gulati, Corinna Hawkes, Tidiane Kinda, Melissa Klink, Alex McCalla, Claudio Montenegro, Stefano Pagiola, Eija Pehu, Catherine Ragasa, Antti Seelaff, and John Staatz. The work was conducted under the general guidance of François Bourguignon in collab- oration with the Sustainable Development Network. Bruce Ross-Larson was the principal editor. Extensive and excellent advice was received from Kym Anderson, Hans Binswanger, Karen McConnell Brooks, Mark Cackler, Manuel Chiriboga, Kevin Cleaver, Christopher Delgado, Shantayanan Devarajan, Josue Dione, Gershon Feder, Alan Harold Gelb, Ravi Kanbur, Jeffrey Lewis, Were Omamo, Keijiro Otsuka, Rajul Pandya-Lorch, Prabhu Pingali, Pierre Rondot, Kostas Stamoulis, Erik Thorbecke, C. Peter Timmer, Joachim von Braun, staff of the Agriculture and Rural Development Department and of the Sustainable Devel- opment Network of the World Bank, staff of RIMISP (Latin American Center for Rural Development), and many others to whom the team is grateful without implication (see page 266). Numerous others inside and outside the World Bank provided helpful com- ments and inputs. The Development Data Group contributed to the data appendix and was responsible for the Selected World Development Indicators. The team also acknowledges the generous support of the multidonor programmatic trust fund (Knowledge for Change Program), the Canadian International Development Agency, Ford Foundation, France's Ministry of Foreign Affairs, Global Donor Platform for Rural Development, International Development Research Centre, International Fund for Agricultural Development, InWEnt (Capacity Building International), Japan's Ministry of Finance, Science Council of the Consultative Group on International Agricultural Research, Swedish International Development Cooperation Agency, Swiss Agency for Development and Cooperation, UK Department for International Development, United States Agency for International Development, and The William and Flora Hewlett Foundation. The team benefited greatly from a wide range of consultations. Meetings and regional workshops were held locally and in Australia, Canada, France, Germany, India, Italy, Japan, Kenya, Mali, Norway, Sweden, and the United Kingdom; and discussions of the draft Report were conducted online. The team wishes to thank the participants in these workshops, videoconferences, and discussions, which included academics, researchers, government officials, and staff of nongovernmental, civil society, and private sector organizations. Rebecca Sugui served as senior executive assistant to the team, Ofelia Valladolid as pro- gram assistant, and Jason Victor and Maria Hazel Macadangdang as team assistants. Evan- geline Santo Domingo served as resource management assistant. xv Abbreviations and Data Notes Abbreviations AATF African Agricultural Technology Foundation IMF International Monetary Fund ADB Asian Development Bank IPCC Intergovernmental Panel on Climate Change AfDB African Development Bank IPR Intellectual property rights CAADP Comprehensive Africa Agriculture IRI International Research Institute for Climate Development Programme and Society CDD Community-driven development IRRI International Rice Research Institute CGIAR Consultative Group on International IWMI International Water Management Institute Agricultural Research MDG Millennium Development Goal CIAT International Center for Tropical Agriculture MFI Microfinance institution CIMMYT International Maize and Wheat Improvement NEPAD New Partnership for Africa's Development Center NERICA New rice for Africa CIRAD Agricultural Research for Developing Countries NGO Nongovernmental organization DAC Development Assistance Committee NRA Nominal rate of assistance EU European Union ODA Official development assistance FAO Food and Agriculture Organization OECD Organization for Economic Cooperation GAEZ Global agroecological zones and Development GDP Gross Domestic Product PPP Public-private partnerships GHG Greenhouse gas PES Payment for environmental services GMO Genetically modified organism PSE Producer support estimate GPS Global Positioning System R&D Research and development HIV/AIDS Human immunodeficiency virus/ SAFEX South Africa Futures Exchange acquired immune deficiency syndrome SPS Sanitary and phytosanitary standards ICARDA International Center for Agricultural SWAps Sector-wide approaches Research in the Dry Areas TFP Total factor productivity ICRAF International Center for Research UN United Nations in Agroforestry UNDP United Nations Development Programme ICTs Information and communication technologies UNCTAD United Nations Conference on Trade IDA International Development Association and Development IDB Inter-American Development Bank UNFCCC United Nations Framework Convention IEA International Energy Agency on Climate Change IFAD International Fund for Agricultural USAID United States Agency for International Development Development IFAP International Federation of Agricultural USDA United States Department of Agriculture Producers WDR World Development Report IFDC International Center for Soil Fertility and WHO World Health Organization Agricultural Development WTO World Trade Organization IFPRI International Food Policy Research Institute WWF World Wide Fund for Nature ILO International Labor Organization xvii xviii ABBREVIATIONS AND DATA NOTES Country Code Country Name Country Code Country Name AGO Angola MLI Mali ARG Argentina MOZ Mozambique AZE Azerbaijan MWI Malawi BDI Burundi MYS Malaysia BEN Benin NER Niger BFA Burkina Faso NGA Nigeria BGD Bangladesh NPL Nepal BGR Bulgaria PAK Pakistan BLR Belarus PER Peru BOL Bolivia PHL Philippines BRA Brazil PNG Papua New Guinea CHL Chile POL Poland CHN China PRY Paraguay CIV Côte d'Ivoire ROM Romania CMR Cameroon RUS Russian Federation COL Colombia RWA Rwanda CZE Czech Republic SDN Sudan DOM Dominican Republic SEN Senegal DZA Algeria SLV El Salvador ECU Ecuador SVK Slovak Republic EGY Egypt, Arab Rep. of SYR Syrian Arab Rep. ETH Ethiopia TCD Chad GHA Ghana TGO Togo GIN Guinea THA Thailand GTM Guatemala TJK Tajikistan HND Honduras TUN Tunisia HUN Hungary TUR Turkey IDN Indonesia TZA Tanzania IND India UGA Uganda IRN Iran, Islamic Rep. of UKR Ukraine KEN Kenya VEN Venezuela, R. B. de KHM Cambodia VNM Vietnam LAO Lao PDR YEM Yemen, Republic LKA Sri Lanka ZAF South Africa MAR Morocco ZAR Congo, Dem. Rep. of MDG Madagascar ZMB Zambia MEX Mexico ZWE Zimbabwe Data notes The countries included in regional and income groupings in low- and middle-income economies and thus may include this Report are listed in the Classification of Economies table economies in transition from central planning, as a matter at the end of the Selected World Development Indicators. of convenience. The terms advanced countries or developed Income classifications are based on gross national income countries may be used as a matter of convenience to denote (GNP) per capita; thresholds for income classifications in this high-income economies. edition may be found in the Introduction to Selected World Dollar figures are current U.S. dollars, unless otherwise spec- Development Indicators. Group averages reported in the fig- ified. Billion means 1,000 million; trillion means 1,000 billion. ures and tables are unweighted averages of the countries in the Serbia and Montenegro is used in this Report either because group, unless noted to the contrary. the event being discussed occurred prior to the independence The use of the word countries to refer to economies implies of the Republic of Montenegro in June 2006 or because sepa- no judgment by the World Bank about the legal or other rate data for the Republic of Serbia and the Republic of Mon- status of a territory. The term developing countries includes tenegro are not available. Overview An African woman bent under the sun, continuing to reduce poverty and hunger weeding sorghum in an arid field with a for several decades thereafter. Agricul- hoe, a child strapped on her back--a vivid ture alone will not be enough to massively image of rural poverty. For her large fam- reduce poverty, but it has proven to be ily and millions like her, the meager bounty uniquely powerful for that task. With the of subsistence farming is the only chance last World Development Report on agri- to survive. But others, women and men, culture completed 25 years ago, it is time have pursued different options to escape to place agriculture afresh at the center of poverty. Some smallholders join producer the development agenda, taking account of organizations and contract with export- the vastly different context of opportunities ers and supermarkets to sell the vegetables and challenges that has emerged.2 they produce under irrigation. Some work Agriculture operates in three distinct as laborers for larger farmers who meet the worlds--one agriculture-based, one trans- scale economies required to supply mod- forming, one urbanized. And in each the ern food markets. Still others, move into agriculture-for-development agenda differs the rural nonfarm economy, starting small in pursuing sustainable growth and reduc- enterprises selling processed foods. ing poverty. While the worlds of agriculture are vast, In the agriculture-based countries, varied, and rapidly changing, with the right which include most of Sub-Saharan Africa, policies and supportive investments at local, agriculture and its associated industries are national, and global levels, today's agricul- essential to growth and to reducing mass ture offers new opportunities to hundreds poverty and food insecurity. Using agricul- of millions of rural poor to move out of ture as the basis for economic growth in the poverty. Pathways out of poverty open to agriculture-based countries requires a pro- them by agriculture include smallholder ductivity revolution in smallholder farming. farming and animal husbandry, employ- Given Sub-Saharan Africa's unique agricul- ment in the "new agriculture" of high-value ture and institutions, that revolution will products, and entrepreneurship and jobs in have to be different from the Asian green the emerging rural, nonfarm economy. revolution. How to implement it after many In the 21st century, agriculture continues years of limited success remains a difficult to be a fundamental instrument for sustain- challenge. But conditions have changed, able development and poverty reduction. and there are many local successes and new Three of every four poor people in develop- opportunities on which to build. ing countries live in rural areas--2.1 billion In transforming countries, which living on less than $2 a day and 880 million include most of South and East Asia and on less than $1 a day--and most depend the Middle East and North Africa, rapidly on agriculture for their livelihoods.1 Given rising rural-urban income disparities and where they are and what they do best, pro- continuing extreme rural poverty are major moting agriculture is imperative for meet- sources of social and political tensions. The ing the Millennium Development Goal of problem cannot be sustainably addressed halving poverty and hunger by 2015 and through agricultural protection that raises 1 2 WORLD DEVELOPMENT REPORT 2008 the price of food (because a large number of on a complex agenda of interrelated agree- poor people are net food buyers) or through ments and international public goods. Civil subsidies. Addressing income disparities in society empowerment, particularly of pro- transforming countries requires a compre- ducer organizations, is essential to improv- hensive approach that pursues multiple ing governance at all levels. pathways out of poverty--shifting to high- This Report addresses three main value agriculture, decentralizing nonfarm questions: economic activity to rural areas, and pro- · What can agriculture do for develop- viding assistance to help move people out of ment? Agriculture has served as a basis agriculture. Doing this calls for innovative for growth and reduced poverty in many policy initiatives and strong political com- countries, but more countries could ben- mitment. But it can benefit 600 million of efit if governments and donors were to the world's rural poor. reverse years of policy neglect and rem- In urbanized countries, which include edy their underinvestment and misin- most of Latin America and much of Europe vestment in agriculture. and Central Asia, agriculture can help reduce the remaining rural poverty if small- · What are effective instruments in using holders become direct suppliers in modern agriculture for development? Top pri- food markets, good jobs are created in agri- orities are to increase the assets of poor culture and agroindustry, and markets for households, make smallholders--and environmental services are introduced. agriculture in general--more produc- With rising resource scarcity and mount- tive, and create opportunities in the ing externalities, agricultural development rural nonfarm economy that the rural and environmental protection have become poor can seize. closely intertwined. Agriculture's large envi- · How can agriculture-for-development ronmental footprint can be reduced, farm- agendas best be implemented? By design- ing systems made less vulnerable to climate ing policies and decision processes most change, and agriculture harnessed to deliver suited to each country's economic and more environmental services. The solution social conditions, by mobilizing politi- is not to slow agricultural development--it cal support, and by improving the gov- is to seek more sustainable production sys- ernance of agriculture. tems. The first step in this is to get the incen- tives right by strengthening property rights What can agriculture do and removing subsidies that encourage for development? the degradation of natural resources. Also Agriculture has features that imperative is adapting to climate change, make it a unique instrument which will hit poor farmers the hardest-- for development and hit them unfairly because they have Agriculture can work in concert with other contributed little to its causes. sectors to produce faster growth, reduce Agriculture thus offers great promise for poverty, and sustain the environment. In growth, poverty reduction, and environ- this Report, agriculture consists of crops, mental services, but realizing this promise livestock, agroforestry, and aquaculture. It also requires the visible hand of the state-- does not include forestry and commercial providing core public goods, improving capture fisheries because they require vastly the investment climate, regulating natural different analyses. But interactions between resource management, and securing desir- agriculture and forestry are considered in able social outcomes. To pursue agriculture- the discussions of deforestation, climate for-development agendas, local, national, change, and environmental services. and global governance for agriculture need to be improved. The state will need greater Agriculture contributes to development in capacity to coordinate across sectors and many ways. Agriculture contributes to to form partnerships with private and civil development as an economic activity, as a society actors. Global actors need to deliver livelihood, and as a provider of environ- Overview 3 mental services, making the sector a unique · As a livelihood. Agriculture is a source instrument for development. of livelihoods for an estimated 86 per- · As an economic activity. Agriculture cent of rural people. It provides jobs for can be a source of growth for the national 1.3 billion smallholders and landless economy, a provider of investment oppor- workers, "farm-financed social welfare" tunities for the private sector, and a prime when there are urban shocks, and a foun- driver of agriculture-related industries dation for viable rural communities. Of and the rural nonfarm economy. Two- the developing world's 5.5 billion people, thirds of the world's agricultural value 3 billion live in rural areas, nearly half of added is created in developing countries. humanity. Of these rural inhabitants an In agriculture-based countries, it gener- estimated 2.5 billion are in households ates on average 29 percent of the gross involved in agriculture, and 1.5 billion domestic product (GDP) and employs are in smallholder households.3 65 percent of the labor force. The indus- The recent decline in the $1-a-day tries and services linked to agriculture in poverty rate in developing countries-- value chains often account for more than from 28 percent in 1993 to 22 percent 30 percent of GDP in transforming and in 2002--has been mainly the result of urbanized countries. falling rural poverty (from 37 percent to Agricultural production is important 29 percent) while the urban poverty rate for food security because it is a source remained nearly constant (at 13 percent). of income for the majority of the rural More than 80 percent of the decline in poor. It is particularly critical in a dozen rural poverty is attributable to better countries of Sub-Saharan Africa, with a conditions in rural areas rather than to combined population of about 200 mil- out-migration of the poor. So, contrary lion and with highly variable domestic to common perceptions, migration to production, limited tradability of food cities has not been the main instrument staples, and foreign exchange constraints for rural (and world) poverty reduction. in meeting their food needs through But the large decline in the number of imports. These countries are exposed rural poor (from 1,036 million in 1993 to to recurrent food emergencies and the 883 million in 2003) has been confined uncertainties of food aid, and for them, to East Asia and the Pacific (figure 1). In increasing and stabilizing domestic pro- South Asia and Sub-Saharan Africa, the duction is essential for food security. number of rural poor has continued to Figure 1 The number of poor rose in South Asia and Sub-Saharan Africa from 1993 to 2002 ($1-a-day poverty line) Rural poverty Urban poverty Millions of people Millions of people below $1-a-day poverty line below $1-a-day poverty line 500 500 400 1993 2002 400 1993 2002 300 300 200 200 100 100 0 0 Sub- South East Asia Middle East Europe & Latin Sub- South East Asia Middle East Europe & Latin Saharan Asia & Pacific & North Central America & Saharan Asia & Pacific & North Central America & Africa Africa Asia Caribbean Africa Africa Asia Caribbean Source: Ravallion, Chen, and Sangraula 2007. 4 WORLD DEVELOPMENT REPORT 2008 rise and will likely exceed the number of This group of countries has 417 million urban poor until 2040. In these regions, a rural inhabitants, mainly in Sub-Saharan high priority is to mobilize agriculture for countries. Eighty-two percent of the rural poverty reduction. Sub-Saharan population lives in agricul- · As a provider of environmental services. ture-based countries. In using (and frequently misusing) nat- · Transforming countries--Agriculture ural resources, agriculture can create is no longer a major source of economic good and bad environmental outcomes. growth, contributing on average only It is by far the largest user of water, con- 7 percent to GDP growth, but poverty tributing to water scarcity. It is a major remains overwhelmingly rural (82 per- player in underground water depletion, cent of all poor). This group, typified agrochemical pollution, soil exhaustion, by China, India, Indonesia, Morocco, and global climate change, accounting and Romania, has more than 2.2 billion for up to 30 percent of greenhouse gas rural inhabitants. Ninety-eight percent emissions. But it is also a major pro- of the rural population in South Asia, 96 vider of environmental services, gener- percent in East Asia and the Pacific, and ally unrecognized and unremunerated, 92 percent in the Middle East and North sequestering carbon, managing water- Africa are in transforming countries. sheds, and preserving biodiversity. With · Urbanized countries--Agriculture con- rising resource scarcity, climate change, tributes directly even less to economic and concern about environmental costs, growth, 5 percent on average, and pov- business as usual in the way agriculture erty is mostly urban. Even so, rural areas uses natural resources is not an option. still have 45 percent of the poor, and agri- Making the farming systems of the rural business and the food industry and ser- poor less vulnerable to climate change is vices account for as much as one third of imperative. Managing the connections GDP. Included in this group of 255 mil- among agriculture, natural resource lion rural inhabitants are most countries conservation, and the environment must in Latin America and the Caribbean and be an integral part of using agriculture many in Europe and Central Asia. Eighty- for development. eight percent of the rural populations in both regions are in urbanized countries. Agriculture's contributions differ in the Countries follow evolutionary paths three rural worlds. The way agricul- that can move them from one country type ture works for development varies across to another. China and India moved from countries depending on how they rely on the agriculture-based to the transforming agriculture as a source of growth and an group over the past 20 years, while Indo- instrument for poverty reduction. The nesia gravitated toward the urbanized (fig- contribution of agriculture to growth and ure 2). In addition, countries have sharp poverty reduction can be seen by categoriz- subnational geographical disparities--for ing countries according to the share of agri- example, many transforming and urban- culture in aggregate growth over the past 15 ized countries have agriculture-based years, and the current share of total poverty regions (such as Bihar in India and Chiapas in rural areas, using the $2-a-day poverty in Mexico). line (figure 2). This perspective produces Classifying regions within countries three types of countries--three distinct according to their agricultural potential rural worlds (table 1): and access to markets shows that 61 per- · Agriculture-based countries--Agricul- cent of the rural population in developing ture is a major source of growth, account- countries lives in favored areas--irrigated, ing for 32 percent of GDP growth on humid, and semihumid areas with little average--mainly because agriculture moisture stress, and with medium to good is a large share of GDP--and most of market access (less than five hours from a the poor are in rural areas (70 percent). market town of 5,000 or more). But two- Overview 5 Figure 2 Agriculture's contribution to growth and the rural share in poverty distinguish three types of countries: agriculture based, transforming, and urbanized Agriculture's contribution to growth, 1990­2005, % 80 Actual poverty data Agriculture-based BDI Predicted poverty data countries Poverty data over time RWA 60 CMR MWI SDN PRY BEN NER INDIA NGA PNG 40 CMR (1965­94) BGR TGO LAO GHA AZE CIV SYR MDG KEN BFA ETH NPL ZMB MOZ GIN MLI TCD UGA 20 HND PAK IRN YEM KHM SEN DZA GTM CHINA BRA PHL BOL AGO IDN BGD PER EGY VNM (1981­2001) ARG UKR RUS DOM IND TUN VEN SVK TUR MAR THA LKA CHN BRAZIL CHL CZE SLV ECU INDONESIA 0 (1970­96) MEX ZAR POL ROM ZAF MYS (1970­96) TJK HUN COL Transforming countries BLR Urbanized countries ZWE ­20 0.0 0.2 0.4 0.6 0.8 1.0 Rural poor/total poor, 2002 Source: WDR 2008 team. Note: Arrows show paths for Brazil, China, India, and Indonesia. The list of 3-letter codes and the countries they represent can be found on page xviii. Table 1 Characteristics of three country types, 2005 Agriculture- Transforming Urbanized based countries countries countries Rural population (millions), 2005 417 2,220 255 Share of population rural (%), 2005 68 63 26 GDP per capita (2000 US$), 2005 379 1,068 3,489 Share of agriculture in GDP (%), 2005 29 13 6 Annual agricultural GDP growth, 1993­2005 (%) 4.0 2.9 2.2 Annual nonagricultural GDP growth, 1993­2005 (%) 3.5 7.0 2.7 Number of rural poor (millions), 2002 170 583 32 Rural poverty rate, 2002 (%) 51 28 13 Source: Ravallion, Chen, and Sangraula 2007; World Bank 2006y. Note: Poverty line is $1.08 a day, in 1993 purchasing power parity dollars. thirds of the rural population in Sub-Saha- Heterogeneitydefinestheruralworld. Eco- ran Africa lives in less-favored areas defined nomic and social heterogeneity is a defining as arid and semiarid or with poor market characteristic of rural areas. Large commer- access. In five countries with detailed pov- cial farmers coexist with smallholders. This erty maps, the poverty rate is higher in less- diversity permeates the smallholder popu- favored areas, but most of the poor live in lation as well. Commercial smallholders favored areas. So using agriculture to reduce deliver surpluses to food markets and share poverty requires not only investing in less- in the benefits of expanding markets for the favored areas to combat extreme poverty, new agriculture of high-value activities. But but also targeting the large number of poor many others are in subsistence farming, in favored areas. mainly due to low asset endowments and 6 WORLD DEVELOPMENT REPORT 2008 unfavorable contexts. Consuming most poverty as GDP growth originating outside of the food they produce, they participate agriculture (figure 3). For China, aggregate in markets as buyers of food and as sellers growth originating in agriculture is esti- of labor. Membership in these categories mated to have been 3.5 times more effective is affected not only by asset positions, but in reducing poverty than growth outside also by gender, ethnicity, and social status, agriculture--and for Latin America 2.7 as they imply differing abilities to use the times more. Rapid agricultural growth-- same assets and resources in responding to in India following technological innova- opportunities. tions (the diffusion of high yielding vari- Heterogeneity is found in the rural labor eties) and in China following institutional market where there are many low-skill, innovations (the household responsibility poorly remunerated agricultural jobs and a system and market liberalization)--was small number of high-skill jobs that offer accompanied by major declines in rural workers pathways out of poverty. It is found poverty. More recently, in Ghana, rural in the rural nonfarm economy where low- households accounted for a large share of a productivity self- and wage-employment steep decline in poverty induced in part by coexists with employment in dynamic agricultural growth. enterprises. And it is found in the outcomes of migration, which lifts some of the rural Agriculture can be the lead sector for poor out of poverty but takes others to overall growth in the agriculture-based urban slums and continued poverty. countries. Agriculture has a well-estab- This pervasive heterogeneity in agricul- lished record as an instrument for poverty ture and rural society has deep implications reduction. But can it also be the leading for public policy in using agriculture for sector of a growth strategy for the agricul- development. A particular policy reform is ture-based countries? Besides the sheer size likely to have gainers and losers. Trade lib- of the sector, two arguments, applied to the eralization that raises the price of food hurts agriculture-based countries of Sub-Saharan net buyers (the largest group of rural poor Africa, support the view that it can. in countries like Bolivia and Bangladesh) The first is that in many of these coun- and benefits net sellers (the largest group tries, food remains imperfectly tradable of rural poor in Cambodia and Vietnam). because of high transaction costs and the Policies have to be differentiated according prevalence of staple foods that are only to the status and context of households, tak- lightly traded, such as roots and tubers and ing particular account of prevailing gender local cereals. So, many of these countries norms. Differentiated policies are designed not necessarily to favor one group over the other but to serve all households more cost- Figure 3 GDP growth originating in agriculture benefits the poorest half of the population effectively, tailoring policies to their condi- substantially more tions and needs, particularly to the poorest. Balancing attention to the favored and less- Expenditure gains induced by 1% GDP growth, % 8 favored subsectors, regions, and households Agriculture is one of the toughest policy dilemmas fac- 6 Nonagriculture ing poor countries with severe resource constraints. 4 2 Agriculture has a strong record in development 0 Agriculture has special powers in reducing ­2 poverty. Agricultural growth has special Lowest 2 3 4 5 6 7 8 9 Highest powers in reducing poverty across all coun- Expenditure deciles try types. Cross-country estimates show Source: Ligon and Sadoulet 2007. that GDP growth originating in agricul- Note: Based on data from 42 countries during the period 1981­2003. Gains are significantly different for the lower half of ture is at least twice as effective in reducing expenditure deciles. Overview 7 must largely feed themselves. Agricultural Yet agriculture has been vastly underused productivity determines the price of food, for development. Parallel to these suc- which in turn determines wage costs and cesses are numerous failures to use agricul- competitiveness of the tradable sectors. ture for development. Many agriculture- Productivity of food staples is thus key to based countries still display anemic per growth. capita agricultural growth and little struc- The second is that comparative advan- tural transformation (a declining share of tage in the tradable subsectors will still lie agriculture in GDP and a rising share of in primary activities (agriculture and min- industry and services as GDP per capita ing) and agroprocessing for many years, rises). The same applies to vast areas within because of resource endowments and the countries of all types. Rapid population difficult investment climate for manufac- growth, declining farm size, falling soil fer- tures. Most economies depend on a diverse tility, and missed opportunities for income portfolio of unprocessed and processed pri- diversification and migration create distress mary-based exports (including tourism) to as the powers of agriculture for development generate foreign exchange. Growth in both remain fallow. Policies that excessively tax the nontradable and tradable sectors of agriculture and underinvest in agriculture agriculture also induces strong growth in are to blame, reflecting a political economy other sectors of the economy through mul- in which urban interests have the upper tiplier effects. hand. Compared with successful transform- That is why, for many years to come, the ing countries when they still had a high growth strategy for most agriculture-based share of agriculture in GDP, the agriculture- economies has to be anchored on getting based countries have very low public spend- agriculture moving. Success stories of agri- ing in agriculture as a share of their agricul- culture as the basis for growth at the begin- tural GDP (4 percent in the agriculture-based ning of the development process abound. countries in 2004 compared with 10 percent Agricultural growth was the precursor to in 1980 in the transforming countries, fig- the industrial revolutions that spread across ure 4). The pressures of recurrent food cri- the temperate world from England in the ses also tilt public budgets and donor priori- mid-18th century to Japan in the late-19th ties toward direct provision of food rather century. More recently, rapid agricultural than investments in growth and achieving growth in China, India, and Vietnam was food security through rising incomes. the precursor to the rise of industry. Just as Where women are the majority of small- for poverty, the special powers of agricul- holder farmers, failure to release their full ture as the basis for early growth are well potential in agriculture is a contributing established. factor to low growth and food insecurity. Figure 4 Public spending on agriculture is lowest in the agriculture-based countries, while their share of agriculture in GDP is highest Agricultural GDP/GDP Public spending on agriculture/agricultural GDP Percent Percent 35 35 30 29 29 1980 2000 30 1980 2000 25 24 25 20 20 16 17 15 14 15 12 10 11 10 10 10 5 5 4 4 0 0 Agriculture-based Transforming Urbanized Agriculture-based Transforming Urbanized Source : Fan, forthcoming. 8 WORLD DEVELOPMENT REPORT 2008 Underuse of agriculture for development agriculture of staple crops and traditional is not confined to the agriculture-based export commodities also finds new markets countries. In transforming countries with as it becomes more differentiated to meet rapid growth in nonagricultural sectors, changing consumer demands and new uses the reallocation of labor out of agriculture is (for example, biofuels) and benefits from typically lagging, leaving large numbers of regional market integration. However, agri- poor people in rural areas and widening the culture faces large uncertainties that are rural-urban income gap. The farm popula- difficult to predict and call for caution in tion demands subsidies and protection. But managing the global food supply (box 1). weak fiscal capacity to sustain transfers large An emerging vision of agriculture for enough to reduce the income gap and con- development redefines the roles of produc- tinuing urban demands for low food prices ers, the private sector, and the state. Produc- create a policy dilemma.4 The opportunity tion is mainly by smallholders, who often cost of subsidies (which are three times pub- remain the most efficient producers, in par- lic investments in agriculture in India) is ticular when supported by their organiza- reduced public goods for growth and social tions. But when these organizations cannot services in rural areas. Raising incomes in capture economies of scale in production agriculture and the rural nonfarm economy and marketing, labor-intensive commercial must be part of the solution. farming can be a better form of production, and efficient and fair labor markets are the New opportunities are emerging. The key instrument to reducing rural poverty. world of agriculture has changed dramati- The private sector drives the organization cally since the 1982 World Development of value chains that bring the market to Report on agriculture. Dynamic new mar- smallholders and commercial farms. The kets, far-reaching technological and insti- state--through enhanced capacity and new tutional innovations, and new roles for the forms of governance--corrects market fail- state, the private sector, and civil society all ures, regulates competition, and engages characterize the new context for agricul- strategically in public-private partnerships ture. The emerging new agriculture is led to promote competitiveness in the agribusi- by private entrepreneurs in extensive value ness sector and support the greater inclu- chains linking producers to consumers and sion of smallholders and rural workers. In including many entrepreneurial smallhold- this emerging vision, agriculture assumes a ers supported by their organizations. The prominent role in the development agenda. What are effective instruments in using agriculture B O X 1 What is the future for the global food supply? for development? Agriculture has been largely successful in percent from 2000 to 2030. Added to this Agriculture can be the main source of meeting the world's effective demand for is the burgeoning demand for agricultural food. Yet more than 800 million people feedstocks for biofuels, which have already growth for the agriculture-based coun- remain food insecure, and agriculture has pushed up world food prices. tries and can reduce poverty and improve left a huge environmental footprint. And Managing the aggregate response of the environment in all three country types, the future is increasingly uncertain. agriculture to rising demand will require albeit in different ways. This requires Models predict that food prices in good policy and sustained investments, global markets may reverse their long- not business as usual. Sharply increased improving the asset position of the rural term downward trend, creating rising investment is especially urgent in Sub- poor, making smallholder farming more uncertainties about global food security. Saharan Africa, where food imports are competitive and sustainable, diversifying Climate change, environmental degrada- predicted to more than double by 2030 income sources toward the labor market and tion, rising competition for land and water, under a business-as-usual scenario, the higher energy prices, and doubts about impact of climate change is expected to the rural nonfarm economy, and facilitating future adoption rates for new technologies be large with little capacity to cope, and successful migration out of agriculture. all present huge challenges and risks that progress continues to be slow in raising make predictions difficult. per capita food availability. Increase access to assets To meet projected demand, cereal Household assets are major determinants production will have to increase by nearly 50 percent and meat production by 85 Source: Rosegrant and others 2007. of the ability to participate in agricultural markets, secure livelihoods in subsistence Overview 9 farming, compete as entrepreneurs in the women's rights. Redistributing underuti- rural nonfarm economy, and find employ- lized large estates to settle smallholders can ment in skilled occupations. Three core work if complemented by reforms to secure assets are land, water, and human capital. the competitiveness of beneficiaries-- Yet the assets of the rural poor are often something that has been difficult to achieve. squeezed by population growth, environ- Targeted subsidies to facilitate market- mental degradation, expropriation by dom- based land reform are used in Brazil and inant interests, and social biases in policies South Africa, and lessons must be derived and in the allocation of public goods. from these pioneering experiences for Nowhere is the lack of assets greater than potential wider application. in Sub-Saharan Africa, where farm sizes in many of the more densely populated areas Water. Access to water and irrigation is are unsustainably small and falling, land is a major determinant of land productivity severely degraded, investment in irrigation and the stability of yields. Irrigated land is negligible, and poor health and educa- productivity is more than double that tion limit productivity and access to better of rainfed land. In Sub-Saharan Africa, options. Population pressure together with only 4 percent of the area in production is declining farm size and water scarcity are under irrigation, compared with 39 per- also major challenges in many parts of Asia. cent in South Asia and 29 percent in East Enhancing assets requires significant public Asia. With climate change leading to rising investments in irrigation, health, and edu- uncertainties in rainfed agriculture and cation. In others cases, it is more a matter of reduced glacial runoff, investment in water institutional development, such as enhanc- storage will be increasingly critical. Even ing the security of property rights and the with growing water scarcity and rising costs quality of land administration. Increasing of large-scale irrigation schemes, there are assets may also call for affirmative action many opportunities to enhance produc- to equalize chances for disadvantaged or tivity by revamping existing schemes and excluded groups, such as women and eth- expanding small-scale schemes and water nic minorities. harvesting. Land. Land markets, particularly rental Education. While land and water are crit- markets, can raise productivity, help house- ical assets in rural areas, education is often holds diversify their incomes, and facilitate the most valuable asset for rural people to exit from agriculture. As farmers age, as pursue opportunities in the new agriculture, rural economies diversify, and as migration obtain skilled jobs, start businesses in the accelerates, well-functioning land markets rural nonfarm economy, and migrate suc- are needed to transfer land to the most pro- cessfully. Yet education levels in rural areas ductive users and to facilitate participation tend to be dismally low worldwide: an aver- in the rural nonfarm sector and migration age of four years for rural adult males and out of agriculture. But in many countries, less than three years for rural adult females insecure property rights, poor contract in Sub-Saharan Africa, South Asia, and the enforcement, and stringent legal restric- Middle East and North Africa. Improving tions limit the performance of land mar- basic rural education has been slower than kets, creating large inefficiencies in both in urban areas. Where demand for educa- land and labor reallocation and reinforc- tion is lagging among rural households, it ing existing inequalities in access to land. can be enhanced through cash transfers (as Safety nets and access to credit are needed in Bangladesh, Brazil, and Mexico) con- to minimize distress land sales when farm- ditional on school attendance. However, ers are exposed to shocks. increasingly it is the quality of rural educa- Land reform can promote smallholder tion that requires the most improvement, entry into the market, reduce inequalities with education conceived broadly to include in land distribution, increase efficiency, vocational training that can provide tech- and be organized in ways that recognize nical and business skills that are useful in 10 WORLD DEVELOPMENT REPORT 2008 the new agriculture and the rural nonfarm · Make agriculture more sustainable and economy. a provider of environmental services (chapter 8) Health. Widespread illness and death from HIV/AIDS and malaria can greatly Improve price incentives and increase reduce agricultural productivity and dev- the quality and quantity of pub- astate livelihoods. The majority of people lic investment. Recent reforms have affected by HIV work in farming, and there improved price incentives for agricultural is tremendous scope for agricultural policy producers in developing countries, reduc- to be more HIV-responsive in supporting ing but not eliminating historical policy adjustments to labor shocks and the trans- biases against agriculture. Between 1980­ mission of knowledge to orphans. In rural 84 and 2000­04 net agricultural taxation Zambia, population declines have been declined on average from 28 percent to 10 especially severe for young rural adults: 19 percent in agriculture-based countries, percent of people 15­24 years old in 1990, from 15 percent to 4 percent in transform- the most productive age, are estimated to ing countries, and from marginally nega- have died by 2000. But agriculture also tive protection to net protection of 9 per- poses threats to the health of the rural cent in urbanized countries. However, a low poor. Irrigation can increase the incidence level of net taxation hides a combination of of malaria, and pesticide poisoning is esti- protection of importables and taxation of mated to cause 355,000 deaths annually. exportables (especially in the agriculture- Zoonotic diseases such as avian influenza based and transforming countries), which that arise from the proximity of humans can both be high (figure 5). Hence, consid- and animals pose growing threats to human erable room remains for further efficiency health. Better coordination of the agricul- gains through reforms in developing coun- ture and health agendas can yield big divi- tries' own trade policies. Liberalization of dends for productivity and welfare. imports of food staples can also be pro- poor because often the largest number of Make smallholder farming more poor, including smallholders, are net food productive and sustainable buyers. But many poor net sellers (some- Improving the productivity, profitability, times the largest group of poor) will lose, and sustainability of smallholder farming and programs tailored to country-specific is the main pathway out of poverty in using circumstances will be needed to ease the agriculture for development. What will transition to new market realities. this take? A broad array of policy instru- In sharp contrast, there has been relatively ments, many of which apply differently to little progress in the overall decline in pro- commercial smallholders and to those in ducer support in member countries of the subsistence farming, can be used to achieve Organisation for Economic Co-operation the following: and Development (OECD). Producer sup- port declined from 37 percent of gross value · Improve price incentives and increase the of farm receipts in 1986­88 to 30 percent in quality and quantity of public investment 2003­05. There has been a shift away from (chapter 4) support directly linked to product prices to · Make product markets work better other less-distorting forms such as cash (chapters 5 and 6) transfers "decoupled" from production, par- · Improve access to financial services ticularly in the European Union (EU). But and reduce exposure to uninsured risks such transfers are not always neutral for pro- (chapter 6) duction because they reduce aversion to risk · Enhance the performance of producer (wealth effect), reduce the variability in farm organizations (chapter 6) income (insurance effect), and allow banks · Promote innovation through science to make loans to farmers that they otherwise and technology (chapter 7) would not. Overview 11 Figure 5 Developing countries are taxing agricultural exportables less Exportables Importables Nominal rate of assistance, % Nominal rate of assistance, % 30 30 1980­84 2000­04 1980­84 2000­04 26 23 20 20 14 13 10 11 10 10 2 0 0 ­10 ­10 ­13 ­14 ­20 ­19 ­20 ­30 ­29 ­30 ­40 ­40 ­46 ­50 ­50 Agriculture-based Transforming Urbanized Agriculture-based Transforming Urbanized Source : Anderson, forthcoming. Note : The nominal rate of assistance is a measure of domestic output prices relative to border prices, which also takes into account domestic input subsidies. The estimated welfare impacts of full The political economy will determine trade liberalization are relatively large. By the pace and extent of further trade, price, removing their current level of protection, and public spending reforms. Membership industrial countries would induce annual in the World Trade Organization (WTO) welfare gains for developing countries esti- can help induce reform, and local media mated to be five times the current annual can expose taxpayer costs and unequal flow of aid to agriculture. But this impact incidence of gains. In some cases, bar- is heterogeneous across products and coun- gained compromises and compensation tries. With full trade liberalization, inter- schemes for the losers can be effective--as national agricultural commodity prices in Japan's rice policy reforms, the EU's are estimated to increase on average by 5.5 sugar reforms, and Mexico's 1990s reforms percent, while those of cotton are expected for food staples. Linking domestic agricul- to increase by 21 percent and oilseeds by 15 tural reforms to a broader set of economy- percent. This raises particular concerns for wide reforms can increase the likelihood of food-importing countries with tight for- success, as in many developing countries eign exchange constraints such as Burundi, in the 1980s and 1990s, but these reforms Rwanda, and Niger. Poor countries that tend to remain incomplete for agriculture. export cotton or oilseeds, such as Chad, Other subsidy reforms, such as free electri- Sudan, Burkina Faso, Mali, and Benin, stand cal power to Indian farmers, remain dead- to gain. Among the big expected gainers are locked in clientelistic bargains at high effi- Brazil, Thailand, and Vietnam. ciency and environmental costs. The Doha Round of trade negotiations The response to better price incentives must urgently be concluded, particularly depends on public investments in market to eliminate distortions, such as U.S. cot- infrastructure, institutions, and support ton subsidies, which are detrimental to services. But the quality of public spend- the poorest countries. Complementary ing is often low and needs improvement. policies and programs (including aid-for- In some countries, nonstrategic subsidies trade) are needed to compensate losers amount to as much as half of the public (transfer programs) and to facilitate rapid budget for agriculture. To mobilize politi- and equitable adjustments by smallhold- cal support for better use of public expendi- ers to emerging comparative advantages tures in agriculture, an initial step is greater (investments in public goods and institu- public disclosure and transparency of bud- tional reforms). get allocation, and analysis of impacts. 12 WORLD DEVELOPMENT REPORT 2008 Make product and input markets work this has been done, production and quality better. With major structural changes in have improved--as for cotton in Zambia, agricultural markets and the entry of pow- where production tripled. Critically impor- erful new actors, a key issue for development tant, too, is to increase the productivity of is enhancing the participation of small- exports, as exemplified by the recent suc- holders and ensuring the poverty-reducing cessful Ghana experience with cocoa. Qual- impacts of agricultural growth. Options ity improvements and fair trade can open differ across the spectrum of markets. new opportunities for more remunerative markets for some smallholders. Food staples markets. Reducing transac- tion costs and risks in food staples markets High-value markets. The participation of can promote faster growth and benefit the smallholders can also be enhanced in high- poor. Beyond investments in infrastructure, value markets, both global and domes- promising innovations include commodity tic, including the supermarket revolution exchanges, market information systems unfolding in many countries. High-value based on rural radio and short messaging markets for domestic consumption are systems, warehouse receipts, and market- the fastest-growing agricultural markets based risk management tools. in most developing countries, expanding A particularly thorny issue in food mar- up to 6­7 percent a year, led by livestock kets is how to manage price volatility for products and horticulture (figure 6). Fresh politically sensitive food staples in countries and processed fruits and vegetables, fish where they account for a large share of con- and fish products, meat, nuts, spices, and sumer spending. If the food staple is trad- floriculture now account for 43 percent of able, insurance through exchange-traded agrofood exports from developing coun- futures contracts can sometimes manage tries, worth about $138 billion in 2004. As price risks, as for countries or traders in incomes rise, supermarkets become more southern Africa that use the South African dominant in the domestic retail sales of commodity exchange. Risk management agricultural products--reaching 60 percent can also be enhanced by more open bor- in some Latin American countries. ders and private trade, as in the successful The poverty impacts of this growth management of flood-induced rice short- depend on how the rural population partic- ages in Bangladesh in 1998. But most food ipates in high-value markets, either directly staples in agriculture-based countries are as producers (as in Bangladesh) or through only partially tradable, and many countries the labor market (as in Chile). Enhancing subject to frequent climatic shocks man- smallholder participation needs market age public grain reserves to reduce price infrastructure, upgrading farmers' techni- instability--with mixed success. High risks cal capacity, risk management instruments, of price volatility remain for both farmers and collective action through producer and consumers in many agriculture-based organizations. Addressing the stringent san- countries and effective safety nets will con- itary and phytosanitary standards in global tinue to be important until incomes rise or markets is an even bigger challenge. Doing market performance improves. it well depends on joint public and private efforts in policy (food safety legislation), Traditional bulk exports. The long down- research (risk assessment, good practices), ward trend in world market prices of such infrastructure (export processing facilities), traditional exports as coffee and cotton and oversight (disease surveillance). threatens the livelihoods of millions of pro- ducers. Reduced taxation and greater liber- Input markets. Especially for seed and fer- alization of export markets has improved tilizer, market failures continue to be perva- incomes in many settings. But these liber- sive in Sub-Saharan Africa because of high alized markets require a new role for gov- transaction costs, risks, and economies of ernment, particularly in regulating fair and scale. As a result, low fertilizer use is one of efficient operations in marketing. Where the major constraints on increasing agricul- Overview 13 Figure 6 Domestic consumption and exports of high-value products in developing countries are growing rapidly Domestic consumption Exports Index, 1980 = 100 Index, 1980 = 100 350 350 300 300 250 250 200 200 150 150 100 100 50 50 0 0 1980 1985 1990 1995 2000 2005 1980 1985 1990 1995 2000 2005 Meat Horticulture Cereals Meat Horticulture Oilseeds Traditional exports Source: http://faostat.fao.org, accessed June 2007, and http://comtrade.un.org. tural productivity in Sub-Saharan Africa. to agriculture through public programs or The renewed interest in fertilizer subsidies state banks has left huge gaps in financial needs to focus on sustainable solutions to services, still largely unfilled despite numer- market failures. "Market-smart" approaches ous institutional innovations. to jump-starting agricultural input markets include targeted vouchers to enable farmers Rural finance. The microfinance revolu- to purchase inputs and stimulate demand tion, providing access to credit without for- in private markets, and matching grants to mal collateral, has opened access to loans for underwrite selected start-up costs of entry millions of poor people, especially women, of private distributors to input markets. but it has not reached most agricultural Like any subsidies, input subsidies must activities, except in high-turnover activities be used with caution because they have such as small livestock and horticulture. high opportunity costs for productive pub- However, the range of financial products lic goods and social expenditures and they available to the rural poor has broadened risk political capture and irreversibility. But to include savings, money transfers, insur- through the judicious use of subsidies, it is ance services, and leasing options. With possible to underwrite risks of early adop- the rise of integrated supply chains and tion of new technologies and achieve econ- contract farming, financial intermediation omies of scale in markets to reduce input through interlinked agents is becoming prices. Subsidies need to be part of a com- more common. Information technologies prehensive strategy to improve productivity are reducing transaction costs and making and must have credible exit options. loans less costly in rural areas, for example, using agricultural credit cards to purchase Improve access to financial services and inputs or cellular phones to complete bank- reduce exposure to uninsured risks. Finan- ing transactions. Credit reporting bureaus cial constraints in agriculture remain per- covering microfinance institutions and the vasive, and they are costly and inequitably lower tier of commercial banks also help distributed, severely limiting smallholders' smallholders capitalize on the reputations ability to compete. Financial constraints they establish as microfinance borrowers to originate in the lack of asset ownership to access larger and more commercial loans. serve as collateral (wealth rationing) and in Many of these innovations are still at the the reticence to put assets at risk as collat- pilot stage, requiring evaluation and scaling eral when they are vital to livelihoods (risk up to make a real difference for smallholder rationing). The demise of special credit lines competitiveness. 14 WORLD DEVELOPMENT REPORT 2008 Managing risk. Exposure to uninsured landless and women, and they produce 22 risks--the result of natural disasters, health percent of India's total milk supply. shocks, demographic changes, price vola- In spite of many successes, producer tility, and policy changes--has high effi- organizations' effectiveness is frequently ciency and welfare costs for rural house- constrained by legal restrictions, low man- holds. To manage exposure to these risks, agerial capacity, elite capture, exclusion of farmers have to forgo activities with higher the poor, and failure to be recognized as full expected incomes. Selling assets to sur- partners by the state. Donors and govern- vive shocks can have high long-term costs ments can assist by facilitating the right to because decapitalization (distress sales of organize, training leaders, and empowering land and livestock) creates irreversibilities weaker members, in particular women and or slow recovery in the ownership of agri- young farmers. However, providing this cultural assets. In addition, child educa- assistance without creating dependency tion and health can suffer long-term con- remains a challenge. sequences when children are taken out of school in response to shocks or are exposed Promote innovation through science and to early periods of malnutrition, leading to technology. Driven by rapidly growing intergenerational transfers of poverty. private investment in research and devel- In spite of multiple initiatives, little prog- opment (R&D), the knowledge divide ress has been made in reducing uninsured between industrial and developing coun- risks in smallholder agriculture. State- tries is widening. Including both public managed insurance schemes have proven and private sources, developing countries largely ineffective. Index-based insurance invest only a ninth of what industrial coun- for drought risk, now being scaled up by tries put into agriculture R&D as a share of private initiatives in India and elsewhere, agricultural GDP. can reduce risks to borrowers and lenders To narrow this divide, sharply increased and unlock agricultural finance. However, investments in R&D must be at the top of these initiatives are unlikely to reach a crit- the policy agenda. Many international and ical mass unless there is some element of national investments in R&D have paid off subsidy, at the very least to cover start-up handsomely, with an average internal rate costs. of return of 43 percent in 700 R&D proj- ects evaluated in developing countries in Enhance the performance of producer all regions. But global and national failures organizations. Collective action by pro- of markets and governance lead to serious ducer organizations can reduce transac- underinvestment in R&D and in innova- tion costs in markets, achieve some mar- tion systems more generally, particularly ket power, and increase representation in in the agriculture-based countries. While national and international policy forums. investment in agricultural R&D tripled in For smallholders, producer organizations China and India over the past 20 years, it are essential to achieve competitiveness. increased by barely a fifth in Sub-Saharan They have expanded remarkably rapidly Africa (declining in about half of the coun- in number and membership, often in an tries there).5 African countries are addi- attempt to fill the void left by the state's tionally disadvantaged by the fact that the withdrawal from marketing, input pro- specificity of their agroecological features vision, and credit, and to take advantage leaves them less able than other regions of democratic openings allowing greater to benefit from international technology civil society participation in governance. transfers and the small size of many of Between 1982 and 2002 the percentage of these countries prevents them from captur- villages with producer organizations rose ing economies of scale in agricultural R&D. from 8 to 65 percent in Senegal and from 21 Low investments in R&D and low interna- to 91 percent in Burkina Faso. The Indian tional transfers of technology have gone Dairy Cooperatives Network has 12.3 mil- hand in hand with stagnant cereal yields in lion individual members, many of them Sub-Saharan Africa, resulting in a widening Overview 15 yield gap with the rest of the world (figure and biological control more than pesti- 7). For these countries, sharply increased cides. Because most of these technologies investment and regional cooperation in are location-specific, their development R&D are urgent. and adoption require more decentralized Low spending is only part of the prob- and participatory approaches, combined lem. Many public research organizations with collective action by farmers and face serious leadership, management, and communities. financial constraints that require urgent Revolutionary advances in biotech- attention. But higher-value markets open nology offer potentially large benefits to new opportunities for the private sector poor producers and poor consumers. But to foster innovation along the value chain. today's investments in biotechnology, con- Grasping them often requires partner- centrated in the private sector and driven ships among the public sector, private sec- by commercial interests, have had limited tor, farmers, and civil society in financing, impacts on smallholder productivity in the developing, and adapting innovation. With developing world--the exception is Bt cot- a wider range of institutional options now ton in China and India. Low public invest- available, more evaluation is needed of what ment in biotechnology and slow progress works well in what contexts. in regulating possible environmental and A further challenge is to narrow the food safety risks have restrained the devel- income and productivity gaps between opment of genetically modified organisms favored and less-favored regions. Better (GMOs) that could help the poor. The technologies for soil, water, and livestock potential benefits of these technologies will management and more sustainable and be missed unless the international develop- resilient agricultural systems, including ment community sharply increases its sup- varieties more tolerant of pests, diseases, port to interested countries. and drought, are needed for the latter regions. Approaches that exploit biologi- Make agriculture more sustainable--and a cal and ecological processes can minimize provider of environmental services. The the use of external inputs, especially agri- environmental footprint of agriculture has cultural chemicals. Examples include con- been large, but there are many opportuni- servation tillage, improved fallows, green ties for reducing it. Since the 1992 Earth manure cover crops, soil conservation, Summit in Rio, it is generally accepted that and pest control that relies on biodiversity the environmental agenda is inseparable from the broader agenda of agriculture for development. And the future of agriculture Figure 7 The yield gap for cereals between Sub- Saharan Africa and other regions has widened is intrinsically tied to better stewardship of the natural resource base on which it Yield, tons per hectare 6 depends. Both intensive and extensive agriculture 5 face environmental problems--but of dif- ferent kinds. Agricultural intensification 4 has generated environmental problems 3 from reduced biodiversity, mismanaged irrigation water, agrochemical pollution, 2 and health costs and deaths from pesticide poisoning. The livestock revolution has its 1 own costs, especially in densely populated 0 and periurban areas, through animal waste 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 and the spread of animal diseases such as Developed countries South Asia avian influenza. Many less-favored areas East Asia & Pacific Sub-Saharan Africa suffer from deforestation, soil erosion, Latin America & Caribbean desertification, and degradation of pas- Source: http://faostat.fao.org, accessed June 2007. tures and watersheds. In the East African 16 WORLD DEVELOPMENT REPORT 2008 highlands, soil erosion can result in pro- ening property rights (as with agroforestry ductivity losses as high as 2­3 percent a parklands in Niger) and providing long- year, in addition to creating offsite effects term incentives for natural resource man- such as the siltation of reservoirs. agement with off-farm benefits (such as The answer is not to slow agricultural matching grants for soil conservation) are development, but to seek more sustain- necessary in both intensive and extensive able production systems and to enhance farming areas. Inappropriate incentives agriculture's provision of environmental that encourage mining resources--such services. Many promising technological as subsidies to water intensive crops that and institutional innovations can make cause groundwater overpumping--must agriculture more sustainable with mini- be reduced. mum tradeoffs on growth and poverty Reforms are often politically difficult. reduction. Water management strategies Better water measurement through tech- in irrigated areas must improve water nology (remote sensing), better quality of productivity, meeting demands of all irrigation services, and greater accountabil- users (including the environment), and ity to water users can generate political sup- reduce water pollution and the unsus- port for otherwise stalled reforms. tainable mining of groundwater. These Payments for environmental services strategies depend on removing incentives can help overcome market failures in man- for wasteful water usage, devolving water aging environmental externalities. Water- management to local user groups, invest- shed and forest protection create envi- ing in better technologies, and regulating ronmental services (clean drinking water, externalities more effectively. Decentral- stable water flows to irrigation systems, ized governance in irrigation manage- carbon sequestration, and protection of ment has a higher chance of success if legal biodiversity) for which providers should be frameworks clearly define the roles and compensated through payments from ben- rights of user groups and if the capacity of eficiaries of these services. Interest has been groups to manage irrigation collectively is growing, particularly in Latin America. In increased. Nicaragua, payments induced a reduction Better technologies and better ways of in the area of degraded pasture and annual managing modern farm inputs can also crops by more than 50 percent in favor of make rainfed farming more sustainable. silvopastoralism, half of it by poor farmers. One of agriculture's major success stories Environmental certification of products in the past two decades is conservation (or also allows consumers to pay for sustainable zero) tillage. This approach has worked in environmental management, as practiced commercial agriculture in Latin America, under fair trade or shade-grown coffee. among smallholders in South Asia's rice- wheat systems, and in Ghana. In less-favored The urgency of dealing with climate change. regions, community-based approaches to Poor people who depend on agriculture are natural resource management, such as the most vulnerable to climate change. Increas- watershed management program in Eastern ing crop failures and livestock deaths are Anatolia of Turkey, offer significant prom- already imposing high economic losses ise. As survey data from 20 countries show, and undermining food security in parts of women's active engagement in community Sub-Saharan Africa, and they will get far organizations improves the effectiveness more severe as global warming continues. of natural resources management and the More frequent droughts and increasing ability to resolve conflicts. water scarcity may devastate large parts of Getting incentives right is the first step the tropics and undermine irrigation and toward sustainable resource management. drinking water in entire communities of Widespread adoption of more sustainable already poor and vulnerable people. The approaches is often hindered by inappro- international community must urgently priate pricing and subsidy policies and the scale up its support to climate-proof the failure to manage externalities. Strength- farming systems of the poor, particularly Overview 17 in sub-Saharan Africa, the Himalayan Figure 8 Agriculture and deforestation are heavy contributors to greenhouse gas regions, and the Andes. Based on the pol- emissions luter-pays principle, it is the responsibility % of total GHG emissions of the richer countries to compensate the 63% poor for costs of adaptation. So far, global 60 Developed countries Developing countries commitments to existing adaptation funds have been grossly inadequate. 40 Developing-country agriculture and 15% 20 deforestation are also major sources of 11% 7% 4% greenhouse gas emissions: they contribute 0 an estimated 22 percent and up to 30 per- Energy Agriculture Deforestation Industrial Waste cent of total emissions, more than half of (excluding land processes use change) which is from deforestation largely caused by agricultural encroachment (13 million Source: WDR 2008 team, based on data from the United Nations Framework Convention on Climate Change, www.unfccc.int. hectares of annual deforestation globally) (figure 8).6 Carbon-trading schemes-- especially if their coverage is extended to provide financing for avoided deforestation efficient producers with current technolo- and soil carbon sequestration (for example, gies. Policy decisions on biofuels need to conservation tillage)--offer significant devise regulations or certification systems untapped potential to reduce emissions to mitigate the potentially large environ- from land-use change in agriculture. Some mental footprint of biofuels production. improvements in land and livestock man- Increased public and private investment agement practices (for example, conserva- in research is important to develop more tion tillage and agroforestry) are often win- efficient and sustainable production pro- win situations: after the initial investments, cesses based on feedstocks other than food they can result in more productive and sus- staples. tainable farming systems. Moving beyond farming: Biofuels--an opportunity and a challenge. a dynamic rural economy and Promising new opportunities for mitigating skills to participate in it climate change and creating large new mar- Creating rural employment. With rapid kets for agriculture have emerged through rural population growth and slow expan- the production of biofuels, stimulated by sion in agricultural employment, creating high energy prices. But few of the current jobs in rural areas is a huge and insuffi- biofuels programs are economically viable, ciently recognized challenge. Between 45 and many pose social (rising food prices) and 60 percent of the rural labor force is and environmental (deforestation) risks. engaged in the agricultural labor market To date, production in industrial countries and the rural nonfarm economy in Asia has developed behind high protective tar- and Latin America. Only in Sub-Saharan iffs on biofuels and with large subsidies. Africa is self-employment in agriculture These policies hurt developing countries still by far the dominant activity for the that are, or could become, efficient produc- rural labor force, especially for women. ers in profitable new export markets. Poor But with rapidly growing rural populations consumers also pay higher prices for food and declining farm sizes, the rural employ- staples as grain prices rise in world markets ment problem will need to be addressed directly due to the diversion of grain to bio- there as well. fuels or indirectly due to land conversion The rural labor market offers employ- away from food production. ment possibilities for the rural popula- Brazil is the world's largest and most tion in the new agriculture and the rural efficient producer of biofuels, based on its nonfarm sector. But opportunities are bet- low-cost production of sugarcane. But few ter for those with skills, and women with other developing countries are likely to be lower education levels are at a disadvantage. 18 WORLD DEVELOPMENT REPORT 2008 Migration can be a climb up the income fers, also have an insurance function in ladder for well-prepared, skilled workers, or protecting the most vulnerable against it can be a simple displacement of poverty shocks. These programs have to be orga- to the urban environment for others. nized so that they do not undermine the The policy priority is to create more local labor market and food economy and jobs in both agriculture and the rural non- do not create work disincentives for ben- farm economy. The basic ingredients of a eficiaries, but do reach those most in need dynamic rural nonfarm economy are a rap- "just in time." With the shift in emphasis idly growing agriculture and a good invest- of governments and donor programs over ment climate. Linking the local economy the past two decades toward transfers as to broader markets by reducing transaction an instrument for poverty reduction and costs, investing in infrastructure, and pro- the greater attention to impact evaluation, viding business services and market intel- much has been learned about how to bet- ligence are critical. Agro-based clusters-- ter target and calibrate these programs for firms in a geographic area coordinating to greater effectiveness. compete in servicing dynamic markets-- have been effective, with well-documented How can agriculture-for- experiences for nontraditional exports in development agendas best the San Francisco Valley of Brazil and for be implemented? dairy production in Peru and Ecuador. The real challenge is to assist the tran- Pursuing an agriculture-for-development sition of the rural population into higher- agenda for a country implies defining what paying jobs. Labor regulations are needed to do and how to do it. What to do requires that help incorporate a larger share of a policy framework anchored on the behav- rural workers into the formal market and ior of agents--producers and their organi- eliminate discrimination between men zations, the private sector in value chains, and women. Education, skills, and entre- and the state. How to do it requires effective preneurship can be fostered--by providing governance to muster political support and incentives for parents to better educate their implementation capacity, again based on children, improving the quality of schools, the behavior of agents--the state, civil soci- and providing educational opportunities ety, the private sector, donors, and global relevant to emerging job markets. institutions. Providing safety nets. Providing social Defining an agriculture-for- assistance to the chronic and transitory development agenda poor can increase both efficiency and wel- Opening and widening pathways out of fare. Efficiency gains come from reducing poverty. Rural households pursue port- the cost of risk management and the risk folios of farm and nonfarm activities that of asset decapitalization in response to allow them to capitalize on the different shocks. Welfare gains come from support- skills of individual members and to diversify ing the chronic poor with food aid or cash risks. Pathways out of poverty can be through transfers. In Brazil, South Africa, and most smallholder farming, wage employment in countries in Europe and Central Asia, rural agriculture, wage or self-employment in the noncontributory pension funds protect the rural nonfarm economy, and migration out aged, facilitate earlier land transfers to the of rural areas--or some combination thereof. younger generation, and relieve those who Gender differences in access to assets and work from the financial burden of support- mobility constraints are important determi- ing the elderly. These policies have been nants of available pathways. shown to have important spillover effects Making agriculture more effective in on the health and education of the pension- supporting sustainable growth and reduc- ers' grandchildren. ing poverty starts with a favorable socio- Safety nets, such as guaranteed work- political climate, adequate governance, fare programs and food aid or cash trans- and sound macroeconomic fundamentals. Overview 19 It then requires defining an agenda for each Figure 9 The four policy objectives of the agriculture-for-development agenda form a country type, based on a combination of policy diamond four policy objectives--forming a policy Preconditions diamond (figure 9): Macroeconomic fundamentals Governance · Objective 1. Improve access to markets Sociopolitical context and establish efficient value chains 1 · Objective 2. Enhance smallholder com- Improve petitiveness and facilitate market entry Demand for market access; Demand for agricultural establish efficient agricultural and · Objective 3. Improve livelihoods in sub- products value chains nonfarm products sistence farming and low-skill rural occupations 4 · Objective 4. Increase employment in agri- 2 Pathways out Increase employment in Enhance smallholder culture and the rural nonfarm economy, of poverty agriculture and the rural competitiveness; Farming, labor, nonfarm economy; and enhance skills facilitate market entry Income migration Income effects effects enhance skills In using agriculture for development, a country should formulate an agenda with the following characteristics: 3 Transition Transition Improve livelihoods to market to market · Established preconditions. Without social in subsistence agriculture and peace, adequate governance, and sound low-skill rural macro fundamentals, few parts of an occupations agricultural agenda can be effectively Source: WDR 2008 team. implemented. This basic premise was all too often missing in agriculture-based countries until the mid-1990s, particu- countries account for over 80 percent of the larly in Sub-Saharan Africa. rural population in the agriculture-based · Comprehensive. The agenda combines countries. For them, with both limited trad- the four objectives of the policy diamond, ability of food and comparative advantage depending on country context, and spec- in primary subsectors, agricultural produc- ifies indicators that help in monitoring tivity gains must be the basis for national and evaluating progress toward each pol- economic growth and the instrument for icy objective. mass poverty reduction and food security. · Differentiated. Agendas differ by country This poses a huge challenge to governments type, reflecting differences in priorities and the international community, but there and structural conditions across the three is little alternative to success in this under- agricultural worlds. The agendas must be taking, and there are new opportunities further customized to country specifics that provide a basis for optimism. through national agricultural strategies As macroeconomic conditions and com- with wide stakeholder participation. modity prices improved in Sub-Saharan · Sustainable. The agendas must be envi- Africa starting in the mid-1990s (figure ronmentally sustainable both to reduce 10), agricultural growth accelerated from the environmental footprint of agricul- 2.3 percent per year in the 1980s to 3.8 per- ture as well as to sustain future agricul- cent between 2001 and 2005. Rural poverty tural growth. started to decline where growth occurred-- · but rapid population growth is absorbing Feasible. To be implemented and have much of the gain, reducing per capita agri- significant impact, policies and pro- cultural growth to 1.5 percent. Faster growth grams must meet the conditions of polit- and poverty reduction are now achievable, ical feasibility, administrative capacity, but they will require commitments, skills, and financial affordability. and resources. Agriculture-based countries: achieving Diverse local conditions in Sub-Saharan growth and food security. Sub-Saharan Africa produce a wide range of farming 20 WORLD DEVELOPMENT REPORT 2008 Figure 10 Agricultural growth in Sub-Saharan Africa has increased as macroeconomic conditions improved Macroeconomic score Agriculture growth rate, % per year 10 6 5 8 4 6 3 2 4 1 2 1984­95 0 1995­2005 0 ­1 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 ­0.2 0 0.2 0.4 0.6 Average annual change in macroeconomic score Source: WDR 2008 team, based on data from International Country Risk Guide, http://www.icrgonline.com. Note: Macroeconomic score is the average of the budget balance score, inflation score, and exchange rate stability. Each point represents a country. systems and reliance on many types of food water management are needed to enhance staples, implying a path to productivity the resilience of farming systems, especially growth that differs considerably from that for people in subsistence farming in remote in Asia.7 Although diversity complicates and risky environments. And it requires the development of new technologies, it capitalizing on agricultural growth to acti- offers a broad range of opportunities for vate the rural nonfarm economy in produc- innovation. Dependence on the timing and ing nontradable goods and services. The amount of rainfall increases vulnerability agenda must recognize the often-dominant to weather shocks and limits the ability to role of women as farmers, agroprocessors, use known yield-enhancing technologies. and traders in local markets. But the untapped potential for storing The Sub-Saharan context implies four water and using it more efficiently is enor- distinct features of an agriculture-for- mous. Small and landlocked countries act- development agenda. First, a multisectoral ing alone cannot achieve economies of approach must capture the synergies between scale in product markets and in research technologies (seeds, fertilizer, livestock and training, which makes regional inte- breeds), sustainable water and soil manage- gration important. Low population density ment, institutional services (extension, that increases the cost of providing infra- insurance, financial services), and human structure services and loss of human capital development (education, health)-- resources because of HIV/AIDS impose all linked with market development. Second, additional constraints. agricultural development actions must be The agenda for Sub-Saharan Africa is to decentralized to tailor them to local condi- enhance growth by improving smallholder tions. These include community-driven competitiveness in medium and higher approaches with women, who account for potential areas, where returns on invest- the majority of farmers in the region, playing ment are highest, while simultaneously a leading role. Third, the agendas must be ensuring livelihoods and food security of coordinated across countries to provide an subsistence farmers. Getting agriculture expanded market and achieve economies of moving requires improving access to mar- scale in such services as R&D. Fourth, the kets and developing modern market chains. agendas must give priority to conservation It requires a smallholder-based productivity of natural resources and adaptation to cli- revolution centered on food staples but also mate change to sustain growth. including traditional and nontraditional This agenda will require macroeco- exports. Long-term investments in soil and nomic stability, policies to improve pro- Overview 21 ducer incentives and trade, and sharply Continuing demographic pressures imply increased public investment--especially in rapidly declining farm sizes, becoming infrastructure, roads, and communications so minute that they can compromise sur- to improve market access, and in R&D to vival if off-farm income opportunities are address Africa's distinct crops and agro- not available. Competition over access to ecologies, as proposed by the New Partner- water is acute, with rising urban demands ship for Africa's Development. and deteriorating quality from runoffs. As The recent surge in growth of Sub- nonfarm incomes rise, pressures to address Saharan agriculture has been induced by rural-urban income disparities through improved price incentives from macro and subsidies would compete for fiscal expendi- sectoral reforms and higher commodity tures, at a high opportunity cost for public prices. As the easy gains from price reforms goods and rural basic needs. On the other have been captured in many countries, hand, addressing those disparities through future growth will have to rely more on import protection would elevate food costs increased productivity. The increased will- for the large masses of poor consumers who ingness of governments, the private sector, are net food buyers. and donors to invest in Sub-Saharan agri- Because of demographic pressures and culture opens a window of opportunity that land constraints, the agenda for trans- should not be missed. forming countries must jointly mobilize all pathways out of poverty: farming, Transforming countries: reducing rural- employment in agriculture and the rural urban income disparities and rural poverty. nonfarm economy, and migration. Pros- In transforming countries, with 600 million pects are good for promoting rural incomes rural poor and 2.2 billion rural inhabitants, and avoiding the subsidy-protection trap, nonagricultural sectors have been the fast- if the political will can be mustered. Rap- est growing in the world. The main focus idly expanding markets for high-value of agriculture for development is to narrow products--especially horticulture, poul- rural-urban income disparities and reduce try, fish, and dairy--offer an opportunity rural poverty while avoiding the subsidy and to diversify farming systems and develop a protection traps, challenges poorly addressed competitive and labor-intensive small- thus far (figure 11). With growing political holder sector. Export markets for nontradi- attention to widening income disparities, tional products are also accessible because there are strong pressures to better use the transforming countries have a comparative powers of agriculture for development.8 advantage in labor- and management- In these countries, agriculture is almost intensive activities. Many countries have exclusively in the hands of smallholders. high levels of poverty in less-favored regions Figure 11 The urban-rural income disparity has increased in most of the transforming countries Ratio of urban to rural median income 4 Initial year End year 3 2 1 0 Guatemala Thailand Cambodia China Vietnam Indonesia Bangladesh India Pakistan 1989­2002 1990­2002 1997­2004 1985­2001 1992­2001 1993­2002 1991­2000 1989­99 1999­2001 Source: WDR 2008 team, based on nationally representative household surveys. 22 WORLD DEVELOPMENT REPORT 2008 that require better infrastructure and tech- of poverty with good agricultural poten- nologies adapted to these regions. tial. For regions without such potential, the To confront rural unemployment, a transition out of agriculture and the provi- complementary policy objective is promot- sion of environmental services offer better ing a dynamic rural nonfarm sector in sec- prospects. But support to the agricultural ondary towns, linked to both agriculture component of the livelihoods of subsis- and the urban economy. China has brought tence farmers will remain an imperative industry to rural towns, diversifying rural for many years. incomes, an approach that could be emu- lated in other transforming countries. In Implementing an agriculture-for- all transforming countries, the transfer of development agenda labor to the dynamic sectors of the econ- The agriculture-for-development agenda omy must be accelerated by massive invest- presents two challenges for implementa- ments in skills for this generation and the tion. One is managing the political econ- next. The momentous changes this restruc- omy of agricultural policies to overcome turing implies must be insured by effective policy biases, underinvestment, and mis- safety-net programs to allow households investment. The other is strengthening to assume risks in moving to their best governance for the implementation of agri- options. Successfully meeting the dispar- cultural policies, particularly in the agri- ity problem in transforming countries can culture-based and transforming countries make a huge dent in world poverty. for which governance gets low scores (fig- ure 12). Urbanized countries: linking smallhold- Insufficient attention to these political ers to modern food markets and providing economy and governance challenges was a good jobs. The broad goal is to capitalize major reason several key recommendations on rapid expansion of modern domestic of the 1982 World Development Report on food markets and booming agricultural agriculture were not fully implemented, subsectors to sharply reduce the remaining particularly those for trade liberalization, rural poverty, still stubbornly high. The increased investments in infrastructure urbanized countries, with 32 million rural and R&D in Africa, and better delivery poor--representing 39 percent of all their of health and education services to rural poor--are experiencing the supermarket populations. revolution in food retailing. For smallhold- ers, being competitive in supplying super- The future offers more promise for agricul- markets is a major challenge that requires ture for development. The prospects are meeting strict standards and achieving scale brighter today than they were in 1982. The in delivery, for which effective producer anti-agriculture bias in macroeconomic organizations are essential.9 Exceptionally policies has been reduced thanks to broader high land inequality in Latin America also economic reforms. Agriculture is likely to constrains smallholder participation. benefit from other general governance Increasing the access of smallholders reforms that are now high on the agenda, to assets, particularly land, and increas- such as decentralization and public sector ing their voice in unequal societies can management reforms. But reforms specific enhance the size and competitiveness of to using agriculture for development are yet the smallholder sector. Beyond farming, to be widely implemented. territorial approaches are being pursued There is also evidence that the politi- to promote local employment through cal economy has been changing in favor of interlinked farming and rural agroindus- agriculture and rural development. Both try, and these experiences need to be bet- rural civil society organizations and the pri- ter understood for wider application. Agri- vate sector in agriculture value chains are cultural growth is especially important to stronger than they were in 1982. Democra- improve well-being in geographic pockets tization and the rise of participatory policy Overview 23 Figure 12 Agriculture-based and transforming countries get low scores for governance Governance score 2.0 1.5 1.0 0.5 0 ­0.5 ­1.0 Voice and Political Government Regulatory Rule of law Control of accountability stability effectiveness quality corruption Agriculture-based countries Urbanized countries Transforming countries Developed countries Source: Kaufmann, Kraay, and Mastruzzi 2006. making have increased the possibilities for reforms to redefine their roles and develop smallholder farmers and the rural poor to new capacities. New models are starting to raise their political voice. The private agri- emerge. Uganda pioneered contracting out business sector has become more vibrant, agricultural advisory services, giving pro- especially in the transforming and urban- ducer organizations a say in awarding the ized countries. New, powerful actors have contracts. entered agricultural value chains, and they have an economic interest in a dynamic and Strengthening civil society and democracy. prosperous agricultural sector and a voice in The "third sector"--communities, pro- political affairs. Yet these improved condi- ducer and other stakeholder organiza- tions alone do not guarantee the more suc- tions, and nongovernmental organizations cessful use of agriculture for development-- (NGOs)--can improve representation of smallholders must have their voices heard the rural poor and, in so doing, governance. in political affairs, and policy makers and Producer organizations can give political donors must seize the new opportunities. voice to smallholders and hold policy mak- ers and implementing agencies account- New roles for the state. Market failures able by participating in agricultural policy are pervasive, especially in the agricul- making, monitoring the budget, and engag- ture-based countries, and there is a need ing in policy implementation. In Senegal, for public policy to secure desirable social the Conseil National de Concertation et de outcomes. The state has a role in mar- Coopération des Ruraux, an umbrella orga- ket development--providing core public nization of producer organizations, is active goods, improving the investment climate in the development and implementation of for the private sector--and in better natu- national agricultural strategies and poli- ral resources management by introducing cies. Freedom of association, a free press, incentives and assigning property rights. and investment in the social capital of rural Strengthening the capacity of the state in organizations, including women's organiza- its new roles of coordinating across sectors tions, are important for such demand-side and partnering with the private sector and strategies of improving governance. civil society is urgently needed for imple- menting the agriculture-for-development A mix of centralized and decentralized agendas. In most countries, ministries services. By bringing government closer of agriculture are in need of far-reaching to rural people, decentralization holds the 24 WORLD DEVELOPMENT REPORT 2008 potential to deal with the localized and Reforming global institutions. The agri- heterogeneous aspects of agriculture, espe- culture-for-development agenda cannot be cially for extension. But not all agricultural realized without more and better interna- services should be decentralized, as some tional commitments. And the overarching such as scientific research and animal dis- global tasks of the 21st century--ending ease surveillance have important economies hunger and poverty, sustaining the envi- of scale. Decentralized institutions need to ronment, providing security, and managing address local elite capture and social exclu- global health--will not be accomplished sion, often prevalent in agrarian societies. without agriculture. The global agricul- In India, the reservation of seats for women tural agenda has a multiplicity of dimen- in local councils has helped better target sions: establishing fair rules for interna- public investments to gender-specific needs. tional trade, agreeing on product standards Elsewhere corruption has been reduced by and intellectual property rights, providing grassroots monitoring systems, government new technologies for the benefit of the poor, audits with results diffused by the media, avoiding such negative externalities as live- and use of information and communica- stock diseases, conserving the world's bio- tion technologies to keep records and share diversity, and mitigating and adapting to information. climate change. Community-driven development (CDD) With their narrow sectoral focus, the can harness the potential of rural communi- global institutions created for agriculture ties--their local knowledge, creativity, and in the 20th century, despite their many social capital. Decentralization and CDD achievements, are inadequately prepared typically contribute to the agriculture-for- to address today's interrelated and multi- development agenda in a sequenced way, sectoral agendas. Institutional reforms and focusing on basic services and public goods innovations are needed to facilitate greater first, and engaging in income-generating coordination across international agencies activities once the most basic needs have and with the new actors in the global arena, been met. Territorial development can help including civil society, the business sector, manage economic projects with a broader and philanthropy. scale than the CDD approach. Implementing the global agenda requires a mix of institutional arrangements. Spe- Improving donor effectiveness. In the cialized institutions, such as the Consul- agriculture-based countries, donors are tative Group on International Agricul- extraordinarily influential. In 24 Sub- tural Research, the Food and Agriculture Saharan countries, donor contributions Organization of the United Nations, and represent at least 28 percent of agricultural the International Fund for Agricultural development spending--and more than Development, can provide long-term sup- 80 percent in some countries. Country- port and commitment by improving their led agricultural strategies and the broader efficiency and cross-agency coordination. poverty reduction strategies provide a Cross-sectoral, issue-specific networks can framework for donors to align their sup- react quickly to emergencies, such as con- port to the agricultural sector and with trolling avian influenza, and seize emerg- each other, using the government's public ing opportunities, such as biofortification expenditure and procurement systems as through nutrient-enhanced crops. In other mechanisms for program implementation. cases, mainstreaming global priorities, At the regional level, the Comprehensive such as adaptation to climate change, into Africa Agricultural Development Program increased donor aid to agriculture may work provides priorities for coordinating donor best. Delivering on the international agenda investments. Although these national and is a matter not only of self-interest, which regional efforts provide the institutional extends broadly in a global world, but also frameworks for donor support to agricul- of equity and justice between the developed ture, progress in implementation has been and developing worlds and between present slow. and future generations. Overview 25 What now? Toward implementation requires mobilizing political support, skills, If the world is committed to reducing pov- and resources. erty and achieving sustainable growth, the There is growing recognition among powers of agriculture for development must governments and donors that agriculture be unleashed. But there are no magic bullets. must be a prominent part of the develop- Using agriculture for development is a com- ment agenda, whether for delivering growth plex process. It requires broad consultations in the agriculture-based countries or for at the country level to customize agendas reducing rural poverty and addressing the and define implementation strategies. It also environmental agenda everywhere. Today's requires having agriculture work in concert improved opportunities and greater will- with other sectors and with actors at local, ingness to invest in agriculture provide national, and global levels. It requires build- optimism that agriculture-for-development ing the capacity of smallholders and their agendas can move forward. The window of organizations, private agribusiness, and the opportunity that this offers should not be state. It requires institutions to help agricul- missed because success will provide high ture serve development and technologies payoffs toward the Millennium Develop- for sustainable natural resource use. And it ment Goals and beyond. PART I Growth and poverty reduction in agriculture's three worlds What can agriculture do for development? 1 Three out of four poor people in develop- Africa, especially when contrasted with the ing countries--883 million people--lived green revolution in South Asia (figure 1.1). in rural areas in 2002.1 Most depend on In the mid-1980s, cereal yields were compa- c h a p t e r agriculture for their livelihoods, directly or rably low and poverty was comparably high. indirectly. So a more dynamic and inclusive Fifteen years later in South Asia, yields had agriculture could dramatically reduce rural increased by more than 50 percent and poverty, helping to meet the Millennium poverty had declined by 30 percent. In Development Goal on poverty and hunger. Sub-Saharan Africa, yields and poverty There are many success stories of agri- were unchanged. Food security remains culture as an engine of growth early in the challenging for most countries in Africa, development process and of agriculture as given low agricultural growth, rapid popu- a major force for poverty reduction. Most lation growth, weak foreign exchange earn- recently, China's rapid growth in agricul- ings, and high transaction costs in linking ture--thanks to the household responsi- domestic and international markets. bility system, the liberalization of markets, Important challenges persist for agricul- and rapid technological change--has been ture in other regions as well. Where growth largely responsible for the decline in rural in nonagricultural sectors has accelerated, poverty from 53 percent in 1981 to 8 per- especially in Asia, the reallocation of labor cent in 2001 (see focus A). Agricultural out of agriculture is lagging, concentrating growth was the precursor to the accelera- poverty in rural areas and widening rural- tion of industrial growth, very much in the urban income disparities. This becomes way agricultural revolutions predated the a major source of political tensions and industrial revolutions that spread across insecurity. Where agriculture's share in the temperate world from England in the the economy has shrunk significantly, as mid-18th century to Japan in the late-19th in Latin America, connecting poor rural century.2 households to agriculture's new dynamic Agriculture has also offered attractive subsectors, either as smallholders or as business opportunities, such as high-value workers, remains a challenge. And every- products for domestic markets (dairy farm- where, agriculture is a major user and a ing in Kenya, aquaculture in Bangladesh, frequent abuser of natural resources. By vegetables for supermarkets in Latin Amer- making better use of water and land and ica) and international markets (specialty providing such environmental services as coffee in Rwanda, horticulture in Chile, managing watersheds, agriculture can make Guatemala, and Senegal). There have also growth more environmentally sustainable. been successes in traditional crops with This chapter takes a macro perspec- new demands, such as feed-maize exports tive to show that in many settings it pays to China from Laos and sugar cane for bio- to rebalance incentives facing agriculture, fuels in Brazil. manufacturing, and services and to invest Parallel to these successes are numer- better and more in agriculture. To design ous failures in getting agriculture moving. appropriately differentiated policies across Most striking is the still-unsatisfactory settings, this chapter presents a typology of performance of agriculture in Sub-Saharan countries based on agriculture's contribu- 26 Growth and poverty reduction in agriculture's three worlds 27 Figure 1.1 Cereal yields are up and poverty is down in South Asia, but cereal yields and poverty were unchanged in Sub-Saharan Africa South Asia Sub-Saharan Africa Cereal yields, Cereal yields, tons per hectare Poverty incidence, % tons per hectare Poverty incidence, % 60 60 3.5 50 3.5 50 Poverty (right axis) Poverty (right axis) 40 40 2.5 2.5 30 30 Yields (left axis) 20 20 1.5 1.5 10 10 Yields (left axis) 0.5 0 0.5 0 1984 1987 1990 1993 1996 1999 2002 1984 1987 1990 1993 1996 1999 2002 Sources: Ravallion and Chen 2004; World Bank 2006y. tion to growth and poverty reduction: agri- cally despite almost no growth in per capita culture-based, transforming, and urban- GDP, as illustrated by Nigeria (figure 1.2). ized. It reviews past policies and investment The same is true for Latin America since patterns and introduces a framework to 1980, as illustrated by Brazil. This is con- understand the political economy behind sistent with the observed urbanization of agricultural policymaking. poverty in these two regions. By contrast, the reallocation of labor out of agriculture The structural transformation has been very slow in China, partly because The process of economic development is of restrictions on labor mobility, which, one of continuous redefinition of the roles given rapid growth outside of agriculture, of agriculture, manufacturing, and services. is consistent with an increase in the rural- Two empirical regularities characterize this urban divide.3 structural transformation. First, at low lev- Agriculture's essential but els of development, the shares of agriculture in gross domestic product (GDP) and in declining contribution to employment are large (up to 50 percent and growth as countries develop 85 percent, respectively), but they decline as Many poor countries still display high agri- countries develop (figure 1.2). Second, there cultural shares in GDP and employment (an is a large and persistent gap between the average of 34 and 64 percent, respectively, share of agriculture in GDP and the share in Sub-Saharan Africa).4 In countries in the of agriculture in the labor force. These two $400-to-$1,800 GDP per capita range, many stylized facts suggest an essential but evolv- of them in Asia, agriculture is on average 20 ing role for agriculture in fostering growth percent of GDP and 43 percent of the labor and reducing poverty. force. These ratios decline to 8 percent and These patterns of structural transfor- 22 percent, respectively, in countries in the mation have been observed historically $1,800-to-$8,100 GDP per capita range, in most developed countries and are cur- many of them in Eastern Europe and Latin rently taking place in developing countries America. Adding the forward and back- that experience growth. But there are note- ward links to agriculture (extended agri- worthy deviations. In most Sub-Saharan culture) typically increases the share in the countries over the last 40 years, the share of economy by half or more, especially in the labor in agriculture has declined dramati- middle-income countries.5 28 WORLD DEVELOPMENT REPORT 2008 Figure 1.2 As countries develop, the shares of GDP and labor in agriculture tend to decline, but with many idiosyncrasies Share of labor and GDP in agriculture 1.0 NPL Share of labor in agriculture (1990­2005, average) BFA BDI Share of GDP from agriculture (1990­2005, average) NER RWA Trajectories of the share of labor in agriculture, 1961­2003 ETH MLIUGA GIN TZA MWI MOZ 0.8 LAO TCD MDG KEN PNG KHM ZMB SEN AGO CHN VNM ZAR ZWE SDN China 1961­2003 TGO CMR IND 0.6 THA BEN ZAR GHA BGD CIV BDI LAO YEM IDN TUR ETH PAK UGA TZA BOL GTM RWA Nigeria 1961­2003 LKA MLI Brazil 1961­2003 GHA KHM 0.4 NPL PHL MAR NER BEN EGY TJK TGO NGA HND PRY SDN NGA CMR PER TCD TJK MDG PNG SYR SLV PRY IRN MWI MOZ BFA UZB VNM UZB AZE ECU TUN HND DZA BGD KEN CIV SYR COL POL IND PAK MYS MEX IRN GTM 0.2 GIN YEM LKA PHL DOM BLR ROM SEN EGY BRA ZWE CHN UKR MAR COL CHL IDN ROM TUN TUR ZMB AZE BOL SLV HUN BLR BGR DZA ZAF MYS ARG UKR VEN CZE AGO ECU DOM SVK CHL BGR PER BRA THA SVK MEX ARG ZAF POL HUN VEN CZE 0 90 150 245 400 670 1100 1800 3000 4900 8100 GDP per capita, constant 2000 US$ (log scale) Source: WDR 2008 team, based on data from World Bank 2006y. Note: The list of 3-letter codes and the countries they represent can be found on page xviii. The large share of agriculture in poorer Agriculture's power economies suggests that strong growth in for poverty reduction agriculture is critical for fostering overall The large and persistent gap between agri- economic growth. As GDP per capita rises, culture's shares in GDP and employment agriculture's share declines, and so does its suggests that poverty is concentrated in contribution to economic growth. This hap- agriculture and rural areas--and that as pens while agricultural output simultane- nonagricultural growth accelerates, many ously increases in absolute value, because the of the rural poor remain poor. nonagricultural sectors are growing faster. That the incidence of poverty among Increasingly, agriculture contributes to agricultural and rural households is per- shaping the environmental sustainability of sistently much higher is confirmed by the the growth process, across the development micro evidence from numerous country spectrum. It is a major user of scarce natu- poverty studies by the World Bank (see ral resources (85 percent of the developing focus A). Furthermore, where nonagricul- world's fresh water withdrawal and 42 per- tural growth has accelerated, rural-urban cent of its land) and a largely unrecognized income disparities widen. For example, in provider of environmental services (seques- East Asia, the ratio of rural-to-urban pov- tering carbon, managing watersheds, and erty increased from about 2:1 to more than reducing deforestation). 3.5:1 between 1993 and 2002, despite a sub- Growth and poverty reduction in agriculture's three worlds 29 stantial decline in absolute poverty. Even be ascribed to improved conditions in rural with rapid urbanization, the developing areas; migration accounted for only 19 per- world is expected to remain predominantly cent of the reduction.7 The comparative rural in most regions until about 2020 (box advantage of agricultural growth in reduc- 1.1), and the majority of the poor are pro- ing poverty is also supported by economet- jected to continue to live in rural areas until ric studies. Cross-country econometric evi- 2040.6 dence indicates that GDP growth generated The persistent concentration of (abso- in agriculture has large benefits for the poor lute and relative) poverty in rural areas and is at least twice as effective in reducing illustrates the difficulty of redistributing poverty as growth generated by other sec- income generated outside of agriculture and tors, controlling for the sector's size (box the deep inertia in people's occupational 1.2). However, as countries get richer, the transformation as economies restructure. superiority of growth originating in agri- Migrating out of agriculture to urban areas culture in providing benefits for the poor is often hampered by lack of information, appears to decline. cost, skill gaps, aging, and family and social ties. Consequently, many people remain The three worlds of agriculture in rural areas with expectations for bet- ter lives unfulfilled, generating social and for development political tensions that can jeopardize the In light of the evolving role of agriculture growth process. Broad-based growth in the in fostering growth and reducing poverty, rural economy appears essential for reduc- countries are classified in this Report as ing both absolute and relative poverty. agriculture-based, transforming, or urban- Indeed, from a simple decomposition, 81 ized, based on the share of aggregate growth percent of the worldwide reduction in rural originating in agriculture and the share of poverty during the 1993­2002 period can aggregate poverty ($2.15 a day) in the rural B O X 1 . 1 Rural population dynamics An estimated 2.5 billion of the 3 billion rural population is expected to continue to grow after 2030 at the earliest. But rural areas of inhabitants are involved in agriculture: 1.5 until 2020 and decline thereafter, due to slower Latin America and East Asia have been losing billion of them living in smallholder house- population growth and rapid urbanization in population since 1995. However, the share of holds and 800 million of them working in most countries (figure below). South Asia will the population living in rural areas is declining smallholder households. The size of the rural begin such a decline only after 2025, and Africa on all continents, including Africa. Populations in developing countries will remain predominantly rural until 2020 Billions of people Rural population, millions Share of rural population 4 1,500 100 1,200 80 3 900 60 Rural 2 600 40 1 300 20 Urban 0 0 0 1950 1970 1990 2010 2030 1950 1970 1990 2010 2030 1950 1970 1990 2010 2030 Africa Latin America & Caribbean South Asia Developing countries East Asia Source: United Nations 2004. 30 WORLD DEVELOPMENT REPORT 2008 contributes only a little to growth. Poverty B O X 1 . 2 Cross-country evidence on the effect of is no longer primarily a rural phenomenon, agricultural growth on poverty reduction although the $2.15-a-day poverty incidence is 63 percent higher than in urban areas. Among 42 developing countries over erty reduction in Sub-Saharan Africa and Agriculture acts like any other competitive 1981­2003, 1 percent GDP growth South Asia, but larger poverty-reducing originating in agriculture increased the tradable sector, and predominates in some effects of growth originating in other sec- expenditures of the three poorest deciles tors in East Asia and Latin America. locations. In these economies, agriculture at least 2.5 times as much as growth can reduce the remaining rural poverty by originating in the rest of the economy including the rural poor as direct producers (figure below). Welfare gains from growth originating Similarly, Bravo-Ortega and Lederman in agriculture are substantially larger and by creating good jobs for them. for households in the poorer five (2005) find that an increase in overall GDP There is no unique route for a country expenditure deciles coming from agricultural labor productiv- to move from an agriculture-based to an ity is on average 2.9 times more effective Expenditure gains induced urbanized and eventually to a high-income in raising the incomes of the poorest by 1% GDP growth, % quintile in developing countries and 2.5 country. However, the routes traveled by 8 times more effective for countries in Latin China (1981­85 to 1996­01), India (1965­ Agriculture America than an equivalent increase in 6 Nonagriculture 70 to 1989­94), Indonesia (1970­76 to GDP coming from nonagricultural labor 1990­96), and Brazil (1970­75 to 1990­96) productivity. Focusing on absolute pov- 4 erty instead, and based on observations are illustrative (figure 1.3). Both China and from 80 countries during 1980­2001, 2 India moved from the agriculture-based Christiaensen and Demery (2007) report category to the transforming category over that the comparative advantage of agri- 0 15 to 25 years, but with little change in the culture declined from being 2.7 times more effective in reducing $1-a-day pov- rural share in poverty. Indonesia, already ­2 erty incidence in the poorest quarter of 2 3 4 5 6 7 8 9 in the transforming category in the 1970s, countries in their sample to 2 times more Lowest Highest further reduced the share of rural poverty, effective in the richest quarter of coun- Expenditure deciles tries. Using cross-country regressions per as did Brazil, a country in the urbanized region and looking at $2-a-day poverty, Source: Ligon and Sadoulet 2007. category. Note: The two curves are significantly different Hasan and Quibriam (2004) find larger at the 95 percent confidence level for the lowest The three country types capture the effects from agricultural growth on pov- five expenditure deciles. major distinguishing features in the role of agriculture for growth and poverty reduction across countries and provide a sector. Three clusters of structurally differ- useful framework to focus the discussion ent economies emerge, each with distinct and help formulate broad policy guidance. challenges for agricultural policy mak- Even so, substantial variations remain ing (figure 1.3 and tables 1.1 and 1.2). In among (and within) the countries in each the agriculture-based economies (most of type (box 1.3). them in Sub-Saharan Africa), agriculture contributes significantly to growth, and the Agriculture-based countries poor are concentrated in rural areas. The In the agriculture-based countries, most key policy challenge is to help agriculture of them in Sub-Saharan Africa, agricul- play its role as an engine of growth and pov- ture accounted for about a third of overall erty reduction. growth over 1993­2005. More than half In transforming economies (mostly in a billion people live in these countries, 49 Asia and North Africa and the Middle East), percent of them on less than $1 a day and agriculture contributes less to growth, but 68 percent of them in rural areas (tables 1.1 poverty remains overwhelmingly rural. and 1.2). By its mere size, the agricultural The rising urban-rural income gap accom- sector is critical for development, at least in panied by unfulfilled expectations creates the medium term. Both the staple crop and political tensions.8 Growth in agriculture the agricultural export sectors play impor- and the rural nonfarm economy is needed tant, but distinct roles in fostering growth to reduce rural poverty and narrow the and reducing poverty. The staple crop sec- urban-rural divide. tor is typically the largest subsector and pro- In urbanized economies (mostly in East- duces mostly for the domestic market. The ern Europe and Latin America), agriculture nonstaple crop sector typically produces Growth and poverty reduction in agriculture's three worlds 31 Figure 1.3 Agriculture-based, transforming, and urbanized countries constitute agriculture's three worlds Agriculture's contribution to growth, 1990­2005, % 80 Actual poverty data Agriculture-based BDI Predicted poverty data countries Poverty data over time RWA 60 CMR MWI SDN PRY BEN NER INDIA NGA PNG 40 CMR (1965­94) BGR TGO LAO GHA AZE CIV SYR MDG KEN BFA ETH NPL ZMB MOZ GIN MLI TCD UGA 20 HND PAK IRN YEM KHM SEN DZA GTM CHINA BRA PHL BOL AGO IDN BGD PER EGY VNM (1981­2001) ARG UKR RUS DOM IND TUN VEN SVK TUR MAR THA LKA CHN BRAZIL CHL CZE SLV ECU INDONESIA 0 (1970­96) MEX ZAR POL ROM ZAF MYS (1970­96) TJK HUN COL Transforming countries BLR Urbanized countries ZWE ­20 0.0 0.2 0.4 0.6 0.8 1.0 Rural poor/total poor, 2002 Source: WDR 2008 team. Note: The contribution of agriculture to growth is defined as the agricultural growth rate times the sector average share over the period divided by the GDP growth rate (computed from World Bank DDP 2006). Rural shares in poverty marked with a green circle are from Ravallion, Chen, and Sangraula (2007), using the $2.15/day poverty line. Rural shares of poverty marked with an orange diamond are predicted with an estimated regression of the rural share of poverty on rural share of population, agricultural share in GDP, log of GDP per capita in 2000 US$ , and regional dummies. The dynamic paths are taken from Ravallion and Chen (2004) for China; World Bank (2000b) for India; the United Nations' Economic Commission for Latin America and the Caribbean; (http://www. eclac.org) for Brazil; and the Central Bureau of Statistics (http://www.bps.go.id) for Indonesia, with poverty rates based on their national poverty lines. Arrows show paths for Brazil, China, India, and Indonesia. The list of 3-letter country codes and the countries they represent can be found on page xviii. Table 1.1 Demographic and economic characteristics of three country types, 2005 Agriculture-based countries Transforming countries Urbanized countries Population Total (millions) 615 3,510 965 Rural (millions) 417 2,220 255 Share of rural population (%) 68 63 26 Annual population growth, 1993­2005 (%) 2.5 1.4 1.0 Geographical distribution of rural population (%) Sub-Saharan Africa 82.2 13.6 4.2 South Asia 2.2 97.8 0 East Asia and Pacific Islands 0.9 96.1 2.9 Middle East and North Africa 8 92 0 Europe and Central Asia 0 12 88 Latin America and Caribbean 2.2 9.7 88.1 Labor force (in 2004) Total (millions) 266 1,780 447 Agricultural (millions) 172 1,020 82 Share of agriculture (%) 65 57 18 Economy GDP per capita (2000 US$) 379 1,068 3,489 Annual GDP growth, 1993­2005 (%) 3.7 6.3 2.6 Agriculture Agriculture value added per capita (2000 US$) 111 142 215 Share of agriculture in GDP (%) 29 13 6 Agriculture's contribution to growth, 1993­2005 (%) 32 7 5 Annual agricultural GDP growth, 1993­2005 (%) 4 2.9 2.2 Annual nonagricultural GDP growth, 1993­2005 (%) 3.5 7 2.7 Sources: Labor force data: FAO 2006a. Other data: World Bank 2006y. Note: Averages are weighted and based on 74 countries with at least 5 million people, except for agriculture value added, which is based on 71 countries because of missing information. Data are for 2005 unless otherwise noted. 32 WORLD DEVELOPMENT REPORT 2008 Table 1.2 Poverty in three country types, 2002 Agriculture-based Transforming Urbanized countries countries countries Population (millions) Total 494 3,250 888 Rural 335 2,100 251 Poverty ($2.15 a day) Total poverty rate (%) 80 60 26 Number of rural poor (millions) 278 1,530 91 Share of rural poor in total poor (%) 70 79 39 Rural poverty rate (%) 83 73 36 Urban poverty rate (%) 73 35 22 Poverty ($1.08 a day) Total poverty rate (%) 49 22 8 Number of rural poor (millions) 170 583 32 Share of rural poor in total poor (%) 70 82 45 Rural poverty rate (%) 51 28 13 Urban poverty rate (%) 45 11 6 Source: Ravallion, Chen, and Sangraula 2007. Note: Averages are weighted and based on 60 countries among those of table 1.1 for which poverty is documented in the source. Poverty lines are defined in 1993 purchasing power parity dollars. for export and is often dominated by tradi- make the nonfood tradable sector competi- tional commodities, but increasingly it also tive.11 For major staples in Africa, there is includes new dynamic subsectors of high- evidence of a negative correlation between value products such as vegetables, flowers, per capita production and price for maize and fish. in Ethiopia and Ghana; sorghum in Burkina Faso, Mali, and Sudan; cassava in Ghana; The nontradable staple crop sector. Even and (weakly) millet in Burkina Faso, Mali, with globalization, the staple crop sector and Sudan. Only Kenya, with its significant remains largely nontradable in substan- price intervention, does not follow the pat- tial parts of the agriculture-based coun- tern. However, this transmission mecha- tries for two reasons. First, locally grown nism will be sustained only if the gains from staples such as cassava, yams, sorghum, total factor productivity rise faster than the millet, and teff, which are not internation- decline in food prices so that farmer prof- ally traded (although sometimes region- itability is maintained. If not, farmers may ally traded), often predominate in the local abandon the technologies that induced the diets. Second, the domestic food economy productivity gains in the first place. remains insulated from global markets by The poverty-reducing effects of enhanc- high transport and marketing costs, espe- ing production in the farm sector depend cially in the rural hinterlands9 and in land- on the net marketing position of the poor locked countries. In Ethiopia the price of and the price elasticity of food demand.12 maize can fluctuate from around $75 per Poor net-food-buying households benefit ton (the export parity price) to $225 per ton from lower food prices, as long as the gain (the import parity price) without triggering from reduced spending on food exceeds international trade. This nontradable staple the loss from reduced wage income. Poor crop sector represents 60 percent of agricul- net-food-selling producers, by contrast, tural production in Malawi and 70 percent gain only if productivity grows faster than in Zambia and Kenya.10 prices fall. Given that demand for staple When the staple crop sector is large and crops is usually price inelastic, producers nontradable, gains in staple crop productiv- may well lose. Even so, increasing staple ity increase the aggregate food supply and crop productivity usually reduces poverty reduce food prices. That keeps the nomi- overall, because in addition to the urban nal wages of unskilled workers as well as poor, more than half of poor rural house- the prices of all the inputs that have a large holds are typically net food buyers, a little labor content at lower levels, thereby helping appreciated fact (chapter 4). Growth and poverty reduction in agriculture's three worlds 33 B O X 1 . 3 Large countries have regional heterogeneity that replicates the three worlds of agriculture In very large countries, individual states may and a few urbanized states (figure below). this heterogeneity, all states of Brazil qualify fall into different categories. India, overall a Similarly, Mexico, an overall urbanized coun- as urbanized, and in China all provinces but transforming country, also has agriculture- try, also has some transforming states and Hainan are transforming. based states such as Uttar Pradesh and Bihar two agriculture-based states. In contrast with Transforming India has agriculture-based and urbanized states, and urbanized Mexico has transforming and agriculture-based states India Mexico Agriculture's contribution Agriculture's contribution to growth, 1993­2005, % to growth, 1993­2004, % 50 50 Agriculture-based 40 40 Agriculture-based 30 Jammu-Kashmir Zacatecas Bihar 30 UP Sinaloa Punjab 20 20 Chiapas AP Michoacán Guerrero Rajasthan Durango Haryana West Bengal 10 10 Jalisco Hidalgo Oaxaca Marashtra México Baja Goa Puebla Orissa Distrito Yucatán Querétaro California Pondicherry Federal 0 Tamil Nadu 0 Arunach P Chandighar Kerala Urbanized ­10 ­10 Transforming Urbanized Transforming ­20 ­20 0 0.2 0.4 0.6 0.8 1.0 0 0.2 0.4 0.6 0.8 1.0 Rural poor/total poor, 2002 Rural poor/total poor, 2002 Sources: Central Statistical Organization and Planning Commission for India, Instituto Nacional de Estadística Geografía e Informática (INEGI) for Mexico. Figure 1.4 Price and wage effects Microevidence from Madagascar is illus- effects onfarm incomes, which dominated dominated the long-run elasticity of trative. Although rice is usually tradable, it in the short run (figure 1.4). rural poverty to cereal yields in India, proved effectively nontradable in rural areas 1958­94 of Madagascar because of high transport The tradable agricultural sector. Global- Elasticity of poverty to cereal yield costs. Analysis of commune census data ization and new dynamic producers (for ­1 shows that doubling rice yields reduces the example, coffee in Vietnam) have increased ratio of the food insecure in the community competition in traditional exports. But the ­0.8 by 38 percentage points and shrinks the recent boom in smallholder cocoa produc- ­0.6 hungry period by 1.7 months (or one-third). tion in Ghana (from 390,000 tons in 2001 to Falling rice prices and rising nominal wages 740,000 tons in 2006)14 through new plant- ­0.4 of agricultural laborers boosted real wages, ings, new varieties, and better husbandry benefiting especially the poorest, who are following higher world market prices sug- ­0.2 often net rice buyers supplying labor. Poor gests that many African countries are com- net sellers also benefited, as productiv- petitive in primary agricultural commodi- 0 ity gains exceeded food price declines.13 Short run Long run ties. Tea in Kenya is another example. And Econometric studies of India for 1958­94, there is good potential to increase yields Direct Food Wage income price effect where many of the rural poor are landless, further. New markets have also opened effect effect report price and wage effects of food crop for traditional exports, such as premium productivity to be more important in reduc- coffees, and for nontraditional high-value Source : Datt and Ravallion 1998a. Note : The direct income effect includes that ing rural poverty in the long run than direct agricultural products, such as vegetables from higher yields and employment. 34 WORLD DEVELOPMENT REPORT 2008 (from Senegal), fish (from Uganda), and able agriculture, growth of agriculture can flowers (from Kenya).15 enhance growth in other sectors through con- The defining macroeconomic contribu- sumption and production links. When agri- tion of tradable agriculture to aggregate cultural incomes are spent on domestically growth is foreign exchange, which allows produced nontradable goods and services, imports of inputs and capital goods. Coun- it stimulates demand for domestic industry tries with mineral resources, such as Zam- and services. Production links proceed for- bia, obviously depend less on their agricul- ward by fostering growth in agroprocessing tural exports. But most agriculture-based and food marketing and backward through economies depend on agriculture for a large demand for intermediate inputs and services. share of their foreign exchange, as exempli- The availability of resources (entrepreneur- fied by tobacco exports in Malawi. ship, excess capacity) and a favorable invest- The poverty-reducing effects of developing ment climate that allow a supply response tradable agriculture depend on the participa- from the nonagricultural sector are critical tion of smallholders and poor households in for realizing such links. production. Labor intensive nontraditional Empirical evidence confirms these exports can also have substantial local pov- multiplier effects.17 The strength of the erty-reducing effects by generating employ- agricultural multipliers differs depending ment, as in Kenya and Senegal,16 despite the on a country's economic structure. Small tightening food standards and more verti- economies with large tradable sectors (for cally integrated market chains that tend to example, Lesotho) have smaller multipliers favor medium farms (chapter 5). than large economies with a high share of nontradable agriculture and services (for Links with sectors outside of agriculture. In example, Cameroon, Nigeria, and Tanza- addition to the macroeconomic channels nia). Most of these linkage effects occur through prices for nontradable agriculture through commerce and services. Hence and through foreign exchange for trad- globalization and inexpensive imports of manufactured goods in rural markets--say, from China--likely have limited effects on the strength of the links. They also enable B O X 1 . 4 Agriculture's comparative advantage new agro-based exports to create links. in Sub-Saharan Africa Agriculture's comparative advantage support the contention that indirect costs Agriculture as an engine for growth early comes from three sources: inherent in a poor business environment on. Agriculture is an effective engine for First, from factor endowments. Most are higher on average in Africa than in growth for most agriculture-based coun- African and agriculture-based economies their competitors in the developing world. tries because they need to produce most of are relatively rich in natural resources, but Third, from dynamic economies of poor in skilled labor, suggesting compara- scale. The very existence of economies of their own food, and they are likely to keep tive advantage for unprocessed primary scale puts late-comers at a disadvantage a comparative advantage in agriculture at products. In some countries, a combina- in competing with countries that have least in the medium term. Consider food tion of natural resources and human already developed their industrial base. production first. In low-income countries, capital endowments point to comparative Agriculture-based economies have largely advantage in processed primary com- missed the expansion of labor-intensive the demand for staple food is driven by modities, even though other factors may manufacturing that spurred development rapid population growth and high income have prevented the development of the in Asia in the 1980s. There is still debate elasticity. In Africa, demand for food is agricultural processing sector to date. on the likelihood that Africa will emerge Second, from the difference in produc- expected to reach $100 billion by 2015, dou- as a significant exporter of manufactured tivity and costs. These are determined by goods. But, based on current and emerg- ble its level of 2000.18 With staples mostly the business environment, infrastructure ing comparative advantage, a diverse nontradable, and frequent shortages of (roads, electricity, communications), and portfolio of processed and unprocessed foreign exchange for importing substitute institutions (legal, financial, regulatory) primary-based exports (including services that influence the efficiency of operations such as tourism) will remain the main cereals, food production in the agriculture- for firms and industries. The business option for generating foreign exchange in based countries has to keep up with domes- environment is more important for manu- the medium term. tic demand (see focus C). facturing and high-value services because Source: Collier and Venables (Forthcoming); Now consider exports. Beyond Mauritius they use these factors more intensively. Eifert, Gelb, and Ramachandran 2005; Wood World Bank Investment Climate surveys and Mayer 2001. and, more recently, apparel from Kenya and Madagascar under preferential trade agree- Growth and poverty reduction in agriculture's three worlds 35 ments (especially the African Growth and Opportunities Act), manufactured exports B O X 1 . 5 A role for agriculture in Africa's have not taken off in Sub-Saharan Africa. mineral-rich countries African exports are concentrated in unpro- cessed primary products, in sharp contrast Agriculture accounts for one-third of the ture, irrigation, agricultural credit, and economies of African mineral-rich coun- fertilizer subsidies. Nigeria, by contrast, with the manufactured goods exported tries. Between 1985 and 1999, agriculture squeezed agriculture, directly through the from the transforming countries of Asia. contributed on average twice as much as marketing boards, and indirectly through While some of that difference is related industry to their overall growth.21 Poverty its fixed exchange rate, which heavily remains widespread, however, despite taxed its agricultural exports and subsi- to macro and trade policies, this trade higher average per capita GDP than in the dized cheap imports. composition largely corresponds to the mineral-poor countries. The contrasting In Indonesia $1-a-day poverty declined comparative advantages for most African pre-1997 experiences of Indonesia and from 47 percent in 1981 to 14 percent in countries (box 1.4). Therefore, the growth Nigeria, both large oil-exporting coun- 1996. In Nigeria it increased from 58 per- tries, is telling. cent to 70 percent in the same period.22 strategy of agriculture-based economies for Indonesia supported agriculture, indi- The different treatment of agriculture many years to come has to be anchored in rectly through regular devaluations of the explains much of these widely divergent improving agricultural productivity. exchange rate that provided incentives outcomes. to its producers of agricultural tradables, and directly through investments of some What history shows. Higher agricultural Sources: Mwabu and Thorbecke 2004; World windfall oil revenues in rural infrastruc- Bank 1982. productivity generating an agricultural surplus, taxed to finance industrial devel- opment, and enabling lower food prices underpinned early development in Western land and forests, as a basis for sustainable Europe, the United States, and Japan, and agricultural growth. As shown by the con- later in Taiwan, China, and the Republic of trasting experiences of Indonesia and Nige- Korea.19 More recently, rapid agricultural ria, both large oil exporters, fostering agri- productivity growth in China and India has cultural growth is appropriate for reducing been widely credited with initiating indus- poverty in mineral-rich countries as well trialization and inducing rapid reductions (box 1.5). in poverty.20 The critical insight from these successful experiences is that the adverse Transforming countries effects of surplus extraction on agriculture More than 2 billion people, about three- were each time counterbalanced (or pre- quarters of the rural population in devel- dated) by public investment in scientific oping countries, reside in the rural areas research for agricultural technologies and in of transforming economies, encompassing rural infrastructure, including irrigation. most of South and East Asia, North Africa Premature and unduly high extraction and the Middle East, and some of Europe through an urban policy bias combined and Central Asia. Although agriculture with a lack of public investment in agri- contributed only 7 percent to growth dur- culture despite good growth potential are ing 1993­2005, it still makes up about 13 highlighted in the next section as key rea- percent of the economy and employs 57 sons for sluggish agricultural performance percent of the labor force. Despite rapid in many agriculture-based countries. Gha- growth and declining poverty rates in na's growth and poverty reduction in the many of these countries, poverty remains 2000s suggest that robust balanced agricul- widespread and largely rural--more than tural growth is still feasible today (see focus 80 percent of the poor live in rural areas. A). In countries, or regions within coun- Natural resources are also coming under tries, with poor agroecological conditions, growing pressure from agriculture and the agriculture's contributions to growth will competition for land and water from rap- be limited. Even so, agriculture is still likely idly growing urban populations and non- to play an important complementary role agricultural sectors. in reducing poverty and improving food security (see focus C). Agricultural intensi- Managing the rural-urban divide. A dis- fication will also be critical for reversing the tinguishing feature of transforming econo- degradation of natural resources, especially mies is the widening gap between rural and 36 WORLD DEVELOPMENT REPORT 2008 urban incomes. In China the incidence of make migration more attractive, inflating urban poverty declined twice as fast as that the pool of urban unemployed, leading to of rural poverty between 1980 and 2001; in urban congestion and the urbanization Indonesia, 2.5 times as fast over the same of poverty. Complementing these policies period; and in Thailand 3.7 times as fast with those that foster rural income growth between 1970 and 1999.23 and slow migration out of the traditional Nonagricultural sectors now account sector can provide important synergies.25 for most of the economic growth. But the Rural income growth can do much for transition of people out of agriculture and poverty reduction in the transforming rural areas is not keeping pace with the countries (see focus A). For example, 75­ restructuring of economies away from 80 percent of the dramatic drop in national agriculture. In China, longstanding policy poverty in China during 1980­2001 was impediments to labor mobility24 kept the the result of poverty reduction in the rural rural population behind while urban econ- areas. A similar pattern was observed in omies were expanding rapidly. In India, the Indonesia where the emergence of rural low level and quality of education of most towns ("urbanization without migration") rural workers is mainly responsible for was further emphasized.26 their inability to find jobs in the booming services economy. Reducing rural poverty through the new One policy response is facilitating faster agriculture and nonfarm employment. absorption of the agricultural labor force in Historically, there have been numer- the urban economy through investments in ous attempts to reduce rural poverty and human capital and labor market policies, address the rising income gap by increasing such as vocational training, transport ser- agricultural protection, often with limited vices, and job matching (see chapter 9). But success. The current call for agricultural the time lags in educating people are sub- subsidies in the face of weak fiscal capac- stantial. Moreover, the same policies also ity in the transforming countries is also unlikely to provide a sustainable solution to massive rural poverty (box 1.6). Increasing agricultural productivity, B O X 1 . 6 Supporting farmers without a strong fiscal including yields for staple crops, will be base: lessons from Thailand critical in countering pressures for agri- Before the 1960s, Thailand was an rice premium revenues fell with the decline cultural protection. Staple crops are still agriculture-based country with rice in world rice prices after the food crisis. the largest agricultural subsector (slightly accounting for the bulk of its export earn- This episode epitomizes the dilemma more than a third of agricultural output in ings. Rice exports were heavily taxed, in formulating sustainable policies to China and India, and slightly more than mainly through a duty levied proportional address rural-urban disparities. The pro- to export quantities (the rice premium), gram was contradictory because it tried half in Vietnam). In some countries that which hovered around 30 percent until the to support farmers based on the revenue are large players in international markets, mid-1970s. This served the dual purpose from taxing them, without a strong fiscal continuing to focus on food staples is also of raising government revenue for invest- base outside of agriculture. Even if the necessary to ensure national food secu- ment and securing cheap food for urban program had worked, increasing rice prices consumers. As GDP per capita doubled would have met strong resistance from rity. But rising incomes shift the compo- and exports from labor-intensive manu- poor urban consumers. sition of food expenditure from basic and facturing increased (40 percent by the As Thailand's economy advanced, the unprocessed staple foods to more varied end of the 1970s), widening rural-urban rice premium was gradually reduced and disparities pressured politicians to install diets with processed foods (chapter 2). So then abolished in 1986. New support pro- visible measures supporting farmers. grams have since been introduced, such as growth in agriculture is increasingly driven After some political instability, the the commodity credit program. Low-inter- by the rapidly expanding demand for live- Farmers' Aid Fund was established in 1974, est government loans are given against stock products and high-value crops, which based on large rice premium revenues from the pledge of rice, with the pledged rice sharp increases in world rice prices during canceling the debt if rice prices do not are also more labor intensive.27 the world food crisis of 1973­75. The fund meet a target. However, such programs The poverty impact of growth in the undertook several programs to support are unlikely to be sustainable or generous agricultural sector will thus depend increas- farmers, including price supports through enough to close income gaps. ingly on the poor connecting to these new government rice purchases. Yet the pro- gram was soon terminated, largely because Source: Hayami 2005. growth processes, either as smallholders or as laborers. Vertically integrated supply Growth and poverty reduction in agriculture's three worlds 37 chains may pose particular challenges for higher urban labor costs also stimulated them (see chapter 5), although recent evi- urban-to-rural subcontracting in vari- dence from China suggests that small and ous sectors throughout East Asia, both for poor farmers take an active part in China's domestic consumption and for export.36 rapidly expanding horticulture economy.28 Without the rapid expansion of rural non- farm employment through subcontracting Nonfarm employment. Agriculture alone in the export-oriented town and village cannot relieve rural poverty; rural nonfarm enterprises, rural poverty and inequality employment is also important. The poten- would have been much higher in China's tial of agriculture to contribute to rural central province of Hubei.37 poverty reduction differs across countries. Poverty reduction through rural non- In China, where land is relatively equally farm employment is often indirect. In distributed, the reduction in poverty was India and Bangladesh, relatively few of almost four times higher from GDP growth the poor gain access to nonfarm jobs.38 originating in agriculture than from GDP Yet by siphoning off nonpoor agricultural growth originating in industry or ser- wage laborers, nonfarm employment puts vices.29 Rapid agricultural development upward pressure on agricultural wages, also contributed substantially to the dra- benefiting the poor. matic poverty reduction in Vietnam over the past 15 years and is likely to remain an Urbanized countries important pathway out of poverty for many Agriculture makes up only 6 percent of the of Vietnam's poor.30 In India and Indone- urbanized economies and contributes about sia, however, growth in rural services was proportionately to growth, but the agribusi- estimated to contribute at least as much as ness and food industry, and services can growth in agriculture toward reducing pov- account for 30 percent of GDP. Although erty.31 In India the poverty-reducing effects almost three-quarters of the population of of nonfarm economic growth are greater in urbanized countries lives in urban areas, 45 states with higher initial levels of farm pro- percent of the poor are in rural areas, and ductivity and rural living standards.32 18 percent of the labor force still works in Growth in rural nonfarm employ- ment in many cases remains closely linked Figure 1.5 The ratio of food processing to agricultural value added rises with incomes to growth in agriculture, as agriculture Food processing value added/agriculture value added becomes a larger supplier of intermediate 0.6 inputs to other sectors such as processed HUN foods (forward linkages) (figure 1.5). Rural trading and transport, often of food, make up about 30 percent of rural nonfarm employment.33 Econometric estimates ARG from rural China also suggest significant 0.4 ROM BRA MEX cross-sectoral effects from growth in farm- ing to certain nonfarming activities, with less evidence of reverse linkages.34 ZWE ECU IRN MYS But with urbanization and globaliza- COL ZAF tion, growth in rural nonfarm employment BOL PER 0.2 SVK occurs increasingly independently from SEN PHL TUR agriculture. Regions in India with the slow- MAR MWI THA est growth in agricultural productivity had IDN the largest increase in the rural nonfarm EGY NPL BGD tradable sector.35 When capital and prod- IND ucts are mobile, investors seek low-wage 0 UGA 0 2,000 4,000 6,000 8,000 opportunities in areas that did not increase GDP per capita, constant 2000 US$ their incomes through higher agricultural Source : World Bank 2006y; UNIDO Industrial Statistics Database 2005. productivity. Urban overcrowding and Note : The list of 3-letter codes and the countries they represent can be found on page xviii. 38 WORLD DEVELOPMENT REPORT 2008 agriculture. Most countries in Latin Amer- good jobs in agriculture and the rural non- ica and many in Europe and Central Asia farm economy (chapter 10). The rapid con- fall into this category. centration in agribusiness and food retail- ing sharpens this challenge (chapter 5). Agriculture: a good business with poverty- reducing potential. In urbanized coun- Agriculture's development tries, agriculture acts like other tradable potential shortchanged sectors, often economically important in The agriculture-for-development connec- specific subregions. It provides growth tions revealed by the evidence reviewed here opportunities in subsectors with a com- have too often not been exploited. Certainly parative advantage as well as environmen- agriculture has yet to perform as an engine tal services--with new markets for biofu- of growth in most Sub-Saharan countries, els, carbon trading, and the preservation where populations are slowly urbanizing of biodiversity opening opportunities yet without a reduction in poverty. Even in the largely to be tapped. The main divide is now transforming countries, the rural poverty between the traditional rural sector and the and income disparity challenges remain modern rural and urban sectors. The pres- huge, despite spectacular growth in some sure for agricultural protection remains. countries. With agriculture mostly tradable, prices Four hypotheses could explain this do not decline from growth in productivity, divide between promise and reality: and landowners capture most of the sur- plus. The distribution of land and the labor · Agricultural productivity growth is intrin- intensity of production govern the pov- sically slow, making it hard to realize the erty-reducing effects. Poverty is increas- growth and poverty-reducing potential of ingly reduced through the employment of agriculture. unskilled labor. Much of the expansion of · Macroeconomic, price, and trade policies Chile's agricultural GDP can be attributed unduly discriminate against agriculture. to a labor-intensive agroexport boom over · There has been an urban bias in the allo- the past two decades. The rural poor ben- cation of public investment as well as efited indirectly through their employment misinvestment within agriculture. by large-scale farmers and agroprocessors, Official development assistance to agri- with many jobs taken by women. The pov- · culture has declined. erty-reducing impact has been substantial, despite vertically integrated supply chains. Each percent expansion of agricultural Is the agricultural sector and agroprocessing output is estimated to less productive? have reduced national poverty by 0.6­1.2 Some refer to the oft-observed slower percent.39 growth in agriculture than in the rest of the But success in agriculture does not always economy to argue that agriculture is inher- reduce poverty. Brazil experienced dramatic ently less dynamic. The argument goes as growth in agriculture during the 1990s, fol- far back as Adam Smith, who posited that lowing trade liberalization and an improve- productivity was bound to grow slower in ment of price incentives. But it is unclear agriculture than in manufacturing because how much the boom reduced rural poverty of greater impediments to specialization because agricultural employment declined and the division of labor in agricultural and shifted to higher-skilled wage workers as production. More recently it is argued, production became more capital intensive. especially for Africa, that rapid agricul- The reduction in rural poverty was largely tural growth will be difficult because of an the result of income transfers and employ- inherently unfavorable agroecological base, ment in the rural nonfarm economy.40 rapid soil degradation, low population den- The challenge of using agriculture for sity, poorly functioning markets, and com- development in the urbanized countries petition from the rest of the world.41 is to create opportunities for smallholders In this debate, it is important to dis- in supplying the modern food markets and tinguish the rate of growth in output (or Growth and poverty reduction in agriculture's three worlds 39 value added) in agriculture from the rate Figure 1.6 Labor productivity has been a more important source of growth in agriculture of growth in some measure of productiv- than in nonagriculture, 1993­2005 ity, such as labor productivity or total fac- Percenta Percenta Percenta tor productivity. Comparing the rate and 7 7 7 sources of growth in value added in agri- 6 6 6 culture and in the nonagricultural sectors over the past 15 years shows different pat- 5 5 3.68% 5 terns over the three worlds of agriculture 4 4 4 (figure 1.6). In transforming countries, the extraordinary dynamism of the nonagricul- 3 3 3 2.13% tural sector is reflected in its sustained high 2 2 2 0.55% growth rate based on both the increase in 4.39% 2.21% 3.16% employment and in labor productivity--as 1 1.79% 1 1 2.69% 1.96% evident from this decomposition of growth. 0.65% 0 0 0 But rates of growth in agriculture and non- ­0.63% ­1.01% agriculture are similar in the agriculture- ­1 ­1 ­1 based and urbanized countries. And labor Agriculture Nonagriculture Agriculture Nonagriculture Agriculture Nonagriculture productivity in agriculture grew faster than Agriculture-based countries Transforming countries Urbanized countries in nonagriculture in each of these two coun- Annual growth in employment, % Annual growth in labor productivity, % try categories. Moreover, total factor productivity Source: FAO (2006a). a. Annual sector growth rate (equal to the sum of the growth rates for employment and labor productivity). (TFP) has grown faster in agriculture than in industry in many settings. For 50 low- countries taxed agriculture relative to other and middle-income countries during 1967­ sectors. Interventions induced a 30 percent 92, the average growth in TFP was 0.5 to decline in the relative price of agricultural 1.5 percentage points higher in agriculture products with respect to a nonagricultural than in nonagriculture, with comparable price index. This policy bias was largest in differences observed across the develop- agriculture-based countries of Sub-Saha- ment spectrum.42 ran Africa, with overvalued exchange rates, These findings are not taken to claim high tariff protection in industry, and taxes superiority in agricultural TFP growth over on agricultural exports all contributing to the past decades, but to refute the notion the bias. It was estimated that a 10 percent- that agriculture is a backward sector, where age point reduction in total taxation to investment and policies are automatically the sector would increase overall annual less effective in generating growth. Brazil growth by 0.43 percentage points. and Chile--where agricultural commodi- Since then, most developing countries ties have become mostly tradable and where have substantially improved their macro- growth in agriculture has exceeded growth economic policy and reduced their biases in nonagriculture for more than a decade-- against agriculture (chapter 4). A com- confirm that agriculture can be a dynamic posite score comprising three key elements sector. But in many countries where agri- of sound macroeconomic policy (fiscal, culture is less tradable, it is likely to grow monetary, and exchange rate) shows a clear more slowly than nonagricultural sectors, improvement since the mid-1990s in almost given Engel's Law (as incomes rise, the pro- all Sub-Saharan African countries (figure portion spent on food falls). 1.7). A positive association is also observed between improvement in that score and the Are macroeconomic, price, and performance of agriculture. trade policies discriminating against Econometric evidence at the country agriculture? level shows that periods of rapid growth in There is considerable evidence that slower agriculture and substantial poverty reduc- growth in agriculture relates to the macro tion have followed reforms. In Uganda the and sectoral policy biases against it. The increase in coffee prices--largely brought landmark Krueger, Schiff, and Valdés about by domestic market liberalization, but (1991)43 study clearly documented how 18 also by the devaluation of the exchange rate 40 WORLD DEVELOPMENT REPORT 2008 Figure 1.7 Macroeconomic policy and agricultural growth have improved in Sub-Saharan Africa Macroeconomic score Agriculture growth rate, % per year 10 6 5 8 4 6 3 2 4 1 2 1984­95 0 1995­2005 0 ­1 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 ­0.2 0 0.2 0.4 0.6 Average annual change in macroeconomic score Source: http://www.icrgonline.com. Note: The macroeconomic score is the average of the budget balance score, inflation score, and exchange rate stability score provided by the International Country Risk Guide. Each point represents a country. and favorable world prices--substantially It was the heavy exploitation of agriculture reduced rural poverty during 1992­2000 by before meaningful (public) investment spurring a supply response. It is estimated in agricultural development that proved that a 10 percent increase in the price of lethal, especially in Africa. The goose was coffee reduces the poverty headcount by 6 often killed before it could lay its golden percentage points.44 In China 60 percent of egg. The share of public spending on agri- the dramatic expansion of agricultural out- culture in agriculture-based countries put and 51 percent of the reduction in rural (mostly in Africa) is significantly less (4 poverty from 33 to 11 percentage points percent in 2004) than in the transforming between 1978 and 1984 have been attrib- countries during their agricultural growth uted to institutional reforms, especially the spurt (10 percent in 1980) (table 1.3). The household production responsibility sys- low levels of agricultural spending in Sub- tem, and to price reforms.45 Saharan Africa are insufficient for sustained Even where macroeconomic and price growth. Recent advocacy by the New Eco- policies have been reformed, interna- nomic Program for African Development tional trade policies--especially protection to increase agricultural spending to 10 and subsidies of member countries of the percent of national budgets aims to reverse Organisation for Economic Co-operation this trend, bringing it to a level that is closer and Development (OECD)--continue to to that which brought success to the now impose substantial costs on developing- transforming countries. country agriculture. Overall trade policies To assess optimal cross-sectoral allo- depress prices of agricultural products in cations of public investment, the returns international markets by an average of 5 to spending across sectors would ideally percent (chapter 4). Only modest progress be systematically compared. Doing so is has been made to date in reforming these fraught with conceptual, methodological, policies, and much depends on a successful and data problems, indicating an important outcome of the Doha Round of trade talks. continuing research agenda. High returns to agricultural research and extension have been documented, with a meta-analysis Is public spending biased toward reporting rates of return in the range of 35 urban needs? percent (Sub-Saharan Africa) to 50 percent Successful countries have invested in agri- (Asia) for 700 studies, far above the cost of culture before taxing it (directly and indi- money accessible to developing countries rectly) to finance industrial development.46 (see chapter 7).47 While irrigation projects Growth and poverty reduction in agriculture's three worlds 41 Table 1.3 Public spending in agriculture-based countries is low Agriculture-based countries Transforming countries Urbanized countries 1980 2004 1980 2004 1980 2004 Public spending on agriculture as a share 6.9 4.0 14.3 7.0 8.1 2.7 of total public spending (%) Public spending on agriculture as a share 3.7 4.0 10.2 10.6 16.9 12.1 of agricultural GDP (%) Share of agriculture in GDP (%) 28.8 28.9 24.4 15.6 14.4 10.2 Source: Fan forthcoming. Note: Numbers for agriculture-based countries are based on 14 countries (12 from Sub-Saharan Africa), those for transforming countries on 12 countries, and those for urbanized countries on 11 countries. in Sub-Saharan Africa were often inef- where agricultural subsidies rose from 40 fective in the 1970s and 1980s, returns on percent of agricultural public expenditures projects now often reach the 15­20 percent in 1975 to 75 percent in 2002 (chapter 4). range commonly obtained in the rest of the Underinvestment in agriculture, especially world (chapter 2).48 Evidence from rural pronounced in the agriculture-based econo- Uganda shows agricultural R&D and rural mies, is further compounded by misinvest- feeder roads as profitable investments.49 ment, especially in the transforming and In Asia and Latin America, the decline urbanized countries. in public funding for agriculture partly reflects agriculture's diminishing impor- Development assistance to tance in the economy (table 1.3). There have agriculture declined dramatically been recent reversals in several countries The share of agriculture in official develop- though, including China, India, and Mex- ment assistance (ODA)52,53 declined sharply ico,50 motivated by the need to fight poverty over the past two decades, from a high of and narrow the rural-urban income gap. about 18 percent in 1979 to 3.5 percent in Agricultural spending has often been 2004 (figure 1.8). It also declined in abso- biased toward subsidizing private goods (fer- lute terms, from a high of about $8 billion tilizer, credit) and making socially regressive (2004 US$) in 1984 to $3.4 billion in 2004. transfers. These are overall substantially less The bigger decline was from the multilat- productive than investments in core public eral financial institutions, especially the goods such as agricultural research, rural World Bank. In the late 1970s and early infrastructure, education, and health.51 The 1980s the bulk of agricultural ODA went bias toward private goods often worsens as to Asia, especially India, in support of the countries' GDP per capita rises, as in India, green revolution, although this declined Figure 1.8 Official development assistance to agriculture declined sharply between 1975 and 2004 Share and level of ODA to agriculture Source of ODA to agriculture ODA to agriculture by region, 2004 US$ billions 2004 US$ billions Percentage 2004 US$ billions 2004 US$ billions 10 20 5 5 % of total ODA to agriculture Multilateral (right axis) Asia 8 16 4 4 Bilateral 6 12 3 3 Africa 4 ODA to agriculture 8 2 2 (left axis) 2 4 1 1 Latin America 0 0 0 0 1975 1980 1985 1990 1995 2000 2005 1975 1980 1985 1990 1995 2000 2005 1975 1980 1985 1990 1995 2000 2005 Source: OECD 2006a. Note: Data smoothed by locally weighted regressions. 42 WORLD DEVELOPMENT REPORT 2008 dramatically thereafter. Total ODA to agri- The political economy culture in Africa54 increased somewhat in of agricultural policy the 1980s, but it is now back to its 1975 level While the low-productivity beliefs may be of about $1.2 billion. This decline in atten- changing under the weight of evidence, and tion to agriculture is all the more striking the macroeconomic context has definitely because it happened in the face of rising improved, a better understanding of the rural poverty. political economy of agricultural policy A complex of reasons explains the making is necessary to address the continu- decline of donor support to agriculture and ing policy neglect and under- and misin- rural development: (1) falling international vestment in the sector. This understanding commodity prices that made agriculture will be used in chapters 4 to 8 to interpret less profitable in developing countries; (2) policy outcomes, and in chapters 10 and increased competition within ODA espe- 11 to design agriculture-for-development cially from social sectors; (3) emergency agendas that meet the political feasibility responses to numerous crises; (4) opposi- criterion. tion from farmers in some donor countries to supporting agriculture in their major export markets; and (5) opposition from The process of agricultural environmental groups that saw agricul- policy making ture as a contributor to natural resource Agricultural policy making can be seen as destruction and environmental pollution. the outcome of a political bargain between Failed agricultural development efforts politicians and their citizens.56 Citizens can also influenced the expectations of donors. be atomistic individuals who demand pol- The "agroskepticism" of many donors may icy action in exchange for political support well be related to their experience with past (votes) or they can be organized in lobbies unsuccessful interventions in agriculture, that defend special interests. such as large-scale integrated rural devel- opment and the training-and-visit system State objectives and policymaking. Politi- for extension, which were both promoted cians enjoy different degrees of autonomy. heavily by the World Bank.55 Poor under- They have their own objectives, for example, standing of agrarian dynamics, weak gover- to be reelected or to maintain legitimacy, to nance, and the tendency for donors to seek improve the welfare of their constituency, one-size-fits-all approaches contributed to or to pursue some vision for the country. the failures. Implementation difficulties are Institutions such as the structure of the especially challenging in agriculture with bureaucracy, alternative forms of represen- weak governance and the spatial dispersion tation, agenda-setting mechanisms, and of programs. This experience underlines reward systems condition their preferences the need to strengthen donor and country and power in the political game. There are capacity for program design and to invest many examples of major policy reforms led in governance and institutions for effective by a state with considerable autonomy in implementation (chapter 11). decision making. The green revolution in Since 2001, government and donor inter- Asia, for example, occurred in both demo- est in agriculture has increased, at least in cratic and nondemocratic political systems. discourse and modestly in support. This is In India, the driving force of the green happening because of a turnaround in the revolution was the political will to become reasons for the decline in support to agri- food self-sufficient, once the U.S. govern- culture, such as higher international com- ment decided in the mid-1960s to use food modity prices; higher priority of agricul- aid as an instrument of foreign policy.57 ture to developing-country governments; Indonesia (under Suharto) is an example of and new approaches to agricultural devel- a single-party regime that launched a green opment projects based on decentralization, revolution. participation, and public-private partner- Authoritarian regimes in Africa appar- ships, with greater likelihood of success. ently had fewer political incentives to sup- Growth and poverty reduction in agriculture's three worlds 43 port smallholder agriculture. African states capital, such as the skills to influence poli- used both coercion and the strategic sup- tics. And--importantly--they need social port of larger farmers to suppress opposi- capital such as strong membership orga- tion to agricultural pricing policies that nizations that can be mobilized for dem- taxed agriculture.58 There are also numer- onstrations and lobbying. In developing ous cases in which African states did make economies, farmers' transaction costs in serious efforts to intensify agricultural pro- collective action are high in view of their duction, but unlike in Asia, many focused large numbers, dispersed nature, high on large-scale production, without sus- transportation and information costs, pov- tained success.59 erty, and strong patronage relations with Economic crises can give policy mak- a landlord class that may pursue oppo- ers more autonomy to engage in reforms site interests. For this reason, smallholder that were difficult in normal times. Many interests tend to be poorly represented, and reforms of the role of the state in agricul- policy is biased toward urban interests and ture were introduced as part of structural those of the landed elite. adjustment made inevitable by the debt cri- The urban poor, by contrast, do not need sis--for example, the dismantling of mar- a high degree of organization to stage a pub- keting boards in Uganda (see box 4.4). lic protest, as illustrated by the food riots More often, policy makers seek to maxi- over the price of bread in Egypt. Industrial mize political support within their resource groups usually have more financial resources constraints. Political support is usually to influence politics, and they often belong related to the expected policy-induced to social elites, whose social capital facilitates changes in welfare. Hence politicians may lobbying. As countries urbanize and indus- rally support by favoring groups that are los- trialize, farmers face fewer challenges to col- ing ground relative to the others. Farm sub- lective action. Their numbers decrease and sidies were introduced in the 1930s in the their access to resources increases while the United States when farm incomes dropped widening income gap between the agricul- 50 percent more than those of their urban tural and nonagricultural sectors provides counterparts. Electricity subsidies in India a cause for action. Historically, in industrial are maintained partly as a compensation economies, farmers have formed astonish- for the increasing income disparity between ingly effective pressure groups to pursue the agricultural and nonagricultural sec- agricultural protection and subsidies, which tors. China's bold reforms launched in 1978 have proved extremely difficult to dismantle answered the imperative of restoring China's in spite of the rapidly decreasing number of food independence and a minimum living farmers (see chapter 4).61 standard for all its citizens. In democracies, Democratization in many developing the votes of farmers can be very influential. countries has increased the possibilities The 2004 elections in India, for example, for smallholders to form organizations were won by a party coalition that promised and influence politics. In West Africa, for to resolve "agrarian distress."60 example, producer organizations and par- liaments are increasingly involved in the Collective action and policymaking. Or- formulation of agricultural strategies and ganized groups of citizens can have strong policies (see chapter 11).62 They have influ- influence over the policy process. The power enced policy making in Senegal and Mali. of lobbies depends on their ability to over- Whether these agricultural policies will come the costs of organization and free- increase budget allocations to agriculture riding. Extensive empirical evidence shows remains to be seen. that small and more geographically con- centrated groups fare better, as do groups Why use inefficient better organized and with strong leader- policy instruments? ship. To be effective, lobbies need financial Imperfect information on welfare effects resources--for example, to contribute to implies that certain policy instruments are political campaigns. They also need human politically more effective than others, even 44 WORLD DEVELOPMENT REPORT 2008 if less efficient economically. As politicians Decentralization and closer proximity maximize short-run political support rather between the electorate and policy makers than their constituency's welfare, they pre- may be part of the answer. Increasing the fer the former instruments over the latter. autonomy of compensatory agencies or cast- For example, price supports are chosen over ing compensations into legislation--such as direct income transfers because self-suffi- Mexico's PROCAMPO to make the North ciency appeals to a nationalistic sentiment American Free Trade Agreement negotia- of voters, farmers fear an excessively visible tions politically acceptable to producers of "welfare" stigma, and information on the crops competing with imports--have been cost of direct transfers could lead to sub- used successfully, with the risk of irrevers- sequent policy reversal. Some instruments ibility once subsidies have been introduced. have benefits that are easier to target to A new role for agriculture political clients, such as investment projects or food aid. Broadly distorting export taxes in development may thus be maintained to provide fiscal The case for using the powers of agriculture revenues that can be used to reward politi- for poverty reduction and as an engine of cal clients and ethnic-group supporters.63 growth for the agriculture-based countries Certain instruments have costs that are is still very much alive today. Effective use easier to conceal--for example, trade taxes requires adjusting agendas to each country as opposed to land or value added taxes. type and within countries as well. However, Net social cost is exchanged for political despite convincing successes, agriculture feasibility and redistributive gains. has not been used to its full potential in The inability to make credible commit- many countries because of anti-agriculture ments in a dynamic policy process may fur- policy biases and underinvestment, often ther force the government into suboptimal compounded by misinvestment and donor policy. Groups losing from reform anticipate neglect, with high costs in human suffering. that they will be worse off in the long run, New opportunities for realizing this poten- even though compensation may be prom- tial are present today, but also coming are ised now. Lack of a commitment device to new challenges, particularly in pursuing a clinch compensation when there is a delay smallholder-driven approach to agricultural between policy implementation and redis- growth that reconciles the economic, social, tributive effects is a major hurdle to policy and environmental functions of agriculture. making. The resulting status quo bias has The following chapters explore the instru- been used to explain opposition to trade ments available to use agriculture for devel- reforms and to the removal of subsidies in opment and how to define and implement exchange for better future public services. agendas specific to each country type. focus A Declining rural poverty has been a key factor in aggregate poverty reduction Poverty rates in rural areas have declined over the past decade, mostly because of the impressive gains in China. But 75 percent of the world's poor still live in rural areas, and rural poverty rates remain stubbornly high in South Asia and Sub- Saharan Africa. Rural poverty reduction contributed more than 45 percent to overall poverty reduction in 1993­2002, with only a small share of that resulting from rural-urban migration. Rural-urban income gaps have narrowed in most regions except Asia, where the widening gap is a source of political tensions and a motive for new efforts to stimulate agricultural and rural development. P overty is concentrated in rural areas: other countries the declines in rural poverty growth. But from what is now known, it With an international poverty line of were unrelated to agriculture, such as in El appears very likely that the majority of the $1.08 a day, 75 percent of the develop- Salvador and Nepal, where rural poverty fell world's poor will still be in rural areas for ing world's poor live in rural areas whereas largely because of rising nonfarm incomes several decades. only 58 percent of its population is rural. and remittances.1 Poverty rates in rural areas have declined The urban population share for the The rural-urban income divide in the past 10 years, but remain extremely developing world is expected to reach 60 high (figure A.1). They declined from 37 per- percent by 2030.2 At that rate, the urban is large and rising in most cent in 1993 to 30 percent in 2002 for the share of $1.08-a-day poverty--now 25 per- transforming economies developing world as a whole, using a $1.08- cent--will reach 39 percent by 2030.3 These In almost all parts of the world, rural pov- a-day poverty line (box A.1). Outside China, projections are approximations because erty rates are higher than urban ones, and though, the results are less impressive, with a the pace of urbanization will depend on the depth of poverty is usually greater. In decline from 35 percent to 32 percent. The the extent and pattern of future economic 2002, the poverty rate for rural areas in number of poor people in rural areas fell only slightly, from 1 billion to 0.9 billion. With a Figure A.1 Rural poverty rates and number of rural poor ($1.08-a-day poverty line) higher poverty line ($2.15 a day), the poverty Rural poverty rate, % Rural poor, millions World rural poor, millions rates declined from 78 percent to 70 percent, 60 600 1,200 and the number of poor people slightly declined from 2.2 billion to 2.1 billion. World (right axis) 50 500 1,000 These global trends hide large variations in the evolution of poverty across regions 40 400 800 and countries. Rural poverty rates remain frustratingly high and tenacious in South 30 300 600 Asia (40 percent in 2002) and Sub-Saharan Africa (51 percent), and the absolute num- 20 200 400 ber of poor in these regions has increased since 1993. 10 100 200 Many countries that had fairly high agri- cultural growth rates saw substantial reduc- 0 0 0 tions in rural poverty: Vietnam, with land 1993 1996 1999 2002 1993 1996 1999 2002 reform and trade and price liberalization; Sub-Saharan Africa Latin America & Caribbean Moldova, with land distribution; Bangla- South Asia Europe & Central Asia desh, with rising farm and rural nonfarm East Asia & Pacific Middle East & North Africa earnings and lower rice prices resulting World from new technologies; and Uganda, with Source: Ravallion, Chen, and Sangraula 2007. economic reforms and a resulting boom in coffee production. Agriculture was also the key to China's massive and unprecedented B O X A . 1 A reestimation of international poverty levels reduction in rural poverty and to India's slower but still substantial long-term decline World rural and urban poverty statistics world are unsurprisingly higher than previ- (boxes A.2 and A.3). Ghana is Sub-Saharan for the period 1993 to 2002 have been con- ous estimates, by about 10 percent. With Africa's breaking story of poverty reduction sistently estimated for the first time by a the $1.08 poverty line, aggregate poverty over 15 years, with a decline in rural poverty World Bank team (Ravallion, Chen, and San- in 2002 is now estimated at 1,183 million, as the largest contributor (box A.4). graula 2007). The methodology includes compared with the 1,067 million previously But in some countries rural poverty did an adjustment of the poverty lines of $1.08 reported. The recent decline in aggregate and $2.15 a day, in 1993 purchasing power poverty, published in other World Bank not decline, despite agricultural growth: for parity (PPP), for the higher cost of living documents, is not reflected in this Report example, Bolivia and Brazil's agricultural in urban areas. With this adjustment, the because the rural-urban disaggregation is growth concentrated in a dynamic export- new estimates for aggregate poverty in the not available beyond 2002. oriented sector of very large farms. And in 46 WORLD DEVELOPMENT REPORT 2008 B O X A . 2 China's unprecedented reduction in rural poverty China's poverty reduction in the past 25 years varieties (Lin 1992). Rural incomes rose by 15 imbalances. Restrictions on internal labor is unprecedented. Estimates by Ravallion and percent a year between 1978 and 1984 (Von migration, industrial policies that favored Chen (2007) indicate that poverty fell from Braun, Gulati, and Fan 2005), and the bulk of China's coastal areas over the poorer inland 53 percent in 1981 to 8 percent in 2001, pull- national poverty reduction between 1981 and regions, and service delivery biases that ing about 500 million people out of poverty. 1985 can be attributed to this set of agrarian allowed the Chinese rural education and health Rural poverty fell from 76 percent in 1980 to 12 reforms. systems to deteriorate are all examples of poli- percent in 2001, accounting for three-quarters The role of agricultural growth in poverty cies that contributed to disparities in regional of the total. The evolution of poverty has been reduction remained important in subsequent and sectoral economic performances. very uneven over time, however. The sharpest years, as the reforms created the rural nonfarm reduction was in the early 1980s, with some sector, which provided employment and income Urban and rural poverty in China reversal in the late 1980s and early 1990s. to millions of people whose work was no longer needed on farms. The share of the rural nonfarm Poverty rate, % The role of institutional change 70 sector in GDP went from close to zero in 1952 to in poverty reduction more than one-third in 2004 (Von Braun, Gulati, The sharp decline in poverty from 1981 to 60 and Fan 2005). Considering the entire period, 1985 was spurred by agricultural reforms that 50 Ravallion and Chen (2007) concluded that started in 1978. The household responsibility growth in agriculture did more to reduce pov- system, which assigned strong user rights for 40 erty than did either industry or services. individual plots of land to rural households, 30 the increase in government procurement Rising inequalities Rural prices, and a partial price liberalization all Higher incomes for large parts of the popula- 20 National had strong positive effects on incentives for tion came at the cost of higher inequality. 10 Urban individual farmers. In the initial years of the Unlike most developing countries, China has reforms agricultural production and produc- higher relative income inequality in rural areas 0 1981 1984 1987 1990 1993 1996 1999 2002 tivity increased dramatically, in part through than in urban areas (Ravallion and Chen 2007). farmers' adoption of high-yielding hybrid rice There are also large regional and sectoral Source: Ravallion and Chen 2007. B O X A . 3 Reducing rural poverty in India The role of technological change relative terms. The rapid trade liberalization of inequality. But despite impressive growth in poverty reduction the 1990s had sharply differentiated regional and poverty reduction in the 1990s, the In the 1960s and 1970s the introduction of impacts. Rural districts with a higher concen- picture of overall welfare gains is nuanced, semidwarf varieties of wheat and rice--in tration of industries hurt by liberalization had because health outcomes have not improved. the green revolution--led to dramatic leaps slower progress in reducing the incidence and India's recent reforms, unlike China's, were in agricultural production and raised farm- depth of poverty because of the extremely not directed at agriculture. Today, there is a ers' incomes, especially in northwest India. limited mobility of labor across regions and renewed policy focus on agriculture in India, Rural poverty fell from 64 percent in 1967 industries. because many believe that the full poverty to 50 percent in 1977 and to 34 percent in Urban incomes and expenditures also reduction potential of agriculture in India has 1986. A large share of the gains came from increased faster than did rural incomes, yet to be unleashed. an increase in real wages and a decline in resulting in a steady increase in the ratio Sources: World Bank 2000b; Burgess and Pande grain prices. Growth in the agricultural sec- of urban-to-rural mean real consumption 2005; Chaudhuri and Ravallion 2006; Von Braun, tor reduced poverty in both urban and rural from just below 1.4 in 1983 to about 1.7 in Gulati, and Fan 2005; Topalova 2005; Ravallion and areas. This was true also of growth in services. 2000. Even then, India had fairly low income Datt 1996; Datt and Ravallion 1998a. But industrial growth did not reduce poverty. Land reform, rural credit, and education poli- Urban and rural poverty in India cies also played a role in the 1970s and 1980s, even if these programs might have cost some Poverty rate, % economic growth. 70 Beginning in 1991 India instituted sweep- 60 ing macroeconomic and trade reforms that spurred impressive growth in manufacturing 50 Rural and especially in services. Poverty data for 40 2004, comparable to the 1993 figures, show a continuing decline in poverty rates. 30 Green Urban Revolution Diverging patterns and a mixed picture 20 Period of rural welfare 10 Although there is a consistent poverty-reduc- ing pattern across almost all Indian states, 0 growth has been uneven. From 1980 to 2004 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 initially poorer states grew more slowly, result- Source: World Bank 2000b; 2007 National Sample Survey (NSS), Government of India. ing in income divergence in both absolute and Note: Poverty rates based on NSS data and the official poverty line. Declining rural poverty has been a key factor in aggregate poverty reduction 47 B O X A . 4 Ghana: African success in poverty reduction Ghana's growth and poverty reduction over modestly at 1 percent. Since 2001 a significant Urban and rural poverty in Ghana the past 15 years is Africa's new and important part of productivity gains has been in cocoa. Poverty rate, % success story. Real GDP has grown at more Cocoa production, although accounting for 80 than 4 percent a year since 1980 and at more only 10 percent of total crop and livestock than 5 percent since 2001. The poverty rate production values, contributed about 30 Rural savannah fell from 51.7 percent in 1991­92, to 39.5 in percent of agricultural growth. Ghana has 60 1998­99, and 28.5 in 2005­06. Poverty fell by also enjoyed strong growth in horticulture All rural about 17 points in the urban areas, and by 24 (almost 9 percent of total exports in 2006) in rural. If all rural-urban migrants are assumed driven mostly by pineapples. Both cocoa and 40 National to be poor, an estimated 59 percent of the pineapples are smallholder-based, and the Rural forest total poverty reduction was due to declining poverty reduction associated with recent 20 rural poverty. But there has been an increase in growth appears particularly strong among Urban inequality (the Gini coefficient rose from 0.35 cash-crop growers. Even so, the resource and to 0.39 over the 15 years), particularly at the export base of the economy remains narrow, 0 regional level, with Accra and the forest areas and the economy highly vulnerable to exter- 1991­92 1998­99 2005­06 experiencing more poverty reduction than has nal shocks. the rural savannah in the north. Ghana is one of the few Sub-Saharan Source: Coulombe and Wodon 2007. Ghana's accelerated growth is a result of Africa countries to register a sustained posi- better economic policy and a better invest- tive growth in per capita food production and ment climate as well as high commodity prices. declining food prices since 1990. But there is total factor and labor productivity and grow- In 2001­05 agriculture outperformed the ser- evidence of environmental degradation and ing fertilizer use over the past 10 years are vice sector, growing at 5.7 percent a year, faster unsustainable natural resource use. Food crop positive indicators of such a process. than overall GDP at 5.2 percent. and livestock production needs to intensify Agricultural growth has been mainly due to sustain current rates of agricultural growth Sources: Bogetic and others 2007; Coulombe and to area expansion, with yields increasing and to benefit more of the population. Rising Wodon 2007; Jackson and Acharya 2007. developing countries (30 percent) was more income in half the countries. Differences Why the poverty decline in rural than twice that for urban areas (13 percent), have been increasing in many countries. This areas--rural development or using the $1.08-a-day poverty line.4 Though increase is most notable in rapidly trans- migration? the gap has been closing in many parts of forming Asia (figure A.2). In India, rural and Higher urban incomes have pulled rural- the world, it has opened dramatically in East urban incomes were fairly similar in 1951, urban migration flows. But to what extent Asia and remained stable in South Asia. but the gap has since widened substantially are observed reductions in rural poverty Differences in income between rural and (box A.3). In China, the gap between rural caused by migration or by a genuine decline urban areas illustrate the rural-urban dispar- and urban incomes narrowed in the early in poverty among the nonmigrants who stay ity problem. In a sample of almost 70 coun- reform years, when rapid agricultural growth in rural areas? The answer depends on the tries, the median urban income (consump- drove overall economic growth, but it has pattern of migration. tion) is at least 80 percent higher than rural since opened again (box A.2).5 If migration is poverty-neutral--that is, the poor and nonpoor migrate at the same rate--the genuine decline in poverty of rural residents is equal to the observed decline in Figure A.2 The urban-rural income disparity has increased in most of the transforming countries the rural poverty rate. But if the nonpoor Ratio of urban to rural median income are more likely to migrate--as documented 4 for many countries--the reduction in pov- Initial year End year erty among nonmigrants is higher than the observed decline in poverty. If all migrants 3 are assumed to be poor, that sets a lower bound for the genuine reduction of poverty 2 in rural areas.6 If all those who migrate are poor, 81 per- cent of the reduction in rural poverty (6.9 1 percentage points of an 8.5 percentage point reduction) is still due to reduction of pov- 0 erty among rural residents, not to migration Guatemala Thailand Cambodia China Vietnam Indonesia Bangladesh India Pakistan (table A.1). Indeed, almost all the decline in 1989­2002 1990­2002 1997­2004 1985­2001 1992­2001 1993­2002 1991­2000 1989­99 1999­2001 South Asia and East Asia is because of a gen- Source: WDR 2008 team, from nationally representative household surveys. uine decline in poverty in rural areas. Even 48 WORLD DEVELOPMENT REPORT 2008 Table A.1 Even assuming that all migrants are poor, most poverty reduction in rural areas is due to tion gives a lower bound for the genuine declining poverty among rural residents reduction of aggregate poverty achieved in Rural poverty rate Change in rural poverty rate rural areas. ($2.15-a-day poverty line) for nonmigrants A lower bound for the contribution of Poverty- the rural sector to the decline in overall pov- neutral All migrants erty is 45 percent, and a more likely contri- Region 1993 2002 migration poor bution is more than 55 percent (table A.2). Sub-Saharan Africa 85.2 82.5 ­2.8 ­1.5 Outside China, the contribution of rural South Asia 87.6 86.8 ­0.8 ­0.4 areas is likely to be 80 percent (certainly not India 91.5 88.6 ­2.9 ­2.7 less than 52 percent), and in Sub-Saharan East Asia Pacific 85.1 63.2 ­21.9 ­20.0 Africa more than 80 percent. Rural develop- China 88.6 65.1 ­23.6 ­22.1 ment is thus essential to reduce poverty and Middle East and North Africa 35.8 37.6 1.9 6.1 achieve the Millennium Development Goal Europe and Central Asia 19.8 18.7 ­1.1 ­0.3 of halving the aggregate poverty rate. Latin America and Caribbean 47.3 46.4 ­0.9 7.8 Total 78.2 69.7 ­8.5 ­6.9 Within-country heterogeneity: Less China 73.7 71.3 ­2.4 ­1.6 less favored areas and poverty Source: WDR calculations, based on data in Ravallion, Chen, and Sangraula 2007. Note: Poverty rates are estimated using the 1993 $2.15-a-day poverty line. Beyond the rural-urban income divide, within-country heterogeneity in poverty when China is excluded from the sample, into the rural contribution, the urban con- across rural areas is a significant concern in 67 percent of the reduction in rural poverty tribution, and a population shift component many countries. It is commonly stated that is from causes other than migration. Note, (table A.2).7 In the first decomposition, the agricultural and rural investments should however, that this decomposition is an rural contribution is the reduction in the be directed to less favored areas because accounting exercise and thus does not speak rural poverty rate applied to the rural popu- poor people are concentrated there. Others to the indirect ways in which migration and lation in 2002. The urban contribution is the dispute this.8 Recent advances in geographic urban growth contribute to rural poverty reduction in the urban poverty rate applied information systems provide new opportu- reduction (such as remittances). to the 2002 urban population (the urban nities to answer basic questions about the population of 1993 plus the migrants). And spatial distribution of rural poverty in rela- the rural-urban migration contribution is tion to agriculture. Methods to estimate Rural areas contribute the poverty reduction corresponding to the welfare at the level of small communities, to a large share of the decline transition of migrants from the rural to the often referred to as "poverty mapping," pro- in national poverty urban poverty rate. vide basic information on the location of What, then, is the contribution of rural pov- A second specification assumes that all the poor. This information can be overlaid erty reduction to overall poverty reduction? migrants are poor. By attributing maximum with geographic information on agroeco- There are two ways to decompose aggregate contribution of migration to the reduction logical conditions and market access, such change in poverty between 1993 and 2002 of poverty in rural areas, this decomposi- as reported in chapter 2. Table A.2 Contribution of the rural sector to the aggregate poverty change Aggregate poverty rate Contribution of rural sector ($2.15-a-day poverty line) to aggregate poverty change change Poverty-neutral Region 1993 2002 1993­2002 migration All migrants poor Sub-Saharan Africa 79.8 77.5 ­2.2 81.1 44.6 South Asia 85.1 83.4 ­1.7 32.8 17.4 India 89.1 85.6 ­3.5 60.7 56.0 East Asia Pacific 70.6 45.6 ­25.0 53.4 48.8 China 72.8 44.6 ­28.3 52.0 48.8 Middle East and North Africa 23.5 23.5 0.1 n.a. n.a. Europe and Central Asia 16.6 13.6 ­3.0 14.1 3.5 Latin America and Caribbean 29.6 31.7 2.1 ­10.3 88.1 Total 63.3 54.4 ­8.8 55.5 45.1 Less China 59.6 57.9 ­1.8 78.8 52.4 Source: WDR calculations, based on data in Ravallion, Chen, and Sangraula 2007. Note: Poverty rates are estimated using the 1993 $2.15-a-day poverty line. n.a. = not applicable. Declining rural poverty has been a key factor in aggregate poverty reduction 49 Analyses for Brazil, Ecuador, Thailand, and medium agricultural potential areas, in Figure A.3 Incidence of poverty and Malawi, and Vietnam show that poverty Thailand and Cambodia more than 70 to geographic characteristics, Brazil rates tend to be higher in remote areas 80 percent live in good agricultural poten- Poverty rate, % than in more accessible areas (figure A.3). tial areas. 50 Poverty is also deeper and more severe in Where poverty incidence does not coin- remote areas. But at the level of disaggre- cide with poverty density, there are impor- 46 gation used for poverty, there is no general tant tradeoffs in the regional targeting of relationship between poverty rates and agri- policy interventions. The greatest impact on cultural potential.9 42 poverty may be through fostering growth The spatial patterns in the numbers of in more favored regions where most poor poor people (poverty density) are strikingly people live, especially growth that gener- 38 Good access Poor access different from those for poverty rates (pov- ates incomes for smallholders and creates erty incidence). In all the countries studied employment. Yet the extreme poor in more Share of rural poor, % the majority of the rural poor live in locali- marginal areas are especially vulnerable, and 30 ties with good access, as seen in Brazil (figure until migration provides alternative oppor- A.3).10 This is largely because less favored tunities, the challenge is to improve the sta- 20 areas are typically less densely populated bility and resilience of livelihoods in these than are favorable areas. In Brazil, for exam- regions. One concern with marginal areas 10 ple, 83 percent of the rural population lives is the possible existence of geographic pov- within two hours of a large city. By contrast, erty traps. Evidence of such traps has been 0 there is no clear pattern among countries shown for China, for example.11 In such a Good access Poor access for the distribution of the poor population case, reducing rural poverty requires either High Medium Low potential and agricultural potential. Whereas in Brazil a large-scale regional approach or assisting more poor people (75 percent) live in low the exit of populations. Source: Buys and others 2007. Note: High agropotential areas are those with very high or high agropotential under the GAEZ (Global Agro Ecological Zones) classification, which accounts for climate, soil, terrain, and land use, created by the Food and Agriculture Organization and IIASA in 2000. Medium agropotential areas are those with a medium or moderate GAEZ classification. Low agropotential areas are those classified as low, marginal, or very marginal in the GAEZ classification. Good access is defined as travel time of not more than two hours to the nearest city with a population of 100,000 or more. The share of the poor population is calculated for rural areas at the district level. Agriculture's performance, diversity, and uncertainties 2 A big question at the time of the last World productivity and income growth in the Development Report on agriculture, in 1982, face of declining prices for grains and tra- was whether agriculture would be able to ditional tropical exports. Rising demand c h a p t e r provide enough food for the world's grow- for high-value horticulture and livestock ing population. Twenty-five years later it in these rapidly growing economies offers is clear that world agriculture has met the farmers opportunities to diversify into new global demand for food and fiber. Increasing markets. per capita production, rising productivity, This chapter highlights emerging trends, and declining commodity prices all attest opportunities, and constraints that will drive to this success. But adequate global supplies future agricultural performance in response do not mean that countries or households to four challenges: the potential for a pro- have enough food--purchasing power mat- ductivity revolution in Sub-Saharan Africa, ters more than availability (see focus C). options for less-favored areas, diversification And the future world supply of food may in favored areas, and global uncertainties. be uncertain: increasing resource scarcity, The considerable diversity of agricultural heightened risks from climate change, higher production conditions underlines the com- energy prices, demand for biofuels, and plexity of these challenges. doubts about the speed of technical progress all have implications for future agricultural Productivity growth in performance. developing countries drove In addition, improved agricultural per- agriculture's global success formance has not been uniform through- out the world. Improvements have yet to Agriculture's performance has been impres- stimulate enough growth in agriculture- sive. From 1980 to 2004, the gross domes- based countries, especially in Sub-Saharan tic product (GDP) of agriculture expanded Africa, to allow them to achieve a sustained globally by an average of 2.0 percent a year, structural transformation (chapter 1). more than the population growth of 1.6 per- Environmental costs have often been high, cent a year. This growth, driven by increas- compromising the sustainability of future ing productivity, pushed down the real price production and affecting natural ecosys- of grains in world markets by about 1.8 per- tems and human health. cent a year over the same period. Poor agricultural performance in some areas relates to difficult agroclimatic condi- Developing countries have led tions or low investments in infrastructure agricultural growth that constrain market access. The agricul- Developing countries achieved much faster tural challenge in these less-favored areas agricultural growth (2.6 percent a year) is to sustainably intensify production in than industrial countries (0.9 percent a diverse farming systems, while improving year) in 1980­2004. Indeed, developing infrastructure and markets. countries accounted for an impressive 79 In the high-potential areas that have percent of overall agricultural growth dur- led the global increase in food production, ing this period. Their share of world agri- especially the transforming countries of cultural GDP rose from 56 percent in 1980 Asia, the challenge is different: sustaining to 65 percent in 2004. By contrast, they 50 Agriculture's performance, diversity, and uncertainties 51 accounted for only 21 percent of nonagri- continued to expand through the 1990s and cultural GDP in 2004.1 into the 2000s. Today 39 percent of the crop The transforming economies in Asia area in South Asia is irrigated, 29 percent in accounted for two-thirds of the develop- East Asia and the Pacific, but only 4 percent ing world's agricultural growth.2 The major in Sub-Saharan Africa. contributor to growth in Asia and the devel- Modern crop varieties of cereals began oping world in general was productivity to be widely adopted in the 1960s. The area gains rather than expansion of land devoted devoted to improved varieties has con- to agriculture. Cereal yields in East Asia tinued to expand, and by 2000 they were rose by an impressive 2.8 percent a year in sown on about 80 percent of the cereal area 1961­2004, much more than the 1.8 percent in South and East Asia, up from less than growth in industrial countries (figure 2.1). 10 percent in 1970. After a late start, Sub- Due to rising productivity, prices have been Saharan Africa is also expanding the use of declining for cereals--especially for rice, improved cereal varieties, which covered 22 the developing world's major food staple-- percent of the cereal area there in 2000.3 and for traditional developing-world export Chemical fertilizer use has also expanded products, such as cotton and coffee. significantly in most of the developing world, except Sub-Saharan Africa. The Better technology and better policy developing-country share of global fertil- have been major sources of growth izer use has risen from about 10 percent in Since the 1960s, rising cereal yields have the 1960s to more than 60 percent today. been driven by widespread use of irrigation, Asian farmers are the major users, with improved crop varieties, and fertilizer (fig- use up sharply from an annual average of ure 2.2). Although crop improvements have 6 kilograms per hectare in 1961­63 to 143 extended well beyond the irrigated areas to kilograms per hectare in 2000­02,4 more embrace huge areas of rainfed agriculture, than in developed countries. Higher fertil- Sub-Saharan Africa has not participated in izer use accounted for at least 20 percent of this agricultural success. the growth in developing-country agricul- For millennia Asian agriculture has ture (excluding dryland agriculture) over been intensified through irrigation, which the past three decades.5 Figure 2.1 Cereal yields rose, except in Sub-Saharan Africa Yields, tons per hectare Yields, tons per hectare 5 5 4 4 Developed countries 3 3 3 2 2 Developing countries 1 1 0 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 East Asia & Pacific Europe & Central Asia Latin America & Middle East & North Caribbean Africa South Asia Sub-Saharan Africa Source: FAO 2006a. 52 WORLD DEVELOPMENT REPORT 2008 Figure 2.2 Modern inputs have expanded rapidly but have lagged in Sub-Saharan Africa Irrigation Sub-Saharan Africa 4 South Asia 39 East Asia & Pacific 29 Middle East & North Africa 33 Europe & Central Asia 11 Latin America & Caribbean 11 0 10 20 30 40 Arable and permanent cropland, % 1962 1982 2002 Improved varieties of cereals Sub-Saharan Africa 24 South Asia 77 East Asia & Pacific 85 Middle East & North Africa 48 Latin America & Caribbean 59 0 20 40 60 80 Cereal area, % 1980 2000 Fertilizer use Sub-Saharan Africa 13 South Asia 98 East Asia & Pacific 190 Middle East & North Africa 73 Europe & Central Asia 34 Latin America & Caribbean 81 0 20 40 60 80 100 120 140 160 180 200 Kg of nutrients per hectare of arable and permanent cropland 1962 1982 2002 Sources: Evenson and Gollin 2003; FAO 2006a. Livestock expansion has also contrib- roads, and human capital from the 1960s, uted to the high agricultural growth rates. combined with better policies and institu- Livestock is one of the fastest growing sub- tions, were the major drivers that made the sectors in developing countries, where it agricultural productivity gains possible.9 already accounts for a third of agricultural Decompositions of productivity gains GDP.6 Production of meat has doubled over consistently point to investment in research the last 15 years, led by a 7 percent annual and development (R&D) as major sources increase in poultry production. of growth.10 Hybrid rice alone is esti- The combination of these breakthroughs mated to have contributed half of the rice produced steady growth in total factor pro- yield gains in China from 1975 to 1990.11 ductivity (TFP), especially in Asia at 1­2 Improved varieties contributed 53 per- percent a year.7 TFP growth was respon- cent of total factor productivity gains in sible for half of output growth after 1960 in the Pakistan Punjab from 1971 to 1994. China and India, and 30­40 percent of the Even in Sub-Saharan Africa, the impact of increased output in Indonesia and Thai- R&D has been identified as important in land, greatly reducing pressure on increas- its (limited) productivity growth.12 Infra- ingly scarce land.8 Investments in science, structure, especially roads, has also been Agriculture's performance, diversity, and uncertainties 53 an important factor in agricultural growth In most cases, countries with high in Asia. In India, investments in rural growth rates of agricultural value added roads contributed about 25 percent of the per capita of agricultural population--such growth in agricultural output in the 1970s, as China (3.5 percent annual growth rate), with high payoffs.13 Investments in human Malaysia (3.1 percent), and Vietnam (2.4 capital--improved education, health, and percent)--were also good performers in nutrition--have repeatedly been shown rural poverty reduction (see focus A). But to increase aggregate productivity.14 One Brazil (5.3 percent annual growth rate) and study for Sub-Saharan Africa found a sig- Pakistan (2.4 percent) have been less suc- nificant positive impact of calorie availabil- cessful in reducing poverty, mainly because ity on agricultural productivity, providing of the highly unequal ownership of and evidence of the interdependence of malnu- access to productive assets such as land and trition, hunger, and agricultural growth.15 irrigation water.18 Policy and institutional changes are also The distinguishing feature of Sub- likely to have been major sources of pro- Saharan growth is the high variability ductivity growth, although few studies have among countries and over time. Over the explicitly quantified the impacts. One such past 25 years, only Nigeria, Mozambique, study is the well-documented impact of the Sudan, and South Africa maintained agricul- household responsibility system in China, tural growth rates per capita of agricultural in which institutional and policy reform population above 2 percent a year, while was the dominant factor promoting agri- seven countries had rates below 1 percent a cultural growth and reducing rural poverty year and another six countries had negative during 1978­84.16 per capita growth. Many countries had sig- Despite this progress, long-term produc- nificant periods of negative growth associ- tivity growth could have been higher and ated with conflicts or economic crises. ecosystem and health costs reduced if the The growth rate of agricultural GDP per environmental costs of modern technology capita of agricultural population for the had been avoided. As much as a third of the region was close to zero during the early productivity gains from technical progress 1970s and negative through the 1980s and in China and Pakistan have been negated early 1990s. But with positive growth rates by soil and water degradation, and this does in the last 10 years, this trend has been not include the offsite pollution costs.17 reversed, suggesting that the stagnation in Growth across regions and Figure 2.3 Growth in agricultural GDP per countries has been uneven agricultural population is lowest in Sub-Saharan The progress in agricultural growth in Africa developing countries has been dominated Annual growth rate 1980­2004, % by the significant gains in Asia, especially in 4 China. Growth in Sub-Saharan Africa has averaged nearly 3 percent over the past 25 3 years, close to the average for all developing countries. But the growth per capita of agri- 2 cultural population in Sub-Saharan Africa (a crude measure of agricultural income) 1 has been only 0.9 percent, less than half that in any other region and well below the star performer, East Asia and the Pacific, at 3.1 0 Sub- South East Middle Latin percent. Latin America had lower agricul- Saharan Asia Asia East America & tural growth than Sub-Saharan Africa, but Africa & Pacific & North Caribbean with Latin America's declining agricultural Africa population, the growth per capita of agri- Agricultural GDP Agricultural GDP/agricultural population cultural population has averaged a healthy 2.8 percent a year (figure 2.3). Sources: FAO 2006a; World Bank 2006y. 54 WORLD DEVELOPMENT REPORT 2008 Figure 2.4 Stagnation in Sub-Saharan African factors can now be readily quantified and agriculture may be over mapped against agricultural areas and (Growth in agricultural GDP per capita of agricultural population in Sub-Saharan Africa) populations using geographical informa- tion systems. Annual growth rate, % 8.0 Both agroecological conditions and 6.0 market access matter Agricultural potential, especially that of 4.0 rainfed agriculture, is highly sensitive to 2.0 soil quality, temperature, and rainfall. Two-thirds (1.8 billion) of the developing 0.0 world's rural population lives in areas with favorable agroecological potential--that is, ­2.0 irrigated areas (42 percent of the rural pop- ­4.0 ulation) or humid and semihumid rainfed areas with reliable moisture (26 percent of ­6.0 the rural population) (map 2.1 and figure ­8.0 2.5).19 But one-third (820 million people) 1968 1972 1976 1980 1988 1984 1992 1996 2000 2004 live in less favored rainfed regions, char- acterized by frequent moisture stress that Sources: FAO 2006a; World Bank 2006y. Note: Line is for data smoothed by locally weighted regressions. limits agricultural production (arid and semiarid areas of map 2.1). Although these less-favored areas account for 54 percent of the agricultural area (45 percent of the Sub-Saharan African agriculture may be cropped area), they produce only 30 per- over (figure 2.4). Improvements in agri- cent of the total value of agricultural pro- cultural performance coincide with better duction. Latin America, the Middle East macroeconomic policies and higher com- and North Africa, and Sub-Saharan Africa modity prices (chapter 1). But food produc- all have fairly high shares of rural popula- tion is still lagging (box 2.1). tion in these moisture-stressed areas. Another characteristic of Sub-Saharan Performance also relates to access to Africa is the generally poor yields of food markets and services. Rural areas by defi- staples, even in the most recent period. The nition are spatially dispersed, which affects green revolution breakthrough in cereal the costs of transport, the quality of public yields that jump-started Asia's agricultural services, and the reliance on subsistence and overall economic growth in the 1960s production. In developing countries 16 and 1970s has not reached Sub-Saharan percent of the rural population (439 mil- Africa, where the adoption of productivity- lion people) lives in areas with poor mar- enhancing inputs has been low (figure 2.2). ket access, requiring five or more hours to There are many reasons for this: depen- reach a market town of 5,000 or more (map dence on rainfed agriculture, diverse food 2.2). About half the agricultural area in crops, poor infrastructure, policy discrimi- these remote regions has good agricultural nation against agriculture, and low invest- potential but lacks the infrastructure to ment (box 2.1). integrate into the wider economy. In Sub- Differences in performance Saharan Africa and the Middle East and North Africa, the percentage of rural pop- reflect different underlying ulation with poor market access is much conditions higher, more than 30 percent (figure 2.5). The different performances of countries In South Asia, only 5 percent live in remote and regions in part reflect the huge diversity areas, and 17 percent in East Asia and the of agricultural production systems--their Pacific. Poor market access reflects low agroclimatic potential, their population investments in infrastructure, often due to density, their infrastructure. Many of these low population density (box 2.2). Agriculture's performance, diversity, and uncertainties 55 B O X 2 . 1 The green revolution in food staples that didn't happen: Sub-Saharan Africa's variegated palette The expansion of food production has taken roads in Sub-Saharan Africa than there were kilograms of nitrogen-phosphorus-potassium quite different courses in Asia and in Sub- in Asia at the time of the green revolution. per hectare per year, five times the average Saharan Africa, where increases in food staples Sub-Saharan African countries are small, many application of 10 kilograms per hectare of were achieved largely by expanding the area of them landlocked, and barriers to trade are nutrients through chemical fertilizers.22 Soil cultivated, as shown in the figure below. relatively high because of high transport costs. nutrient mining is highest in areas of high pop- Population density--low? To some As already mentioned, Sub-Saharan African ulation density. For example, the estimated extent the extensification in Sub-Saharan investment in irrigation (4 percent of crop annual productivity loss in the Ethiopian high- Africa reflects differences with Asia in popula- area) is also only a fraction of that in Asia (34 lands from soil degradation is 2­3 percent of tion density and land availability. The popula- percent of crop area). agricultural GDP a year.23 Clearly the decline of tion density of 29 persons per square kilometer Geography and agroecology--diverse. soil fertility is a large part of the reason for Sub- in Sub-Saharan Africa is only one-tenth that in Other reasons for the differences in agricul- Saharan Africa's low yields, so reversing it must South Asia. Yet population densities in many tural productivity growth include Sub-Saharan be a high priority. areas of Sub-Saharan Africa have reached lev- Africa's intrinsically different agroecological Policies--historically distorted. To els at which growth through land expansion characteristics. The main green revolution reduce risks and increase profitability, Asia under rainfed conditions is no longer sustain- cereals in Asia were wheat and rice, largely provided credit, support prices, and input sub- able. When population density is adjusted for irrigated. Sub-Saharan Africa's diverse rainfed sidies to farmers. In Sub-Saharan Africa gov- land quality, densities in much of Sub-Saharan agroecologies use a wide range of farming ernments also intervened heavily in markets, Africa are similar to those in Asia. For example, systems and a broad number of staples (from but agriculture was taxed more than in other the land-quality-adjusted population density cassava in west and central Africa to millet regions--and it still is (chapter 4). Although in Kenya is estimated to be higher than that in and sorghum in the Sahel). What does such Kenya, Malawi, Zambia, and Zimbabwe initi- Bangladesh.20 heterogeneity in crop production and agro- ated maize-based revolutions using hybrid Infrastructure--undeveloped. Sub- ecological conditions mean? In Sub-Saharan seed and fertilizer, the programs have been Saharan Africa is massively disadvantaged in Africa improved varieties for many different difficult to sustain, due to high marketing infrastructure, increasing transaction costs crops will be needed to increase productivity. costs, fiscal drain, and frequent weather and market risks. In part due to low population Outside technologies often are not directly shocks. Macroeconomic policies and much densities, there are fewer and less-developed transferable, and Africa-specific technologies lower public investment in agriculture than in will be required to improve the region's agri- Asia have also reduced incentives to private cultural productivity (chapter 7). Yet the trend agents and limited supply of public goods Expansion of cereal production for R&D spending was stagnant in the 1990s. such as R&D and roads (chapter 1). has followed very different paths Fertilizer use--low. Largely because of Turning the corner? Recent evidence in Sub-Saharan Africa and Asia poorly developed markets, fertilizer use in Sub- suggests that Sub-Saharan Africa may be Yield (1961­65 = 100) Saharan Africa has stagnated at very low levels, turning the corner. There are many local suc- 260 one of the main reasons for the region's low cesses in food crop production, such as maize 2001­04 agricultural productivity relative to Asia. On in several West African countries, beans in average, Sub-Saharan African farmers must sell Eastern Africa, cassava in many countries, 220 about twice as much grain as Asian and Latin market-driven expansion of the use of fertilizer American farmers to purchase a kilogram of fer- on maize crops in Kenya, and many promising Asia tilizer, given its high price.21 Low volumes, high technological innovations in the early stages 180 prices, high transport costs, and undeveloped of adoption (chapter 7). The challenge is how private input markets are major barriers to fer- to achieve productivity gains in diverse rain- tilizer use in Sub-Saharan Africa (chapter 6). fed systems by coordinating investments in 140 Africa Soils--degraded. The combination of technology with investments in institutions 2001­04 shorter fallows, expansion to more fragile and infrastructure to promote development of land driven by rapid population growth, and input and output markets. 100 a lack of fertilizer use is degrading soils in 100 140 180 220 260 Sub-Saharan Africa. About 75 percent of the Area (1961­65 = 100) farmland is affected by severe mining of soil Sources: Borlaug and Dowswell 2007; Cummings 2005; Djurfeldt and others 2006; Harrigan 2003; nutrients. According to a recent report by the Source: FAO 2006a. InterAcademy Council 2004; Johnson, Hazell, Note: Each point represents a five-year average, International Fertilizer Development Center, and Gulati 2003; Mosley 2002; Sanchez 2002; starting with 1961­65 =100. the average rate of soil nutrient extraction is 52 Spencer 1994. Defining less-favored areas are those that are irrigated or have good The combination of agroclimatic potential rainfall and have medium to high access to and market access provides a working defini- markets. Sixty percent of the rural popula- tion of areas that are favored or less favored tion live in these areas. Less-favored areas for agriculture, at least for market-oriented are of two types--constrained by poor mar- production. In this Report, favored regions ket access, and limited by rainfall. Almost 56 WORLD DEVELOPMENT REPORT 2008 Map 2.1 Agroecological zones in agricultural areas Source: Sebastian 2007, based on GAEZ climate data from FAO/IIASA; GMIA irrigated area data from FAO; and cropping and pastureland data from Ramankutty/SAGE. Note: Agricultural areas include those with at least 10 percent irrigated, cultivated, or grazing lands. Map 2.2 Market access in agricultural areas of Africa, Asia, and Latin America Source: Sebastian 2007, based on market access data from A. Nelson, and extent of agriculture from IFPRI. Note: Agricultural areas include those with at least 10 percent irrigated, cultivated, or grazing lands. Data are not shown for Australia, Canada, Europe, and the United States. two-thirds of the Sub-Saharan rural popu- be considered, including the fragility of the lation are in less-favored areas with either or natural resource base (chapter 8) and social both low agricultural potential or poor mar- conditions. ket access, compared with only 25 percent These distinctions determine the choice for South Asia. Of course, many additional of farming systems and strategies. For elements of less-favored areas should also example, in Ethiopia a disproportionate Agriculture's performance, diversity, and uncertainties 57 Figure 2.5 There are big differences across regions in agricultural potential and access to markets Agricultural potential Sub-Saharan Africa South Asia East Asia & Pacific Middle East & North Africa Europe & Central Asia Latin America & Caribbean 0 20 40 60 80 100 Percentage of rural population Irrigated Humid/sub-humid Arid/semi-arid Market access Sub-Saharan Africa South Asia East Asia & Pacific Middle East & North Africa Latin America & Caribbean 0 20 40 60 80 100 Percentage of rural population Good (0­1 hour) Medium (2­4 hrs) Poor (5 hrs or more) Source: Sebastian 2007. share of vegetable production is in high- is to sequence cost-effective investments in access areas (63 percent of production, but areas that have low population density and only 38 percent of the rural population), little commercial activity. One option is to while cereals are concentrated in less- focus investments geographically to foster favored areas, whether defined by rainfall the development of growth poles. or by market access.24 Beyond infrastructure, agricultural These characteristics are not immutable. investments in new varieties to improve Investments can convert less-favored areas yield stability and in natural resource with low rainfall or poor roads into high- management can be effective in less- potential areas. The most common is irri- favored areas (chapter 8). Over the long gation, which has made some of the world's term, investments in human and social deserts bloom, transforming agricultural capital (education, health, and institutional systems and livelihoods. Likewise, invest- strengthening) to enhance income diversi- ment in transport infrastructure has allowed fication and out-migration may be the best Brazil's interior states to enter global mar- option for many areas (chapter 9). kets for soybeans and other crops. Although the conventional wisdom is that For much of Sub-Saharan Africa, poor most of the poor are in less-favored regions, market access is almost as important a overlapping maps of agroclimatic potential constraint (34 percent of the rural popu- and market access with poverty maps indi- lation) as rainfall (45 percent of the rural cate that this is not so (see focus A). Although population). In Ethiopia, 68 percent of the the poverty rate is often highest in more mar- rural population lives in medium- to high- ginal areas, the largest number of poor people rainfall areas, but farm households are on live in the more-favored areas. Lagging average 10 kilometers from the nearest road regions with high poverty rates are even and 18 kilometers from the nearest public found within countries with rapid economic transport. The challenge in such contexts growth (box 2.3). 58 WORLD DEVELOPMENT REPORT 2008 decline in prices of cereals and traditional B O X 2 . 2 Population density and the definitions exports. of "rural" Changes in consumer diets--brought about by rapid income growth and increas- Market access is closely related to popula- Co-operation and Development (OECD) ing urbanization--are already driving tion density. Worldwide there is enormous uses population density of 150 people per heterogeneity in population densities. In square kilometer to define rural. Applying diversification. Especially in the transform- India less than 1 percent of the population this definition to Brazil would increase ing and urbanized economies, dietary pat- live in areas with fewer than 50 people per its rural population to 25 percent. India terns are shifting away from cereals, roots, square kilometer, compared with 20 per- reports 72 percent of its population as tubers, and pulses to livestock products, cent in Brazil and 60 percent in Zambia (see rural, but the OECD definition would figure below). Zambia's population distribu- reduce that to only 9 percent. Even heavily vegetable oils, fruits, and vegetables (fig- tion is quite uneven, while Cambodia's is agricultural areas in India would not be ure 2.6). Consumer preferences in indus- fairly equal.25 This also means that national rural under the OECD definition. trial countries for specialty products and definitions of "rural" can have quite differ- Differences in population density year-round supplies of fresh produce create ent meanings in different countries. and distance to market towns imply very Rural areas can be defined by settle- different challenges for infrastructure, global markets for many of them. Horticul- ment size, population density, distance to service delivery, and rural development. ture, oilseeds, and livestock are expanding metropolitan areas, administrative divi- High population density makes it cheaper the fastest, with new markets also emerg- sion, and importance of the agricultural to provide public goods, such as roads. ing for feed grains, livestock, and biofuels. sector. Brazil uses administrative divisions Low population density increases the cost and reports 19 percent of its population of such investments but eases constraints Most food products in this new agriculture as rural. The Organisation for Economic of land resources. are perishable, and quality and safety stan- dards are tighter, thus increasing the verti- The distribution of population within a country varies widely cal integration of food systems. Share of population, % Share of population, % 100 100 The horticulture revolution Fruits and vegetables are one of the fastest 80 80 growing agricultural markets in developing countries, with production increasing by 3.6 60 60 percent a year for fruits and 5.5 percent for Zambia vegetables over 1980­2004.26 During this 40 40 period, 58 percent of the increase in world- Cambodia wide horticulture production came from 20 20 China, 38 percent from all other developing Brazil India countries, and the remaining 4 percent from 0 0 developed countries, suggesting that the 0 100 200 300 400 500 0 100 200 300 400 500 Population per sq. km Population per sq. km boom in horticulture is mainly benefiting developing countries. In India, fruits and Share below 150 per sq. km: Share of rural (UN): vegetables were the most important growth Brazil: 25% Brazil: 19% India: 9% India: 72% sector for crop production in the 1990s.27 Zambia: 65% Zambia: 65% The horticulture revolution boosts Cambodia: 31% Cambodia: 83% incomes and employment. Relative to cere- Sources: Center for International Earth Science Information Network (CIESIN) 2006; data on the als, horticulture increases the returns on share of rural population are from United Nations 2004. land about 10-fold. And it generates con- siderable employment through production (about twice the labor input per hectare of cereals) and more off-farm jobs in process- Opportunities for a new ing, packaging, and marketing (chapter agriculture through 9).28 Women hold many of these new jobs. diversification But horticulture also requires produc- Farmers in areas of good agricultural ers to adjust. It is management-intensive, potential and with access to markets-- with a variety of crops and heavy use of about 60 percent of the rural population in cash inputs and chemicals. It is risky, due the developing world--have good oppor- to both pest outbreaks and price volatility, tunities in new markets. By diversifying to and fruit production requires an invest- higher-value products, they can offset the ment of several years to recoup costs. It can Agriculture's performance, diversity, and uncertainties 59 B O X 2 . 3 Why are there lagging regions in countries with high agricultural growth? Even countries with strong overall agricultural access to land. Nearly two-thirds of its soils agricultural growth, which was largely concen- growth have lagging regions, where agricul- are not suitable for farming, a situation only trated in the irrigated coastal regions. tural productivity and household incomes are aggravated by centuries of use (particularly for India's Bihar: Meeting the challenges low. In many cases these regions have lower livestock) that degraded soils and limited their of governance in areas with high agricultural potential or poorer market access capacity to absorb rainfall. agricultural potential than other regions in the same country. But Peruvian Andes: Isolated areas have not Well endowed with fertile land and water lagging areas can also be the result of social participated in rapid agricultural growth resources, Bihar has the potential to achieve processes, with specific territories left aside by Recent economic growth in Peru has been productivity levels equivalent to the more- public policies or poor governance. The most driven by the mining and agricultural sectors, developed states of India.33 But the state's difficult regions are those that combine poor with annual growth rates of 7.9 percent and 3.8 agricultural performance lags seriously agroecological endowments, isolation, and percent, respectively, in 1997­2004. Growth behind the country's. Employing 80 percent social marginalization. in these sectors helps explain why rural areas of Bihar's workforce and generating nearly 40 Brazil's northeast: Low agricultural appear to have done better than urban ones in percent of its GDP, agriculture has performed potential next to a breadbasket reducing poverty after the 1998­99 economic particularly poorly, declining in the early Brazil's agricultural growth of 5.3 percent a crisis. But poverty reduction in rural areas has 1990s by 2 percent a year and growing by less year during 1990­2004 was led by agricultural been unequal across geographic regions. than 1 percent a year since 1995--half the exports from the south and center of the Rural poverty appears to be most respon- national average. country. Agricultural GDP growth there was sive to growth in the coastal regions (elasticity Bihar's agricultural sector has been impressive--Mato Grosso at 14.8 percent a between ­0.9 and ­1.3), and least responsive plagued by low productivity, slow diver- year, Goiás 6.8 percent, Paraná 6.7 percent, and in the sierra regions (elasticity between ­0.6 sification into higher-value crops, poorly Mato Grosso do Sul 5.3 percent. But this per- and ­0.9).31 This can be explained by the developed rural infrastructure, inadequate formance does not reflect the entire country. geography of the Andean region, which iso- investments to expand and maintain surface Alongside a rural Brazil that is a global leader lates towns from the rest of the economy. The irrigation systems, small and fragmented in several agricultural exports is another rural mountainous terrain increases the costs of farms with widespread illegal land tenancy, Brazil, with widespread poverty and depriva- road construction. In some areas it is necessary little transparency in product marketing, and tion affecting millions of people in semisubsis- to walk for several hours to get to a market inadequate public research and extension tence farming. town, health center, or public school. The dis- services. Bihar faces serious challenges to The northeast of Brazil has the country's tance to markets encourages subsistence farm- improve growth and strengthen the public highest rural poverty rates (76 percent) and ing using few purchased inputs, with about 20 administration, service delivery, and invest- the largest concentration of rural poor in Latin percent of agricultural production for personal ment climate. Government efforts to address America.29 States in the northeast were among consumption, labor exchanges characterized the needs of farmers and deliver support ser- the poorest agricultural performers in the by reciprocity, and poor opportunities for non- vices have had little success largely because country for 1990­2004, some with negative agricultural income despite the low productiv- of an unclear strategy, weak institutional agricultural growth rates (Ceará ­4.3 percent ity of the land. capacity, and little accountability, as well as a year, Rio Grande do Norte ­2.3 percent, and These isolated areas have the highest concerns about security and lawlessness. Sergipe ­0.5 percent).30 The northeast's pau- poverty rates in the country ($1-a-day poverty The cause of these problems: a semifeudal city of natural resources and climatic instability rates of more than 65 percent).32 Even though social structure divided by caste. Community (with droughts occurring on average every agricultural income represents more than 75 involvement and transfers of responsibility in five years) are accentuated by the fragile equi- percent of total income in the Andean areas, delivering agricultural technology and sur- librium of its ecosystems and highly unequal these regions did not benefit from recent face irrigation are enjoying some success.34 also inflict considerable harm to the envi- The livestock and ronment: horticulture crops account for 28 aquaculture revolutions percent of global pesticide consumption.35 The livestock and aquaculture revolutions The horticulture revolution, unlike the have been most notable in the transform- green revolution, has been driven largely by ing and urbanized countries of Asia and the private sector and the market. This has Latin America, driven by rising demand for implications for the organization of value poultry, pork, fish, and eggs with increasing chains, with specialized agribusinesses incomes. Beef and milk production have and supermarkets increasing their share in also risen steadily in rapidly growing coun- these markets, especially in the urbanized tries. In India the consumption of milk countries. Grades and standards make it nearly doubled between the early 1980s and more difficult for smallholders acting alone late 1990s.36 to participate in these markets, giving rise Livestock production is switching from to contract farming and collective action by extensive (grazing) to intensive (stall-fed producer organizations (chapter 5). poultry, pigs, and dairy cows), increasing 60 WORLD DEVELOPMENT REPORT 2008 Figure 2.6 Per capita food consumption in developing countries is shifting to fruits and providing more diversified diets. But inten- vegetables, meat, and oils sive production methods and the growing Annual growth rate of concentrations of animals near urban and kilocalories/person/day, % periurban areas of developing countries 4 can increase waste pollution and the inci- dence of diseases such as tuberculosis and 3 avian flu. The movement of live animals and aquatic products makes the accidental 2 spread of disease more likely. Globalization 1 may further widen the environmental foot- print from livestock (box 2.4) and aquacul- 0 ture, calling for policies to prevent irrevers- ible consequences (chapter 8). ­1 Cereals Sugar Oil crops Horticulture Meat Milk Diversifying through export markets 1961­75 1976­90 1991­2003 High-value products also make up a rapidly Source : FAO 2006a. growing share of international trade in agri- cultural products. Exports of horticulture, the demand for feed grains, including oil- livestock, fish, cut flowers, and organic prod- seeds. In developing countries, 28 percent ucts now make up 47 percent of all develop- of grain consumption was already used for ing-country exports, far more than the 21 feed in 2005. But the use of cereals for feed percent for traditional tropical products such is growing more slowly than the increase in as coffee, tea, and cotton (figure 2.7). Across meat production because other feedstuffs, a broad range of nontraditional export prod- such as oilseed meals and cassava, are sub- ucts, developing countries have been gaining stituted for cereal grains, and the share of market share--in 2004 they held 43 percent poultry in total meat production is grow- of the world trade in fruit and vegetables ing. (Poultry requires only 2­3 kilograms of (excluding bananas and citrus). feed per kilogram of meat, compared with Brazil, Chile, China, and Mexico domi- 10 kilograms for beef.)37 nate nontraditional agricultural export Aquaculture is the world's fastest grow- markets. But many countries, including ing food-production sector, increasing at some in Sub-Saharan Africa (Kenya, for an annual average rate of 10 percent since example), are now gaining shares in selected the mid-1980s. Aquaculture now represents product markets. The least-developed coun- more than 30 percent of total food-fish pro- tries have very limited participation--only duction.38 More than 90 percent of aqua- Niger is significant, with 2.6 percent of the culture production occurs in developing world's green bean exports by value39--but countries, and China alone accounts for there have been other recent successes, such 67 percent of global production. Aquacul- as cut flowers from Ethiopia. Despite the ture can provide an important source of expansion of nontraditional exports, prices livelihood for the rural poor, generating have held up well in real terms. Estimates income through direct sales of products of the elasticity of export revenues for non- and employment in fish production and traditional export products indicate there is services, especially in processing. In Asia, room for further market expansion.40 more than 12 million people are directly Even traditional export commodities employed in aquaculture. In Bangladesh provide opportunities for entering high- and Vietnam, more than 50 percent of value markets. The markets for premium workers in fish depots and processing plants quality goods such as coffee, organics, and are women, and although salaries are still Fair Trade products have grown consider- quite low, they are significantly higher than ably in the last decade, starting from a low wages from agricultural activities. base. The Fair Trade market is most devel- The livestock and aquaculture revolu- oped in Europe, less so in Japan and the tions are increasing the supply of protein and United States. But the market for organic Agriculture's performance, diversity, and uncertainties 61 produce has grown strongly in both Europe (retail sales of $10.5 billion in 2003) and the B O X 2 . 4 The global environmental footprint of United States ($12 billion).41 There is con- expanding livestock siderable scope for expanding exports to these emerging markets (chapter 5). During the decade 1994­2004, world trade area under soybean cultivation between in soybeans doubled. Seventy percent 1999/2000 and 2004/05 by planting an of the global increase in exports went to additional 54,000 square kilometers--an Biofuels--a revolution China, where total meat production rose area larger than Costa Rica--much of it in the making? from 45 million to 74 million tons over displacing ecologically important savanna the period, generating rapid expansion woodland (cerrado) and forest.45 The mean Biofuels could be the next revolution. Based in demand for feedgrains. Argentina and annual deforestation rate in the Amazon on maize, sugar, cassava, oil palm, and other Brazil responded rapidly to this market from 2000 to 2005 (22,392 km2 per year) crops, biofuels offer potentially major new opportunity, providing more than two- was 18 percent higher than in the previous thirds of the increased global exports of five years (19,018 km2 per year), partly the markets to agricultural producers. Some soybeans. result of agricultural expansion.46 Because countries have been aggressively encour- Rapid growth in exports from Argen- trees are being burned to create open aging biofuel production as oil prices have tina and Brazil has been supported by land in the frontier states of Pará, Mato risen and concerns over energy security bringing new land under cultivation, often Grosso, Acre, and Rondônia, Brazil has at the expense of forests and woodlands. become one of the world's largest emit- and the environment have increased. But In the northern Salta region of Argentina, ters of greenhouse gases. To mitigate the current economics, environmental issues, half the area under soybean cultivation in negative ecological impacts, an alliance and the prospects of alternative technolo- 2002/03 was previously covered by natural of private companies, nongovernmental gies and feedstocks make biofuels' future vegetation. Much of this area included organizations, and the government of the highly threatened Chaco ecosystem.44 Brazil signed a two-year moratorium on growth quite uncertain (see focus B). In Brazil the states of Goias, Mato Grosso, buying soybeans from newly deforested and Mato Grosso do Sul doubled the land in the Amazon.47 Future perspectives: confronting challenges and rising uncertainties Figure 2.7 High value exports are expanding rapidly in developing countries Even if agricultural and food systems have Billions of dollars (2000 prices) been globally successful over the past four 80 decades, can they meet the likely demand for food over the next 25 or 50 years? Can 60 they accommodate rapid urbanization and 40 changing diets, and will they do this in a sustainable and environmentally friendly 20 way? What are the main uncertainties that might compromise success? 0 Cereals Traditional Oilseeds, feeds, Livestock and Fruits and exports and others fish products vegetables A "business as usual" scenario 1980 1990 2000 2004 Projections of global future food supply and demand are always subject to wide mar- Source: United Nations Commodity Trade Statistics Database (COMTRADE). gins of error and generally influenced by Notes: Traditional exports include cocoa, tea, coffee, rubber, tobacco, sugar, cotton, and spices. prevailing market conditions: when prices are fairly high, as they are today, projec- tions of the impact of climate change and tions tend to be more "pessimistic."42 Both energy prices are especially difficult given the United Nations' Food and Agriculture current uncertainties--the IFPRI baseline Organization (FAO) and the International uses "medium" scenarios for both.48 Food Policy Research Institute (IFPRI) In the IFPRI models, the overall projec- have recently released "business as usual" tion is that global food consumption will projections to 2025­30 and 2050 that show increase more slowly in the future. Growth broadly consistent trends.43 Such projec- in cereal consumption will slow from 1.9 tions are inherently conservative; they percent annually in 1969 to 1999 to 1.3 assume no major changes in policies (such percent a year from 2000 to 2030; growth as trade) or policy responses to market in meat consumption will also slow from conditions (such as increased investment 2.9 percent a year to 1.7 percent annually in R&D induced by higher prices). Projec- (see figure 2.8).49 This slowdown reflects 62 WORLD DEVELOPMENT REPORT 2008 Figure 2.8 Slower growth in cereal and meat consumption is projected for the next 30 years Cereal consumption Meat consumption Annual growth rate, % Annual growth rate, % 8 8 7 1969­99 (actual) 7 1969­99 (actual) 6 2000­30 (projected) 6 2000­30 (projected) 5 5 4 4 3 3 2 2 1 1 0 0 ­1 ­1 Sub- South East Asia Middle East Europe & Latin Sub- South East Asia Middle East Europe & Latin Saharan Asia & Pacific & North Central America & Saharan Asia & Pacific & North Central America & Africa Africa Asia Caribbean Africa Africa Asia Caribbean Source: Rosegrant and others 2006b. a. Includes food, feed, and other uses. b. No data are available on meat consumption for Europe and Central Asia in 1969­99. two factors: an overall slowing of popula- The global projections hide widening tion growth to 1 percent a year (nearly all supply-demand imbalances in developing growth is in developing countries), and the countries. Net cereal imports by developing medium to high levels of food consumption countries of Asia, Africa, and Latin Amer- per capita already attained in some highly ica are projected to increase to 265 million populous developing countries (for exam- tons in 2030 from 85 million tons in 2000. ple, China). This reflects continuing high import depen- In developing countries overall, per cap- dence in the Middle East and North Africa ita consumption of cereals for food will fall and sharp increases in imports in Asia and slightly; together with continuing trends Sub-Saharan Africa (figure 2.9). in the efficiency of converting feed grain These trends greatly increase the impor- to meat, per capita cereal consumption for tance of developing countries in global food all uses in developing countries increases markets. The major exporting countries by only 0.1 percent a year. Slower demand are the developed countries and Brazil and growth leads to slower growth of cereal Argentina. Some countries in Europe and production in all regions. Meat consump- Central Asia are projected to become impor- tion also slows sharply, except in South Asia tant exporters. Only in Sub-Saharan Africa, and Sub-Saharan Africa, where meat con- with high transport costs and scarce foreign sumption will increase at a slightly faster exchange, is the growing import gap a con- rate, but from very low per capita consump- cern for food security. Again, the biggest tion levels. challenge is in Sub-Saharan Africa, where Despite the slowing growth in consump- even in 2030 the average per capita calorie tion, current projections reverse the long- consumption is expected to be around 2,500, term decline in cereal prices at 1.6 percent less than the 3,000+ in other regions. a year observed in previous decades. Cereal The assumptions underlying these pro- prices are projected to increase margin- jections show that supply constraints for ally at 0.26 percent a year to 2030 and to land, water, and energy; increased climate accelerate to 0.82 percent a year from 2030 variability and climate change; and persis- to 2050.50 The slight upward price trend for tent low investment levels in research pose cereals is a significant reversal from previ- formidable challenges in meeting future ous projections--land and water scarcity food demand. They suggest rising uncer- combined with slower technical progress tainty and the potential for larger and more (discussed below) explain this reversal. frequent shocks to global food prices. Agriculture's performance, diversity, and uncertainties 63 Looming land constraints Figure 2.9 Developing countries will become even bigger markets for cereals exported largely by developed countries Throughout most of history, agriculture grew by bringing more land under culti- Tons, millions 300 vation, driven by population growth and expanding markets. But in the more densely 2000 (actual) 200 2030 (projected) populated parts of the world, the land fron- tier has closed. In Asia land scarcity has 100 become acute in most countries, and rapid urbanization is reducing the area available 0 for agriculture.51 The urbanized countries of Latin ­100 America and Europe and Central Asia are ­200 relatively land-abundant because of lower Developed Europe & Latin Sub-Saharan South Middle East & East Asia population densities and a declining agri- countries Central Asia America & Africa Asia North Africa & Pacific Caribbean cultural population (see figure 2.10). In Latin America there is further scope for Source: Rosegrant and others 2006b. Notes: Negative values indicate net cereal imports, and positive values indicate net cereal exports. agricultural land expansion, driven by export markets, but this is often at the expense of cutting subtropical and tropical Even land now used for agriculture is forests and woodlands.52 In Sub-Saharan threatened. Productivity growth of avail- Africa high rural population growth drives able land is often undermined by pollu- expansion into forest or grazing land--cre- tion, salinization, and soil degradation ating conflicts with traditional users--or from poorly managed intensification, all into areas subject to human and animal dis- reducing potential yields (chapter 8). Some eases. Even so, there is considerable room sources suggest that globally, 5 to 10 mil- for land expansion in some Sub-Saharan lion hectares of agricultural land are being countries, but this will require large invest- lost annually to severe degradation.53 Soil ments in infrastructure and human and degradation through nutrient mining is animal disease control to convert these a huge problem in Sub-Saharan Africa, lands to productive agriculture. though much of it is reversible through Figure 2.10 Arable and permanent cropland per capita of the agricultural population is falling in Sub-Saharan Africa and South Asia Index of cropland per agricultural population (1961 = 100) 180 Sub-Saharan Africa 0.48 160 140 South Asia 0.27 120 East Asia & Pacific 0.23 100 80 Middle East & 0.74 North Africa 60 Europe & 3.53 40 Central Asia 20 Latin America & 1.55 Caribbean 0 1961 1967 1973 1979 1985 1991 1997 2003 0 1 2 3 4 Cropland per capita of agricultural Sub-Saharan Africa Middle East & North Africa population in 2003, hectares South Asia Europe & Central Asia East Asia & Pacific Latin America & Caribbean Source: FAO 2006a. Notes: Cropland represents both arable and permanent cropland. 64 WORLD DEVELOPMENT REPORT 2008 better soil management and fertilizer use water because of a lack of infrastructure or (see box 2.1). the human and financial capital to tap the available resources (chapter 8). The Middle Acute water scarcity East and North Africa and Asia face the Agriculture uses 85 percent of fresh water greatest water shortages, although there are withdrawals in developing countries, and pockets of severe water scarcity in all other irrigated agriculture accounts for about regions as well. 40 percent of the value of agricultural pro- Large areas of China, South Asia, and duction in the developing world.54 With- the Middle East and North Africa are now out irrigation, the increases in yields and maintaining irrigated food production output that have fed the world's growing through unsustainable extractions of water population and stabilized food production from rivers or the ground.57 The ground- would not have been possible. water overdraft rate exceeds 25 percent in Demand for water for both agricultural China and 56 percent in parts of northwest and nonagricultural uses is rising, and India.58 With groundwater use for irriga- water scarcity is becoming acute in much tion expected to continue rising, often of the developing world, limiting the future driven by subsidized or free electricity, the expansion of irrigation. The water avail- degradation of groundwater aquifers from able for irrigated agriculture in develop- overpumping and pollution is certain to ing countries is not expected to increase become more severe (chapter 8).59 because of competition from rapidly grow- Sub-Saharan Africa and Latin America ing industrial sectors and urban popula- have large untapped water resources for tions.55 New sources of water are expen- agriculture. But even in Sub-Saharan Africa, sive to develop, limiting the potential for almost a quarter of the population live in expansion, and building new dams often water-stressed countries, and the share imposes high environmental and human is rising.60 Even so, there now are many resettlement costs. opportunities for economically investing in According to the Comprehensive Assess- irrigation in Sub-Saharan Africa (box 2.5), ment of Water Management in Agricul- and the irrigated area there is projected to ture,56 approximately 1.2 billion people live double by 2030. in river basins with absolute water scarcity In other regions, the emphasis on water (figure 2.1); 478 million live in basins where for irrigation has already shifted to increas- scarcity is fast approaching; and a further ing the productivity of existing water with- 1.5 billion suffer from inadequate access to drawals by reforming institutions and removing policy distortions in agriculture Figure 2.11 Water scarcity affects millions of people in Asia and the Middle East and and in the water sector (chapter 8). With North Africa productivity growth and a modest growth Population living in areas of absolute water scarcity in irrigated area of 0.2 percent annually, Percent Millions irrigated production is projected to account 600 for nearly 40 percent of the increased agri- 60 Percent (left axis) 500 cultural production in the developing world Millions (right axis) by 2030. 400 40 300 Uncertain effects of climate change Global warming is one of the areas of great- 200 20 est uncertainty for agriculture. If emissions 100 continue at today's rate, the global average temperature is likely to rise by 2°C­3°C 0 0 Sub-Saharan South East Middle Europe & Latin OECD over the next 50 years, with implications Africa Asia Asia & East Central America & for rainfall and the frequency and intensity Pacific & North Asia Caribbean Africa of extreme weather events.61 The effects are not evenly distributed. While many regions Source: International Water Management Institute (IWMI) analysis done for the Comprehensive Assessment of Water Management in Agriculture (2007) using the Watersim model. have already become wetter, parts of the Agriculture's performance, diversity, and uncertainties 65 B O X 2 . 5 Substantial potential for expanding irrigation in Sub-Saharan Africa-- in the right way Sub-Saharan Africa has a large untapped of poorer market opportunities and higher These economic returns can be realized only potential for irrigation. Only 4 percent of the investment costs than in other regions. But if a significant share of the area is sown with total cultivated area is under irrigation, with with the new generation of better-designed higher-value crops. This underlines the need a mere 4 million hectares added in the last 40 irrigation projects, costs in Sub-Saharan for complementary investments in roads, years, far less than in any other region.62 Invest- Africa are now comparable to those in other extension services, and access to markets. ment in irrigation projects steadily declined in regions, thanks to improvements in institu- Small-scale irrigation is also showing recent the 1980s, partly in response to the many failed tions, technology, and market opportunities successes, especially in Niger and the Fadama irrigation investments and partly because for high-value products (see table below). program in Nigeria (chapter 8). Returns on irrigation in Sub-Saharan Africa 1970­74 1975­79 1980­84 1985­89 1990­94 1995­99 Sub-Saharan Africa Number of projects 3 9 11 15 4 3 Cost per hectare (2000 US$) 4,684 24,496 11,319 7,669 8,287 8,347 Average economic rate of return (%) 10 2 8 16 17 30 Non-Sub-Saharan Africa Number of projects 21 66 75 41 49 6 Cost per hectare (2000 US$) 3,433 4,152 5,174 2,252 3,222 3,506 Average economic rate of return (%) 19 15 15 18 21 17 Sources: African Development Bank and others 2007; Carter and Danert 2007; IFAD 2005a; International Water Management Institute (IWMI) 2005; World Bank 2006t. Note: Rates of return on externally financed irrigation projects in Sub-Saharan Africa and the rest of the world (two-thirds of which were in Asia) during 1970­99. Sahel, the Mediterranean, southern Africa, change after 2050 with further increases and parts of southern Asia are becoming in temperature.65 But stronger impacts drier--and this trend will continue. Water are expected at the regional level. Relative scarcity will increase in many areas, partic- to the scenario of no climate change, agri- ularly in the already-dry parts of Africa and cultural GDP in Sub-Saharan Africa (the in areas where glacial melt is an important region with the highest impact from cli- source of irrigation water. mate change) could contract by anywhere With moderate warming, crop yields are from 2 to 9 percent.66 expected to increase in temperate areas and The major implications of climate change decline in the tropics. Crop-climate models are thus largely for the distribution of agri- predict an increase in global crop produc- cultural production. In a globalizing world, tion in slight to medium warming scenarios some of the adaptation can be accommo- of less than 3°C.63 But the combined effects dated by trade, if measures are in place to of higher average temperatures, greater ensure alternative livelihoods of those most variability of temperature and precipita- affected. But for much of the tropics, espe- tion, more frequent and intense droughts cially areas of Sub-Saharan Africa nega- and floods, and reduced availability of tively affected by climate change, trade can water for irrigation can be devastating for only partially fill the gap. agriculture in many tropical regions (see focus F). One-third of the population at High energy prices: pressure on food risk of hunger is in Africa, one-quarter in prices from two sides Western Asia, and about one-sixth in Latin Although there is considerable uncertainty America.64 about future energy prices,67 there is little The impact of climate change on food doubt that energy prices will be higher prices at the global level is predicted to than in the past 20 years and that this will be small through 2050. Some models pre- increase agricultural production costs, dict more substantial effects from climate placing upward pressure on food prices. 66 WORLD DEVELOPMENT REPORT 2008 On the demand side, the greatest uncer- gated wheat in the Indian Punjab in 2002, tainty is the pace of expansion of biofuels and 34 percent of soybean costs in Mato using agricultural feedstocks in response Grosso, Brazil.74 Sharply higher fertilizer to high energy prices. The magnitude of prices could have far-reaching effects on the expansion of use of feedstocks and its developing-country agriculture--push- impact on food prices is uncertain. Recent ing down fertilizer application rates and projections indicate real price increases of crop yields and raising food prices--unless as much as 40 percent for maize by 2020, rapid advances are made in tapping nutri- with spillover effects on substitute grains ent sources that do not depend on fossil (wheat), given rapid growth in biofu- fuels, such as biological nitrogen fixation els demand.68 But over the long run, the by including legumes in farming systems or prices of feedstocks such as maize and biotechnological advances that fix nitrogen sugar cannot rise faster than real energy in cereals (chapter 7). prices if biofuels are to be competitive, so Beyond the farmgate, other energy- the impacts are likely to be much lower.69 dependent food production inputs, such Major uncertainties then relate to the price as transport and refrigeration costs, will be of oil, the technical progress in conversion affected by higher energy costs. Four per- efficiency of agricultural feedstocks and cent of U.S. food costs are attributable to biomass, and the extent that governments transport expenses alone.75 Long-distance subsidize or mandate biofuel production air freight for global food markets may be (see focus B). most affected--aviation fuel represents On the supply side, much of today's agri- about 7 percent of the retail price of a basket cultural production is fairly energy inten- of high-value products in a U.K. supermar- sive, more so in the developed world than ket.76 These costs are stimulating interest in in the developing. Estimates by the FAO local food markets in industrial countries indicate that 6,000 megajoule (MJ) of fossil to minimize "food miles"; however, there is energy--equal to 160 liters of oil--are used not always a strong association between the to produce one ton of maize in the United distance that food travels and the combined States. One ton of maize grown in Mexico use of nonrenewable energy in food produc- under traditional methods uses only 180 MJ tion and transport.77 of energy inputs, equal to 4.8 liters of oil.70 Energy is required directly for the opera- Will science deliver? tion of machinery and indirectly for fertil- With growing resource scarcity, future food izers and other chemicals. Fertilizer prices, production depends more than ever on for example, are linked to energy prices increasing crop yields and livestock pro- because natural gas, a primary component ductivity. But the outlook for technological in nitrogen fertilizer production, repre- progress has both positive and negative ele- sents 75 to 90 percent of the production ments that raise uncertainty. For the major costs.71 In the United States, energy costs cereals--rice, wheat, and maize--the accounted for 16 percent of agricultural growth rate of yields in developing coun- production costs in 2005, about one-third tries has slowed sharply since the 1980s for fuel and electricity and two-thirds indi- (figure 2.12); the easy gains from high use rectly for energy to produce fertilizer and of green-revolution inputs have already chemicals.72 Econometric analyses suggest been made, except in Africa. Plant breed- that U.S. grain prices (which determine ers continue to increase the yield poten- world prices) would rise by 18­20 percent of tial of wheat by about 1 percent annually, any increase in crude oil prices, not includ- but less for the world's major food crop, ing effects on the demand side through rice.78 Slowing of R&D spending in many biofuels.73 countries raises concerns about the pace of In developing countries, fertilizer costs future gains (chapter 7). are a growing share of production costs-- Historically, a significant part of yield 18 percent of the variable costs for irri- gains has been achieved by narrowing the Agriculture's performance, diversity, and uncertainties 67 Figure 2.12 Growth rates of yields for major whether this revolution will become a real- cereals are slowing in developing countries ity for food production in the developing Average annual growth rate, % world because of low public investment in 6 these technologies and controversies over 5 their possible risks (see focus E). However, Wheat biotechnology applications using genomics 4 and other tools are not controversial, and 3 Maize their declining costs and wider applica- tion should ensure continuing yield gains 2 through better resistance to disease and Rice 1 tolerance for drought and other stresses 0 (chapter 7). 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 Source: FAO 2006a. The bottom line: a more Note: Data smoothed by locally weighted regressions. uncertain future? Future trends could be accentuated if sev- eral adverse outcomes eventuate. High gap between average farm yields and the energy prices combined with more biofu- experimental yield potential of the crop, up els production from food crops could lead to a point where average farm yields reach to large food crop price increases through about 80 percent of experimental yields. effects on both supply and demand. Global China's major rice-producing provinces warming could occur faster than expected and much of the wheat and maize pro- and add to water shortages, hitting irrigated duced in industrial countries have already agriculture with lower yields and increasing reached this point, so the gap is closing.79 risk in rainfed agriculture. Rapid income Other rice-producing areas of Asia are well growth in Asian countries with limited land below 80 percent of experimental yields, and water resources could lead to a surge in and their yield growth has slowed because food imports that, combined with higher of deteriorating soil and water quality and energy and fertilizer prices, drive up food imbalanced nutrient use.80 prices. Or, all three could happen together. Exploitable yield gaps are especially Interdependence also implies likely trad- high in medium- to high-potential areas of eoffs between poverty, food security, and agriculture-based countries. Onfarm dem- environmental sustainability. For example, onstrations using available "best bet" tech- land constraints can be relaxed in many nologies suggest a wide yield gap for maize in Sub-Saharan Africa (figure 2.13). But Figure 2.13 Exploitable yield gaps are high for maize in Africa closing the gaps is a matter not just of trans- ferring these technologies to farmers, but Tons per hectare 6 of putting in place the institutional struc- Average national yield tures--especially well-functioning input 5 Average yield in farm demonstrations and output markets, access to finance, and 4 ways to manage risks--that farmers need to adopt the technology (chapters 5 and 6). 3 The world is poised for another tech- 2 nological revolution in agriculture using the new tools of biotechnology to deliver 1 significant yield gains (chapter 7). Already 0 100 million hectares of crops, or about 8 Malawi Ethiopia Nigeria Uganda Mali Mozambique percent of the cropped area, are sown with (4566) (310) (2501) (461) (163) (508) transgenic seeds (often known as geneti- Source: Sasakawa Africa, personal communication. cally modified organisms or GMOs). But Notes: Number of plots in parentheses. Open pollinated improved varieties in all cases except Nigeria, which uses hybrids. Data for 2001 for Ethiopia, Mozambique, Nigeria, and Uganda; 2002 for Malawi; and an average of there is considerable uncertainty about 2001, 2002, and 2004 for Mali. 68 WORLD DEVELOPMENT REPORT 2008 regions in response to rising prices, but growth, in a context where food produc- only at significant environmental cost. tion is important for food security (chapter Because of these uncertainties, global, 1). With limited tradability because of the national, and local production shocks could types of food consumed and high transac- become more frequent. Countries will need tion costs, the need for Sub-Saharan Africa to increase their capacity to manage shocks to feed itself based largely on its own pro- through production risk mitigation (better duction remains a stark reality. Poor per- water control or drought-tolerant varieties), formance is a source of food insecurity only trade, and insurance (chapter 5). Countries partially compensated by food imports and with rising incomes will be best able to food aid. manage these shocks because higher food Faster growth of agricultural production prices will have less impact on real incomes. in Sub-Saharan Africa is also essential for The least-developed countries would be hit overall growth and poverty reduction in hardest. the region, as seen in chapter 1. The recent progress in accelerating growth in Sub- A growing divide among regions? Saharan Africa must be sustained in coun- Differences in agricultural performance tries already experiencing rapid growth and among countries are projected to persist broadened to (often conflict or post conflict) and even deepen under a business-as-usual countries that have not yet participated. scenario, especially between the agriculture- The second reason for a continued focus based countries and the rest. Within Sub- on agricultural production is the poor agri- Saharan Africa, continuing rural population cultural performance across all country growth greater than 1.8 percent a year in types in areas with difficult agroclimatic some countries adds to already serious pres- conditions or inadequate infrastructure sure on available land.81 Together with poor that constrains market access. In these agricultural resources and a high depen- regions, livelihoods depend on agricultural dence on domestic agriculture, the risks of production, either as a source of income food insecurity in such landlocked countries or for food for home consumption. The as Burundi, Ethiopia, and Niger will greatly challenge is to improve the productivity increase unless massive efforts are mounted of subsistence agriculture, diversify to new to intensify production on existing land.82 markets where possible, and open opportu- IFPRI projections highlight the close link nities for nonfarm work and migration as between agricultural productivity and nutri- pathways out of poverty (chapter 3). tional outcomes in Sub-Saharan Africa-- The third reason is that even high- and the urgency of increased investments to potential areas that led the global increase reach the Millennium Development Goal of in food production (such as the transform- cutting hunger by half. ing countries of Asia) are facing a triple production challenge. They must sustain productivity and income growth in the Conclusion--a continuing face of declining prices in grains and tra- production challenge ditional tropical exports, they must seize Does success over the past three decades the opportunity to diversify in high-value in meeting rapidly growing food demands horticulture and livestock in response to mean that food production is no longer a rapidly growing domestic and interna- problem? The review of food and agricul- tional demand, and they must reduce the tural production trends and challenges in environmental footprint of intensive crop this chapter suggests four reasons why the and livestock systems. production problem still belongs on the The last reason is more speculative, but development agenda. still important. Even at the global level, The first is the lagging performance of future agricultural success may be com- agriculture-based countries, especially in promised by greater resource scarcity, Sub-Saharan Africa, relative to population heightened risks from climate change, Agriculture's performance, diversity, and uncertainties 69 higher energy prices, competition for land of rising food prices. The world food supply between food and biofuels, and under- requires close monitoring and new invest- investment in technical progress. For the ments to speed productivity growth, make first time since the world food crisis in the production systems more sustainable, and 1970s, global models predict the possibility adapt to climate change. focus B Biofuels: the promise and the risks Biofuels offer a potential source of renewable energy and possible large new markets for agricultural producers. But few current biofuels programs are economically viable, and most have social and environmental costs: upward pressure on food prices, intensified competition for land and water, and possibly, deforestation. National biofuel strategies need to be based on a thorough assessment of these opportunities and costs. Biofuels could become big markets a fivefold increase of the share of biofuels Are biofuels economically viable without for agriculture--with risks in global transport energy consumption-- subsidies and protection? The breakeven With oil prices near an all-time high and from just over 1 percent today to around 5 price for a given biofuel to become eco- few alternative fuels for transport, Brazil, to 6 percent by 2020.4 nomical is a function of several parameters. the European Union, the United States, and The most important determining factors are several other countries are actively support- the cost of oil and the cost of the feedstock, Economic viability of biofuels ing the production of liquid biofuels (etha- which constitutes more than half of today's and the impact on food prices nol and biodiesel).1 The economic, envi- production costs. ronmental, and social impacts of biofuels Governments provide substantial support Biofuel production has pushed up feed- are widely debated. As a renewable energy to biofuels so that they can compete with stock prices. The clearest example is maize, source, biofuels could help mitigate climate gasoline and conventional diesel. These sup- whose price rose by 23 percent in 2006 change and reduce dependence on oil in the ports include consumption incentives (fuel and by some 60 percent over the past two transportation sector. They may also offer tax reductions), production incentives (tax years, largely because of the U.S. ethanol large new markets for agricultural producers incentives, loan guarantees, direct subsidy program.6 Spurred by subsidies and the that could stimulate rural growth and farm payments), and mandatory consumption Renewable Fuel Standard issued in 2005, incomes. On the downside are environ- requirements. According to recent esti- the United States has been diverting more mental risks and upward pressure on food mates, more than 200 support measures maize to ethanol. Because it is the world's prices. These impacts, which depend on the costing around $5.5­7.3 billion a year in largest maize exporter, biofuel expansion type of feedstock (raw material), production the United States amount to $0.38­0.49 per in the United States has contributed to a process, and changes in land use, need to be liter of petroleum equivalent for ethanol decline in grain stocks to a low level and carefully assessed before extending public and $0.45­0.57 for biodiesel.5 Even in Bra- has put upward pressure on world cereal support to large-scale biofuel programs. zil, sustained government support through prices. Largely because of biodiesel produc- Of the global fuel ethanol production direct subsidies was required until recently tion, similar price increases have occurred of around 40 billion liters in 2006, about to develop a competitive industry, despite for vegetable oils (palm, soybean, and rape- 90 percent was produced in Brazil and the uniquely favorable sugarcane-growing con- seed).7 Cereal supply is likely to remain United States, and of over 6 billion liters of ditions, a well-developed infrastructure, and constrained in the near term and prices will biodiesel, 75 percent was produced in the a high level of synergy between sugar and be subject to upward pressure from fur- EU--mainly in France and Germany (figure ethanol production. Domestic producers in ther supply shocks.8 Provided there is not B.1). Brazil is the most competitive producer the European Union and the United States another major surge in energy prices, how- and has the longest history of ethanol pro- receive additional support through high ever, it is likely that feedstock prices will rise duction (dating back to the 1930s), using import tariffs on ethanol. less in the long term as farmers respond to about half its sugarcane to produce etha- nol and mandating its consumption. With tax incentives, subsidies, and consumption Figure B.1 Fuel ethanol and biodiesel production is highly concentrated mandates for biofuel production, the United Ethanol (40 billion liters) Biodiesel (6.5 billion liters) States used 20 percent of its maize crop to produce ethanol in 2006/07 (forecast).2 Other European 8% Union New players are emerging. Many devel- 4% oping countries are launching biofuel pro- grams based on agricultural feedstocks: Other 12% biodiesel from palm oil in Indonesia United States and Malaysia, ethanol from sugarcane in 13% Mozambique and several Central Ameri- United States can countries, and ethanol from sugarcane 46% and biodiesel from such oil-rich plants European Brazil Union as jatropha, pongamia, and other feed- 42% 75% stocks in India.3 Although assessments of the global economic potential of biofuels have just begun, current biofuels policies Source: F.O.Licht Consulting Company, personal communication, July 17, 2007. could, according to some estimates, lead to Note : Percentages of global production of fuel ethanol and biodiesel in 2006. Biofuels: the promise and the risks 71 higher prices (chapter 2), and biofuels pro- Potential environmental impacts: Global technologies are likely to require even larger duction will be moderated by lower profits environmental benefits from using renew- economies of scale, with investment costs in because of higher feedstock prices.9 able fuels--reducing greenhouse gas emis- the hundreds of millions of dollars just to Rising agricultural crop prices from sions (GHGs)--are frequently cited as rea- build one plant. demand for biofuels have come to the sons for policy support to biofuels. Although Although most biofuel production is forefront in the debate about the potential possibly significant, those benefits cannot be large in scale, small-scale production of conflict between food and fuel. The grain assumed. The emissions from growing feed- biodiesel with current technologies could required to fill the tank of a sport utility stocks (including emissions from fertilizer meet local energy demand (for example, vehicle with ethanol (240 kilograms of maize production), manufacturing biofuels, and biodiesel use in stationary electricity gener- for 100 liters of ethanol) could feed one per- transporting biofuels to consumption cen- ators). For wider markets and for biodiesel son for a year, so competition between food ters, as well as those from changes in land use for transportation, meeting consistent and fuel is real. Rising cereal prices will have use, also have to be evaluated.14 quality standards in small-scale production an adverse impact on many food-importing Using existing crop land, Brazilian sug- is a problem.20 countries. Even in the short term, higher arcane is estimated to reduce gasoline emis- prices of staple crops can cause significant sions by about 90 percent. Biodiesel is also welfare losses for the poor, most of whom relatively efficient, reducing GHGs by 50 to 60 Defining public policies for biofuels are net buyers of staple crops.10 But many percent. In contrast, the reduction of GHGs To date, production in industrial countries poor producers could benefit from higher for ethanol from maize in the United States has developed behind high protective tariffs prices (chapter 4). is only in the range of 10 to 30 percent.15 In on biofuels and with large subsidies. These Future biofuels technology may rely on such cases, demand-side efficiency measures policies are costly to those developing coun- dedicated energy crops and agricultural in the transport sector are likely to be much tries that are or could become potentially and timber wastes instead of food crops, more cost-effective than biofuels in reduc- efficient producers in profitable new export potentially reducing the pressure on food ing GHGs. The cost of reducing one ton of markets.21 Poor consumers may pay higher crop prices and contributing to the supply carbon dioxide (CO2) emissions through the prices for food staples as grain prices rise in of more environmentally friendly supplies production and use of maize-based ethanol world markets. Food prices may rise directly of liquid biofuels. But technology to break could be as high as $500 a ton, or 30 times because of the diversion of grain to biofu- cellulose into sugars distilled to produce the cost of one ton of CO2 offsets in the Euro- els or indirectly because of land conversion ethanol or gasify biomass is not yet com- pean Climate Exchange.16 away from food when induced by distor- mercially viable--and will not be for several According to the 2006 EU Biofuel Strat- tionary policies. years.11 And some competition for land and egy, a change in land use, such as cutting Can developing countries, apart from water between dedicated energy crops and forests or draining peat land to produce Brazil, benefit from production of biofuels? food crops will likely remain. feedstocks such as oil palm, can cancel the Favorable economic conditions and large GHG emission savings "for decades."17 environmental and social benefits that justify Reducing potential environmental risks significant subsidies are probably uncom- Nonmarket, context-specific from large-scale biofuels production could mon for the first-generation technologies. benefits need to be evaluated be possible through certification schemes to In some cases, such as landlocked countries Whether the financial costs, efficiency losses, measure and communicate the environmen- that are importers of oil and potentially effi- and the tradeoffs between food and fuel asso- tal performance of biofuels (for example, a cient producers of sugarcane, the high costs ciated with these various support measures Green Biofuels Index of GHG reductions).18 of transport could make biofuel produc- are justified depends on the environmental Similar standards exist for organic products tion economically viable even with current and social benefits and risks of biofuels and and for the sustainable production of forest technologies.22 The much higher potential their contribution to energy security. products (Forest Stewardship Council). But benefits of second-generation technologies, Potential to enhance energy security: Cur- the effectiveness of certification schemes at including for small-scale biodiesel produc- rent-technology biofuels can only margin- reducing environmental risks from biofuels tion, justify substantial privately and pub- ally enhance energy security in individual will require full participation from all major licly financed investments in research. countries because domestic harvests of feed- producers and buyers as well as strong mon- The challenge for developing country stock crops meet a small part of the demand itoring systems. governments is to avoid supporting biofuels for transport fuels, with few exceptions (for Benefits to smallholders: Biofuel can ben- through distortionary incentives that might example, ethanol in Brazil). In 2006/07, efit smallholder farmers through employ- displace alternative activities with higher around one-fifth of the U.S. maize harvest ment generation and higher rural incomes, returns--and to implement regulations was used for ethanol but displaced only but the scope of these impacts is likely to and devise certification systems to reduce about 3 percent of gasoline consumption.12 remain limited. Ethanol production with environmental risks. Governments need According to recent projections, 30 percent current technologies requires fairly large to carefully assess economic, environmen- of the U.S. maize harvest would be used for economies of scale and vertical integra- tal, and social benefits and the potential to ethanol by 2010, but it would still account tion and may do little to help small-scale enhance energy security. Other often more for less than 5 percent of U.S. gasoline con- farmers. In some parts of Brazil, however, cost-effective ways of delivering environ- sumption.13 Second-generation technologies producer cooperatives have succeeded in mental and social benefits need to be con- could potentially make a higher contribution ensuring smallholder participation.19 Sec- sidered, especially through improvements in to energy security. ond-generation biofuels using cellulosic fuel efficiency. Rural households and their pathways out of poverty 3 Agriculture is a major source of livelihoods oriented smallholder entrepreneurs and for people in developing countries, but smallholders largely engaged in subsistence rural areas are a large harbor of poverty. To farming. There is a parallel dualism in the c h a p t e r understand how agricultural growth can labor market between high-skill and low- reduce rural poverty, this chapter identi- skill jobs, and between migration with fies three pathways out of rural poverty. It high and low returns. Nor is diversification characterizes the livelihood strategies of always a sign of success. Chapter 9 analyzes rural households and identifies challenges the factors underlying the heterogeneity in to defeating rural poverty through these labor market and migration outcomes, with pathways.1 a focus on policy measures to improve these Many rural households move out of outcomes for the rural poor. poverty through agricultural entrepreneur- Rural households design livelihood ship; others through the rural labor market strategies to suit their asset endowments and the rural nonfarm economy; and oth- and account for the constraints imposed by ers by migrating to towns, cities, or other market failures, state failures, social norms, countries. The three pathways are comple- and exposures to uninsured risks. They mentary: nonfarm incomes can enhance may not use those terms, but they certainly the potential of farming as a pathway out understand the constraints. Their strategies of poverty, and agriculture can facilitate the can reflect joint decision making by men labor and migration pathways. and women in the household, or can be bar- Inspecting what individuals and house- gained outcomes when members each pur- holds do in rural areas helps dismiss two sue their own advantage. But their strategies frequent misconceptions about rural pop- compensate for only part of the constraints ulations. The first is the belief that rural they operate under, leaving important roles households are either all farmers or all for improvements in their access to assets diversified. To the contrary, there is a con- and in the contexts for using these assets.2 siderable heterogeneity in what they do and The key, then, is to enhance collective action in the relative importance of what they do and mobilize public policy to maximize the for their incomes. A large majority of rural likelihood of success for rural households to households are engaged in some agricul- travel a pathway out of poverty. tural activity, but many derive a large part Policy makers thus face daunting chal- of their income from off-farm activities and lenges. The asset endowments of rural from migration. Individuals participate in a households have been low for generations, wide range of occupations, but occupational and they continue to decline in places. diversity does not necessarily translate into Market and government failures affect- significant income diversity in households. ing the returns on those assets are perva- The second misconception is the belief sive. Adverse shocks often deplete already- that the type of activities households pur- limited assets, and the inability to cope with sue determines their success in moving out shocks induces households to adopt low- of poverty. This is not so because of the risk, low-return activities. Recent changes considerable heterogeneity within activi- in the global food market, in science and ties. Livelihood strategies in agriculture are technology, and in a range of institutions characterized by dualism between market- that affect competitiveness are also creat- 72 Rural households and their pathways out of poverty 73 ing new challenges to the competitiveness sion helped many households move up the of smallholders. Understanding these chal- socioeconomic ladder. Others benefited lenges is essential in designing public poli- from greater trade in food crops.4 cies that can help rural men and women In Vietnam, liberalizing agricultural pull themselves out of poverty. The chal- markets induced many subsistence farm- lenges differ across countries and subna- ers to become more market oriented (table tional regions, and thus demand context- 3.1). Two-thirds of smallholders previously specific agendas to reduce rural poverty. engaged primarily in subsistence farming entered the market. Their poverty rates fell drastically, and their incomes almost dou- Three complementary pathways bled, while the production of high-value out of rural poverty: farming, and industrial crops rose. Agricultural sales labor, and migration increased more for households with larger Rural poverty rates have declined in many land endowments and those closer to mar- countries (see focus A). But how exactly has kets or with nonfarm industries in their this happened? Is it that poor households communities. Households engaged in sub- leave rural areas, or that older, poor gen- sistence farming that did not enter the mar- erations are replaced by younger, less-poor ket were more likely to diversify their income generations? Have specific households been sources outside of agriculture, with poverty able to escape poverty by gradually improv- rates in those groups falling as well. ing the earnings from whatever they do, or In India, income from the nonagricul- has this happened by drastically changing tural sector--the labor pathway out of pov- activities? Success stories help illustrate erty--was an important driver of growth in how rural households have exited poverty rural areas between 1970 and 2000. Nonag- through the three pathways of farming, ricultural employment also had important labor, and migration. indirect effects by increasing agricultural In Tanzania, those most successful in wages. In Indonesia, agricultural house- moving out of poverty were farmers who holds that shifted into the nonfarm econ- diversified their farming activities by grow- omy between 1993 and 2000 were likely ing food crops for their own consumption to have exited poverty. In Tanzania, too, and nontraditional cash crops (vegetables, business and trade provided an important fruit, vanilla) as well as raising livestock. pathway out of poverty, but only for those People who remained in poverty were those with networks in well-connected commu- who stuck to the more traditional farming nities. In addition, remittances from both systems. In Uganda, escaping from poverty domestic and international migration have was linked to improving the productivity reduced rural poverty, as happened in rural of land and diversifying into commercial China and Nepal.5 Migration can offer a crops. Qualitative evidence for Niger shows pathway out of poverty for those who leave that shifts to more sustainable cultivation and for those who stay behind (chapter 9). practices by small-scale farmers led to better Several pathways often operate at the soil conservation, increased income from same time. In Bangladesh and Tanzania, the agroforestry, and lower vulnerability.3 farm, nonfarm labor, and migration path- Some policy reforms have greatly ways were all successful. In Indonesia, some enhanced the capability of smallholder people moved out of poverty through the entrepreneurs to lift themselves from pov- farming pathway, others through the non- erty. This was clearly a key to China's early farm pathways. And in 35 villages in Andhra agricultural success story (see focus A). In Pradesh, diversification of income sources is Malawi, reforms reducing differential pro- correlated with moving out of poverty. 6 tection of large estates dramatically shifted These careful studies using longitudinal the structure of agricultural production. data have shed light on the strong potential Smallholders rapidly diversified into cash relationships between poverty reduction crops and now produce 70 percent of burley and each of the pathways. However, estab- tobacco, a major export crop. The expan- lishing causality is difficult, and there is no 74 WORLD DEVELOPMENT REPORT 2008 Table 3.1 Changing market participation among farming households in Vietnam Subsistence oriented Market entrant Market oriented 6a 13a 28a Household characteristics 1992/3 1997/8 1992/3 1997/8 1992/3 1997/8 Assets Land owned (ha) 0.37 0.43 0.50 0.57 0.60 0.72 Land used (ha) 0.55 0.43 0.59 0.58 0.71 0.75 Education of household head (years) 4.6 -- 6.3 -- 6.3 -- Context Market in community (%) 31 -- 40 -- 47 -- Commercial enterprise in community (%) 34 -- 43 -- 42 -- Outcomes Real income per capita (1998 dong 1,000) 893 1,702 1,138 2,042 1,359 2,978 Share of agricultural income in total income (%) 80 62 83 66 83 73 Share of households below the poverty line (%) 86 62 73 48 64 37 Shares of gross agricultural income by crop type Staple crops (%) 78 73 70 61 63 54 High-value and industrial crops (%) 14 13 21 31 29 39 Source: WDR 2008 team using VLSS 1992/93 and 1997/98. Note: Subsistence-oriented farming households are defined here as selling less than 10 percent of their agricultural production in both years; market-entrant households as selling less than 10 percent in 1992/3 and more than 25 percent in 1997/8; and market-oriented households as selling more than 25 percent in both years. Rural farming households are households with more than 50 percent of income from agriculture. a. Percent of rural farming households. -- = not available. systematic evidence on the relative impor- have a large impact on agricultural land tance and success of these strategies, a result purchases, and returning migrants are more of conceptual challenges in understanding likely to set up a nonfarm business.8 the dynamics of poverty (box 3.1). While transfers from migrants back to the farm household can relax capital and Pathways often enhance each other risk constraints, the relationship between The complementing effects of farm and migration and agricultural productivity nonfarm activities can be strong. In Ban- is complex. The (temporary) absence of gladesh and Ecuador, farm households with household members reduces the agricul- better market access or in areas with higher tural labor supply. Agricultural productiv- agricultural potential earn more from agri- ity can therefore fall in the short run but culture, but they also diversify more into rise in the long run as households with nonfarm activities. In Asia, high rural sav- migrants shift to less labor intensive, but ings rates from rising incomes during the possibly equally profitable, crops or live- green revolution made capital available for stock.9 Male out-migration can transfer investment in nonfarm activities.7 Diversi- responsibility for farm management to fication into nonfarm activities can relax women. And where women have less access credit and liquidity constraints on own- to credit, extension, and markets, as is fre- farm agricultural production and enhance quently the case, farm productivity might the competitiveness of the family farm on fall as a result. The transfer of responsibility the agricultural pathway. may also be only partial, limiting women's The farming, labor, and migration path- possibilities to take advantage of emerging ways have often enhanced each other. In the opportunities to improve competitiveness. Philippines, the green revolution allowed The variation in rural children of land reform beneficiaries and large farmers--especially daughters--to households' income strategies attain high levels of education. These highly Contrary to the prototypical image of educated offspring are now sending large smallholders as pure farmers, landed rural transfers back to farm households. In Paki- households rely on many activities and stan, remittances from temporary migrants income sources. Besides farming, they par- Rural households and their pathways out of poverty 75 ticipate in agricultural labor markets, in self-employment or wage employment in B O X 3 . 1 Establishing the relative importance the rural nonfarm economy, and they might of the different pathways receive transfers from household members who have migrated. Moving out of poverty is a process households. It is thus not possible to know that can take a very long time. Many whether they would have been poor had Diversification has several dimensions shocks can occur during that time, and a they not migrated (see focus A). This is that should not be confounded. The rural household's income fluctuations may be particularly important because many economy is diversified, even if many non- similar in magnitude to long-term income migrants are more educated than those changes. So, in the short-term, it is seldom agricultural activities are indirectly linked who stay behind, and they would prob- clear whether observed income changes ably not have been among the poorest. to agriculture. Within this diversified rural reflect transitory movements in and out Nor is it easy to disentangle why economy, a large part of household income of poverty, or long-term trends. Only by households chose a particular strategy diversification comes from combining interviewing the same households many from what made the pathway successful. times over long periods might it be pos- More entrepreneurial households might incomes from the different household sible to gauge the relative importance of choose "better" strategies, but they might members, each often specializing in one different pathways in a particular context. also be more successful in moving out of occupation. In Malawi, 32 percent of farm Consider trying to capture the full poverty independently of the strategies households have two sources of income, and effects of the migration pathway on those they choose. Some migration studies have who migrated. When people migrate, they addressed this selection issue and estab- 42 percent have three or more, but among typically disappear from surveys, unless lished the effects of migration on the pov- household heads only 27 percent engages in one manages to track them down in their erty of household members left behind. more than one activity. In China, 65 per- new locations, which can be difficult. But doing this for the other pathways cent of rural households operate in both Moreover, a lot of migration is by young remains unresolved. people, before they form independent the farm and nonfarm sectors, while only a third of individuals do so.10 These patterns imply that household income diversification can fluctuate considerably with households depend on farming for their livelihoods, life cycles, and the number of working-age but use the majority of their produce for individuals in the household. Further, the home consumption (subsistence-oriented returns on many of these activities are low, farmers).12 Still others derive the larger and the diversity of occupations does not part of their incomes from wage work in always translate into income diversifica- agriculture or the rural nonfarm economy, tion: one activity is often the dominant or from nonagricultural self-employment source of income. (labor-oriented households). Some house- To design policies that help households holds might choose to leave the rural sec- along successful pathways, it is crucial tor entirely, or depend on transfers from to understand which income strategies members who have migrated (migration- they currently pursue and why they chose oriented households). Finally, diversified to pursue them. This allows evaluating households combine income from farming, whether policies should aim at enhancing off-farm labor, and migration. their current strategies or at helping them Income sources can be used to classify to pursue more remunerative ones. Further- rural households according to the five liveli- more, understanding why some households hood strategies (table 3.2 and box 3.2). The remain poor despite choosing strategies relative importance of each differs across that are optimal, given their assets and con- the three country types: agriculture-based, straints, helps to identify policy options. transforming, and urbanized. It also differs across regions within countries. Farming- A typology of rural households led strategies are particularly important Rural households engage in farming, in the agriculture-based countries, where labor, and migration, but one of these farming is the main livelihood for a large activities usually dominates as a source share of rural households, as many as 71 of income. Five livelihood strategies can percent in Nigeria and 54 percent in Ghana be distinguished. Some farm households and Madagascar. Many of those households derive most of their income from actively are subsistence oriented. engaging in agricultural markets (market- In the transforming and urbanized coun- oriented smallholders).11 Others primarily tries, the labor- and migration-oriented 76 WORLD DEVELOPMENT REPORT 2008 Table 3.2 Typology of rural households by livelihood strategies in three country types Farm oriented Market Subsistence Labor Migration oriented oriented Total oriented oriented Diversified Total Country Year (Percentage of rural households in each group) Nigeria 2004 11 60 71 14 1 14 100 Madagascar 2001 -- -- 54 18 2 26 100 Agriculture- Ghana 1998 13 41 54 24 3 19 100 based Malawi 2004 20 14 34 24 3 39 100 countries Nepal 1996 17 8 25 29 4 42 100 Nicaragua 2001 18 4 21 45 0 33 100 Vietnam 1998 38 4 41 18 1 39 100 Pakistan 2001 29 2 31 34 8 28 100 Albania 2005 9 10 19 15 10 56 100 Transforming Indonesia 2000 -- -- 16 37 12 36 100 countries Guatemala 2000 4 7 11 47 3 39 100 Bangladesh 2000 4 2 6 40 6 48 100 Panama 2003 1 5 6 50 6 37 100 Urbanized Ecuador 1998 14 11 25 53 2 19 100 countries Bulgaria 2001 4 1 5 12 37 46 100 Source: Davis and others 2007. Note: Farm-oriented household: more than 75 percent of total income from farm production. Farm, market-oriented household: more than 50 percent of agricultural production sold on market. Farm, subsistence-oriented household: less than or equal to 50 percent of agricultural production sold on market. Labor-oriented household: more than 75 percent of total income from wage or nonfarm self-employment. Migration/transfers-oriented household: more than 75 percent of total income from transfers/other nonlabor sources. Diversified household: Neither farming, labor, nor migration income source contributes more than 75 percent of total income. -- = not available. strategies are more common, with shares of ute a large share of average labor income labor-oriented households varying from 18 (as in Indonesia, Pakistan, and Panama), percent in Vietnam to 53 percent in Ecua- while nonagricultural self-employment dor.13 Among these households, wages earnings are more important in labor- from nonagricultural labor often contrib- oriented households in Ghana and Viet- nam. In Bulgaria, Ecuador, and Nepal, agri- cultural wages are important for the income of labor-oriented households. Despite the B O X 3 . 2 Constructing comparable measures of income across countries importance of the labor pathway in trans- forming countries, market-oriented farm- The analysis of sources of rural income pre- methodologies would make it impossible ing households remain the largest rural sented here is based on income aggregates to compare results between different group in Vietnam. from the Rural Income Generating Activity countries. Even if most households are special- database. For each country the income While the standardized calculations components include wages (separately across countries enhance comparability, ized--that is, they derive the vast major- for agriculture and nonagriculture), self- the analysis of sources of rural income ity of their income from only one of the employment, crops, livestock, transfers, is constrained by the pervasive weak- three income sources (farming, labor, or and a final category of all remaining non- ness of the raw income data in many of migration)--a substantial remaining share labor income sources (excluding imputed the surveys analyzed. Many household rent), as reported in each country question- surveys likely underestimate income of households in all countries has diversi- naire. All aggregates are estimated in local because of underreporting, misreport- fied income strategies. In the 15 countries currency at the household level and annu- ing of the value of own consumption, of table 3.2, 14 to 56 percent of households alized and weighted. Some of the country income seasonality, and the difficulty do not derive more than 75 percent of their results may differ from results previously of obtaining reliable income data from published in poverty assessments and households that do not usually quantify income from one of these three sources, but other country reports because of efforts to their income sources. instead have a more mixed income portfo- ensure comparability across countries in See Davis and others (2007) and lio.14 These diversified households derive the results presented here. www.fao.org/es/esa/riga/ for further between 20 percent (in Bangladesh) and 46 Analyses that draw on income aggre- information on methodology. gates from different sources using different percent (in Ghana, Malawi, and Vietnam) of their income from farming. Rural households and their pathways out of poverty 77 Heterogeneity of the agriculture provides employment to 1.3 bil- household strategies lion people worldwide, 97 percent of them in developing countries.16 It is also a major A household's income structure does not source of income for rural households. tell whether it is engaged in a successful Between 60 and 99 percent of rural house- income strategy. Each of the strategies can holds derive income from agriculture in become pathways out of poverty, but many 14 countries with comparable data (figure households do not manage to improve their 3.2). In the agriculture-based countries in situation over time, reflecting the marked figure 3.2, farm crop and livestock income heterogeneity in each of the activities and and agricultural wages generated between the fact that income varies widely for each of the strategies (figure 3.1).15 42 and 75 percent of rural income. Onfarm income comes both from production for Rural occupations and self-consumption and from sales of agricul- tural products to the market. In the trans- income sources forming and urbanized countries, the share The heterogeneity in each of the household of rural income from onfarm activities and strategies reflects differences in the returns agricultural wages is between 27 and 48 on the various activities of rural households percent. So, participating in agricultural and individuals. The economic activities activities does not always translate into high and the sources of income themselves also agricultural income shares. differ substantially across regions, between For the poorest households, onfarm poor and rich households, between house- income and agricultural wages typically holds with different asset endowments, and account for a larger share of household between men and women. income, ranging from 77 percent in Ghana to 59 percent in Guatemala, than for richer Agriculture: a major occupation households (figure 3.3). In Asia, Latin for rural households, America, and some countries in Africa especially for the poor (Malawi and Nigeria), agricultural wages The Food and Agriculture Organization of are more important for low-income than the United Nations (FAO) estimates that for high-income households. Onfarm Figure 3.1 Real per capita income varies widely for each livelihood strategy Ecuador 1995 Nepal 1996 Frequency Frequency 0 0 ­1,000 0 1,000 2,000 3,000 4,000 ­2,500 0 2,500 5,000 7,500 10,000 Sucres (thousands) Rupees Market-oriented farming Labor-oriented Subsistence-oriented Migration-oriented farming Diversified Source: Davis and others 2007. 78 WORLD DEVELOPMENT REPORT 2008 Figure 3.2 In most countries, the vast majority of rural households participate in agriculture Percent 100 80 60 40 20 0 2004 2004 1998 1996 2000 2001 1998 2000 2005 2001 2001 2000 1998 2003 Malawi Nigeria Ghana Nepal Pakistan VietnamIndonesia AlbaniaBulgaria EcuadorPanama Bangladesh Nicaragua Guatemala Sub-Saharan South Asia East Asia Europe & Latin America Africa & Pacific Central Asia & Caribbean Participation in agriculture Income share from agriculture Source: Davis and others 2007. income often declines as overall expen- Yet asset endowments are not always ditures increase (in Ghana, Guatemala, good predictors of market orientation. Dif- and Vietnam, for example), but it is most ferences in land endowment between mar- important for households in the middle of ket- and subsistence-oriented farmers are the distribution of income in Nepal. much less pronounced in Bangladesh, Gua- In most countries, there is a marked temala, and Malawi. In Ghana and Nigeria, dualism in the smallholder sector, between female-headed households are more likely market-oriented farmers and smallholders to be market oriented than subsistence ori- engaged in subsistence farming. Only a very ented. This shows that market orientation small share of all marketed agricultural can also be conditioned by many other fac- products is produced by the subsistence- tors, such as land quality, access to markets, oriented households. In Malawi, subsistence or agricultural potential affecting crop and farmers sell about 9 percent of the marketed livestock choice and productivity. agricultural products, but in Nepal and Within the household, market orienta- Vietnam, less than 2 percent.17 The dual- tion can differ with the gender of the cul- ism in household farming strategies usually tivator, and women are often more likely to reflects differences in asset endowments. be engaged in subsistence farming and less Farmers with larger land endowments are likely to cultivate cash crops. Large-scale more likely to be market-oriented. Market- production of nontraditional and high-value oriented farmers own almost twice as much agricultural exports has, however, increased land as subsistence farmers in Nicaragua women's wage work in fields, processing, and and Panama, and four times more land in packing. This does not hold everywhere. In Pakistan. The human capital endowments China, for example, the evidence suggests of rural households are also correlated with there is no feminization of agriculture.18 their market orientation. Educated house- More generally, women's participation in hold heads are often more likely to sell a agricultural self-employment differs across large share of their products to the mar- regions. In Africa, Europe and Central kets, while female-headed households more Asia, and some East Asian countries, men often produce for self-consumption. and women work equally in agricultural Rural households and their pathways out of poverty 79 Figure 3.3 Sources of income vary between poor and rich Income, % 100 80 60 40 20 0 2nd 3rd 4th 2nd 3rd 4th 2nd 3rd 4th 2nd 3rd 4th Poorest Richest Poorest Richest Poorest Richest Poorest Richest Ghana 1998 Guatemala 2000 Vietnam 1998 Nepal 1996 Onfarm income Agricultural wage labor Nonagricultural income Transfers & other Source: Davis and others 2007. Note : For each country, columns represent the bottom fifth to the top fifth of the expenditure distribution. self-employment19 (figure 3.4). In Mozam- regions may diversify into nonagricultural bique, Rwanda, Uganda, and Egypt, women activities to take advantage of attractive are even more likely to participate in agri- opportunities. Those in less-favored envi- cultural self-employment. By contrast, ronments may shift into low-value nonag- in Latin America and South Asia, women ricultural activities to cope with the risks. reportedly work less in agricultural self- Households with good asset endowments employment. But in these regions, as well may seize remunerative opportunities in as in Africa, women have broadened and the nonfarm sector. Those lacking land or deepened their involvement in agricultural livestock may be driven into low-value non- production in recent decades.20 Yet many farm employment. Labor market income development policies continue to wrongly can also be important where population assume that farmers are men. The impor- pressures on limited land resources are high tant role of women in agriculture in many or where seasonal income from farming is parts of the world calls for urgent attention insufficient for survival in the off-season, to gender-specific constraints in produc- possibly because of chronic rainfall deficits, tion and marketing. prices, or diseases.21 Off-farm income can be important for both poor and rich households. Yet, the Income diversification rich often dominate lucrative business and specialization in wage niches. The poor, lacking access to capital, employment and nonagricultural education, and infrastructure, are not the self-employment main beneficiaries of the more lucrative Market-oriented smallholders can be highly sources of nonfarm income. This is, in part, successful in food markets and in the new because of the differential access to high- agriculture. But for many smallholders, skill and low-skill jobs (chapter 9). Illiterate agriculture is a way of life that offers secu- adults are more likely to be working in agri- rity and complements earnings in the labor cultural wage and self-employment. Liter- market and from migration. Other rural ate adults are more likely to have nonagri- households specialize in wage employ- cultural wage jobs. And older cohorts are ment or nonagricultural self-employment. less likely to be working in nonagricultural Households in prosperous agricultural wage employment than younger cohorts.22 80 WORLD DEVELOPMENT REPORT 2008 Figure 3.4 Women's reported participation in agricultural self-employment relative to men's varies by region Sub-Saharan Africa South Asia East Asia & Pacific Middle East & North Africa Europe & Central Asia Latin America & Caribbean 0 20 40 60 80 100 Percentage of men Agricultural self employment Agricultural wage employment Nonagricultural self employment Nonagricultural wage employment Sub-Saharan Africa South Asia East Asia & Pacific Middle East & North Africa Europe & Central Asia Latin America & Caribbean 0 20 40 60 80 100 Percentage of women Agricultural self employment Agricultural wage employment Nonagricultural self employment Nonagricultural wage employment Source : Regional averages based on available household surveys for 66 countries (ages 15 to 64). Note: The omitted group includes individuals out of the labor force and individuals whose economic activity is not defined. Activity refers to the individual's reported principal activity. For a more detailed explanation, please see endnote 19 on page 272. See also WDR 2008 team 2007. Exiting, coping, and acquiring Migration responds to income gaps capital through migration between the origin and the destination. Where access to nonagricultural employ- It can occur because people are pushed ment is limited or where the climate (or out of rural areas by negative shocks or a technology) prevents continual cultiva- deteriorating resource base--or are pulled tion, seasonal migration can supplement out by attractive employment opportuni- income, smooth consumption, and pro- ties elsewhere. In Chile, the local unem- tect household asset bases during the lean ployment rate is positively correlated with season. Laborers migrate seasonally to out-migration, but the expansion of agri- other regions in their own country, often cultural employment and jobs in agropro- attracted to large export crop estates that cessing slowed migration. Cohort analyses provide income in the off-season or during with population censuses between 1990 emergencies. They also migrate across bor- and 2000 for Ecuador, Mexico, Panama, ders, and a large part of south-south migra- and Sri Lanka suggest that people move tion is seasonal.23 out of localities that are more remote, with Where migration is more or less perma- less infrastructure, and with poorer living nent, income from migration depends on conditions. Yet areas with high agricultural the success of the migrant and the reason potential can also have high out-migration, for migration. So migration is not a guar- as in Guatemala. Rural migrants often go anteed pathway out of poverty (chapter 9). abroad or to urban areas that offer bet- Nor is it available to all. High migration costs ter income opportunities. However, many often prevent the poorest-of-the-poor from choose to migrate to urban areas that are migrating, or limit their migration to nearby relatively close by or move to other rural areas, where the returns might be low. areas (box 3.3).24 Rural households and their pathways out of poverty 81 B O X 3 . 3 The challenge of drastic demographic changes from selective migration Migration can be an important source of Almost a quarter of the 15­24 cohort from 1990 had left rural Mexico by 2000 remittance income (money sent home by household members who have left to find Urban population 1990­2000 by cohort Rural population 1990­2000 by cohort work), but it often drastically changes the Millions Millions composition of the rural population. This can 12 12 pose its own challenges for rural develop- ­2% ment, because migration is selective. Those 10 1990 2000 10 1990 2000 who leave are generally younger, better 4% educated, and more skilled.25 Migration thus 8 8 can diminish entrepreneurship and education level among the remaining population.26 In 6 6 ­3% ­24% addition to changing the skill and age com- ­6% 4 4 position of those staying behind, migration ­7% ­11% can change the ethnic composition of rural ­12% 2 2 populations. Migration rates of indigenous populations are often lower, because they are 0 0 attached to land as ancestral territories and 15­24 25­34 35­44 45­54 15­24 25­34 35­44 45­54 because they may be discriminated against Age in 1990 Age in 1990 in labor markets. There are also clear gen- Source: Buck and others (2007)), from information in the 10 percent sample of Mexico census (1990 and 2000). der differences in migration, but they differ Note: Columns represent the same cohort of people observed in the 1990 and 2000 censuses with a 10-year across countries, even within the same region. difference in age. The population reported for 1990 is corrected for location and age-specific mortality rate International migration out of rural areas is during the decade. The residual change is thus due to net out-migration. male-dominated in Ecuador and Mexico, but female-dominated in the Dominican Republic, migrate. People at all education levels moved than women (27 percent versus 21 percent) and Panama, and the Philippines.27 to both urban and rural areas, but the highly among nonindigenous than indigenous (25 Analyses of the population censuses of educated were much more likely to move to percent versus 18 percent). Until 2000 women Brazil and Mexico illustrate some of the regu- out-of-state urban centers (see figure below). were more prone to migrate to semiurban and larities. In Brazil between 1995 and 2000, rural Almost a quarter of those ages 15­24 in urban centers within the country, and men to men and women ages 20­25 were most likely 1990 had left rural Mexico by 2000, migrating to the United States. Indigenous migration has its to migrate, and young women migrated more urban centers or abroad (see the figure above). own dynamics, responding to seasonal agricul- than men (the first figure below). Illiterate indi- Among the older cohorts, migration was also tural cycles within Mexico, though international viduals were least likely to migrate, and highly high, reaching 6­12 percent. Rural emigration migration among indigenous groups steadily educated individuals were twice as likely to is much more common among Mexican men increased in the 1990s. Young Brazilian women migrate more than young men--and the less educated migrate less Share of migrants in each category, % Education level 25 Higher 20 Women, rural Secondary 15 Primary Men, rural 10 None Men, urban Women, urban 0 10 20 30 5 Share of rural population migrating, % To urban in municipality To urban in state 0 To urban out of state 15 25 35 45 55 65 To rural Age Source: Buck and others 2007; Lopez-Calva 2007; from information available in Brazil's 2000 census on residence in 1995. 82 WORLD DEVELOPMENT REPORT 2008 Income from remittances sent by for- Living in a poor area can itself be a causal mer household members often increases factor in perpetuating poverty because of the land, livestock, and human capital base geographical externalities.30 The strategies of rural household members who stayed of rural households are conditioned by the behind. Remittances can also offset income agricultural potential and natural resources shocks, protecting households' productive available in their environment (chapter 2). asset base. Evidence from the Oportunidades Recent work on the geography of poverty program in Mexico suggests that public sheds light on how these factors relate to transfers can similarly lead to investments household strategies and rural poverty (see in productive activities and risk coping.28 focus A). Population density and access to Private and public transfers account for markets, strongly correlated with transac- a surprisingly large share of rural income, tion costs and asymmetric information, also particularly in transforming and urbanized determine household strategies. With good economies. In some countries there have information, farmers are more equipped been major increases in transfers. In Bul- to make relevant decisions and learn about garia, households became more dependent additional diversified employment oppor- on public transfers as government spending tunities. New information technologies can on social protection rose to offset economic help address some of these information dis- hardships. In Brazil and Mexico, conditional advantages (chapter 7). cash transfers have become important for When market failures coincide, house- rural household income and are major con- holds need to consider their consumption tributors to rural poverty reduction. needs in making production decisions, and Urban-to-rural migration highlights vice versa. This can explain many aspects agriculture's role as a safety net, showing of rural households' livelihood strategies, that many urban residents are still part of including some that might otherwise appear a broader rural kinship network. During irrational.31 Consider a few examples. the 1997 financial crisis in Indonesia and Farm households that produce food and Thailand, and during the early transition cash crops will not always be able to respond years in the Caucasus and Central Asia, to an increase in the price of the cash crop. reverse migration helped people deal with When transaction costs in food markets are economic shocks. There is also evidence of high and labor markets function imperfectly, return migration in parts of Africa, related a household might not be able to employ to economic shocks and AIDS. Agriculture more labor to increase cash-crop produc- thus provides "farm-financed social wel- tion while maintaining the necessary food fare" when public welfare services are defi- production for its own food security.32 It is cient or nonexistent.29 thus confined to responding to price incen- tives through technological change or more use of fertilizer, but capital market imperfec- Household behavior when tions can limit these possibilities. As a result, markets and governments fail: the response to price incentives in cash crops rational, despite appearances is often limited, shrinking the benefits from Rural men and women determine their price and trade policies that increase pro- livelihood strategies in a context of failed ducer incentives (chapter 4).33 markets. Many markets in rural settings Market imperfections, combined with do not support efficient outcomes because differences in asset endowments, includ- of high transaction costs, insufficient and ing social capital, can also shed light on unequal access to information, imperfect technology adoption (chapter 7). Evidence competition, externalities, and state failures from Ghana, India, and Mozambique sug- to provide public goods. With such market gests that social learning may be important and state failures, initial asset endowments for adopting new technologies. Farmers' affect the efficiency of resource use and decisions are influenced by the experiences thus the well-being of households. of farmers in their social networks, which Rural households and their pathways out of poverty 83 can help reduce asymmetric information In many cases, collective action alone on the new technology. New technologies cannot correct market failures; that is a often involve uncertainties about appropri- crucial role for policies and the state. Yet ate application or suitability for a particu- in many developing countries, the state lar environment. Consequently, adoption has failed to play this role. To the contrary, patterns can be slow, as individual farm- many policies have been detrimental to ers gain from waiting and learning from rural households' livelihoods. Taxation of others' mistakes. Sometimes all farmers the agricultural sector, policy biases favor- can deem the evaluation costs too high or ing large farms, and failure to provide uncertain, choosing to stay with the status education and health services severely con- quo, behavior that can appear inefficient to strain the potential of rural households to an outsider. Recent evidence from Kenya pull themselves out of poverty through the suggests that households might also have a farming pathway. Reversing such policies saving commitment problem and thus do can enhance existing household strategies not put money aside after the harvest to or open the potential for new and success- buy fertilizer for the next season, another ful ones. explanation for the limited adoption of otherwise profitable strategies.34 Mutual influence of household The household is the domain of complex strategies and social norms interactions of cooperation and power plays. Social norms often have a strong influence A woman's power is affected by her partici- on household strategies and on the roles of pation in economic activity, which itself men and women in the household. In Côte depends on her asset endowment (including d'Ivoire, social norms not only dictate that human capital) and her access to the house- food crops should be grown by women hold's assets. Intrahousehold differences in and cash crops by men, but also influence control over assets and cash can thus affect the use of profits from different crops for cultivation and technology decisions, as well household expenditures.37 Social norms as a household's market orientation. A study often dictate that most of the childrear- in southern Ghana found that soil fertility, ing, cooking, and household chores are the tenure security of plots, and participation responsibilities of women, limiting their in the credit market were lower for women potential to take advantage of new farming, than for men; consequently, women were labor, or migration opportunities, reinforc- much less likely to plant pineapples than ing inequalities. Or increased labor force men. Pineapples were more profitable than participation by women, combined with the subsistence crops that women tended to these traditional roles at home, mean much cultivate. Evidence from Burkina Faso sug- longer workdays for women than for men. gests that output of crops grown by both Yet in some contexts women's wage men and women could increase by 6 percent jobs, and the income they generate, can if some labor and manure were reallocated shift the balance of power and work inside to women's plots.35 the house. Women's employment in the To the extent that these factors prevent growing export flower industry in Ecua- households from maintaining soil fertility dor increased the participation of men in or otherwise adopting sustainable practices, housework.38 Traditional time allocation they can have important repercussions for patterns can also be affected when house- natural resource management. Unsustain- holds move to more market-oriented cash able outcomes can also be the result of collec- crop production. Gender divisions between tive action problems, with the "tragedy of the crops can shift with new technology, as commons" looming where household liveli- occurred with rice growing in The Gambia. hoods depend on open access to resources In Guatemala, labor shortages associated (chapter 8). Empirical evidence suggests, with high-value export production forced however, that cooperative resource manage- women to reduce the time they devoted to ment often emerges in such settings.36 independent income-producing activities 84 WORLD DEVELOPMENT REPORT 2008 or to cultivating crops under their own con- Lacking a minimum asset endowment trol. Labor constraints also encroached on can thus trap households in long-term pov- the time that women could allocate to food erty. The asset endowments of many rural crops. Where men control income from households have been low for generations, cash crops, power imbalances in the house- explaining the persistence of rural poverty, hold can be reinforced when new market and the tighter asset squeeze on many small- opportunities open.39 Shifts in household holders challenges their survival. Increasing strategies that might lead to pathways out the asset base of the poor is a major chal- of poverty are not gender neutral. lenge for policy makers in implementing an agriculture-for-development strategy. Rural household asset positions: often low and unequal Human capital endowments Household asset positions determine Rural households' human capital endow- household productivity. More generally, ments tend to be dismally low. Rural-urban household asset endowments condition gaps in educational attainment and health livelihood strategies. Education and health outcomes remain large in most regions. status affect a person's potential to engage Regional averages for Sub-Saharan Africa, in high-value nonfarm jobs as well as the South Asia, and the Middle East and returns on agriculture. Education might North Africa show that rural adult males facilitate learning about new technologies, have about 4 years of education, and rural and given the physical intensity of most adult females have 1.5 to 4 years (figure agricultural labor, health and nutrition can 3.5). Only in Europe and Central Asia are affect agricultural productivity. The size education levels notably higher. Inequality and quality of landholdings condition crop in access to education by ethnic group is and technology choices and the potential of also high in many countries. Differences producing marketable surplus. Households between rural and urban areas are even without any access to land are excluded larger, with adult males in rural Africa and from the farming pathway. Owning work Latin America having about 4 years less animals can affect the timing of cultivation education than their urban counterparts practices. And livelihood strategies rely on (figure 3.5). social networks for trust, social learning, In some countries, such as Mexico, adult and collective action. education programs have boosted rural literacy rates. In many countries school enrollment rates have increased consider- Figure 3.5 Rural-urban gaps in educational attainment are large ably over the last decade. Yet differences in Years of education school attendance for children by wealth 12 categories and ethnic groups remain large, and gender differences are still significant 9 in most countries. In Latin America, the 6 returns to education were lower for indig- enous groups. Moreover, the quality of 3 education is often drastically lower in rural 0 areas (chapter 9).40 Access to quality health services is ­3 also much lower in rural areas. In many ­6 countries the imbalance between rural Europe & East Asia Middle East Sub-Saharan Latin America South Asia Central Asia & Pacific & North Africa Africa & Caribbean and urban areas in skilled health workers is extreme. In Africa only half the rural Rural men Rural women Rural-urban difference: men Rural-urban difference: women population has access to improved water Source: WDR 2008 team. or improved sanitation, and in Asia only 30 Note : Average education levels for adult populations, 25­64 years old, for countries in each region. Calculations percent.41 Poor health reduces agricultural based on 58 countries (excluding China and India) with recent household survey data with information on years of education, weighted by 2000 population. See Background Note by WDR 2008 team (2007) for details. productivity, and some agricultural prac- Rural households and their pathways out of poverty 85 tices contribute to health problems such as periods show declines in average farm sizes malaria, pesticide poisoning, and zoonotic and increases in landlessness. In many diseases (see focus H). high-population-density areas of Africa, AIDS takes a heavy toll on rural popu- average farm sizes have also been declining. lations in Africa, with mortality among Such land pressure in economies still heav- young adults rising sharply. Life expectancy ily reliant on agriculture is a major source is declining in many countries--in Malawi, of rural poverty, and it can also produce for example, from 46 years in 1987 to 37 social tensions contributing to civil con- years in 2002. HIV incidence early in the flict.46 This is true even if the division of epidemic is often higher for the educated, landholdings may have an equalizing effect, decimating human capital.42 AIDS also as the declining land Gini coefficients (less reduces adults' capabilities to work, diverts inequality) for India, Malawi, and Tanzania the labor of others to caregiving, and suggest (see table 3.3). breaks the intergenerational transmission By contrast, agricultural land is still of knowledge. All these factors can result in expanding in some African and Latin reduced agricultural production. Evidence American countries, and farm sizes are from rural Kenya suggests that antiretro- increasing (table 3.3 and chapter 2). In cash- viral treatment can sustain the adult labor cropping regions of Mozambique, such area force, leading to less child labor and better expansion was found to reduce poverty.47 child nutrition outcomes.43 Greater access to land for the rural poor, AIDS can also severely affect the particularly where off-farm income and demographic profile of rural populations migration opportunities are lacking, is a through the direct effects on mortality major instrument in using agriculture for and through migration that helps people development. cope. In its 2003 World Health Report, the In Latin America and some countries of World Health Organization (WHO) (2003) Africa and South Asia, unequal land access reported a shift of orphans to rural areas.44 is often perpetuated through social mecha- Analysis based on population censuses nisms--leaving many households, often suggests that African countries with high ethnic minorities or indigenous people, HIV prevalence (Botswana, Swaziland, and without access to land or with land plots Zimbabwe) have higher dependency ratios too small to meet their needs. Most of the than would be predicted for their level of land is in large farms, while most farms development.45 These changes in rural are small.48 This bimodal pattern has been household composition are likely to affect increasing in Brazil over the last 30 years, household income strategies, as well as the where the number of medium-size farms potential of rural households to benefit declined while the numbers of both small from agricultural and rural growth. The and very large farms increased. Small farms changes also have implications for the role control a declining share of the land, while of subsistence farming for household sur- large farms control a growing proportion vival (box 3.4). (figure 3.6). In Bangladesh the number of farms doubled in 20 years, and the number Land pressures and the persistence of farms smaller than 0.2 hectares increased of bimodal land distributions affect more than proportionally--but most of household landholdings the land is in larger farms.49 Moreover, As land gets divided through inheritance in a large share of rural households in these a growing population, farm sizes become regions do not have any access to land.50 smaller. In India the average landholding Land concentration thus contributes to the fell from 2.6 hectares in 1960 to 1.4 hect- asset squeeze on smallholders and landless ares in 2000, and it is still declining. Panel households. data that followed household heads and Mechanisms that perpetuate land their offspring in Bangladesh, the Philip- inequality include segmented land mar- pines, and Thailand over roughly 20-year kets when property rights are insecure, 86 WORLD DEVELOPMENT REPORT 2008 B O X 3 . 4 Returning to the farm in Zambia--subsistence agriculture, AIDS, and economic crisis Cohort analysis with the Zambia census data The most striking observation is the high by the attrition rates in both urban and rural sheds light on changes in the age composi- mortality rate between 1990 and 2000. areas, indicates high mortality. tion of the urban and rural populations in Because international migration is very low, In urban Zambia, large population declines a country with high HIV prevalence rates. the declining size of each cohort, indicated have occurred across all age groups, except the youngest. This contrasts with rural Zambia, where declines are especially large among Following 1990 population cohorts to 2000 shows high mortality rates, particularly young adults (19 percent for those 15­24 in among young adults 1990), indicating high mortality rates for this Population 1990­2000 by cohort, rural Population 1990­2000 by cohort, urban group.51 Similar population analysis also sug- Thousands Percent Thousands Percent gests higher mortality rates among the literate 50 50 population, confirming trends observed else- where in Africa. 2000 40 2000 40 Economic shocks that induced domes- 30 30 (right scale) (right scale) tic migration help explain the differences 1000 20 1000 20 between rural and urban patterns. In 2000 10 10 many more rural residents, of all age groups, reported having moved from the urban areas. 0 0 0 0 By contrast, fewer urban residents had rural 5­14 15­24 25­34 35­44 45­54 5­14 15­24 25­34 35­44 45­54 origins, particularly among older age groups Age in 1990 Age in 1990 (figure below). This indicates that net migra- tion reversed from rural-to-urban in 1990 to 1990 2000 Attrition rate urban-to-rural in 2000. Rural-to-urban migra- tion slowed considerably between 1990 and Source: WDR 2008 team, based on Zambia population census. Note: Columns represent the same cohort of people observed in the 1990 and 2000 censuses with a 10-year 2000, but urban-to-rural migration increased. difference in age. The attrition between the two observations includes both net out-migration and death. These patterns have been linked to the dearth Ages refer to cohort ages in 1990. of employment opportunities in towns and cities and the stagnation in the (largely urban) Migration patterns have reversed, with a recent increase in rural-to-urban migration copper mining industry triggered by a global slump in copper prices. Population 1990­2000 by cohort Population 1990­2000 by cohort Another explanation of the rural-urban born urban, rural now born rural, urban now differences in attrition rates among adults Thousands Thousands is return migration by HIV-affected people. 300 300 A higher proportion of rural households has 1990 2000 1990 2000 elderly household heads (12.9 percent versus 4.8 percent in urban areas). These households 200 200 rely more on subsistence agriculture and have considerably less access to income from non- 100 100 farm sources, including transfers, than other rural households. The majority of the rural 0 0 elderly households have (AIDS) orphans living 5­14 15­24 25­34 35­44 45­54 5­14 15­24 25­34 35­44 45­54 with them (on average, 0.8 orphans per elderly Age in 1990 Age in 1990 rural household). Note : Columns represent the number of people from the same cohort of age and born in urban (rural) areas Source: Potts 2005; World Bank 2005p; calculations that lived in rural (urban) areas in 1990 and 2000. The difference between the two observations includes of WDR 2008 team, based on Zambia population both migration and death. census. and unequal access to capital and other likely to own land, and female landowners input or output markets. More generally, tend to own less land than men. Evidence the inequality in many rural societies is from a sample of Latin American coun- perpetuated by elite capture in public ser- tries shows that only 11 to 27 percent of all vices; intergenerational transfers of poverty landowners are women. In Uganda women through low education, ill health, and poor account for the largest share of agricultural nutrition; and a deeply entrenched culture production but own only 5 percent of the of poverty (box 3.5).52 land, and they often have insecure tenure Women's access to land is often limited rights on the land they use.53 by unfavorable marital and inheritance Country examples shed light on some of laws, family and community norms, and the underlying mechanisms. Until a recent unequal access to markets. Women are less law change, a woman in Nepal could not Rural households and their pathways out of poverty 87 Table 3.3 Changes in farm size and land distribution Land distribution Average farm size Change in (Gini) (hectares) total number Change in Farm size of farms total area definition Country Period Start End Start End % % useda Smaller farm size, more inequality Bangladesh 1977­96 43.1 48.3 1.4 0.6 103 ­13 Total Pakistan 1990­2000 53.5 54.0 3.8 3.1 31 6 Total Thailand 1978­93 43.5 46.7 3.8 3.4 42 27 Total Ecuador 1974­2000 69.3 71.2 15.4 14.7 63 56 Total Smaller farm size, less inequality India 1990­95 46.6 44.8 1.6 1.4 8 ­5 Total Egypt 1990­2000 46.5 37.8 1.0 0.8 31 5 Total Malawi 1981­93 34.4 33.2b 1.2 0.8 37 ­8 Cultivated Tanzania 1971­96 40.5 37.6 1.3 1.0 64 26 Cultivated Chile 1975­97 60.7 58.2 10.7 7.0 6 ­31 Agricultural Panama 1990­2001 77.1 74.5 13.8 11.7 11 ­6 Total Larger farm size, more inequality Botswana 1982­93 39.3 40.5 3.3 4.8 ­1 43 Cultivated Brazil 1985­96 76.5 76.6 64.6 72.8 ­16 ­6 Total Larger farm size, less inequality Togo 1983­96 47.8 42.1 1.6 2.0 64 105 Cultivated Algeria 1973­2001 64.9 60.2 5.8 8.3 14 63 Agricultural Sources: Anríquez and Bonomi (2007). Calculations based on agricultural censuses. a. Total land area, agricultural (arable) land area, or cultivated (planted) crop area. b. Inequality obtained from the Malawi 2004/05 household survey. Figure 3.6 Farm size distributions are often bimodal Bangladesh India Brazil Percent of farms Percent of farms Percent of farms 50 50 20 40 40 1995 16 1977 30 30 12 1970 1996 20 20 1970 8 1996 10 10 4 0 0 0 0.01 0.1 1 10 0.01 0.1 1 10 100 0.1 1 100 1,000 100,000 Farm size, hectares (log scale) Farm size, hectares (log scale) Farm size, hectares (log scale) Bangladesh India Brazil Percent of land Percent of land Percent of land 60 25 20 1970 50 20 1977 15 40 15 1995 30 10 1996 10 1970 20 1996 5 5 10 0 0 0 0.01 0.1 1 10 0.01 0.1 1 10 100 0.1 1 100 1,000 100,000 Farm size, hectares (log scale) Farm size, hectares (log scale) Farm size, hectares (log scale) Source: Estimations based on agricultural census (Anríquez and Bonomi 2007). Note: Farm size in log scale. 88 WORLD DEVELOPMENT REPORT 2008 such contexts, household welfare depends B O X 3 . 5 New technologies and positive discrimination on herd size and the shocks that might policies reduce social inequalities in India affect it. The rapidly growing demand for livestock products in developing countries Inequalities across cultural, social, and India's recent shift to the panchayat reinforces the value of livestock as part of ethnic groups often reflect differences system of local government includes in access to economic opportunities. reserved council seats for women and household asset portfolios and its potential Consider the persistence of caste-based members of scheduled castes and tribes. to reduce poverty.55 inequalities in the Indian economy. The new emphasis on participatory and In 14 countries analyzed, the majority of Members of underprivileged "scheduled" community approaches has created possi- rural households own some livestock, with castes and tribes typically live in sub- bilities for marginal groups to gain power, habitations of a village, geographically challenging cultural norms while shifting shares above 80 percent in Albania, Ecuador, distinct from the main village. Residential structures of traditional authority. Nepal, and Vietnam. Even among the poor- segregation means that the public goods New technologies that link villages est households, more than 40 percent own consumed by members of scheduled with world production, consumption, and livestock, except in Pakistan. Many live- castes and tribes--such as sanitation governance further reduce the depen- facilities, drinking water, local roads, and dence on traditional norms. Television and stock holdings consist of small animal spe- even schools--are distinct from those communications have changed rural con- cies; fewer than 40 percent of rural house- consumed by better-off castes and are sumer preferences. Technological changes holds own cattle. The share of livestock generally of very poor quality. in agriculture, information technologies, owned by the top fifth of livestock holders Governments can reduce inequalities trade, and transportation have expanded by targeting funds toward areas popu- opportunities for many rural people. The varies between 42 percent and 93 percent, lated by the poor. Indeed, many Indian access to new knowledge does not neces- showing that livestock holdings tend to be government programs require funds to sarily correlate with traditional social hier- quite unequal. Indeed, these inequalities are be spent on scheduled-caste habitations. archies, so it can help break the traditional similar to those for landholdings.56 Recent research suggests that such man- inequality traps. But it can also lead to new dates ensure a higher level of investment inequalities as access to information and in poor habitations. However, it also shows capital come to matter more than tradi- Differential access to formal and that these policies cannot significantly tional norms. informal social capital reduce the prevailing bias of village gov- ernments to devote far more resources to Membership in formal and informal orga- the main village complexes. Sources: Kochar 2007; Rao 2007. nizations--and in community or ethnic networks--is a major asset of the rural poor, important for access to input and output markets, insurance, trust in transac- inherit land from her parents. In Malawi tions, and influence over political decisions. widows can lose their land from land grab- Social networks can also foster technology bing by the husband's family. Women's land adoption through social learning. Exclusion rights under customary tenure regimes are from such networks can severely limit the also much weaker than men's. Evidence choices of many, and the poorest are most from Ghana suggests that shifts to individ- likely to be excluded. Social capital is not ual ownership in such contexts can some- only important for farmers; it also deter- times strengthen women's land rights. Yet mines opportunities in the nonagricultural in other cases, titling programs, by con- sectors (for traders or for job referrals) and ferring titles to the male household head, for migration. For agricultural workers in contribute to the breakdown of custom- (often isolated) large estates in Sri Lanka ary systems that helped guarantee married and elsewhere, the lack of networks is a women's access to land.54 major constraint on upward mobility.57 Producer organizations can be part of the Livestock: a key asset for the social capital of many smallholders, con- poorest, particularly in arid tributing to smallholder competitiveness. and semiarid settings Between 1982 and 2002, the proportion of Livestock is often the largest nonland asset villages with a producer organization rose in rural household portfolios. In Burkina from 8 percent to 65 percent in Senegal and Faso and Ethiopia, livestock accounts for from 21 percent to 91 percent in Burkina more than half of rural households' wealth. Faso. Overall, 69 percent of Senegal's rural In arid and semiarid settings of Africa and households and 57 percent of Burkina Asia, livestock can offer the only viable Faso's are now members of producer orga- household agricultural strategy (box 3.6). In nizations. Data for other African and Latin Rural households and their pathways out of poverty 89 American countries, although fragmented, also indicate a rapid increase in the number B O X 3 . 6 Pastoralists' precarious livelihoods of such local organizations.58 Pastoralism and agropastoralism are the linked to weather conditions and thus are Exclusion from formal networks typi- main agricultural production systems in particularly vulnerable. cally affects women more than men, and dryland areas, supporting the livelihoods Pastoral strategies of herd diversity, women are less likely to be members of of 100 to 200 million people worldwide. flexibility, and mobility reflect rational producer organizations, their member- The number of extremely poor pastoralists and crucial survival mechanisms in erratic and agropastoralists is estimated at 35 to environments. Such strategies can be ship constrained by cultural norms. But 90 million. More than 40 percent of the enhanced by policy, and some Sahelian there are exceptions. In Senegal women pastoralists live in Sub-Saharan Africa, 25 countries (Burkina Faso, Mali, Mauritania, participate more than men in producer percent in Middle East and North Africa, and Niger) have been promoting policy 16 percent in East Asia, 8 percent in South organizations. In Bangladesh and India, reforms aimed at legally recognizing the Asia, and 4 percent each in Latin America rights of pastoralists and improving the self-help and microlending groups consist and in Europe and Central Asia. management of rangeland resources. But primarily of women. In Andhra Pradesh, Itinerant herding, moving animals recent efforts to set aside extensive areas poverty-reduction programs reaching from place to place to follow water and of marginal lands as national parks and pasture availability, has evolved over cen- biodiversity reserves, particularly in Africa, more than 8 million women have built turies and is well suited to sustaining life pose new challenges to pastoralism. on and enhanced such self-help groups, in areas where rainfall is unpredictable. Sources: Blench 2001; Rass 2006; Thornton and increasing the access to group loans and Yet, pastoralist livelihoods remain closely others 2002. collective marketing for agricultural com- modities and input supplies.59 also worry about abrupt changes in rules Pervasive risks and for land tenure or regulations for trade; for costly responses them, the state can be an additional source Agriculture is one of the riskiest sectors of uninsured risk. Rural political violence of economic activity, and effective risk- and crime can also cause considerable farm reducing instruments are severely lacking productivity losses, as in Colombia.61 in rural areas. Negative shocks can deplete The lack of access to insurance and credit assets through distress sales of land and markets makes agricultural producers par- livestock. It can take a very long time for ticularly vulnerable. Households thus often households to recover from such losses. reduce their consumption risk by choosing When income and asset shocks coincide, low-risk activities or technology, which households have to choose between reduc- typically have low average returns. In rural ing consumption or depleting assets.60 areas of semiarid India, such self-insurance This suggests a role for policies to enhance produces returns for the poor that are 35 household's ability to manage risk and to percent lower than if they did not need to cope when hit by a shock. self-insure.62 Rural households often identify weather- Shocks can be idiosyncratic--when one related and health shocks as their biggest household's experience is weakly related, if risks. The immediate production and wel- at all, to that of neighboring households-- fare losses associated with drought can or covariate--when households in a same be substantial. In Kilimanjaro, Tanzania, geographical area or social network all suf- farmers who reported rainfall patterns well fer similar shocks. Idiosyncratic shocks can below normal in the year prior to the sur- arise from microclimatic variation, local vey experienced a 50 percent reduction in wildlife damage or pest infestation, ill- their agricultural revenues and a 10 per- ness, and property losses from fire or theft. cent reduction in their consumption. Ill- Such shocks can, in principle, be managed nesses and injuries in a family simultane- by insurance within a locale. By contrast, ously reduce income because of lost time covariate shocks, arising from war, natu- working and deplete household savings ral disasters, price instability, or finan- because of spending on treatment. Studies cial crises, are difficult to insure locally for Africa, Asia, and Latin America suggest and require some coordinated external that health shocks contribute to more than response. Yet, even idiosyncratic risk often half of all descents of previously nonpoor has large effects, indicating the potential households into chronic poverty. Farmers for better local risk management. 90 WORLD DEVELOPMENT REPORT 2008 Are agricultural risks increasing? Recent herd size recovered to 50 percent of pre- empirical evidence suggests that heightened drought levels, but there was little recovery volatility attributable to apparent increases for households that lost their entire breed- in climate variability (drought, flooding, ing stock.65 and other natural disasters) has been off- Coping with shocks often comes at the set by reduced volatility from greater use of expense of investments in the next genera- irrigation and livestock.63 Yet the costs of tion. In addition to the higher infant mor- each meteorological event or other natural tality rate in drought years, survivors are disaster are rising, reflecting the expansion often stunted, which in turn affects future of population and cultivation into more educational attainment and lifetime earn- vulnerable areas. Moreover, the economic ings. Rural households often also respond costs of extreme weather events increase as to low rainfall or unemployment shocks production systems use more capital, unless by withdrawing children from school or that capital allows the use of risk-reducing decreasing their attendance so that they technology. Higher investments can thus can help at home and on the farm. Children increase asset-risk exposure, one obstacle to taken out of school for even a short period expanding credit use by poor households. are much less likely to return to school.66 This also helps explain why many farm- Negative shocks can have differential ers who are not poor remain vulnerable effects along gender lines, and women (or to shocks in the absence of risk-mitigating girls) in poor households often bear the measures. largest burden. Meeting current consump- Poor areas generally are also riskier. tion after a shock can also degrade the Prices tend to be more variable in more environment at a cost of future livelihoods. remote areas, often the poorest regions, Shocks can intensify pressures on common because limited market access and greater property, increase poaching and encroach- costs of getting to market make it more ing on protected areas, and augment con- difficult to offset local supply and demand flicts between pastoral and farming com- shocks. Poor households also have fewer munities.67 So protecting rural households means to insure against bad weather, and against uninsured risks is an area for greater they face more weather-related disasters-- policy attention (chapter 6). aggravated by inequality in the coverage and effectiveness of infrastructure. People in Smallholder challenges low-income countries are four times more to compete likely to die in natural disasters than those The potential of agriculture to contribute in high-income countries.64 Uninsured to growth and poverty reduction depends risks and poverty can thus create downward on the productivity of small farms. The vast spirals of perpetual impoverishment. majority of farmers in developing coun- tries are smallholders, and an estimated 85 Lack of insurance and percent of them are farming less than two asset depletion hectares. In countries as diverse as Bangla- The inability to protect a household from desh, China, Egypt, and Malawi, 95 percent income and asset shocks can result in long- of farms are smaller than two hectares, and term consequences across generations in many other countries the great major- through reduced investments in health, ity of farms is under two hectares.68 The nutrition, and schooling. In many circum- literature linking household's asset endow- stances, recovering from a shock is slow ments to agricultural productivity has long and often incomplete by the time the next emphasized an inverse relationship between shock occurs. And after an income shock, farm size and factor productivity. Both the poor recover more slowly than the non- theory and empirical evidence have shown poor. Households in an isolated community that such a relationship is common when in Zimbabwe lost 80 percent of their cattle imperfections in both land and labor mar- in the 1992 drought. By 1997, the average kets are large.69 The inverse relationship is Rural households and their pathways out of poverty 91 a powerful rational for land access policies While smallholders have an advantage in that redistribute land toward smallholders, overcoming labor supervision problems, increasing both efficiency and equity. other factors can erase their competitive Smallholder farming--also known as advantage. Yields on land allocated to crops family farming, a small-scale farm operated might be higher on larger farms, which tend by a household with limited hired labor-- to apply more fertilizer or other inputs. remains the most common form of orga- And the gap might be increasing over time. nization in agriculture, even in industrial For example, gains in cereal yields on small countries. The record on the superiority of farms are lagging behind gains on larger smallholder farming as a form of organi- farms in both Brazil and Chile (figure 3.7). zation is striking. Many countries tried to Yield gaps can arise because imperfec- promote large-scale farming, believing that tions in credit and insurance markets pre- smallholder farming is inefficient, back- vent small farmers from adopting more ward, and resistant to change. The results productive capital-intensive techniques or were unimpressive and sometimes disas- higher-value products. Evidence from Brazil trous. State-led efforts to intensify agricul- indicates that price changes following mar- tural production in Sub-Saharan Africa, ket liberalizations favored technologically particularly in the colonial period, focused more advanced producers who were better on large-scale farming, but they were not able to cope with price and yield variability sustainable. In contrast, Asian countries and deal with the demands of agroprocess- that eventually decided to promote small ing. Imperfections in capital and insurance family farms were able to launch the markets, combined with transaction costs, green revolution. They started support- can also prevent markets for land sales and ing smallholder farming after collective rentals from allocating land to the most farms failed to deliver adequate incentives efficient users.70 Moreover, imperfect com- to produce, as in China's farm collectiviza- petition in those markets might favor land tion, or on the verge of a hunger crisis, as concentration in larger farms. These com- in India and Indonesia. Countries that pro- plexities indicate the need to jointly con- moted smallholder agriculture--for vari- sider policies targeting land, capital, and ous political reasons--used agriculture as risk for smallholders (chapter 6). an engine of growth and the basis of their Moreover, while there may be constant industrialization. returns to scale in production, economies of Even if small farmers use their resources scale in the "new agriculture" often are the more efficiently than larger farmers, there key for obtaining inputs, technology, and may still be disadvantages in being small. information and in getting products to the Figure 3.7 Yields on small farms lag behind large farms in staples in Brazil and Chile Brazil Chile Maize yield, tons per hectare Wheat yield, tons per hectare 4 6 5 3 1996 4 1997 2 3 1980 2 1 1 1976 0 0 1 10 100 1,000 1 10 100 1,000 10,000 Farm size (harvested area), hectares (log scale) Farm size (harvested area), hectares (log scale) Source: Anríquez and Bonomi 2007. 92 WORLD DEVELOPMENT REPORT 2008 market (chapter 5). As agriculture becomes to become market participants in staples more technology driven and access to con- and high-value crops. sumers is mediated by agroprocessors and Smallholders can act collectively to supermarkets, economies of scale will pose overcome high transaction costs by form- major challenges for the future competi- ing producer organizations (chapter 6). tiveness of smallholders. Cooperation between larger commercial These different mechanisms can all farmers and smallholders is another pos- reverse the small farm labor advantage, or sibility. Smallholders sometimes can also make it irrelevant, leading to a potential benefit from economies of scale in input or decline of the family farm (box 3.7). The output markets by renting out their land perceived "crisis" in smallholder agricul- and working on the larger farms.71 Increas- ture is epitomized by the rash of suicides ing the bargaining power of smallholders in of heavily indebted farmers in India, the this type of arrangement can help guaran- long-term stagnation of productivity of tee that benefits are shared by smallholders food crops in Africa, the role of poor (indig- and the larger farms. enous) farmers in the political instability of many Latin American countries, and the Conclusions increasing rural-urban income disparities Three powerful and complementary path- in South and East Asia. But there are many ways out of poverty are smallholder farm- policy instruments to help smallholders ing, off-farm labor in agriculture and the increase their competitiveness, as long as rural nonfarm economy, and migration. governments do not tilt the playing field The following chapters discuss policies and against them. programs that can open and widen these pathways for the rural poor by increasing Smallholder entrepreneurs their asset holdings and by improving the and cooperation context that determines the level and vola- Heterogeneity in the smallholder sec- tility of the returns on assets. Chapters 4 to tor implies that a group of entrepreneur- 8 explore how farming can be made more ial smallholders is likely to respond when effective in providing a pathway out of pov- markets offer new opportunities. Improved erty. Chapter 9 looks into the possibilities access to assets, new technologies, and bet- offered by the agricultural labor market, the ter incentives can allow more smallholders rural nonfarm economy, and migration. B O X 3 . 7 Are farms becoming too small? Population pressures, unequal landholdings, A related question is whether declining small, inefficient farms. In China, greater ten- and inheritance norms favoring fragmenta- farm sizes widen rural-urban income gaps. ure security has been advocated to facilitate tion are leading to rapid declines in farm sizes With urban wages increasing in many Asian moves to the nonfarm economy. Without such in many parts of Asia and Africa. In China and countries, labor productivity in agriculture a policy change, the trend of declining farm Bangladesh, average farm size is about 0.5­0.6 might have to increase to avoid widening the sizes in China might continue. hectares, and in Ethiopia and Malawi about 0.8 gap. One way of achieving such productivity In other places, policy-led land consolida- hectares. Have farms become "too small"? gains might be through farm consolidation tion has been considered. The advantages The farm-size debate is motivated by a and mechanization. are not always clear, however, because some number of concerns. First, some argue that the Policies activating land rental and sales households will lose their access to land.72 But inverse farm size­efficiency relationship might markets can promote such consolidation. where consolidation occurs through the land not hold at very small farm sizes, or that even Increases in land inequality and landlessness rental market, win-win situations can occur. if such farms are efficient, they might be too can then coincide with a pro-poor process of Alternatively, increasing the productivity of small for rural households to escape poverty change, as in Vietnam, where rural economic small farms--through high-value crops or based on the income of the farm alone. Others development and greater diversification in the higher-yielding technologies for food crops-- argue that small farms disguise unemployment sources of income sharply reduced poverty. can increase the incomes from small farms. if labor markets do not work properly. The rel- Conversely, tenure insecurity can prevent land evance of these arguments depends in part on reallocation through sales or rental markets, Sources: Anríquez and Bonomi 2007; Deininger and the availability of alternative income sources preventing such gains. In Japan, government Jin 2003; Otsuka 2007; Ravallion and van de Walle and on the safety-net value of small farms. intervention in land rental markets preserves forthcoming. Rural households and their pathways out of poverty 93 The heterogeneity of smallholders, some wide range of institutions that affect com- market oriented and some subsistence ori- petitiveness are creating new challenges for ented, calls for differentiated agricultural smallholder entrepreneurs. They are also policies that do not favor one group over opening new opportunities. By addressing the other, but that serve the unique needs these challenges and seizing these oppor- of all households while speeding the pas- tunities, smallholders can escape poverty sage from subsistence to market-oriented through the farming pathway, especially farming. Recent changes in the global food when policies reverse traditional biases market, in science and technology, and in a against the smallholder. focus C What are the links between agricultural production and food security? Today, the world has more than enough food to feed everyone, yet 850 million are food insecure. Achieving food security requires adequate food availability, access, and use. Agriculture plays a key role in providing (1) food availability globally (and nationally and locally in some agriculture-based countries); (2) an important source of income to purchase food; and (3) foods with high nutritional status. I n the mid-1970s, as rapidly increasing Secure world, insecure households the 1970s, 37 million people were removed prices caused a global food crisis, food The world is generally food secure, produc- from the ranks of the undernourished, and security emerged as a concept. Attention ing enough food to meet the dietary needs 100 million in the 1980s, but in the 1990s, focused first on food's availability but then of today's global population--although only 3 million were removed. quickly moved to food access and food use-- future global food security should not be What accounts for these millions of and, most recently, to the human right to taken for granted because of uncertainties food-insecure individuals? Food security adequate food. The International Covenant from growing resource scarcity and cli- depends on adequate and stable food avail- on Economic, Social, and Cultural Rights, mate change (chapter 2). Yet 850 million ability, access to adequate and appropriate ratified by 153 states, obligates these states people remain undernourished.2 Accord- food, and proper use and good health to to progressively realize the right to food. ingly, the first Millennium Development ensure that individual consumers enjoy the The commonly accepted definition of Goal includes the target of halving hunger full nutritional benefits of available, acces- food security is-- as tracked by the measure of undernour- sible food. Availability is necessary but not enough to ensure access, which is necessary when all people, at all times, have physi- ishment given by the Food and Agriculture but not enough for effective use. cal, social, and economic access to suf- Organization of the UN (FAO) .3 ficient, safe, and nutritious food to meet The highest incidence of undernourish- Food availability--producing their dietary needs and food preferences ment is in Sub-Saharan Africa, where one for an active and healthy life.1 in every three persons suffers from chronic enough to eat hunger (figure C.1). The greatest number The price increases in the mid-1970s world The chronically food insecure never of undernourished is in South Asia (299 food crisis were exacerbated by low foreign have enough to eat. The seasonally food million), closely followed by East Asia (225 exchange reserves, limiting food imports insecure fall below adequate consumption million). in many food-deficit countries. This rise levels in the lean season. And the transitory East Asia has reduced the prevalence in prices prompted some countries to look food insecure fall below the food consump- of undernourishment in the past decade inward, striving for food self-sufficiency tion threshold as a result of an economic or by more than 3 percent a year and South through domestic production. But today natural shock such as a drought, sometimes Asia by 1.7 percent a year, but the failure with deeper international markets, lower with long-lasting consequences. to reduce the absolute number of under- real prices, and more countries with con- Investments in agriculture are impor- nourished remains a cause for concern. In vertible exchange rates, trade can stabilize tant to increase food security. The channels are complex and multiple. Rising produc- Figure C.1 Undernourishment is highest in Sub-Saharan Africa tivity increases rural incomes and lowers food prices, making food more accessible Prevalence of undernourishment, 2003 (% of total population) to the poor. Other investments--such as 40 improved irrigation and drought-tolerant SSA crops--reduce price and income variability by mitigating the impact of a drought. Pro- 206 30 SA ductivity gains are key to food security in countries with foreign exchange shortage or limited infrastructure to import food. The 299 20 same applies to households with poor access EAP to food markets. Nutritionally improved LAC MENA crops give access to better diets, in particular 225 10 52 36 ECA through biofortification that improves crop 27 nutrient content. The contributions that agriculture makes to food security need to 0 be complemented by medium-term pro- ­4 ­3 ­2 ­1 0 1 2 Annual average change in prevalence of undernourishment, 1992­2003, % grams to raise incomes of the poor, as well as insurance and safety nets, including food Sources: http://faostat.fao.org; FAO 2006c. aid, to protect the chronic and transitory Note: The size of bubbles represents millions of undernourished people. EAP--East Asia and Pacific, LAC--Latin America and Caribbean, SA--South Asia, SSA--Sub-Saharan Africa, MENA--Middle East and North Africa, poor (chapter 9). ECA--Europe and Central Asia. What are the links between agricultural production and food security? 95 food availability and prices for most coun- than 40 percent in Guinea-Bissau, Haiti, and ran Africa. Yet it remains home to 210 mil- tries (chapter 5). And most countries have the Republic of Yemen. With such levels of lion undernourished people and 39 percent diversified their export base, increasing their dependency and food imports often repre- of the world's underweight children.8 Ban- capacity to import. senting more than 20 percent of the avail- gladesh, India, and Nepal occupy three of the However, food availability is still a concern able foreign exchange, world price fluc- top four positions in the global ranking of in some agriculture-based countries. Many tuations place additional strain on import underweight children. Ethiopia is the fourth, countries have declining domestic production capacity and therefore domestic food avail- with the same incidence of underweight per capita of food staples.4 Burundi, Ethiopia, ability. World price variability remains high, children as India. Many believe that the infe- Kenya, Madagascar, Nigeria, Sudan, Tanzania, with a coefficient of variation of around 20 rior status of women in South Asia has to and Zambia all had negative per capita annual percent. some extent offset the food security benefits growth rates in staple food of ­1.0 to ­1.7 Because of the low price elasticity of of agriculture-led poverty reduction. percent from 1995­2004. In addition, staple demand for food staples and the thinness of food production in many agriculture-based markets, problems in food availability (from Food use--ending hidden hunger countries is largely rain fed and experiences low domestic production or lack of imports) Food use translates food security into nutri- large fluctuations caused by climatic variabil- translate into large spikes in domestic prices tion security. Malnutrition has significant ity. In Sudan, for example, the coefficient of and reductions in real incomes of poor con- economic consequences, leading to estimated variation of domestic staple food production sumers (many of whom are farmers). Even individual productivity losses equivalent to is 25 percent. This means that a shortfall of at in countries that engage in trade, transpor- 10 percent of lifetime earnings and gross least 25 percent of average production occurs tation and marketing costs result in a large domestic product (GDP) losses of 2 to 3 every six years. And many other countries wedge between import and export parity percent in the worst-affected countries.9 But have similarly high coefficients: Niger and within which domestic prices can fluctuate malnutrition is not merely a consequence Malawi at 18 percent; Rwanda at 15 percent; without triggering trade. Price variability, of limited access to calories. Food must not and Burkina Faso, Chad, Kenya, Uganda, and which is already high even in capital cities only be available and accessible, but also be the Republic of Yemen above 10 percent. with mostly liberalized markets, is exacer- of the right quality and diversity (in terms Stagnation or decline in domestic pro- bated in inland and more remote regions. of energy and micronutrients), be safely pre- duction and large fluctuations clearly raise pared, and be consumed by a healthy body, a potential problem of food availability Food access--having enough as disease hinders the body's ability to turn at the national level. Can this problem be to eat food consumption into adequate nutrition. addressed through imports? In many coun- But for most of the malnourished, the lack Lack of dietary diversity and poor diet tries the answer is yes. In other countries, of access to food is a greater problem than quality lead to micronutrient malnutrition or however, the main staples consumed have food availability. Nobel Laureate Amartya hidden hunger,10 even when energy intakes a low degree of tradability and are hardly Sen famously wrote that "starvation is a are sufficient. Hidden hunger can cause ill- traded internationally (chapter 1). Poor matter of some people not having enough ness, blindness, and premature death as well infrastructure imposes high costs for food food to eat, and not a matter of there being as impair the cognitive development of survi- to reach isolated areas, even when the capi- not enough food to eat."5 The irony is that vors. In the next 12 months, malnutrition will tal city and coastal cities are well served by most of the food insecure live in rural areas kill 1 million children before the age of five.11 international markets. where food is produced, yet they are net Iron deficiency among female agricultural Beyond tradeability issues--with ade- food buyers rather than sellers (chapter 4). workers in Sierra Leone will cost the economy quate infrastructure and internationally Poverty constrains their access to food in the $100 million in the next five years.12 traded staples--low foreign exchange avail- marketplace. According to the UN Hunger Although increased production of hor- ability often limits the capacity to import. Task Force, about half of the hungry are ticulture products and livestock has been Consider the case of Ethiopia that would smallholders; a fifth are landless; and a tenth agriculture's main avenue to improve diet import on average 8 percent of its staple are agropastoralists, fisherfolk, and for- quality, agriculture now offers an additional food consumption (assuming no food est users; the remaining fifth live in urban pathway to address hidden hunger. Biofor- aid) to maintain current levels. Addition- areas.6 Today, agriculture's ability to gener- tification is enhancing staple crop varieties ally, a 9 percent shortfall in production, ate income for the poor, particularly women, and improving diet quality with higher levels which occurs on average every six years, is more important for food security than its of vitamins and minerals through conven- could only be compensated by a doubling ability to increase local food supplies. Women, tional crop-breeding and biotechnology. of imports. But in the absence of food aid, more than men, spend their income on food. In the future, agriculture will continue to Ethiopia would already be spending 16 per- In Guatemala, the amount spent on food in play a central role in tackling the problem of cent of its foreign exchange earning on food households whose profits from nontradi- food insecurity. It can maintain and increase imports, leaving little scope for the neces- tional agricultural exports were controlled global food production, ensuring food avail- sary increases in imports. by women was double that of households ability. It can be the primary means to gener- Almost all the agriculture-based coun- whose men controlled the profits.7 ate income for the poor, securing their access tries are net importers of food staples, India has moved from food deficits to to food. And through new and improved importing on average 14 percent of their food surpluses, reducing poverty signifi- crop varieties, it can improve diet quality total consumption over the past 10 years, cantly and reaching a per capita income and diversity and foster the link between but reaching high dependency levels of more higher than that in most parts of Sub-Saha- food security and nutrition security. PART II Reforming trade, price, and subsidy policies What are effective instruments for using agriculture for development? 4 Agriculture is a cause of contention in countries, these economic and social costs international trade negotiations as well as in remain significant and perpetuate global domestic debate on price and subsidy poli- income disparities. Correcting those pol- c h a p t e r cies. It is often the cause of delays to multi- icy and investment failures can accelerate lateral trade negotiations, as in the Uruguay growth and reduce poverty. and Doha Rounds; is a source of political This chapter reviews the recent policy tension, especially in transforming coun- shifts across developed and developing tries; and is a challenging area for policy countries; the potential gains from further dialogue with development partners, par- reforms; who gains and loses from reform; ticularly in the poorest countries. Reforms and the pace, sequencing, and complemen- are usually politically sensitive with strong tary support needed in advancing these vested interests and, hence, are often diffi- reforms to enhance growth and reduce cult to achieve. Yet significant gains can be poverty. The political economy framework made from further agricultural trade, price, from chapter 1 helps in understanding the and subsidy policy reforms. Such gains determinants of policy choices for selected will not come easily, however, for reforms cases--and the ways to further improve require addressing the political economy of trade and price incentives and the efficiency difficult policy choices. There will be both of public spending. gainers and losers from reforms. Agricultural policies vary widely across Agricultural protection and countries. They have historically tended to shift from net taxation to subsidies as a subsidies in developed countries country's per capita income rises (chapter Much attention has been given to reducing 1).1 Low-income countries tend to impose the negative impacts of developed country relatively high taxes on farmers in the policies on developing countries--par- export sector as an important source of fis- ticularly through efforts to open markets cal revenue, while developed countries tend and to remove developed-country subsidy to heavily subsidize farmers. These differ- policies that have induced production and ences often create a policy bias against the depressed world prices (box 4.1). Rising poor in both domestic and international agricultural protection in developed coun- markets. tries and concerns about its impact on The economic and social costs of today's poorer developing countries spurred inter- trade, price, and subsidy policies in world national efforts in the 1980s to reduce dis- agriculture are large. They depress inter- torted prices in world markets. At the start national commodity prices by about 5 per- of the Uruguay Round of trade negotiations cent on average (much more for some com- in 1986, some agricultural exporting coun- modities) and suppress agricultural output tries formed the Cairns Group and ensured growth in developing countries. They con- that members of the General Agreement on sume a large share of the government bud- Tariffs and Trade put agricultural trade and get and distract from growth-enhancing subsidy reform high on the Uruguay Round investments. Although reduced over the agenda. Developing countries also formed last two decades, especially in developing the G-20 group at the time of the Cancun 96 Reforming trade, price, and subsidy policies 97 Ministerial conference in the Doha Round in 2003 to secure reductions in developed- B O X 4 . 1 Types of instruments that distort trade country protection. Three main types of instruments distort of the costs of exporters such as market- trade: market access, export subsidies, and ing expenses, special domestic transport Reform progress is slow, with little domestic support. charges, and payments to domestic change in overall support Market access: These include import exporters to make sourcing products from tariffs and quotas that protect local pro- domestic producers competitive. Member countries of the Organisation for ducers from competing imports. Protec- Domestic support: These include Economic Co-operation and Development tion induces local production to be higher direct support to farmers linked to the (OECD) are reforming their agricultural than would be the case at market prices, type, price, and volume of production. policies, but progress is slow. The average at the expense of international producers Depending on the level of support, local and exporters. production is usually higher and compet- support to agricultural producers fell from Export subsidies: These include ing imports lower than in the absence of 37 percent of the gross value of farm receipts government payments that cover some subsidies. in 1986­88 (the beginning of the Uruguay Round) to 30 percent in 2003­05. This esti- mate, referred to as the producer support estimate (PSE), measures the annual mon- Figure 4.1 Progress has been slow in reducing overall support to agricultural producers in etary value of gross transfers from consum- the OECD, but there has been some move to less-distorting "decoupled" payments ers and taxpayers to agricultural producers, Producer support estimate, %a measured at the farmgate level as a share of 80 70 the gross value of farm receipts. It arises 64 62 from policy measures that support agricul- 60 58 ture, regardless of their nature, objectives, or impacts on farm production or income.2 41 40 37 34 While the 7-percentage-point decline in 30 support is progress, the amount of support 22 increased over the same period from $242 20 16 8 billion a year to $273 billion. 13 5 3 8 1 2 2 0 3 8 6 More than 90 percent of the dollar value 2 0 2 OECD EU Japan Rep. of Korea United States Australia of agricultural support in OECD countries is provided by the European Union (which PSE due to coupled payments 1986­88 PSE due to coupled payments 2003­05 alone provides about half); Japan; the PSE due to `decoupled payments' 1986­1988 PSE due to `decoupled payments' 2003­05 United States; and the Republic of Korea. In Source: OECD 2006b. all four, the PSE remains high (figure 4.1).3 Note: Coupled payments include market price supports and payments tied to output level and input use. OECD countries include EU, Australia, Canada, Iceland, Japan, Republic of Korea, Mexico, New Zealand, Norway, In contrast, two OECD countries--Austra- Switzerland, Turkey, and the United States. lia and New Zealand--provide little sup- a. Transfers to agricultural producers as a share of the gross value of farm receipts. port to their farmers. OECD countries have increased preferen- Price support to farmers in OECD coun- tial access to their markets for some devel- tries creates incentives to produce more. oping countries. For example, in 2000, the The recent shift to separate or decouple United States signed the African Growth support from the type, volume, and price and Opportunity Act, which offers preferen- of products is an effort to reduce the trade- tial access to Africa's products in U.S. mar- distorting effects on current or future kets. The EU continues to provide extensive production while maintaining support to nonreciprocal preferential market access to farmers. Twenty-eight percent of the PSE countries in Sub-Saharan Africa, the Carib- in 2003­05 was decoupled from produc- bean, and the Pacific under the Cotonou tion and input use, up from 9 percent in Agreement. In 2001 the EU also provided 1986­88 (figure 4.1). duty-free and quota-free access to its markets Decoupled payments are less distorting to UN-designated Least Developed Coun- than output-linked forms of support such tries for "Everything But Arms," although it as tariff protection, but they can still influ- excluded services and delayed opening sensi- ence production. They can reduce farmers' tive markets for bananas, rice, and sugar. aversion to risk (wealth effect) and reduce 98 WORLD DEVELOPMENT REPORT 2008 the variability in farm income (insurance Agricultural taxation effect). Banks often make loans to farmers in developing countries that they would not make to other borrow- ers, keeping farmers in agriculture.4 Policies in developing countries have also blunted the incentives for agricultural pro- Most programs of decoupled payments ducers. Macroeconomic policies historically have no time limit, as in the EU and Tur- taxed agriculture more than agricultural key. The United States had a program with policies did, but both were important in a time limit in the 1996 Farm Bill, but it poorer countries. The indirect tax on agri- was not enforced. Mexico's decoupled pro- culture, through overvalued currencies gram initially had a time limit; the program and industrial protection, was nearly three was supposed to expire when the North times the direct tax on the sector at the time American Free Trade Agreement phase-in of the last World Development Report on is completed in 2008, but the government agriculture (1982). In a study that included has already announced that the program 16 of today's developing countries from the will be retained in some form. Unless 1960s to mid-1980s, average direct taxation these programs have time limits with cred- was estimated at 12 percent of agricultural ible government commitments to stick to producer prices and indirect taxes at 24 them, decoupled payments risk becoming percent. High taxation of agriculture was more distorting and costly than commonly associated with low growth in agricul- assumed. In addition, continuing output- ture--and slower growth in the economy.5 linked programs along side decoupled sup- The poorest developing countries taxed port can significantly dampen the less-dis- agriculture the most, and reinvestments of torting effects of decoupled programs. tax revenues in agriculture were low and Progress on decoupling has varied sig- inefficient (chapter 1). nificantly by commodity, with most prog- With reforms in the 1980s and 1990s to ress on grains--although recent initiatives restore macroeconomic balance, improve to expand the use of biofuels in OECD resource allocation, and regain growth in countries may indirectly reverse some of many of the poorest countries, both direct this progress. Needed now is a rapid shift and indirect taxes were reduced. The reform to less-distorting decoupled support for of overvalued currencies, which taxed agri- export products important to developing cultural exports (usually exported at the countries, particularly cotton. There have official rate) and subsidized food imports, been some recent changes to rice, sugar, is reflected in the huge reduction in the and cotton policies in Japan, the EU, and parallel market premiums for foreign cur- the United States, respectively, all at an rency in developing countries. For 59 devel- early stage of implementation. oping countries, the trade-weighted average premium fell from more than 140 percent Political economy factors matter in the 1960s to approximately 80 percent in for further reform the 1970s and 1980s and to just 9 percent in Political economy factors in each coun- the early 1990s, with wide variation across try have determined the pace and extent countries.6 of reforms. U.S. cotton policies, EU sugar policies, and Japan rice policies indicate Agriculture-based countries are that the impact of the World Trade Orga- taxing agriculture less nization (WTO) in inducing reform is real Reforms in agriculture-based countries, and that media pressure can complement particularly in Sub-Saharan Africa, more it (box 4.2). The cases show that reforms than halved the average net taxation of are not easy and often require bargained agriculture from 28 percent to 10 percent compromises and compensation schemes between 1980­84 and 2000­04 (simple for the losers to get agreement on further average across countries included in figure reducing high levels of agricultural protec- 4.2). The approach used to measure the tion (as in the Japanese rice policy reforms change in net taxation in developing coun- and the EU sugar policy reforms). tries is through calculation of a nominal Reforming trade, price, and subsidy policies 99 B O X 4 . 2 The political economy of agricultural reforms in developed countries Agricultural subsidies and tariffs on rice and get agreement to a reform program while not EU structural and rural development funds. sugar, aggregated across all countries, are undermining, but perhaps slowing, the even- Africa, Caribbean, and Pacific countries that estimated to account for 20 percent and 18 tual shift to larger-scale production. Larger- received higher-than-world-market prices for percent, respectively, of the global cost of all scale farmers are already exiting the Japan their quota of sugar produced for sale in the agricultural trade policies--the highest of all Agricultural Cooperatives marketing system, EU market were eligible for an assistance plan commodities. Although the equivalent global exits expected to accelerate under the direct- worth 40 million for 2006. cost of cotton subsidies and tariffs is much payments program, reducing the political smaller, the absolute cost to developing coun- power of Japan Agricultural Cooperatives and U.S. cotton policy reform: tries is large, an estimated $283 million a year. its resistance to reform. WTO and local media pressure For Sub-Saharan Africa, the developed-country to offset industry lobby power cotton subsidies and tariffs account for about EU sugar policy reform: compensation The United States accounts for 40 percent 20 percent of the total cost of trade policies on and restructuring to complement reform of world cotton exports and 20 percent of all merchandise goods. EU domestic sugar prices--supported by high world cotton production. Subsidies have import tariffs--are three times higher than been equivalent in value to about two-thirds Japanese rice policy reform: bargained world market levels, increasing incentives to of the market value of production over the compromise to agree on decoupled produce sugar in the EU and depressing the 2000­05 period. The additional U.S. produc- support world market price of sugar at the expense of tion prompted by these subsidies is estimated Japan protects rice producers, a traditional many developing-country exporters. However, to reduce the world cotton price by 10 to 15 source of political support, through a 778 some African, Caribbean, and Pacific countries percent, at significant cost to developing percent ad valorem tariff equivalent on rice benefit from these higher prices under the countries. imports. In 2007 Japan introduced a less- Everything But Arms trade agreements. U.S. cotton policy is heavily influenced by distorting direct payment to farmers linked The European Union agreed to reform its a strong interest group, the Cotton Council of to farm size, not production. The payment is sugar regime in February 2006; reforms began America (representing the 24,721 cotton grow- expected to be bargained against a decline in July 2006 and extend for four years. If fully ers, according to the census in 2002, as well in tariff levels for rice--making payments to implemented, the reforms would radically as ginners, exporters, bankers, and suppliers). farms larger than a certain size to target "prin- change the sugar regime, in place for almost The council is one of the most powerful U.S. cipal" rather than "part-time" farmers. The new 40 years. For years, the policy had encountered commodity lobbies, winning disproportion- scheme is viewed as a less-distorting alterna- discontent from the food processing industry, ately higher support relative to other sectors, tive to border protection and as a mechanism paying three times the world price for sugar. particularly since the enactment of the 1996 to induce larger-scale production. But two main factors led to the initiation of Farm Bill (an average equivalent of $120,000 a Why did politicians agree to the proposed reforms. First, the EU's sugar export subsidy year per farmer). scheme despite the apparent risk of undermin- system was ruled noncompliant with agreed Four West African cotton-producing ing their political support from rural areas? commitments under the WTO. Second, the EU's countries (Benin, Burkina Faso, Chad, and Three factors. One is the ever-strengthening Everything But Arms initiative was introduced Mali) submitted a joint proposal to the WTO in voices from nonfarm sections of the economy. in 2001 to open the EU sugar market to duty- May 2003, demanding removal of support to A second is media pressure: fearing Japan's free and quota-free imports from the world's 50 the cotton sector by the United States, China, increasing isolation in the global economic Least Developed Countries from 2009 onward. and the EU and compensation for damages community for its rice policies. Third is the This was expected to lead to a surge in imports until full removal of support. Brazil initiated a view that agriculture should be part of the and the destabilization of the EU sugar regime comprehensive case against the United States broader economic reforms. unless the sugar price was reduced. Adding to for noncompliance with its WTO obligation The system of protection of agriculture has these determinant factors was the campaign on cotton subsidies. In March 2005, the WTO been kept in place by a strong pro-agricultural of an international nongovernmental organiza- Dispute Settlement Body instructed the United coalition of the Ministry of Agriculture, Forestry, tion coalition that emphasized the negative States to bring the offending cotton subsidy and Fisheries; the ruling Liberal Democratic effects of the EU sugar policy for developing measures into compliance with its WTO obliga- Party; and the Japan Agricultural Cooperatives, countries. The reform became imperative. tions. The United States made adjustments in which implements the farm subsidies pro- While the political equilibrium turned response to the WTO decision, but in Decem- grams. But the Ministry of Agriculture, Forestry, against the sugar producers, measures were ber 2006 Brazil formally expressed its dissatis- and Fisheries has gradually shifted to more put in place to address the expected loss of faction with the extent of U.S. policy changes market-oriented policies. The Liberal Demo- revenues that the reform will induce and to and asked the WTO panel to find the United cratic Party has shifted its balance of interest counter the producers' opposition. Compensa- States "out of compliance" with the original rul- toward urban areas because of growing sup- tion and a restructuring fund (financed partly ing. The compliance phase of the case is now port from cities in recent elections, an indica- by producers) to encourage uncompetitive proceeding. While the reduction in U.S. cotton tion that nonagricultural groups are gaining producers to leave the industry were agreed to subsidies was a response to the legal case at political capital in this policy arena. in February 2006. EU farmers are expected to the WTO, the U.S. media and reform-minded While reform seems inevitable, opposi- receive compensation for an average of 62 per- groups also pressured the U.S. Congress to tion by Japan Agricultural Cooperatives cent of the price cut phased over four years. reduce support. led to a compromise in the coverage of the The four-year restructuring fund has three direct-payment scheme, expanded to include main objectives: to encourage less-competi- Sources: Anderson, Martin, and van der direct payments to small part-time farmers if tive producers to leave the industry, to cope Mensbrugghe 2006a; Anderson and Valenzuela they organized into a collective farming unit. with the social and environmental impacts of forthcoming; Masayoshi Honma, Yujiro Hayami, Although viewed as weakening the efforts factory closures, and to help the most affected Dan Sumner, Don Mitchell, and John Baffes, all at structural change, it seemed necessary to regions develop new businesses in line with personal communication 2007. 100 WORLD DEVELOPMENT REPORT 2008 rate of assistance to farmers (box 4.3). Nine Figure 4.2 For agriculture-based countries, net of 11 countries in a recent study had lower agricultural taxation fell in 9 of 11 countries net taxation in the second period (figure Kenya 4.2). Only Nigeria and Zambia had higher net taxation between the two periods, with Uganda the highest net taxation in 2000­04 in Côte Madagascar d'Ivoire (about a ­40 percent nominal rate Cameroon of assistance). Despite macroeconomic adjustment, Sudan real domestic prices for agricultural Ghana exports across these countries did not Nigeria change much on average over the 1980s as Ethiopia the macroeconomic improvements barely offset the declines in world commodity Tanzania prices. The situation changed during the Zambia 1990s--more favorable world commodity Côte d'Ivoire prices, continued macroeconomic reforms, and agricultural sector reforms led to larger ­80 ­60 ­40 ­20 0 20 40 increases in real domestic prices of agricul- Nominal rate of assistance, % tural exports.7 The stronger price incen- 1980­84 2000­04 tives explain part of the higher agricultural growth in many of the agriculture-based Source: Anderson (Forthcoming). countries since the mid-1990s (chapter 1). The aggregate nominal rates of assistance decline in taxation is the result of improved mask significant differences in taxation and macroeconomic policies. protection between agricultural imports For the agriculture-based countries, and exports and among products. An aver- tobacco, groundnuts, and cocoa were still age nominal rate of assistance close to zero heavily taxed over 2000­04. The net taxa- at the country level simply indicates no net tion of coffee declined from 53 percent to taxation, but it could be the result of large 7 percent, and for cotton it declined from import tariffs offsetting large export taxes. 32 percent to 15 percent over the two peri- On average between 1980­84 and 2000­04, ods. Sugar shifted from being heavily taxed agriculture-based countries lowered pro- (nominal rate of assistance of ­36 percent tection of agricultural importables, from a in 1980­84) to being heavily protected (76 14 percent tariff equivalent to 10 percent, percent in 2000­04) (table 4.1). and there has been a significant reduction in taxation of exportables, from 46 per- Transforming and urbanized cent to 19 percent (figure 4.3). Most of the countries are protecting agriculture more Net taxation in transforming countries B O X 4 . 3 Nominal rates of assistance declined on average from 15 percent to 4 per- cent, but with significant variations across The nominal rate of assistance to farmers input subsidies and differences between countries (simple average across countries is defined as the price of their product the international prices of inputs and the included in figure 4.4). Some countries in the domestic market (plus any direct prices that farmers pay for these inputs. output subsidy) less its price at the border, If a country distorts its market for foreign shifted to protect the sector more (Indone- expressed as a percentage of the border currency, efforts are made to account for sia, India, Malaysia, and Thailand), while price (adjusting for transport costs, quality the difference between the exchange rate others continued to tax it, although at lower differences, and so forth.). The nominal used by the importers (assumed to be the levels than in the 1980s (as in Egypt and rate measures differences in output prices, parallel exchange rate) and the exporters but there may also be distortions on the (a weighted average of the parallel and Senegal) (figure 4.4). Zimbabwe is the only input side. To capture those distortions in official exchange rates) and an estimated country of this group that had a higher net countries where they are important, the equilibrium exchange rate. tax on the sector, mainly because of a highly nominal rate is adjusted (expressed as out- overvalued currency. There has also been a put price equivalent) to account for direct Source: Anderson (Forthcoming). significant shift in the relative rate of assis- Reforming trade, price, and subsidy policies 101 Figure 4.3 Developing countries are taxing exportables less Exportables Importables Nominal rate of assistance, % Nominal rate of assistance, % 30 30 1980­84 2000­04 1980­84 2000­04 26 23 20 20 14 13 10 11 10 10 2 0 0 ­10 ­10 ­13 ­14 ­20 ­19 ­20 ­30 ­29 ­30 ­40 ­40 ­46 ­50 ­50 Agriculture-based Transforming Urbanized Agriculture-based Transforming Urbanized Source: Anderson (Forthcoming). Note: The countries used for each category are shown in figures 4.2, 4.4, and 4.5, respectively. The aggregates are simple unweighted averages. Value-weighted averages show a similar pattern, although the NRA for exportables in transforming countries in 2000-04 was close to zero, given the dominance of China in the weights. Value-weighting also reduced the NRAs for importables in urbanized countries over the two periods. tance to agriculture versus nonagriculture in underestimate actual taxation as currency some countries, with a remaining challenge overvaluations were not included in the to keep sectoral biases low (box 4.4). estimates.8 (The official exchange rate was There are also differences across agri- used for both time periods.) Six of seven cultural imports and exports. On average countries analyzed (Argentina, Chile, between 1980­84 and 2000­04, transform- Colombia, the Dominican Republic, Ecua- ing countries slightly reduced protection of dor, and the Philippines) had higher pro- agricultural importables from a 13 percent tection or lower taxation in 2000­04 than tariff equivalent to 11 percent, and reduced in 1980­84 (figure 4.5). Rice and sugar are the taxation of exportables from 29 percent the most-highly-protected products in the to 13 percent (figure 4.3). urbanized countries (table 4.1). Between In urbanized countries, the average net 1980­84 and 2000­04, urbanized coun- taxation shifted from marginally negative tries slightly lowered their level of protec- in 1980­84 to a net protection rate of 9 tion of agricultural importables from an percent in 2000­04 (simple average across average tariff equivalent of 26 percent to 23 countries included in figure 4.5). The net percent, and shifted from a tax on export- taxation estimate for Latin American coun- ables of 14 percent to a subsidy equivalent tries, particularly in the earlier period, may of 2 percent (figure 4.3). Table 4.1 Nominal rates of assistance by commodity in developing countries (percent) Agriculture-based Transforming Urbanized Product 1980­84 2000­04 1980­84 2000­04 1980­84 2000­04 Sugar ­36 76 33 35 ­11 52 Rice ­4 5 ­12 4 ­4 44 Wheat ­12 ­3 ­4 8 8 ­8 Coffee ­53 ­7 -- -- ­38 4 Maize ­11 ­7 ­23 8 ­14 ­1 Cotton ­32 ­15 ­20 ­2 -- -- Cocoa ­51 ­36 -- -- -- -- Groundnuts ­19 ­38 9 9 -- -- Tobacco ­49 ­50 -- -- -- -- Source: Anderson (Forthcoming). Note: The nominal rate of assistance is weighted by the value of production across countries in each of the three country categories, and estimates are included only if data were available for three or more countries. -- = not available. 102 WORLD DEVELOPMENT REPORT 2008 Figure 4.4 For transforming countries, 9 of 10 Net protection has on average increased either increased protection or reduced taxation from 4 percent in 1992/93 to 31 percent in 2002/03 (simple average across countries).10 Indonesia There are large differences across countries. India For example, Estonia, Latvia, and Lithuania Thailand imposed about a 30 percent tax equivalent on the sector in 1992/93, while Slovenia Malaysia protected the sector. Between 1992/93 and China 2002/03, protection on agricultural imports Pakistan increased on average from a 13 percent to a Sri Lanka 38 percent tariff equivalent. Exports were taxed at 2 percent on average in 1992/93, Egypt but in 2002/03 they were protected with an Senegal average tariff equivalent of 24 percent. The Zimbabwe increase in protection is in part a result of EU accession by many of these countries ­80 ­60 ­40 ­20 0 20 40 over the period analyzed, resulting in a shift Nominal rate of assistance, % to the higher protection levels of the EU. 1980­84 2000­04 Still space for further efficiency gains Source: Anderson (Forthcoming). While there is less domestic price and trade policy exploitation of farmers in develop- Urbanized countries in Eastern and Cen- ing countries now than in the 1980s, it has tral Europe have on average increased agri- not disappeared. Net taxation of agricul- cultural protection.9 (Comparative statistics ture is low in all but a few countries. But are not included in the figures here because disaggregating net taxation by exportable the earliest data available are from 1992.) and import-competing products shows B O X 4 . 4 Significant progress in reducing the antiagricultural bias in China and India As developing countries become richer, they omies of Northeast Asia when they had similar ing upward in both countries. China bound its generally protect agriculture more. Both China per capita incomes, the trends are strikingly agricultural tariffs at relatively low levels when and India have reduced their antiagricultural similar. China has reduced its antiagricultural it joined the WTO in 2001. The challenge now is bias substantially over the past three decades, bias at a later stage of economic development to keep sectoral biases low and not follow the not only directly but also indirectly via cuts than India, but the assistance to agriculture rela- trend to heavily protect agriculture that other to manufacturing protection (figures below). tive to nonagriculture (measured by a relative countries followed when they were at similar When compared with the more-advanced econ- rate of assistance [RRA] index) has been trend- levels of development. India--assistance to tradables, 1965­2004 China--assistance to tradables, 1980­2005 Rate of assistance, % Rate of assistance, % 120 120 NRA--nonagriculture 80 80 NRA--nonagriculture 40 40 NRA--agriculture 0 0 NRA--agriculture ­40 ­40 Relative rate of assistance Relative rate of assistance ­80 ­80 1965­69 1970­74 1975­79 1980­84 1985­89 1990­94 1995­99 2000­04 1980­84 1985­89 1990­94 1995­99 2000­05 Source : Anderson (Forthcoming). Note : The relative rate of assistance to agriculture is 100*[(100 + NRAagt)/(100+NRAnonagt) ­ 1] , where NRAagt is the nominal rate of assistance to producers of tradable agricultural goods and NRAnonagt is the nominal rate of assistance to nonagricultural tradables (mainly mining and manufacturing). The index is bound from below at ­100 and is zero when the agricultural and nonagricultural tradables sectors have identical nominal rates of assistance. Reforming trade, price, and subsidy policies 103 Figure 4.5 For urbanized countries, 6 of 7 either The power of outside actors is real, as dem- increased protection or reduced taxation onstrated by the impact of WTO accession on protection in transforming and urban- Colombia ized countries and by the impact of foreign Philippines assistance on taxation in agriculture-based Ecuador countries. However, lasting change occurs only with a strong domestic constituency. Chile Strengthening local constituencies to build Dominican Republic coalitions for remaining policy reforms South Africa can help--particularly as political systems become more open and competitive. Argentina ­80 ­60 ­40 ­20 0 20 40 Simulated gains Nominal rate of assistance, % from trade liberalization 1980­84 2000­04 Agricultural policy reform in both devel- Source: Anderson (Forthcoming). oped and developing countries offer signifi- cant potential welfare gains, including from trade reforms. The magnitude of the costs that exports are still heavily taxed in many of current trade policies and correspond- countries, while some imports are heavily ing potential gains from further reforms protected. This suggests room for further have been quantified through simulations welfare gains. Further reforms should be of global computable general equilibrium designed in the context of a country's level models. These models are based on a sim- of development. Many developing coun- plified but consistent representation of tries where agriculture is a large share of production, income, and demand in each gross domestic product (GDP) will need to country or group of countries and of inter- continue to tax agriculture (although not national markets. While the models require disproportionately) to provide a surplus for strong assumptions, they remain a power- broader development programs (see transi- ful tool for analysis of global trade scenar- tional support section). ios (box 4.6). Political economy factors matter The costs to developing countries of for further reform current trade policies are substantial Agricultural reforms in many of these The global welfare costs of current trade countries, particularly the agriculture- policies fall on both developed and develop- based ones, came after the macroeconomic ing countries. Recent estimates show that reforms of the 1980s. They were heavily the global costs of trade tariffs and subsidies supported by external donors through pol- would reach about $100 billion to $300 bil- icy advice and conditional lending. Other lion a year by 2015.11 About two-thirds of important elements of the reforms, reflect- the costs are estimated to come from agri- ing the political economy in countries (box cultural tariffs and subsidies (the remainder 4.5), include leadership and exploiting win- from tariffs and subsidies in other sectors), dows of opportunity (as in Uganda), tying much higher than agriculture and processed the fortunes of local leaders to the success food's 6 percent share of global GDP and 9 of the local economy, building on local sup- percent share of international trade. While port, using WTO accession (as in China), these costs are a modest share of global GDP and bargained complementary policies to for developing countries, they are substantial support free trade (as in Mexico). relative to current aid flows for agricultural Reforms are not easy, because there will development. Developed-country agricul- be both gainers and losers. Reducing heavy tural policies cost developing countries about taxation and protectionist biases in devel- $17 billion per year--a cost equivalent to oping countries requires understanding about five times the current levels of overseas the political economy aspects of reform. development assistance to agriculture.12 104 WORLD DEVELOPMENT REPORT 2008 B O X 4 . 5 The political economy of agricultural reforms in developing countries Three examples, one from each country more than 300 million to fewer than 50 million. Nacional para el Campo (National Agreement category, illustrate the political economy of Why was China able to make these tough for the Countryside), greatly increasing public reform in developing countries. In Uganda decisions when leaders in many other nations resources funneled to rural areas. (agriculture-based) and China (transforming), falter? The 1990s reforms eliminated state trading net taxation of agriculture declined signifi- Much of the pressure for reform came from enterprises in agricultural products and sup- cantly between 1980­84 and 2000­04, while in the failed policies and poor performance of port prices. In exchange, they provided com- Mexico (urbanized) there was a shift to protec- agriculture. China's leaders were committed to mercial producers with brokerage services and tion over the same period. becoming a secure and independent country. market information for price-risk management, There was also an imperative to worry about and substituted support prices with compen- Uganda: leadership and a window equity and provide citizens with a minimum satory payments based on target incomes. The of opportunity standard of living. Central planning was not government complemented market support Uganda's agricultural reforms disbanded the proving effective. with decoupled, per-hectare payments to Coffee Marketing Board and the Lint Marketing The decentralization reforms in China producers of basic grains and oilseeds, under a Board monopolies in 1991 and the Produce tied the fortunes of local leaders significantly new program called PROCAMPO. The govern- Marketing Board in 1993--all had heavily taxed to the success of the local economy. Hence, ment strengthened land property rights in agriculture. Cross-district product movement policy initiatives that tied local revenues, local rural areas. Major grants and subsidized credit- restrictions were also removed. The reforms investment spending, and cadre salaries to based programs assisted the agricultural sec- significantly increased the share of the border the increases in agricultural output and the tor's transition toward greater efficiency and price received by farmers and contributed to transformation of the economy toward rural global competitiveness, through the Alianza the large 1990s decline in the percentage of industrialization had local support. That the Contigo (Alliance with You). In 2004 roughly people below the national poverty line. reforms were introduced in a gradual process 80 percent of the Ministry of Agriculture's The reforms followed a broader set of of local experimentation and learning reduced $3.7 billion budget was devoted to marketing macroeconomic reforms by the National Resis- the political risks associated with the reform. support, PROCAMPO, and Alianza Contigo, tance Movement government, which came to Moreover, the grassroots pressure built in the roughly a third of Mexico's public spending on power in 1986. The macroeconomic reforms process helped the reformers in the Chinese rural development. (by reducing the overvalued currency) had a government win the battle with conservative The reforms have not eliminated distor- greater impact on agricultural export prices reform critics. tions in the allocation of production factors. than the agricultural reforms, although both Market interventions under the new policy were significant. Following the armed struggle Mexico: delicate balance between regime, while greatly increasing the role of to power, popular legitimacy formed the complementary programs to facilitate the private sector, have perpetuated or even bedrock of the regime, enabling the president agricultural policy reform and exacerbated such distortions, hampering the to pursue difficult and potentially unpopular protection traps adjustment toward more efficient use of pri- reforms, including those in agriculture. Groups During the 1990s, following the North Ameri- vate and public resources. Although interven- with vested interests in the marketing boards can Free Trade Agreement, which established tions were initially established as temporary lost their political weight in the regime change. the (gradual) elimination of tariff and nontariff measures to ease adjustment to a market- barriers to agricultural imports by 2008, the based food sector, the economic interests China: tying the success of local leaders Mexican government implemented wide- created by these interventions and the export to the success of the local economy ranging agricultural market-oriented policy subsidies in developed countries have made it China launched a bold but gradual set of reforms. The reforms were designed in ways politically infeasible for Mexican policy makers reforms in 1978, first raising prices for agri- that avoided major political opposition from to justify an exit strategy. cultural commodities; then decollectivizing domestic agricultural producers with signifi- agricultural production, making the farm cant political power. household the residual claimant; and finally The power of farmer organizations in Sources: Avalos-Sartorio 2006; Huang, Rozelle, beginning to slowly but steadily dismantle Mexico was evident in 2002 with a horseback and Rosegrant 1999; Lin 1992; McMillan, Waley, and Zhu 1989; Opolot and Kuteesa 2006; Qian the state-run procurement and input supply incursion into Mexico's congressional build- and Weingast 1996; Robinson 2005; Rosenzweig systems. In response, the rural economy took ing as a way to influence policy. The mes- 2003; Rozelle 1996; Swinnen and Rozelle 2006; off. Agriculture boomed. Productivity nearly sage, reminiscent of the Mexican Revolution World Bank 2002a; Yang 1996; Yunez-Naude and doubled. The number of rural poor fell from of 1910, paid off with a negotiated Acuerdo Barceinas Paredes 2004; Zahinser 2004. Developing countries are estimated to Vietnam and 3.2 percent for Thailand. For share 30 percent of the welfare costs of cur- agricultural and nonagricultural liberal- rent trade policies, whether from agricul- ization alike, half of the costs to developing tural policies or from policies in the other countries are estimated to come from poli- sectors (table 4.2). These lower absolute cies in developed countries, the other half costs on developing countries translate from policies in developing countries as a into a higher percentage of income because group (table 4.2). of their smaller economies. As a group, the More than 90 percent of the global costs estimated cost by 2015 is 0.8 percent of real are estimated to come from market access GDP--but for some countries it is esti- restrictions through tariffs rather than mated to be much higher: 5.2 percent for from export subsidies or domestic support. Reforming trade, price, and subsidy policies 105 However, their relative importance varies significantly by product.13 For example, B O X 4 . 6 Simulating the effects of trade liberalization the reverse is true for cotton, where 89 per- with global models cent of the costs are expected to come from export subsidies and domestic support pro- The general equilibrium models used by flexibility in resource reallocation across grams and 11 percent from tariffs.14 different studies to analyze global trade sectors of production; and the character- scenarios are conceptually similar: disag- ization of the competitive market structure. Trade reforms offer significant scope gregating the world into a number of Particular attention is given to modeling to reduce the global costs of current poli- countries or groups of countries, modeling sources of price distortion, including bilat- in each case supply and demand for a large cies through raising international agricul- eral tariffs and subsidies and domestic number of commodities, deriving import subsidies to agriculture, but modeling the tural prices, which is expected to increase demand and export supply, and solving distortionary effects of specific measures developing-country agricultural trade for the world equilibrium prices that clear such as tariff-quotas, various forms of quan- shares and agricultural output growth the international market. The World Bank tity restrictions, and so-called decoupled LINKAGE model, for example, comprises support is extremely difficult at a global rates in the aggregate. However, not all 27 regions or countries, with a focus on level. There is little empirical evidence on developing countries will gain. isolating the largest commodity exporters which to base specification of investment and importers, and 25 sectors, of which 13 and productivity effects, and thus these Large price increases expected are agriculture or food. One of the great are largely ignored, (although they could for some commodities from trade strengths of general equilibrium models is presumably be important). The level of that they impose consistency: all exports disaggregation by income groups within reforms: a gain for exporters, a loss are imported by another country, total countries also tends to remain low, if at all. for importers employment never exceeds labor supply, As recognized by the authors, the many and all consumption is covered by produc- assumptions underlying these models can According to the 2006 World Bank study, tion or imports. However, they must rely on lead to large over- or underestimates of the full trade liberalization is estimated to strong assumptions--particularly on the impacts of merchandise trade reforms on increase international commodity prices on adjustments to changes in trade policies net real household income, although with as captured by key supply and demand much more consensus on the structural average by 5.5 percent for primary agricul- elasticities, for which empirical validation is impacts. Yet, there is no real alternative to tural products and 1.3 percent for processed often inadequate. Key features of the mod- using these models when analyzing reform foods.15 Developing countries are estimated els are the degree of tradability of com- with many indirect effects, and comparison to gain 9 percentage points in their share modities in each country, which determines of outcomes across models is important to the passthrough of international prices get a sense of their validity. of global agricultural exports--increasing to domestic prices; the supply response from 54 percent to 65 percent. to price changes, which depends on the Sources: Francois and Martin 2007; Hertel and But these aggregate results hide big dif- availability of resources in the country and others 2006; van der Mensbrugghe 2006. ferences across commodities and, there- fore, countries. The largest estimated price increases are for cotton and oilseeds (figure Table 4.2 Estimated cost distribution of current trade policies 4.6), with significant estimated trade share (percent of costs of current global trade policies in 2015 relative to a full trade liberalization scenario) gains to developing countries exporting Distribution of welfare costs these products (figure 4.7). Liberaliza- Developing Developed tion of cotton and oilseeds is estimated countries countries Total to induce a shift of world production to Source of welfare costs: the developing countries, with an even- Developing countries policies greater shift in export shares. Developing Agriculture and food 9.8 6.6 16.4 countries' share of exports is estimated to Other sectors 5.2 23.0 28.2 increase from 49 percent to 83 percent for Developed countries policies cotton, and from 55 percent to 82 percent Agriculture and food 9.1 38.0 47.0 Other sectors 5.9 2.4 8.4 for oilseeds. The direction of change in All countries trade policies (sum of the above) 30.0 70.0 100.0 international prices is unambiguous, but Real GDP cost 0.8 0.6 0.7 the magnitude of the price changes differs Source: Anderson, Martin, and van der Mensbrugghe 2006a. across studies. For example, a review of 11 Note: The full trade liberalization scenario is based on estimates of bilateral tariffs and domestic and export subsidies studies estimating the changes to interna- as of 2001. Bilateral trade preferences are included. tional cotton prices from full trade liberal- ization suggests an average price increase Oilseed production subsidies in the of 10 percent16 (lower than the 21 percent OECD and import tariffs in some develop- estimated in the 2006 World Bank study), ing countries are the main causes of the cur- and estimates of cereal price increases rent oilseed trade share loss to developing range from 4 to 8 percent.17 countries as a group. While OECD country 106 WORLD DEVELOPMENT REPORT 2008 Figure 4.6 Estimated real international commodity price increases following complete countries also provide significant direct trade liberalization assistance to cotton producers (for example, China) and apply import tariffs of up to 10 Cotton 20.8 percent (Argentina, Brazil, Egypt, India, Oilseeds 15.1 Dairy products 11.9 and Uzbekistan).19 Full trade liberalization Coarse grains 7.0 would increase international prices and pro- Wheat 5.0 duction in Sub-Saharan Africa. West African Processed meat 4.3 cotton exports are estimated to increase by Rice 4.2 60 percent.20 Removing U.S. cotton subsidies Fruit and vegetables 2.8 alone is estimated to increase the incomes of Other crops 2.6 West African cotton producers by 8 to 20 Sugar 2.5 percent.21 Production in OECD countries Livestock 2.5 is estimated to decline significantly in the Vegetable oil and fats 1.9 absence of current producer subsidies. % change in real price With international food prices expected Source: Anderson, Martin, and van der Mensbrugghe 2006a. to increase, there is particular concern for food-importing developing countries.22 Because many of the poorest countries Figure 4.7 The corresponding gain in the estimated trade shares of developing countries spend a large part of their incomes on cereal imports, they may incur an overall welfare Cotton 27 loss despite gains from price increases in Oilseeds 34 nonfood commodities such as cotton.23 Dairy products 7 Almost all of the agriculture-based Coarse grains 5 countries are net importers of cereals, with Wheat 21 a large share of their export earnings spent Processed meat 18 on cereal imports--more than 10 percent Rice 2 Fruit and vegetables 4 over the past 10 years in Benin, Burundi, Other crops ­3 Ethiopia, Mozambique, Niger, Rwanda, and Sugar 9 Sudan, and 20 percent in Burkina Faso. An Livestock 2 increase of cereal prices by about 5 percent Vegetable oil and fats 1 (the change expected from full liberaliza- Percentage point gain tion) would negatively affect these cereal importers. This expected long-term price Source: Anderson, Martin, and van der Mensbrugghe 2006a. change is small relative to short-term cereal- price movements, as experienced for maize tariffs on oilseeds are low, many countries with the more than 50 percent increase in provide support for domestic production international prices over the past two years. through farm subsidies. India and China, A cereal price increase may also accentu- the largest importers of oilseeds, impose ate the problems associated with fluctua- significant import tariffs. Full trade liber- tions in domestic production (food security alization is estimated to raise international focus). Yet, many of the same countries are oilseed prices and production in Latin net exporters of oilseeds and cotton. Sudan American and Sub-Saharan Africa, reduce earns on average 12 percent of its foreign oilseed production in OECD countries exchange from oilseeds exports and 7 per- (from subsidy removal), with little aggre- cent from cotton exports. Over the past 10 gate net impact in South and East Asia as years, cotton exports on average accounted price effects of lower import tariffs (mainly for 40 percent of total exports from Benin, in India and China) would be offset by 25 percent from Chad and Mali (although higher international prices.18 these shares have been decreasing), and OECD cotton production subsidies, pri- 30­60 percent from Burkina Faso. Trade marily in the United States, significantly reforms that increase the price of cotton reduce the share of cotton exports from and oilseeds simultaneously with that of developing countries. Several developing cereals appear to more than compensate Reforming trade, price, and subsidy policies 107 these countries for the foreign exchange Figure 4.8 Latin America and Sub-Saharan Africa are expected to have higher agricultural loss on cereal imports. There are, however, output growth under global trade reforms food-importing countries that produce Change in annual agricultural output growth, %a little or no cotton and oilseeds--such as 3 Burundi, Kenya, Niger, and Rwanda--and 2.0 they would remain vulnerable to cereal 2 price increases. Additional investments in domestic agriculture to raise the produc- 1 0.3 0.4 tivity of food staples may be needed for the 0.0 0.0 0 most vulnerable countries. ­0.2 ­0.1 ­1 Faster agricultural output ­1.7 growth in Latin America ­2 Developed Developing Sub- South Asia East Asia Middle East Europe Latin and Sub-Saharan Africa countries countries Saharan & Pacific & North & America & In the World Bank study, agricultural out- Africa Africa Central Caribbean Asia put growth in developing countries is esti- Source: Derived from Anderson, Martin, and van der Mensbrugghe 2006a. mated to increase from an annual rate of 3.9 a. Difference between estimated average annual agricultural growth to 2015 under full liberalization in 2005 and percent in the baseline scenario to 4.2 per- the baseline without liberalization. cent under the full liberalization scenario, an 8 percent increase in the growth rate or countries, but worsens for net importers of a 4.3 percent increase in agricultural output these commodities. Subsequent changes in over a 10-year period. Latin America and national welfare usually follow the direction Sub-Saharan Africa share the largest gains, of these terms of trade changes, but changes while developed countries, South Asia, and in poverty often do not follow this pat- Europe and Central Asia are estimated to tern. A fall in poverty can occur even with lose on average (figure 4.8). worsening terms of trade (as estimated for Most of the gains to developing coun- Bangladesh), and vice versa (as estimated tries are estimated to come from efficiency for Vietnam) (table 4.3). In contrast to the gains.24 Hence, complementary investment dominance of the terms-of-trade effects support will be needed to facilitate adjust- from developed-country reforms, the gains ment to realize these efficiency gains from from developing-country agricultural trade trade reforms. reforms are estimated to come mainly from efficiency gains from their own country Poverty declines in many countries, reforms. These gains are estimated to have but not in all positive poverty-reducing effects. However, Not everyone will gain from agricultural the magnitude of these effects varies across trade liberalization; there will be losers countries, depending on the size of the pre- across and within developing countries. vailing distortions. Tracing the overall welfare effects of trade The transmission of global trade reforms policy reform on poverty requires a compre- to poverty reduction involves many chan- hensive approach that links a broad general nels, and the specific effects are as varied equilibrium macroeconomic model with as the countries themselves. Some devel- detailed household survey data. A recent oping countries are estimated to benefit study of 15 developing countries takes this from large terms-of-trade improvements approach.25 following developed country reform, such Several broad regularities emerge from as Brazil (competitive in heavily protected the study. Removal of trade-distorting agri- agricultural products such as sugar, oil- cultural policies in developed countries seeds, and beef) and Thailand (an exporter has mixed terms-of-trade effects on devel- of rice) (table 4.3). The terms-of-trade oping countries. Term of trade improves improvements translate into higher levels of for developing countries exporting com- national welfare in Thailand than in Brazil modities currently protected in developed as the former is more trade dependent. The 108 WORLD DEVELOPMENT REPORT 2008 Table 4.3 Illustrative poverty effects from agricultural trade reform in developed and developing countries Brazil Thailand Vietnam Mexico Mozambique Bangladesh Developed countries liberalize Change in: Terms of trade (percent) 4.9 1.1 0.3 ­0.2 ­0.4 ­0.5 Welfare (percent) 0.7 0.8 0.2 ­0.2 ­0.6 ­0.2 Poverty (percent) ­1.8 ­6.6 0.2 0.3 0.1 ­0.1 Developing countries liberalize Change in: Terms of trade (percent) 0.6 0 ­0.4 ­0.3 0.6 ­0.4 Welfare (percent) 0.1 0.5 1.1 0.1 1.8 0.3 Poverty (percent) ­0.2 ­4.6 ­1.7 0.6 ­1.1 ­0.2 Both developed and developing countries liberalize Change in: Poverty at $1 a day (percent) ­1.9 ­11.2 ­1.5 0.9 ­1.0 ­0.3 Poverty at $1 a day (thousands of people) ­445 ­133 ­23 86 ­62 ­128 Source: Hertel and others 2007. Note: Six of the 15 countries are presented in the table above, selected to illustrate the different transmission magnitudes from terms of trade, to welfare, to poverty reduction across countries. Of the 15 countries studied, 2 were estimated to experience an increase in poverty from agricultural trade liberalization in both developed and developing countries. terms of trade are estimated to worsen for import tariffs lowers the price of food for countries such as Bangladesh (an importer poor consumers and lowers the income of of cotton, wheat, and oilseed) and Mozam- surplus food producers. For example, in bique (an importer of wheat and rice and Mexico poverty in rural households is esti- an exporter of seafood, the international mated to rise from domestic tariff cuts. By price of which is expected to decline with contrast, in Vietnam both real agricultural global trade reforms). incomes and real wages are estimated to The poverty effect of terms-of-trade rise following reforms, generating broad- changes from developed-country agricul- based poverty reductions. ture reforms depend on where the poor Overall, when developed and develop- are, what they do for a living, and what ing country agricultural trade reforms are they consume. For example, smaller terms- combined, the extent of poverty reduction of-trade changes for Thailand are estimated tends to be enhanced--and the proportion to lead to larger poverty impacts relative to of the population experiencing a poverty Brazil. The reason: one-third of the extreme rise diminishes. poor (below $1 per day) in Brazil mostly live off transfers and lose from food price Gainers and losers among the poor increases, which dampen the employment within countries and income gains of the other two-thirds A particular concern with trade policies for of the extreme poor, mainly unskilled agri- staple foods is their potential welfare impact cultural workers and self-employed. In on the poor. While most poor are net buyers contrast, the extreme poor in Thailand are of food, others are net sellers. Any change predominantly rural households with diver- in price will therefore produce gainers and sified income sources and are estimated to losers among the poor. Considering only the gain from price increases. In Bangladesh, average poverty effect (as presented in table the estimated terms-of-trade loss translates 4.3) may hide important consequences of into lower poverty levels as the poor are policy reform on poverty across households heavily reliant on unskilled wage income (box 4.7). The distribution of gainers and and benefit from lower food prices. losers is country specific. Developing-country agricultural trade In assessing the impact of food import reforms are estimated to have a much prices on household welfare, the degree of smaller impact on their own terms of trade transmission of international prices to rural than developed-country policy changes households also matters. The degree of (table 4.3). Removing developing-country transmission varies significantly by coun- Reforming trade, price, and subsidy policies 109 B O X 4 . 7 Net buyers and net sellers of food staples within a country The vulnerability of poor people to food price households, and they spend 27 percent of their net sellers of food staples. As rice sales (and increases varies across countries (table below). total budget on purchasing rice. Poor Bangla- maize in Madagascar) represent a large share In Bolivia and Ethiopia, the diet includes staples deshis are the most vulnerable to increases in of household income in these countries--up such as potatoes, sorghum, and teff that are rice prices. Only 8 percent of the poor are net to 70 percent in Madagascar--net sellers are not traded by these countries on international sellers of food, so the aggregate welfare effect sensitive to any changes in rice prices. Aggre- markets. As a result, poor people are less vul- of a change in rice prices is dominated by its gate income gains to sellers from an increase nerable to variation in prices of imported cere- effect on net buyers. Zambia has few land- in rice prices overwhelm the loss to buyers. als. In the five other countries in the table, trad- less poor people but many smallholders who Similarly, in Morocco 35 percent of poor rural able products (rice, wheat, maize, and beans) are net buyers, and they are affected by price households are net sellers and lose more in the represent between 40 percent and 64 percent changes of imported maize and wheat. aggregate than net buyers from cereal price of food expenditures. In Bangladesh, more In contrast, Cambodia, Madagascar, and declines.26 than 50 percent of the poor are in rural landless Vietnam have many smallholders who are A majority of the rural poor are not net sellers of tradable food staples. Bolivia Ethiopia Bangladesh Zambia Cambodia Madagascar Vietnam 2002 2000 2001 1998 1999 2001 1998 Share of internationally traded staples 25.5 24.1 41.2 40.4 56.3 62.7 64.4 in food consumption of the poor (%) Distribution of poor (%) Urban (buyers) 50.9 22.3 14.9 30.0 8.4 17.9 6.1 Rural landless (buyers) 7.2 -- 53.3 7.4 11.5 14.8 5.8 Smallholders net buyers 29.1 30.1 18.8 28.8 25.8 18.9 35.1 Smallholders self-sufficient 7.1 39.5 4.6 20.8 18.0 27.3 19.4 Smallholders net sellers 5.6 8.0 8.4 13.0 36.3 21.1 33.6 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Share of net purchase/sale of staples by specific groups of the poor (% of the total expenditures of the specific groups) Purchase per net urban buyer 12.0 9.4 22.7 11.5 5.9 4.8 13.1 Purchase per net rural buyer 12.9 28.4 27.3 18.9 20.8 10.7 19.9 Sales per net seller 37.6 35.1 39.7 21.0 39.0 70.3 37.4 Share of net purchase/sale of staple aggregated across all the poor (% of the total expenditure of all poor) Purchase by all poor net buyers 11.3 10.2 22.0 10.3 8.1 3.6 8.8 Sales by all poor net sellers 1.4 2.8 4.0 2.3 14.4 18.4 12.5 Source : Authors' calculations, based on data provided by Ataman Aksoy and Aylin Isik-Dikmelik, personal communication. Note : Data are only for those people below the national poverty lines. Tradable staples included are rice, wheat, maize, and beans. Excluded staples are cassava, potatoes, plantains, sorghum, and teff. -- = not available. try, affected by transaction costs and trad- through the employment and wage effects ability within the country. For example, a induced by the price changes.29 In many recent study of eight developing countries countries, such as Mali and Burkina Faso, a indicates low price transmission to farmers large number of smallholders produce both in Colombia, Egypt, Ghana, Indonesia, and food and export commodities and may Madagascar. However, in Argentina, Chile, benefit from trade liberalization, which and Mexico about 60 percent of domestic would result in a rise in cereal and cotton price variability can be explained by world prices. The ability of farmers to respond to price changes.27 Price changes at the house- new market opportunities depends on such hold level determine the magnitude of wel- nonprice factors as market infrastructure, fare impacts.28 institutions, and services. Broad-ranging Beyond the first-order food price effects, trade reform in Vietnam in the early 1990s trade liberalization affects the poor through induced a large supply response and welfare the creation and loss of markets and gain among poor farmers.30 110 WORLD DEVELOPMENT REPORT 2008 Rising or falling prices of staples and ing countries. Tariff reduction is expected other agricultural products can also induce to have a greater impact on global welfare changes in employment and wages. The and poverty reduction than the removal of direction and magnitude of these effects subsidies in developed countries, although are case specific and depend on labor mar- both are important.36 There are excep- ket conditions. In countries with a large tions (for example, cotton) where reducing share of a landless rural population work- export subsidies are expected to have large ing in agriculture for wages, as in South impacts and where important gains from Asia, labor market impacts can be signifi- the Doha round can be made.37 cant. A study of Bangladesh concluded that The suspension of the Doha Round of the average landless poor household loses trade negotiations between July 2006 and from an increase in rice prices in the short January 2007, and the fitful progress follow- run, but gains in the long run as wages rise ing the resumption of talks, raise important over time.31 An opposite result is obtained questions about the prospects for further in Mexico, where the reforms of the 1990s reforms through multilateral agreements. induced a decline in unskilled wages and There are several possible scenarios. agricultural profits that offset the gain from lower prices of consumption goods.32 A Doha Round agreement--content Decompositions of incomes in Vietnam, matters. The best outcome would be an Bangladesh, and Uganda reveal that labor agreement on further reforms, particu- market effects are indeed important chan- larly on agricultural products important to nels for trade reforms to affect welfare.33 the poorest countries, such as cotton. The impact would depend on the following: Scope for achieving · The extent to which applied or actual potential gains tariffs are below their upper-bound rates Advancing global trade liberalization is not agreed upon at the WTO. Current applied easy, as demonstrated by the Uruguay and rates are generally below bound rates, Doha Rounds of trade negotiations. Vested requiring larger cuts in bound rates if interests strongly defend many current applied rates are to be cut. Average bound policies and are reluctant to change. Most tariffs are almost double applied rates in past policy reforms have come from unilat- developed countries, and over two and eral reform efforts, which will continue to a half times applied rates in developing be important in the future, but multilateral countries.38 and regional agreements remain important · The level of developed-country subsidy instruments to remove distortions in inter- reduction for key export crops, such as national and regional markets.34 cotton. As domestic support programs account for 89 percent of the global Multilateral agreements: welfare costs of cotton trade policies, the Doha Round reducing these subsidies could be an The Doha Development Round of trade important gain to developing countries, negotiations provides an opportunity to particularly the cotton-producing coun- realize at least part of the potential gains of tries in Sub-Saharan Africa. Again, the full trade liberalization. While the poten- limits agreed at WTO greatly exceed tial gains from full trade liberalization as current support levels. a share of GDP are larger for developing · The treatment of "sensitive products," countries than for developed countries which if not tightly constrained can (table 4.2), the estimated impacts of a undercut reform impacts. Developed potential Doha agreement suggest the gains countries are seeking smaller tariff and are smaller for developing countries.35 Part subsidy reductions for self-selected sen- of the reason: Doha places heavier empha- sitive products than implied by a general sis on eliminating export subsidies and on formula approach. Estimates show that if cutting domestic subsidies than on reduc- only 1 percent of all tariff lines in the EU ing tariffs in both developed and develop- were exempt, the expected overall aver- Reforming trade, price, and subsidy policies 111 age tariff reduction estimated under the need to use bilateral and regional agree- Doha Round, with no exemptions, could ments to advance reforms. More bilateral halve.39 The United States proposal is to and regional trade agreements on agricul- limit sensitive products to 1 percent of ture would be a less-efficient and more- all tariff lines, while the EU proposal is costly outcome than further global reform, 8 percent. perhaps delaying and complicating it. But · The treatment of "special products." regional agreements can often be useful for Developing countries are seeking small addressing issues not on the multilateral or no tariff cuts on special products-- agenda (see below). deemed important for food security, The worst outcome of a Doha Round livelihood security, and rural devel- failure would be a spiraling back to global opment. The potential impact of any protection, including in developing coun- exemptions will likely be country spe- tries, reversing past efficiency gains and cific. Net buyers of food, especially the impacts on poverty reduction. OECD sub- very poor, will likely be hurt by tariffs on sidies are already inducing some developing food staples that raise prices above what countries to call for higher protection rates they would be without tariffs (box 4.7). on a range of agricultural products (as at Net sellers would benefit. Some devel- the 2006 Food Security Summit for Sub- oping countries exporting products that Saharan Africa). may be deemed "special" by other coun- Regional trade agreements tries are concerned about the potential restrictions on developing-country mar- As trade among developing countries is ket access for these products. These fac- a growing share of their overall trade, tors need to be considered in any agree- improving developing-country access to ments on special products. (See also the developing-country markets can have a section on transitional support.) significant effects. Regional agreements can address · Special and differential treatment for regional collective action issues that are not developing countries. Developing coun- on the agenda in multilateral trade discus- tries are required to make smaller cuts sions. For example, regional agreements in protection than developed countries can reduce political tension and take advan- under the current development round tage of economies of scale in infrastructure of trade negotiations (under special and provision. Greater regional integration and differential treatment agreements). While opening regional markets can be important developed-country agricultural trade in regions with many small countries (Sub- reform will likely have a larger poverty Saharan Africa, for example).41 impact on many countries than devel- More than a third of global trade is oping-country reforms, the latter can between countries that have some form potentially reduce poverty more consis- of reciprocal regional trade agreement.42 tently across a large number of develop- ing countries--both are important.40 These agreements have usually been eas- ier to reach than multilateral agreements, Following the above, a Doha agreement with fewer participants involved, and they would capture some of the benefits of full usually extend beyond tariff reductions to liberalization if that agreement lowers tariff reduce impediments associated with border bindings significantly below actual levels, crossings, regulations, and standards. Not reduces developed-country subsidies where all such agreements create new trade and they matter most for developing countries investment--some instead divert them. (such as for cotton), limits sensitive-product (For example, countries with high exter- tariff lines, and reflects the net-buyer status nal border protection may actually reduce of the poor in special-product agreements. members' trade overall, even through trade within the group increases.) Scenarios in the absence of an agreement. African countries have four regional In the absence of a Doha Round trade trade agreements on average, and Latin agreement, developing countries would American countries have seven, adding to 112 WORLD DEVELOPMENT REPORT 2008 the complexity of trade. A recent World increase over the last two years. Moreover, Bank review of regional agreements con- because of infrastructure and transport cluded that agreements most likely to costs, the transmission of world food staple increase national incomes are those with prices to domestic producers is very imper- low external "most-favored nation" tariffs, fect, especially in agriculture-based coun- few sectoral and product exemptions, non- tries.44 In fact, most food staples in most restrictive rule-of-origin tests, measures to agriculture-based countries are not traded facilitate trade, rules governing investment internationally, but only locally and in the and intellectual property that are appro- region (see focus C). So the overall effect of priate to the development context, and trade distortions on farm incomes of food implementation schedules put into effect staple producers in the poorer developing on time.43 Implementation has proven dif- countries is likely to be small. ficult in many countries: volumes of formal In the case of a tradable food staple with documents legalize free movement of goods high price transmission, a case for protec- and people across borders, but implemen- tion could be made for modest, short-term tation remains weak. Efforts are needed to protection where there is a high likelihood ensure policy harmonization, reduce non- of reduced protection in world markets in tariff barriers, reduce border formalities the short to medium term that would cause and corruption, address problems of cur- world prices to rise, and where the domes- rency transfers, and capitalize on econo- tic industry would be clearly competitive mies of scale in infrastructure. with undistorted prices. But even in these cases, protection would be modest (that is, of a magnitude close to the expected rise Transitional support in world prices, which for cereal products Transitional support may be needed to facil- is about 5­10 percent). The political dif- itate further reforms and sector adjustment. ficulties of adjusting policy once the trade Important issues are the role of transitional distortion is removed must be considered. protection, the ability to shift to alternative Consequently, credible exit strategies should forms of revenue, and the needed public be specified if protection is introduced. spending to support transitions. Food security. Aside from arguments Arguments for and against about distorted world prices, the case is protection of food staples in sometimes made for protecting domestic developing countries food staple industries in the name of food OECD policies. There have been recent security. This should be considered with calls by some developing countries for caution. First, consumers bear the cost of interim import protection in response to protection, particularly poor consumers current OECD trade policies. The argu- who spend a high share of income on food ments are that OECD protection reduces staples, and many rural poor are net food international prices below the long-term buyers in many countries (see box 4.7). trend, which harms the competitiveness of Second, poverty and insufficient purchas- import-competing food sectors and leads ing power rather than lack of food supply is to the decapitalization of agriculture and usually the main cause of food insecurity, to rural-urban migration. Therefore, it is although there are important exceptions in argued, import protection is justified to the agriculture-based countries (focus C). maintain the domestic industry. For example, in 2004 Indonesia enacted But there are several counterarguments. a temporary import ban on rice--which The average distortion in world prices from has now become permanent--to increase trade policies is about 5 percent for food domestic production. Two-thirds of the staples, as discussed elsewhere in this chap- poor are net consumers of rice and are ter. This long-term effect is small relative hurt by the rice price increases induced by to recent price changes, as reflected by the the ban. The impacts of the ban have been more than 50-percent world maize price identified as the main cause of the increase Reforming trade, price, and subsidy policies 113 in poverty headcount from 16 percent in as alternative policies such as increasing 2005 to 18 percent in 2006.45 access to assets and productivity-enhanc- If an industry is already protected, rapid ing investments in research, education, liberalization for a sector that is a large and extension, and rural infrastructure. But tradable part of the economy can generate in recognition of the political sensitivity significant unemployment and hardship of these markets and country specificity of in the short term, especially for the poor, trade policy impacts, providing flexibility who lack the assets or knowledge to take within trade rules makes sense if it is done advantage of new opportunities.46 In this in a way that encourages the shift to market case, it is imperative to include transitional liberalization. support for vulnerable groups to ensure that they benefit from growth, and to sus- Transitioning to alternative forms tain political support for trade reform (see of taxation below). For those with productive assets, Further reducing the protection of imports this transitional support should be pro- and the taxation of agricultural commodity vided not only for income support (as in exports can pose a fiscal dilemma for many PROCAMPO in Mexico), but also to facili- agriculture-based countries that depend tate transition to competitive activities. on these revenues for public investment. In Sub-Saharan Africa, trade taxes account for Safeguard policies. Governments that about a quarter of all government revenues; require a safety net to increase their com- in the developing countries of Asia and the fort level when they liberalize markets and Pacific, they account for about 15 percent.48 reduce applied tariffs, may consider price Agriculture remains the dominant sector bands to reduce exposure to world price in most agriculture-based countries and variability, if such safeguard policies are so will have to continue to contribute to allowed in the new round of WTO nego- national and local government revenues-- tiations. Price floors implemented through consistent with their current level of eco- a temporary increase in the import levy nomic development. Four key principles may help to prevent extreme hardship to to guide agricultural taxation, highlighted producers in years when world prices are in a previous analysis of Africa, remain extremely low. Similarly, temporary reduc- valid:49 they should be nondiscriminatory, tions in tariffs could be implemented when minimize efficiency losses, and consider the world prices are very high. (It must be rec- effectiveness of fiscal capture and capacity ognized, however, that the ability of this to implement. mechanism to significantly reduce upward Agriculture should not be taxed at a price volatility is limited, unless there is higher rate than other sectors, and agricul- significant initial tariff protection, which is tural taxes should be integrated with general not likely to be either efficient or equitable.) value added, profit, and income taxes. Out- To minimize the economic costs of any such put and input taxes should be minimized. variable levy schemes, and to ensure that Land taxes can minimize efficiency losses they do not become permanent increases and induce production, although these do in protection, it is important to have clearly not generally exist in agriculture-based defined rules for safeguard interventions countries. Output taxes can be replaced by that cannot be captured by vested inter- consumption taxes (sales or value added ests, and that temporary tariff increases are taxes) in countries with the administrative infrequent and of short duration.47 To date, capacity to implement them.50 Capacity to there are few, if any, successful examples of implement new systems will have to be built using such safeguards and some examples over many years. In the interim, it may be in which they clearly did not work well. necessary to rely partly on commodity and In sum, trade policy on food staples input taxes for revenue. must recognize that protection of domes- Recent evidence shows a mixed picture tic production is often not pro-poor. Nor in shifting to alternative sources of revenue is protection as efficient in helping farmers but provides some lessons on how to deal 114 WORLD DEVELOPMENT REPORT 2008 with trade revenue losses. Developed coun- needed adjustments, the government tries have recovered all revenue lost from may have to make cash payments and previous trade reforms. Middle-income provide social safety nets, as in Mexico countries have recovered 45­60 cents of through the PROCAMPO program (see each dollar of lost revenue. Low-income box 4.5).53 However, cash transfers to countries have recovered only 30 cents compensate for losses are insufficient to of each dollar of lost revenue. Experience induce supply response. Targeted invest- across low-income countries varies widely. ments, such as infrastructure investments Malawi, Uganda, and Senegal have man- and extension services, are needed to aged to recover most revenue losses. What improve productivity or education and to makes this possible? Efforts to broaden tax facilitate transition (see next section).54 bases by reducing exemptions, simplify- The challenge is to ensure an adequate ing rate structures, and improving revenue balance among the complementary income administration can help, as can excise and support for transitions and core public pro- broad-based value added taxes on con- sumption.51 By contrast, value added sys- grams to spur long-term agricultural growth and poverty reduction. The risks of falling tems with multiple rates and exemptions into protection and subsidy traps induced and weak administrative capacity have led by a dominant focus on transitional sup- to low recovery. Trade reform may need to port at the expense of long-term growth are be sequenced with complementary domes- high. Governance problems that may limit tic tax reforms and significant improve- the capacity to implement these programs ments in the quality of agricultural public must also be addressed (chapter 11). spending. Public investment Policies and public spending to support transitions for long-term development Too often trade liberalization is discussed The magnitude of smallholder supply without considering the important role of response to trade and price policy reforms complementary policies and programs to depends on, among other factors, rural facilitate transitions and support the los- infrastructure (irrigation, roads, transport, ers. Complementary policies include pub- power, and telecommunications), markets, lic investment and other policies that will rural finance, and research.55 Where these facilitate response to the new market signals are deficient, complementary investments for long-term growth (discussed in the next will be necessary to take advantage of trade section). It is necessary to recognize the het- reforms. Similarly, if these nonprice factors erogeneity in the groups adversely affected, are in place but domestic macroeconomic examine their distinguishing demographic and sectoral policies depress incentives to and geographic characteristics, and analyze produce, the supply response may be lim- the magnitude of the losses and potential ited. In many countries, particularly the gains. Transitional support may include the agriculture-based ones, these nonprice fac- following: tors are undeveloped and need significant investment, particularly in market infra- · Grants to facilitate production shifts. An structure, institutions, research and exten- example is the Turkey program to reduce sion, and natural resource management. agricultural subsidies. Per-hectare grants Over the long term, these investments are were paid to farmers to facilitate their likely to be more important than trade transition out of tobacco and hazelnut reforms in using agriculture for develop- production and into more efficient alter- ment. Details of investment priorities will natives such as maize, soybean, sunflower, be the topics of subsequent chapters. and vegetables. Complementary support Public spending has often been diverted was provided to improve the efficiency of from these needed long-term investments the cooperative marketing channels.52 to agricultural subsidies. Subsidies are usu- · Cash transfers and social safety nets. To ally economically inefficient and often pro- sustain the extreme poor and to support mote wasteful use of resources at a high cost Reforming trade, price, and subsidy policies 115 to farmers in terms of foregone growth and subsidies. Overall public expenditures on incomes. Where long-term capital invest- agriculture have remained at approximately ments have been made, too few resources 11 percent of agricultural GDP, while the are allocated to operations and mainte- share of subsidies for fertilizer and elec- nance to ensure the sustainability of these tricity (see box 4.8) and for support prices investments. for cereals, water, and credit has steadily Agricultural subsidies are defined here as risen--at the expense of investments in payments from the public budget for essen- public goods, such as research and devel- tially private goods such as agricultural opment, irrigation, and rural roads. Agri- inputs. Subsidies can help overcome tem- cultural spending is about 4 times greater porary market failures (as part of a broader on subsidies than on public goods (figure strategy), offset fixed costs of infrastruc- 4.9). Moreover, the returns on subsidies in ture, and reduce risk (chapter 6). But they India have declined.57 These findings and have seldom been used for these purposes, the results from a related study suggest the have mostly benefited richer farmers, and potential for significant efficiency gains are often difficult to remove once estab- from reallocating public expenditures in lished--all leading to inefficient and ineq- agriculture in India.58 uitable resource use. Thus the quality of Reforms to improve the efficiency public spending--the efficiency of resource of rural public spending use--is often an even more important issue to address than its level. Understanding why public rural expen- ditures are allocated to unproductive Inefficiency of current spending interventions requires understanding the A large share of public spending has been political economy of government policies. used to provide private goods at high cost. Institutional, demographic, and economic Public expenditure reviews suggest that variables jointly shape the size and quality of agricultural budget allocations to private public spending. One factor affecting quality goods are high: 37 percent in Argentina is information. The lack of a formal program (2003), 43 percent in Indonesia (2006), of expenditure evaluations--combined 75 percent in India (2002), and 75 percent with a lack of access to public information in Ukraine (2005). Transfers to parastat- on expenditures and their beneficiaries-- als and subsidies in Kenya in 2002/03 dilutes the effectiveness of any formal accounted for 26 percent of total govern- accountability mechanisms that might be ment expenditures in agriculture, and in provided by political checks and balances, Zambia in 2003/04, about 80 percent of a free press, or well-intentioned civil society nonwage spending went to subsidies to organizations. With such information gaps, farmers for fertilizer and maize prices. public debates about public policies tend to Allocations to subsidies often divert be manipulated by special interest groups. funds from high-return investments in public goods. In Zambia only about 15 percent of the 2003/04 agricultural budget Figure 4.9 Subsidies have risen while public was spent on research, extension services, goods investments have declined in India and rural infrastructure--investments % of agricultural GDP that have shown high payoffs (chapter 7). 7 Reallocating spending on private subsi- 6 dies to public goods can increase growth.56 5 However, although these subsidies are eco- Subsidies nomically inefficient, they are often politi- 4 cally expedient. Improving the efficiency of 3 resource use thus requires addressing the 2 Public good investment political economy pressures determining 1 budget allocations (box 4.8). 0 In India, too, the trend has been to move 1975­79 1980­84 1985­89 1990­94 1995­99 2000­02 away from public goods investments toward Source: Chand and Kumar 2004. 116 WORLD DEVELOPMENT REPORT 2008 B O X 4 . 8 Examples of subsidies in India and Zambia Electricity subsidies to agriculture to the agricultural sector. Unlike other policy research and extension. Spending on agri- in India: can greater local accountability instruments, it does not require implementa- cultural research and development fell from induce reforms? tion by the (often ineffective) public admin- about 1.2 percent of agricultural GDP in 1985 With 55­60 percent of India's irrigated land istration. Farmers who buy water from pump to about 0.5 percent in 2000. supplied by groundwater, electricity for tube- owners--a considerable proportion of farmers Why is spending on fertilizer subsidies so well pumps is an important input. Most state in most states--potentially benefit from the high? There are no powerful groups that would governments provide electricity to farmers at subsidy, too, which increases the attractiveness benefit from its elimination, despite its being a subsidized flat rate--often for free. But the of this policy instrument for politicians who an economically unproductive use of public quality of service is poor because of erratic and want to win state elections. resources. This contrasts with early reforms in limited supply and voltage fluctuations, which Addressing jointly the quality of electricity maize milling, where the private sector gained can result in crop losses from forgone irriga- supply and its cost is a key element of reform- significantly from privatization and strongly tion and damaged pumping equipment. ing the subsidy policy. However, because of supported the reform. Under the fertilizer pro- The electricity subsidies to agriculture widespread power theft and losses, states gram, traders often benefit. are also fiscally draining and environmentally lack the credibility to deliver better service in A 2002/03 household survey showed that damaging. In Punjab electricity subsidies to exchange for higher prices. One option would only 29 percent of farmers acquired fertilizer, agriculture in 2002/03 were 7 percent of state be to decentralize energy supply to local 59 percent of them through private dealers expenditures. Together with other policies that governments or community groups, relying and 36 percent through the government promote water-intensive crops such as rice, the on local accountability to improve electricity Fertilizer Support Program. Both groups had electricity subsidies contribute to the overex- quality. Elite capture must still be prevented, higher income and wealth and were close to ploitation of groundwater. About 60 percent of but this community-oriented option has the tarmac roads and district centers. However, the state's groundwater resources are already potential to break the political impasse. This those receiving fertilizer through the gov- overexploited, with extraction rates exceeding exemplifies a tradeoff between potential effi- ernment program were predominantly civil recharge rates--clearly not sustainable. ciency cost from the loss of economies of scale service employees, in a program intended to Increasing electricity prices and introduc- in decentralized generation, and not making be targeted at the poor. Parliamentarians also ing metering are technically and economically any progress at all. benefited, sometimes informing groups of sound, but they are not politically feasible, farmers that there was no need to repay loans so far. Larger farmers obviously benefit more Zambia fertilizer subsidies: no strong on fertilizer received. from the subsidy, and they have political influ- opposing coalitions The economic costs of the program are ence, but there is more to these subsidies. About 5 percent of Zambia's national budget high--both from lower spending in higher- Their introduction followed massive farmer goes to agriculture. In fiscal 2005 more than productivity areas such as agricultural protests against electricity price increases in half the agriculture budget was spent on the research, extension, and infrastructure, and the 1980s. Now, their continuation responds Fertilizer Support Program (37 percent) and from slower diversification away from maize to the increasing income disparity between crop marketing (for maize) under the Food production. the agricultural and nonagricultural sectors, Reserve Agency (15 percent). Only 3 percent worsened by India's relatively low agricultural of the budget went to irrigation development Sources: Beintema and others 2004; Birner, Sharma, growth rate. Making electricity free is a politi- and other rural infrastructure, and 11 percent and Palaniswamy 2006; Govereh and others 2006; cally convenient instrument to transfer income to operating costs, which included agricultural Pletcher 2000;. World Bank 2003d. Rigorous evaluations, their wide dissemi- trative decentralization accompanies polit- nation, and increasing transparency could ical democratization.60 Still, the challenge reduce this information gap. is to avoid elite capture, and so far the evi- Special interest groups also influence dence on the effect of decentralization on patterns of public spending. In Latin Amer- corruption is mixed.61 ica the share of rural subsidies provided by governments is higher where there is more income inequality.59 Economic sectors or Conclusions groups of producers that control a large por- Recent policy reforms have improved price tion of national wealth also have the means incentives for agricultural producers in to influence public policies to their benefit. developing countries. Net agricultural taxa- If the ineffectiveness of public expenditures tion across these countries has, on average, is a result of the influence of special interest declined sharply. Between 1980­84 and groups, the solution might be to link budget 2000­04, it declined from 28 percent to implementation to participatory decision 10 percent in agriculture-based countries, making in which poor rural households from 15 percent to 4 percent in transform- have a voice (chapter 11). This might work ing countries, and from marginally negative best for local expenditures where adminis- to a net protection of 9 percent in the urban- Reforming trade, price, and subsidy policies 117 ized countries. But changes in net taxation opment, education, and associated insti- in some countries are the result of rising tutional support. But public investments protection of agricultural imports with con- in agriculture are too often squandered tinuing taxation of exports. These differ- on regressive subsidies. Significant room ences suggest considerable space for further remains for improving the efficiency of policy improvements, but with potential public resources by increasing investments distributional impacts within countries. In on high-priority public goods. Needed are contrast there has been relatively little prog- actions to increase information, account- ress in the overall decline in OECD producer ability, and commitment. Information gaps support. However, there has been a shift in public knowledge of budget allocations away (decoupling) from support directly and impacts of public spending on agricul- linked to product prices, volumes, and area ture have to be closed through greater pub- planted to other less-distorting forms such licity and transparency of budget allocation as cash transfers, particularly in the EU. and evaluation. The estimated impacts of full trade Political economy determines the pace liberalization are substantial for develop- and extent of reform and has to be addressed ing-country trade and agricultural output in both developed and developing countries. growth. Full trade liberalization is expected Building coalitions to support and sustain to increase international commodity prices reforms can help. The WTO has induced by 5 percent on average, developing-coun- reform, and local media have played sup- try share in global agricultural trade by portive roles (as in the U.S. cotton industry). about 9 percentage points, and agricultural In some cases, bargained compromises and output growth in developing countries on compensation schemes for the losers may be average by about 0.3 percent a year. Urban- needed--as in the new Japanese rice policy ized countries, particularly those in Latin reforms, the EU sugar reforms, and Mexico's America with competitive advantage in 1990s reforms. Linking domestic agricul- many of the currently protected products, tural reforms to a broader set of economy- stand to benefit the most. Not everyone will wide reforms can strengthen reform coali- gain from liberalization: net-selling farm- tions and increase the likelihood of progress, ers will benefit, while households that are as happened in many developing countries net buyers of food may lose from higher in the 1980s and 1990s. food prices if their wages or other earnings Key elements of the future agenda are to do not increase enough to compensate. continue to get prices right through trade Further trade liberalization in develop- and domestic policy reform, to ensure com- ing countries may need to be sequenced with plementary tax reforms to replace lost trade tax reforms to reduce tax losses from trade revenues for reinvestment in the sector, to revenues and subsequent public investment ensure that the quality of public spending in the agriculture sectors in these countries. improves, to provide support to comple- Complementary policies and programs are mentary programs to facilitate transitions, needed to compensate losers in developing and to invest massively in core public goods countries and to facilitate rapid and equi- for longer-term sustained growth. All of this table adjustment to emerging comparative requires a comprehensive approach beyond advantages. price and adjustment; governments must Supply response to trade reforms depends focus on improving market infrastructure, on public investments in core public goods institutions, and support services--topics such as irrigation, roads, research and devel- of the subsequent chapters. Bringing agriculture to the market 5 Far-reaching changes in domestic and alone do not promote equitable outcomes. global markets are creating big opportu- So smallholders may need to build their nities for farmers and agribusiness entre- bargaining power through their producer c h a p t e r preneurs. The demand for high-value organizations, assisted by public policy. primary and processed products is rapidly The nature and pace of market develop- increasing, driven by rising incomes, faster ment differs across food staples (cereals), urbanization, liberalized trade, foreign traditional bulk export commodities (cof- investment, and advancing technology. fee, cocoa, tea, cotton), and higher-value These developments are expanding market products for domestic and export markets opportunities, which is important for faster (dairy, meat, fruits, vegetables). This chap- agricultural and nonfarm growth and for ter examines the new opportunities and greater employment and rural incomes. But challenges for smallholders in the mar- the new markets demand quality, timely kets for each of these important commod- deliveries, and economies of scale, posing ity groups. It highlights the broad array of special challenges for smallholders. private, public, and civil society initiatives Still in many agriculture-based and that have been pursued to make markets transforming countries, food staples remain work better for development and poverty a mainstay for a major share of households, reduction. many of them poor. But the performance of food staple markets is often hampered Food staples: improving by poor infrastructure, inadequate support commodity trading and services, and weak institutions, pushing up transaction costs and price volatility. How risk management markets for food staples function thus The market for food staples remains by far affects livelihoods, welfare, and food secu- the most important in many agriculture- rity, especially for poor households. based and transforming countries, because Well-functioning agricultural marketing staples take up a major share of household systems can reduce the cost of food and the food expenditures and account for the bulk uncertainty of supply, improving the food of agricultural gross domestic product security of poor and nonpoor households. (GDP). Growing populations sustain By linking farmers more closely to con- demand, supplemented by the rapidly grow- sumers, these marketing systems transmit ing demand for livestock feed in middle- signals to farmers on new market opportu- income countries. Inhibiting the market for nities and guide their production to meet food staples are high transaction costs, changing consumer preferences for quan- product wastage and losses, wide marketing tity, quality, variety, and food safety. margins, poor market integration, limited Efficient markets require good gover- access to trade finance, and weak regulatory nance and public policy--infrastructure, institutions. Better markets for food staples institutions, and services that provide have broad implications for agricultural market information, establish grades and growth because they raise farmgate prices, standards, manage risks, and enforce con- build the confidence of farmers in their reli- tracts--a continuing challenge in many ability, and allow farmers to diversify to countries. However, efficient markets higher-value products. 118 Bringing agriculture to the market 119 Figure 5.1 Layers of intermediaries characterize Ghana's maize markets $ per 100 kilograms, 1998 1.9 31.0 0.9 1.2 0.7 27.0 0.9 1.7 0.8 1.5 22.8 fee profit losses 1.1 0.3 profit 0.3 mkt 1.7 0.6 losses 17.3 Retailer fee others fee profit interest, price Transport losses fee, agent interest, handling, costs mktg Wholesaler price Transport & mktg Storage, other interest, price Wholesaler price wholesale Storage, & Transport, Wholesale wholesale retail Handling, Commission Storage, Farmgate Handling Techiman Accra Accra Source: Natural Resources Institute, personal communication 2006. In agriculture-based and transforming nections is thus critical to strengthening the countries, small and medium-size traders links of farmers and the rural economy to and layers of intermediaries are common local, regional, and international markets in the marketing of food staples and other (box 5.1). agricultural commodities (figure 5.1). Often one-person businesses dealing in Market information systems several commodities, the traders and inter- Market information keeps farmers and mediaries are mainly self-funded because of traders attuned to the demands and chang- limited access to credit. They maximize the ing preferences of consumers, guiding returns on their working capital by rapidly farming, marketing, and investing. Mar- turning over small quantities, with little ket information encompasses timely and storage. Quality grades are rarely standard- accurate prices, buyer contacts, distribu- ized, nor are weights and measures, mak- tion channels, buyer and producer trends, ing personal inspection by buyers essential. import regulations, competitor profiles, This requires that traders travel extensively, grade and standards specifications, post- increasing transaction costs. harvest handling advice, and storage and Improving and modernizing the mar- transport recommendations.2 keting system can increase market effi- Public market information systems have ciency, foster competitiveness with imports, often been disappointing, with information and reduce losses and risks. Market mod- disseminated too slowly, in the wrong form, ernization, beyond improving basic trans- or too infrequently to be of real use to market port, includes marketing information sys- participants.3 Several innovative approaches tems, commodity exchanges, and price-risk are being piloted in different parts of the management. world, building on advances in communi- cations technology (radio, cell phone, tele- Poor road connections vision, Internet) and the liberalization of Inadequate transport infrastructure and ser- telecommunications and broadcasting. In vices in rural areas push up marketing costs, India, the Ministry of Agriculture operates undermining local markets and exports. This AgMark Net, which collects price informa- is particularly the case in Africa, where less tion from wholesale markets nationwide than 50 percent of the rural population lives and disseminates it through the Internet. close to an all-season road. Trader surveys The private sector in India is investing in in Benin, Madagascar, and Malawi find that telecommunications infrastructure, such as transport costs account for 50­60 percent of mobile phone networks and Internet-linked total marketing costs.1 Improving road con- rural kiosks, which aid in strengthening 120 WORLD DEVELOPMENT REPORT 2008 B O X 5 . 1 Impacts of road infrastructure on markets and productivity Rural road development has the potential one study in Vietnam found that four to six need to be provided as part of a package of to reduce transport costs and generate mar- years after road rehabilitation, road transport interventions that helps certain groups benefit ket activity. In Vietnam, road rehabilitation services were more likely to respond where more than they would have and that protects increased the variety of goods that households markets were already established and natural or compensates those who may lose. sold in the market--primary fruits, vegetables, disasters were relatively infrequent. Policy The governance and institutional settings and meat--and encouraged greater participa- needs to consider more than the absence or are also important in determining impacts. tion in trade and services. In Georgia, the con- dire condition of a road before deciding that a Road project funds may not end up funding struction and rehabilitation of roads increased new road is critical. In each specific case, policy what was intended and hence have no impact. the opportunities for off-farm and female should ask whether roads are the right instru- Infrastructure expenditures present opportu- employment. In Madagascar, simulations sug- ment for overcoming the constraints to a given nities for graft and the diversion of resources. gest that a 50 percent reduction in travel time welfare outcome and if so, what other policy This can change when incentives change. One per kilometer on roads would increase rice initiatives and investments are needed. study found that the threat of an audit on road production by 1 percent. Heterogeneities across households will projects in Indonesia significantly increased However, these effects will be mediated by determine who gains and who loses. Hold- the actual amounts spent on labor and build- specific geographic, political, and economic ing community characteristics constant, ing materials for roads, thereby bringing the settings. Complementary inputs and policies some households will be better placed to quality of the roads nearer to that originally may be required to achieve the full benefits take advantage of a new road, based on their intended. Fungibility can also dull impacts, as from improved roads. Even if aggregate out- endowments and the nature of their occupa- aid or central government funding for road put gains are forthcoming, there will almost tions. Households differ in what they buy and projects may substitute for local government certainly be losers too. How one weighs the sell and hence how much they will gain or lose infrastructure spending. Finally, the lack of gains and losses and whether poverty falls from the changes in prices induced by better funding and institutional arrangements for is ultimately an empirical question. Recent roads. Poor households are more likely to rely routine maintenance can significantly reduce work using impact evaluation methods shows on the production of nontraded goods and the impacts of newly improved roads. mixed results, suggesting that to be effective, services that may actually be displaced by bet- How much roads matter depends on a rural road policy needs to adapt to context ter roads fomenting increased competition. range of factors. Of course, roads matter to and setting. On the other hand, road improvement has a economic development, but how much they Policy should focus more on the comple- general income effect that could generate matter depends on a number of other factors. mentary role of rural roads. Past policy has demand for services from poor providers. The Comprehensive approaches are needed that fixated on the supply of rural roads as a cata- net effect is an empirical question. The picture are compatible with how local institutions lyst to development and market activity. Poor that emerges from recent, more methodologi- work in practice, including what they are capa- road conditions often coincide with a number cally rigorous impact evaluations is a complex ble of delivering. This may require fashioning of other bottlenecks inhibiting agricultural one. In Nepal, better road access benefited the a whole package of cross-sectoral investments productivity and economic development, poor and the nonpoor, but the proportionate (roads and complementary investments) including poor agroclimatic endowments, low gains were higher for the nonpoor. Dercon and and policy changes that will ensure a higher population density, no transport services, low others (2006) find that access to all-weather efficiency impact, as well as more desirable education levels, a lack of electricity, and risk, roads in 15 villages in Ethiopia reduced the poverty and equity outcomes. credit, and other market failures. Road benefits incidence of poverty by 6.7 percent. Given depend heavily on interactions with other the heterogeneity of impacts, more attention infrastructure and geographical, community, needs to go to beneficiary selection, recogniz- Sources: Limao and Venables 2001; Van der Walle and household characteristics. For example, ing that tradeoffs exist. Moreover, roads may 2007. market information, extension, and other SMS) and the willingness of mobile phone services to farmers. In West Africa, a public- companies to invest in these systems, sup- private partnership set up TradeNet, a trad- ported by initial donor funding. The new ing platform that allows sellers and buyers to systems have the potential to significantly get into contact over the Internet and by cell reduce transaction costs, especially search phones (box 5.2). and transport costs, and warrant continued Market information systems also dis- investment and evaluation. seminate price information in Kenya, Mozambique, and Senegal, using a mix Commodity exchanges: of Internet, short message service (SMS), fast and low cost voicemail, radio, and market chalkboards.4 Commodity exchanges offer a fast and Local FM radio broadcasts market infor- low-cost mechanism for discovering mation in Mali and Uganda.5 It is still too prices, trading, and resolving contractual early to judge the long-term viability and disputes. A physical exchange is often a impact, but anecdotal evidence points to first step to more sophisticated trading the interest of farmers (with rising use of contracts--initially contracts for forward Bringing agriculture to the market 121 B O X 5 . 2 Innovative uses of information technology to link farmers to markets in India and West Africa E-Choupal and its rural Internet kiosks its delivery to ITC. In 2006/07 ITC purchased receive real-time prices for more than 80 com- Between 2000 and 2007, the agribusiness about 2 million tons of wheat, soybeans, cof- modities from 400 markets across West Africa. division of ITC Limited set up 6,400 Internet fee, shrimp, and pulses valued at $400 million Individual users can advertise their goods and kiosks called e-Choupals in nine Indian states, through the e-Choupal network. This direct offers on free Web sites with their own Internet reaching about 38,000 villages and 4 million purchasing cuts marketing costs for both farm- addresses, and farmer and trader groups can farmers. ITC establishes an Internet facility in ers and ITC. It improves price transparency set up Web sites to manage all these services a village and appoints and trains an operator and allows better grading of produce. It also for their members. (sanchalak) from among the farmers in the allows farmers to realize a bigger share of the The Ghana Agricultural Producers and village. The sanchalak operates the computer final price. Traders Organization (www.tradenet.biz/ to enable farmers to get free information on gapto) is a major beneficiary. In 2006 it con- local and global market prices, weather, and TradeNet, a West African trading platform cluded trade deals worth $60,000 with other farming practices. The e-Choupal also allows with Internet and mobile phones producer and trader organizations in Burkina farmers to buy a range of consumer goods and TradeNet, a Ghana-based trading platform, Faso, Mali, and Nigeria. These deals involved agricultural inputs and services (sourced from allows users to sign up for short message ser- purchasing tomatoes, onions, and potatoes other companies). vice (SMS) alerts for commodities and markets without middlemen, reducing the transaction The e-Choupal serves as a purchase center of their choice and receive instant alerts for costs substantially. for ITC for 13 agricultural commodities, with offers to buy or sell as soon as anyone else on Source: Kofi Debrah, personal communication, the sanchalak acting as the commission agent the network has submitted an offer on their 2007; DeMaagd and Moore 2006; Shivakumar, in purchasing the produce and organizing mobile phone. Users can also request and personal communication, 2007. delivery, and perhaps later, contracts for from the exchange by high transport and futures, options, and swaps. China, India, transaction costs or by quality differences. South Africa, and Thailand have agricul- Establishing exchanges in Africa is chal- tural futures exchanges to facilitate a wider lenging because of continuing govern- range of financing and risk management ment intervention in grain markets, small transactions.6 All four have large domestic markets, and weak systems for warehouse markets and fairly well-developed financial receipts and grades and standards. sectors. India's commodity futures exchanges Price-risk management: expanded rapidly after the government a role for governments? eliminated the ban on their operations in Because of the vulnerability of poor pro- 2004.7 Three national electronic and 21 ducers and consumers to price shocks for regional futures exchanges trade contracts food staples, governments often seek to sta- for cereals, sugar, cotton, potatoes, oilseeds, bilize prices, countering efforts to liberal- and spices.8 The fortnightly turnover totaled ize markets. The variability in world grain $8.7 billion on the three national exchanges prices remains significant, with coefficients in a two-week period in September 2005.9 of variation 20­30 percent for rice, wheat, The South Africa Futures Exchange (SAFEX) and white maize. Domestic price instabil- offers futures contracts on white and yellow ity tends to be high in Africa, especially in maize, wheat, sunflower, and soybeans, and land-locked countries (such as Ethiopia), it traded more than 1.9 million contracts in where the wedge between the export and 2006. Traders throughout southern Africa import parity price is large and drought use SAFEX as a benchmark for pricing increases the impact of domestic shocks physical trades. In 2006 the government of (figure 5.2).11 Malawi used a SAFEX-based call option to The appropriate role of government protect itself from the risk of international in managing food-price risk continues price increases when a bad harvest would to be debated. Opponents of government require significant imports.10 intervention note that price stabilization Futures trading requires good financial policies often lead to economically ineffi- and legal structures and supportive gov- cient production decisions and discourage ernment policies. The benefits diminish if incentives to search for cost-reducing tech- the markets for smallholders are separated nical and institutional innovations. Most 122 WORLD DEVELOPMENT REPORT 2008 Figure 5.2 Wholesale prices in Ethiopia fluctuate within a wide import-export parity band Many developing countries have agen- cies to maintain publicly owned strategic US$ per ton 325 reserves that aim to reduce price instability, but the agencies instead often destabilize Import parity (Addis Ababa) 275 Wholesale price at Addis Ababa prices through unpredictable market inter- Export parity (FOB Djibouti) ventions, border closings, and poorly timed 225 imports.16 Safeguards are needed to prevent this. They include arm's length, central bank­type autonomy; highly professional 175 management and analytical capacity; strict rule-based and transparent market opera- 125 tions to meet a narrowly defined objective; and tendering procurement and storage to 75 the private sector.17 25 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Traditional bulk export Source : Rashid, Assefa, and Ayele 2006. commodities: maintaining international competitiveness often, the government agencies implement- Maintaining international competitiveness ing the policies are subject to inefficiencies, in bulk agricultural commodity exports corruption, and vested interests, resulting is a major challenge for many low-income in huge fiscal costs.12 Proponents of gov- countries, especially in Africa. Competi- ernment intervention, by contrast, show tiveness is important, because exports of that the net welfare effects of food-price coffee, cocoa, tea, cotton, and other bulk instability can be significant for economic commodities are their main source of for- growth and for household food and nutri- eign exchange. For Benin, Burkina Faso, tion security.13 Burundi, and Mali, one such commodity Another view is that the nature and accounts for more than half of the value of extent of price-stabilization interventions total exports. will depend on country-specific factors.14 Producers of these commodities, how- Food-price stabilization is more relevant in ever, have faced a long-term downward low-income countries where food staples trend in prices as global supply outpaced are a large share of the incomes of poor pro- demand (figure 5.3). Productivity increased ducers and the expenditures of poor con- among traditional producers and export- sumers, where one food staple dominates, ers, and new players, such as Vietnam in where domestic production is highly vari- coffee and tea, further expanded supply.18 able, and where poor infrastructure and Increasing productivity to cope with declin- location restrict tradability. ing prices helped some countries in the Lessons over several decades suggest that short term but added to the long-term the design of food-price risk interventions downward pressure on world prices, with should be part of a long-term strategy that consumption stagnating in the major mar- emphasizes measures to raise productiv- kets (Western countries) and growth lim- ity of food staples, improve the efficiency ited in the "new" markets (Eastern Europe, of markets (infrastructure, market infor- the Middle East, and the former Soviet mation, grades and standards, warehouse Union).19 Cotton subsidies in member receipts), and minimize the impact of price countries of the Organisation for Economic shocks (weather-based insurance and safety Co-operation and Development (OECD) nets) (chapter 6).15 Liberalizing trade, espe- further depressed prices (chapter 4). Pro- cially by promoting regional trade, can be jections for coffee, cocoa, and tea indicate a source of "quick wins" for reducing price continuing price declines.20 volatility, especially in small and medium- Another major challenge is the declin- size countries (box 5.3). ing global demand for higher-priced grades Bringing agriculture to the market 123 of cocoa, coffee, and tea, as demand shifts to lower-quality products. Technological B O X 5 . 3 Price stabilization through international trade: advances in processing technology and saving $200 million in Bangladesh bulk transport permit international cocoa grinders to use, and cost-effectively com- To stabilize domestic prices and the urban centers, the total fiscal cost would pensate for, lower-quality cocoa beans.21 availability of food, many countries have have been $160­210 million. accumulated large national stocks as The liberal trade policy helped the And the technology advances in roasting emergency reserves. But market develop- government stabilize prices without large lower-quality robusta coffee allow its sub- ment and trade liberalization provide government stocks. Other factors were another option, potentially less costly and stitution for higher-quality arabica. Chang- also important. The large expansion in the more effective. winter season boro rice and wheat har- ing consumer preferences, such as the shift As floods spread across much of Ban- vests over more than two decades helped toward instant and flavored coffees and gladesh in mid-1998, rice prices rose to reduce the importance of the monsoon convenience teas, further shift demand import parity levels (the export price of rice crop in total domestic production and rice in the exporting country plus trans- minimize the time between major domes- toward lower-quality products. Cotton port and normal marketing costs). The tic harvests. Moreover, large-scale imports is the exception, where the importance liberalization of rice trade induced mas- would not have been possible without attached to lint quality has risen in recent sive imports of rice by hundreds of small market infrastructure, particularly roads years with the widespread use of high-speed traders. Private rice imports, estimated and bridges. Nor would they have been at 2.42 million tons, were 6.1 times larger possible without pro-market policies, spinning machines with demanding quality than government rice distributions. If the including no limits on private stocks and requirements. government had imported this grain, the no restrictions on movement and access to Specialty markets (organic, gourmet, added cost of the imported rice delivered foreign exchange. Fair Trade) offer an alternative higher- to local delivery points would have been $50­100 million. And if the government priced market, but they account for only a had subsidized this rice by selling it at the Sources: Del Ninno and others 2001; Dorosh small share of the global market (see section price used for limited government sales in 2001. on specialty markets). Currently, the spe- cialty coffee sector accounts for only about 6­8 percent of global consumption.22 Many countries, such as Tanzania and its Kiliman- Figure 5.3 World prices for traditional bulk exports continue to decline jaro specialty coffee or KILLICAFE initia- tive, are targeting these markets to expand Price (cents per kilogram) export markets and increase revenues.23 1000 Cocoa Coffee arabica Different paths to liberalizing Coffee robusta Tea (3 auctions) 800 Cotton Rubber domestic markets Bulk export commodity markets in Africa 600 were traditionally controlled by parastatal agencies, which often had monopoly pow- ers in domestic marketing, exporting, 400 and providing inputs to farmers (seeds, fertilizer, credit, extension services). The 200 parastatals also aimed to stabilize prices received by farmers. In many instances 0 the vertical coordination arrangements in 1970 1975 1980 1985 1990 1995 2000 2005 2010p 2015p production and marketing enabled farmers Source: World Bank data group. to overcome market failures in the input, Note: Prices are in constant 1990 dollars. Prices from 2007 onward are projected. credit, and insurance markets. They also ensured a steady supply of products of assured quality for export. But the agencies and 1990s, and many parastatal agencies were widely criticized for inefficiencies and were abolished or restructured. mismanagement that lowered the prices African countries that restructured their paid to farmers and raised the fiscal costs to bulk commodity markets followed differ- government.24 To redress these failures, the ent paths, ranging from restructuring the bulk commodity markets in many coun- parastatal ownership to include the private tries in Africa were liberalized in the 1980s sector and farmers (for example, cotton in 124 WORLD DEVELOPMENT REPORT 2008 Burkina Faso), to market zoning (for exam- producing countries in Africa. The absence ple, cotton in Ghana), to full market liber- of a clear legal and regulatory framework alization (cotton in Uganda, and cocoa and to guide private sector and farmer behav- coffee in Cameroon and Côte d'Ivoire).25 ior in the context of free market competi- Overall the liberalization programs gener- tion or weak contract enforcement created ated immediate benefits: an influx of pri- confusion and allowed some malpractices vate capital, management, and marketing to persist (box 5.4). To help private trad- expertise; and market competition reduc- ers enforce contracts, Côte d'Ivoire and ing transaction costs, increasing prices Zambia adopted zoning arrangements to received by farmers and typically leading to regulate cotton marketing that have worked prompter payment for crops purchased.26 reasonably well.28 However, competition One study found that 85 percent of coffee from new buyers in Zimbabwe and Tanza- producers in Tanzania were better off as nia weakened quality enforcement.29 the gains from higher producer prices more What contributed to these second- than offset the loss from reduced access to generation problems? The weaknesses and credit through public sources.27 lack of credibility of public institutions to enforce appropriate rules of behavior for After liberalizing: addressing the private sector is part of it. Public inter- second-generation problems vention in grades and standards and in In many countries, the restructuring of the contract enforcement is essential to ensure market brought second-generation prob- that private markets work. Liberalization lems, aptly illustrated by cotton in major also exposed the underdevelopment of rural financial systems, which need to be addressed (chapter 6). The African expe- B O X 5 . 4 Zambia and Burkina Faso: contrasting rience also highlights the potential for experiences in liberalizing domestic associations and professional organiza- cotton markets tions (farmer groups in Tanzania) to over- come the shortsightedness of individual Zambia--production triples, after some collecting produce on behalf of Dunavant. farmers and buyers.30 Partial privatiza- fixes. Zambia's cotton sector continues The distributor's remuneration was directly tion in Burkina Faso has given farmers to evolve after market liberalization, with tied to the amount of credit recovered, on more ownership, but it led to heavy fiscal significant impacts on productivity and an increasing scale. Dunavant established quality. In 1995 the government sold the inspection points in all buying stations to outlays (box 5.4). Lint Company of Zambia, the government enforce quality standards. National pro- parastatal, to two private companies, duction tripled between 2000 and 2003, Higher-value urban markets: Clark Cotton and Lornho, later acquired and credit repayments improved from by Dunavant. To ensure access by partici- linking producers to modern about 65 percent to more than 90 percent. pating farmers to extension services and There are now more than 300,000 cotton- supply chains inputs (on loan), the two companies imple- producing farmers in Zambia. mented outgrower schemes, contracting Burkina Faso--losses of $128 million. Rising incomes, urbanization, greater with smallholders. The costs of the inputs The government tried to reduce inefficien- female participation in the workforce, were to be paid by farmers upon sale of cies by changing the structure of ownership wider media penetration--all are driv- their seed cotton. But the rapid entry of of SOFITEX, the cotton parastatal, in 1999. ing the demand for higher-value products, other buyers created overcapacity in gin- It allowed producers, represented by the ning and fierce buyer competition. The Union Nationale des Producteurs de Coton du semiprocessed and processed products, outgrower schemes began to fail because Burkina Faso, to take up 30 percent owner- and convenience foods (figure 5.4). They of rampant side-selling by farmers to ship, empowering farmers to oversee the are also increasing consumer attention to other traders offering high prices without management of SOFITEX and ensure profes- food quality and safety. Diets are global- grading and defaults on input loans. As sional management. But the institutional the defaults increased, the cost of credit changes at SOFITEX did not improve its izing too, with local consumer preferences increased, which led to more defaults or financial position. Supporting and stabiliz- influenced by international tastes. These exits from the outgrower program. Produc- ing domestic cotton prices as world prices trends open new markets for a wide range tion in 2000 was less than half that in 1998. declined produced financial losses of $128 of higher-value agricultural products and After 2000 many agents and buyers million from 2004/05 to 2006/07. exited the industry, leaving two dominant propel the evolution of the marketing sys- Sources: Bonjean, Combes, and Sturgess companies. Dunavant used distributors to tem in many developing countries, with 2003; Food Security Research Project improve credit repayments. Distributors (FSRP) 2000; Christopher Gilbert, personal the entry and rapid growth of supermarket were responsible for identifying farmers, communication, 2007; Tschirley, Zulu, and chains and the food processing and food providing inputs and technical advice, and Shaffer 2004. service industries. Bringing agriculture to the market 125 Figure 5.4 Food consumption expenditures in in developing countries, either directly or Indonesia are shifting from cereals to higher-value through joint ventures with local firms. and prepared foods Changing consumer demand is also Share in per capita food expenditure, % driving the growth of the food process- 40 39 ing and food service industries. Processed 1981 foods account for about 80 percent of 30 2005 global food sales, estimated at $3.2 trillion 22 22 22 22 in 2002.31 Although spending on processed 20 20 19 foods is still low in developing countries 14 15 ($143 per capita per year in lower-middle- income countries and $63 per capita in 10 6 low-income countries), it is growing fast- est in these countries--28 percent a year 0 Cereals Beverages Meat, Fruits Prepared in lower-middle-income countries and 13 and and eggs, and foods percent a year in low-income countries. tubers other fish, vegetables "Eating out" is also becoming popular. For foods and dairy example, spending on food services now Source : Badan Pusat Statistik Indonesia, http://www.bps.go.id. accounts for 22 percent of food budgets in Brazil and Indonesia and 15 percent of urban food spending in China. For many developing countries, the supermarket revolution began in the early Infrastructure impediments to mid-1990s. By the early 2000s, retail food The perishability of most high-value agri- sales in supermarkets exceeded 50 percent cultural products requires careful handling, of total retail food sales in many countries special facilities (packhouses, cold storage, in Latin America and in major urban cen- and refrigerated transport), and rapid deliv- ters elsewhere (figure 5.5). Accelerating the ery to consumers to maintain quality and expansion: significant foreign direct invest- reduce physical and nutritional losses. In ment by multinational supermarket chains many developing countries, the long supply Figure 5.5 Rising per capita incomes drive supermarket growth Share of supermarkets in retail food 80 United Kingdom Brazil France United States 70 60 Argentina Mexico S. Africa Czech Republic Thailand 50 Chile Korea, Rep. of Philippines Costa Rica Colombia 40 Ecuador Guatemala 30 Indonesia Bulgaria Kenya 20 Nicaragua China 10 Bangladesh 0 India 0 5 10 15 20 25 30 35 40 45 GDP per capita, thousand PPP $ Sources : Reardon and Berdegué 2006; World Bank 2006y. 126 WORLD DEVELOPMENT REPORT 2008 chain, poor access to roads and electricity, and convenience of small produce shops and inadequate infrastructure and services and wet markets offer a competitive alter- in physical markets add to the transaction native. Fresh fruits and vegetables generally costs and cause quality deterioration and account for the lowest share in supermarket high spoilage losses. In India it is estimated sales, and small shops and wet markets will that fruit and vegetable postharvest losses likely remain important marketing chan- amount to about 40 percent of total annual nels for these products for years to come.36 production, equal to a year's consumption Significant inefficiencies in the tradi- in the United Kingdom.32 tional wholesale marketing systems and Market infrastructure and facilities in competition encourage supermarkets, food developing countries are often limited and processors, and food service providers to congested, increasing the difficulty of trad- use supply chains to reduce coordination ing perishable goods. A survey of wholesale costs, capture economies of scale, and markets handling fresh produce in four increase food safety and quality. This is states in India found that 17 percent had profoundly changing the structure of pro- no covered shops, about half did not have duction and wholesale marketing in many paved roads in the market yard, about 40 developing countries. Recent studies show percent of the shops had no electricity, and that procurement systems change earliest only 6 percent of the markets had a cold- for processed foods, meat, and dairy prod- storage facility.33 In Tamil Nadu, India, a ucts, eventually extending to fresh fruits related study found that wealthier farmers and vegetables.37 tend to capture a disproportionate share of Procurement takes many forms, varying the benefits of facilities in congested whole- by supermarket chain, product, and coun- sale markets.34 Nonetheless, investments in try.38 It can involve centralized procurement, market facilities would be pro-poor because which shifts from fragmented per-store sales by poorer farmers would increase pro- purchases to operating a distribution center portionally more than those by the wealthy catering to a district (as in China), the whole farmers. country (as in Mexico), or whole region (as in Central America). It can also involve Modern procurement systems shifting from purchases in traditional spot Supermarket growth in most countries wholesale markets to relying on specialized follows similar diffusion patterns across or dedicated wholesalers and logistics firms space, consumer segments, and product (as in Central America and East Asia) or to categories.35 From a base in large cities, direct contracting (as in East Asia and East- supermarkets initially spread to interme- ern Europe)--to cut transaction, coordina- diate cities and towns, and later to small tion, and search costs and ensure greater towns in rural areas--in response to mar- control over quality and consistency of sup- ket competition and saturation. They often ply.39 China Resources Enterprise estimates first target the upper-income consumer that it is saving 40 percent in distribution (national and expatriate), followed by the costs by combining modern logistics with middle class and later the urban lower- centralized distribution in its two large new income households. centers in southern China.40 Dominating the supermarket's product Modern procurement can also involve selection in the early stages are processed contracting with processors and farmers foods (canned, dry, and packaged food or using preferred-supplier lists. This is items), motivated by economies of scale often done where farmers or processors are in procurement and direct relations with grouped or are individually large (as in the processed-food manufacturers. Product Philippines, Russia, and Thailand).41 The selection gradually expands to semipro- contracts are incentives for suppliers to stay cessed foods (dairy, meat, and fruit prod- with the buyer and invest in assets that fit ucts). The last category to be added is fresh the retailer's specifications for products. The fruits and vegetables, as consumer prefer- arrangements may include direct or indirect ence for fresh produce and the proximity assistance for farmers to invest in training, Bringing agriculture to the market 127 management, inputs, and basic equipment. twice the farm size (two hectares versus Modern procurement also often involves one) and 40 percent more education than private standards and their enforcement-- nonparticipating farmers, and are nearly standards that serve two main functions.42 twice as likely to have irrigation, four times They help coordinate supply chains by stan- as likely to have a truck, and twice as likely dardizing product requirements for suppli- to be close to paved roads and be in a farmer ers over many regions or countries, enhanc- organization. Participating farmers use ing efficiency and lowering transaction costs. much more labor-intensive practices because And they help ensure that public food-safety of requirements for field practices, sorting, standards are met in all markets served by and packing. Because they are more likely the retail chain or food-processing firm, to double-crop over the year, participating distinguishing one's products from com- farmers hire 2.5 times more labor (typically petitors through signaling.43 As these private from local asset-poor households). So even standards are more widely adopted, there is if small farmers do not participate directly, growing concern about the capacity of small they can benefit through farm employment farmers to meet them. (chapter 9). Studies of tomato growers in Indonesia and kale growers in Kenya find Impact on smallholders and retailers similar results. The modernization of procurement systems Participation in modern supply chains affects farmers differently across coun- can increase farmer income by 10 to 100 tries and products. Some recent studies of percent (Guatemala, Indonesia, Kenya).48 selected commodities find that the modern Recent studies of contract farmers show procurement systems exclude asset-poor that they have significantly higher incomes farmers. Supermarket buying agents prefer than other farmers.49 Because participating to source from large and medium-size farm- farmers tend to reap substantial benefits, ers if they can (for example, for tomatoes in the payoff from assisting farmers to make Mexico and potatoes in Indonesia); if large the necessary "threshold investments" can and medium-size farmers have sufficient be high. quantities, smallholders are not included.44 Some studies have found that smaller Where small farms are the dominant struc- processing firms were left out of the supply ture, supermarkets have no choice but to chain, with medium-size and large proces- source their produce from them. Super- sors preferred for long-term contracts.50 The markets may also rely on small farmers to number of small retail stores often declined satisfy consumers' demand for specialty or with rising market share for supermar- niche products that only small farmers with kets--with implications for employment. abundant labor produce. Sometimes super- In urban Argentina, from 1984 to 1993, the markets need an advertising tool to promote most intense period of supermarket takeoff, sales with socially conscious consumers: the number of small food shops declined "buying local, from smallholders."45 from 209,000 to 145,000.51 But the competi- The most important determinant of small tion is also driving some small retail stores farmers' participation is not always farm size. and processors to grow and upgrade their Instead, it can be access to physical, human, services (as in India).52 and social assets: to education, irrigation, transport, roads, and such other physical Helping smallholders keep up with assets as wells, cold chains, greenhouses, the requirements good quality irrigation water (free of con- The government and the private sector can taminants), vehicles, and packing sheds.46 help smallholders expand and upgrade their An effective producer organization--another range of assets and practices to meet the new major asset--can also help small farmers requirements of supermarkets and other enter the high-value supply chains. coordinated supply chains (table 5.1). The Most farmers lacking these assets are options include public good investments to excluded.47 In Guatemala, lettuce farmers increase farmers' productivity and connec- participating in modern supply chains have tivity to markets, policy changes to facilitate 128 WORLD DEVELOPMENT REPORT 2008 Table 5.1 Public and private options for strengthening farmer links to the market Public sector Issue Public investments Policy environment Private sector Lack of access to markets Invest in education, rural Liberalize domestic trade; foster Assist farmers in forming producer infrastructure (roads, markets, development of input and credit organizations electricity, irrigation); support markets formation of producer organizations Weak technical capacity Support market-oriented extension Foster environment for private Provide extension and key inputs to extension to emerge farmers Meeting quality standards Support farmer training on good Establish grades and standards Supply inputs and train farmers on agricultural practices for quality quality management and food safety enhancement and food safety Meeting contract conditions Train firms in contract design and Foster institutions for dispute Foster trust; develop contracts that management; train farmers on their resolution; strengthen producer are self-enforcing rights and obligations organizations Farmer exposure to risk Foster development of commodity Create enabling environment for Use contracts that share risk equally and futures exchanges; train firms insurance market among parties; assist farmers to on use of market instruments to access insurance hedge risk Source: Adapted from World Bank 2007e. trade and market development, and public- with producer organizations or commercial private efforts to promote collective action farmer "leaders" that supplement their own and build the technical capacity of farmers production with that from individual small to meet the new standards. farmers (box 5.5). The producer organiza- Some supermarkets and processors or tions or farmer leaders provide technical their agents help farmers overcome their assistance to ensure quality, quantity, and asset constraints and improve their busi- timing of delivery. In addition, the pre- ness image by providing technical assis- ferred supplier or wholesaler often expects tance, in some instances through public- the producer organizations or farmer lead- private partnerships.53 Examples include ers to assemble the products (washing, joint extension by supermarket field staff sorting, grading, packaging, and labeling), and government extension officers, techni- ready to be placed on supermarket shelves. cal assistance to acquire inputs and obtain Many producer organizations do not certification, and training to improve prod- have the capacity to provide their mem- uct quality and food safety. bers with the technical assistance required Other supermarkets and processors enter for ensuring collective compliance with into production contracts, which sometimes quality, quantities, and timing (chapter 6). include the supply of inputs, credit, and Well-targeted technical and financial sup- extension services (for example, in Mada- port from donors, governments, or nongov- gascar and Slovakia).54 For many small ernmental organizations is often necessary farmers, these contracts are the only means for producer organizations to overcome to acquire inputs and use support services. these initial hurdles and become profes- By supplying inputs and providing assured sional entrepreneurs.55 The support must markets and prices, contracting firms share be provided with a long-term commitment production and marketing risks with farm- but with a clear phase-out strategy and a ers. Reducing these risks helps stabilize view to empower (chapter 6). farmers' incomes, critical in the absence of insurance markets. The technical assistance Higher-value exports: to farmers also generates indirect benefits, as farmers apply the improved farm prac- meeting product standards tices for the contract crops to other crops, Agricultural exports diversified signifi- increasing their productivity. cantly in the last two decades, particularly Supermarkets also procure through pre- into high-value fresh and processed prod- ferred suppliers or wholesalers that contract ucts, fueled by changing consumer tastes Bringing agriculture to the market 129 B O X 5 . 5 Linking small farmers to high-value chains: Three approaches The Philippines: a farmer leader and assorted vegetables--from 30 to 40 tons when members. With its marketing success, the small-farmer clusters it started to operate in May 2006, to 80 tons cooperative's membership increased from NorminVeggies is a multistakeholder associa- two months later. 29 to 152, its farmed area increased from 0.2 tion supplying vegetables to the fast-food hectare in 1992 to thousands of hectares in industry, supermarkets, and vegetable proces- China: farmer marketing through 2005, with total capitalization reaching RMB 21 sors in the Philippines. In December 2003 it a cooperative million in 2005. started Normincorp, a marketing company Supported by local government, a group of that links the farmer directly to the buyer, in small-scale growers registered the brand Croatia: supermarket assists farmers exchange for a 6 percent facilitation fee. The "Yulin" for their watermelons, with production to obtain investment loans farmer, liable for the product, retains owner- standardized through coordinated plant- In Croatia the supermarket chain Konzum ship over it all along the chain. Normincorp ing, quality inspection, and packaging. They established preferred-supplier programs to forms production clusters: a group of 10 small formed the Ruoheng watermelon cooperative procure strawberries. It encourages suppliers farmers allied with a commercial lead farmer to ensure their proprietary techniques and to use irrigation and greenhouses to reduce who helps jump-start quality production. expand their marketing network. The coopera- the seasonality of strawberry production and The clusters commit to undertake a common tive sells directly to wholesalers (40 percent), improve the quality of produce. Such invest- production and marketing plan for a particular supermarkets (25 percent), and retailers (35 ments require significant capital, which many product for an identified market. The lead percent), which buy from the cooperative farmers did not have, nor did they possess farmer coordinates the production processes because it can deliver large volumes on a regu- enough collateral to secure bank loans. So of the cluster farmers and is responsible for lar and timely basis and ensures food safety Konzum negotiated with the local banks to use training them to ensure the quality specified and quality standards. The "Yulin" watermelon the farmers' contracts with the supermarket as by the market. Normincorp has become the high-quality brand image commanded a a "collateral substitute." preferred supplier for several clients thanks higher price than other watermelons (3.0 yuan Sources: Concepcion, Digal, and Uy 2006; Dries, to its ability to respond to changes in market per kilogram versus 1.2 yuan per kilogram), Reardon, and Swinnen 2004; Zuhui, Qiao, and Yu requirements. It doubled monthly sales of increasing the income of the cooperative's 2006. and advances in production, transport, and Figure 5.6 Transport, handling, and packaging are other supply-chain technologies (chapter major costs for French bean exports in Bangladesh 2). Comparatively low and declining tar- $ per 100 kilograms, 2004 iff barriers and year-round supplies also 4.6 34.1 increased the competitiveness of develop- ing-country exports.56 Fresh and processed 13.5 fruits and vegetables, fish and fish products, meat, nuts, spices, and floriculture account airport for about 47 percent of the agricultural to exports from developing countries, which in 2004 amounted to $138 billion (chapter Transport 2). Continued growth of these high-value 2.3 0.4 exports will require efficient value chains, 0.9 0.3 particularly domestic transport, handling, 12.1 Cooling Packing and packaging, which make up a large share of the final costs (figure 5.6). center Grading to cleaning price Meeting sanitary and price Sorting, phytosanitary standards Farm Transport processing FOB For agrofood products, sanitary and phy- Source: Global Development Solutions LLC data 2004. tosanitary (SPS) standards govern inter- national trade to address food safety and agricultural health risks associated with fication in agricultural exports focus atten- pests (fruit flies), food-borne and zoo- tion to how widely the standards for food notic diseases (foot and mouth and mad safety and animal and plant health diverge cow diseases), and microbial pathogens across countries--and the different capaci- and other contaminants (mycotoxins and ties of governments and commercial supply pesticides). The rapid growth and diversi- chains to manage them. 130 WORLD DEVELOPMENT REPORT 2008 In reaction to the periodic "food scares" management functions of government. The in industrial countries, coupled with bet- greater attention to good practices in agri- ter scientific knowledge and greater public culture and food processing may not only concern about these various risks, many improve export competitiveness, but also countries tightened their SPS standards or generate spillover benefits to domestic con- extended their coverage to new areas. Pub- sumers. Although there will inevitably be lic standards were also introduced to ensure winners and losers, this view suggests that fair competition, reduce information costs enhanced capacity to comply with stricter to consumers (organic foods), and promote standards can provide the basis for more competition based on quality.57 In paral- sustainable and profitable agrofood exports lel, the private sector developed standards in the long term. and supplier protocols to ensure compli- There is general agreement that SPS ance with official regulations, fill perceived standards affect agrofood trade, but there gaps in such regulations, differentiate their is no consensus on the relative importance brands in a competitive market place, and of individual measures in relation to other otherwise manage their commercial and trade-distorting measures, or on the aggre- reputational risks.58 These standards tend gate net effects of those measures. The lack to blend food safety and quality manage- of consensus is not surprising, because esti- ment concerns--or to have protocols that mating the impact of such standards pres- combine food safety, environmental, and ents enormous empirical difficulties. Sev- social parameters (child labor, labor condi- eral studies based on econometric models tions, and animal welfare). An example is have estimated very large potential losses protocols developed by the transnational in trade.62 In contrast, most industry case Euro-retailer, Produce Working Group studies identify an array of competitive fac- for Good Agricultural Practices, which tors affecting trade (of which standards are includes 33 retail and food service compa- only one) and typically point to both "win- nies in Europe and Japan.59 ners" and "losers," not to absolute declines A concern for developing countries is in trade. When the Guatemalan raspberry the proliferation and stringency of food- industry faced official and private market- safety and health measures being adopted access problems following an outbreak of in export markets. Many fear that the food-borne illness in the United States, emerging standards will be discriminatory many leading operators shifted their pro- and protectionist. Developing countries duction base across the border into Mexico. worry that they will be excluded from the While the Guatemalan industry has never export markets because they lack in-coun- recovered, exports from Mexico and Chile try administrative and technical capacities have served an expanding market.63 to comply with the requirements or that the costs of compliance will erode their com- Meeting the costs of compliance petitive advantage. The standards could Despite the worry that SPS standards and further marginalize weaker economic the cost of compliance will disadvantage players, including smaller countries, enter- developing countries, recent studies find that prises, and farmers. Both anecdotal cases compliance costs64 tend to be small relative and research lend some evidence to support to the scale of most export industries. Fixed, this "standards as barriers" perspective.60 nonrecurrent costs are generally 0.5 percent An alternative view highlights the to 5.0 percent of three-to-five-year exports, opportunities in the evolving standards while recurrent costs tend to be 1 percent environment and the scope for capitaliz- to 3 percent of annual exports.65 The focus ing on them.61 Common public and private on compliance costs can distract countries standards across international markets can from the benefits, many of them long term reduce transaction costs. Standards can and intangible. Productivity gains, reduced also provide incentives for modernizing wastage, worker safety, environmental ben- developing-country supply chains and help efits, and the value of continuing market clarify the necessary and appropriate risk access can be underestimated or not counted Bringing agriculture to the market 131 as benefits. Compliance can also generate export standards that led to the shift from spillover benefits to domestic consumers smallholder contract farming to large-scale from greater awareness of food-safety risks integrated estate production, the higher and access to safer products. horticulture exports increased incomes Empirical work on the impact of more and reduced regional poverty by about 12 stringent standards on smallholder partici- percentage points and extreme poverty pation in higher-value supply chains show a by half.67 Poor households benefited more mixed picture. In theory, there are economies through labor markets than through prod- of scale in product traceability, certification, uct markets (box 5.6). and testing that tend to provide a competi- tive advantage to larger production units. Looking at the benefits and choices Yet there are examples from many countries Developing-country suppliers rarely face where, because of limits on land acquisition all-or-nothing choices when determining or other features of the agrarian structure, the changes and investments to conform smallholders remain the dominant suppli- to emerging standards. They have a range ers for export firms.66 Consequently, insti- of choices. One is compliance--adopting tutional arrangements have been developed measures to meet the standards. Another is to manage the attendant risks and transac- voice--seeking to influence the rules of the tion costs of sourcing exports with exacting game. A third is redirection--seeking other standards from smallholders. markets and countries or changing the mix Also important is the large increase in of products.68 Suppliers need to weigh the off-farm work opportunities with expanded costs and advantages for different products agrofood exports. In Senegal, despite tight and market segments. In some cases, there B O X 5 . 6 Employment gains and reduced poverty in rural Senegal Fresh fruit and vegetable exports from Sen- downstream buyers (to ensure markets) of households to 34 percent). While con- egal to the European Union (EU) increased and upstream suppliers (to guarantee food tract farming favored larger farmers, poorer significantly in the last 15 years, despite the safety, quality, and the timing of production). households participated as farm workers. Par- tightening of SPS standards. Senegal's main Increased vertical coordination led to the ticipation in fresh fruit and vegetable export export is French beans, which account for 42 shift from contract farming with smallholders production, whether as a worker or contract percent of fresh fruit and vegetable exports, to large-scale estate production in agroin- farmer, raised household incomes (figure more than doubling from 3,000 metric tons in dustrial farms. below). Estate farm workers had incomes 1991 to 7,000 metric tons in 2005. Changing The incidence of contract farming 1.2­2.3 million CFA francs higher than non- EU SPS standards put pressure on export- declined (from 23 percent of participating participating households, while contract ers to invest more to meet these standards households to 10 percent), but employment farmers had incomes between 2.4 million and and to increase vertical coordination with in estate farms increased (from 10 percent 4.1 million CFA francs higher. Household participation in French bean export production in Senegal Incidence of poverty and extreme poverty among participating households, 2005 Share of participating households, % Share of households, % 40 60 Poverty Total participants Extreme poverty 30 40 20 20 10 Contract farmers Estate farm workers 0 0 1991 1993 1995 1997 1999 2001 2003 2005 Non-participants Estate farm Contract workers farmers Source : Maertens and Swinnen 2006. 132 WORLD DEVELOPMENT REPORT 2008 Table 5.2 Public and private sector roles to enhance trade-related SPS compliance and quality management capacity Public sector Private sector Policy and regulatory environment Good management practices Pursue international dialogue; adopt domestic food safety legislation and Implement appropriate management practices (hazard analysis and critical standards consistent with local conditions and preferences, WTO, and other control point, "good" agricultural practices); obtain formal certification where trade obligations viable Risk assessment and management Traceability Strengthen national or subnational systems for pest, animal disease, and market Develop systems and procedures to enable traceability of raw materials and surveillance; support research on food safety and agricultural health concerns intermediate and final products Awareness building and promoting good practices Develop training, advisory, and conformity assessment services Support consumer awareness campaigns on food safety; promote good Strengthen human capital, physical infrastructure and management systems agricultural hygiene, and food processing practices to be integrated into to supply support services to agriculture, industry, and government related to extension programs; invest in appropriate laboratory infrastructure; accredit quality and food-safety management private laboratories Collective action and self-regulation Infrastructure investments Self-regulate through adoption and oversight of industry "codes of practice"; Improve water supply and sanitation and marketing facilities alert government to emerging issues; advocate for effective government services Source: Adapted from World Bank (2007e). may be larger and more profitable oppor- from developing countries. Geographic tunities to serve the domestic market, a indications (labeling such as Blue Mountain regional market, or industrial-country seg- coffee from Jamaica), which capitalizes on ments that impose less stringent standards local know-how and special agroecologi- or allow more time to implement them. cal conditions to establish brand identity, Addressing the export challenges of SPS are one example. Organic, Fair Trade, and standards requires joint public and private Rainforest Alliance­certified products are efforts. The public sector should take the others. Organic products are grown without lead in policy (standards and food-safety the use of conventional pesticides, artificial legislation), in research on risk assessment fertilizers, or sewage sludge--and pro- and good management practices, and in cessed without ionizing radiation or food disease surveillance (table 5.2). The pri- additives.71 Fair Trade seeks greater equity vate sector should take the lead in building in international trade and aims to contrib- awareness, training, and complying with ute to sustainable development by offering food-safety and agricultural-chemical-use better market conditions and securing the requirements, either individually or collec- rights of marginal producers and workers.72 tively through trade associations. Rainforest Alliance­certified products meet There is growing evidence that countries stringent environmental and social stan- staying abreast of technical and commer- dards for production. cial requirements and anticipating future Retail sales, mainly to meet the grow- changes have repositioned themselves in ing demand in high-income countries, and more remunerative market segments.69 To area planted under these products have strengthen local capacity to meet these stan- expanded significantly. The area planted to dards, developing countries can draw sup- organic crops reached 31 million hectares port from the Standards and Trade Devel- in 2005, with retail sales reaching $23.9 opment Facility, a global program aimed at billion in the EU, Canada, United States, providing financial and technical assistance and Asia in 2006.73 The biggest developing- to countries to enhance their expertise and country producers of organic products are capacity to analyze and implement SPS China and middle-income Latin American standards and improve their human, ani- countries. Sub-Saharan countries account mal, and plant health situation.70 for a large proportion of organic cotton production, while Asia and Latin America Decommodification dominate production of organic coffee and in specialty markets cocoa. Retail sales of certified Fair Trade The "decommodification" of some tradi- products in high-income countries reached tional agricultural products opens alter- $1.4 billion in 2005. Bananas and coffee are native markets for higher-value products the most traded products of Fair Trade.74 Bringing agriculture to the market 133 Fair Trade: How fair? defined by the World Trade Organization Most case studies highlight the positive reduce this risk. The risk of protection is impact of Fair Trade on producer prices, lowest for tropical products with limited incomes, and well-being. Some benefits of developed-country domestic competi- Fair Trade include building capacity (sup- tion and highest for in-season temperate port services, improved market informa- products.78 tion and awareness), empowering local An expansion of developing-country non- actors, mitigating gender imbalances, and traditional exports could create an adding- providing clear environmental benefits.75 up problem if several countries rapidly There are concerns, however, about the expand production, perhaps so much that sustainability of Fair Trade. Producers in export revenues decline. The potential for some developing countries face problems of this is greatest in commodity markets for rationing, because Fair Trade prices are set unprocessed foods.79 The potential compe- above market clearing levels and potential tition posed by efficient large producers-- supply is exceeding demand. There are also such as Brazil and China--can also be sig- concerns about long-term effects on invest- nificant.80 The Food and Agriculture ment and productivity and the efficiency of Organization of the United Nations esti- Fair Trade channels. But few evaluations mates that an increase in China's exports of have been carried out. green beans is likely to reduce world market Recent studies show that the costs and prices, with adverse effects on the export margins for coffee sold through Fair Trade revenues of other developing countries.81 So are high, and that intermediaries, not farm- under some circumstances, the expansion ers, receive the larger share of the price pre- of agricultural exports by some market par- mium. One estimate is that growers receive ticipants could curtail market potential. 43 percent of the price premium paid by the A close eye needs to be kept on export consumer for Fair Trade roasted coffee and products dominated by one or two coun- 42 percent for soluble coffee.76 The higher tries--or when smaller countries simul- cost of processing and marketing is partly taneously expand their export market explained by the diseconomies of scale shares.82 This emphasizes the need for related to the small volumes and high asso- export-promotion agencies in developing ciated costs: certification of supply-chain countries to build stronger capacities in actors, membership fees, advertising, and market intelligence. campaigning.77 Conclusion Market saturation: more production Markets are good for efficiency, and much at lower prices? progress has been made in market devel- There is also concern about export market opment, especially under private sector saturation for high-value exports, as devel- leadership. But further efficiency gains will oping countries jump onto the same export require public sector support to deliver the bandwagon, often referred to as the "adding necessary public goods, foster institutional up" or "fallacy of composition" problem. If innovation, and secure competitiveness. all countries, and especially large countries, Because efficient markets do not always try to substantially increase their exports secure socially desirable outcomes, comple- of a product, there is a risk that they will mentary policies are often needed to ensure encounter rising protection from industrial smallholder participation. countries--or that the terms of trade will A large agenda remains in improving the decline so much that the benefits of any performance of the marketing systems in increased export volume are more than developing countries. Public investments to offset by lower export prices. While there expand access to rural infrastructure and is some evidence that developing countries services--such as rural roads and transport face protectionist tendencies from indus- services, physical markets, telecommunica- trial (and also some developing) countries tions, and electricity--will be critical to when exports pass a threshold, the rules reducing transaction costs and physical losses 134 WORLD DEVELOPMENT REPORT 2008 and to enhancing transparency and competi- tions to guard against opportunistic and tiveness in traditional markets. Technical uncompetitive behavior in the marketing and institutional innovations reducing trans- system. Public-private partnerships can action costs and risks also show promise, also be important in conducting research especially the wider use of information tech- and capacity building to develop good agri- nologies (mobile phones, the Internet, and cultural practices, meet the new domestic commodity exchanges) and vertical coordi- and international SPS standards, and train nation arrangements with individual farmers and assist farmers to adopt them. or producer organizations. The public sector can facilitate small- Rapidly growing local and international holder access to the big opportunities offered demand for high-value agricultural products by market development. Greater access to opens important growth opportunities for assets for smallholders (as has clearly been the agricultural sector in developing coun- seen in the procurement preferences of super- tries. However, modern procurement sys- markets), level playing fields, and strong tems for integrated supply chains and super- producer organizations to achieve scale and markets with stringent food-safety standards market power are necessary elements. The raise concerns about how to ensure that opportunities offered by major changes in developing countries in general, and small markets will work for the poor only if these farmers in particular, share in these growth complementary policies are in place. opportunities. The private sector can enable smallhold- International experience highlights the ers to participate as partners in modern pro- respective roles of the government and the curement systems and exports. It can setup private sector to meet these challenges. A innovative vertical coordination arrange- priority area for public action is to establish ments with farmers or producer groups. It an enabling policy environment (competi- can facilitate farmer access to credit, inputs, tion policy, contract enforcement, setting extension, and certification. It can support grades and standards, food-safety legisla- the training of farmers in good agricultural tion). It will also involve developing cred- practices to meet quality, food-safety, and ible public institutions to enforce regula- international sanitary standards. focus D Agribusiness for development A dynamic private agribusiness sector linking farmers and consumers can be a major driver of growth in the agricultural and the rural nonfarm sectors. But growing agribusiness concentration may reduce its efficiency and poverty reduction impacts. A better investment climate for small and medium enterprises can improve competitiveness. Targeted public-private sector partnerships and corporate social responsibility initiatives are instruments to promote smallholder participation. A gribusiness is the off-farm link in small, mostly in rural market towns, and competitive small and medium agroenter- agrofood value chains. It provides operated by households that often have prises in rural areas can link smallholders to inputs to the farm sector, and it wage labor and farming as other sources value chains and urban demand. links the farm sector to consumers through of income.3 Medium and large agroenter- the handling, processing, transportation, prises are mainly urban based because of The agribusiness revolution: marketing, and distribution of food and the requirements for economies of scale Are there tradeoffs? other agricultural products.1 Thus, there are and infrastructure. The large enterprises are Growing concentration in the strong synergies between agribusiness and often dominated by multinational corpora- agribusiness sector the performance of agriculture for develop- tions that have consolidated through verti- Driven by gains from economies of scale ment. Dynamic and efficient agribusiness cal and horizontal integration.4 and globalization of the food chain, multi- spurs agricultural growth. And a strong link In recent years, influenced by changes in national agroenterprises increasingly domi- between agribusiness and smallholders can consumer demand and rapid technological nate the agribusiness sector along the value reduce rural poverty. and institutional innovations, the struc- chain. They provide inputs such as pesti- Agribusiness has a large and rising share ture of agribusiness has changed dramati- cides, seeds, and crop genetic technologies of gross domestic product (GDP) across cally and its performance has been highly that have consolidated horizontally and ver- developing countries (figure D.1). Though dynamic. Two major challenges need to be tically into a small number of multinational agriculture declines from 40 percent of GDP addressed in considering the role of agri- firms (table D.1). On the marketing side, a to less than 10 percent as GDP per capita business for development: Market forces few multinational enterprises are broadly rises, agribusiness (including agricultural do not guarantee competitiveness, nor do diversified from seeds, feeds, and fertiliz- trade and distribution services) typically they guarantee smallholder participation, ers to product handling and processing of rises from under 20 percent of GDP to more both essential to link agricultural growth to sweeteners and biofuels. Food processing than 30 percent before declining as econo- development. For these reasons, promoting firms are integrating backward to primary mies become industrial (13 percent in the competitiveness and enhancing smallholder product handling and forward to retail dis- United States).2 participation are two priorities of the agri- tribution. Retailing has been transformed Agribusiness comprises diverse private culture-for-development agenda (chapter by the "supermarket revolution" (chapter agroenterprises, a majority of which are 10). The two complement each other as 5). National, regional, and global supply chains are being radically altered, bypass- ing traditional markets where smallholders Figure D.1 The relative shares of agriculture and agribusiness in GDP change as incomes rise sell to local markets and traders. Supermar- % share of GDP kets control 60 to 70 percent of food sales 60 in Argentina and Brazil, and are expanding Agriculture rapidly in China, India, and urban Africa. 50 Agribusiness Though these trends in agribusiness con- solidation have been going on for years in Thailand 40 industrial countries, they are now becoming Malaysia common in developing countries as well.5 Indonesia Chile In 2004 the market share for the four 30 Agribusiness largest agrochemical6 and seed companies Brazil Argentina Uganda Côte d'lvoire Kenya (the concentration ratio of the top four, or 20 Agriculture CR4) reached 60 percent for agrochemi- Nigeria cals7 and 33 percent for seeds, up from 47 10 percent and 23 percent in 1997, respec- tively.8 The CR4 in biotechnology patents 0 was 38 percent in 2004 (table D.1). In some 150 400 1100 3000 8100 subsectors, global concentration is much GDP per capita, 2000 US$ (log scale) higher--in 2004 one company had 91 per- Sources: WDR 2008 team. Data from Jaffee (1999) as cited in World Bank (2003f); and from Pryor and Holt (1999). cent of the worldwide transgenic soybean Note: Agribusiness includes the value added for agro-related industries and for agricultural trade and distribution area.9 It is generally believed that when an services. Data are for Argentina, Brazil, Cameroon, Chile, Côte d'Ivoire, Ghana, India, Indonesia, Kenya, Malaysia, Mexico, Nigeria, Republic of Korea, South Africa, Tanzania, Thailand, Uganda, and Zimbabwe. industry's CR4 exceeds 40 percent, market 136 WORLD DEVELOPMENT REPORT 2008 Table D.1 Major suppliers of agricultural inputs and growing concentration Agrochemicals Seeds Biotechnology 2004 sales Market share 2004 sales Market share Number Patent share Company ($ million) (%) ($ million) (%) of U.S. patentsa (%) Monsanto 3,180 10 3,118 12 605 14 Dupont/Pioneer 2,249 7 2,624 10 562 13 Syngenta 6,030 18 1,239 5 302 7 Bayer Crop Sciences 6,155 19 387 2 173 4 BASF 4,165 13 -- -- -- -- Dow Agrosciences 3,368 10 -- -- 130 3 Limagrain -- -- 1,239 5 -- -- Others/Private 7,519 23 16,593 66 1,425 34 Public Sector -- -- -- -- 1,037 24 Market concentrationb CR4 (2004) 60 33 38 CR4 (1997)c 47 23 Sources: UNCTAD 2006b; International Seed Federation at http://www.worldseed.org. a. Number of U.S. agricultural biotechnology patents issued during the 1982­2001 period. b. Market concentration is measured by the concentration ratio CR4, which indicates the market share of the four largest firms participating in the market. c. Fulton and Giannakas 2001. -- = not available. competitiveness begins to decline,10 leading tor is not easy, and there are tradeoffs. Con- to have access to private financial services, to higher spreads between what consumers trols and administrative requirements will risk-sharing institutions, and business pay and what producers receive for their increase transaction costs, commercial and development services. produce.11 political risks, and opportunities for rent Rules and regulations for intellectual The high concentration in multinational seeking. Interventions protecting weak mar- property rights, employment conditions, agribusiness is evident in coffee, tea, and ket players may do more harm than good-- contracting, and product standards also cocoa. Coffee is produced by an estimated 25 consumers, small farms, and small enter- affect the profitability of agroenterprises million farmers and farm workers, yet inter- prises may lose out if private enterprises and the distribution of benefits from agri- national traders have a CR4 of 40 percent, and vote with their feet or pass on increased business development. Barriers to entry coffee roasters have a CR4 of 45 percent. There transaction costs to them. But support to in establishing businesses are particularly are an estimated 500 million consumers. agroenterprise development can increase strong for small businesses, which suffer The share of the retail price retained by competitiveness by favoring entry of small more from poor access to finance and weak coffee-producing countries--Brazil, Colom- and medium enterprises (SMEs) and facili- business skills.15 bia, Indonesia, and Vietnam account for 64 tating the inclusion of smallholders. Addressing bottlenecks percent of global production--declined Instruments to address the bottlenecks to from a third in the early 1990s to 10 percent Small and medium small and medium agroenterprise devel- in 2002 while the value of retail sales dou- agroenterprise development opment include matching grants, chal- bled. Similar concentrations are observed in Two complementary approaches can be fol- lenge funds in public-private partnerships, the tea value chain where three companies lowed to support agroenterprise develop- preferential access to finance, partial loan control more than 80 percent of the world ment for competitiveness and participation. guarantees, tax breaks, and assistance in the market. Cocoa has a CR4 of 40 percent for One is to improve the investment climate to formation of agroindustrial networks. For international traders, 51 percent for cocoa induce the entry of private investors, partic- developing smaller agroenterprise in rural grinders, and 50 percent for confectionary ularly SMEs. Surveys of the rural investment areas, the focus has usually been on direct manufacturers. Developing countries' claim climate in Indonesia, Nicaragua, Sri Lanka, interventions rather than on improving the on value added declined from around 60 and Tanzania indicate that the lack of rural investment climate that could have wider percent in 1970­72 to around 28 percent in finance, infrastructure, and business and and more sustained impacts. The reason is 1998­2000.12 public services is particularly binding.14 The that ministries of agriculture have no man- Concentration widens the spread other approach targets bottlenecks in small date in generic issues of investment climate, between world and domestic prices in com- and medium agroenterprise development, whereas ministries mandated with economic modity markets for wheat, rice, and sugar, particularly in value chains. policies have limited interest in agricultural which more than doubled from 1974 to Improving the investment climate value chains in rural areas.16 1994. A major reason for the wider spreads The investment climate's four main compo- There is some debate over matching grants is the market power of international trading nents can all contribute. First is to ensure a to promote agribusiness because they have companies.13 sound macro policy environment. Second is been linked to market distortions and favorit- Balancing private investment to provide public goods such as infrastruc- ism, and they do not always promote growth- and competitiveness ture. Third is to have a legal and regulatory oriented SMEs. But they have had some suc- Designing and implementing policies to framework that fosters competition, busi- cesses in increasing the capacity of smallholders induce competition in the agribusiness sec- ness integrity, and fair practices. Fourth is to link to value chains (box D.1). Matching What are the links between agricultural production and food security? 137 even though they can boost market develop- B O X D . 1 Opening export markets to small-scale organic ment for the industry the firm is engaged in. cocoa producers in the Dominican Republic An example is the school milk feeding and dairy development programs sponsored by The Department for International Develop- Growers Association and European cocoa the TetraPak Food for Development Office, ment's (DFID) Business Linkages Challenge buyers. The project also created a better with the objective of improving the health Funds (BLCF) provides cost-sharing grants to quality product that opened new types and academic performance of children while promote business linkages, market develop- of markets for gourmet cocoa producers. creating demand for milk products and sup- ment, and pro-poor impact for smallholders. These investments paid a differential of porting smallholder participation.17 In the Dominican Republic, a 2002 BLCF $405 per ton to small-scale growers, gener- grant, matched by the private sector, funded ated a 25 percent increase in employment At the other end of the spectrum are a two-year organic chocolate production benefiting women, spread computer and programs delivering strong benefits to the project that improved the competitiveness Internet technology across communities, poor while allowing enterprises to break of smallholder organic cocoa producers by and increased the purchasing power of the even, with profits reinvested. An example obtaining higher and more stable prices for broader community--all reducing poverty. is the yogurt-producing venture of Groupe their product. It created stronger relation- Danone in cooperation with the Grameen ships up and down the value chain and forged new links between the Small Cocoa Group in Bangladesh. It extends loans Source: www.businesslinkageschallengefund.org. and technical assistance to smallholders to acquire dairy cows and invests in a process- grants are best used for business opportuni- holder participation. There is a growing ing plant for dairy products that meet local ties that can be profitable in the long run tendency among large enterprises to pursue nutritional needs and create employment in but face high startup costs. Oversight from business ventures that not only appeal to processing and distribution.18 independent peer review boards is essential corporate interests but also deliver a social In between are public-private partner- to ensure fairness and transparency. return, often benefiting the poorest of the ships that can be advantageous for inves- poor. These activities can take a variety of tors but may not initially yield a return. Corporate social responsibility forms depending on their direct economic The Mars Corporation is taking the lead Smallholder inclusion in agrofood value payoff, but are largely public-private or in Indonesia in coinvesting with the public chains can also occur through agribusiness civil society-private partnerships, where the sector and donors in a research and devel- initiatives that are motivated by more than driver is the private sector. opment program to promote cocoa quality just profits. Global agroenterprises can use At one end of the spectrum are programs and a sustainable supply while paying small- their resources and expertise to help develop delivering social benefits, but with no short- holders a premium for growing the higher agrofood value chains and promote small- run profit-making value for the enterprise, quality product.19 Supporting smallholder competitiveness through institutional innovations 6 Structural adjustment in the 1980s disman- · Innovations in finance can provide tled the elaborate system of public agencies smallholders with better access to credit, that provided farmers with access to land, savings facilities, money transfer mecha- c h a p t e r credit, insurance, inputs, and cooperative nisms, remote payments, and leasing. organizations. The expectation was that · Weather-indexed insurance can pro- removing the state would free the market vide new ways of reducing problems of for private actors to take over these func- imperfect information in mitigating tions--reducing their costs, improving farmers' risks. their quality, and eliminating their regres- · Institutional innovations can also pro- sive bias. Too often, that didn't happen. mote more efficient input markets, as In some places the state's withdrawal was new local agrodealers have emerged and tentative at best, limiting private entry. market-smart subsidies are tried. Elsewhere, the private sector emerged only slowly and partially--mainly serv- · Producer organizations can engage in ing commercial farmers but leaving many more effective collective action to access smallholders exposed to extensive market services, achieve economies of scale in failures, high transaction costs and risks, markets, and acquire voice in policy and service gaps. Incomplete markets and making. institutional gaps impose huge costs in for- gone growth and welfare losses for small- Land policies for secure rights holders, threatening their competitiveness and reallocating resources and, in many cases, their survival. Institutions governing land rights and The last 10 years have seen a broad effer- ownership affect the efficiency of land use. vescence in institutional innovations to fill If those who farm lack secure rights to the deficits in land markets, financial ser- land, they have less incentive to exert effort vices, input markets, and producer organi- to use it productively and sustainably or to zations. Although significant progress has carry out land-related investments. And if been made, this institutional reconstruc- women--who cultivate much of the land tion of agriculture is still incomplete, espe- in Africa--have few vested rights, house- cially for smallholders and more marginal holds tend to produce less than their asset areas. Moving forward requires more clar- base could otherwise provide. Secure and ity on the roles of the state and the private unambiguous property rights also allow sector--and more analysis of what works markets to transfer land to more productive and how it could be improved. This chapter uses and users. Cost-effective systems of documents how: land administration facilitate agricultural · New mechanisms can increase the secu- investment and lower the cost of credit by rity of property rights, facilitate land increasing the use of land as collateral, thus reallocation as rural households adjust reducing risk for financial institutions. their livelihood strategies or leave for the Institutions governing access to land city, and facilitate access to land for the have a long history of adapting to social, landless. natural, and economic factors. Their diver- 138 Supporting smallholder competitiveness through institutional innovations 139 sity reflects land's value not only as a factor land institutions.2 With greater knowledge of production but as a source of status, cul- of such laws, land-related investments and tural identity, and political power. Design- productivity increase, as evidence from ing property rights that support efficient Uganda suggests. With fewer than a third of land use and recognize the multiplicity of households informed about the law, further rights, particularly for women and indige- efforts to disseminate information could nous groups, is a highly complex issue that have a large impact.3 requires further exploration. Land policies Communal lands and common property were often adopted less to increase effi- resources, including grazing and indig- ciency than to further the interests of dom- enous lands, are a special case of custom- inant groups, making land issues politically ary tenure. In addition to their productive charged. This section addresses how recent value, they are often important as safety institutional and technological innovations nets for the poor because of the cultural can help deal with such legacies, increase values embodied in them. But they are vul- the security of tenure, and provide broad- nerable to degradation and appropriation based access to land to maximize its contri- by powerful chiefs, outsiders, and bureau- bution to agricultural competitiveness and crats. Increasing access to and the produc- economic development. tivity of such resources can be achieved by the following: Enhancing tenure security · Formalizing customary laws in ways that Providing land owners or users with secu- are participatory and reflect the diversity rity against eviction enhances their com- of the ethnic, historical, and social con- petitiveness by encouraging land-related struction of land.4 Delineating legally investment, as numerous studies show.1 valid boundaries, identifying existing Earlier interventions to improve tenure rights that may overlap or be of a seasonal security focused almost exclusively on indi- nature (between herders and sedentary vidual titling, but this can weaken or leave agriculturalists), and registering them as out communal, secondary, or women's appropriate. rights. Moreover, the process of titling can be used for land-grabbing by local elites and · Vesting day-to-day management deci- bureaucrats. So, although individual titling sions in an accountable body that func- is still appropriate in many cases, it needs tions transparently--say, as a legally to be complemented by new approaches to incorporated user group with clear rules securing tenure. for conflict resolution that are respected by all involved. Recognizing customary tenure. In many · Making evolution to more formal types countries, vast expanses of land held under of tenure possible through a well-defined customary tenure do not enjoy legal pro- and transparent process. In Mexico cer- tection, often because of legislation from tified individual land plots in ejido com- colonial times. For example, many Afri- munities can become fully transferable can jurisdictions considered most land to freehold land through a qualified vote be "state land." Those who had cultivated by the assembly. But the fact that fewer such land for generations received only pre- than 15 percent of ejidos chose full titling carious tenure rights and could lose their shows that many users see that the ben- land--say, to make room for "strategic" efits of maintaining communal relations investments--with little or no compensa- can be greater than those from individu- tion. Over the last decade, a large number alization of rights. of African countries adopted a wave of new land laws to recognize customary tenure, Documenting land rights. While legal make lesser (oral) forms of evidence on recognition of existing rights is an indis- land rights admissible, strengthen women's pensable first step, there is often demand land rights, and establish decentralized to demarcate plots and issue certificates 140 WORLD DEVELOPMENT REPORT 2008 to reduce boundary disputes and facili- key asset, land rights are critical for women's tate land transactions. High survey stan- bargaining power within the household, dards and the associated costs under tradi- their broader economic opportunities, and tional technology--between $20 and $60 their long-term security in cases of divorce per parcel5--have been a major obstacle or the death of a family member. Recog- to broader implementation. But recent nition of the adverse consequences of dis- advances in technology--particularly the crimination against women in this area has widespread availability of satellite imag- led to changes in constitutional provisions ery and handheld global positioning sys- and more specific legislation to require gen- tem (GPS) devices, together with institu- eral equality of men and women, mandate tional arrangements that put local actors issuance of joint titles, modify inheritance in charge of systematic adjudication--can legislation, and ensure female representa- greatly reduce the cost of issuing certificates tion on land administration institutions.8 for boundaries with reasonable accuracy. Such measures can have a positive impact. Experience points to considerable demand But legal reforms that clash with traditional for these land certification programs, as in power arrangements may be indifferently Ethiopia (box 6.1). enforced. Examples, many of them from Where women have a main role in culti- Asia or Latin America, show that to mini- vation, their land rights affect productivity mize clashes, a mix of mediation and raising and investment.6 In addition, with land as a awareness can complement other programs to allow landholders to effectively exercise their rights. For example, Mexico's ejido sys- tem now includes mediation to protect the B O X 6 . 1 Benefits from community-driven land property rights of women. In Nicaragua a certification in Ethiopia program to title land rights in the names of Thanks to the promising results from issu- reduce encroachment (76 percent) and both spouses included consultations with ing land-use certificates to about 632,000 increase soil conservation (66 percent). the indigenous population to clarify both households in Tigray in 1998/99, other A rough estimate puts the cost of communal and collective rights. Ethiopian regions have embarked on a certificates at only $1 a plot, in large part large-scale certification effort, issuing because local inputs to conflict resolution land-use certificates to about 6 million and surveying are voluntarily provided by Expanding options for conflict resolution. households (18 million plots) in 2003­05. local land-use committees. Adding hand- In many developing countries a large share The process starts with local aware- held GPS with accuracy to less than one of court cases involve land-related disputes. ness campaigns, sometimes with the dis- meter to record corner coordinates would Apart from clogging courts and stifling tribution of written material, followed by increase these costs by about 60 cents. elections of land-use committees in each With modern technology making low-cost investment, unresolved conflicts can depress village. After a period of training, these approaches more feasible, systematic cer- the productivity of land use. In Uganda pro- committees resolve existing conflicts, tification could help implement new land ductivity on plots under dispute is less than referring cases that cannot be settled legislation in Africa and beyond. Without amicably to the courts. This is followed by mechanisms to keep records up to date, a third that on undisputed plots.9 Tradi- demarcation and surveys of undisputed however, the effect may be short lived. tional institutions can resolve some local- plots in the presence of neighbors, with Estimates for the Amhara Region suggest ized disputes, but they are not well equipped subsequent issuance of land-use certifi- that updating should be possible at about to address disputes that cut across groups cates that, for married couples, include 65 cents per transaction. names and pictures of both spouses7 but Demand for certificates is strong: 95 belonging to different communities--for no sketch map or corner coordinates. percent of households outside the program example, between nomads and sedentary Because land remains state owned would like to acquire one, 99 percent of agriculturalists, across ethnic boundaries, with strong restrictions on transfers, cer- those with a certificate would be willing to or between individuals and the state. Tradi- tificates document only inheritable use pay an average of $1.40 to replace a lost cer- rights. Even so, more than 80 percent of tificate, and 90 percent (most of them will- tional institutions also tend to be under the respondents in a nationwide survey indi- ing to pay) would like to add a sketch map. control of men and favor men in disputes cated that certification reduced conflicts, Although the positive impact of certifi- with women, such as those over inheritance encouraged them to invest in trees and cates is likely reduced by current policies rights.10 Expanding the options to resolve soil conservation and to rent out land, that restrict land rental and prohibit sales and improved women's situations. They or mortgaging of land, certification can be land conflicts systematically and out of also felt that having a certificate would a step toward a broader process of land court can have large benefits, especially for increase the possibility of getting com- policy reform. the poor and for women who otherwise are pensation in cases of land taking. Many seldom able to enforce their legal rights, as expect demarcation of communal land to Source: Deininger and others 2007. demonstrated in Ethiopia and India.11 Supporting smallholder competitiveness through institutional innovations 141 Modernizing land administration. In many countries, land administration is one B O X 6 . 2 Improving the efficiency of land of the most corrupt public services. Irregu- administration services in Georgia larities and outright fraud are frequent in allocating and managing public lands. The Georgia established a single national land The time for property registration fell administration agency, made all informa- from 39 days to 9 days, and the associated rents can be large. In India, bribes paid tion publicly available on the Internet, cost decreased from 2.4 percent to 0.6 annually by users of land administration put licensed private surveyors in charge percent of property value, with attendant services are estimated at $700 million,12 of conducting surveys, and drastically cut benefits for land users--evidenced by staff (from 2,100 to 600) while increasing greater rental and sales market activity three-quarters of the public spending on salaries eightfold. To keep the registry and more mortgages and credit by private science, technology, and environment. In financially independent, the registry law and agricultural lenders. Kenya, land grabbing by public officials, was revised, a free legal consultation systemic during 1980­2005, was "one of established, and the fee structure adjusted. Source: Dabrundashvili 2006. the most pronounced manifestations of corruption and moral decadence in our society."13 Modern technology and part- If tenure is insecure or restrictions con- strain land leasing, productivity-enhancing nerships with the private sector can yield rental transactions will not fully material- quick benefits. One example: computeriz- ize or the poor may be excluded. In the ing records in the Indian state of Karnataka Dominican Republic, Nicaragua, and Viet- is estimated to have saved users $16 million in bribes.14 Automating registration and nam, insecure land ownership reduced the propensity to rent and limited transactions the associated land valuation allowed out- to preexisting social networks.18 In Ethio- sourcing to the private sector, which sig- pia, fear of losing the land, together with nificantly improved access to the service explicit rental restrictions, was the main and cut stamp duties from 14 percent to reason for suboptimal performance of rental 8 percent, while quadrupling tax revenue from $120 to $480 million.15 markets.19 In India, tenancy restrictions reduce productivity and equity (box 6.4). Land administration institutions will Replacing them with policies that facilitate be viable in the long term and independent renting would improve access to land by from political pressure only if they can sus- those remaining in the rural sector. tain their operations financially, without charging more than users are willing to pay. Strengthening land sales' markets. Sales Although the reforms to make them more markets for acquiring land increase invest- efficient are well known, with their effec- ment incentives and provide a basis for tiveness repeatedly shown (box 6.2), imple- using land as collateral in credit markets. mentation faces strong resistance from However, imperfections in other mar- interests benefiting from the status quo. kets, and expectations of future land price Access to land increases, affect markets for land sales more than those for rentals, implying that sales Enabling land rental markets. Getting land would not necessarily transfer land to the markets to work is fundamental where new most productive producers. Historically, options emerge for households to diversify most land sales happened under distress, livelihoods and eventually leave agriculture. requiring defaulting landowners to cede In developed countries, about 50 percent of their land to moneylenders, who could farmland is rented, often under sophisticated amass huge amounts of it.20 contracts. In most developing countries, by Data on land sales over 20 years in India contrast, land rental markets are atrophied. reveal some peculiar features of land sales However, land rentals are increasing where markets: they had not been practiced extensively ear- lier--as in Eastern Europe;16 in Vietnam, · Land went to better cultivators and from where rental participation quadrupled to 16 land-abundant to land-scarce households, percent in five years;17 and in China, where allowing the land-scarce to improve their rentals allow rural communities to respond welfare without making sellers worse to large-scale out-migration (box 6.3). off. But sales markets are thinner, more 142 WORLD DEVELOPMENT REPORT 2008 B O X 6 . 3 How land rentals can increase productivity and equity in China Land rental markets can contribute much to sample with information on the two parties in the gains, with the rest going to landlords rural diversification and income growth in a land transactions highlights the impact of land in rents. rapidly growing economy. Look at China. After rentals on occupational structures, land pro- · Net income for both renters and landlords the introduction of the household responsibil- ductivity, and welfare: increased--respectively by 25 percent ity system in 1978, land-use rights were allo- · Land rentals transformed the occupational and by 45 percent (partly due to migration cated on a per capita basis, leading to an egali- structure. While almost 60 percent of those income)--in a very equitable way. tarian land "ownership" structure, with land renting out their land relied on agriculture as also functioning as a social safety net. Although This shows the importance of well- their main source of income before entering households held 15-year land-use contracts, functioning land rental markets in a context rental markets, only 17 percent continued to administrative reallocation--in clear breach of strong nonagricultural growth and migra- do so--while 55 percent migrated (up from of contractual obligations--was regularly tion. But many producers still feel constrained 20 percent) and 29 percent engaged in local practiced in response to population growth or by insecure property rights. To allow land nonfarm activity (up from 23 percent). to make land available for nonagricultural pur- markets to better respond to the needs of a poses. But with rural-urban migrants tripling · Land rentals also increased productivity. Net changing economy, recent initiatives, espe- from 5 percent of the total labor force in 1988 revenue on rented plots rose by about 60 cially the 2003 Rural Land Contracting Law, aim to 17 percent (or 125 million migrants) in 2000, percent, supporting the notion that rental at strengthening farmers' property rights and the limits of exclusive reliance on administra- markets, by transferring land to better farm- reducing the scope for discretionary interven- tive allocations became obvious. ers from those with low ability or little inter- tion by officials. Decentralized land rentals, which comple- est in agriculture, can improve rural welfare. mented and eventually replaced administrative Renters--who generally had less land, more Sources: Benjamin and Brandt 2002; Brandt, reallocations, have proven just as equitable family labor, and lower levels of assets and Rozelle, and Turner 2004; Cai 2003; Deininger and but significantly more productive. A national education--received about two-thirds of Jin 2005; Kung and Liu 1997. affected by life-cycle events, and less redis- ership, land markets are no panacea for tributive than those for rentals. addressing structural inequalities that · Climate shocks increased the probabil- reduce land productivity and hold back ity of distress land sales, although miti- development.24 To overcome such inequali- gated by local safety nets (employment ties, ways of redistributing assets, such as guarantees) and access to credit from land reform, are needed. Postwar Japan, banks.21 the Republic of Korea, and Taiwan (China) show that land reform can improve equity · Although land ownership ceilings im- and economic performance. But there are posed by "reform" may have played a many cases where land reform could not role, land sales and purchases did more be fully implemented or even had nega- than land reform to equalize India's land ownership.22 tive consequences. Evictions of tenants or changes of land use ahead of legislation that This implies little justification for policy would have given greater security to tenants measures to restrict land sales, especially or allowed expropriation of underused land because they tend to drive transactions often made prospective beneficiaries worse underground and undermine access to for- off or prompted land owners to resort to mal credit without addressing the underlying even less-efficient techniques.25 problems of asymmetries in power, informa- If land is transferred through redis- tion, and access to insurance. Safety nets and tributive land reform, improvements in other measures, including redistributing access to managerial skills, technology, land, are more appropriate than constraints credit, and markets are essential for the on sales to deal with these problems and new owners to become competitive. Some prevent distress sales. Land taxes can curb tenancy reforms have proved highly effec- speculative demand and encourage better tive,26 but measures to clarify ownership land use, while providing revenue for local rights are needed to avoid disincentives for governments to fulfill their functions.23 investments. Land reform through market exchange assisted by grants and technical Making land reform more effective. In assistance to selected beneficiaries shows countries with highly unequal land own- promise, with Brazil the leading innovator, Supporting smallholder competitiveness through institutional innovations 143 but this approach deserves further analysis of costs and impacts. To be effective, any B O X 6 . 4 Rental markets and the impact of restrictions approach to land reform must be integrated in India into a broader rural development strategy-- using transparent rules, offering clear and Where tenants had few alternatives, land- Higher village incomes increase the lords used land rentals to extract as much propensity to rent, because wealthier unconditional property rights, and improv- as possible. This led Indian policy makers households are more likely to move out ing incentives to maximize productivity to impose rent ceilings to protect tenants of agriculture and rent out their land. gains. Yes, it can enhance access to land and to prohibit tenancy in many states. The equity impact of rental restric- Partly as a result, reported land rental for the rural poor. But to reduce poverty tions is shown by comparing the marginal activity in India declined sharply, from 26 product of one day of labor in agricultural and increase efficiency, reform requires a percent in 1971 to less than 12 percent in self-cultivation (Rs 150 for males and commitment by government to go beyond 2001, contrary to trends in other countries. females) with daily wages in the casual providing access to ensuring the competi- Still, renting continues to be an important labor market (Rs 46 for males and Rs 34 means of accessing land. More households for females). The (statistically significant) tiveness and sustainability of beneficiaries rented land in 2001 than the total number difference implies that, even after sub- as market-oriented smallholders. that have benefited from land reforms tracting payments to the landlord, renting since independence. can improve household welfare consid- Financial services The assumptions underlying inter- erably. Gender discrimination in casual ventions in land rental markets may no labor markets would make renting par- for smallholders longer hold, as a national survey that ticularly attractive for women, consistent The ability of agricultural enterprises and allows comparisons over time suggests. with anecdotal evidence of rural women's Instead of causing reverse tenancy, rental use of self-help groups to rent land, often rural households to invest for the long markets help land-scarce and labor- against the law. And eliminating land term and make calculated decisions for abundant households with agricultural rental restrictions would facilitate moves risky and time-patterned income flows is skills but little education--37 percent of into the rural nonfarm economy. shaped by an economy's financial services. them landless--to rent land from land- abundant and wealthy households that Despite the rapid development of financial take up nonagricultural employment. Source: Deininger, Jin, and Nagarajan 2006. services, a majority of smallholders world- wide remain without access to the services they need to compete and improve their livelihoods. Broader access to financial Lifting the pervasive financial services--savings and credit products, constraints that perpetuate poverty financial transactions, and transfer ser- Financial constraints are more pervasive vices for remittances--would expand their in agriculture and related activities than opportunities for more efficient technol- in many other sectors, reflecting both the ogy adoption and resource allocation. nature of agricultural activity and the aver- Financial services are delivered to rural age size of firms. Financial contracts in rural populations by organizations that exist areas involve higher transaction costs and along a continuum from informal to for- risks than those in urban settings because mal, with the boundaries between catego- of the greater spatial dispersion of produc- ries often blurred. In general, formal finan- tion, lower population densities, the gener- cial institutions are licensed and supervised ally lower quality of infrastructure, and the by a central authority. They include public seasonality and often high covariance of and private commercial banks; state- rural production activities. So banks and owned agricultural or rural development other traditional for-profit financial inter- banks; savings and loan cooperatives; mediaries tend to limit their activities to microfinance banks; and special-purpose urban areas and to more densely populated, leasing, housing, and consumer finance more affluent, more commercial areas of companies. Informal providers of finan- the rural economy. Operating costs there cial services include rotating savings and are lower, loan sizes large enough to cover credit associations, money lenders, pawn- fixed transaction costs, and legal contracts shops, businesses that provide financing to more easily enforced. their customers, and friends and relatives. The rural reality: few households and In between stand financial nongovernmen- small firms can meet their need for credit tal organizations (NGOs), self-help groups, and other financial services. In India a recent small financial cooperatives, and credit survey of 6,000 households in two states unions. showed that 87 percent of the marginal 144 WORLD DEVELOPMENT REPORT 2008 farmers surveyed had no access to formal The root of the problem is that lenders credit, and 71 percent had no access to a sav- tend to offer only a limited menu of prod- ings account in a formal financial institu- ucts, mainly with heavy collateral require- tion.27 Informal financial arrangements ments. Wealthier farmers can obtain larger serve rural communities, but they tend to loans at lower cost from formal lenders fragment along lines of household location, because they can credibly pledge assets or asset ownership, or membership in kin- or future cash flows. Asset-poor households, by ethnic-based networks, all affecting the contrast, are limited to considerably smaller transaction costs of contracting, the size of loans at much higher rates because they have the possible transactions, and the rate of to turn to lenders who must substitute costly interest charged.28 There is thus a tremen- monitoring for collateral. Poor farmers may dous need for financial innovations that can also turn down loans, even if they qualify, place smallholders on a ladder of ascending because they are unwilling to bear the risk financial market access--as well as for inno- of losing collateral, termed "risk ration- vations that can complement financial ser- ing."31 In the studies of Honduras, Nica- vices by managing the systemic risks that ragua, and Peru, 20, 40, and 50 percent of undercut their supply. credit-constrained borrowers, respectively, The costs of financial constraints for are risk-rationed. Access to credit and insur- smallholders are huge--in forgone oppor- ance are thus closely tied conceptually and tunities and in their exposure to risk. In empirically and must be jointly improved to rural Honduras, Nicaragua, and Peru, the enhance access to credit. credit-constrained population constitutes The skewed access to credit can blunt some 40 percent of all agricultural produc- employment and contribute to worsening ers. Producers lacking credit use on average the income distribution. Land market poli- only 50 percent to 75 percent of the pur- cies also become less effective if there are chased inputs of unconstrained producers wealth-biased financial market constraints. and earn net incomes (returns on land and family labor) between 60 percent and 90 Adapting microfinance percent of the unconstrained (figure 6.1).29 to reach smallholders In Central and Eastern Europe, nearly 50 The inadequacies of rural financial markets percent of smallholders in five countries reflect real risks and real transaction costs report financial constraints to be the major that cannot simply be wished, or legislated, barrier to the growth and expansion of away. Innovations are required to permit their enterprises.30 more flexible forms of lending while guar- anteeing that borrowers repay loans. One approach to resolve these prob- Figure 6.1 Credit-constrained rural households lems follows from the pioneering efforts use fewer inputs and have lower incomes of the Grameen Bank. Microfinance insti- Ratio of constrained households to unconstrained, % tutions (MFIs) open the menu of avail- 100 able contracts with new arrangements that substitute for collateral. They often 80 have guidelines to favor groups--particu- larly women--excluded from borrowing 60 through other channels. Many MFIs lend 40 to local groups whose members select one another and share the liability for repaying 20 loans, so local social capital substitutes for wealth as collateral. MFIs often target rural 0 Nicaragua Peru Honduras areas, where social capital is stronger. Input per hectare This shared liability creates powerful Net income per hectare incentives for rigorous peer selection and Total productive wealth borrower monitoring, and it can work well Source : Boucher, Carter, and Guirkinger 2006. when loans are used for a diversity of (quick Supporting smallholder competitiveness through institutional innovations 145 turnaround) activities. However, it works survive without resorting to nontranspar- less well for crop activities, where all produc- ent fees.34 Other regulations make it nearly ers are subject to a common set of weather impossible for MFIs to mobilize savings risks (when one cannot pay, often no one can and accept deposits. Recognizing this, pay) and where project gestation periods are India recently passed a new microfinance long and share the same timing. Weather law reducing the amount of start-up capital risk also undermines the financial stability an MFI was required to have before it could of local MFIs, and most explicitly limit their take deposits. Such reforms need to bal- share of lending to agriculture to reduce ance protecting small-saver deposits with exposure to risk. Moreover, many microfi- expanding the menu of opportunities they nance organizations have targeting criteria face. One possibility is a well-structured for maximum landholding that restrict their insurance scheme for deposits. lending to agricultural activities. To meet the underserved agricultural Reshaping financial services market, MFIs have begun to innovate.32 for smallholders and the rural FUNDEA in Guatemala has offered indi- nonfarm economy vidual loans to agricultural producers of MFIs cannot, however, provide the main- short-cycle tomatoes and other vegeta- stay of rural finance. Promoting, improv- ble crops. It has adopted the value chain ing, or even creating rural institutions to approach to financing inputs and outputs, support a wide range of rural financial using standing crops as collateral. Caja los transactions remains one of the funda- Andes in Bolivia began to accept nonstan- mental challenges facing developing-coun- dard collateral assets and lend to farmers try governments. The range of alternatives well diversified across a range of agricul- is broad. Government-sponsored agricul- tural and nonagricultural activities.33 In tural lending institutions have been suc- 2006 it became a bank, Banco Los Andes cessful in many now-developed economies Procredit, and agricultural loans now con- such as the Republic of Korea and Taiwan stitute 10 percent of its portfolio. (China). But in many developing countries, In short, while microfinance lending in government efforts to improve rural finan- agriculture is still small, there are hope- cial markets have a record of doing more ful signs that innovation will permit the harm than good, heavily distorting market microfinance movement to partially fill the prices; repressing and crowding out private agricultural void, at least for producers with financial activities; and creating central- small enterprises engaged in high-value ized, inefficient, and frequently overstaffed activities, particularly animal husbandry bureaucracies captured by politics.35 There- and horticulture. There is a strong case fore it is not surprising that public agricul- for public policy support to search for, and tural and development banks came under pilot test, technological and institutional heavy criticism in the 1980s.36 Bolivia and innovations that reduce the costs and risks Peru simply closed their traditional agricul- of doing business. Many of the newly devel- tural banks, while The Gambia and many oped innovations may have the character of of the former Soviet republics sold off and a public good, because innovations by one privatized all or part of their state banking lender may be quickly adopted by another. programs.37 This justifies public support for promising start-ups to enable them to reach scale and Reforming public agricultural banks. become financially viable within predeter- Unless state-owned agricultural banks mined time periods. undergo a radical transformation in gover- Reformed financial regulations, coupled nance arrangements that can insulate them with better financial infrastructure, could from political capture, they are unlikely also boost access to financial services in to function in a commercially sustainable many countries. Forty developing and manner and serve the needs of smallhold- transition economies still have interest rate ers. What's needed is some form of privati- ceilings that make it difficult for MFIs to zation. Banrural in Guatemala shows how 146 WORLD DEVELOPMENT REPORT 2008 interference to transform financial institu- B O X 6 . 5 Banrural SA: from ill-performing tions. But such a transformation is hardly agrarian bank to profitable automatic or ensured, because state banks public-private financial institution remain vulnerable to political capture. Key elements of reform include those advocated Banrural SA in Guatemala shows that Bandesa employees (1). Each group elects to improve governance and accountability financial and development goals can its own directors and can sell stock only to of many state functions: transparency and be combined and that a large bank can other members of the group. This unusual remain highly profitable while offering governance model has empowered the professionalization. Financial objectives financial services to poor, rural, and agri- private stakeholders and balanced goals must be promoted by clear incentives for cultural clients. Banrural was created in of profitability and rural development. It is management and staff that tie rewards to 1997, when Guatemala closed Bandesa, sustainable because the board and equity the financial performance of branches. its poorly performing public agricultural makeup cannot be altered significantly bank. With 200,000 credit clients, Banrural over time. has a default rate of less than 1.5 per- A focus on rural areas and poor cli- Providing financial services through self- cent. With 1 million savings accounts, it ents. Banrural's profits come from a high help groups and financial cooperatives. In facilitates the transfer of more than $1.3 volume of small transactions, mostly in several Indian states, a separate movement billion in remittances. It works mainly rural areas. Having learned the lessons outside of Guatemala City. Half its clients of the microfinance revolution, it adapts has emerged, based on village-level women are women, and it provides biometric and financial technologies to its clientele-- self-help groups and their federations at the multilingual devices to serve illiterate and loan officers visit all clients, decisions are village, mandal, and district levels. These indigenous clients. based on an evaluation of business and estimated 2.2 million groups collect sav- An innovative governance model. household income flows, and use of tradi- Banrural is controlled by private share- tional collateral is limited--without losing ings from their members and either deposit holders. The public sector owns less than its identity as a bank. Its lending portfolio them in rural banks or lend them to mem- 30 percent of the equity and provides to agriculture has more than doubled since bers. After demonstrating their capacity no direct subsidies. The remaining 70 it was privatized. To increase its reach to percent is divided among five types of to collect on loans over a six-month time smallholders and rural microenterprises, stock, each represented on the board of Banrural functions as a second-tier bank, period, rural banks will typically leverage a directors. The 10 board seats are divided providing credit lines to more than 150 group's savings by a factor of four, provid- among the public sector (3), unions institutions, such as credit unions and ing additional capital that is mostly used for (mostly agricultural producer unions, not financial NGOs. To build strong community credit unions) (2), Mayan organizations bonds, it provides health care and scholar- agricultural purposes. It is often easier for (2), NGOs (1), small and micro enterprises ships and supports community activities. self-help groups to obtain loans than it is (including microfinance organizations) for larger farmers, many of them poor cus- (1), and the general public and former Source: Trivelli 2007. tomers for rural banks. With the self-help groups responsible for all screening, pro- cessing, and collection activities, the trans- firm budget constraints and appropriate action costs for loans are greatly reduced. governance mechanisms can create a pub- Financial cooperatives and their net- lic-private institution that meets the needs works are reemerging as promising institu- of rural and agricultural finance (box 6.5). tions in rural finance in many countries, Other reforms of state-sponsored lenders combining the advantages of proximity have produced some of the most success- with modern management tools.38 Locally ful agricultural-oriented finance programs, based, their transaction costs are typically including Bank Rakyat Indonesia and lower than those of other financial institu- BAAC Thailand. tions. But because they are members of a Building on existing (but perhaps failed) larger network, they can offer the variety public banks offers the opportunity of and volume of financial services that rural using their branch networks to establish a customers require, and they can pool risks presence and take advantage of scale and as well as costs. In Burkina Faso, RCPB, the spatial dispersion to reduce costs. The suc- largest network of financial cooperatives, is cessful restructuring and later privatization establishing rural service points and very of the former agricultural bank of Mongolia small village-based credit unions, managed (renamed KhanBank in 2006) and of NMB and supervised by financial cooperatives in in Tanzania demonstrate the potential of an larger villages.39 existing branch bank infrastructure, inno- vative and independent management and Expanding the reach of rural finance. In- oversight, and strong barriers to political formation technologies offer a broad array Supporting smallholder competitiveness through institutional innovations 147 of new ways to extend financial services to inadequate legal frameworks, which often rural areas, for value chains and for agri- prevent the collateralization of less con- culture more broadly. The use of mobile ventional assets (such as an input supplier's phones for banking is being pioneered by contract for a standing crop).44 Further Wizzit in South Africa and by Globe Tele- undercutting collateralized lending are com and Smart in the Philippines. The legal systems that fail to provide clear rules phones can be used to pay for purchases in for priority claims on assets and prompt stores and to transfer funds, significantly redress in the event of default. Without reducing transaction costs. With legal collateral, high risks cannot always be com- frameworks in place, m-banking could be pensated by higher interest rate premiums, one of the major breakthroughs in extend- so many smallholders are simply rationed ing outreach to poor customers.40 Branch- out of the credit market. less banking--using post offices, stores, gas stations, and input providers--is another Reputational collateral through microcredit successful approach to reaching rural cus- reporting bureaus. Microcredit reporting tomers at low cost. Brazil, India, Kenya, the bureaus that establish individual reputa- Philippines, and South Africa demonstrate tions can help small farmers use their past its financial viability, although there are credit histories as an asset. A smallholder issues in regulating such endeavors.41 begins by establishing a credit history in the Rural leasing is another financing option MFI sector, often using credit for nonagri- for rural entrepreneurs, in agriculture and cultural purposes. In some instances, sav- in the rural nonfarm economy. Commercial ings records are also accepted as proof of providers in Mexico, Pakistan, and Uganda good financial behavior. The credit bureau show that leasing can finance the acquisi- establishes a reliable, portable signal of the tion of productive assets.42 Now running borrower's reputation. Armed with this sig- profitably, these commercial providers all nal, a borrower should then be able to climb benefited from access to government and a lending ladder, moving from the more donor funds to jump-start their opera- restricted purposes and term structures of tions, demonstrating the potential benefits MFI credit to standard loan contracts from of public-private partnerships. institutions able to bear the portfolio risk and term structures required for agricul- Financing through interlinked agents. Yet tural loans. another way to increase agricultural For a lending ladder to work, two things access to capital is financial intermedia- must happen. First, a credit report must tion through linked agents in value chains help lenders select clients and induce clients (input suppliers or output processors) to repay loans. This becomes all the more (chapter 5). Those agents are often more essential as competition among lenders able to cost-effectively monitor on-farm rises. Second, information on a borrower's behavior (eliminating information asym- credit worthiness and reputation must flow metries), thus reducing monitoring costs up the rungs from MFI to commercial lend- and enabling financial institutions to accept ers. A study of a credit bureau that includes nonstandard forms of wealth as collateral, MFIs in Guatemala shows that both can such as standing crops or, for warehouse happen.45 However, a client's credit history receipt financing, harvested crops.43 addresses risks related to the borrower's Further work is needed to determine financial behavior--but it does not, and whether these (often spatially monopolis- cannot, address business risks related to tic) practices offer finance at competitive weather and prices in agriculture. rates and whether transaction costs con- tinue to bias them against smallholders. Insurance to manage risk As mentioned, some MFIs and coopera- Risk distorts investments and puts assets tives have themselves begun to adopt this in jeopardy. Insurance can assist farmers in form of secured lending. But their success taking more risks in production and prevent has in many instances been undercut by shocks from depleting their assets. It can 148 WORLD DEVELOPMENT REPORT 2008 also reduce interest rates needed to offset Managing risk through the risk of default and increase the availabil- microfinance ity of agricultural credit by making traders As discussed, the absence of insurance limits and other intermediaries more willing to access to credit. Conversely, accessible credit put their assets into an agricultural loan can help a household smooth consumption portfolio.46 And in addition to enhancing and avoid distress sales. But shouldn't house- the supply of agricultural credit, insurance holds save in anticipation of future needs can make potential borrowers more willing and use their savings to self-insure? House- to bear the risk of conventional collateral- holds do, of course, save grain and cash, but ized loans. As always, there is a tradeoff. less than might be expected. Just as there are Insurance is costly and leads to higher over- credit constraints, households have limits all costs when added on to a loan. to saving because of low (or even negative) Individuals and local networks can do real interest rates, security concerns, and the much to manage risk, but such strategies inaccessibility of banks. In addition, fam- often founder on systemic risk, beyond the ily obligations and gender roles hinder the capacity of the individual and community accumulation of cash. On the supply side, to manage. Innovations to address systemic many banks find that transaction and regu- risk can complement the local capacity to latory costs make small deposits unprofit- manage idiosyncratic risks. By so doing, able. MFIs partially address this. In addition the expectation is that the innovations will to their well-known extension of credit to underwrite a more productive and sustain- households with limited collateral, many able pattern of agricultural and human MFIs offer secure and convenient ways of capital investment. saving small amounts, often requiring a sav- ings history before granting a first loan. Individual and community MFIs can serve an additional role in risk responses to risk management: they can reduce the market- One element of any strategy to address the ing and monitoring costs of insurance by cost of risk is to expand a household's risk being intermediaries for insurance to their management opportunities. Communities clients. MFIs often require insurance on have developed informal systems of mutual the assets purchased when a loan is taken insurance and contingent loans to respond out--for example, to insure against the loss to shocks based on traditional norms47 and of a cow. They may also require clients to local information. For example, pastoralists insure against external factors that inter- in Kenya provide cattle to neighbors who fere with the ability to repay on schedule or have lost a portion of their herds to repay offer loan-protection insurance to ensure past assistance and to create future obliga- that debts are not passed on to survivors. tions.48 But these systems tend to fail poor MFIs can serve as intermediaries for families, for several reasons. One is the other types of insurance covering individ- inherent limitation of insuring for covari- ual risks, taking advantage of their ability to ate shocks: one's neighbors cannot provide collect small amounts regularly and in keep- assistance if they are also under stress. ing with the transformation of some MFIs Another is that such systems entail transac- from lending institutions to providers of a tion costs of searching for partners, coordi- broader range of financial services, includ- nating activities, and monitoring reciprocal ing savings accounts. The marginal costs for arrangements. As these costs increase, the collecting payments are reduced when staff optimal size of a mutual-support network is networks are already in place, opening the reduced, also reducing risk sharing. More- possibility of providing death and disability over, individuals tend to form networks insurance as well as health and crop insur- with others of their own caste, ethnicity, ance. Indeed, the lives of more than 1.6 mil- and gender, as well as a similar asset base. lion Africans were insured in 2004 through Mutual insurance, though useful, tends to a profit-making microinsurance product be weakest for the poorest and to fall short marketed though 26 NGO-managed MFIs, when it is most needed. 24 of them in Uganda.49 Supporting smallholder competitiveness through institutional innovations 149 Meeting the promise of weather- indexed insurance B O X 6 . 6 Mongolia's index-based livestock insurance MFIs cannot necessarily address moral haz- Since 2005, Mongolia has piloted index- windy summers and cold, high-snowfall ard or adverse selection, two major obstacles based livestock insurance to share risks winters, the insurance index is linked not to providing insurance. One innovation among herders, insurance companies, and to a weather event, but to historical live- the government. The project combines stock mortality data. Insurance payments that might do so is insurance indexed to an self-insurance, market-based insurance, are thus not directly linked to individual objective indicator of weather, such as rain- and social insurance. Herders retain small herders' livestock losses; payments are fall or temperature. Because weather is not losses that do not affect the viability of instead based on local mortality. This affected by individual behavior, indexed their business (self-insurance), while larger should avoid or reduce moral hazard and losses are transferred to the private insur- adverse selection--and reduce costs. insurance can address both monitoring ance industry (market insurance through A key to the approach is having good costs and moral hazard. The choice of indi- a base insurance product). This is not a data to develop the livestock mortality cator depends on both the type of cover- purely commercial program, however. The index. Mongolia has a 33-year time series government bears the final layer of cata- age and the cost and availability of data on adult animal mortality for all regions strophic losses (social insurance through a and for the four major species of animals for estimating the probability of a payout. disaster-response product). (cattle and yak, horse, sheep, and goat). Cumulative rainfall or the date of the start Herders pay a market premium rate The mortality index provides the basis for of a rainy season is often proposed as the for the base insurance product, which determining the specific mortality rates pays out to individual herders whenever that would trigger indemnity payments. indicator; the number of days with tem- the livestock mortality rate in a local peratures below or above a cutoff is also in region exceeds a threshold. As excess common use. mortality reflects a combination of dry, Source: World Bank 2005l. One concern is basis risk--the corre- spondence of the indicator and the actual losses incurred by a policyholder. The companies, and the government (box 6.6). more specific the indicator, the lower the In Malawi, weather-indexed insurance cov- basis risk and more responsive it will be ers the loans necessary to finance improved to farmers' needs. But a diverse range of seeds and fertilizer, with insurance payouts products--including separate rainfall con- going directly to banks to settle the farmers' tracts for planting, growing, and harvesting loans. In India, an MFI, BASIX, intermedi- stages--would make their marketing more ates between insurance companies and its difficult because individuals often find it clients. The entry of private investors and hard to assess the probabilities of an event. the number of repeat customers for unsub- Furthermore, addressing individual shocks sidized weather insurance indicates the increases monitoring costs. So, index-based potential for a private market. insurance may have its greatest potential in addressing broad covariate shocks. Defining government's role Several approaches are being tried to in agricultural insurance adapt indexed insurance to diverse condi- The track record of agricultural insur- tions. Because they are still in pilot stages, ance directly supplied by governments is no definitive statement about their sustain- not encouraging. In Brazil, costs exceeded ability or their impact on credit rationing, premiums by more than 300 percent.50 input use, and portfolio choice is avail- However, governments may have a role in able. Mexico determines the timing of inducing insurance services. In Tanzania, assistance to small farmers after weather- what farmers were willing to pay for insur- related shocks on the basis of a weather ance was less than the actuarial fair cost index. The payment amount is based on of providing coverage, particularly among proxies for chronic poverty. In 2006, 28 low-income farmers.51 Indeed, the tendency percent of the nonirrigated cultivated area for wealthier households to purchase more was covered through an insurance contract insurance is a general pattern, with impli- with the federal and state governments, cations for income distribution.52 Targeted with the availability of weather stations the subsidies might thus be warranted for vari- main limitation. Mongolia, by contrast, able costs to induce learning, especially when promotes private livestock insurance, with insurance premiums are less costly than ex the government addressing reinsurance to post assistance. Subsidies can also offset the share risks among herders, the insurance fixed costs of establishing a market. 150 WORLD DEVELOPMENT REPORT 2008 Governments can also improve ex post Similarly, demand for fertilizer used on risk mitigation by improving the data noncommercial crops is generally weak and necessary for privately provided market unstable, for many of the same reasons: lack insurance. For example, insurers may be of knowledge, information asymmetries, unable to estimate the costs of rare events: liquidity constraints, risk and uncertainty, a 1-in-100 event is hard to distinguish from and high opportunity costs.53 Profitability a 1-in-80 event. Similarly, risks are hard tends to weigh heavily in farmers' deci- to quantify in a changing climatic or eco- sions, because the cost of fertilizer often nomic environment. Thus, insurers may represents a large share of cash production require higher premiums to accommodate costs.54 When cost factors and risk factors such ambiguity of risk. When governments act in tandem, as they do in most rain- assemble information that can be employed fed environments, the impact on fertilizer in index-based insurance, they provide a demand can be significant.55 public good that can improve the efficiency How do the distinctive features of of markets and reduce costs. demand for seed and fertilizer affect supply? The incentives for private firms to invest in Developing efficient producing and distributing seed depend on the potential profitability of these activi- input markets ties. In industrial countries, where eco- Agricultural productivity has grown rapidly nomic incentives (and the expanding use of where modern varieties and fertilizers have intellectual property rights) make it more been widely adopted, but not where adop- likely that farmers will regularly purchase tion has lagged (chapter 2). In much of Asia seed, plant breeding is done mainly by seed and parts of Latin America, promoting seed companies. But in smallholder agriculture and fertilizer use was accompanied by com- in developing countries, seed companies plementary investments in irrigation, rural depend on public research programs to pro- roads, marketing infrastructure, financial vide varieties. This makes the pipeline for services, and other factors that made using new products uncertain. Private seed com- seed and fertilizer profitable and paved the panies usually have incentives to serve the way for dynamic commercial input mar- needs of business-oriented farmers when kets. But throughout most of Africa, these the predominant seed technology is hybrid, complementary investments are small or when onfarm seed production is difficult, nonexistent, and private input markets or when output markets demand a uni- have yet to emerge on a large scale. Recent form product that depends on genetically initiatives to build seed and fertilizer mar- uniform, high-quality seed.56 When these kets provide lessons that can inform future conditions are absent, as is often the case in policy design. smallholder farming systems, the incentives for private seed companies are low. Special challenges in seed and For fertilizer, seasonally variable and fertilizer markets geographically dispersed demand discour- Why are efficient markets for seed and fer- ages potential suppliers because markets tilizer so difficult to develop? To begin with, are small, making low-cost procurement demand for both inputs is highly variable in difficult. Producing, importing, and trans- time and space. In developing countries, the porting fertilizer entail major economies of demand for seed is strongest when farmers scale.57 Importing fertilizer, for example, is are growing hybrids, whose seed must be most cost effective in lots of 25,000 tons, replaced regularly. It is weakest when farm- considerably above the annual demand ers are growing varieties whose seed can be in most Sub-Saharan African countries. saved from the harvest and replanted for Transport costs are particularly high in several cropping seasons. In addition, the Africa because of the generally poor road quality of seed found in the market may be and rail infrastructure. Because of domes- unknown as quality cannot be determined tic transport costs, fertilizer use is higher through visual inspection. in coastal African countries than in land- Supporting smallholder competitiveness through institutional innovations 151 Figure 6.2 Transport costs make up about one- many smallholders with no reliable access third of the farmgate price of urea fertilizer in to seed. African countries, 2005 Initiatives to promote fertilizer use have Procurement costs, US$/ton usually encouraged cost-effective import- 400 ing. Many Sub-Saharan countries do not have access to the raw materials to manu- 300 facture fertilizer, and few have a domestic market big enough to support an efficient manufacturing facility. Government ini- 200 tiatives have often sought to make fertilizer more affordable at the farm level, com- 100 monly through subsidies, which are enjoy- ing new popularity.60 Subsidies remain 0 controversial, however, in part because of United States Nigeria Malawi Zambia their high cost. To cite a possibly extreme Other domestic costs example, in Zambia 37 percent of the public Port charges, and inland and domestic transport International shipping and insurance budget for agriculture in 2005 was devoted Sourcing to fertilizer subsidies (figure 6.3). Subsidies may also heighten inequality by benefiting Source: Gregory and Bumb 2006. mainly the larger farmers.61 There are situations where fertilizer can locked ones.58 In Malawi, Nigeria, and be productively subsidized, but they need to Zambia, international and domestic trans- be carefully identified (box 6.7). When used port costs make up about one-third of the as part of a broader strategy to address the farmgate price (figure 6.2). binding constraints on supply and demand, Adding to the high logistics costs are well-designed fertilizer subsidies can help to high financing costs. Fertilizer purchases overcome temporary market failures. But typically involve large volumes, and a year or they should be "market smart," contribut- more can elapse between the time advance ing to the development of viable private- payments are made to a supplier and the sector-led input markets.62 Market-smart time proceeds are received from retail sales. subsidies should be targeted to poor farmers Just as producers face risk, so do input sup- to encourage incremental use of fertilizer pliers. If rains fail early in the season, sales by those who would otherwise not use it. As of fertilizer can plummet as farmers scale volumes increase, the market price of fertil- back their planting. And if rains fail late in izer will come down to the true economic the season, credit recovery can become dif- price and reduce the need for subsidies. ficult as farmers experience crop failures and are unable to repay their loans. Figure 6.3 More than a third of Zambia's 2004/05 public budget for agriculture went to fertilizer Promoting seed and fertilizer use subsidies in Africa Food security Given the market failures that lead to Food Reserve Agency and drought relief Irrigation 11% socially suboptimal use of seed and fer- (maize marketing) investment 15% 3% tilizer, governments frequently step in to distribute them directly. Government-led Infrastructure 2% distribution programs have often increased input use, but the fiscal and administrative Personal costs are usually high and the performance emoluments erratic.59 Recent cutbacks in public seed 20% Fertilizer multiplication schemes and public seed dis- Support Program tribution programs have saved money for 37% Operational funds governments, but private companies have 11% not always stepped in to fill the gap, leaving Source: Jayne and others 2006a. 152 WORLD DEVELOPMENT REPORT 2008 B O X 6 . 7 Is there a rationale for fertilizer subsidies? Fertilizer subsidy programs have tried to rem- · They can stimulate adoption by encouraging tilizer subsidies would have to be the most edy low fertilizer use by small-scale farmers in farmers to use fertilizer and learn about its cost-effective option for achieving the desired Africa. Various benefits are cited in justifying benefits, creating positive externalities for social objective, compared with such alter- the subsidies--economic (real productivity others. natives as food aid, food for work, and cash increases), environmental (reductions in land · They can overcome missing or imperfect transfers. degradation), and social (poverty alleviation or credit or insurance markets for farmers that Whether fertilizer aid is cheaper than food emergency relief). Despite having some obvi- cause farmers to use suboptimal amounts of aid depends on the relative costs for govern- ous drawbacks--the high cost, difficult target- fertilizer. ments to acquire fertilizer and food, and to ing, and crowding out of commercial sales-- deliver the items to needy households. It also · They can offset taxes or output price controls fertilizer subsidies continue to have strong depends on the additional food crop output that make fertilizer financially unprofitable, support from farmers and from politicians who likely to be generated per dollar of fertilizer when removal of taxes or price controls is not view farmers as an important constituency. distributed to and applied by farmers--and feasible. Two questions should be addressed in other cost savings associated with fertilizer aid, · They can generate environmental externali- considering whether subsidies are appropri- such as avoiding farm-to-market transport and ties associated with higher soil fertility-- ate for promoting increased fertilizer use. handling costs incurred when farmers must sell reducing soil erosion, deforestation, and First, can fertilizer subsidies bring economic a portion of their crop to repay fertilizer loans. carbon emissions. benefits to societies that exceed their costs? Fertilizer aid would be appropriate if food Second, are there circumstances when subsi- In practice, it has been difficult to imple- markets are working poorly. However, cash dies are justified to achieve social rather than ment subsidies and avoid undesirable market transfers to enable households to purchase economic goals? and distributional effects. food may be more appropriate if food markets are working well, especially in marginal areas For efficiency For welfare where food production payoffs for fertilizer Fertilizer subsidies can bring economic ben- If it would not be economical to use fertilizer use are risky. efits to society in several ways: even when input, output, finance, and risk markets are working well, is there a rationale · They can kick-start fertilizer markets by off- Sources: Conley and Udry 2001; Foster and for using subsidies to achieve noneconomic setting high initial distribution costs until the Rosenzweig 1995; Gramlich 1990; Morris and or social safety-net objectives, such as food market expands, economies of scale are real- others 2007; Sachs 2003; Pedro Sanchez, personal security or emergency income support? Fer- communication, 2007. ized, and prices decline. Market-smart fertilizer subsidies can be On the demand side, efforts to encour- justified, but the conditions for using them age greater use of seed and fertilizer have efficiently are demanding. They should often focused on strengthening the ability stimulate new demand for fertilizer without of farmers to acquire inputs. To stimulate displacing existing commercial sales. They market development, vouchers have been should encourage competition in fertilizer- distributed rather than the inputs them- distribution channels. And they should be selves. In Malawi, under a scheme known temporary, introduced for a limited period, as Inputs for Assets, vouchers were distrib- with a clear schedule for phasing out when uted only to those who had participated they've achieved their purpose. Fertilizer in a public works project, providing some subsidies used as a safety-net measure in self-targeting because wealthier farmers marginal production environments can were less likely to participate in building rarely be recommended, because other roads. Vouchers were redeemable with instruments for providing income sup- local agrodealers, which strengthened port or ensuring food security will almost effective demand for inputs and increased always be more effective. sales--and profits--of private distribu- tors.63 More recently the government of What shows promise? Malawi has sought to increase demand sig- Because public interventions in seed and nificantly through large-scale distribution fertilizer markets have so often failed, of coupons (about 3.5 million in 2006/07), attention is turning to new approaches to with farmers expected to pay a cash price establish sustainable private-sector-led when redeeming the coupon equivalent to input distribution systems. What can be about one-third the retail price of fertilizer. done to overcome the weak demand and With the help of favorable weather, aggre- inadequate supply for seed and fertilizer? gate maize production increased sharply Supporting smallholder competitiveness through institutional innovations 153 after the program was launched, but the budgetary costs of the program have been B O X 6 . 8 Thriving rural input supply retailers as very high and difficult to control, and there agrodealers in Africa has been a high level of displacement of smallholder commercial fertilizer sales. The Rockefeller Foundation has led the dealers, not from the government-owned development of agricultural input sup- Agricultural Development and Marketing In an experimental pilot scheme in ply pipelines in rural Kenya, Malawi, and Agency or from large commercial distribu- Kenya, fertilizer vouchers were sold to Uganda. Working with global partners tors in urban areas. farmers at harvest time as a commitment such as the International Fertilizer Devel- With the number of agrodealers opment Center (IFDC) and local organiza- device to ensure that funds were reserved expanding, the distances traveled by small- tions, it has piloted: holder farmers in search of inputs have for fertilizer rather than drawn away to been drastically reduced in many districts. meet other demands--with good results.64 · Training rural retailers to develop their The range, volume, quality, and price of technical, product, and business man- In Mali and Nigeria, matching grants were agricultural inputs supplied into rural areas agement skills. After being trained, the have also improved significantly. provided to producer organizations dur- retailers become certified as agrodealers. Meanwhile, the default rate on the ing an initial period for use in testing and · Linking certified agrodealers to major credit guarantees was less than 1 percent learning about new technologies.65 agricultural input supply firms, using in the first three years of the program. partial credit guarantees that cover 50 On the supply side, the international The low default rate is attributed to the percent of the default risk. high quality of the technical and busi- research centers of CGIAR have promoted · Repackaging seed and fertilizer into ness management training for the agro- partnerships in eastern and southern Africa small packs (as small as 1 kilogram for dealers--and their acting together to between public plant-breeding programs seeds and 2 kilograms for fertilizer) to ensure repayment. As a result of greater increase the affordability for farmers. and private seed producers. In West Africa, involvement in seed and fertilizer sales, · Organizing agrodealers into purchasing agrodealers have become important Sasakawa Global 2000 has supported small- groups to facilitate bulk purchasing from extension nodes, and several seed, fertil- scale private seed producers by provid- suppliers. The group members provide izer, and agrochemical companies now ing technical training, business advisory joint collateral to guarantee repayment. use the agrodealers to conduct demon- services, and access to credit. In Kenya, strations of new technologies. These efforts to strengthen rural dis- Malawi, and Uganda, the Rockefeller Foun- tribution networks are beginning to bear dation has teamed with local NGOs to build fruit. In Malawi a recent survey of rural Source: Morris and others 2007; Kelly, networks of rural agrodealers (box 6.8).66 markets showed that the majority of farm- Adesina, and Gordon 2003; International ers now buy their inputs from local agro- Fertilizer Development Centre (IFDC) 2005. In Angola, Mozambique, and other coun- tries where farmers lost their seed stocks during civil conflicts, NGOs such as Seeds of Hope have sponsored seed fairs and seed tural input markets. Progress in improving exchanges to supplement emergency seed distribution.67 seed and fertilizer distribution systems will not be sustainable, however, unless there is Another avenue for improving input strong, effective demand for both inputs, supply systems is to strengthen the capacity assured only as long as investment in seed of producer organizations to take respon- and fertilizer is profitable for farmers. That sibility for the final stages of distribution. will be the case only if they have access to For smallholders, purchasing inputs in bulk reliable markets for selling their products and organizing distribution through their at remunerative prices (chapters 4 and 5). own organizations is a way to compensate Building input markets must go hand-in- for inadequate private sector delivery. For hand with building output markets and input suppliers, dealing with producer linking farmers to those markets. organizations presents considerable advan- tages over dealing with geographically dis- Producer organizations persed farmers who individually purchase in a context of value chains only very small quantities of inputs. In Ethiopia, producer organizations are tak- and globalization ing over retail fertilizer distribution from A prosperous smallholder sector is one of government and parastatal companies. the cornerstones of an agriculture-for- These and other innovative efforts to development strategy. Yet, smallholders stimulate greater use of improved seed and typically face high transaction costs and fertilizer provide lessons about state and low bargaining power in factor and prod- donor support to private-sector-led agricul- uct markets. They have limited access to 154 WORLD DEVELOPMENT REPORT 2008 public services, and their voices are often cooperatives.69 In France, 9 of 10 produc- not heard in policy forums where issues ers belong to at least one cooperative, with that affect their survival are being decided. market shares of 60 percent for inputs, 57 In a world increasingly dictated by value percent for products, and 35 percent for chains and the rules of globalization, com- processing.70 petitiveness is the condition for survival. To In the 1960s, many developing-country confront this situation, smallholders have governments initiated cooperative develop- formed various types of producer organi- ment programs, often to ensure quotas for zations to better compete. These organiza- cash crops and distribute subsidized credit tions have expanded rapidly in developing and inputs. Cooperatives were largely gov- countries, and there are dispersed successes ernment controlled and staffed. So farmers on three fronts: markets, public services, considered them as an extended arm of the and voice. However, the world of value public sector, not as institutions that they chains and global market forces is creat- owned. This form of cooperative was rarely ing new challenges for their organizations. successful. Political interference and elite The challenge for the organizations is how capture resulted in poor performance and to respond; for governments and donors it discredited the movement. For example, is how to assist without undermining the in the case of the Indian sugar cane coop- organizations' autonomy. eratives, large growers depress the price of sugar cane to the detriment of small farm- Producer organizations have ers. This generates retained earnings within increased rapidly in developing the cooperatives that large farmers can then countries siphon off through various means.71 Producer organizations are membership- This situation changed radically in based organizations or federations of orga- the 1980s. Political liberalization opened nizations with elected leaders accountable opportunities for producers to become to their constituents. They take on various active players through organizations of legal forms, such as cooperatives, associa- their own. Structural adjustment disen- tions, and societies.68 Their functions can gaged the state from many productive func- be grouped in three categories: tions and services. Contrary to expectation, the dismantling of parastatal agencies led · Commodity-specific organizations focus- to only limited entry of private providers, ing on economic services and defending mostly in high-potential areas. Smallhold- their members' interests in a particu- ers thus turned to producer organizations lar commodity, such as cocoa, coffee, or to compensate for the withdrawal of state cotton services and the lack of private alternatives. · Advocacy organizations to represent Where government interference in coopera- producers' interests, such as national tives prevailed, producers often sidestepped producers' unions them and created associations. · As mentioned in chapter 3, producer Multipurpose organizations that respond organizations have spread rapidly. It is esti- to the diverse economic and social needs mated that 250 million farmers in devel- of their members, often in the absence oping countries belong to one.72 Produc- of local governments or effective public ers are also organizing at the regional and services international levels (box 6.9). These orga- In industrial countries, producer orga- nizations enable producers to participate nizations have been fundamental to the in consultations with regional and inter- success of the family farm, still the domi- national bodies. nant form of organization of production Producer organizations engage in a today. In the United States, dairy coop- broad array of activities that are reviewed in eratives control about 80 percent of dairy the Report. They participate in trade nego- production, and most of the specialty crop tiations and domestic agricultural policy producers in California are organized in making (chapter 4), improve the terms of Supporting smallholder competitiveness through institutional innovations 155 access to output (chapter 5) and input mar- kets (above), support the generation and B O X 6 . 9 Producer organizations with international adoption of technological innovations and memberships diversification into new activities (chap- ter 7), and contribute to natural resource The International Federation of Agricul- orities. It has general consultative status tural Producers (IFAP) was founded in with the Economic and Social Council of management (chapter 8). They are a fun- 1946. To meet the needs of farm orga- the United Nations and the CGIAR. damental building block of agriculture- nizations from developing countries, Via Campesina, an international for-development agendas (chapter 10). it created AgriCord in 2000, an alliance network of 92 federations or unions, was of agriagencies that offer programs And they are actively engaged in participa- created in 1992 to coordinate organiza- to strengthen farmer organization tions of small and midsize producers; agri- tory governance, particularly in relation to members of IFAP. Under AgriCord's cultural workers; rural women producers; decentralization and community-driven capacity­building program, farmer and indigenous communities from Africa, development approaches (chapter 11).73 organizations from industrial countries America, Asia, and Europe. It aims at influ- help to strengthen their colleagues in encing decision making by governments Among the better-known producer developing countries. IFAP represents and multilateral organizations regarding organizations are the Indian Dairy Cooper- 115 national organizations from 80 coun- the economic and agricultural policies atives Network and the National Federation tries, and developing countries now form that affect its members and strengthening of Coffee Growers of Colombia. In 2005 the the majority of IFAP membership. It is women's participation. the only world forum for farmers from Indian Dairy Cooperatives, with 12.3 mil- industrial and developing countries to Sources: www.ifap.org/en/index.html; lion members, accounted for 22 percent of exchange concerns and set common pri- www.viacampesina.org. the milk produced in India. Sixty percent of the cooperative members are landless, very smallholders, or women. (Women make up 25 percent of the membership).74 with obligations. In the name of solidarity, Created in 1927, the National Federation of they are pressed to cross-subsidize poorer- Coffee Growers of Colombia has 310,000 performing members at the expense of members, most of them smallholders (less better performers, thereby weakening than 2 hectares), and it provides produc- rewards for efficiency and innovation. tion and marketing services to 500,000 They are also frequently pressed to deliver coffee growers. It uses its revenues to con- public goods to the community, putting tribute to the National Coffee Fund, which a drain on their resources.77 An analysis finances research and extension and invests of 410 producer organizations in Chile in services (education and health) and basic shows that ones that succeed have strict infrastructure (rural roads, electrification) rules that are performance oriented. Rules for coffee-growing communities.75 allocate costs and benefits to each mem- ber on the basis of his or her farming per- Producer organizations face formance and market conditions; enforce many challenges agreements between the organization and Producer organizations have expanded the individual; and reduce the transac- rapidly, but existence does not guarantee tion costs of negotiating, monitoring, and effectiveness. For that, they need to face five enforcing agreements between the organi- major challenges, both internal and exter- zation and its members.78 nal to the organization.76 Dealing with a heterogeneous membership. Resolving conflicts between efficiency and Producer organizations have to represent equity. Producer organizations typically the interests of an increasingly diverse operate in the context of rural communi- membership (chapter 3). This creates a ties where they are subject to norms and major challenge in achieving fair repre- values of social inclusion and solidarity. sentation across a widening spectrum of This may clash with the requirements of interests. Leaders tend to be older males, professional, business-oriented organiza- larger-scale farmers, and members of the tions that must help members compete to rural elite. Yet, organizations have to ensure survive in the market place. In the name that the interests of smallholders, women, of inclusion, organizations have difficulty and young producers are fairly represented excluding members who do not comply and their needs adequately served. There is 156 WORLD DEVELOPMENT REPORT 2008 an important role here for public social ser- regional, and national levels. Governments vices and NGOs to help enhance the capac- and donors can enhance the effectiveness ity of weaker members in acquiring skills of producer organizations' participation in and achieving voice in the organizations. these consultations by helping them gain Important is to put in place more transpar- equal access to information, seek profes- ent decision-making mechanisms as well as sional advice to better understand the con- information and communication systems, sequences of the policies being discussed, using media and information technology to and recruit expertise to prepare their inputs empower the newer and weaker members, into the policy dialogue. improve the governance of the organiza- tions, and enforce leaders' accountability Dealing with a sometimes-unfavorable toward their members. external environment. However effective they are internally in meeting the above Developing managerial capacity for high- four challenges, producer organizations value chains. Globalization and integrated cannot successfully promote the interests supply chains place new demands on the of smallholders without an enabling legal, managers of producer organizations. Man- regulatory, and policy environment that agers must deal with more sophisticated guarantees the organizations' autonomy. national and international supply chains, This requires changing the mindset of pol- with stringent and changing requirements icy makers and staff in government agen- (chapter 5). They must orchestrate mem- cies about the role of the organizations. bers' supplies to meet the demands of these Organizations must be recognized as full- value chains--achieving scale and timing fledged actors, not as instruments of policies in delivery; satisfying sanitary and phyto- designed and implemented without consult- sanitary standards; and meeting the speci- ing them, nor as channels for implementing fications demanded by agroprocessors, donors' agendas. Public services must be cli- exporters, and supermarkets.79 ent oriented to partner with the organiza- Here as well, governments and donors tions, with mechanisms that allow equitable have an important role to play in support- negotiations between the organizations and ing capacity building in a wide variety of other sectors. Governments' interference in areas: management; market intelligence; cooperatives management must be removed, technical aspects of production; input pro- a difficult process that requires confronting curement and distribution; meeting phyto- powerful, vested individual and political sanitary standards; and engaging in policy interests.81 Donor support to the Indian analysis, dialogue, and negotiations. Donors dairy cooperatives was partly motivated by have also been involved in strengthening the objective of improving their efficiency leaders' managerial capacities and putting through removing government interfer- in place transparent financial management ence. Although considerable progress was systems. made, the objective was still not completely achieved by the end of two decades of sup- Participating in high-level negotiations. port.82 Hence, an effective use of producer Producer organizations participating in organizations as part of an agriculture-for- high-level technical discussions, such as development agenda requires a strong, pro- global trade negotiations, need new tech- active state setting the conditions for this to nical and communication skills.80 In successfully happen. addition, experts that represent the orga- nizations must remain true to national Supporting producer organizations and local members' interests, a difficult to empower them challenge for apex organizations cover- Governments and donors have supported ing a wide range of interests. This requires producer organizations, often through maintaining open channels of communi- specialized NGOs. Several producer orga- cation with their memberships at the local, nizations in industrial countries support Supporting smallholder competitiveness through institutional innovations 157 organizations in developing countries producer organizations require further through NGOs financed by member fees. experimentation and solid impact analyses However, investing in social capital is to become more effective. not easy. To be effective, support should be committed for the long term but with Institutional innovations--still a a clear phasing-out strategy. Donor and government support, whether financial, work in progress managerial, or technical, can be a double- Despite the recent effervescence of institu- edged sword, creating dependency and tional innovations across a broad range of undermining the organizations rather than countries and markets, huge institutional empowering them, depending on how that gaps remain in supporting the competi- support is provided.83 Although there is no tiveness of smallholders. Land markets are blueprint for the best way to give support, still incomplete and inefficient. Financial one approach that has proven effective is to markets are still laden with asymmetries of use demand-driven funds, with producer access and information. Insurance against organizations selecting activities and ser- risk is available to only a few individuals vice providers, such as happens in Senegal and communities. Input markets are ineffi- and Mali.84 Another approach, introduced cient as a result of small scale and distorted by the Participatory Policy Generating by subsidies that tend to benefit more the Program financed by Dutch aid, supports larger landholders. Producer organizations producer organizations' links with univer- are only beginning to represent the inter- sities that can provide policy research for ests of poor smallholders. With so much proposed producer organizations positions. left to do, the chapter closes on a note not The African Farmers Academy provides of satisfaction with accomplishments but training courses tailored to the needs of of work in progress, with much left to be farmer leaders in the areas of agricultural done and urgency in doing so to reduce the policy and international and regional trade. inefficiencies, inequities, and human costs These and other approaches to empower of the remaining institutional gaps. Innovating through science and technology 7 The technological challenges facing agri- new world of agriculture is opening space culture in the 21st century are probably for a wider range of actors in innovation, even more daunting than those in recent including farmers, the private sector, and c h a p t e r decades. With the increasing scarcity of civil society organizations. Linking techno- land and water, productivity gains will be logical progress with institutional innova- the main source of growth in agriculture tions and markets to engage this diverse set and the primary means to satisfy increased of actors is at the heart of future productiv- demand for food and agricultural prod- ity growth. ucts. With globalization and new sup- These changes focus attention on wider ply chains, farmers and countries need to innovation systems. With the development continually innovate to respond to chang- of markets, innovation becomes less driven ing market demands and stay competitive. by science (supply side) and more by mar- With climate change, they will have to kets (demand side). New demand-driven gradually adapt. All regions, especially the approaches stress the power of users--men heterogeneous and risky rainfed systems and women farmers, consumers, and inter- of Sub-Saharan Africa, need sustainable ests outside of agriculture--in setting the technologies that increase the productivity, research agenda and the importance of stability, and resilience of production sys- research in a value chain from "farm to plate." tems.1 These changes imply that technology Innovation for the new agriculture requires for development must go well beyond just feedback, learning, and collective action raising yields to saving water and energy, among this much broader set of actors. reducing risk, improving product quality, This chapter looks at the recent record of protecting the environment, and tailoring science and technological innovation from to gender differences. three perspectives: Science is also changing rapidly. Revo- lutionary advances in the biological and · The recent impacts and emerging chal- information sciences have the potential to lenges of biological and management enhance the competitiveness of market- technologies oriented smallholders and overcome · The investments in research and devel- drought and disease in production systems opment (R&D) to generate new tech- important to the poor. Consider the win- nologies, paying particular attention to win-win of transgenic insect-resistant cot- growing divides between industrial and ton: it has reduced yield losses, increased developing countries, and within the farmer profits, and greatly reduced pesti- developing countries themselves cide use for millions of smallholders. But · The emerging institutional arrange- the benefits of biotechnology, driven by ments that make investments in inno- large, private multinationals interested vation, including extension, more effi- in commercial agriculture, have yet to be cient and effective in meeting market safely harnessed for the needs of the poor. demands through collective action and The institutional setting for technologi- farmer involvement cal innovation is changing rapidly as well-- it is more complex, involving plural systems The main conclusion: Investments and multiple sources of innovation. The in agricultural R&D have turned much 158 Innovating through science and technology 159 of developing-world agriculture into a the 1960s aimed at adapting improved vari- dynamic sector, with rapid technological eties and animal breeds to subtropical and innovation accelerating growth and reduc- tropical conditions has generated high pay- ing poverty. But global and national market offs and pro-poor impacts. Rapid advances failures continue to induce serious underin- in the biological and informational sciences vestment in R&D and in related extension promise even greater impacts that have yet systems, especially in the agriculture-based to be tapped for the benefit of the poor (see countries of Africa. Increasing public and focus E). private investment in R&D and strength- ening institutions and partnerships with Slow magic: the continuing spread the private sector, farmers, and civil society of improved varieties organizations are now essential to assess Since the 1960s, scientific plant breeding user demand for R&D, increase market that developed improved varieties suited responsiveness and competitiveness, and to smallholders in subtropical and tropi- ensure that the poor benefit. These invest- cal areas--the green revolution--has been ments and institutional innovations will be one of the major success stories of develop- even more important in the future, with ment (figure 7.1). Initially spearheaded by rapidly changing markets, growing resource semidwarf varieties of rice and wheat and scarcity, and greater uncertainty. improved varieties of maize from interna- tional agricultural research centers of the Consultative Group on International Agri- Genetic improvement has been cultural Research (CGIAR), public breed- enormously successful, but not ing programs in developing countries have everywhere released more than 8,000 improved crop Agriculture is a biological process--so tech- varieties over the past 40 years.2 Private nological innovation in agriculture is dif- seed companies have also become signifi- ferent from that in other sectors. The 1950s cant sources of improved hybrid varieties and 1960s showed that genetic improve- for smallholders for some crops, especially ment technologies such as crop and animal maize. breeds were often location specific and gen- The contribution of improved crop vari- erally did not travel well from the temperate eties to yield growth since 1980 has been North to the tropical South. Research since even greater than in the green revolution Figure 7.1 Improved varieties have been widely adopted, except in Sub-Saharan Africa Area planted with improved varieties, 2000­05, % of crop area 100 80 60 40 20 0 Rice Wheat Maize Sorghum Cassava Potatoes Sub-Saharan Africa Middle East & North Africa South Asia Latin America & Caribbean East Asia & Pacific Sources: WDR 2008 team, based on Evenson 2003; http://www.faostat.fao.org; IRRI, personal communication 2007; CIMMYT, personal communication 2007. Notes: Improved varieties of rice and wheat are semidwarf varieties first developed in what became known as the green revolution. Data are provided for the period 2000­05, except for maize in some Sub-Saharan African countries where data are from 1997. 160 WORLD DEVELOPMENT REPORT 2008 decades. In the 1980s and 1990s, improved tial share of the maize area was planted to varieties are estimated to have accounted for improved varieties and hybrids in 2006 as much as 50 percent of yield growth, com- in Kenya (80 percent), Malawi (30 per- pared with 21 percent in the preceding two cent), Tanzania (28 percent), Zambia (49 decades. Poor consumers have been the main percent), and Zimbabwe (73 percent).10 beneficiaries. Without those gains in yields, · Cassava. Improved disease-resistant world cereal prices would have been 18­21 strains of cassava have been adopted, percent higher in 2000, caloric availability reaching more than half the cassava area per capita in developing countries would in Nigeria, the world's largest producer. have been 4­7 percent lower, 13­15 million Cassava has been the fastest growing more children would have been classified as food staple in Africa, and since it is a sta- malnourished, and many more hectares of ple of the poor, the impacts of produc- forest and other fragile ecosystems would tivity gains are especially pro-poor.11 have been brought under cultivation.3 Steady genetic improvements to newer · Rice. The New Rice for Africa--com- generations of varieties--and their spread bining the high-yielding potential of beyond irrigated areas and rainfed areas Asian rice with the resistance of African with good water control--have contrib- rice to weeds, pests, diseases, and water uted to continuing yield gains. For exam- stress--was released to farmers in 1996. ple, improved varieties are now planted Increasing yields under low input condi- on 80 percent of the cereal area in India, tions, it is cultivated on about 200,000 only about half of it irrigated.4 Newer gen- hectares in Africa.12 Yet adoption is still erations of improved wheat varieties have modest because of insufficient dissemi- provided an annual increase in yields of 1 nation, training, and extension. percent, and globally the area planted with · Beans. In eastern, central, and southern them has more than doubled since 1981, Africa, nearly 10 million farmers, mostly largely in rainfed areas.5 women, are reportedly growing and Not all farmers have been touched by consuming new bean varieties (Phaseo- this "slow magic."6 Sub-Saharan Africa has lus vulgaris), many with multiple stress seen very incomplete adoption, with many resistances.13 countries having almost no area under A complementary institutional develop- improved varieties. Why the limited green revolution in Sub-Saharan Africa?7 The ment in low and uncertain rainfall regions of marginal production potential is par- broader mix of crops grown in the region; ticipatory varietal selection and breeding the agroecological complexities and het- approaches that involve farmers in the early erogeneity of the region; the lack of infra- stages of plant breeding. Decentralized and structure, markets, and supporting institu- participatory approaches allow farmers to tions; and the gender differences in labor select and adapt technologies to local soil responsibility and access to assets all have contributed (chapter 2).8 and rainfall patterns and to social and eco- nomic conditions, using indigenous knowl- Recent experience in Sub-Saharan edge as well. Between 1997 and 2004, the Africa offers more promise. After a late Barley Research Program of the Interna- start, improved varieties are finally making tional Center for Agricultural Research in an impact on some food staples: Dry Areas in Syria transformed its opera- · Maize. Improved maize varieties and tion from 8,000 plots planted and evalu- hybrids were widely adopted by small- ated on the research station to 8,000 plots holders in many African countries in the planted in farmers' fields and evaluated by 1980s, reaching almost universal coverage farmers.14 It was found that participatory in a few countries, such as Zimbabwe. But plant breeding and varietal selection speeds much of this was underwritten by heavy varietal development and dissemination to subsidies for inputs and prices, subsidies 5­7 years, half the 10­15 years in a conven- that were unsustainable.9 Still, a substan- tional plant-breeding program.15 Innovating through science and technology 161 In the very poor, rainfed rice-growing would decline--a situation best described areas of South Asia that the green revolu- by the Red Queen in Alice in Wonderland: tion passed by, participatory plant breed- "Now here, you see, it takes all the running ing is now paying off with strong early you can do to keep in the same place."19 A adoption of farmer-selected varieties that third to a half of current R&D investments provide 40 percent higher yields in farm- in crop breeding may be for maintenance, ers' fields.16 The approach needs to be more leaving reduced resources to address pro- widely tested in the heterogeneous rain- ductivity advances.20 fed environments of Africa, where involv- Underinvesting in maintenance research ing farmers, especially women farmers, can threaten local food supplies and some- in selecting varieties has shown early suc- times have global significance. Consider the cesses for beans, maize, and rice.17 The cost dramatic recent emergence of Ug99, a new effectiveness of the approach for wider use race of stem rust (Puccinia graminis tritici) also needs to be evaluated. in wheat, the world's second most impor- But improved varieties alone will not tant food staple. Stem rust is catastrophic produce a green revolution in less-favored because it can cause an almost complete areas; low soil fertility and lack of water con- loss of crops over wide areas. Ug99 first trol are major constraints that are difficult appeared in 1999 in Uganda and is now to overcome through genetic enhancement widespread in wheat-growing areas of alone. In the language of crop scientists, Kenya and Ethiopia; in 2007 it was found both the G (genotype) and the E (crop envi- in Yemen. Based on previous experience, ronment and management) have to change Ug99 is expected to be carried by the wind to exploit the type of positive G × E interac- through the Middle East to wheat-growing tions that characterize a green revolution. areas of South Asia and possibly to Europe and the Americas. Given the narrow base Yield risk and the Red Queen of genetic resistance to the disease in exist- Yield stability is important for all farm- ing varieties of wheat, the spread of Ug99 ers, but especially for subsistence-oriented could cause devastating losses in some of farmers whose food security and livelihood the world's breadbaskets.21 The last major are vulnerable to pest and disease outbreaks, outbreak of stem rust in the United States droughts, and other stresses. Improved in 1953 and 1954 caused a 40 percent yield varieties can make yields more stable. A loss worth $3 billion in today's dollars.22 recent study concluded that the variability Through a new international effort, plant of cereal yields, measured by the coefficient breeders and pathologists should be able of variation around trends over the past 40 to avoid a global epidemic by screening for years, has declined in developing countries, resistant genotypes and getting them into a decline that is statistically associated with farmers' fields. the spread of improved varieties, even after Farmers who use traditional varieties controlling for more irrigation and other are also vulnerable to random outbreaks inputs.18 The annual benefits from better of disease, as with the recent outbreak of yield stability in maize and wheat alone bacterial wilt (Banana Xanthomonas wilt) are estimated at about $300 million--more in East Africa. The disease threatens the than the annual spending on maize- and livelihoods and food security of millions wheat-breeding research in the developing of people who depend on bananas in the world. Great Lakes Region--an area that boasts Yield stability of improved varieties the world's highest per capita consumption largely reflects long-standing efforts in of bananas.23 In Uganda, where bananas breeding for disease and pest resistance. are a staple, the potential national loss is Even when improved varieties are bred to estimated at $360 million a year.24 A geneti- resist a disease, they must be periodically cally engineered variety with resistance to replaced to ensure against outbreaks from the disease is a breakthrough, but apply- new races of pathogens. Without invest- ing it depends on Uganda's putting bio- ment in such "maintenance research," yields safety regulations in place (see focus E).25 162 WORLD DEVELOPMENT REPORT 2008 These recurring crises are wake-up calls to The cross-breeding of dairy cows with develop appropriate maintenance research exotic breeds has improved the livelihoods strategies together with global coordina- of smallholder farmers in high-potential tion, surveillance, and financing. areas in the tropics. About 100 million cat- Progress in developing varieties that tle and pigs are bred annually in the devel- perform well under drought, heat, flood oping world using artificial insemination.32 and salinity has been generally slower than And thanks largely to artificial insemina- for disease and pest resistance. The Interna- tion, about 1.8 million small-scale farm- tional Maize and Wheat Improvement Cen- ers in the highlands of East Africa draw a ter (CIMMYT), after more than 30 years of significant part of their livelihood from the research to produce drought-tolerant maize higher milk yields they obtain from geneti- varieties and hybrids, is now seeing results cally improved dairy cattle.33 in eastern and southern Africa. Evaluated Similarly for fish, genetically improved against existing hybrids, the new ones yield tilapia is changing aquaculture into one of 20 percent more on average under drought the fastest growing sectors in Asian agricul- conditions.26 Similarly, recent evidence ture. In 2003 improved strains from a single points to significant yield gains in breed- project--for the genetic improvement of ing wheat for drought and heat-stressed farmed tilapia (GIFT)--accounted for 68 environments.27 New varieties of rice that percent of the total tilapia seed produced survive flooding have also been identified.28 in the Philippines, 46 percent in Thailand, Such advances in drought, heat, and flood and 17 percent in Vietnam. Lower produc- tolerance will be especially important in tion costs per kilogram of fish, high sur- adapting to climate change. vival rates, higher average weight per fish, But large areas of major food crops are and yields 9­54 percent higher than exist- now planted each year in relatively few ing strains explain the fast uptake of GIFT- improved varieties, and genetic uniformity derived strains.34 can make crops vulnerable to major yield Even so, genetic improvement in animals losses. There is some evidence that genetic and fish have reached only a small share of uniformity increases yield risk, even though developing-country farmers, partly because it can also produce higher yields.29 In recent of constraints in the delivery systems for decades, the world has largely avoided these technologies. Livestock breeding ser- major disasters from genetic uniformity, in vices in much of the developing world are part because of frequent turnover of variet- still generally subsidized, crowding out the ies, which brings new sources of resistance. private sector. More research to reduce the Even so, wider conservation and use of costs of these technologies, and more policy genetic resources are needed (chapter 11). and institutional reforms to ensure more efficient and widespread delivery, will enable Beyond crops: genetic improvement the developing world to capture the full ben- of livestock and fish efits of these promising technologies. Advances in animal and fish genetics com- bined with improved animal health and A biotechnology revolution feeding have been the basis of the livestock in the making? revolution in developing countries (chapter Agricultural biotechnology has the poten- 2). Improved pig and poultry breeds have tial for huge impacts on many facets of been adopted through private direct trans- agriculture--crop and animal productiv- fers from the North.30 These gains show up ity, yield stability, environmental sustain- in livestock productivity. Over 1980­2005 ability, and consumer traits important to in the developing world, the annual off-take the poor. The first-generation biotechnolo- from a flock of chickens with a total live gies include plant tissue culture for micro- weight of 1,000 kilograms increased from propagation and production of virus-free 1,290 kilograms to 1,990 kilograms and planting materials, molecular diagnostics that of pigs improved from 140 kilograms of crop and livestock diseases, and embryo to 330 kilograms live weight.31 transfer in livestock. Fairly cheap and eas- Innovating through science and technology 163 ily applied, these technologies have already and inspire public confidence in them. The been adopted in many developing countries. potential benefits of these technologies for For instance, disease-free sweet potatoes the poor will be missed unless the inter- based on tissue culture have been adopted national development community sharply on 500,000 hectares in Shandong Province increases its support to interested countries in China, with yield increases of 30­40 per- (see focus E). cent,35 and advanced biotechnology-based diagnostic tests helped eradicate rinderpest Management and systems virus in cattle. technologies need to The second-generation biotechnologies complement genetic based on molecular biology use genomics to provide information on genes impor- improvement tant for a particular trait. This allows the Much R&D is focused on improving the development of molecular markers to management of crop, livestock, and natu- help select improved lines in conventional ral resource systems. The CGIAR invests breeding (called marker-assisted selection). about 35 percent of its resources in sus- Such markers are "speeding the breeding," tainable production systems, twice the 18 leading to downy mildew­resistant millet percent it invests in genetic improvement.37 in India; cattle with tolerance to African Much of this work has emphasized soil and sleeping sickness; and bacterial leaf blight- water management and agroecological resistant rice in the Philippines.36 As the approaches that exploit biological and eco- costs of marker-assisted selection continues logical processes to reduce the use of non- to fall, it is likely to become a standard part renewable inputs, especially agricultural of the plant breeder's toolkit, substantially chemicals.38 Examples include conservation improving the efficiency of conventional tillage, improved fallows and soils, green breeding. manure cover crops, soil conservation, and The most controversial of the improved pest control using biodiversity and biologi- biotechnologies are the transgenics, or cal control more than pesticides. genetically modified organisms, commonly known as GMOs (see focus E). Transgenic Zero tillage technology is a tool for "precision breed- One of the most dramatic technological rev- ing," transferring a gene or set of genes con- olutions in crop management is conservation veying specific traits within or across spe- (or zero) tillage, which minimizes or elimi- cies. About 9 million smallholder farmers, nates tillage and maintains crop residues as mainly in China and India, have adopted ground cover. It has many advantages over transgenic Bt cotton for insect resistance. conventional tillage: increasing profitability It has already reduced yield losses from from savings in labor and energy, conserv- insects, increased farmer's profits, and sig- ing soil, increasing tolerance to drought, nificantly reduced pesticide use in India and reducing greenhouse gas emissions. But and China. Transgenic technology remains it makes the control of weeds, pests, and dis- controversial, however, because of per- eases more complex, and it usually requires ceived and potential environmental and some use of herbicides. health risks. In Latin America (mainly Argentina and Biotechnology thus has great promise, Brazil), zero tillage is used on more than but current investments are concentrated 40 million hectares (about 43 percent of largely in the private sector, driven by com- the arable land).39 Originally adopted by mercial interests, and not focused on the large and midsize farmers, the practice has needs of the poor. That is why it is urgent spread to small farmers in southern Bra- to increase public investments in pro- zil. Networks of researchers, input suppli- poor traits and crops at international and ers, chemical companies, and farmers have national levels--and to improve the capac- used participatory research and formal and ity to evaluate the risks and regulate these informal interactions to integrate various technologies in ways that are cost effective parts of the technology (rotations, seeds, 164 WORLD DEVELOPMENT REPORT 2008 stock fodder (box 7.2).43 These technolo- B O X 7 . 1 When zero means plenty: the benefits of zero gies are quite location specific, however, tillage in South Asia's rice-wheat systems and research to adapt them to farming sys- tems defined by soils, land pressure, and South Asia's rice-wheat systems, the bed- production costs by up to 10 percent. It labor availability (differentiated by men rocks of food security, are in trouble (chap- reduces water use by about 1 million liters ter 8). Long-term experiments show that per hectare (a saving of 20­35 percent). It and women) should be a high priority to crop yields are stagnating and that soil and improves soil structure, fertility, and biolog- address the severe depletion of soil nutri- water quality are in decline. In response, ical properties and reduces the incidence ents in Sub-Saharan Africa. the Rice­Wheat Consortium of the Indo- of weeds and some other pests. Zero till- Gangetic Plain of South Asia--a network age with wheat succeeding rice is now the Pest management of international scientists, national scien- most widely adopted resource-conserving tists, extension agents, private machinery technology in the Indo-Gangetic Plain, At the other end of the spectrum, research manufacturers, and nongovernmental especially in India with some 0.8 million that reduces use of dangerous pesticides organizations (NGOs)--has developed and hectares planted in 2004 using the method. can have win-win-win benefits for profit- promoted zero-tillage farming. Research on zero tillage on rice-wheat Although zero tillage is part of a much systems in India is estimated to have a rate ability, the environment, and human health broader farm management system that of return of 57 percent, based on an invest- in intensive systems. Integrated pest man- involves many agricultural practices, a key ment of $3.5 million.40 agement uses a combination of practices, part of the system promoted by the consor- Further work must consider the fact tium is planting wheat immediately after that women contribute more than half the especially improved information on pest rice without tillage so that the wheat seed- labor in the rice-wheat system, especially populations and predators to estimate pest lings germinate using the residual moisture for livestock management. This has impor- losses and adjust pesticide doses accordingly. from the previous rice crop. A notable tant implications for involving women in Despite notable examples of integrated pest aspect of the approach has been to work seed selection and fodder management with local machinery manufacturers and practices for the system. management, adoption has often been lim- farmers to adapt drills to local conditions. ited because of its complexity (chapter 8). Zero-tillage farming increases wheat Sources: Malik, Yadav, and Singh 2005; However, biological control of pests can yields through timely sowing and reduces Paris 2003. sometimes have spectacular impacts, often requiring no action on the part of farmers. One of the best-documented cases is the chemicals, and machinery) and adapt them control of the cassava mealybug in Sub- to local conditions. The approach was also Saharan Africa, which was introduced acci- used by an estimated 100,000 smallhold- dentally with planting material from Latin ers in Ghana in the past decade.41 It is America in the 1970s, causing significant also being rapidly adopted in the irrigated economic losses.44 The International Insti- wheat-rice systems of the Indo-Gangetic tute for Tropical Agriculture responded Plain (box 7.1). to the crisis by selecting, rearing, and dis- tributing in 20 countries a parasitoid wasp Legumes and soil fertility that was the mealybug's natural enemy. The Another input-saving and resource- biological control provided by the wasp conserving technology is introducing or was so effective that the cassava mealybug improving legumes in farming systems to is now largely controlled. Even when using provide multiple benefits, most notably the most conservative assumptions, the biologically fixing nitrogen that reduces return on this research investment has been the need for chemical fertilizer (especially extremely high (net present value estimated if the legume is inoculated with nitrogen- at US$9 billion).45 fixing Rhizobium). Much of the yield gain in Australian cereal production over the Combinations past 60 years comes from rotation sys- The greatest impact on productivity is tems that include legumes.42 In southern obtained through production ecology Africa, fast-growing "fertilizer" trees such approaches that combine improved variet- as Gliricidia, Sesbania, and Tephrosia have ies and several management technologies, improved soil fertility, soil organic matter, crop-livestock integration, and mechani- water infiltration, and holding capacity. cal technologies to exploit their synergistic Other benefits include reduced soil erosion effects.46 For example, in Ghana zero tillage and the production of fuelwood and live- is combined with improved legume-based Innovating through science and technology 165 fallows and maize varieties.47 In eastern Africa, low-input integrated pest manage- B O X 7 . 2 Using legumes to improve soil fertility ment has been developed by planting Des- The low fertility in much of African soil almost $2 million for 2005/06. The tech- modium (a nitrogen-fixing leguminous and the low (and sometimes declining) nologies often work best in combination plant that can be used for livestock fod- use of mineral fertilizers have increased with judicious doses of mineral fertilizer. der) between the rows of maize to suppress farmer interest in agroforestry-based soil With 12 million smallholder maize Striga, an especially serious parasitic weed.48 fertility systems. The main methods are a farmers in eastern and southern Africa, rotational fallow or a permanent intercrop rotational fallows and permanent inter- A similar integrated approach involving of nitrogen-fixing trees. The systems have cropping offer considerable long-term improved varieties, biological nitrogen fix- spread mainly in the southern African opportunities for integrated soil fertility ation, cover crops, and machinery adapted subhumid region, where they have more management to keep African soils produc- than doubled maize yields and increased to zero tillage has been vital to the global tive and healthy. net returns on land and labor. In Zambia, competitiveness of Brazilian soybeans.49 Source: Consultative Group on International the financial benefits to the nearly 80,000 Agricultural Research Science Council With the rise of value chains, such tech- farmers practicing improved fallows were (CGIAR) 2006a. nologies must also often integrate product quality and agricultural processing. The integrative nature of management The need for more and agroecological approaches also affects suitable technologies the way R&D is carried out. Because of Although R&D on production and resource location specificity, farmer and commu- management has huge potential, success nity participation in R&D characterizes the has been mixed, with zero tillage as the major success stories of these technologies. outstanding success. Suitable technologies Location specificity also reduces the poten- are still badly needed to conserve and effi- tial for spillovers of technologies from other ciently use scarce water, control erosion, regions--so despite substantial investment and restore soil fertility for smallholders in by the CGIAR, the evidence of impacts is less-favored areas. However, such complex limited.51 technologies are often labor or land inten- For these reasons, scaling up manage- sive and may be unattractive to farmers ment and system technologies will not be where labor costs are high, land is scarce, easy. Networks of scientists, farmers, pri- or discount rates on future returns are very vate firms, and NGOs take time to develop high or the returns risky. These concerns and become inclusive and effective. They are especially important to women farm- also take time to develop the "ecological lit- ers lacking access to assets and services and eracy" to successfully apply many of these who have specific seasonal labor-use pat- technologies (chapter 8). But advances in terns. Although the technologies are aimed geographic information systems and remote at poor farmers, the record shows higher sensing by satellites are opening new ways adoption levels by wealthier farmers.50 to synthesize complex and diverse spatial Management and systems technologies data sets, creating new opportunities for can require considerable institutional sup- collaboration among scientists, policy mak- port to be widely adopted (chapter 8). Many ers, and farmers. of them involve the interaction of several actors--such as collective action among Investing more in R&D neighboring farmers--as well as technical Agricultural productivity improvements support, learning, farmer-to-farmer inter- have been closely linked to investments in action, and knowledge sharing, as with agricultural R&D (chapter 2).52 Published conservation tillage in Brazil. In addition, estimates of nearly 700 rates of return many technologies have positive impacts on R&D and extension investments in on the environment that are not captured the developing world average 43 percent in the private benefits for adopting farm- a year.53 Returns are high in all regions, ers and may require payment for environ- including Sub-Saharan Africa (figure 7.2). mental services to encourage their adoption Even discounting for selection bias in eval- (chapter 8). uation studies and other methodological 166 WORLD DEVELOPMENT REPORT 2008 Figure 7.2 Estimated returns to investment in agricultural R&D are high in all regionsa public sector.55 But even growth in public --averaging 43 percent spending on R&D, after rapidly increasing in the 1960s and 1970s, has slowed sharply All countries (1673) in most regions in the past decade or more, All developed countries (990) opening a knowledge divide between poor countries and rich countries and within All developing countries (683) the developing world between a handful of Sub-Saharan Africa (188) "star performers" and most of the others. Developing countries as a group invested Asia (222) 0.56 percent of their agricultural gross Middle East & North Africa (11) domestic product (GDP) in agricultural R&D in 2000 (including donor contribu- Latin America & Caribbean (262) tions), only about one-ninth of the 5.16 per- 0 20 40 60 cent that developed countries invest. Part of Percent this disparity is because private investment makes up just over half of R&D spending Source : Alston and others 2000. a. Based on studies carried out from 1953 to 1997. Number of observations in parentheses. in industrial countries but only 6 percent in the developing world. Still, the intensity of public investment (in relation to agricul- issues,54 there is little doubt that investing tural GDP) is five times higher in industrial in R&D can be a resounding success. The countries (table 7.1). high payoffs relative to the cost of capital A few developing countries--notably also indicate that agricultural science is China, India, and to a less extent, Brazil-- grossly underfunded. have rapidly increased their spending on agricultural R&D over the past two decades. Why agricultural R&D Their shares in developing-country public is underfunded spending in agricultural R&D increased Public investment is especially important for from a third in 1981 to almost half in 2000. funding agricultural R&D where markets Including spending on science and tech- fail because of the difficulty of appropriat- nology for all sectors, these three countries ing the benefits. Seeds of many improved accounted for 63 percent of the total--which varieties can be reused by farmers and sold is meaningful, because an increasing share or shared with neighboring farmers (nonex- of agricultural R&D is carried out in general cludable). Information on improved man- science and technology organizations.56 The agement practices can be freely exchanged private sector also has a growing presence (nonrival). Intellectual property rights in these countries, where expanding agri- (IPRs) have partially overcome these mar- cultural input markets provide incentives ket failures in industrial countries, but few to invest. technologies of importance to poor farmers Meanwhile, many agriculture-based can be cost-effectively protected by IPRs countries are flagging or slipping in the (box 7.3). A major exception is private sec- amount spent on R&D. In the 1990s, public tor investment in hybrid seed of a few crops R&D spending in Sub-Saharan Africa fell in where intellectual property can be protected nearly half the 27 countries with data, and by trade secrets. Farmers must purchase the share of agricultural GDP invested in hybrid seed frequently to maintain its yield R&D fell on average for the whole region.57 advantage, providing a steady market for private seed companies. Politics, prices, and spillovers. Why does this underinvestment in R&D continue, Star performers--and the others. For given the well-documented high rate of these reasons, private investment in devel- return on investment? Three main rea- oping-country R&D has been very lim- sons: First, the political economy of public ited--94 percent of the agricultural R&D expenditure decisions tends to emphasize in the developing world is conducted by the short-term payoffs and subsidies that are Innovating through science and technology 167 B O X 7 . 3 Stronger IPRs in developing countries: effect on small farmers Under the World Trade Organization (WTO) North-South bilateral and regional trade How countries could do more Agreement on Trade-Related Aspects of Intel- agreements often put pressure on developing Even so, countries could do more to adapt IPR lectual Property Rights, member countries are countries to adopt even stronger protection-- legislation to their needs within the guidelines required to implement IPRs, including those such as that based on the 1991 Convention of of current international treaties. For example, for plant varieties and biotechnology inven- UPOV, which makes selling and exchanging a country could provide strong protection for tions. The most common type of protection is seed of protected varieties illegal. commercial crops as an incentive for private through plant variety rights. A handful of devel- investment, while excluding or providing oping countries also provide patent protection. Little impact so far weaker protection to staple food crops impor- Many developing countries have elected A recent review of the impacts of stronger IPRs tant to subsistence-oriented farmers, where to follow the model developed in 1978 by on the seed industries of China, Colombia, seed saving and exchange are integral to industrial countries, the Convention on the India, Kenya, and Uganda found relatively farming practices. Protection of New Varieties of Plants--known little impact to date, mainly because the IPRs Only a few developing countries with large by its implementing agency, the International are still under development in most coun- commercial sectors or potential in private bio- Union for the Protection of New Varieties of tries. Although limitations on the exchange technology R&D should consider strong IPRs, Plants (UPOV), which harmonized conditions of farmer-saved seed appear a significant such as UPOV 1991 and strong patent laws. and norms for protecting new varieties while obstacle to smallholder farmers, there are no Plant variety rights also need to fit into other giving farmers the right to save and exchange indications that such rules have been enforced. regulatory systems, such as seed certification seed. Other countries (for example, India and Indeed, it is generally not cost effective to laws, biosafety laws, and such other IPRs as Thailand) explicitly recognize framework farm- enforce such rules for staple crops grown by trademarks and trade secrets. In any event, ers' rights to save and exchange seed (derived smallholders. Also, the potential advantages of sharply increased capacity of the public sector, from the 2004 international treaty of the Food IPRs should not be overrated in most develop- private firms, and farmers is needed to design and Agriculture Organization of the UN [FAO]) ing countries. Relative to broader investment and build credible and cost-effective IPR sys- and to share benefits arising from the use of climate issues, IPRs do not seem critical in the tems that fit a country's needs. farmers' genetic resources and indigenous initial development of a private seed sector, knowledge (based on the 1993 Convention on but they could help to support a maturing Sources: Oxfam International 2007b; Tripp, Biological Diversity). commercial seed industry. Louwaars, and Eaton 2007; World Bank 2006k. Table 7.1 Total public agricultural R&D expenditures by region, 1981 and 2000 Public agricultural R & D spending as a % R & D spending of agricultural GDP 1981 2000 1981 2000 2000 int'l $, millions Sub-Saharan Africa 1,196 1,461 0.84 0.72 Asia & Pacific 3,047 7,523 0.36 0.41 China 1,049 3,150 0.41 0.40 India 533 1,858 0.18 0.34 West Asia & North Africa 764 1,382 0.61 0.66 Latin America & Caribbean 1,897 2,454 0.88 1.15 Brazil 690 1,020 1.15 1.81 Developing countries 6,904 12,819 0.52 0.53 Japan 1,832 1,658 1.45 3.62 United States 2,533 3,828 1.31 2.65 Developed countries 8,293 10,191 1.41 2.36 Total 15,197 23,010 0.79 0.80 Sources: Agricultural Science and Technology Indicators database, http://www.asti.cgiar.org; Pardey and others 2007. Note: These estimates exclude Eastern Europe and the former Soviet Union countries because data are not available. "politically visible" (chapter 4), while agri- farmers in developing countries are a dis- cultural R&D investments are both long incentive to both public and private invest- term (10 years or more) and risky. More- ment in R&D (chapter 4).58 over, in agriculture-based countries, the Third, because the benefits of much political power of farmers is low anyhow public R&D spill over to other countries, (chapter 1). Second, trade distortions and it might not make much economic sense national policies that reduce incentives to for small countries to spend their scarce 168 WORLD DEVELOPMENT REPORT 2008 resources on agricultural science, on their Saharan Africa, there is less potential to own behalf; many nations have been free- capture spillovers because of the relative riding on the efforts of a few others. The uniqueness of their agroclimatic conditions international agricultural research centers and crops (box 7.4). of the CGIAR were created specifically to provide spillovers in many areas of technol- Ways to increase investment in R&D ogy.59 Over half of all benefits of R&D are Increasing public funding of R&D will generated by such spillovers.60 require greater political support to agricul- But future reliance on spillovers for ture, particularly to finance public goods. productivity enhancement carries risks.61 Forming coalitions of producers and agri- Privatization of R&D restricts access to businesses around particular commodities proprietary technologies and the sharing or value chains may be the most effective of scientific knowledge (see below). Tra- way to lobby for more public funding and ditional sources of spillovers for produc- for producers and agribusiness to cofinance tivity growth--the public R&D systems R&D. In addition, institutional reforms, in developed countries and the CGIAR-- discussed next, will be needed to make have also shifted priorities away from investing in public R&D organizations productivity-enhancing research to research more attractive--and more effective. on the environment and food safety and Another way to increase investment is quality.62 In some regions, especially Sub- to remove barriers to private investment B O X 7 . 4 Sub-Saharan Africa's agricultural R&D challenge In addition to stagnant R&D spending, Sub- · There is considerable heterogeneity within · Complex agricultural challenges in Sub- Saharan Africa faces specific challenges that add Africa resulting from rainfed production Saharan Africa require combining genetic urgency to increasing the spending on agricul- systems, reducing the spillover potential improvement emphasizing pests, diseases, tural R&D, extension, and associated services: among countries in the region. and drought, with improvements in soil and water management, and with labor-saving · The potential to capture spillovers of tech- · Because of small country size, agricultural technologies in areas of low population den- nology from outside the region is less in research systems in Sub-Saharan Africa are sity or serious HIV/AIDS infection. Sub-Saharan Africa than in other regions. This fragmented into nearly 400 distinct research is partly because the crops grown in Sub- agencies, nearly four times the number in These problems are surmountable. First, Saharan Africa are more diverse, with many India and eight times that in the United Australia, another dryland continent techno- so-called orphan crops where there is little States (table below). This prevents realizing logically distant from other regions, has one global public or private R&D (for example, economies of scale in research. of the highest intensities of public R&D invest- cassava, yams, millet, plantain, teff ), and partly · Funding per scientist is especially low in ment in the world (more than 4 percent of because of "agroecological distance." Using Sub-Saharan Africa. With nearly 50 percent agricultural GDP); it has a productive and com- an index of agroecological distance--zero more scientists than India, and about a petitive agricultural sector. Second, spillovers to represent no potential for spillovers from third more than the United States, all of can be better targeted at a world scale--for high-income countries, where most R&D is Sub-Saharan Africa spends only about half example, East African highland countries such conducted, and 1 for perfect spillover poten- of what India spends and less than a quarter as Ethiopia and Kenya have product mixes and tial--Pardey and others (2007) estimate that of what the United States spends. Only a agroecological conditions similar to Mexico. the average index for African countries is quarter of African scientists have a PhD, Third, the rise of regional research organiza- 0.05, compared with 0.27 for all developing compared with all or most scientists in India tions in Africa should help achieve economies countries. So, technologies imported from and the United States. of scale and scope. other continents often do not perform well. Comparison of research systems in Sub-Saharan Africa, India, and the United States around 2000 Sub-Saharan Africa India United States Arable and permanent crop area (hectares, millions) 147 160 175 Number of public agricultural research agencies 390 120 51 Number of full-time equivalent scientists 12,224 8,100 9,368 Percentage of scientists with PhD 25 63 100 Annual public spending on agricultural R&D (1999 int'l $, millions) 1,085 1,860 3,465 Spending per scientist (1999 int'l $, thousands) 89 230 370 Sources: FAO 2006a. Pal and Byerlee 2006; Pardey and others 2007. Innovating through science and technology 169 in R&D. One constraint to private R&D and increasing the contestability of fund- investment is a weak investment climate for ing through competitive funding mecha- private investors generally (see focus D). A nisms. To succeed, these reforms have to be second is weak demand from smallholders accompanied by a long-term commitment for improved technologies because of risks, to build capacity (box 7.5), which has paid credit constraints, and poor access to infor- off in the now-strong public research sys- mation. A third is that production systems tems in Brazil, China, and India. A chal- and technologies in much of the develop- lenge for public research systems in Africa ing world make it difficult to enforce IPRs. is attracting and retaining scientists, who Added to these three are restrictions on operate in a global marketplace, especially private sector imports of technologies and women scientists--who make up only 21 high regulatory barriers to the release of percent of the total (see focus G).67 new technologies, such as the varieties Research universities are also underused developed by the private sector.63 for publicly supported science. Competitive More could be done to stimulate pri- funding mechanisms for public funds have vate investment in R&D by improving the increased the role of universities in agricul- environment for private innovation--say, tural R&D in some countries. For example, through stronger IPRs for inventions for 30­50 percent of the competitive grants for commercial crops (see box 7.3) and lower agricultural R&D in Brazil, Chile, Ecuador, barriers to the import and testing of tech- and Mexico have been channeled to univer- nologies. Another approach is to make pub- sities.68 Moreover, universities prepare the lic funding for R&D contestable and open next generation of scientists. A comprehen- to private firms to implement the research, sive agricultural science policy is needed to usually with private cofinancing. Competi- address continuing weaknesses in univer- tive funding has become common, especially sity systems, especially in agriculture-based in Latin America, and some funds have the countries (see focus G). specific objective of funding private innova- While investment in public R&D orga- tion (FONTEC in Chile, for example). Yet nizations remains important, the public another approach is to establish a "purchase sector cannot do it alone. Science-driven fund" or prize to reward developers of spe- and linear research-extension-farmer cific technologies, such as varieties resistant approaches--in which public research sys- to a particular disease.64 Prizes were used tems generate technologies disseminated historically to promote inventions, such as an accurate way to measure longitude.65 The reward could also be tied to the economic B O X 7 . 5 Long-term capacity development in Ghana benefits actually generated.66 The Ghana Grains Development Project is The project's bottom-up approach one of the few African success stories of integrated farmers in all stages of research Institutional arrangements long-term donor support to strengthen and included socioeconomic assessment of to increase the efficiency and national research and extension for food the technology. Complemented by large- effectiveness of R&D systems production. Ghana is also one of the few scale extension programs supported by countries with sustained increases in the NGO Sasakawa Global 2000, more than Although public research organizations per capita food production. The project half of all maize farmers in Ghana adopted dominate in most developing coun- focused primarily on increasing the output improved varieties, fertilizer, and planting of maize and cowpeas through well- methods by 1998. But after the removal of tries, their efficiency and effectiveness in adapted varieties and management prac- fertilizer subsidies, fertilizer use dropped today's changing world are in question. tices for each of Ghana's agroecological to 25 percent, challenging the approach's Institutional reforms of public R&D were zones. A special feature was the graduate- sustainability. Adoption by women farmers addressed in World Development Report level training of about 50 scientists, nearly (39 percent) was significantly lower than all of whom returned to the project. that for men (59 percent), reflecting differ- 2002. They include creating well-governed Annual maize production jumped ences in access to assets and services, and autonomous bodies or public corpora- from 380,000 tons in 1979, when the especially the biases in extension. tions, such as EMBRAPA (the Brazilian project started, to more than 1 million public agricultural research corporation); tons by the project's end in 1998. Maize Sources: Canadian International Development yields increased by 40 percent from Agency, personal communication, 2006; improving their effectiveness in assess- 1.1 tons per hectare to 1.5 tons. Morris, Tripp, and Dankyi 1999. ing and responding to farmer demands; 170 WORLD DEVELOPMENT REPORT 2008 through largely public extension systems even industrial countries benefit from it. to farmers--worked well in some contexts Its future success depends on increasing its (the green revolution). But they work less core funding and sharply focusing its pri- well in meeting today's rapidly changing orities (chapter 11). market demands, especially for high-value International cooperation in R&D goes and value-added products. Nor are they well beyond the CGIAR. Growing capacities suited to more heterogeneous contexts, in the large countries with dynamic R&D sys- as in rainfed areas of Sub-Saharan Africa, tems, such as Brazil, China, and India, repre- where more comprehensive approaches are sent an underused resource for South-South needed to secure development and adop- cooperation that other developing countries tion of technological innovations. can tap, with modest funding. New collabor- To improve the efficiency and effec- ative arrangements among developing coun- tiveness of R&D, collective action and tries make this possible. FONTAGRO, the partnerships involving a variety of actors Regional Fund for Agricultural Technology in an innovation systems framework are for Latin America and the Caribbean, is one emerging as important. Such a framework example. Created in 1998 as a consortium of recognizes multiple sources of innovation, 13 countries, FONTAGRO allocates grants and multiple actors as developers and users competitively to organizations in the region, of technologies, in a two-way (nonlin- achieving economies of scale and scope for ear) interaction. Such systems have many preestablished research priorities.70 Similar advantages. They can pool complementary approaches are being implemented through assets such as intellectual property, genetic the Forum for Agricultural Research in resources, and research tools. They can Africa and several subregional associations. reap economies of scale and scope. They The Latin American Fund for Irrigated Rice, can facilitate technology transfers through which includes members from public and arrangements with private input distribu- private sectors and from producer organiza- tors. They can promote integrated value tions in 13 countries, finances regional rice chains. And they can foster mechanisms to improvement research. express consumer and farmer demands for technology and product traits. Public-private partnerships Given the dominance of public systems Global and regional partnerships for R&D in developing countries, and the for economies of scale global role of the private sector in R&D and The high fixed costs of much of today's in value-chain development, public-private research require economies of scale in R&D. partnerships (PPPs) offer much potential That puts small and medium-size coun- and are proliferating. tries and research organizations at a disad- vantage for some kinds of research. Many Making biotech available to smallholders. developing countries may be too small to One type of PPP makes the products of bio- achieve efficient scale in agricultural R&D, technology available to smallholders in the except in adaptive research. A challenge for developing world, in areas where the private global efficiency in agricultural science, and sector has little commercial interest. Bio- for many smaller countries, is to develop technology partnerships can link global and institutions for financing and organizing local actors through complex agreements research on a multinational basis.69 that reflect their assets (table 7.2)--the The CGIAR was created to facilitate such CGIAR has 14 such partnerships.71 Some spillovers by producing international pub- partnerships also reflect the rise of new lic goods that benefit the poor. Its collec- philanthropists, such as the Gates Founda- tive action, with 64 funders and 15 interna- tion and foundations (Syngenta Founda- tional centers, has been one of agriculture's tion) associated with private biotechnology global success stories. The CGIAR system is companies, that provide both new sources critical for small, agriculture-based coun- of private funding and access to research tries to underwrite the cost of R&D, but tools and technologies. Innovating through science and technology 171 Table 7.2 Assets of public and private sectors in agribiotechnology research Institution/firm Scientific and knowledge assets Other assets Multinational research firms (life-science firms) Genes, gene constructs, tools, related information Access to international markets and marketing resources networks Biotechnology research capacity Access to international capital markets Economies of market size IPR skills International agricultural research centers (CGIAR) Germplasm collections and informational resources Access to regional/global research networks Conventional breeding programs and infrastructure Access to bilateral/multilateral donor funding Applied/adaptive research capacity Generally strong reputational integrity National agricultural research institutes Local/national knowledge and materials Seed delivery and dissemination programs and in medium-size countries infrastructure Conventional breeding programs and infrastructure Generally strong reputational integrity Applied/adaptive research capacity Local firms Local/national knowledge and materials Seed distribution and marketing infrastructure Applied/adaptive research capacity Source: Adapted from Byerlee and Fischer (2002) and Spielman and von Grebmer (2004). Note: For simplicity, advanced research institutes and other players in the global research system are excluded from this table. Despite the promise, PPPs of this type have been slow to deliver results on the B O X 7 . 6 IPR options to give the poor access ground because of high transaction costs to modern science in negotiating intellectual property agree- The increasing share of tools and technol- Golden Rice with enhanced Vitamin A is ments (box 7.6); asymmetric information ogies protected as intellectual property in an example: patents have been negoti- on asset positions and bargaining chips; the developed world--by both the public ated for humanitarian use for farmers clashes of public and private cultures; and and private sectors--poses a major chal- in the developing world with incomes a lack of mutual trust, resulting in coordi- lenge to harnessing them for the benefit under $10,000 a year. nation failures across actors.72 of poor people. · Public Intellectual Property Resource for For many countries, the fact that a Agriculture is a consortium of public R&D gene or tool is protected in rich countries organizations that encourages intel- Innovating in value chains. A second type may not be a problem, as IPRs are relevant lectual property sharing in the public of partnership is being stimulated by new only in the country awarding the patent sector and provides licenses for humani- or plant variety right (unless a product markets for high-value products and supply tarian use in the developing world. derived from the gene or tool is exported · Biological Information for Open Society chains. In those chains, innovation may be to a country holding the IPR). Since many fosters collaborative "open source" less dependent on local R&D because the small countries and least-developed development of key enabling tech- technology for many high-value products countries are not attractive commercial nologies, such as tools of genetic markets for private companies, few pat- is less location-specific than that for tradi- transformation, that will be made freely ents are taken out in those countries. available to developing countries. It is tional staples (for example, horticulture in Countries may unilaterally decide to use also a clearinghouse for databases from greenhouses and stall-fed dairy farming). a particular gene or tool if they can physi- IPR offices to reduce transaction costs in cally obtain it (by obtaining seed with a A dynamic system of innovation comprises acquiring intellectual property. desired gene). private business, farmers, processors, regu- · African Agricultural Technology Founda- Patent protection is more common latory bodies, and public R&D organiza- tion brokers the acquisition of intellec- for the rapidly emerging and larger coun- tual property for smallholders in Africa, tions operating in partnerships, networks, tries. For all countries, timely access to case-by-case, on a humanitarian basis. new tools and technologies, as well as or consortia. The foundation brokered the partner- the tacit knowledge required to use them Policymakers can facilitate these PPPs by ship of CIMMYT, the Kenya Agricultural effectively, increases the value of a formal providing incentives for innovation through Research Institute, BASF (a private agreement to obtain access. producer of agrochemicals), the Forum competitive funds that cofinance both R&D Some innovative approaches to for Organic Resource Management and acquire proprietary science--or at least and the pilot testing of innovations, usually Agricultural Technologies, seed compa- reduce the transaction costs of doing in partnership with private actors: farmers, nies, and NGOs to make the Striga-killing so--for the benefit of small farmers in the maize-herbicide technology available to processors, or other agribusinesses. India's developing world include the following: smallholders in Kenya. National Agricultural Innovation Project · Market segmentation and humanitarian will support about 15 value chains, such as licenses recognize that many technolo- Sources: African Agricultural Technology gies may benefit poor farmers who are Foundation (AATF) 2004; Wright and those for biofuels and livestock, at roughly not an attractive market for private firms. Pardey 2006. $5 million apiece, through this approach. 172 WORLD DEVELOPMENT REPORT 2008 Coordination can also be facilitated along Tanzania and coffee research in Colombia, the value chain by formalizing coordinat- for example). Widely adopted in industrial ing bodies or consortia of participants in a countries, such levies have been underused specific value chain. in developing countries, despite their poten- tial to resolve underinvestment and improve Making R&D more responsive the demand orientation and effectiveness of to farmers and the market research.74 In most cases, the levies are 0.5 Formal R&D partnerships with farmers' percent or less of the value of commodity organizations aim to enhance the demand output. If matched by public funding, as in for innovation by bringing farmers' voices Australia and Uruguay,75 they would allow into decision making. Collective action a significant increase in research intensity of this sort can identify constraints, pool in developing countries. Even where levies indigenous knowledge, and aggregate tech- are not feasible,76 donors and governments nological demands. These partnerships could still channel more funding through help scale up adaptive research, testing, farmer organizations, especially for adap- and dissemination--and facilitate access tive research--as in Mali, where Regional to inputs, markets, and finance for the new User Commissions manage funds for adap- technologies. tive research. Farmer organizations (chapter 6) have The most successful partnerships com- demonstrated strong interest in such part- bine farmer organizations with value chains nerships. One approach empowers farmers and PPPs to integrate market demands (box by formally including them in governing 7.8). Funds are becoming more available to councils of research organizations. This cofinance these partnerships. In Senegal, generally produces results only if the system farmer organizations have strong decision- is decentralized and farmers have a control- making powers in the National Agricultural ling interest in resource allocation--giving Research Fund, which finances research them the power to approve research proj- carried out in partnership with private and ects and programs, as in Mexico (box 7.7). development actors. Farmers have even more influence where A big challenge in integrating farmer they finance a significant share of R&D. The organizations into technological innova- best-known examples of this approach use tion is that their leaders are at an educa- levies on commercial crops, such as cotton tional and social disadvantage relative to or coffee, governed by commodity-based scientists and technical advisors. This gap producer organizations (for tea research in is even more pronounced for poor and marginal groups and for women. Targeted capacity building and financing are usually required to empower weaker members and B O X 7 . 7 Mexican farmers lead research through to ensure that farmer leaders fairly repre- PRODUCE foundations sent their interests. PRODUCE foundations,73 farmer-led NGOs, well as the National Council for Science were created in Mexico in 1996 to leverage and Technology. They also manage a trust Using available technology additional funding for the cash-strapped fund, which has a mechanism for match- national agricultural research institutes ing funds between the governments and better: extension and ICT and to give producers a role in the funding producers. innovations and focus of agricultural R&D. The founda- The foundations are, however, the turf tions help set priorities and approve and of commercial farmers. Attempts to inte- There is general agreement about the con- cofinance research projects in each state. grate small farmers have failed because siderable productivity and profitability In 1998 the 32 foundations (one for of high transaction costs in dealing with gaps in most smallholder farming systems each state) created a national coordinat- individual farmers and the difficulties in ing office to help them become key play- identifying small producers with an orien- relative to what is economically attainable ers in Mexico's agricultural innovation tation toward commercial agriculture, the (chapter 2).77 Lack of access to inputs and system. They now lobby successfully for main emphasis of PRODUCE. credit and the inability to bear risks explain agricultural R&D. part of the gaps (chapter 6). But one major The foundations have formal links with research and educational institutions, as Sources: Ekboir and others 2006. reason is an information and skills gap that constrains the adoption of available Innovating through science and technology 173 technologies and management practices or reduces their technical efficiency when B O X 7 . 8 Adding value to a poor farmer's crop: adopted. Hence the recent emphasis is on cassava in Colombia and Ghana new approaches to demand-led extension and to the application of new information Cassava, traditionally viewed as a subsis- In Colombia, the International Center tence crop of the poor, is emerging as a for Tropical Agriculture structured its and communications technologies (ICTs) strategic link in industrial value chains in early cassava research around dried cas- to reduce these gaps. Colombia, Ghana, and many other coun- sava chips for the animal feed industry. tries. Private-public farmer partnerships Between 1980 and 1993, 101 cooperative New demand-led approaches facilitated this transformation through and 37 private processing plants were greater coordination along the value built. By 1993 these facilities produced to extension chain--and through R&D within a broader 35,000 tons of dried cassava, with an esti- Agricultural extension helps farmers learn context of new products and markets and mated value of $6.2 million. greater competitiveness. how to augment their productivity, raise Since 2004 the Ministry of Agricultural In Ghana, the Sustainable Uptake of and Rural Development has explicitly their incomes, and collaborate with one Cassava as an Industrial Commodity Proj- included cassava in competitive calls for another and with agribusiness and agri- ect established systems linking farmers, R&D projects to stimulate further inno- cultural research. Accordingly, extension especially women, to new markets for cas- vation and maintain competitiveness sava products, such as flour, baking prod- in value chains. High-value clones with programs are shifting from prescribing ucts, and plywood adhesives. The local enhanced nutritional quality, novel starch technological practices (delivery model) to Food Research Institute and industrial mutations, and sugary cassava have been focusing more on building capacity among users collaborated to organize more than identified and integrated into value chains rural people to identify and take advantage 100 stakeholders into a value chain of cas- for the animal feed, starch, and ethanol sava production and drying in rural areas, industries, respectively. of available opportunities, both technical grinding and milling in central facilities, and economic (empowerment model). To and distribution to industrial processors. Source: World Bank (2006h). perform such a wide-ranging role, exten- sionists must be trained in areas beyond technical agriculture to build skills in From centralized to decentralized. In the mobilizing farmers, tapping market intel- 1990s many governments moved away from ligence, and managing farm and nonfarm centralized systems and transferred to local businesses (see focus G). governments the responsibility for deliver- Public services have dominated exten- ing extension and, in some cases, financing sion. Public spending for extension exceeds it, in line with wider efforts to decentral- that for agricultural research in most devel- ize government (chapter 11). The expected oping countries. But public financing and advantages are to improve access to local provision face profound problems of incen- information and better mobilize social tives of civil servants for accountability to capital for collective action. It should also their clients, weak political commitments improve accountability, as agents report to to extension and to agriculture more gen- local stakeholders or become employees of erally, extension workers not being abreast local government, which--if democrati- of relevant emerging technological and cally elected--would be keen on receiv- other developments, a severe lack of fiscal ing positive feedback on the service from sustainability in many countries, and weak the client-voter. Although these are good evidence of impact. reasons to decentralize extension, general One of the most influential efforts to difficulties in decentralization, as well as "fix" public extension was the training and local political capture, have in some cases visit (T&V) model of organizing extension, compromised progress in delivering more promoted by the World Bank from 1975 to effective advisory services.79 1995 in more than 70 countries. The T&V A promising additional element, approach aimed to improve performance increasingly adopted, is to involve farmers of extension systems by strengthening in decentralized governance. Since 2000, their management and formulating spe- both the Agricultural Technology Man- cific regular extension messages. But the agement Agencies (ATMAs) in India and T&V system exacerbated other weaknesses, the National Agricultural and Livestock especially fiscal sustainability and lack of Program in Kenya have set up stakeholder real accountability. The result: widespread forums from national to district and sub- collapse of the structures introduced.78 district levels to plan and set priorities for 174 WORLD DEVELOPMENT REPORT 2008 extension activities. Both promote farmer cofinancing are appropriate, through to full interest groups around specific crop and privatization for some services. In all these livestock activities, farmer-to-farmer learn- efforts to make agricultural innovation sys- ing and knowledge sharing, and marketing tems more demand driven, there is a need partnerships with the private sector. Based to pay attention to how women's demands on favorable evaluations of the first phase can be better represented, accommodating (including an estimated 25 percent increase their time constraints (in, say, participat- in farmer incomes in most ATMA districts, ing in farmer organizations), and employ- far more than the 5 percent in most neigh- ing them in advisory services to increase boring districts), the two programs are effectiveness of service delivery.81 being scaled up to the national level, and As in research, building demand is part similar initiatives are under way in many of successful extension. Management may other countries, such as Tanzania.80 become the responsibility of farmer or agri- business organizations rather than local Mixing public and private. Other new governments. Extension can still be publicly approaches recognize the significant pri- funded, but funds can flow through farmer vate-good attributes of many extension organizations that have a controlling inter- services, such as technical advice delivered est in fund allocation (figure 7.3). Farmer by processors and wholesalers to farmers organizations, in turn, may contract out producing high-value crop and livestock extension services to private providers and products under contract (chapter 5). Mixed NGOs, as in Uganda's National Agricultural public-private systems involve farmer orga- Advisory Services, viewed by farmers as nizations, NGOs, and public agencies con- working well.82 Another approach is to have tracting out extension services. The various a private company and the state extension approaches are now often found alongside system jointly finance and provide advisory each other, in a shift from a "best practice" services, especially for agrochemical inputs, or "one-size-fits-all" to a "best fit" approach as in Madhya Pradesh, India.83 to particular social and market conditions. For example, approaches based on public Farmer to farmer. Extension methods funding but with involvement of the local have also become more diverse, includ- governments, private sector, NGOs, and ing farmer-to-farmer extension. Informal producer organizations in extension deliv- networks among farmers have always been ery may be most relevant to subsistence-ori- powerful channels for exchanging infor- ented farmers (table 7.3). With agricultural mation and seeds. Several programs are commercialization, various forms of private formalizing and linking such networks for Table 7.3 Ways of providing and financing agricultural advisory services Source of finance for the service Producer organizations Provider of the service Public sector Farmers Private firms NGOs (POs) Public sector Public sector advisory Fee-based services .. NGOs contract staff POs contract staff services with from public extension from public extension decentralization services services Private firms Publicly funded Fee-based services or Information provided .. POs contract staff from contracts to service by input dealers with input sales or private service providers providers marketing of products NGOs Publicly funded Fee-based services .. NGOs hire staff and .. contracts to service provide services providers Producer organizations Public funds managed .. .. .. POs hire extension staff by farmer organizations to provide services to members Source: Birner and others (2006). n.a. = not applicable. .. = negligible in practice. Innovating through science and technology 175 knowledge sharing and learning. The Pro- Figure 7.3 Financing for extension services, the traditional and the new approach grama Campesino a Campesino in Nicara- Farmers Farmer organizations gua and the Mviwata network in Tanzania provide national coverage through farmer- to-farmer approaches.84 Services Accountability $ Services A related approach is the Farmer Field School, originally designed as a way to Extension organization Extension organization introduce integrated pest management to $ Accountability irrigated rice farmers in Asia. The schools Accountability $ have been introduced, often on a pilot basis, in some 80 developing countries, and Ministry of Agriculture Ministry of Agriculture their scope has been broadened to other types of technology.85 Impact evaluations, Source: Chipeta 2006. still limited, have shown that the approach can significantly improve farmers' knowl- scriptions are averaging 6 million a month, edge of new technological options, but the many in rural areas. schools have not demonstrated the cost In Africa, about 9 percent of the popu- effectiveness hoped for in service delivery.86 lation have mobile phones in networks that This may be because complex management could reach 60 percent of the population. In information, such as that for integrated pest Uganda, 80 percent of communities have management, does not travel as easily from mobile phone coverage, and 5 percent of farmer to farmer as information on seed of households possess mobile phones.87 The improved varieties. It is also because ben- broader coverage, more than the possession efits from the management skills acquired of individual mobile phones, induces market need to be observed over the long run. participation by reducing transaction costs in crop marketing and increasing prices, Back on the agenda. Agricultural exten- especially for perishable goods.88 The Kenya sion services, after a period of neglect, Agricultural Commodity Exchange and are now back on the development agenda, Safaricom Limited collect and disseminate with a sense of excitement about many of current and reliable commodity price infor- the emerging institutional innovations. mation to Kenyan farmers through a low- Clearly there still is much to do in bringing cost Short Message Service (SMS) provider. needed extension services to smallholders Farmers also use ICTs for extension around the world, especially the poorest advice from a range of sources, but it takes groups. Understanding what works well in time to develop demand-driven services. the diverse circumstances of the develop- Private operators and an NGO in India ing world remains a challenge, of course. reach tens of thousands of farmers and are More evaluation, learning, and knowledge being rapidly scaled up (box 7.9). Comput- sharing are required to capitalize on this ers are now being linked through mobile renewed momentum. phone networks to greatly expand the scope of information. The soon-to-be-launched New ICT tools at the farm level "$100 laptop" could herald an even greater The declining costs of ICTs are giving farm- role for ICTs.89 ers and rural people in developing coun- Policies to improve ICT access in rural tries much greater access to information. In areas need to focus as much on content and China, 83 percent of villages now have fixed education as on infrastructure. Education phones, and 56 percent have mobile cover- is one of the key factors affecting the return age. In India, 77 percent of villages have to ICTs in agricultural production, along fixed phones, and 19 percent have mobile with electricity, roads, and appropriate coverage. Mobile phone coverage in India business models.90 Local content creation is expanding at breakneck speed--on one needs to be linked to institutional innova- day in 2006, Nokia sold more than 400,000 tions to provide farmer-responsive exten- new mobile phone handsets, and new sub- sion services. 176 WORLD DEVELOPMENT REPORT 2008 agricultural R&D throughout the develop- B O X 7 . 9 Private agribusiness and NGOs: leading ICT ing world cannot be overstated. Without provision to farmers in India more investment, many countries may con- tinue to lose ground in the ability to adapt Indian private companies and NGOs are The self-help groups use the centers' com- new knowledge and technologies developed global leaders in providing informa- puters to manage their business accounts tion to farmers, as a spinoff from India's and coordinate their activities, using video elsewhere and ensure competitiveness. The meteoric rise as a world leader in ICTs. links with the other villages. greatest urgency is to reverse the stagnant The e-Choupals (chapter 5) now provide Farmers can use the centers to access funding of agricultural R&D and broader information on the weather and farming databases of technical information, devel- knowledge systems in Sub-Saharan Africa. techniques in local languages, in addition oped by the hub, with the help of experts to information on market prices. from local agricultural institutions, in This reversal must be driven by national The M. S. Swaminathan Research Foun- their local language. Dairy farmers, for leadership and funding, but it will require dation established Knowledge Centers in example, have received training in some substantially increased and sustained Pondicherry in 1997. With the support of centers using touch-screen computer support from regional and international the Indian Space Research Organization, applications developed by the local vet- centers in each village are connected by erinary college. An alliance of more than organizations. satellite to a hub at Villianur. The cen- 80 partner organizations extends the con- Continuing progress, especially in ters are managed by women's self-help cept throughout India. extending benefits of R&D to agriculture- groups, which receive microcredit loans based countries and less-favored regions and training to start small businesses such Source: M.S.Swaminathan Research as mushroom or biopesticide production. Foundation (MSSRF) 2005. elsewhere, depends on research in these environments for improving crop, soil, water, and livestock management and for developing more sustainable and resilient Moving forward agricultural systems. These technological Science and technological innovation are innovations, often location specific, must critical for the agriculture-for-development be combined with institutional innovations agenda to succeed on four fronts. First, at a to ensure that input and output markets, global level, science will become even more financial services, and farmer organiza- important to meet growing demand in tions are in place for broad-based produc- the face of rising resource constraints and tivity growth. energy costs. Second, in all countries, science Low spending on R&D is only part of the and innovation are central for maintaining problem. Many public research organiza- market competitiveness, both domestic and tions face serious institutional constraints global. Third, the potential of science to that inhibit their effectiveness and thus address poverty in both favored and less- their ability to attract funds. Major reform favored regions has yet to be fully tapped. is required. Likewise, old-style agricultural Tailoring technologies to growing hetero- extension is giving way to a variety of new geneity among farmers and to differentiated approaches to funding and delivery that needs of men and women farmers remains involve multiple actors. The rise of higher- a scientific and institutional challenge. And value markets is creating new opportunities fourth, science will be critical in adapting to in the private sector to foster innovation and mitigating climate change and tackling along the value chain, involving coopera- environmental problems more generally. tion among the public sector, private sector, With current R&D policies likely to farmers, and civil society organizations. leave many developing countries as agri- What is needed now is to better understand cultural technology orphans in the decades what works well in what context and scale ahead, the need to increase funding for up emerging successes. focus E Capturing the benefits of genetically modified organisms for the poor Transgenics, or genetically modified organisms (GMOs), are the result of transferring one or more genes, usually from a wild species or a bacterium, to a crop plant. In 2006, farmers in 22 countries planted transgenic seeds on about 100 mil- lion hectares, about 8 percent of the global crop area (figure E.1). Though transgenics have been taken up more rapidly in commercial farming, they have considerable potential for improving the productivity of smallholder farming systems and providing more nutritious foods to poor consumers in developing countries. However, the environmental, food safety, and social risks of transgenics are controversial, and transparent and cost-effective regulatory systems that inspire public confi- dence are needed to evaluate risks and benefits case by case. Rapid adoption of Bt cotton agroecological zones.2 In some studies, Slow progress in foods Farmers in developing countries have been farmers in China recorded a $470 per hect- Transgenic food crops have not been widely adopting transgenics since 1996, largely as are increase in net income (340 percent), adopted by smallholders in the developing a result of spillovers from private research largely because of a two-thirds reduction in world. Since 2001, South Africa (mostly and development (R&D) in the industrial pesticide applications (table E.1).3 But some large-scale farmers) has been producing Bt countries. But their use has been limited reports indicate much smaller reductions in white maize (used for human consump- to certain crops (soybean and maize used pesticide use and regional variation in ben- tion), covering more than 44 percent of its for animal feed, and cotton), traits (insect efits.4 Overall, China represents a successful total white maize area in 2006.9 The Phil- resistance and herbicide tolerance), and case in terms of productivity, farm incomes, ippines has approved a transgenic Bt maize countries with commercial farming (Argen- and equity. Supporting the quick and exten- mostly for feed. China allows cultivation tina and Brazil). The only transgenic widely sive adoption of Bt cotton in China was its and use of publicly developed transgenic adopted by smallholders has been Bt cot- low seed cost, thanks to publicly developed vegetables. ton for insect resistance. An estimated 9.2 Bt cotton varieties and decentralized breed- Despite limited adoption, interest in million farmers, mostly in China and India, ing that enabled the transfer of the Bt trait transgenic food crops remains high, and a planted Bt cotton on 7.3 million hectares in into locally adapted varieties.5 wave of second-generation products is mak- 2006.1 Likewise, Indian farmers growing Bt ing its way toward the market. Transgenic The rapid adoption of Bt cotton in cotton used less insecticide and gained sig- rice, eggplant, mustard, cassava, banana, China and India attests to its profitability nificant yield increases,6 with the additional sweet potato, lentil, and lupin have been for most farmers. Available farm-level stud- advantage of more stable yields.7 While Bt approved for field-testing in one or more ies largely support higher profits from adop- cotton has been rapidly and successfully countries. And many transgenic food crops tion of Bt cotton, and also document sub- adopted in Gujarat, Maharashtra, Karnataka, are in the public research pipeline in devel- stantial environmental and health benefits and Tamil Nadu, farmers in Andhra Pradesh oping countries.10 through lower pesticide use. But the impacts initially experienced a loss, largely because Many of these technologies promise vary across years, institutional settings, and of the use of poorly adapted varieties.8 substantial benefits to poor producers and consumers. Most notable are traits for the world's major food staple, rice, including Figure E.1 The adoption of transgenics is on the rise in most regions, but not in Africa and Europea pest and disease resistance, enhanced vita- min A content (Golden Rice), and salt and Hectares, millions flood tolerance. Advanced field testing of 120 Bt rice in China shows higher yields and an 80 percent reduction in pesticide use.11 The 100 Africa Asia estimated health benefits of Golden Rice are Latin America large, because rice is the staple of many of 80 USA/Canada/Australia the world's poor who suffer from vitamin A deficiency. In India alone 0.2­1.4 million 60 life-years12 could be saved annually through widespread consumption of Golden Rice; this would be more cost-effective than cur- 40 rent supplementary programs for vitamin A.13 But despite the promise, the 1990s 20 projections that transgenic varieties of rice would be available to farmers by 2000 were 0 too optimistic.14 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Africa has benefited the least from Source: James 2006. transgenic crops, in part because locally a. The area planted with transgenics in Europe is about 200,000 hectares, mostly in Romania and Spain. important food crops such as sorghum and 178 WORLD DEVELOPMENT REPORT 2008 Table E.1 Economic and environmental benefits from Bt cotton Argentinaa Chinaa Indiab Mexicoa South Africac Added yield (%) 33 19 26 11 65 Added profit (%) 31 340 47 12 198 Reduced chemical sprays (number) 2.4 -- 2.7 2.2 -- Reduced pest management costs (%) 47 67 73 77 58 Note: The figures are based on farm-level surveys in important cotton producing regions within each country. a. Adapted from FAO 2004e. b. Qaim and others 2006. Other recent studies include Gandhi and Namboodiri 2006, who reported similar trends except for a much higher increase in profits (88 percent). c. Bennett, Morse, and Ismael 2006. Other studies point to high variability in yields (Gouse, Kirsten, and Jenkins 2003; Gouse and others 2005; Hofs, Fok, and Vaissayre 2006). -- = not available. cassava have attracted little attention from ies.20 Likewise, scientific evidence and expe- food aid. Exporters fear the loss of overseas commercial biotechnology firms.15 Trans- rience from 10 years of commercial use do markets and of a "GMO-free" brand. They genics could reduce the impact of several not support the development of resistance have to consider the costs of segregating the of Africa's intractable problems, such as in the targeted pests or environmental harm storage and shipments of transgenics from animal diseases, drought, and Striga (a dev- from commercial cultivation of transgenic conventional varieties, and obtaining clear- astating parasitic weed), much faster if they crops, such as gene flow to wild relatives, ance for transgenics for consumption in the were integrated into breeding programs. A when proper safeguards are applied.21 But importing country.23 Countries and farm- recent study showed that disease-resistant despite a good track record, environmental ers slow to adopt transgenics may lose their transgenic bananas would likely be adopted risks and benefits do need to be evaluated competitiveness in global markets, however, by the poorest farmers, particularly given case by case, comparing the potential risks if cost-reducing transgenics, such as Bt cot- today's high disease losses.16 with alternative technologies and taking ton, are widely adopted in large exporting into account the specific trait and the agro- countries.24 Why the slow progress ecological context in which it will be used. in transgenics? Public perception of risks can be as impor- A way forward There are five main reasons for the slow prog- tant as the objective risk assessment based The current global controversies and power ress in developing transgenic food staples: on scientific evidence in ensuring accep- plays between interest groups supporting Neglect of pro-poor traits and orphan tance of the technologies. either side of the debate on transgenics cre- crops. Investments in R&D on transgen- Weak regulatory capacity. The capac- ate much uncertainty, dampen investment ics are concentrated largely in the private ity of regulatory bodies to assess environ- in R&D, impede objective assessment of the sector, driven by commercial interests in mental and food safety risks and approve technology, and discourage adoption and industrial countries. Because the private the release of transgenics is limited in most use in developing countries.25 An important sector cannot appropriate benefits of R&D developing countries. Weak regulatory sys- opportunity to contribute to the pro-poor on smallholder food crops (chapter 7), this tems fuel public distrust and ignite opposi- agricultural development agenda will be research must be led by the public sector. Yet tion to transgenics. Low regulatory capacity missed if the potential risks and benefits of the public sector has underinvested in R&D is a major factor slowing approvals even of transgenics cannot be objectively evaluated generally and in biotechnology specifically. products that have already undergone exten- on the basis of the best available scientific The Consultative Group on International sive testing, such as Bt rice in China and evidence and taking into account public risk Agricultural Research, the global leader in Bt eggplant in India.22 Weak capacity also perceptions. agricultural research targeting the needs of results in widespread use of unauthorized Introducing transgenics requires a cost- the poor, spends about 7 percent of its bud- transgenic seeds in many settings (cotton effective and transparent regulatory system get (about $35 million) on biotechnology, in India and China, and soybean in Brazil with expertise and competence to manage only part of which is for transgenics.17 Bra- in past years), which further reduces public their release and use. Open information zil, China, and India have large public bio- confidence in the regulatory system. disclosure, labeling, where feasible, and a technology programs, which together may Limited access to proprietary technologies. consultative process are critical for harness- spend several times this amount.18 But the With an increasing share of genetic tools ing public support for transgenics. Strong numbers are still small in comparison with and technologies covered by intellectual regulatory capacity does not necessarily the $1.5 billion spent each year by the four property protection and largely controlled mean stringent standards on risks. On the largest private companies.19 by a small group of multinational com- contrary, competent regulators can keep Risks. Continuing concerns about pos- panies, the transaction cost of obtaining information requirements for approval at sible food safety and environmental risks material transfer agreements and licenses an appropriate level to ensure safety, based have slowed release in many countries. can slow public research on and release of on knowledge of the trait and the ecosys- These concerns have persisted even though transgenics (chapter 7). tem into which it will be introduced. High available scientific evidence to date on food Complexity of trade in transgenics. Some regulatory barriers may impose high costs safety indicates that the transgenics now in countries worry about health effects of on society by restricting or slowing access the market are as safe as conventional variet- imports of transgenic foods, including to beneficial technologies. High barriers Capturing the benefits of genetically modified organisms for the poor 179 may also restrict competition in seed mar- calls for a broad assessment of the technolo- and make their own decisions. The inter- kets and reduce options for farmers, because gy's potential risks and benefits in the wider national development community should public research organizations and national food and ecological system. Risk assess- stand ready to respond to countries calling seed companies may not be able to pay the ment must also consider the consequences for access to modern technologies, as in the high cost of regulatory clearance (estimated and risks of not using transgenics.26 For recent declaration of the African Union.27 It at more than $1 million for the first Bt cot- example, transgenics offer a powerful tool should be prepared to meet requests to fund ton varieties in India). for nutritional enhancement that may save the development of safe transgenics with In setting the regulatory standards, deci- lives (Golden Rice) or help farmers adapt to pro-poor traits and to underwrite the high sion makers must weigh public risk percep- climate change through faster integration of initial costs for their testing and release. If a tions and degrees of risk tolerance, which genes for drought- and flood-tolerance. new wave of safe and pro-poor technologies differ among societies. Despite the absence Countries and societies ultimately must is developed and accepted, the regulatory of proven risks, the precautionary approach assess the benefits and risks for themselves costs should fall sharply. Making agricultural systems more environmentally sustainable 8 The green revolution in Asia doubled cereal agricultural production through the ero- production there between 1970 and 1995, sion of soil and depletion of soil nutrients yet the total land area cultivated with cere- (table 8.1). Estimates of the magnitude and c h a p t e r als increased by only 4 percent.1 Such inten- productivity impact of land degradation are sification of agriculture has met the world's debated, but in hotspots such as the high- demand for food and reduced hunger and lands of Ethiopia, degradation may be high poverty (chapters 2 and 7). By dramatically enough to offset the gains from technical slowing the expansion of cultivated area, change. agricultural intensification has also pre- Problems from agricultural produc- served forests, wetlands, biodiversity, and tion extend outside of fields or pastures: the ecosystem services they provide.2 water pollution, reservoir siltation from But intensification has brought environ- soil erosion, mining of groundwater acqui- mental problems of its own. In intensive fers, deforestation, the loss of biodiver- cropping systems, the excessive and inap- sity, and the spread of livestock diseases. propriate use of agrochemicals pollutes Although farmers and pastoralists have waterways, poisons people, and upsets eco- strong incentives to address onsite prob- systems. Wasteful irrigation has contrib- lems, they have weak incentives to mitigate uted to the growing scarcity of water, the offsite effects. Avoiding such externalities unsustainable pumping of groundwater, requires regulatory mechanisms, negoti- and the degradation of prime agricultural ated solutions, and/or transferring pay- land. Intensive livestock systems, part of the ments between those causing the damage continuing livestock revolution, also present and those affected by it, possibly involving environmental and health problems. High large numbers of people separated in space, concentrations of livestock in or near urban time, and interests. This has proved very areas produce waste and can spread animal difficult in most poor countries because diseases, such as tuberculosis and avian bird of the general weakness of public institu- flu, with risks for human health. tions and the legal system. Some problems, In areas not affected by the green revolu- such as the spread of animal diseases and tion, there has been little if any agricultural climate change, require cooperation at the intensification; instead, agriculture has global level (chapter 11). Negative intergen- grown through extensification--bringing erational externalities, even less tractable, more land under cultivation. This has led arise when farmers use resources today to environmental problems of a different with too little regard for the resource heri- kind--mainly the degradation and loss of tage they leave for future generations. forests, wetlands, soils, and pastures. Every Environmental problems play out in dif- year about 13 million hectares of tropical ferent ways in intensive and extensive agri- forest are degraded or disappear, mainly cultural systems. (See chapter 2 for defini- because of agriculture. Some 10­20 percent tions and mapping of the major farming of drylands may suffer from land degrada- systems.) Intensive systems in high-potential tion (or desertification).3 areas have an advantage: their natural envi- Onsite degradation of natural capital has ronment is usually fairly resilient and not direct impacts on agricultural productivity easily damaged. However, high external because it undermines the basis for future input use often makes these systems sources 180 Making agricultural systems more environmentally sustainable 181 Table 8.1 Agriculture's environmental problems onsite and offsite Global effects Onsite effects Offsite effects (externalities) (externalities) Intensive agriculture Soil degradation (salinization, Groundwater depletion Greenhouse gas emissions (high-potential areas) loss of organic matter) Agrochemical pollution Animal diseases Loss of local biodiversity Loss of in situ crop genetic diversity Extensive agriculture Nutrient depletion Soil erosion downstream effects (reservoir siltation) Reduced carbon sequestration (less-favored areas) from deforestation and carbon Soil erosion onsite effects Hydrological change (e.g., loss of water retention in dioxide emissions from forest upstream areas) fires Pasture degradation in common property areas Loss of biodiversity Level of cooperation None (individual or household) Community, watershed, basin, landscape-level, Global typically required regional, or national of downstream pollution through fertilizer, tion, prices, subsidies, interest rates, mar- pesticide, and animal waste runoff and ket access, risk, property rights, technology, increased water salinity levels. Conversely, and collective action (see table 8.1). Often the areas having extensive systems are fragile resulting in both onsite and offsite resource and easily damaged. Low input use means degradation, these factors can be modified extensive systems are not a major source of through policy changes and public invest- pollution, but farming steep slopes and frag- ment, although global forces are changing ile soils can cause substantial erosion, dam- the drivers of resource degradation in new aging downstream areas. ways. Global markets can leave a global environmental footprint, such as the impact Drivers of resource degradation of Asian demand for soybeans for livestock Some resource degradation in rural areas on deforestation in the Amazon (chapter 2). has little to do with agriculture. Logging, Furthermore, climate change is increasing mining, and tourism also degrade resources production risks in many farming systems, through deforestation, conversion of natu- reducing the ability of farmers and rural ral ecosystems, and pollution. Moreover, societies to manage risks on their own. many farmers and pastoralists do not Two difficult drivers to manage are pov- degrade their land or mismanage natural erty and population. Poverty is more likely resources. Much agricultural production is to drive resource degradation in less-favored sustainable, and in some cases large areas regions, where poor-quality and fragile have been under continuous cultivation for soils must support rising population den- centuries, if not millennia. In other cases, sities. But even in these areas the relation- such as the Machakos region of Kenya, ship can be complex and indeterminate.5 In areas once degraded have been restored and other contexts poor people typically control crop yields have recovered.4 Even in areas only small shares of the total resources and thought to be mismanaged, closer analysis so are fairly minor contributors to degra- often reveals that farmers take a variety of dation. On its own, then, reducing poverty conservation actions. Nonetheless, farming will seldom reverse resource degradation. and pastoral activities are often the main Yet the poor and women are typically most drivers of degradation. affected by resource degradation wherever Overcoming environmental problems in it occurs, because they have the fewest agriculture requires a good understanding assets and options for coping with degra- of private incentives of individual resource dation, and they depend most on common users and ways to manage resources more property resources.6 successfully from society's point of view. Population pressure has mixed impacts Many factors affect private incentives for on resource degradation, depending mainly managing resources, including informa- on the available technology. As Malthus 182 WORLD DEVELOPMENT REPORT 2008 observed in 18th century England, popu- less-favored areas, payments for environ- lation pressure without technological mental services can be used when national advances leads to agricultural encroach- and global social benefits exceed the ment into ever-more-marginal areas, reduc- opportunity cost of current land use and ing average yields, degrading resources, the management costs of the program. and worsening poverty. When suitable technologies and institutions are available, Improving agricultural however, population growth can lead to their adoption and sustain improvements water management in resource conditions and yields. Because Agriculture uses 85 percent of water con- many natural resource management tech- sumed in developing countries, mainly for nologies are labor intensive (for example, irrigation. Even though irrigated farming terracing or contouring land, building irri- accounts for only about 18 percent of the gation structures), population growth can cultivated area in the developing world, it actually assist their uptake because it lowers produces about 40 percent of the value of labor costs.7 agricultural output.10 When population pressure is combined The continuing high productivity of with high initial levels of poverty and few irrigated land is key to feeding much of the technology options for boosting produc- developing world, yet future trajectories are tivity, degradation and poverty can spiral worrisome (chapter 2). Many countries are downward.8 This is happening in some experiencing serious and worsening water areas of Africa, where many farms are now scarcities. In many river basins, freshwater too small to support a family, yield growth supplies are already fully used, and urban, has stagnated, and job opportunities off the industrial, and environmental demands for farm are rare. These distressed areas can water are escalating, increasing the water become breeding grounds for civil conflict, stress. Globally, about 15­35 percent of total displacing environmental refugees and dis- water withdrawals for irrigated agriculture rupting efforts to reach the very poor and are estimated to be unsustainable--the use vulnerable.9 of water exceeds the renewable supply.11 An With this as background, turn now estimated 1.4 billion people12 live in basins to strategies for achieving more sustain- with high environmental stress where water able development in intensive and exten- use exceeds minimum recharge levels (map sive farming systems. The key challenges 8.1). As a result of excessive withdrawals, in irrigated areas are to use less water in such major rivers as the Ganges, the Yellow the face of growing water scarcities; stop River, Amu Darya, Syr Darya, Chao Phraya, unsustainable mining of groundwater; Colorado River, and the Rio Grande may and prevent the degradation of irrigated not reach the sea during part of the year. land through waterlogging, salinization, Other well-known consequences of unsus- and nutrient depletion. In intensive farm- tainable irrigation are the degradation of ing areas in general (irrigated and high- the Aral Sea in Central Asia and the shrink- potential rainfed areas), modern inputs ing of Lake Chad in western Africa and like seed, fertilizer, pesticides, and water Lake Chapala in central Mexico. need to be managed to sustain high yields Intensive use of groundwater for irriga- without damaging the environment. In tion rapidly expanded with the adoption of intensive livestock systems, particularly in tubewell and mechanical pump technol- periurban and urban areas, the manage- ogy. In the Indian subcontinent, ground- ment of animal wastes and disease risks water withdrawals have surged from less needs to improve. In less-favored regions than 20 cubic kilometers to more than 250 with extensive farming systems, develop- cubic kilometers per year since the 1950s.13 ment needs to support the livelihoods of The largest areas under groundwater irriga- local people and still be compatible with tion in developing countries are in China other environmental services on a fragile and India. Relative to total cultivated area, resource base. In both high-potential and reliance on groundwater is highest in the Making agricultural systems more environmentally sustainable 183 Map 8.1 Overexploitation has caused severe water stress in many river basins Water stress indicator in major basins Overexploited (more than 1.0) Heavily exploited (0.8 to 1.0) Moderately exploited (0.5 to 0.8) Slightly exploited (0 to 0.5) Source : Data from Smakhtin, Revenga, and Döll 2004; map reprinted with permission from United Nations Development Programme 2006. Note : The environmental water stress indicator is the total water use in relation to water availability, after taking into account environmental water requirements (the minimum flows to maintain fish and aquatic species and for river channel maintenance, wetland flooding, and riparian vegetation). Middle East and South Asia (figure 8.1). vulnerability of coastal groundwater aqui- But because of the open-access nature of fers to climate change, as saline intrusion groundwater, it suffers from depletion; will get worse in depleted aquifers as sea contamination by municipal, industrial, levels rise. and agricultural users; and saline water Poor water management is also leading to intrusion. Where groundwater use is most land degradation in irrigated areas through intensive, aquifer recharge tends to be too salinization and waterlogging. Waterlogging small to sustain it.14 usually occurs in humid environments or Groundwater resources are being over- irrigated areas with excessive irrigation and drawn to such an extent that water tables insufficient drainage (for example, Egypt's in many aquifers have fallen to levels that unmetered irrigation of the Nile valley and make pumping difficult and too costly. delta). Salinization is a larger problem in arid Small farmers with little access to expen- and semiarid areas (for example, Pakistan's sive pumps and often insecure water rights large irrigation perimeters and the Aral Sea are most affected. Saline intrusion result- basin). Nearly 40 percent of irrigated land in ing from overpumping--the most common dry areas of Asia are thought to be affected form of groundwater pollution--leads to by salinization.16 The result is declining pro- losses of large agricultural land areas. In ductivity and loss of agricultural land. Better Mexico's coastal aquifer of Hermosillo, water management and onfarm investments, annual withdrawals three to four times the such as field leveling and drainage, can rec- recharge rate resulted in a 30 meter drop tify these problems, but this often requires in water tables and saltwater intrusion at substantial public investments in off-farm the rate of 1 kilometer per year, causing infrastructure, strong water management large agribusiness firms to relocate to other institutions, collective action, and a good regions.15 Falling water tables increase the understanding of the hydrology. 184 WORLD DEVELOPMENT REPORT 2008 Figure 8.1 Dependence on groundwater irrigation ing interconnectedness among competing is highest in the Middle East and South Asia users of water and aquatic ecosystems has Saudi Arabia led to severe environmental stress in many Bangladesh basins, where the remaining flow after Yemen diversions for industry, municipal, and Pakistan Libya agricultural use has often been insufficient Iran to maintain the health of river ecosystems India and groundwater aquifers. More efficient Syria Egypt use of water in irrigation and better water Cuba allocation are key to meeting these increas- Italy ing demands. Mexico Local interventions can have unexpected United States China consequences elsewhere in a basin. For Morocco example, efficiency improvements, such as Afghanistan canal lining and microirrigation, can reduce Algeria Total irrigated area Turkey the quantity of water available to down- Groundwater Argentina irrigated area stream users and the size of the environmen- Brazil tal flows because efficiency improvements 0 20 40 60 80 100 often result in expansion of irrigated areas.18 % of total cultivated area Harvesting water and using more groundwa- Source: FAO AQUASTAT database accessible at http:// ter can have similar effects on other users in www.fao.org/ag/agl/aglw/aquastat/main/index.stm and International Commission on Irrigation and Drainage database the basin. To avoid misguided investments accessible at http://www.icid.org/index-e.html. and policies, quantifying the impact of local interventions within the broader hydrology With competition for water growing, of the whole system is becoming increasingly the scope for further irrigation expan- important.19 sion is limited (with few exceptions, such Adaptive management--an approach for as Sub-Saharan Africa). Thus agriculture river restoration that explicitly recognizes must meet future food demand through the uncertainty about the response of natu- water productivity improvements in both ral ecosystems to policy interventions--can irrigated and rainfed areas (chapter 2). Pro- help mitigate environmental degradation jections indicate that yield improvements and the loss of wetlands and wildlife habitats in existing irrigated areas, rather than fur- even in severely stressed basins. For exam- ther expansion, will be the main source of ple, restoration of the environmental flows growth in irrigated agriculture (chapter 2).17 has had promising results for the northern Meeting the water scarcity challenge will Aral Sea, despite unmatched hydrologi- require integrated management of water use cal complexity and massive environmental at river-basin levels for better water alloca- damage from past excessive water with- tion across sectors, and greater efficiency in drawal for irrigation (box 8.1). the use of water within irrigation systems. Rising climatic uncertainties and hydro- The details of policies must be adapted to logical variability increase the urgency of local conditions, but in general they include integrated planning approaches, which is a combination of integrated water manage- already evident in arid regions with large- ment approaches, better technology, and scale irrigation. In Morocco, dams were institutional and policy reform. designed on the basis of past rainfall pat- terns, but in an unusually intense period Moving toward integrated of droughts, the volume of water stored water management in irrigated was insufficient, resulting in major water agriculture shortages.20 Expensive irrigation schemes In much of the 20th century, the emphasis are thus used far below their potential, and was on building infrastructure to increase modification to allow for water-saving tech- water withdrawals. Since then, the increas- nologies, such as drip irrigation, increase Making agricultural systems more environmentally sustainable 185 costs. Because changes in rainfall from cli- mate change are expected to have a similar B O X 8 . 1 Restoring the northern Aral Sea--by doubling effect in other parts of Africa, Morocco's the Syr Darya's flow experience is a cautionary tale for countries planning to make new investments in irri- Unsustainable expansion of cotton cultiva- ies, crops, and livestock have begun to tion and poor water management in the recover, and the microclimate may have gation in drought-prone areas. According Aral Sea basin produced a major environ- become less arid. Economic prospects for to recent predictions, greater variability in mental disaster. By the late 1980s the Aral local communities look positive again-- precipitation will significantly affect surface Sea had shrunk so much that it divided in for the first time in more than 30 years. water across a quarter of the continent.21 two, and by the 1990s much of the land The key to this transformation: an around the northern Aral was a saline integrated approach to restoring the Because climate change is shrinking wasteland. Syr Darya River. Rehabilitating dams, mountain glaciers, irrigation systems in the In 1999 Kazakhstan began to restore barrages, and embankments along long term will not receive enough runoff it. A 13-kilometer dike to the south of the river in Kazakhstan, which fell into the Syr Darya outfall raised the northern disrepair following the collapse of the water from glacial melt in the Andes, Nepal, sea's level and reduced its salinity. It was Soviet Union, doubled the river's flow and and parts of China--or they may receive it thought that it would take up to 10 years improved the potential for hydropower. at the wrong time because of early melt. to raise the water level. However, only For the northern Aral, success depended Additional investments will be required seven months after the dike's completion, on identifying discrete national invest- the target level was reached, and spare ments that would contribute to wider to store and save water. Including climate water started to flow over the spillway regional or multicountry plans. risk in the design of irrigation systems and to the south. Water levels have risen by long-term planning can significantly reduce an average of four meters. Local fisher- Sources: Pala 2006; World Bank 2006q. more costly adjustments later. Improving productivity ized governance models in the irrigation of irrigation water sector, usually through water users' asso- Physical scarcity of water may be a fact of ciations, are more successful than govern- life in the most arid regions, but it is height- ment agencies in recovering costs. Although ened by policies that induce higher water decentralization tends to result in better use and the overdevelopment of hydraulic maintenance, the efficiency and productiv- infrastructure. In particular, the expansion ity outcomes have been mixed.22 of irrigated agriculture has often been at the Institutional reform of large-scale irriga- expense of other water users, biodiversity, tion schemes is a challenge everywhere, but and ecosystem services, damaging fisheries there are some encouraging success stories. and wetlands. Bureaucratic rigidities, sub- In the 1970s the Office du Niger, a large irri- sidized pricing of water supplied to farmers, gation scheme in Mali, was in disarray as a and the failure to recognize or account for result of highly centralized top-down man- externalities contribute to the problem. agement.23 In the 1980s the government Many large irrigation schemes suf- embarked on reforms that succeeded only fer from inflexible water delivery systems when the mission of the irrigation agency that constrain farmer responses to chang- was redefined--introducing strong pri- ing markets and profit opportunities and vate sector incentives in its management, encourage unsustainable use of ground empowering farmers, and building a strong and surface water. Modernization of these coalition of stakeholders (chapter 11). The systems requires a combination of physi- scheme's greater efficiency quadrupled yields, cal investments, economic incentives, and and overall production increased by a factor institutional change. Reengineering many of 5.8 between 1982 and 2000. Attracted by canal-based irrigation schemes to facili- employment opportunities, the area's popu- tate more flexible water management at the lation increased by a factor of 3.5, and pov- field level can encourage farmers to grow a erty fell more than in other areas.24 greater diversity of crops and better adjust Economic policies often create inappro- water supplies to crop needs. With a more priate incentives for farmers in the choice reliable water supply, farmers will be more of technology and water management willing to share the cost of services. Lessons practices. In irrigated agriculture, energy from global experience show that decentral- subsidies encourage groundwater mining, 186 WORLD DEVELOPMENT REPORT 2008 and the underpricing of canal water steers Innovative technologies can improve farmers away from water-efficient crops. the quality of irrigation services and facili- Subsidies for canal irrigation, power, and tate cost recovery. For example, accurately fertilizer in India, abetted by state procure- measuring water use in irrigation is now ment of output at guaranteed prices, led possible with canal automation28 or satel- farmers to overproduce rice, wheat, and lite data. Moving from manually operated other low-value crops, using water-intensive to automated channel control of irrigation, cultivation and making excessive withdraw- as applied in Australia, could be used in als of groundwater (chapter 4).25 More than some developing countries.29 Remote-sens- a fifth of groundwater aquifers are overex- ing technologies can measure the amount ploited in three of the four leading green of water from surface and groundwater revolution states, disproportionately affect- schemes actually applied to the fields.30 ing smallholders and damaging drinking- Although these technologies require a sub- water supplies (figure 8.2). More realistic stantial initial investment, they can be more charges for water and power would not only cost effective than other alternatives.31 help correct incentives to use water effi- Economic reforms outside the water ciently, they would also enable the agencies sector that influence relative product prices that provide these resources to better cover often have a major influence on water pro- their operation and maintenance costs and ductivity in agriculture. In India's Punjab improve the quality of service delivery. region, well known for overexploitation of But removing subsidies for irrigation groundwater, minimum support prices for services has proven difficult. Better pricing rice increase the financial attractiveness of and cost recovery are explicit objectives of rice relative to less-water-intensive crops. many irrigation projects and policies, but Likewise, many water-scarce countries in there has been little progress.26 Applying the Middle East and North Africa support volumetric charges for irrigation water has the production of irrigated wheat, at the run into obstacles in many developing coun- expense of other horticultural crops that tries--exceptions are Armenia, Iran, Jordan, would pay higher returns to water. More Morocco, South Africa, and Tunisia. Even liberal trade policies could also encour- where volumetric pricing has been accepted age efficient specialization--products as a principle, cost recovery is lower than with high water requirements would be expected because of payment evasion, meter imported from places with more water, and tampering, and measurement problems.27 water-scarce regions would specialize in less-water-intensive and higher-value crops. Figure 8.2 Groundwater aquifers in India are Sequencing of reforms in the water sector being depleted and broader economic reforms becomes decisively important if the broader reforms Punjab alter the constellation of political forces Haryana Rajasthan and generate support for otherwise stalled Tamil Nadu reforms in the water sector. Gujarat Uttar Pradesh Maharashtra Using water markets when water Bihar rights are secure Karnataka Groundwater West Bengal Theoretically, markets for allocating water developed Andhra Pradesh across sectors and within irrigation schemes Overexploited Madhya Pradesh aquifers are the most economically efficient instru- Orissa ment for improving water productivity. 0 20 40 60 80 100 Local water markets have often developed Percent naturally where social control and hydrau- Source : World Bank 2003d. Note : "Groundwater developed" is a percent of all available lic infrastructure make this possible (for groundwater in a state. "Overexploited aquifers" is a percent example, trading water turns in traditional of administrative blocks in which groundwater extraction exceeds recharge. irrigation systems in South Asia, or trad- Making agricultural systems more environmentally sustainable 187 ing groundwater in Jordan and Pakistan). Seizing windows of opportunity However, it is unlikely that markets will and making reforms happen reallocate water on a large scale in develop- Many changes in irrigation management-- ing countries in the near future.32 So far, from allocation of water rights to the reform large water markets have been confined to of irrigation agencies--are politically con- countries with strong institutional frame- tentious. Past reforms have often failed or works and secure water rights (that is, indi- remained incomplete because of overopti- vidual or collective entitlements to water), mism about the willingness or capacity of such as Chile and Mexico. Online water local bureaucracies to carry them out and trading, especially between farmers and about the time and cost of needed invest- urban users, is now possible in California. ments. In Indonesia, Madagascar, and Paki- As water becomes more scarce, inter- stan, reform strategies ignoring the political est in water markets will likely increase reality met with slow progress.34 because they can efficiently allocate water Reforming irrigation systems and water among different users. The early experi- allocations is inherently a political process. ence with formal water markets shows that For example, water management bureaucra- a variety of approaches may be needed, cies may oppose the devolution of respon- depending on the local institutions, cul- sibility and greater accountability to water tural norms, hydrological conditions, and users. When reforms have political as well as capacity to transfer water over long dis- technical champions, they are more likely to tances. The design of water markets also succeed. In Chile, Mali, Namibia, and South needs to take into account the increasing Africa, institutional reforms in water suc- frequency of droughts as a consequence of ceeded largely because they were part of a climate change and the possibility of water broader package of political and economic rationing. A flexible water allocation pro- reforms with strong political backing.35 In cess, whereby water allocations depend on Mali the president championed reform of actual water availability, may be needed. the Office du Niger (chapter 11). In Morocco Water rights that are perceived as just and the leadership of the ministries of finance responsive to the needs of all water users are and economic affairs were instrumental in a precondition for successful introduction of building consensus and creating a window water markets. Inequality in water rights is of opportunity for pursuing reforms.36 Even often embedded in traditional water rights, centralized states with limited mechanisms the distribution of land rights, and access for accountability in the sector (Algeria, the to irrigation. For example, women are often Arab Republic of Egypt, and the Republic of excluded from building and maintaining Yemen, for example) are beginning to release irrigation works, a common way for partici- information to the public, involve citizen pants to obtain rights in the scheme.33 With groups, and enact changes to increase the mounting pressure on water resources, secur- accountability of publicly managed irriga- ing water rights of indigenous groups, pasto- tion systems.37 ralists, smallholder farmers, and women is An adequate legal framework and a clear becoming particularly important. division of responsibility between the public Conflicting interests of upstream and sector and water users are essential to suc- downstream users complicate the alloca- cessful devolution of management to water tion of water rights. Local disagreements users, including the ability to set budgets, can be resolved by community approaches define what services to provide, and collect to governing shared resources, but reaching payments.38 Representation of women farm- agreement between upstream and down- ers in water user's associations and gender stream users on a larger scale, particularly training of association staff can improve in the context of transboundary water bod- performance of water user's associations. ies, is far tougher. Similarly, enforcing rights Reliance on women's nongovernmental over groundwater is challenging because of organizations (NGOs) and women's par- the difficulty of monitoring extraction. ticipation in construction and rehabilitation 188 WORLD DEVELOPMENT REPORT 2008 works has helped achieve active participa- current management approaches. There is tion of women in water users associations in growing evidence that soil-health degrada- some successful cases, such as the Domini- tion and pest and weed buildup are slowing can Republic.39 productivity growth. These trends are best documented in the intensive rice-wheat Greening the green revolution systems of South Asia (box 8.2). A remarkable shift to high-input farming is High-input farming has also reduced behind agriculture's intensification in irri- biodiversity in local landscapes and genetic gated and high-potential rainfed farming diversity in the crops grown.41 Modern areas in transforming and urbanized coun- crop varieties often carry similar sources tries. Exemplified by the green revolution, of genetic resistance to production stress, high-input farming typically involves mono- although this is being counteracted by more cropped fields and a package of modern seed rapid turnover of varieties and by spending varieties, fertilizers, and pesticides. more on breeding approaches that broaden Despite its success in dramatically the genetic base or adapt materials to keep increasing food production and avoiding ahead of ever-evolving pests and diseases the conversion of vast amounts of additional (chapter 7).42 Preservation of crop and ani- land to agriculture, high-input farming has mal genetic resources through ex situ gene produced serious environmental problems. banks is supported through global initia- The mismanagement of irrigation water was tives (chapter 11) and has become an even just discussed. Additional offsite problems higher priority because of the need to adapt arise from the injudicious use of fertilizers to climate change. and pesticides: water pollution; indirect Faced with these resource-related prob- damage to larger ecosystems when excess lems, farmers need assistance to fine-tune nitrates from farming enter water systems; their cropping systems and crop manage- and inadvertent pesticide poisoning of ment practices to local conditions. More humans, animals, and nontargeted plants diversified systems can often reduce the and insects.40 Fertilizer nutrient runoff need for chemical fertilizers and pesti- from agriculture has become a major prob- cides (for example, mixed legume-cereal lem in intensive systems of Asia, causing systems), but power, fertilizer, and output algal bloom and destroying wetlands and subsidies discourage a shift to alternative wildlife habitats. cropping patterns, as in India's Punjab.43 Equally alarming has been mounting Complementary investments in market evidence that productivity of many of these infrastructure and institutions and dissem- intensive systems cannot be sustained using ination of research and knowledge will also be needed where environmental benefits from diversification would tilt the balance in favor of alternative cropping patterns. B O X 8 . 2 Resource degradation in rice-wheat systems The environmental cost of pollution by of South Asia fertilizers and pesticides can be reduced by The rice-wheat system covers 12 million Punjab, extensive use of nitrogen fertilizer better management of these inputs without hectares in the Indo-Gangetic Plain of and pesticides has also increased concen- sacrificing yields. Integrated pest manage- India and Pakistan, providing a significant tration of nitrates and pesticide residues ment that combines agroecological prin- share of marketed food grains in India and in water, food, and feed, often above ciples with judicious use of pesticides can Pakistan. But intensive and continuous tolerance limits. Results from long-term monoculture of rice (summer season) and experiments in India and econometric increase yields and reduce environmental wheat (winter season) has led to seri- analysis of productivity data over time damage (box 8.3).44 Other knowledge- ous soil and water degradation that has and across districts in Pakistan's Punjab based improvements in management that negated many of the productivity gains reveal that soil- and water-quality deg- from the green revolution. Soil saliniza- radation may have negated many gains are win-win for farmers include using tion, soil-nutrient mining, and declining from adoption of improved varieties and pest-resistant varieties, better timing and organic matter are compounded by other technologies. application of fertilizer and water, preci- depletion of groundwater aquifers and sion farming (using geographic informa- buildup of pest and weed populations Sources: Ali and Byerlee 2002; Kataki, Hobbs, and resistance to pesticides. In India's and Adhikary 2001. tion systems [GIS]), and low-tillage farm- ing (chapter 7).45 Making agricultural systems more environmentally sustainable 189 Despite the promise of integrated man- agement practices, farmers have been slow B O X 8 . 3 Integrated pest management to control the to take them up. One reason is the subsidies Andean potato weevil in Peru on water and fertilizer that some govern- ments still provide in intensive systems. A late blight and the Andean potato weevil · Biological control, with the fungus are major threats to potato production, Beauveria By making inputs less costly, subsidies reducing yields by a third to a half. To help · Handpicking adult insects and using encourage farmers to be more wasteful in farmers, the International Potato Center chickens to eat larvae. their use. Another reason is that many of and Peruvian partners started adaptive Although farmers did not adopt all onfarm research in two potato-growing these improved practices are knowledge the practices, a before-and-after study communities in the Andes in 1991. intensive and require research and exten- showed that farmers could substantially The research introduced several inte- sion systems that can generate and transfer reduce damage and increase their net grated pest management practices: income on average by $154 per hectare. knowledge and decision-making skills to · Chemical control, with selective A cost-benefit analysis using survey data farmers rather than provide blanket rec- insecticides showed an internal rate of return of 30 ommendations over large areas.46 Farmers · Agronomic control, adjusting harvest percent, with all research and develop- will also need greater ecological literacy to time, soil management, and tillage after ment costs included and a service life of harvest 20 years. better understand interactions in complex · Mechanical control, such as covers for ecosystems--an objective of many farm- transport, ditches around potato fields, Sources: TAC's Standing Panel on Impact ers' field schools on integrated management vegetative barriers, and the elimination Assessment SPIA 1999; Waibel and Pemsl approaches (chapter 7). A third reason is the of volunteer plants 1999. negative externality of much environmental damage in high-input farming systems. By driving a wedge between the private inter- a direct consequence of rising per capita ests of farmers and the larger social value incomes and urbanization (chapter 2). of the environmental services they degrade, This intensification has been assisted by the systems can lead to significant offsite technological change, particularly in ani- degradation unless incentives are changed, mal breeding, nutrition, and health. The by taxing pesticides or effectively regulat- results--more productive animals; larger ing pollution, for example. production units that capture economies But new forces are at work inducing of scale; and greater integration within the many farmers to use intensive systems more market chain, improving quality and lower- sustainably. There is a rapidly expanding ing the costs of marketing and transport. demand for organic and other environ- Livestock intensification has also pro- mentally certified products (chapter 5). The duced environmental problems linked to high health, quality, and environmental the move from dispersed production in standards of emerging supply chains and rural areas to specialized livestock units supermarkets also compel farmers to shift in urban and periurban areas, now hap- to better and more sustainable farming pening on a grand scale in much of Asia. practices. Decentralized governance allows The major environmental threats are the greater access to local information and use pollution of water and soil with animal of local social capital in regulating externali- waste, especially nitrogen, phosphorous, ties. Civil society has the capacity to provide and highly toxic heavy metals such as cad- technical assistance and help organize farm- mium, copper, and zinc. Dense livestock ers and communities to meet the more strin- populations also add significantly to the gent environmental standards. Community risks of spreading animal diseases and high organizations and producer cooperatives economic losses. Some of these diseases are were at the heart of the recent expansion of also a threat to humans, especially where organic export production in East Africa.47 dense populations of animals and humans come in close contact. Managing intensive Strategies to manage the environmen- livestock systems tal and health problems of intensive live- Driven by the growth in demand for meat, stock systems need to alter this pattern of milk, and eggs, intensive livestock systems urban concentration. Areas that can absorb are burgeoning in the developing world, higher livestock densities can be identified 190 WORLD DEVELOPMENT REPORT 2008 with GIS technology, superimposing cur- miology of avian flu is not yet fully clear, rent farming systems and their nutrient its spread in East Asia seems accelerated by balances on ecologically sensitive areas, that mix. The traditional backyard poul- prevailing human population densities, try systems concentrated around urban and infrastructure.48 Inducing enterprises areas allows the continuing--albeit low- to relocate to an environmentally more level--circulation of the virus, while larger, suitable area requires both "command and intensive operations near urban areas, with control" and "market-based" instruments. considerable movement of feed, animals, Command and control measures might and people, enable the virus to scale up and include limiting the size of livestock farms spread. (Norway), limiting the livestock density per farm (Germany), and introducing mini- Reversing degradation mum distances between farms (Spain) or in less-favored areas between farms and the nearest waterway Many less-favored areas have gained little (Brazil). Market-based instruments include from past agricultural successes in rais- tax rebates for relocation (Thailand, box ing yields. Less-favored areas include lands 8.4), environmental taxes on urban live- with low agricultural potential because of stock farms, and investment support for poor climate, soil, and topography; they onfarm infrastructure to reduce nutrient also cover areas that may have higher agri- leaching (countries of the Organisation cultural potential but are underexploited for Economic Co-operation and Develop- because of limited access to infrastructure ment [OECD]). Tradable manure quota and markets, low population density, or systems, with a government buy-back sys- social and political marginalization (chap- tem to reduce overall animal pressure, have ter 2). Less-favored areas account for 54 worked in the Netherlands.49 percent of the agricultural area and 31 per- One cause of recently emerging diseases cent of the rural population of developing such as avian flu is the mix of traditional countries (chapter 2). Many of these areas and intensive production systems in areas are either hillside and mountain regions densely populated by both people and live- (uplands) or arid and semiarid zones (dry- stock, as occurs in urban and periurban lands). They are mostly characterized by areas (see focus H).50 Although the epide- extensive agriculture, resource degradation, and poverty. Settlement areas in tropical forests, although smaller in their extent and B O X 8 . 4 Managing poultry intensification in Thailand population, are another important category from an environmental perspective, with Thailand, as an important player in the 2006--in village poultry and a small deforestation contributing to reduced global global poultry meat market (more than commercial unit with poor biosecurity-- 500 million tons of exports in 2003), has emphasize the need for vigilance. carbon sequestration and climate change. controlled many of the disease risks. Less-favored regions encompass a broad A zoning and tax system significantly Thailand is shifting the concentration array of low-input farming systems, includ- reduced the concentration of poultry of poultry away from Bangkok ing migratory herding in arid areas; agro- in periurban areas in less than a decade Number of chickens per square km (figure at right). Poultry farmers close pastoral systems in dryland areas; inte- 2,000 to Bangkok had to pay high taxes, while grated crop, tree, and livestock production farmers outside that zone enjoyed tax-free in hillside and highland areas; and managed status.51 1,600 1992 secondary forest-fallow cultivation at forest Highly pathogenic avian influenza was 1,200 also controlled, although it has not been margins.53 Many are environmentally frag- 2000 fully eradicated. Following an outbreak in ile, their soils, vegetation, and landscapes late 2003, the Thai government developed 800 easily degraded. Some, especially upland and disease-free zones with 24-hour move- forest areas, also protect watersheds, regu- ment control and high biosecurity--with 400 thousands of inspectors going door to late water flows in major river basin systems, door to search for diseased animals.52 The 0 50 100 150 200 250 300 350 sequester large amounts of carbon above and large exporters shifted to cooked meat. Distance from Bangkok, km below ground, and are host to a rich array The incidence of highly pathogenic avian influenza fell, but two outbreaks in August of biodiversity. Few of these environmental Source : Steinfeld and others 2006. benefits are valued in the market place. Making agricultural systems more environmentally sustainable 191 Land degradation and deforestation in The expanding agricultural frontier is less-favored areas reduce agricultural pro- the leading cause of deforestation, even ductivity and cause the loss of other valuable though not all conversion and degradation ecosystem services, including biodiversity of forest cover is associated with extensive habitats. Land degradation is most severe in agriculture. Deforestation is occurring most such hotspots as the foothills of the Hima- rapidly in the remaining tropical moist for- layas; sloping areas in the Andes, southern ests of the Amazon, West Africa, and parts China, and Southeast Asia; rangelands in of Southeast Asia (map 8.2). Deforestation Africa and Central and West Asia; and the in mosaic lands60 (where small clumps of arid lands of the Sahel. Most land degrada- forest are embedded in otherwise inten- tion is the result of wind and water erosion.54 sively cultivated agricultural systems, often Soil-nutrient mining resulting from short- in close proximity to urban centers) is a ening of fallows and very low use of fertil- small contribution to the overall forest loss, izer is endemic across much of Sub-Saharan but these forests are important biodiversity Africa. Overgrazing and degradation of pas- habitats and biological corridors.61 toral areas are widespread in much of the Because more than half of all species steppe of North Africa, the Middle East and exist primarily in agricultural landscapes Central Asia, and the Sahel. outside protected areas, biodiversity can be Estimates of the global extent of soil preserved only through initiatives with and degradation and its productivity impact are by farmers. This dependence of biodiver- scarce and debated. In Sub-Saharan Africa, sity on agricultural landscapes is explicitly estimates of productivity losses are generally recognized in the concept of ecoagriculture in the range of 1 percent a year or less,55 but (an integrated approach to agriculture, in extensive areas in Kenya, Ethiopia, and conservation, and rural livelihoods within Uganda, they are higher. According to near- a landscape or ecosystem context).62 infrared spectrometry data, about 56 percent In many less-favored regions, popula- of the land is moderately to severely degraded tion growth is placing enormous pressure in the Nyando River Basin in Kenya.56 On a on the natural resource base. Until a few national scale, costs of land degradation in decades ago, natural resources were com- Kenya may translate into losses of 3.8 per- monly abundant and, once used, could cent of gross domestic product (GDP).57 Soil recover through fallows and shifting cul- degradation tends to be a greater problem tivation. Many of the more fragile lands in upper watershed areas with steep slopes. were not farmed at all or were grazed by Intensive grazing has led to gully erosion and nomadic herders. Sparsely settled forests the loss of 5 percent of productive area in provided hunting and gathering livelihoods Lesotho over the course of about 30 years,58 for tribal peoples. Today, many of these and in Turkey's Eastern Anatolia region, ero- lands support moderate to high popula- sion affects more than 70 percent of culti- tion densities, providing food, fuelwood, vated land area and pastures. water, and housing. Without adequate Soil erosion in upper watersheds causes increases in land or animal productivity to downstream sedimentation and second- secure their livelihoods, farmers expand ary salinization (through salts in irriga- their crop areas by shortening fallows and tion water) in many irrigated areas. For clearing new land--much of which is envi- example, in the Tigray region of Ethiopia, ronmentally fragile and easily degraded-- soil erosion in upper catchments halved and add livestock to already-overstocked the storage capacity of reservoirs within pastoral areas. Sometimes intensification five years of construction. In Morocco, can help reduce this pressure (box 8.5). soil erosion reduced storage capacity of 34 In transforming and urbanized coun- large reservoirs by about 0.5 percent per tries, out-migration is an important liveli- year. According to one set of estimates, hood option, but two consequences are an the replacement cost of the storage capac- increase in women farmers and a general ity lost from sedimentation globally could aging of the farm workforce in many of reach $13 billion a year.59 these areas (chapter 3). 192 WORLD DEVELOPMENT REPORT 2008 Map 8.2 Many deforestation hotspots are in tropical areas Forest covered by data sets based on remote sensing and Forest covered only by expert opinion national statistics Not forested Forest not identified Forest cover change Average annual deforestation rate as hot spot Hotspot (low certainty) >1% Hotspot (high certainty) 0.01 ­ 1% No change or increase Source : Lepers and others 2005. Reprinted with permission, © American Institute of Biological Sciences. Note: Areas are defined as hotspots when deforestation rates exceed threshold values, as estimated from either available deforestation data or from expert opinion. Strategies for less-favored areas text. The diversity on both counts is consid- Public policy interventions to reduce pov- erable. Options include encouraging more erty and preserve the environment are war- out-migration, promoting income diversi- ranted in many less-favored regions. Many fication into nonfarm activities, increasing such interventions have been neglected recurrent expenditure on safety nets, sup- because of the perception that rates of porting more intensive agricultural devel- return on public investments are better in opment where it is profitable to do so, and high-potential areas--as was true during introducing payments for environmental the early phases of the green revolution in services. Nonagricultural options are gen- Asia and as may be true in Africa today. erally more viable in transforming and But public investments in roads, educa- urbanized countries with dynamic non- tion, irrigation, and some types of research agricultural sectors--and less so in poor and development (R&D) can produce agriculture-based countries with stagnant competitive rates of return63 and positive economies. outcomes for poverty and the environ- Agricultural development in less-favored ment in less-favored areas. However, some regions is constrained to varying degrees policy interventions aimed at reducing by fragile, sloped, and already-degraded poverty can result in important tradeoffs soils; erratic and low rainfall; poor market between poverty and the environment-- access; and high transport costs. Typically new road development is a major cause of a shift to more intensive agricultural pro- deforestation.64 duction systems that can raise productivity The form of policy interventions should and reduce or reverse the need for further depend on the type of less-favored region crop area expansions is required. The chal- targeted and on the national economic con- lenge is to do this profitably while ensur- Making agricultural systems more environmentally sustainable 193 B O X 8 . 5 Four trajectories: disappearing or rebounding forests, misery or growth Expansion of the agricultural frontier into sification. Forest area dwindled in the Indian raising the value of forests, and better tenure forested areas has been triggered by several Terai where the green revolution increased the makes it possible for households and commu- factors, including population pressure, pov- value of putting land into agriculture, until a nities to manage forests. The result: a mosaic erty, market conditions, road construction, and 1980 ban on cutting forests for agriculture. The of croplands and managed forests, as in parts off-farm employment opportunities. Major expansion of soybean cultivation in the Brazil- of Kenya, Tanzania, and the Sahel. new roads are another powerful driving force ian forest margins is another example of global Reforestation with abandonment of rural of deforestation. Intensifying agriculture can economic forces at work. areas. Forests are rebounding in some regions help reduce pressure on forest cover, but the Deforestation with impoverishment. When combined with out-migration (western outcome depends on how these factors play land use proves unsustainable--soil fertility Europe, Japan, North America, and more out. Sometimes market opportunities make declines and agricultural incomes collapse-- recently Eastern and Central Europe). Several it profitable to continue expansion into forest natural regrowth of forests may not occur. developing countries appear to be making this areas despite intensification in existing fields. Consequently, people leave the land, as with transition from conversion to agriculture to Four trajectories are possible. millions of hectares of imperata grasslands in forest regrowth, including parts of Asia (China, Deforestation with intensification. Intensi- Southeast Asia and large areas of apparently the Republic of Korea, peninsular Malaysia, fication can help slow deforestation if geog- abandoned pastures near Belem, Brazil. If this and possibly parts of India and Vietnam), Cen- raphy or tight labor markets prevent further type of unsustainable land use combines with tral America (Costa Rica and the Dominican expansion into forest areas. For example, high population pressure, the result is impov- Republic), Cuba, and Morocco.66 intensification of rice farming in the valleys in erishment and immiseration, as in Madagascar. the Philippines absorbed excess labor from Reforestation with intensification. Refores- hillside farms, allowing forests to recover.65 But tation is likely to accompany intensification deforestation can continue even with inten- when forest depletion leads to wood scarcity, Source: World Bank 2007i. ing the sustainable use of resources at local and disease resistance. These improvements levels and avoiding negative environmental can produce significant gains in productiv- externalities at higher scales. ity and will be more important as farmers Strategies for these areas need to be based try to adapt to climate change. Improved on two key interventions: (1) improving pest and disease resistance is particularly technologies for sustainable management important to stabilize yields and make of land, water, and biodiversity resources; farming systems more resilient. and (2) putting local communities in the Integrated soil and water management driver's seat to manage natural resources. in watersheds has received insufficient pol- Both approaches need a supportive policy icy attention, even though it can result in environment to succeed. remarkable improvements in agricultural productivity in many less-favored areas.67 Improving technologies for sustainable Better water, soil, and crop management resource management. The low produc- can more than double productivity in rain- tivity of most less-favored areas requires fed areas with currently low yields.68 Invest- major new technology breakthroughs to ments in water harvesting and small-scale secure profitability, reverse resource deg- irrigation are in many circumstances cata- radation, and improve livelihoods. After lytic--reducing the barriers to adoption of years of neglect, less-favored regions have otherwise costly soil and crop management recently attracted more agricultural R&D practices by increasing their profitability. attention from public, nongovernmental, The advent of tubewell and treadle- and private agencies (chapter 7). Initial pump technology in the 1990s was behind efforts targeted natural resource manage- the successful transformation in South ment practices that conserve scarce water, Asia's poverty triangle--Bangladesh, east- control erosion, and restore soil fertility ern India, and Nepal's Terai region. Small while using few external inputs (fertilizer). farmer-controlled irrigation using simple Many of these practices are complex and low-cost technologies--river diversion, site specific. lifting with small (hand or rope) pumps Plant breeding has focused on varieties from shallow groundwater or rivers, and that are more tolerant of drought and poor seasonal flooding--also enjoys local suc- soil conditions and that have greater pest cess in Africa, especially for high-value 194 WORLD DEVELOPMENT REPORT 2008 horticulture (in Burkina Faso, Mali, Niger, estry-based soil fertility systems (mainly and Tanzania, for example). However, these through rotational fallow or a permanent projects require social capital and commu- intercrop of nitrogen-fixing trees) have nity action. more than doubled yields and increased net Farmer user groups were key to the suc- returns on land and labor in the southern cess of Nigeria's Second National Fadama African region (chapter 7). Development Project, which invested in Livestock intensification using inte- irrigation equipment, other farm assets, grated agroforestry-livestock production rural infrastructure, and advisory services. systems in less-favored areas is another Incomes of the participants of this commu- approach with high potential payoffs. The nity-driven project have increased by more common constraint on intensifying tradi- than 50 percent on average, between 2004 tional livestock systems is the lack of feed.70 and 2006. In the dry savannah zone, where To address that, farmers are improving farmers invested mainly in small-scale irri- pasture management (area rotation, sil- gation, average incomes increased by nearly vopastoral systems), producing legumi- 80 percent.69 nous fodder crops, and using crop residues Incorporating trees into farming sys- and industrial subproducts (feedblocks tems (agroforestry) is another promising in northern Africa, cottonseed in West approach that has already had far-ranging Africa, and fodder trees in Niger). High- impacts in many hillside and agropastoral quality fodder shrubs that are easy to grow areas in Africa. New market opportuni- and that generate net returns of $40 per ties have led to an expansion of fruit and cow per year have already been adopted nut production by smallholder farmers. In by about 100,000 East African smallholder Kenya, fruit trees contribute about 10 per- dairy farmers; there is potential to expand cent of total household income regardless of this to another 2 million smallholders.71 In wealth, and about 60 percent of all firewood Niger, agroforestry parklands have led to a and charcoal comes from farms. Agrofor- remarkable recovery of degraded soils and provided livestock feed on about 5­6 mil- lion hectares (box 8.6). Conservation farming is another sustain- B O X 8 . 6 Agroforestry parklands in Niger turn back able land management technology that has the desert and restore livelihoods been adapted to a wide range of conditions A series of Sahelian droughts in the 1970s parklands (crop-fuelwood-livestock pro- (chapter 7). In the Sahel, tree planting and and 1980s coupled with strong population duction systems) have developed, includ- simple and low-cost stone bunding (putting growth led to severe land degradation and ing Gao (Faidherbia albida), baobab, and stones around the contours of slopes to keep the loss of trees, animals, and livelihoods other trees and bushes. rainwater and soil within the farming area) in Niger. The ecological and economic Villagers report improvement in soil crisis triggered a search for solutions fertility and livelihoods despite the coun- retain soil nutrients and reduce erosion, involving authorities, technical experts, try's weak economic performance. Sheep leading to higher and more stable yields and and communities, with astonishing results. and goats increased in number thanks to incomes.72 In the steep hillsides of the Chi- Tree and shrub density has increased the fodder from Gao foliage. Women have apas region in Mexico, the combination of 10­20 times since 1975 in several surveyed been the main beneficiaries because they villages in Niger's Maradi, Tahoua, and own most of the livestock. Time spent col- conservation tillage and crop mulching has Zinder regions. In the past 20 years, tree lecting fuelwood, traditionally women's increased net returns on land and labor.73 cover has increased on about 5­6 million task, has fallen from around two-and-a- The uptake of these various practices hectares without resorting to expensive half hours a day to half an hour. In villages large-scale tree plantations. (At the previ- has been mixed.74 Some natural resource where livestock herds did not grow, water ous cost of $1,000 a hectare, agroforestry availability--not the lack of feed--is the management practices simply do not offer parklands of this scale could have cost main reported constraint. Sales of wood enough gains in land and labor productiv- $5­6 billion.) have become an important income source ity to make the investment worthwhile.75 Key to this transformation was the in rural areas in the surveyed villages, transition from state ownership of trees to especially for the poor. Many are labor intensive and incompatible de facto recognition of individual property with seasonal labor scarcities, aging popu- rights. Instead of chopping down trees in Sources: Larwanou, Abdoulaye, and Reij lations, and the increasing role of women their fields, which in the past belonged to 2006; Polgreen 2007; McGahuey and farmers. Fallows, terracing, and green the state, farmers started treating them as Winterbottom, personal communication, valuable assets. Integrated agroforestry 2007; Reij, personal communication, 2007. manures (dedicated crops grown for their organic matter and nutrients, which are Making agricultural systems more environmentally sustainable 195 plowed into the soil rather than harvested) tant for natural resources management also keep land out of crop production, and because of the enormous agroecological composting and manuring compete with diversity in less-favored areas and the need to household needs for energy from scarce select and adapt technology to fit local needs organic matter. Natural resource man- and conditions. Community approaches can agement is also knowledge intensive, and provide the secure property rights and col- farmers may not have access to appropriate lective action for improving natural resource agricultural extension or training. Learn- management. They can also help manage ing from neighbors turns out not to be very local externalities and mediate between local effective for complex natural resource man- people and the project activities of govern- agement practices.76 ments, donors, and NGOs. Investments in natural resource manage- Community organizations that represent ment, unlike those in single-season inputs the interests of a diverse group of stakehold- such as fertilizer and improved seed, are long ers, including pastoralists, women and term, requiring secure long-term property indigenous groups, tend to be more effective rights over resources. Farmers will be reluc- at resolving conflicts over natural resource tant to plant trees, for example, if they are use than central authorities.79 Some of the uncertain of being able to retain possession more successful community organizations and reap the eventual rewards (as in Niger). are led by women. Active engagement by Communities are more likely to invest in women is important because they tend to be improving common grazing areas and wood- more dependent on natural resources in lots if they have secure rights to use those communal areas as farmers and collectors resources and can exclude or control outsid- of fuelwood, fodder, and water.80 Women's ers (as in the Tigray Highlands of Ethiopia).77 participation in community organizations Formalizing individual or community land to manage natural resources improves their rights is important, as is access to credit for effectiveness. Survey results of 33 rural pro- longer-term investments (chapter 6). grams in 20 countries found higher levels of collaboration, solidarity, and conflict reso- Putting local communities in the driver's lution in community organizations that seat. Adoption of many natural resource included women.81 management practices requires collective Collective action for resource manage- action at community or higher levels. There ment often needs to be at landscape levels, has been a veritable explosion of community requiring cooperation by groups of farmers organizations for natural resource manage- or even entire communities.82 For example, ment in recent years, driven largely by NGOs contouring hillsides to control soil erosion that have become active in many less-favored and capture water requires a coordinated regions. They have also been encouraged by investment and water-sharing arrange- some international development agencies ments by all farmers on the same hillside. (such as the International Fund for Agri- Watershed development requires coopera- cultural Development [IFAD]) to empower tion among all the key stakeholders in a poor people, particularly poor women, watershed, and this may involve one or more and to ensure that they participate in new entire communities. But ensuring broad growth opportunities, as in the very success- participation and sustainable outcomes is ful Southern Highlands Project of Peru.78 challenging because watershed manage- Some governments have also turned to local ment programs often have winners and communities to take over roles formerly losers. Conservation interventions, such as fulfilled--usually very inadequately--by rangeland closure, can cause income losses the state, such as managing forests in India, at least in the short term, particularly for rangelands in the Middle East and North the poor (as in Turkey, box 8.7). Africa, and pastures during the transition The growth of community organizations from central planning in Mongolia. is proving a challenge for government min- Participatory approaches involving farm- istries responsible for agriculture and natu- ers and communities are especially impor- ral resources, because they seldom have the 196 WORLD DEVELOPMENT REPORT 2008 B O X 8 . 7 Two tales of community-driven management, watersheds, and pastures Environmental sustainability and income small-scale irrigation are households with but no longer was governed by traditional insti- trade off in Eastern Anatolia access to springs, the main source of water in tutions. Rapid growth in the number of herder Soil erosion is one of the most serious prob- the project area. The majority of the livestock families (more than doubling between 1992 lems affecting the sustainability of agriculture are owned by wealthier households with more and 1999) and livestock (by about 30 percent) in Turkey because as much as a third of the cul- land and greater ability to switch to intensive has caused severe pasture degradation. tivated land and extensive areas of rangelands livestock systems. Immediate project benefits Overgrazing and desertification may affect and mountain pastures have steep slopes. have been linked to land and water-source about 76 percent of pastureland. A successful About 16 million hectares, or more than 70 ownership, while forest income from fuelwood comanagement approach between state and percent of the cultivated and grazed land area collection and timber sales--from which the communities has received active government in Turkey, are affected by erosion, especially in poor could benefit to the same degree--will and NGO legal and technological support the upper watershed of the Euphrates River in be received only in the long term, after the res- (using GIS systems and community mapping) Eastern Anatolia. Extensive livestock systems toration of forest cover on the hillsides. and has begun to fill the institutional vacuum are a main culprit. Poor rangeland manage- Reconciling environmental sustainability in pasture management. ment has led to extensive soil degradation, with income generation for the poor has been Adoption of community-based pasture limiting the scope for natural forest regenera- difficult because of uncertainty about the size management practices tends to be higher in tion, and contributing to greatly increased soil and timing of eventual conservation benefits, areas with limited pasture capacity, far away sedimentation. and unequal access to productive resources in from cities and market centers, and in herder The Eastern Anatolia Watershed Reha- areas of intensive cultivation. After the initial communities with strong social relations. The bilitation Project, with strong community willingness of the communities to agree to for- most problematic issue is resolution of disputes involvement, has helped slow soil and forest est closures in return for the immediate com- between the herders from different communi- degradation in the region. It closed forest pensatory benefits, pressure to reopen closed ties. As suggested by a survey of selected sites, grazing. It terraced and reforested degraded areas for grazing is expected to escalate. incomes have risen between 9 percent and hillsides. It intensified livestock production and 67 percent during the three years since the horticulture in the valley. And it compensated Comanagement of pastures raises herder beginning of the project. Improvement and for the loss of income from extensive livestock incomes in Mongolia protection of community hayfields, establish- systems. Without taking into account the Mongolia has the largest remaining contiguous ment of hay and fodder funds, and preparation eventual benefits of reduced sedimentation area of common pastureland in the world-- of additional fodder for the winter are reported downstream, the project had an estimated home to 172,000 herding families. Pasturelands to have helped reduce animal losses by an aver- rate of return of about 16 percent and is widely have never been privately owned, but custom- age of 6­12 percent. judged successful. ary rules governed the traditional pasture man- Many households have seen their incomes agement system prior to the period of central rise, but the poverty impact of the project has planning. With transition to a market economy, Sources: World Bank 2004f; Ykhanbai and been ambiguous. The main beneficiaries from private livestock ownership was reintroduced Bulgan 2006. organizational culture or human resources the agropastoral systems of the Middle East to support participatory approaches. New and North Africa ended up further degrad- specialist structures may have to be created, ing farmland and rangeland (box 8.8). cutting across disciplines and relevant min- So, despite their promise, community istries. Alternatively, organizations from approaches are not a panacea on their the private sector and civil society could be own. Acute resource loss, irreconcilable contracted to link central policies and pro- social conflict, a lack of capacity, or sim- cedures with practices on the ground. ply the absence of a valid community often Training and leadership support from requires more centralized interventions outside actors (NGOs) have often succeeded or at least support from outside agencies. in filling a void in leadership and technical Resolving conflicting interests between skills in the community and government pastoralists and agriculturalists in many ministries, even within the context of an dryland areas (as in Sudan, Lebanon, and institutional vacuum in the trasition period Mongolia), or managing and controlling in Mongolia (as in Mongolia, box 8.7). water resources beyond the immediate Sometimes well-intentioned interven- watershed, may demand more than what tions to redress poverty in less-favored community approaches can deliver. Much areas may backfire and undermine tradi- remains to be learned about the conditions tional ways of managing common property for them to succeed and be scaled up. natural resources. For example, govern- Given the large externalities in less- ment attempts to help pastoral communi- favored regions, promoting sustainable ties manage droughts and grazing areas in farming and reducing poverty do not always Making agricultural systems more environmentally sustainable 197 B O X 8 . 8 Managing drought and livestock in pastoral areas of the Middle East and North Africa Most of the agricultural land in the Middle tivity of the pastures, avoiding the long-term increased sharply in recent years, and grazing East and North Africa receives less than 400 degradation of grazing areas. However, the practices have changed; many of the animals millimeters of annual rainfall and is devoted ability to manage drought shocks has declined no longer leave the steppe during the dry to barley-sheep systems that use the available with population growth, as more people seek season but have their feed and water trucked cropping land and the vast grazing areas of to earn a livelihood from the meager resources in. This leads to overgrazing during the dry the steppe. Agropastoral societies have their in these areas, and by more frequent and pro- season, reduces the natural seeding of annual own strategies for coping with drought, long longed droughts associated with global warm- pasture species, disturbs the soil, and contrib- a significant factor in the region. Mobile or ing. Droughts now bring significant losses of utes to wind erosion, particularly in areas near transhumant grazing practices reduce risks livestock, push many farmers and herders into water and feed supply points. High govern- of having insufficient forage in any one loca- poverty, and hold back investments in better ment procurement prices for barley have also tion. Reciprocal grazing arrangements with natural resources management. encouraged the mechanized encroachment more distant communities provide access to Governments throughout the region have of barley cultivation onto rangelands, where it their resources in drought years. Flock sizes intervened to help manage drought losses, cannot be sustained. and stocking are adjusted to match available but usually on the basis of crisis relief once the While systematic rescheduling of credit grazing resources. Extra animals can be easily drought has set in and without much thought for farmers provides some short-term relief liquidated in a drought, either for food or cash. to the longer-term consequences. The most to herders and small-scale farmers, this Barley farmers and shepherds diversify into important interventions are feed subsidies for approach has proved of greatest benefit to crop farming and nonagricultural occupations, livestock and debt forgiveness, both degrad- larger farms--and contributed to the chroni- particularly through seasonal migration for off- ing resources. cally poor debt-collection performance of farm employment. Feed subsidies (mostly for barley) have the region's agricultural development banks. These traditional risk strategies have man- been quite successful in protecting livestock Better alternatives, which need to be explored, aged drought shocks and enabled pastoral numbers and production during droughts. But would be simple forms of drought insurance, societies to survive for many centuries. The they have also accelerated rangeland degra- early warnings of drought, and safety nets for interplay between drought and traditional dation in the long term by undermining the the poor. management systems has also helped to keep traditional process of adjusting flock size to total flock sizes in equilibrium with the produc- interyear climatic variations. Flock sizes have Source: Hazell, Oram, and Chaherli 2001. stem environmental degradation. There are attempted to regulate what farmers can and few technological or community-driven cannot do. Neither approach has worked approaches to resolve the tradeoffs that well nor been sustained over time. Occa- frequently occur between reducing poverty sionally, win-win technologies can generate and environmental degradation--solutions both high returns for farmers and high lev- require much more effective mechanisms els of environmental services, but these are for managing environmental externali- few and far between, and may not remain ties, including payment for environmental win-win over time as prices change.83 services. The bottom line is that if society wants farmers to undertake natural resource man- agement practices that have benefits outside Payment for the farm, society needs to compensate them. environmental services This has been attempted at small scales by Agricultural landscapes in both less- providing concessionary loans for invest- favored and high-potential areas produce a ments, using food-for-work programs for wide range of valuable environmental ser- conservation activities such as tree plant- vices, such as sequestering carbon, harbor- ing, and supplying key inputs like seedlings ing biodiversity, regulating water flows, and without charge. These efforts usually pro- providing clean water downstream. Farm- vide only short-term rewards, however, and ers receive no compensation for providing the incentive they create ends as soon as the these services, however, and so they tend rewards end. The benefits of these short- to be underproduced. Many approaches term programs have usually been tem- to increasing environmental services are porary at best. The emerging approach of based on demonstrating to farmers the payment for environmental services (PES) "right thing to do"--forgetting that it's the aims to address this problem. "right thing" for others and not necessar- PES is a market-based approach to con- ily for the farmers. Other approaches have servation based on the twin principles that 198 WORLD DEVELOPMENT REPORT 2008 those who benefit from environmental ser- Colombia, Costa Rica, and Nicaragua has vices (such as users of clean water) should induced substantial changes in land use, pay for them, and those who generate these with degraded pastures transformed into services should be compensated for provid- silvopastoral systems (where trees and live- ing them.84 In a PES mechanism, service stock are produced together) (figure 8.3).86 providers receive payments conditional on Despite the expensive and technically chal- their providing the desired environmental lenging practices, poor households are services (or adopting a practice thought to actively participating. generate those services). Participation is Water users are the most significant voluntary. The PES approach is attractive current source of funding for PES schemes, in that it (1) generates new financing, which mainly through decentralized, watershed- would not otherwise be available for conser- specific schemes, but also through nation- vation; (2) can be sustainable, as it depends wide programs (as in Mexico). Water users on the mutual self-interest of service users paying for watershed conservation through and providers and not on the whims of gov- PES mechanisms are domestic water sup- ernment or donor funding; and (3) is effi- ply systems, hydroelectric power producers, cient if it generates services whose benefits irrigation systems, and bottlers. The poten- exceed the cost of providing them. tial for watershed payments can signifi- There has been very strong interest in cantly expand with a better understanding PES programs in recent years, particularly of the effects of upstream land-use changes in Latin America. Costa Rica has the old- on downstream water services. est program, created in 1997, which at the Carbon payments--under the Clean end of 2005 was paying for forest conser- Development Mechanism or the voluntary vation on about 270,000 hectares, or about (retail) market--are another large poten- 10 percent of forest area. Mexico created tial source of funding for PES (chapter 11). a similar program in 2002, and at the end Small-scale farmers can benefit from carbon of 2005 it was paying for the conservation sequestration payments, but this requires of about 540,000 hectares (or about 1 per- strong local community organizations cent of forest area).85 Most PES schemes capable of developing adequate monitoring in developing countries have focused on and verification systems. The Scolel Té proj- retaining forest, but interest is growing in ect in Mexico's Chiapas region mobilized applying the approach to agricultural areas. local community and farmer organizations A pilot project on degraded pastures in to commercialize carbon through agrofor- estry. Of the sale price of $3.30 per ton of Figure 8.3 With PES, degraded pasture has been converted to sustainable land use in carbon dioxide, 60 percent went directly to Nicaragua farmers, raising families' local incomes by an average of $300 to $1,800 per year.87 But Improved pasture with high tree density many obstacles, including high transaction Poor households costs (40 percent in this case) and the need Natural pasture with high tree density Nonpoor households to coordinate the activities of many small Improved pasture with low tree density farmers to generate meaningful amounts of carbon sequestration, limit participation of Fodder banks small farmers in this market. Natural pasture with low tree density If payment schemes are to be used more widely, they will have to ensure that the Degraded pasture funding base is sustainable for the long Annual crops term, directly linking service users and providers. This is easier when there are just ­600 ­500 ­400 ­300 ­200 ­100 0 100 200 300 one or two large service users with fairly Net land use change, hectares clear actual or potential environmental Source: Computations from Silvopastoral Project GIS mapping data by Pagiola and others (forthcoming). Notes : Land use changes by poor and nonpoor Silvopastoral Project participants in Matiguás-Río Blanco, threats--and when the causes and effects Nicaragua (2003­05). Areas converted to other uses with net land-use change of less than 30 hectares are not between farm activities and environmental shown. The poor are defined as households below the national poverty line, using household survey data on income from all sources. outcomes are fairly well understood. Small Making agricultural systems more environmentally sustainable 199 watersheds with a downstream hydropower requires removing price and subsidy poli- plant (usually most vulnerable to sedimen- cies that send the wrong signals to farm- tation) or domestic water suppliers (affected ers, strengthening property rights, provid- by contamination and sedimentation) are ing long-term support to natural resource good candidates. Large basins with mul- management, and developing instruments tiple users, where downstream impacts are to help manage increased climate risks. the cumulative impact of myriad upstream Better technologies and better ways of uses, are poor candidates. Using PES for managing water and modern farm inputs biodiversity conservation is also difficult are now available to make intensive farm- because of the lack of stakeholders with ing more sustainable. But their widespread strong financial interests. adoption is hindered by inappropriate pric- ing policies, insufficient training of farm- Conclusions ers, and a failure to manage negative exter- Since the 1992 Earth Summit in Rio, it is nalities. In less-favored regions, new and generally accepted that the agriculture and promising technologies are emerging, but environment agendas are inseparable. Deg- their adoption is complicated by the length radation of natural resources undermines of time before payoffs are realized and the basis for agricultural production and the need for collective action. One of the increases vulnerability to risk, imposing more promising recent developments has high economic losses from unsustainable been devolution of control to local orga- use of natural resources. The agriculture- nizations for community natural resource for-development agenda will not succeed management. without more sustainable use of natural On the positive side, many opportunities resources--water, forests, soil conserva- exist to harness agriculture's potential as a tion, genetically diverse crops and animal provider of environmental services. The varieties, and other ecosystem services. At emergence of new markets and programs the same time, agriculture is often the main for payments for environmental services is entry point for interventions aimed at envi- a promising approach that should be pur- ronmental protection. It is the main user of sued by local and national governments land and water, a major source of green- as well as the international community. house gas emissions, and the main cause of Agriculture's role is central to mitigation conversion of natural ecosystems and loss of climate change and protection of biodi- of biodiversity. The intricate links between versity, and carbon financing may become the agriculture and environment agendas an important source of funding for these require an integrated policy approach. global public goods (chapter 11). But in The large environmental footprint of many cases, development of markets for agriculture on natural resources remains environmental services at the local level, pervasive, but there are many opportuni- with close proximity between service pro- ties for reducing it. Getting the incentives viders and consumers of these services, may right is the first step towards sustainability. be more promising than putting into place Improving natural resource management in national payment schemes when gover- both intensive and extensive farming areas nance and fiscal capacities are weak. focus F Adaptation to and mitigation of climate change in agriculture Climate change will have far-reaching consequences for agriculture that will disproportionately affect the poor. Greater risks of crop failures and livestock deaths are already imposing economic losses and undermining food security and they are likely to get far more severe as global warming continues. Adaptation measures are needed urgently to reduce the adverse impacts of climate change, facilitated by concerted international action and strategic country planning. As a major source of greenhouse gas (GHG) emissions, agriculture also has much untapped potential to reduce emissions through reduced defor- estation and changes in land use and agricultural practices. But for this to be achieved, the current global carbon financing mechanism needs to change. Impact of climate change areas in some developing countries would complementary reforms and better market The impacts of climate change on agricul- also be damaged by flooding and salinization access for high-value products.11 But greater ture could be devastating in many areas. caused by sea level rise and salt water intru- variability of rainfall and surface flows needs Many regions already feel these impacts, sions in groundwater aquifers.6 Less precipi- to be taken into account in the design of new which will get progressively more severe tation would reduce the availability of water irrigation schemes and the retrofitting of as mean temperatures rise and the climate for irrigation from surface and groundwater existing ones. The cost of modifying irriga- becomes more variable (chapter 2). sources in some areas. Access to perennial sur- tion schemes, especially when those depend Scientific evidence about the seriousness face water may be particularly vulnerable in on glacial melt (as in the Andes, Nepal, and of the climate threat to agriculture is now semiarid regions, especially in parts of Africa parts of China) or regulation of water flow by unambiguous, but the exact magnitude is and in irrigated areas dependent on glacial high-altitude wetlands, could run into mil- uncertain because of the complex interac- melt. Between 75 and 250 million people are lions if not billions of dollars.12 tions and feedback processes in the ecosys- expected to experience increased water stress Better climate information is another tem and the economy. Five main factors will in Africa.7 In all affected regions, the poor will potentially cost-effective way of adapting to affect agricultural productivity: changes in be disproportionately vulnerable to its effects climate change.13 Consider an agrometeoro- temperature, precipitation, carbon dioxide because of their dependence on agriculture logical support program in Mali. Initiated (CO2) fertilization, climate variability, and and their lower capacity to adapt. in 1982 in response to the Sahelian drought, surface water runoff. Initially, rising atmo- timely weather information and technical spheric concentrations of carbon benefit crop Adapting to climate change advice helped farmers better manage cli- growth and could offset yield losses from heat Adapting agricultural systems to climate mate risk and reduce the economic impact and water stress, but this"carbon fertilization" change is urgent because its impact is already of droughts.14 may be smaller in practice than previously evident and the trends will continue even if The greater uncertainty from climate estimated from experimental data.1 emissions of GHG emissions are stabilized at change can be best addressed through con- Under moderate to medium estimates current levels. Adaptation can substantially tingency planning across sectors. Many of of rising global temperatures (1­3°C), crop- reduce the adverse economic impact. the Least Developed Countries are prepar- climate models predict a small impact on Farmers are already adapting. According ing National Adaptation Action Plans to global agricultural production because nega- to recent survey data from 11 African coun- identify immediate priorities to improve tive impacts in tropical and mostly develop- tries, they are planting different varieties preparedness for climate change.15 Main- ing countries are offset by gains in temperate of the same crop, changing planting dates, streaming climate change in the broader and largely industrial countries.2 In tropical and adapting practices to a shorter growing economic agenda, rather than taking a nar- countries even moderate warming (1°C for season. 8 But in some countries more than a row agricultural perspective, will be crucial wheat and maize and 2°C for rice) can reduce third of all households that perceive greater in implementing these plans.16 yields significantly because many crops are climate variability or higher temperatures The costs of adapting to climate already at the limit of their heat tolerance. report no change in their agricultural prac- change--estimated at tens of billions of For temperature increases above 3°C, yield tices. Barriers to adaptation vary by coun- dollars in developing countries--far exceed losses are expected to occur everywhere and be try, but for many the main reported barrier the resources available, requiring significant particularly severe in tropical regions. In parts is the lack of credit or savings.9 Farmers in transfers from industrial countries. Con- of Africa, Asia, and Central America yields of Ethiopia, Kenya, and Senegal also point to tributions to existing adaptation funds are wheat and maize could decline by around the lack of access to water.10 $150 to $300 million a year.17 The recently 20 to 40 percent as temperature rises by 3 to In countries with severe resource con- announced Nairobi Framework for adapting 4°C, even assuming farm-level adjustments to straints, farmers will not be able to adapt to to climate change is a step in the right direc- higher average temperatures.3 With full CO2 climate change without outside help. And tion, but it is not expected to provide even fertilization the losses would be about half as the poor will need additional help in adapt- a tenth of the required amounts. The inter- large.4 Rice yields would also decline, though ing, especially where costs are higher. national community needs to devise new less than wheat and maize yields. The public sector can facilitate adaptation mechanisms to provide a range of global These are conservative estimates because through such measures as crop and livestock public goods, including climate information they do not consider crop and livestock losses insurance, safety nets, and research on and and forecasting, research and development of arising from more intense droughts and floods, dissemination of flood-, heat-, and drought- crops adapted to new weather patterns, and changes in surface water runoff, and threshold resistant crops. New irrigation schemes in techniques to reduce land degradation. Many effects in the response of crop growth to tem- dryland farming areas are likely to be particu- of these measures are win-win, such as devel- perature changes.5 Agriculture in low-lying larly effective, especially when combined with oping drought- and flood-tolerant varieties, Adaptation and mitigation of climate change in agriculture 201 improving climate information, or planning of reduced carbon sequestration (storage) sion rice varieties and livestock breeds. And for hydrological variability in new irrigation through land use change (e.g., the loss of soil it is not yet clear that they would be more investments. Because of the long time lag organic matter in cropland and pastures, and cost-effective than alternatives to reduce between the development of technologies forest conversion to agriculture), although GHG emissions by increasing efficiency in and information systems and their adoption quantitative estimates are uncertain. transport and power sectors.22 in the field, investments to support adapta- Emissions of carbon dioxide from The public-good nature of research in tion need to be developed now. Carbon taxes changes in agricultural land use can be this area warrants international support based on the polluter pays principle could be reduced by slowing deforestation. And for innovative cost-effective solutions to a major source of revenue for this. opportunities for this reduction through reduce emissions from livestock and rice carbon trading are in principle quite large paddy fields, for example, by breeding low- Mitigating climate change because of generally low returns from for- emissions plant varieties and animal breeds through agriculture est conversion to agricultural uses. At one and by using advanced biotechnologies. Livestock and crops emit CO2, methane, extreme, conversion of forest to traditional Agriculture might also reduce climate change nitrous oxide, and other gases, making agri- pasture in Acre, Brazil, produces a net pres- through greater production of bioenergy for culture a major source of GHG emissions ent value of future earnings of $2 per hectare transport and power. Much depends on the (figure F.1).According to the emissions inven- in land value at a cost of a loss of 145 tons total GHG emissions through the entire pro- tories that governments submit to the United of sequestered carbon, or equivalent to less duction cycle from the cultivation of feed- Nations Framework Convention on Climate than $0.01 per ton of CO2. The correspond- stock crops to final use--which can negate Change, agriculture accounts for around 15 ing value for forest conversion to intensive much of the carbon sequestration from pro- percent of global GHG emissions. Adding cocoa plantations in Cameroon is $3 per ton ducing biofuels (see focus B). emissions from deforestation in developing of CO2.20 A price of around $27 per ton of Carbon financing can support mitigation countries (agriculture is the leading cause of CO2 in carbon markets (comparable to the The emerging market for trading car- deforestation), raises its global contribution May 2007 trading price in the European Cli- bon emissions offers new possibilities for to 26 and up to 35 percent of GHG emis- mate Exchange for 2008­10 carbon allow- agriculture to benefit from land uses that sions. Around 80 percent of total emissions ances) could deter conversion of 5 million sequester carbon. The main obstacle to from agriculture, including deforestation, are square kilometers of forest by 2050.21 realizing broader benefits from the main from developing countries (figure F.1).18 Other promising approaches are changes mechanism for these payments--the Clean Agriculture contributes about half of the in agricultural land management (conserva- Development Mechanism (CDM) of the global emissions of two of the most potent tion tillage, agroforestry, and rehabilitation Kyoto Protocol--is its limited coverage of noncarbon dioxide greenhouse gases: nitrous of degraded crop and pasture land), over- afforestation and reforestation (chapter 11). oxide and methane. Nitrous oxide emis- all improvement of nutrition and genetics No incentives were included in the protocol sions from soils (from fertilizer application of ruminant livestock, storage and capture for developing countries to preserve forests, and manures) and methane from enteric technologies for manure, and conversions despite the fact that deforestation contrib- fermentation in livestock production each of emissions into biogas. Many of these utes close to a fifth of global GHG emissions, account for about one-third of agriculture's approaches have win-win outcomes in largely through agricultural encroachment. total noncarbon dioxide emissions and are higher productivity, better management of Negotiations for the period after 2012 projected to rise.19 The rest of noncarbon natural resources, or the production of valu- should correct this major flaw. They could dioxide emissions are from biomass burn- able by-products, such as bioenergy. Others also explore credits for sequestration of ing, rice production, and manure manage- require substantial investment at the global carbon in soils (for example, through con- ment. Agriculture is also a major contributor level, such as the development of low-emis- servation tillage), for "green" biofuels, and Figure F.1 Agriculture and the associated deforestation are major sources of GHG emissions for agroforestry in agricultural landscapes. Incentives are also needed for investment % of total GHG emissions in science and technology for low-emission 63% technologies, such as cattle breeds that emit 60 Developed countries Developing countries less methane. Remote satellite sensing to monitor results on the ground is a promis- 40 ing new approach.23 For mitigation, a future climate treaty will 15% 20 11% need a better incentive structure to encour- 7% 4% age full participation and compliance. For 0 Energy Agriculture Deforestation Industrial Waste adaptation, because of an unfavorable dis- (excluding land processes tribution of benefits, the international com- use change) munity faces major challenges in obtaining the cooperation and financing of industrial Source: WDR 2008 team based on data from the United Nations Framework Convention on Climate Change, www.unfccc.int. countries, which do not see the direct bene- Note: These are the latest available data for developing countries as a group, and consistent comparisons using fits from contributing. But the manifestation UNFCCC data are possible only for 1994 data. There is a large range of uncertainty about gross emissions from land use change (mainly from deforestation). The best estimate of the contribution of emissions from land use change to of climate change is increasing the urgency total emissions is 20 percent (with a range from 10 to 30 percent) of total global emissions during the 1990s (Watson and the will at the global level to tackle both and others 2000). The UNFCCC estimate of total emissions from deforestation based on emissions inventories as reported by developing countries (11.4 percent) is a low-range estimate. adaptation and mitigation (chapter 11). Moving beyond the farm 9 Rural areas across most of the developing lenge that remains poorly understood and world face a formidable employment chal- sorely neglected in policy making. lenge. Even with migration to cities, rural An active policy agenda for the rural c h a p t e r populations continue to grow, sometimes labor market, in agriculture and in other very rapidly, as in Sub-Saharan Africa and sectors, can produce long-term sustained South Asia. Each year's addition to the rural reductions in rural poverty. Perhaps most labor force needs to find work in agricul- important is a better rural investment cli- ture or the rural nonfarm economy, or to mate for agriculture and the rural nonfarm migrate to the urban economy. economy. Improving it will not be enough, The rural labor market offers employ- however. Investments in schooling and ment in the agricultural and nonagricul- training to convert unskilled to skilled tural sectors to skilled and unskilled labor, labor are essential. Skilled workers can take in self-employment and wage labor. Agri- advantage of better local opportunities or culture employs many wage workers--20 migrate. For those who cannot, only social percent of the sector's labor force. The protection can ease their poverty. dynamic high-value crop and livestock sec- tor is labor intensive with good potential Rural employment: for employment growth. Yet labor condi- tions in agriculture are not always condu- a daunting challenge cive to large welfare improvements, in part In India the rural labor force still grows at because of the nature of the production pro- 1.5 percent a year, adding 4 million new cess and in part because of a lack of appro- workers annually. In Bangladesh 1 million priate regulation. Rural nonfarm work is people join the rural workforce every year. increasing rapidly and includes numerous Millions of workers already employed in low-productivity commercial activities in rural areas are trapped in low-earning jobs. thin local markets. But dynamic nonagri- The gap between the number of new cultural subsectors, linked to agriculture or rural workers and the number of new jobs the urban economy, offer opportunities for in agriculture is growing in Sub-Saharan skilled workers. Africa, South Asia, and the Middle East and Wages in agriculture are low, lower on North Africa--and it remains wide in the average than in the other sectors. This dif- other regions (figure 9.1). Improvements in ference is largely a result of the skill com- agricultural productivity can still generate position of workers. Unskilled workers in more and better jobs in most developing low-productivity self-employment in the countries. However, because of the low elas- rural nonfarm economy also garner very ticity of demand for food, the agricultural low earnings. Educated workers find high- labor force will in the long run decline, paying jobs, locally or in secondary cities. not only relatively but also absolutely, as is With labor as the main asset of the poor, already happening in Latin America and landless and near-landless households have the Caribbean, and in Europe and Central to sell their labor in farm and nonfarm Asia. Agricultural advances alone will not activities or leave rural areas. Making the meet the rural employment challenge. The rural labor market a more effective pathway rural nonfarm economy will also have to be out of poverty is thus a major policy chal- a key source of new jobs. 202 Moving beyond the farm 203 Figure 9.1 Agriculture is not enough to absorb new rural workers Sub-Saharan Africa South Asia People, millions People, millions 500 1,200 1,000 400 800 300 600 200 Rural population Rural population 400 100 200 Agricultural labor force Agricultural labor force 0 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 East Asia and Pacific Middle East and North Africa People, millions People, millions 1,200 140 120 100 800 Rural population 80 60 Rural population 400 Agricultural labor force 40 20 Agricultural labor force 0 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 Latin America and Caribbean People, millions 140 120 Rural population 100 80 60 40 Agricultural labor force 20 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 Source: FAO 2006a. Note: Because data on the rural labor force are not available, growth in the rural population is used as a proxy for growth in the rural labor force. The diversity of activities in rural areas rural areas. As reported in chapter 3, how- leads to a corresponding diversification in ever, this does not necessarily mean that income sources (table 9.1). In most coun- individual households have diverse sources tries, nonagricultural activities account of income, only that households differ in for 30 percent to 50 percent of incomes in those sources. 204 WORLD DEVELOPMENT REPORT 2008 Table 9.1 Rural households' diverse sources of income Income shares Agricultural income Nonagricultural income Self-employed Wage Wage Self-employed Transfers and others Sub-Saharan Africa Ethiopia 1999 0.74 0.03b 0.05 0.18 Ghana 1998a 0.55 0.02 0.15 0.22 0.05 Malawi 2004a 0.67 0.08 0.12 0.10 0.04 Nigeria 2004a 0.55 0.13 0.19 0.12 0.01 Zambia 2003 0.65 0.06b 0.10 0.17 South Asia Bangladesh 2000a 0.15 0.13 0.21 0.22 0.29 Nepal 1996a 0.35 0.18 0.19 0.15 0.14 Pakistan 2001a 0.43 0.06 0.24 0.12 0.17 East Asia and the Pacific Indonesia 2000a 0.17 0.09 0.34 0.23 0.16 Vietnam 1998a 0.35 0.04 0.08 0.49 0.04 Europe and Central Asia Azerbaijan 2001 0.53 0.27b 0.20 Albania 2005a 0.29 0.04 0.25 0.21 0.23 Bulgaria 2001a 0.18 0.18 0.19 0 0.45 Kyrgyzstan 1998 0.42 0.20b 0.09 0.30 Latin America and Caribbean Ecuador 1998a 0.29 0.18 0.25 0.24 0.04 El Salvador 2001 0.17 0.09 0.32 0.23 0.18 Guatemala 2000a 0.25 0.22 0.21 0.14 0.19 Nicaragua 2001a 0.22 0.21 0.31 0.17 0.10 Panama 2003a 0.13 0.15 0.44 0.16 0.12 Peru 1997 0.49 0.07 0.44b -- Sources: World Bank (2005p) for Zambia, World Bank (2005n) for Ethiopia, World Bank (2003e) for Kyrgyzstan, World Bank (2003a) for Azerbaijan, World Bank (2005k) for El Salvador, Escobal (2001) for Peru, Davis and others (2007) for the remaining countries. a. Using comparable methodology for computing incomes (see box 3.2). b. May include two or more sources of income. -- = not available. The structure of rural employment surveys report low female wage labor, but shows striking differences across develop- the emerging literature suggests that many ing regions (table 9.2). Off-farm work in women, particularly poor women, rely agriculture and nonagriculture employs increasingly on agricultural wage labor.2 47 percent to 49 percent of adult males in The supply of female labor is both a Latin America and the Caribbean, South household decision and a determinant of the Asia, and in the Middle East and North household's balance of power.3 Changing the Africa, and 38 percent in East Asia and the balance of power as women enter the labor Pacific.1 In Sub-Saharan Africa, it employs force in turn changes the household's deci- 20 percent of adult males. sion. A traditional society in which women Off-farm work is also important for do not work outside the farm can remain women, employing 25 percent of rural adult that way for a long time, even as condi- females in East Asia and the Pacific, Europe tions outside the household, such as female and Central Asia, and Latin America and wages, are changing. But once women start the Caribbean. In South Asia, 11 percent of working, the change can be very rapid, with women participate in the agricultural wage lots of women coming out of their homes to labor market, but even fewer work in rural be active in the labor market. This suggests nonfarm activities. This contrasts with East that there can be high payoffs to one-time Asia and the Pacific and Latin America and interventions by governments or nongov- the Caribbean, where women participate less ernmental organizations that assist wom- often in the agricultural wage labor market en's entry into the labor force: once it has and more in the rural nonfarm economy. In started, it will stick as a new self-fulfilling Sub-Saharan Africa, statistics from national pattern has been established. Moving beyond the farm 205 Table 9.2 Rural employment by sector of activity, selected countries % of adults East Asia Latin America Sub-Saharan and the Pacific Middle East Europe and the Sector of activity Africa South Asia (excl. China) and North Africa and Central Asia Caribbean Men Agriculture, self-employed 56.6 33.1 46.8 24.6 8.5 38.4 Agriculture, wage earner 4.0 21.8 9.4 9.4 10.1 20.9 Nonagriculture, self-employed 6.9 11.8 11.5 8.8 7.4 9.2 Nonagriculture, wage earner 8.6 15.4 17.4 30.9 31.3 17.2 Nonactive or not reported 21.7 14.6 14.4 26.0 27.5 13.4 Women Agriculture, self-employed 53.5 12.7 38.4 38.6 6.9 22.8 Agriculture, wage earner 1.4 11.4 5.7 1.0 5.4 2.3 Nonagriculture, self-employed 6.8 2.9 11.3 2.8 1.6 11.7 Nonagriculture, wage earner 2.8 2.7 8.4 3.9 18.1 11.5 Nonactive or not reported 32.7 64.3 35.5 53.3 46.9 51.2 Source: WDR 2008 team. Note: Data are for 2000 or the nearest year. Based on representative household surveys for 66 countries, which accounts for 55 percent of the population in Sub-Saharan Africa, 97 percent in South Asia, 66 percent in East Asia and the Pacific (excluding China), 74 percent in Europe and Central Asia, 47 percent in the Middle East and North Africa, 85 percent in Latin America and the Caribbean. See endnote 19, chapter 3, page 272 for the methodology and the list of countries. Agricultural wage employment In rural Africa, for example, recent in-depth Agriculture is a large and growing studies suggest that participation in the employer of wage labor agricultural labor market is far greater than Assessing the correct number of paid work- large-scale household surveys suggest,4 with ers in agriculture is difficult because in agricultural wage employment particularly many contexts agricultural wages comple- important for poor and relatively landless ment self-employment. Labor Force Survey households. Data from all regions suggest and Population Census data that classify a positive correlation between national per workers by their main activity typically capita income and wage labor's share in miss large numbers of casual wage earners. agricultural employment (figure 9.2). Figure 9.2 The share of wage workers in agricultural employment rises with per capita income Share of wage workers in agricultural employment, % 100 UKR RUS TJK 80 KGZ CRI CHL 60 PAN VEN COL IND GUY ZAF JOR 40 BGD MEX STP HND ECU SLV TUR NIC BIH LSO GTM BRA DOM 20 IDN KEN PAK EGY PRY JAM THA PER POL HRV MDG VNM YEM MAR RWA UGA BOL MKD ETH ZMB AGO KHM ALB ZAR MOZ SEN GHA HTI CMR CPV MHL 0 BDI BEN TMP BTN ROM FJI TCD 90 SLE BFA GMB 400 1800 8100 GDP per capita, constant 2000 US$ (log scale) Sources : WDR 2008 team; World Bank 2006z. Note: See table 9.2. The list of 3-letter codes and the countries they represent can be found on page xviii. 206 WORLD DEVELOPMENT REPORT 2008 Figure 9.3 The share of wage labor in agricultural employment is rising in many countries Wage labor in agricultural employment, % Wage labor in agricultural employment, % Wage labor in agricultural employment, % 60 80 80 50 60 60 40 30 40 40 20 20 20 10 0 0 0 1970 1975 1980 1985 1990 1995 2000 1970 1975 1980 1985 1990 1995 2000 2005 1970 1975 1980 1985 1990 1995 2000 India Thailand Colombia Mexico Costa Rica Brazil Malaysia Indonesia Chile Dominican Argentina Ecuador Philippines Pakistan Venezuela, R.B. de Republic Guatemala Bolivia Sources : Census data (Argentina, Bolivia, Brazil, Chile, Costa Rica, Dominican Republic, Ecuador, Guatemala, Mexico); Labor Force Surveys (Colombia, Indonesia, Malaysia, Philippines, Pakistan, Thailand, Venezuela) from the International Labour Organization Web site at http://www.ilo.org. National Sample Survey data reported in Glinkskaya and Jalan 2005. Those regional aggregates hide wide dif- industry vary 50­60 percent from the ferences across countries. In Bolivia and peak season to the slack.9 There, men more Peru, wage labor accounts for less than 15 involved in field operations tend to remain percent of the agricultural labor force. In in the labor force throughout the year, Chile and Costa Rica, by contrast, wage but women's participation, which is more earners predominate, exceeding 60 percent. linked to processing the harvest, drops by In India, more than 100 million workers, nearly 30 percent from the peak to slack almost half the agricultural labor force, are season. Females have high rates of unem- in agricultural wage employment.5 ployment, exceeding 50 percent on a daily The number of agricultural wage work- basis during the slack season. ers, and their share in the agricultural Agricultural production is also subject labor force, is growing in most regions (fig- to droughts, floods, pests, and price fluc- ure 9.3).6 In India, the proportion of wage tuations. These shocks (even if insured) workers increased from 42 percent to 47 affect labor demand and supply in ways percent from 1987/88 to 1993/94, with little that exacerbate each other. The demand for change since then.7 In contrast, the share of labor declines. The supply of labor by small wage labor does seem to be falling in some farmers increases to compensate for the Latin American countries. In Brazil this has shortfall in onfarm profit.10 Consequently, been attributed to the prevalence of infor- wages vary sharply with weather conditions mal labor contracts (see below).8 and other agricultural risks. In Bangladesh, the real agricultural wage fell by 50 percent The nature of agriculture affects during the 1974 drought year. In India, an labor demand and contracts analysis of 257 districts from 1956 to 1987 Several factors unique to agriculture-- shows wages are very sensitive to rainfall including seasonality, agricultural produc- shocks. Wages responded less in areas with tion risks, and agency problems--affect better developed financial services and bet- the demand for agricultural labor. In Bra- ter access to other markets, where laborers zilian agriculture, the seasonality of formal could find work.11 employment has increased since 1999 to Agriculture by nature makes supervis- reach a variation of more than 20 percent ing contracts difficult. Without significant within a year (figure 9.4). In Chile, aver- monitoring, it is difficult to observe labor age daily earnings for workers in the fruit effort or to infer effort from observed out- Moving beyond the farm 207 Figure 9.4 Formal employment in Brazilian agriculture has become more cyclical Index of formal employment in agriculture (December 1991 = 100) 140 All other activities 120 100 Agriculture 80 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Source: Carneiro 2003, updated. put. To overcome this agency problem, labor laws target industrial employment. various contractual arrangements arise Even when laws are on the books, low to create appropriate work incentives for familiarity by employers and workers and laborers. One is to offer piece-rate wages poor enforcement undermine compliance rather than daily wages for harvest tasks. in rural areas. Research has shown that workers do supply Working conditions in agriculture can more effort under piece-rate schemes than be hazardous. According to the Interna- when working for daily wages.12 But piece- tional Labour Organization (ILO), agri- rate wages also mean that wage incomes culture is one of the three most danger- vary across workers based on their ability ous occupations, along with mining and to supply work effort; workers with poor construction. About half the estimated physical conditions earn less. 355,000 annual on-the-job fatalities occur In dynamic regions, however, rising in agriculture.16 Agricultural wage work- opportunities in the nonfarm sector have ers face exposure to toxic pesticides, live- raised the costs of long-term labor con- stock-transmitted diseases, and dangerous tracts, reducing their prevalence. India machinery, but they lack adequate train- has witnessed a considerable decline in the ing and protective equipment. Casual number of permanent workers; the major- workers often receive even less training ity of agricultural wage employment is now and instruction and have a greater risk casual. The proportion of casual workers of injury or death. Because working and increased from 65 percent in 1972 to 80 living conditions are often inseparable in percent in 2002 among male wage earners, rural environments, exposure to pesti- and from 89 percent to 92 percent among cides extends beyond work to the rest of female.13 Casual workers are among the the household (see focus H). most vulnerable. In India their poverty Balancing f lexibility in hiring for incidence reached 49 percent in 1993/94, employers and basic protections for laborers almost three times the 17 percent for per- has been elusive. In Brazil, labor legislation manent workers.14 applies to both urban and rural markets, and both are subject to the same labor code. Working conditions in agriculture In the 1990s workers were asked to make are particularly unfavorable direct contributions to social security, 36 Agricultural wage workers face significant percent of their take-home pay. Although occupational, safety, and environmental the additional contribution included pay- hazards, rarely covered under labor pro- ments that would benefit workers directly-- tection.15 They are also poorly protected such as a 13th month's pay, paid minimum by national labor laws. Agriculture is often vacation times, and severance pay--workers excluded from labor legislation, as most perceived a large part of this tax having less 208 WORLD DEVELOPMENT REPORT 2008 value than the cost. So, informal coopera- the formal employment of low- and mar- tives for temporary jobs proliferated, with ginal-productivity workers--the unskilled cooperative members giving up their ben- and young--and this might have different efits in return for higher take-home pay and effects in urban and rural markets. For in-kind payments.17 example, in Nicaragua minimum wages Labor contracting schemes can reduce are binding in every sector of the economy, the volatility of employment for agricul- except perhaps government employment, tural workers, but their employment prac- but the formal employment of rural and tices would benefit from more regulation. agricultural labor is particularly affected.20 Unregulated contractors can take advan- Evidence shows that minimum wages are tage of workers by deducting commissions; set too high relative to the overall distri- holding back wages; imposing debt bond- bution of earnings. In response, low- and age; and overcharging for transportation, marginal-productivity workers take to the housing, and food.18 informal sector because businesses operat- ing in the formal sector are likely to abide Adapting labor regulations by minimum wage laws. to the conditions of farm and rural employment Sources of employment Should labor regulations treat employment in agriculture are changing in agriculture and rural nonfarm activities with the high-value revolution differently? The World Development Report Stimulating employment growth in agri- 2005 emphasized that onerous regulations culture remains a high priority in coun- hurt vulnerable groups. It argued that the tries with a large agricultural sector. The main aim of policies in the labor code Asian green revolution initially stimu- should be to benefit workers, especially the lated the demand for labor and reduced poor, and to generate more employment, poverty through year-round employment whether formal or informal, for the less and higher real wages.21 However, later skilled. As a secondary aim, labor regula- adoption of direct seeding, tractors, and tions should be consistent with incorpo- threshers led to a subsequent decline in rating a larger share of workers into the agricultural employment in India and the formal sector, which provides better worker Philippines. The high-value revolution protection, a pension, and health security; is creating a second wave of employment improves connections to credit markets; growth. Horticulture, livestock, and other and fosters long-term investments by firms high-value activities offer considerable in workers through on-the-job training. potential for employment generation and The policy challenge is to encourage for- productivity growth (box 9.1). For exam- mality while maintaining flexibility. ple, vegetable production can require up to Labor market regulations, particularly five times more labor than cereals (figure in middle-income countries, can unwit- 9.5). In Mexico tomato production requires tingly reduce employment demand and 122 days of labor per hectare, four times encourage informality by imposing high the 29 days per hectare for maize. Similar minimum wages, high severance payments, examples can be found in Peru's asparagus and an "implicit labor tax"--the wedge exports and Chile's fruit exports.22 between what the employer pays and what This high-value revolution and export the worker perceives as his true benefits. expansion are also changing the structure For example, in Brazil, Mexico, Nicaragua, of employment in agriculture. In Chile the and Poland, there is a heavy implicit labor reforms of the 1970s were accompanied by tax on rural labor associated with crossing an increase in agricultural wage workers to from informal to formal employment.19 68 percent of the agricultural workforce, a Also driving employers and workers to percentage that has been rising since 1990 meet in the informal market are legal lower and currently exceeds that for wage workers bounds on formal wages. Minimum wages, in the nonagricultural economy. The pro- to the extent that they are binding, depress portion and rate of increase of wage work- Moving beyond the farm 209 ers in the agricultural labor force are high- est in regions enjoying the export-oriented B O X 9 . 1 Horticulture development in Maharashtra horticultural boom. In contrast, areas with In India the Maharashtra Horticulture contributed more than 1,600 nurseries; greater emphasis on traditional activities Development Program generated employ- supplied fertilizer, agrochemicals, and (wheat, dairy, and beef) have experienced ment by diversifying agriculture into hor- improved seeds; and invested in market- a decline in the number of wage workers ticulture and high-value crops. It provided ing infrastructure. since 1990.23 100 percent wage and material-input From 1996 to 2006, the program cre- subsidies to marginal and small farmers, ated roughly 213 million person-days scheduled caste, scheduled tribes, and of work, or 807,000 person-years. From Rising rural nonfarm other ethnic minorities. All other farm- 1989 to 2001, it accounted for 96 percent ers received subsidies of 100 percent for of the increased area planted to fruits employment wages and 75 percent for material inputs. in Maharashtra. More permanent full- Other public investments included more time employment was created to fill the Agriculture remains the backbone of most than 150 nurseries for high-quality plant- year-round labor requirement of fruit rural economies, but rural employment is ing materials, an informational Web site, orchard operations. Demand for labor was diversifying out of agriculture (see table 9.1). a Pune-Mumbai expressway, and airport increased throughout Maharashtra in the In some Latin American countries, rural and port facility upgrades. The infrastruc- complementary areas of transport, pack- ture developments made the Maharashtra aging, and storage. nonagricultural activities grew at more than products competitive both domestically 10 percent a year between 1980 and the early and internationally. The private sector also Source: World Bank 2003c. 2000s. In Chile, they rose from 25 percent of total rural employment in 1960 to 49 percent by 2002, and in Brazil from 14 percent to 31 percent.24 Indonesia went through a period Figure 9.5 Labor requirements are considerably higher for vegetables than for cereals of rapid growth in the nonfarm share of Average number of labor days per hectare rural employment prior to the 1997 financial 500 crisis (from 30 percent in 1990 to 40 percent Cereals Vegetables in 1995), before falling to 32 percent in 2003. 400 In Bangladesh, nonfarm rural employment increased at a 0.7 percent annual rate dur- 300 ing the 1990s while agricultural employment 200 increased at 0.1 percent.25 Nonfarm employment tends to be more 100 important for women than for men in Latin America (see table 9.2). In Chile in 1960, 0 India Philippines Lao PDR Vietnam Bangladesh Cambodia Vietnam female employment represented more than (southern) (northern) 20 percent of all nonfarm employment, four Source : Weinberger and Lumpkin 2005. times their share in agricultural employment. By 2002 the shares had risen to 30 percent for nonagriculture and 7 percent for agriculture. is predominantly self-employment, and In contrast, nongricultural employment services are mostly wage employment. The favors males in Sub-Saharan Africa, East manufacturing sector is generally small, Asia and the Pacific, and particularly South confined primarily to agroprocessing, but Asia, where trends in female employment it grows as nonfarm rural activities thicken are affected by the opportunities available to and rural-urban links develop (chapter 1). males in the household. As men move into Rural nonfarm enterprises are trans- nonfarm work, women meet the demand for forming the employment structure in rural agricultural labor, resulting in the feminiza- areas. Most enterprises are small, with 80­ tion of the agricultural workforce.26 90 percent relying exclusively on family labor, as illustrated by the distribution of Rural nonfarm enterprises are employment in Indonesia (figure 9.7).27 In mainly for self-employment, Sri Lanka, the average number of workers focused on trade in a rural nonfarm enterprise is 2.4, with Retail trade and services account for 60 per- 79 percent of firms having only one or cent to 75 percent of nonfarm wage employ- two people. In Tanzania, 58 percent of the ment across regions (figure 9.6). Retail trade firms are one-person enterprises, and in 210 WORLD DEVELOPMENT REPORT 2008 Figure 9.6 Retail trade and services dominate nonfarm wage employment to credit and its high cost, inadequate sup- plies of electricity, poor-quality roads and % of total nonfarm employment 100 infrastructure, and the significant operat- ing costs associated with the move from 80 informal to larger formal enterprises. The investment climate is also hurt by weak gov- 60 ernance structures in rural areas and by the lack of well-functioning legal institutions. 40 Another major constraint appears to 20 be low market demand, a consequence of the essentially local market facing rural 0 enterprises. The lack of demand for goods Sub- South Asia East Asia Middle East Europe & Latin and services is perceived as the major con- Saharan & Pacific & North Africa Central Asia America & Africa Caribbean straint in Indonesia and Vietnam, and as the second major constraint in Pakistan. Retail, wage Services, wage Manufacturing, wage Construction, wage Retail, self Services, self Manufacturing, self Construction, self Most businesses buy and sell locally, with little access to outside markets. In Tanza- Source : WDR 2008 team. nia, Nicaragua, and Pakistan, more than Note: See note for table 9.2. 70 percent sell their product in the same locale. In Nicaragua, 73 percent of the input purchases are in the firm's community. Figure 9.7 Most rural nonfarm enterprises have only one or two workers, mostly self- employed, Indonesia, 2005 Consequently, rural nonfarm enterprises perform better in densely populated areas, Total workers, thousands Value-added per worker, US$ where demand is higher. 400 1,600 Addressing these constraints poses 300 1,200 dilemmas. If demand is very local, addi- tional production induced by greater access 200 800 to finance and lower costs of capital will reduce prices, undermining profit and rein- 100 400 forcing the intense competition in these crowded markets. Expanding markets by 0 0 1 2 3 4­5 6­10 11­100 >100 linking to the larger economy is thus essen- Number of workers in firm tial for developing the rural nonfarm econ- Family labor Paid workers Median value-added per worker omy. Infrastructure improvements can both reduce input costs and open larger markets Source : WDR 2008 team, using Rural Investment Climate Assessment data. for local enterprises (chapter 5). But improv- ing infrastructure is likely to produce win- ners that will thrive in the larger environ- Bangladesh 45 percent are. Thus, to date, ment, and losers that can't compete. the employment benefits of this sector to The dependence of nonfarm enterprises rural wage labor are minimal compared on local markets links their profitability with self-employment. to local agricultural conditions. So, the same factors that constrain agricultural The rural investment climate demand also constrain the growth of the reveals the main constraints rural nonfarm sector. The low employment on enterprises in agroprocessing in all countries surveyed The rural economy offers benefits to inves- suggests that the forward links between tors in some areas because of the low cost agriculture and the nonfarm sector are not of labor and land and the reduced conges- as large as they could be. tion. But Rural Investment Climate Assess- The young age of enterprises is another ments also reveal significant constraints on concern: a third of them have less than two investment.28 Among them are poor access years of operation, and a half of them have Moving beyond the farm 211 less than three. This young age can reflect a dynamic rate of enterprise creation--or a B O X 9 . 2 A women's cooperative in India high rate of business failure. In Vietnam the The Self-Employed Women's Association SEWA has shown salt farmers how to pro- annual survival rate of household nonfarm (SEWA) was formed in 1972 in Ahmed- duce higher-value industrial salt rather enterprises is estimated at 83 percent. An abad. Initially a small membership orga- than lower-value edible salt. average household enterprise thus has a 17 nization for poor women working in the The largest cooperative is the SEWA percent chance of not being in operation one informal sector, SEWA now has more than Bank. In 2004 the bank had more than 1.2 million members across India. 250,000 accounts, with deposits totaling year later and a 45 percent chance of failure Members are involved in SEWA $14.4 million. It has encouraged thousands within three years. Successful approaches through unions or cooperatives. The of poor women to regularly save their to the development of nonfarm enterprises, unions, in both urban and rural areas, help incomes through programs such as "door- members gain access to fair treatment, such as that pioneered by the Self-Employed step banking" and offered small loans that justice, markets, and services. The cooper- averaged $73. Members prefer the bank's Women's Association in India, reveal the atives help members market and improve 20 percent interest rate to the exploitation broad support needed to help microentre- the quality of their products while teach- of moneylenders. preneurs succeed (box 9.2). ing them new techniques and how to expand into new products. For example, Source: World Bank 2006i. Generating more rural employment opportunities, on and off the farm the menu of interventions is limited, espe- The demand for labor, even for low- cially with small government budgets. Pub- wage workers, will not increase without a lic investments in infrastructure are critical. dynamic rural economy in both agriculture Moreover, business services, tax incentives, and the nonfarm sector. Perhaps the most and developmental subsidies (such as the basic policy element for a dynamic rural forest and soil fertility subsidies in Chile) economy is a good investment climate. To could prod private entrepreneurs to invest improve the investment climate, govern- in new ventures. ments can secure property rights; invest in Enhancing the dynamics of rural econo- roads, electricity, and other infrastructure; mies can also be approached from a territo- remove price interventions adverse to rural rial perspective. This approach includes the products; develop innovative approaches to promotion of local agro-based clusters where credit and financial services; and aid in the agricultural producers and agroindustries coordination of private and public actors to in a specialized activity interact to better encourage agro-based industry clusters. compete. The Petrolina-Juazeiro region of With more investment and the expan- Brazil's San Francisco Valley shows how sion of rural economic activities comes the dynamic clusters can create links with local potential for higher-paying jobs, particularly services and industries and enhance the off the farm. On the farm, productivity- demand for labor beyond farming. There, enhancing technologies can boost incomes. investment in irrigation and cooperation With the poorest most likely to remain in between commercial entrepreneurs and agriculture, increasing wages for agricul- land reform beneficiaries in the production tural workers offers the greatest potential and marketing of high-value export crops to lift millions out of poverty, particularly produced large direct benefits for partici- in Africa. pating smallholders, a massive expansion of Improvements in the investment climate employment in agriculture and agriculture- (especially ones that generate rural nonfarm related industries and services, wage gains jobs) are easiest in areas with higher popu- based on strong bargaining power of labor lation densities (lower-cost infrastructure) unions, and sharp reductions in poverty.29 and larger natural resource endowments Successful territorial development points (agriculturally generated businesses). This to innovation as a driver of local growth, applies to both farm and nonfarm jobs. But as well as enhancing local spillovers by many areas lack these conditions, so inter- increasing access to dynamic markets and ventions should be adjusted to accommo- strengthening links among farmers, indus- date differences. For less-favorable regions, try, and services. 212 WORLD DEVELOPMENT REPORT 2008 Wages and earnings in the rural How much of this wage difference sim- labor market ply reflects the fact that lower-skill workers take agricultural jobs? For unskilled work- Wages are higher in the rural ers (defined as workers with no schooling), nonfarm sector than in agriculture, much of the difference in distribution is mostly because of skill differences eliminated, especially in Uganda and India Wages are considerably higher in rural (figure 9.9). Even the remaining difference nonfarm employment than in agricultural in wage distribution cannot prove any fun- wage employment (figure 9.8). In Mexico damental sectoral difference in labor com- the average wage in nonagriculture is 56 pensation, because workers choose their percent higher than in agriculture. Both sector of activity and in so doing may select sectors frequently exhibit a bimodal wage that sector according to other skills not distribution, revealing dualism. captured by education. Figure 9.8 Wages are much higher in rural nonfarm employment than in agricultural employment in India, Mexico, and Uganda India 1999 Mexico 2002 Uganda 2002 Frequency Frequency Frequency 2 4 6 8 10 2 4 6 8 10 12 0 5 10 15 20 Log of wages, local currency units Log of wages, local currency units Log of wages, local currency units Agricultural wage Rural nonfarm wage Source : WDR 2008 team. Note: See note for table 9.2. Figure 9.9 For workers with no education, wages in agricultural and rural nonfarm employment are not so different across sectors India 1999 Mexico 2002 Uganda 2002 Frequency Frequency Frequency 2 4 6 8 10 2 4 6 8 10 12 0 5 10 15 20 Log of wages, local currency units Log of wages, local currency units Log of wages, local currency units Agricultural wage Rural nonfarm wage Source : WDR 2008 team. Note: See note for table 9.2. Moving beyond the farm 213 In the rural nonfarm sector, men's wages Earnings in owner-operated are higher than women's, although the dif- rural nonfarm enterprises ference is small in Africa, where employment are heterogeneous is mainly in very small firms. Female wages Is self-employment in the rural nonfarm are more heterogeneous than male wages and sector a refuge, disguising unemployment, tend to show a more bimodal distribution. In or a good source of earnings? Value added India the average wage for agricultural casual per worker, a crude measure of earnings, is work is 30 percent lower for women than for very heterogeneous in the nonfarm sector, men, 20 percent lower for the same task. The and this is reflected in the distribution of difference in the distribution of tasks, with labor productivity in enterprises employ- men doing the better-remunerated tasks ing only family members (figure 9.12). In of plowing and well digging, accounts for Indonesia, the median annual value added the remaining difference between the aver- per worker in these enterprises is $230. As age wages.30 In Mexico, wages are lower for many as 59 percent of firms generate value women with little education than for men added per worker below the agricultural with the same level of education. However, at wage. At the other end, 7 percent generate higher levels of education, the distribution of value added per worker at least five times wages looks very similar across genders. the agricultural wage. Rural nonfarm enterprises that create Wages in agriculture have been employment opportunities usually exhibit declining in Latin America, higher labor productivity. In Indonesia, rising in Asia labor productivity in firms with more than There is evidence that across many Latin 10 workers is $1,400, more than six times American countries, agricultural wages that of the small firms with two or three have been declining. Temporary workers in workers. Workers in these larger enterprises Brazil have lost a third of their income over are also more educated. More than half of the last 30 years (figure 9.10). In Mexico them have finished secondary school, and between 1988 and 1996, temporary workers almost none are without completed pri- lost 30 percent of their purchasing power mary school education. Employees of these and have not regained it since. In contrast, larger firms also constitute the higher peak real wages have increased in most Asian in the wage distribution, such as that in and African countries (figure 9.11). figure 9.8. Evidence from Bangladesh also Figure 9.10 Agricultural wages have been declining in most Latin American countries Real wage index Real wage index 160 120 140 100 120 80 100 80 60 60 40 40 20 20 0 0 1976 1980 1984 1988 1992 1996 2000 2004 1976 1980 1984 1988 1992 1996 2000 2004 Brazil Guatemala Costa Rica Honduras Dominican Republic Cuba Mexico El Salvador Sources: Brazil: Fundaçao Getulio Vargas Estatísticas Agrícolas; other countries: CEPAL, Statistical Yearbook for Latin America and the Caribbean, various years. Note: Nominal wages deflated by national consumer price index. 214 WORLD DEVELOPMENT REPORT 2008 Figure 9.11 Agricultural wages have been rising in most Asian and African countries Real wage index Real wage index 350 250 300 200 250 150 200 150 100 100 50 50 0 0 1960­ 1965­ 1970­ 1975­ 1980­ 1985­ 1990­ 1995­ 1960­ 1965­ 1970­ 1975­ 1980­ 1985­ 1990­ 1995­ 64 69 74 79 84 89 94 99 64 69 74 79 84 89 94 99 Pakistan India Philippines South Africa Tunisia Kenya Sri Lanka Bangladesh Ghana Botswana Zimbabwe Source : Rama and Artecona 2002. Note : Index based on male and female daily wage of casual workers, deflated by the consumer price index. suggests that rural nonfarm enterprises do despite the fact that rural nonfarm enter- better in areas with good access to markets, prises are small, exhibiting little demand infrastructure services, and education.31 for wage labor, they may significantly affect labor market conditions. Any increase in Labor supply: migration and the nonfarm opportunities implies a poten- urban economy tial reduction in the supply of agricultural laborers, increasing wages. So, policy mea- Rural labor outcomes are closely sures that encourage nonfarm employment, related to labor conditions in other even in small enterprises, are likely to gen- sectors of the economy erate spillover benefits to rural laborers. Wages reflect labor supply and demand. The role of dynamic regional towns and On the supply side, workers are mobile, small cities for the rural labor market can- responding to market options in agricul- not be overstated. Nonfarm employment ture and in rural nonfarm activities, and to in rural areas depends on the proximity those in the urban economy by commuting to large urban centers and smaller inter- or migrating. This mobility links sectors mediate cities. In Mexico, the dynamism within rural areas, as well as the urban and of employment is stronger close to urban rural economies. A stagnant nonagricultural centers, and declines until a distance of 150 sector inhibits movements out of agricul- kilometers, beyond which the urban influ- ture in economies where agriculture is stag- ence disappears (figure 9.13). Proximity is nant (as in Sub-Saharan Africa), but also in particularly important for manufacturing. economies where agricultural productivity In isolated municipalities, there is substan- is high (as in Punjab, India, through the first tially more growth in the service sector decade of the green revolution). than in manufacturing, as local agricul- The integration of the labor markets ture creates a demand for local services.32 also weakens the direct correspondence In Indonesia, even within rural areas, wage between employment and earnings within employment as a percentage of total non- each subsector. Increases in agricultural farm employment increases with village labor demand, perhaps reflecting a shift size. These results point to the role of small toward high-value products, may have only and intermediate urban centers as engines small effects on agricultural wages if the for nonfarm employment growth in rural labor supply is highly elastic. Conversely, areas. Moving beyond the farm 215 Figure 9.12 Labor productivity in rural nonfarm Figure 9.13 Growth of manufacturing and service employment in Mexico is a function of self-employment is heterogeneous in Indonesia distance to an urban center with more than 250,000 inhabitants Frequency Manufacturing employment Annual growth rate, % 8 6 4 Agricultural wage 2 0 ­2 0 50 100 150 200 250 300 Km to closest manufacturing center ­200 300 800 1,300 1,800 2,300 2,800 Value added per worker, US$ Service employment Annual growth rate, % Source: The WDR 2008 team has used data from the Indonesia 12 Rural Investment Climate Survey (World Bank 2006j). Note: Labor productivity is computed for rural nonfarm enterprises with no paid workers. The annual agricultural wage is computed from the average village-level daily wage, multiplied by 11 months at 22 days a month. 8 Migration--with the rural nonfarm economy as a bridge 4 Migration to urban areas in search of higher incomes is common and a potential path- way out of poverty. It induces an upward pressure on wages in areas with high rates 0 0 50 100 150 200 250 300 of out-migration.33 This wage increase can Km to closest service center have a positive effect on the labor force Source : Araujo, de Janvry, and Sadoulet 2002. participation of nonmigrants because of Notes: Observations are municipalities with a population in the main city less than 15,000. Growth is for the the need to replace migrant workers. On 1990­2000 inter-census period. the other hand, remittances can create an incentive to reduce the labor supply of non- migrants by increasing their reservation in transforming countries, where migration wage. In particular, remittances can reduce flows increased to almost 20 million a year the labor force participation of women in between 2000 and 2005. Migration flows as favor of home production. A study of remit- a share of the rural population have been tances sent from Mexican migrants in the traditionally highest in urbanized econo- United States finds that women from high- mies, but they have fallen over 2000­05 migration states are less likely to work out- to an annual rate of 1.25 percent. In trans- side the home.34 Similar evidence is found forming and agriculture-based economies, for their hours of work. However, there is the annual flow of out-migration steadily no effect on men's labor force participation increased to 0.8 percent and 0.7 percent of and hours of work. the rural population, respectively. Migration is most pervasive in the trans- Evidence suggests that migration is most forming and urbanized economies, where accessible for the wealthiest and best edu- growing urban areas offer more employment cated of the rural population, as moving opportunities (chapter 1). An estimated requires means to pay for transportation and 575 million people migrated from rural to education to find a good job.36 Moreover, bet- urban areas in developing countries over the ter-educated migrants are the most likely to past 25 years.35 Of these, 400 million lived have a successful migration outcome. In the 216 WORLD DEVELOPMENT REPORT 2008 Philippines, female migrants to urban areas urban wages is declining in many econo- fare better than the less-educated males.37 mies. In Mexico, the rural-urban wage In some countries, China in particular, the ratio increased from 28 percent in 1992 to limited access of migrant workers to social 40 percent in 2002. In India, while agricul- protection in the urban environment leaves tural wages remain low, there is evidence of them vulnerable to economic hardship and convergence between rural nonagricultural hinders their integration into the urban wages for casual workers and urban wages. labor market. Casual work and informality persist for them. Schooling, training, and The rural nonfarm sector can bridge transition to the labor market rural agricultural work and more produc- The main dividing line between high- and tive employment in urban areas. Migration low-paying jobs is skill. Educated adults to small and intermediate cities may offer are more likely to have nonagricultural greater potential than larger cities for poorer wage jobs and to migrate. It is the younger, rural households. In Indonesia between 1993 better-educated, and more-skilled work- and 2000, the migrants to nonfarm jobs in ers who leave the rural areas to find better urban areas were already doing nonfarm income opportunities abroad or in urban jobs in rural areas and tended to be among areas (chapter 3). The large labor supply for the better-off rural nonfarm workers.38 Ini- agricultural jobs, largely from the inability tially, less-well-off people who move rela- of unskilled laborers to move into skilled tively small distances (within a subdistrict) employment, underlies the persistence of tend to have stronger income growth, but poverty and the inequality that emerges subsequent income gains are more limited. when skilled employment takes off outside Given such constraints, one of the best of agriculture in transforming countries.40 prospects for reducing rural poverty is the potential for rural residents to participate Rural areas exhibit dismal levels in the urban economy by commuting, of education while retaining their rural residence and their foothold in farming.39 In northeast Rural workers have less education than urban workers. Rural males have an average Thailand, the greater availability of non- of four years of education in Sub-Saharan farm jobs in nearby cities led to significant Africa, South Asia, Middle East and North improvements in income. Reflecting the Africa, and Latin America and the Carib- greater integration of rural and urban labor bean, and just above six years in East Asia markets, the disparity between rural and and the Pacific (chapter 3). These averages are two to four years less than in urban areas. Women's level of education is even Figure 9.14 Average years of education in rural areas, by age lower, with averages below two years in Years of education South Asia and the Middle East and North 8 Africa. Very high disparities in human capital are also observed between rural and 6 urban China.41 These low averages reflect the aging of the rural population and hide progress 4 over the last decades (figure 9.14). How- ever, a significant rural-urban schooling Vietnam Zambia gap remains in most developing countries. 2 Cambodia Kenya Mexico Brazil Even in countries that have experienced large improvements in education, such as 0 Mexico and Kenya, the level of education 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 Age in years among the youth in rural areas is still barely above primary school, and it is much lower Sources : Population census data for Brazil (2000), Cambodia (1998), Kenya (1999), Mexico (2000), Vietnam (1999), and Zambia (2000). in other countries (table 9.3). Moving beyond the farm 217 Table 9.3 Average years of education of rural 18­25 year olds, selected countries East Asia Sub-Saharan and the Pacific Middle East Europe Latin America Africa South Asia (excl. China) and North Africa and Central Asia and the Caribbean Urban Men 8.5 7.3 10.1 9.3 10.6 8.7 Women 7.6 6.5 10.1 9.2 11.1 8.9 Rural Men 5.5 5.3 8.0 6.8 9.7 5.7 Women 4.3 3.0 7.7 5.0 10.0 5.8 Source: WDR 2008 team. Note: Calculations of average education levels for 18­25 year olds based on 58 countries (excluding China and India) with recent household survey data with information on years of education, weighted by 2000 population. See Background Note by WDR 2008 team (2007) for details. Low levels of education in the rural There is also ample evidence of a cor- labor force tend to reproduce themselves relation between education and the access over generations--poorly schooled parents and return to nonfarm employment. In tend to have poorly schooled children, who China and India, better education enables then have fewer opportunities for higher rural workers to find high-paying non- income. Poverty may affect the ability to farm employment, whereas a lack of edu- continue education--and so is a direct fac- cation tends to force them into agricul- tor in reducing household investment in tural employment or low-wage nonfarm education. Poverty and low education thus employment at best.46 Similarly, in Ghana, become transmitted across generations. Peru, and Pakistan, returns were higher in nonfarm than in farm activities.47 Mirror- Returns to education are low ing these studies, the returns to education in agricultural employment, across countries are consistently higher in higher in the rural nonfarm urban areas than in rural markets, par- economy and in cities ticularly beyond basic schooling.48 Studies A primary determinant of these schooling in Bolivia and Turkey also show returns to gaps is the low rate of return to schooling education to be higher close to urban cen- in traditional agriculture. In Bukidnon, ters, suggesting that off-farm opportunities Philippines--where most of the employ- enhance the value of schooling. ment is in harvesting and is paid piece These higher returns in the nonagricul- rate--raising the level of schooling has no tural economy will influence the schooling effect on wages.42 Similar results are found decisions of rural households, if the poten- in many other contexts. tial for employment exists. In the Phil- But as famously argued by T. W. Schultz ippines and Thailand, rural households (1975), rates of return are higher in dynamic invest a major portion of their additional settings, where technological change and a income in schooling children who later more complex environment require more engage in rural nonfarm jobs or migrate to difficult decisions. During the green revolu- cities to seek more lucrative employment.49 tion in India, education had higher returns In India, rural-to-urban migration signifi- in regions with higher rates of adoption of cantly increases the rate of return to rural the new seeds.43 In Taiwan (China), educa- schooling at levels beyond that of middle tion was also more valuable for production school. Rural parents appear to know this: in areas with greater weather instability.44 urban rates of return affect decisions to Similarly, the return to schooling in rap- school their children to higher levels.50 idly growing economies is significant. For The low level of rural schooling may adults in Indonesia, the return to one addi- also reflect the low quality of rural schools, tional year of education is estimated at 13 relative to those in urban areas.51 Rural- percent, a value close to other international urban differences in school quality mani- estimates.45 fest themselves in differences in school 218 WORLD DEVELOPMENT REPORT 2008 infrastructures, which result in signifi- problem of incentives for parents to invest cant rural-urban differences in schooling more in their children's education. For sup- achievement (see focus G). ply there is the problem of improving the availability and quality of schooling. In Rural labor market outcomes practice, there is an added administrative can be improved by active labor problem: the two sides are generally man- market programs aged by different ministries, one for social Active labor market programs can assist welfare and one for education. rural households in finding better employ- The demand for schooling responds to ment opportunities, thus helping households lower costs, both in school expenses (fees, transition out of poverty. A job-matching clothing, books, and the like) and the program for migrants in China provided off- opportunity costs of traveling over poor farm employment to about 200,000 upland roads to distant locations and not hav- laborers over six years, including roughly ing children to do productive work. These 110,000 interprovincial migrant laborers. It costs to families can be lowered. The recent established a voluntary system of enhanced elimination of school fees for primary edu- rural labor mobility; provided on-the-job cation in Kenya and Uganda induced major training by enterprises (paid for through increases in school enrollment. In Uganda payroll deductions); and put in place a com- the free primary education program that puterized, demand-driven job placement started in 1997 had large impacts on com- system emphasizing local markets, moni- pletion rates for fourth and fifth graders toring worker safety and living conditions, from poor households, especially girls.53 and reporting abuses and grievances. The But free primary education may not be program was extraordinarily effective in enough for poor children to attend school expanding the upland poor's knowledge of because of other costs. and access to off-farm employment and a very Conditional cash transfers, where regu- powerful poverty reduction instrument. It lar school attendance is a condition for also improved migrants' outlooks on life and parents to receive transfers, are expanding fostered greater aspirations. This was clearly in many countries. After an early condi- so for migrant women (about one quarter tional in-kind transfer program in Bangla- of all migrant laborers); they had more self- desh (Food-for-Education), programs have esteem and confidence, reduced work bur- rapidly developed in such middle-income dens (on returning to their home villages), countries as Mexico (Oportunidades) and and greater economic independence.52 Brazil (Bolsa Familia).54 These programs A program in Andhra Pradesh provides reduce current poverty through the cash employment options to the most vulner- transfers and reduce future poverty through able rural youth, linking them to jobs in greater investment in the schooling of poor semiurban areas or at the local level after a children. When successful, they can be a three-month training program with indus- one-generation investment in breaking the try representatives acting as mentors. In intergenerational inheritance of poverty. 2005/06, this program created more than Although costly, these transfer programs 10,000 jobs in semiurban areas, leading to have been successful in middle-income incomes substantially higher than the local countries and are being put in place in many market could provide. At the local level, other countries. However, adapting them to more than 5,000 jobs were created, largely low-income countries with extensive pov- in the textile industry, many for women. erty and weaker school and civil registry Linking training to placement is one key to systems remains an unexplored challenge. this program's success. Investing in the supply of education, and balancing supply-side and demand- Investing in education breaks side investments, is necessary for raising the cycle of poverty educational achievements. In Mexico the There are two sides to investing in human conditional cash-transfer program was tar- capital investment. For demand there is the geted at rural communities sufficiently well Moving beyond the farm 219 endowed with school facilities. Distance to school was found to be a major correlate B O X 9 . 3 Child labor: pervasive in agriculture of program uptake.55 The next step is to The ILO estimated the number of child nent consequences in lower earnings. In extend school facilities to all rural areas. laborers at 218 million in 2004. Most help Brazil, males who entered the workforce Improving the quality of schooling is also their families at home, on the farm, or before age 12 earn 20 percent less per essential. A notable example is Colombia's in the family business--60 percent of hour. Children with a parent who worked Escuela Nueva program of community them are in Asia, and 52 percent are boys. as a child are more likely to work at young Although only 23 percent of the economi- ages, holding other household attributes involvement, curriculum improvement, cally active children are in Sub-Saharan constant. Delaying the age for children to teacher training, and administration. It has Africa, participation rates are highest enter the workforce thus delays labor mar- a flexible schedule to accommodate rural there, an estimated 30 percent of the 5­14 ket entry for the next generation as well. year olds. Child labor can include prostitu- activities, and its teacher training addresses In Brazil, the Program to Eradicate tion and drug trafficking, but on a world Child Labor requires that rural children the needs of each community. More atten- scale these are small numbers. attend school and that parents agree that tion to school quality could significantly Compared with 19 percent for urban their children will not work. The program increase the returns on education. areas of developing countries, 31 percent substantially lowered the incidence of of the children 5­14 in rural areas reported child labor in three states (figure below). working, with 9.8 percent working out- In Bahia, the program reduced child labor Continued efforts are needed to side the family business and 2.5 percent by more than 23 percentage points. reduce child labor being paid.59 Including work and domes- tic chores, 26 percent of rural children Brazil's program to eliminate child labor In the short term, poor families gain from worked 20 or more hours per week, and child labor; thus there are short-term welfare Incidence of child labor, % 9 percent worked 40 or more hours. The 40 losses to rural families from sanctions on child prevalence of unpaid work in rural areas is labor. For development, however, the biggest nearly twice that in urban areas. Not all child labor is harmful, and 30 cost of child labor is lower future education income from children's economic activi- and the persistence of long-term poverty (box ties provides needed income for poor rural 20 9.3). Policy proposals for reducing child labor households. But comparisons across more have included restrictions and prohibitions than 40 countries reveal a negative asso- 10 ciation between child labor and school on employment and even trade sanctions. enrollment. In nine Latin American coun- But these sorts of policies are more likely to 0 tries, third and fourth graders who worked Pernambucco Bahia Sergipe control wage employment for children, not longer hours outside the home performed Treatment Control unpaid family labor. Conditional cash or in- less well in school. Evidence from Ghana, Nicaragua, and Pakistan shows similar kind transfers, which enhance the returns on Sources: Edmonds and Pavcnink 2005; Emerson adverse effects of work on schooling. and Portela Souza 2003; Gunnarsson, Orazem, schooling, are fairly successful in reducing The poorer school performance attrib- and Sedlacek 2005; Ilahi, Orazem, and Sedlacek child labor.56 In Ecuador, Bono de Desarrollo utable to early child labor can have perma- 2005; Yap, Sedlacek, and Orazem 2001. Humano reduced child work by an estimated 17 percentage points. Brazil explicitly tackles child labor in the conditions for support in its Program to Eradicate Child Labor. Private transfers, especially remittances, can also provide income in rural areas. The sums can be huge--an estimated $60 billion Providing safety nets in 2006 in Latin America alone--creating a to reduce vulnerability potentially large source of investment in Rural noncontributory pensions local economies. But transaction costs of The elderly and disadvantaged left behind fund transfers are very high, often exceeding by migration may require additional forms 20 percent. Reducing these fees by 5 percent- of income support. Brazil, Bolivia, South age points could generate annual savings Africa, and many countries in Europe and of $3 billion for workers sending money Central Asia have introduced rural noncon- home.60 Policies should be aimed at reducing tributory pensions.57 They create welfare transaction costs on remittances and encour- gains for recipients and spillover effects on aging investment in the local economy. the education and nutrition of family mem- Designing scalable safety nets bers. But they also keep firms and workers in the informal sector, and there is an addi- to respond to shocks tional cost in having fewer contributors to Safety nets often target those with few assets production.58 including household labor. However, they 220 WORLD DEVELOPMENT REPORT 2008 also have an insurance function. Ideally, While there is extensive experience with they increase expenditures when income or targeting transfers on the basis of chronic production declines.61 In many cases though, poverty, ex post targeting to mitigate conse- safety nets can be procyclical, because eco- quences of shocks requires different imple- nomic shocks often reduce fiscal revenues mentation. Given the cost of collecting indi- just as they call for an increase in expendi- cators responsive to shocks for short-term tures. To counter this, safety nets need to be use, programs may consider using commu- flexible, quick, and efficient. In both Argen- nity targeting or self-targeting. Public works tina and Mexico in the mid-1990s, economic and community subsidies for grains pri- downturns reduced social spending just marily consumed by the poor are examples when poverty was increasing. India, Mexico, of self-targeting. and the Philippines now hold reserve funds Public works often have both scal- or earmark specific taxes for their relief pro- able financing and adaptive self-targeting. grams. This funding is more flexible than India's Maharashtra Employment Guar- donor assistance, but even in this latter case, antee Scheme provides such employment, the trend is towards increased flexibility an important safety net reducing the cost (box 9.4). In addition to responsive financ- of risk management and protecting family ing, identifying beneficiaries and disbursing assets in the event of shocks. Employment funds must be rapid to remain countercycli- in this countercyclical program expanded by cal. To ensure smooth operation of safety 64 percent in response to a drought in 1982. nets when needs rapidly increase, programs Similarly, Argentina's Trabajar program should be in place before a shock occurs. For increased participants' current income.63 the long term, safety nets have to be scaled Workfare programs also offer an opportunity back when a crisis subsides. for low-skilled and rural workers to acquire work experience while building rural infra- structure. About half of the Trabajar partici- pants felt that the program improved their B O X 9 . 4 The gradual but incomplete move toward chances of getting a job, two-thirds believed cash-based food aid that it gave them a marketable skill, and one- third said that it expanded their contacts in Food aid volumes are at long-term lows, costs. Local purchases can facilitate faster the labor market. Mexico uses commercial reflecting sharp reductions in regular responses to crises by greatly reducing program food aid not compensated by delivery time. insurance to achieve countercyclical fund- increases in emergency food aid ship- Today, most countries in Europe give ing of its national and subnational public ments. Emergency aid now dominates almost all their food aid in cash for local works programs. global food aid: more than 57 percent and regional purchases by nongovernmen- Destocking and supplemental feeding, of global food aid flows in 2001­04 were tal organizations and the World Food Pro- emergency aid. Emergency food aid has gram. In 2005, a record 2.55 million metric watering, and veterinary care are other also ushered in a geographic shift from tons of food aid were sourced through counter cyclical programs for pastoral com- Asia to Africa. local or regional purchases in developing munities. In Kenya the response to a drought Major policy changes in Australia, countries. In addition to the European includes a transport subsidy that provides a Canada, and the European Union illus- Union, Australia and Canada have relaxed trate that donors are now more flexible in their domestic food aid procurement rules floor for local prices of livestock and pre- sourcing food aid. In 1996 the European and moved toward more cash-based pro- vents a perverse situation in which declin- Union created the Food Security Budget gramming. More than half the two coun- ing prices increase distress sales of animals. Line, eliminating restrictions tying the tries' food aid is purchased locally. The trigger to support is largely based on a procurement of food aid to European Despite these shifts, the United suppliers. A significant departure from States, which accounts for more than half minimum cattle-to-grain price ratio. Even the past, it encouraged more local and the world's food aid, remains reliant on so, evidence from northern Kenya suggests regional purchases. While local purchases domestically sourced food. In recent years, that interventions that preserve vulnerable can sometimes destabilize local prices, proposals to relax domestic procurement pastoralists' livestock wealth have higher they are estimated to be 30­50 percent rules have been blocked, under pressure less expensive to procure and deliver than from a coalition of agribusinesses, ship- benefit-cost ratios than more conventional food shipments from donor countries.62 ping companies, and nongovernmental destocking interventions--and related In-kind food aid and cash transfers are development and relief organizations. transport subsidies. Veterinary, supplemen- both open to mistargeting and corruption, Politics continue to dissipate the pressure but in-kind aid incurs higher distribution for reform. tary feeding, and supplemental water provi- sion had benefits 2.6­5.3 times the costs.64 Moving beyond the farm 221 A final word on rural labor ture. Certainly, special attention is needed markets and migration: the to provide training to workers to take good need for policy attention jobs, to adjust labor legislation that protects As agriculture intensifies and diversifies, them but does not stifle employment, and to and economies develop, well-functioning help migrants find good employment else- rural labor markets and migration are cru- where. Interventions are also needed on the cial in reducing rural poverty and damp- demand side of the labor market, especially ening rural-urban income disparities. But a better investment climate, and on safety stunningly little policy attention has been nets for the disadvantaged. Compared with given to the structure, conduct, and perfor- other aspects of the rural economy, much is mance of rural labor markets and how they left to be explored in understanding how to ease successful transitions out of agricul- improve rural labor markets. focus G Education and skills for rural development The rural world is changing rapidly, and young people need to be prepared to rise to the new opportunities. Agriculture is also changing, with new technologies, products, markets, and business environments. And many rural people will need to become engaged in nonfarm activities or migrate to urban areas. To seize these opportunities, all will need skills that differ from those of their parents--but education and training systems are not ready to face the challenge. Basic skills and beyond graders who cannot read and write5--and Enterprise training. Enterprises also pro- for rural youth low educational attainment reduces the pos- vide training, available only to those with Across the developing world, the challenge sibilities for employment. formal jobs, usually those with higher levels of providing appropriate education and rele- of education. Smaller enterprises train less Skills for employment vant skills to rural youth needs to be met--it frequently and often use apprenticeships, Finding and maintaining employment is necessary to provide a basic education that which can perpetuate traditional skills that requires broad-based occupational skills or motivates them to study, training to give them may not be useful in changing markets. specific job-related skills, acquired in train- skills for the labor market, and opportunities Training programs for firms in niche ing institutions or on the job. In today's for some to pursue higher education. markets with good growth prospects have rapidly evolving and globally competitive raised the productivity and income of enter- Improving the quality of basic education economy, they increasingly include personal prises by upgrading technology and manage- Despite progress over the past decade in capabilities such as flexibility, resourceful- rial skills. In Madagascar training is targeted increasing access to schooling in the devel- ness, and communication. to small suppliers of intermediate goods for oping world, education levels measured by Vocational schooling. Vocational schools processing and exporting.9 Other examples years of schooling are still dismal in many aim to prepare students for entry into the include the Tanzania Integrated Training for countries (chapter 3). Low attainment in labor market. In developing countries the Entrepreneurship Promotion and the Ghana rural areas is often attributed to farm work; vocational education sector tends to be Opportunities Industrialization Council.10 in those areas, children miss school or drop smaller (22 percent of student enrollment) Higher education out to help with farm or household work. than in Organisation for Economic Co- But studies of child labor show that of the The transition to higher education, which operation and Development countries and 5- to 14-year-old children not in school, is particularly difficult and expensive for geared to lower educational levels such as 37 percent do not work and an additional lower secondary education.6 It is also often rural youth, requires support. The Mexi- 32 percent do only domestic work.1 Other can Jóvenes con Oportunidades offers youth uncoordinated, with vocational training reasons for dropping out include the inabil- in school a savings account in which they centers dispersed under various ministries. ity to meet costs of attendance, distance to accumulate points during grades 9 to 12. Programs that have private participation in school, a curriculum or language incom- The money can be tapped upon the comple- managing institutions (Brazil's SENAR) and patible with local conditions, beliefs that tion of 12th grade for further study, open- designing curricula (Namibia's Community education is not necessary, and poor school ing a business, improving housing, or buy- Skills Development Centers) have been most quality. Improving basic education in rural ing health insurance.11 The program thus effective in meeting labor market demands. areas, whether primary education in Africa provides incentives for children to graduate SENAR is managed by an agricultural or secondary in Latin America, is essential to from secondary school and facilitates their employers' association, and members of energize the process of rural development. continuing on to higher education. agricultural cooperatives make up the The poor quality of rural schools dimin- board.7 One of its most successful features is Second chances ishes their attractiveness and the benefits the integration of occupational training and Many countries operate programs to get of schooling. The PROBE report of public social promotion in the same organization. out-of-school youth back into school or into schools in rural India showed that physical The learning process is related to rural work informal training courses--and illiterate infrastructure was woefully inadequate, with and living conditions and rural women youth into literacy programs. Few countries, 82 percent of schools needing repair.2 Books are given preference for social promotion however, have a system of second chances are often unavailable, and teacher absentee- programs, including training in protection that meets the diverse needs of young peo- ism tends to be high. A study of primary against toxic products used in agriculture. ple who have left school at different stages schools in six developing countries found In Namibia seven Community Skills and come from different socioeconomic set- that 19 percent of teachers were absent on Development Centers impart basic skills to tings. Successful programs are linked to the any given day, and 23 percent were absent in enable youths to generate income through school system, informed by the demands of rural schools in India, Indonesia, and Peru.3 wage employment or self-employment. the labor market, and provided on a flexible Teachers present are unprepared and poorly The centers are training institutions that and part-time basis that can accommodate paid, and violence and harassment are com- vary their basic training courses as income- work and family responsibilities. mon. The PROBE report found that many generating opportunities change in the Morocco's second-chance schools target children did not like school because they local economy. To align with market needs, the 2.2 million children between 8 and 16 were mistreated or discriminated against, experts conduct market assessments, cov- years old who have never entered school or and in many countries fear of violence in ering the occupational interests of youth, have left before the end of the compulsory schools leads children to drop out.4 local development plans, and the needs of cycle. More than three-quarters of them Low quality of schooling means little employers and businesses in both the for- live in rural areas and some 45 percent of learning--it is not uncommon to find fifth mal and informal sectors.8 them are girls. The Ministry of Education Education and skills for rural development 223 forms partnerships with nongovernmental researchers currently possesses a doctorate. 1,000 new students in agriculture over the next organizations (NGOs); with the Ministry The huge potential for women professionals 15 years22 with at least half of these awards ear- providing funding, training facilitators, and to upgrade farming systems remains largely marked for women. The Female Scholarship supplying educational materials; and with untapped, with women making up just 18 Initiative, initiated by Makerere University in NGOs engaging young graduates as facili- percent of African agricultural scientists.19 Uganda and funded by the Carnegie Corpora- tators, enrolling pupils, seeking additional The brain drain of senior staff and unfilled tion, could be a model for this. funding, and managing local programs.12 positions are widely reported in research Doctoral training can be carried out in agencies and universities. Too often, staff existing African centers of strength in agri- Business education shortages are compounded by the loss of life cultural disciplines, such as the African Cen- for the entrepreneurs from HIV/AIDS. For more than a decade, tre for Crop Improvement in Pietermaritz- of the"new agriculture" donors have turned their back on funding burg, South Africa, the Jomo Kenyatta Entrepreneurs in the new agriculture need higher education and overseas training in University of Agriculture and Technology in the skills and competencies to operate in open agriculture. A new generation of agricul- Kenya, and the Ecole Nationale Supérieure and demanding markets. Though advanced tural professionals is needed to replenish d'Agriculture in Senegal. Alternatively, they agronomic techniques remain essential, this dwindling human resource pool and can be carried out in general African univer- entrepreneurs also need a better understand- engage the shifting opportunities associated sities where business, economics, biological ing of the business side of their operations. with the rise in market-driven production. sciences, and science departments can com- They need more and better market informa- Efforts to revitalize agricultural educa- plement the agricultural disciplines. tion and greater understanding of their costs tion should concentrate on updating cur- Because of the interdependence of knowl- and revenues, the required investments, and ricula, transforming teaching practices, and edge across disciplines, it may be better to the value chain they operate in. increasing the number of graduates at all post- train agricultural specialists in general uni- To help students get a foothold in the secondary levels. Most agricultural education versities, where there is close interaction with new agriculture, some African universities institutions offer curricula focused narrowly specialists of other departments, instead of encourage business development. The Uni- on the production of predominant crops and treating agricultural sciences and agricultural versity of Swaziland and the Botswana Col- livestock. Curriculum reform should intro- economics as isolated disciplines in separate lege of Agriculture offer practical Entrepre- duce greater institutional flexibility in the agriculture universities. This change needs to neurial Projects. Business plans are put into face of rapid change and greater responsive- happen now, starting with investments in the practice using a revolving credit fund, with ness to employers and stakeholders. postgraduate programs of local universities. students retaining 75 percent of the profits. One effort to correct these deficiencies Where local training is not feasible in In Mali an agricultural research organization, is the professional upgrading developed for some disciplines, students can obtain doc- Institut d'Economie Rurale, and a higher extension workers by a dozen Anglophone toral training at cost-effective overseas sites education institution, Institut Polytechnique and Francophone universities with assis- or through "sandwich" programs that com- Rurale, have joined to establish the Mali tance from the Sasakawa African Fund for bine locally relevant training with access to Agribusiness Incubator to help agricultural Extension Education. Focusing on mid- international knowledge resources, instruc- entrepreneurs integrate modern technolo- career professionals, the program offers tion in research methods, and exposure gies into local agricultural systems.13 a reformed interdisciplinary curriculum to a wider range of modern technologies. Costa Rica's EARTH University14 prepares leading to bachelor of science and master Greater south-south mobility of students graduates to start up agricultural enterprises, of science degrees, emphasizing technology has also facilitated access to postgraduate emphasizing values development, environ- transfer, participatory methods, and respect programs to students in countries without mental management, and community ser- for local knowledge.20 the necessary university infrastructure. vice.15 Uganda's Makerere University is in the For agricultural higher education, priority In Sub-Saharan Africa, the second most process of adapting the EARTH University should be given to a major staff development important destination for students (after approach. In Chile, Management Centers run campaign. In the 1960s the Brazilian govern- Western Europe) is South Africa--9 of 10 by farmer organizations support decision- ment dispatched 1,000 academic staff for students who study abroad within the region making,entrepreneurial,and managerial capa- overseas studies in agriculture. In the 1970s go to South Africa. In East Asia, 40 percent of bilities among individual family farms and the Brazilian Agricultural Research Enterprise mobile students also remain in the region.23 market-oriented producer organizations.16 (EMBRAPA) sent 500 agricultural researchers The University of Pretoria, South Africa, and abroad for doctoral degrees.21 These are the the University of Philippines, Los Baños, are Agricultural professionals professionals who have guided the impressive main centers for foreign students in the agri- and researchers growth and diversification of Brazilian agri- cultural sciences. The new agriculture also requires more and cultural exports over the past three decades. Because of the long time needed to pre- better trained researchers and agricultural Aggressive human capital development pare a new generation of agricultural sci- professionals.17 But the education and train- programs have paid long-term dividends for entists and professionals, urgent action is ing structures are not always up to this task. Brazil, India, Malaysia, and other countries. needed now to design, fund, and implement Sub-Saharan Africa's human resource Is it not possible for Africa to follow a simi- programs that combine upgrading local pool is severely depleted. Among the 27 lar path? Because of the retirement of senior universities, supporting regional centers of African countries, half saw a decline in the academic staff and researchers, Africa should excellence in teaching and research, and pro- number of agricultural researchers in the launch a vigorous human capital campaign viding cost-effective higher-degree training 1990s (chapter 7).18 Only one in four African with a goal of providing doctoral training to outside the region. focus H The two-way links between agriculture and health Agriculture can pose major threats to health through increased incidence of malaria linked to irrigation, pesticide poison- ing, and diseases transmissible from farm animals to humans in intensive livestock systems. And some of the developing world's major health problems, such as AIDS and malaria, can have disastrous effects on agriculture, through the loss of labor, knowledge, and assets. So coordinating agriculture and health interventions can yield significant welfare benefits for the poor in developing countries. A griculture affects health, and health Ethiopia researchers found malaria preva- tional poisoning from exposure kills an esti- affects agriculture. Agriculture sup- lence to be higher in those villages close to mated 355,000 people each year, two-thirds ports health by providing food and government-promoted micro dams.5 But in of them in developing countries.11 Costs nutrition for the world's people and by gen- Tanzania malaria was less prevalent in irri- of medical treatment, lost labor, and lower erating income that can be spent on health gated areas, where rice-growing improved long-term productivity can be high. care. Yet agricultural production and food incomes so that farm households could Many farmers in developing countries consumption can also increase the risks of afford insecticide-treated nets.6 overuse pesticides and do not take proper water-related diseases (malaria) and food- The impact of malaria on agricultural safety precautions because they do not borne diseases--as well as health hazards productivity has a long history. In the first understand the risks and fear smaller har- linked with specific agricultural systems and half of the 20th century it was the lead- vests. Making matters worse, developing practices, such as infectious animal diseases ing public health problem in Italy, much countries seldom have strong regulatory (avian flu, brucellosis), pesticide poisoning, as in many developing countries today. systems for dangerous chemicals: Pesticides and aflatoxicosis.1 Absences resulting from illness and death banned or restricted in industrial countries Illness and death from AIDS, malaria, were common during the agricultural sea- are used widely in developing countries.12 tuberculosis, and other diseases reduce son, leaving millions of hectares of Italy's Farmer perceptions of appropriate pesti- agricultural productivity through the loss most fertile land fallow.7 In the develop- cide use vary with the setting and culture. It of labor, knowledge of productive adults, ing world malaria continues to have seri- is common in Latin America for farmers to and assets to cope with illness. Because ous negative impacts on productivity. One believe that exposure to pesticides increases the majority of the world's poor work in study of farmers engaged in intensive veg- their tolerance and makes them stronger and agriculture and the poor suffer dispropor- etable production in Côte d'Ivoire showed more able to work, often leading to very high tionately from illness and disease, taking an that malaria sufferers produced about half exposure. In a potato-farming community integrated view of agriculture and health is the yields and half the incomes that healthy in Carchi, Ecuador, researchers documented necessary to address poverty and promote farmers did.8 171 pesticide poisonings per 100,000 people agriculture for development. Malaria can be controlled by modifying per year in the late 1990s--among the high- The lack of coordination of policy mak- or manipulating agricultural water systems. est in the world. Pesticide poisoning there ing between agriculture and health2 under- In the early 1900s better maintenance and was the second largest cause of death for mines efforts to overcome ill health among improvements of irrigation and drainage men (19 percent) and fourth for women (13 the rural poor and gives short shrift to systems reduced malaria cases by more than percent). The high health care costs and lost agriculture's role in alleviating many of the half in the Arab Republic of Egypt, India, work time outweighed the benefits of pesti- world's most serious health problems. Con- and Indonesia.9 A case study in India in cide use. Farmers who focused on naturally sidered here are malaria, pesticide poisoning, 1940­41 showed that intermittent irrigation preventing or suppressing pests and used AIDS, and diseases transmitted from animals of rice fields reduced malaria contraction pesticides only when necessary substantially to humans. The important link through food from 48 percent to 4 percent. Today, there reduced exposure while maintaining yields security and nutrition is discussed elsewhere are many options to mitigate the negative and increasing profitability.13 (focus C). effects of irrigation while maintaining agri- In the Philippines in 1989­91 farmers cultural productivity. They include provid- commonly applied two insecticide doses14 Malaria ing location-specific knowledge of drainage per growing season, elevating their health Every year an estimated 300 to 500 million techniques, intermittently wetting and dry- costs by an average of 70 percent above people get sick from malaria, and more ing rice fields, alternating rice with a dry- those who did not use pesticides. The yield than 1 million die from it, many of them land crop, and using livestock as "bait" for benefits from pesticide use were more than children.3 Characteristics of agricultural mosquitoes.10 offset by the cost of illness.15 production systems, such as crop rotation, To limit the health and economic costs the presence of livestock, and the proximity Pesticide poisoning of pesticide use, policy makers can finance of villages to fields and water sources, affect Pesticides can increase agricultural produc- training and information campaigns and malarial risk. In particular, irrigation can tivity, but when handled improperly, they reduce accessibility to the more dangerous create conditions that favor parasitic vec- are toxic to humans and other species. In agrochemicals through banning or taxing tors and facilitate disease transmission.4 In addition to food safety concerns, uninten- their use. Natural control and integrated The two-way links between agriculture and health 225 pest management also show promise. In Figure H.1 Staple food production declines tested in Kenya, Namibia, Swaziland, and Nicaragua farmers trained in appropriate after an AIDS-related illness or death in Zimbabwe.24 Mozambique pesticide use suffered lower exposure after two years and had higher net returns than Total production as a % of daily The rise of zoonotic disease threats did those not trained.16 recommended kilocalorie intake The livestock revolution in developing coun- 100 tries has been associated with the growth of HIV and AIDS Initial survey (2002) unprecedented concentrations of animals in 80 Follow up survey (2005) In 2006 an estimated 39.5 million people in the urban and periurban areas of develop- 64.1 the world were living with HIV, and an esti- 59.6 ing countries, with major implications for 56.0 mated 2.9 million people died from AIDS.17 60 human and animal health. Of 1,415 species The majority of people affected by HIV 43.8 of infectious organisms known to be patho- 40 36.2 and AIDS depend on agriculture, and their 28.9 genic to humans, 61 percent are zoonotic, or livelihoods are undermined by the disease transmissible from animals to humans. And 20 in many countries. In many Sub-Saharan of the 175 pathogenic species of infectious countries AIDS demands a rethinking of organisms considered to be "emerging" 0 development policies, and parts of South Nonaffected Male illness Female illness (or reemerging) in humans, 75 percent are Asia may face similar situations if the epi- households or death or death zoonotic.25 The poor are especially exposed demic continues unabated.18 Source: Data from Donovan and Massingue (2007) because of the proximity of their living Illness and death from HIV and AIDS comparing the kilocalorie production of households spaces to farm animals. affected by an adult illness or death, likely to be reduce agricultural earnings and productiv- Zoonotic diseases of significance in AIDS-related, with unaffected households in rural ity. A 1997 study of worker productivity in a Mozambique. developing countries fall into three cat- Note: Because these are subsistence farmers, Kenya tea estate found the average daily out- egories based on the form of transmis- production can be used as a measure of consumption. put of HIV-positive workers to be 23 per- Percent daily recommended kilocalorie intake equals sion: foodborne (cysticercosis, brucellosis, cent less than that of healthy workers in the the median home production (kcal/day/adult equivalent) tuberculosis), infectious (avian influenza, divided by the recommended consumption (3,000 kcal/ same fields.19 A study of rural households in day/adult equivalent). tuberculosis), and vector-borne (rabies or Mozambique showed that a household that trypanosomosis). suffered an adult male illness or death likely goals. Promoting labor-saving technologies Animal disease has long been a major to be HIV-related experienced a significant and crops is one way to address lost labor economic issue. The losses from animal reduction in food production, relative to resulting from AIDS-related mortality in deaths from the H5N1 strain of highly other categories of households. This repre- agriculture. But for poorer smallholder pathogenic avian influenza and the costs of sents a major shock for households relying households, the main constraints on live- controlling it run into the tens of billions on subsistence production and already far lihoods may be land and cash rather than of dollars. Since late 2003 the H5N1 strain below their recommended food intake (fig- labor. So cash transfers to help them hire of avian influenza has been responsible for ure H.1). labor, more secure land tenure for women, 4,544 documented outbreaks in poultry in HIV/AIDS also reduces the capacity of and expanded agricultural extension pro- 36 countries, associated with 269 human the agricultural civil service. Between 1996 grams to include women and orphans could cases and 163 fatalities (as of January 2007). and 2000 in Kenya, 58 percent of all deaths have a greater impact on welfare.22 The virus is not easily transmitted to and of staff in the Ministry of Agriculture were Targeted programs can capitalize on the within humans. But the great concern is AIDS-related.20 And Mozambique's Minis- links between AIDS and agricultural liveli- that it could mutate within either animal or try of Agriculture projects that it may lose hoods. To overcome the lack of land and human hosts to become easily transmissible 20­24 percent of its staff to HIV/AIDS from labor often facing AIDS-affected house- from humans to humans, raising the pos- 2004 to 2010. holds, the Livelihoods Recovery through sibility of a disastrous pandemic. Lower agricultural earnings and produc- Agriculture Programme, implemented in The primary method of controlling tivity can also increase the risk of contract- Lesotho in 2002 by CARE and the Ministry animal diseases is to quickly cull diseased ing HIV. Facing insecure livelihoods, some of Agriculture, promotes producing crops animals and others they may have come in household members migrate to find work with high nutritional content on small contact with, reducing the viral load. Vacci- or engage in transactional sex. Many studies plots of land close to the home. Of the par- nations are expensive and difficult to imple- show a significant correlation between HIV ticipants, 53 percent reported that they had ment under developing country conditions.26 prevalence and migration, suggesting that stabilized or increased their food produc- So controlling zoonotic disease in the animal mobility increases the probability of risky tion.23 Another program in Mozambique vector is critical.27 The key is to respond behavior. 21 provides orphans and vulnerable children quickly and comprehensively once the dis- There is tremendous scope for agricul- in high HIV-prevalence areas with crucial ease appears in animals.28 This requires not tural policy to become more HIV-respon- farming and life skills as well as nutritious only trained technicians but also incentives sive and further both health and agricultural daily meals. Similar programs are being to reveal and cull diseased animals. PART III Emerging national agendas for agriculture's three worlds How can agriculture-for- development agendas best be implemented? 10 If agricultural growth has such unique agendas need to be context specific, reflect- abilities to reduce poverty, then why hasn't ing both the broad country type and local it been more consistently realized across conditions. This chapter recaps some of these c h a p t e r developing countries? Poverty plummeted opportunities and challenges and proposes in China, India, Vietnam, and other coun- an agriculture-for-development approach tries when they went through major spurts for agriculture's three worlds. Implementa- of agricultural growth, just as industrial tion aspects of these agendas are addressed take-offs and rising incomes followed in in chapter 11. the wake of major spurts of agricultural growth in Japan and the Republic of Korea. New opportunities Yet agriculture has been used too little for and challenges growth and food security in today's agricul- ture-based countries, with high social costs. New opportunities Its full abilities to reduce rural poverty have Reforms in macroeconomic policies, trade also been used too little in the transforming regimes, and marketing policies in many of and urbanized developing countries, which the poorest countries in the 1990s have led to have large populations of rural poor. better incentives for farmers to invest, more Chapters 4 through 8 suggest some of the active private traders and agroprocessors, and reasons for the underuse of agriculture for higher returns to public and private invest- development, including (1) incomplete and ment in agriculture and rural areas (chap- uneven reforms of the international trade ter 4). The number of armed conflicts has regime (particularly in member countries of declined, and many countries have adopted the Organisation for Economic Co-operation more democratic and decentralized forms of and Development [OECD]); (2) reduced but governance. Globalization opens new export continuing policy biases against agriculture opportunities and increases the flows of for- in many developing countries; (3) under- eign capital and technology. Powerful value investment and poor investment of public chains are integrating markets on a world resources in agriculture and donors turn- scale and a new agriculture of high-value ing their backs on agriculture too early; (4) products has emerged, driven by changes incomplete institutional development (espe- in consumer demand. Regional markets are cially for smallholders) following descaling of also opening for traditional food crops, as in the state in agriculture; (5) lags in the release West Africa and Mercosur (chapter 5). and adoption of new waves of technological Institutional innovations offer more innovations; and (6) the depletion of natural efficient--if still incomplete--mechanisms resources and rising climate change, under- of access to land, financial services, and mining productivity gains. Each cause has inputs, and more effective producer organi- remedies elaborated in those chapters. zations (chapter 6). And new biological and But lessons from the past may not always information technologies offer the poten- apply to the future, especially in a context tial for significant productivity gains, if the marked by major new opportunities. And biosafety protocols and rural information new challenges may invalidate old models. systems necessary for their use can be put In addition, agriculture-for-development in place to exploit them (chapter 7). Better 226 Emerging national agendas for agriculture's three worlds 227 approaches to natural resources manage- of scale in linking to value chains, particularly ment enhance sustainability and reduce supermarkets and high-value export markets. external costs (chapter 8). Agricultural growth has to provide good jobs Even the poorest countries in Sub-Saha- for the landless and marginal farmers, but ran Africa have had numerous local agricul- many innovations are labor saving and jobs tural successes over the past several decades, remain seasonal and unskilled. It has to open with more after 1990 thanks to improve- investment opportunities in the rural non- ments in the macroeconomic environment.1 farm economy through a better investment Some governments in Sub-Saharan Africa, as climate, but it requires new skills for the rural well as China and India, have made agricul- poor to access them. And there is no illu- ture a higher priority, promising to allocate sion that improved policies, institutions, and more of their budgets to it. Donors have also investments in agriculture can reduce pov- stated their intentions to invest more in agri- erty by themselves. Comprehensive multisec- culture, and some are acting on their words. toral approaches are required to coordinate These new commitments are needed now to the contributions of agriculture with invest- sustain and scale up the successes. ments in other sectors, raising complex issues of investment priorities, political tradeoffs in New challenges budgetary processes, and intersectoral coor- Raising agricultural productivity to make dination of implementation (chapter 11). agriculture better perform as an instrument Addressing the political economy of for development will be difficult, particu- agriculture-for-development agendas will larly in some of the poorest countries where continue to be difficult. A first political it is needed most. The long downward trend economy challenge is to give voice to pro- in international commodity prices jeopar- farming coalitions in the agriculture-based dizes the profitability of many production countries that can mobilize public support systems at current levels of productivity. for smallholder-based agricultural growth. With the closing of the land frontier across A second political economy challenge is to much of the developing world and continu- avoid the subsidy and protection traps in ing strong demographic pressures, gains in addressing rural-urban income dispari- land productivity--and sustainable land ties and poverty in the transforming and management--will become fundamental. urbanized countries, by investing more in Rising energy prices challenge the future of public goods and safety nets. New private agricultural intensification based on petro- actors can add voice and political support leum derivatives such as nitrogen fertilizer. to improve agricultural incentives. In addition, the delivery of new waves of technological innovations may be delayed The proposed approach by underinvestment in research and devel- By applying lessons from the past and opment and lack of safeguards to guide the appreciating the new opportunities and adoption of transgenics. new challenges, an agriculture-for-develop- Changing climate and growing water ment approach emerges with several general scarcity will put a premium on efficient water features. It relies on such preconditions as use and resilient farming systems. Climate sound macroeconomic fundamentals and change will be most severe in some of the sociopolitical stability. It is comprehensive poorest countries that are least prepared to in mobilizing many actors in the world of adapt. In these countries, water management agriculture--smallholders and their orga- is least developed and science least funded to nizations, agribusinesses, private entrepre- generate new adaptive technologies. neurs in value chains, the state with new Any future agricultural growth not only roles and functions, and civil society--and has to be doubly green (productive and envi- in balancing multiple policy objectives ronmentally friendly), it also has to enlist (box 10.1). It is differentiated across coun- smallholders, especially women. This poses try types and needs to be environmentally formidable challenges, with rising economies sustainable and feasible to implement. 228 WORLD DEVELOPMENT REPORT 2008 Preconditions. Political and macroeco- The second is accelerating smallholder entry nomic stability is necessary for agricul- to agricultural markets and raising small- tural growth, and without stability, few holder innovativeness and competitiveness. other parts of an agricultural agenda can The third is improving livelihoods and be implemented--a premise increasingly food security in subsistence agriculture and realized in agriculture-based countries low-skilled rural occupations. The fourth after the mid-1990s. is increasing employment and investment opportunities in the rural economy while Comprehensive. Strategies should reflect enhancing skills to allow the rural poor four objectives in a "policy diamond" that to seize these opportunities or to success- set priorities in the agriculture-for-develop- fully migrate. Together they drive the three ment agenda (box 10.1). The first is estab- pathways out of poverty--farming, rural lishing efficient markets and value chains. employment, and migration. B O X 1 0 . 1 Four policy objectives of the agriculture-for-development agenda form a policy diamond 1. Improve market access and establish efficient Preconditions value chains. Value chains link demand in Macroeconomic fundamentals agricultural markets to smallholder produc- Governance ers and create jobs along the links and in Sociopolitical context agriculture. Policy interventions to facilitate value-chain development include improving 1 the overall investment climate and forming Improve strategic public-private partnerships. Demand for market access; Demand for establish efficient 2. Enhance smallholder competitiveness and agricultural agricultural and products value chains nonfarm products facilitate market entry. Smallholders can be competitive and a source of innovation with sufficient asset endowments and in favor- able contexts that allow them to market 4 2 Pathways out a surplus. Policy interventions to enhance Increase employment in Enhance smallholder of poverty their competitiveness and profitability agriculture and the rural competitiveness; Farming, labor, nonfarm economy; include trade reforms for greater market facilitate market entry Income migration Income enhance skills access, improved infrastructure, better effects effects technology, adequate financial services and inputs, and effective producer organiza- tions to gain access to services, markets, and 3 Transition Transition policy making. Improve livelihoods to market to market Inducing a transition from subsistence in subsistence to market requires increasing the access to agriculture and low-skill rural assets for smallholder households, particu- occupations larly to land, entrepreneurial skills, and social capital. It also requires infrastructure to Source: WDR 2008 team. open up regions with agricultural potential but poor market access, and mechanisms to manage risk. 3. Improve livelihoods in subsistence agriculture the rural nonfarm economy to access cash remunerative sources of employment. On and low-skilled rural occupations. Livelihoods income and reduce vulnerability. Improving the demand side, investment and employ- of subsistence farmers can be improved in the livelihoods of subsistence smallholders ment opportunities for skilled labor can four ways. First is by increasing land pro- and unskilled laborers often also requires be enhanced in the rural nonfarm sector ductivity (for higher yields in small plots) food aid, cash transfers, and pensions for the through a better investment climate and and labor productivity (to raise farm labor aged.These improvements require massive territorial development--and in agricul- incomes and free labor for off-farm employ- investments in human capital for the next ture through employment in technically ment). Second is increasing the resilience generation to avoid intergenerational trans- demanding tasks, particularly in high-value of farming systems to reduce risk and food fers of poverty associated with dismally low activities. Skilled labor also has a greater insecurity, especially through better natural education levels in rural areas. likelihood of being pulled into successful resource management.Third is improving 4. Increase employment opportunities in rural migration. Preparing people to migrate the nutritional value of foods produced for labor markets and enhance skills. On the out of agriculture is the flipside of the home consumption. Fourth is diversifying supply side of the labor market, new skills economy's structural transformation as income in agricultural labor markets and are important to gain access to the more agriculture grows. Emerging national agendas for agriculture's three worlds 229 Differentiated. Agriculture-for-devel- period (see table 2 in the Selected World opment agendas differ for the agriculture- Development Indicators at the back of the based, transforming, and urbanized econ- book). Faster growth and sustained pov- omies. In agriculture-based countries, the erty reduction in many countries are now overall goal is accelerating growth, reduc- achievable but will require commitment ing poverty, and providing food security. and resources. In transforming countries, it is reduc- Agriculture is critical to household food ing rural-urban income disparities and security in Sub-Saharan Africa, mainly extreme rural poverty. In urbanized coun- through poverty reduction. But food mar- tries, it is linking smallholders to the new kets poorly serve millions of smallholders, domestic food markets--supermarkets in especially in remote areas with weak infra- particular--and creating remunerative structure, so these areas must rely on their jobs. Structural conditions also differ for own production for food security. Many each country type countries face foreign exchange shortages and high transport costs that limit the Sustainable. With development and scope for imports to meet their food needs environmental protection inextricably (see focus C). Food production is central to linked, agenda design and implementation food security in these countries. need to ensure environmental sustainabil- The overall goal for agriculture-based ity. Production incentives, institutions, countries of Sub-Saharan Africa is to and technologies need to be aligned to secure sustained agricultural growth, better natural resource management and reduce poverty, and improve food security. enhance the provision of environmental This goal is reflected in the Comprehensive services. Africa Agricultural Development Program (CAADP) (box 10.2) of the New Partner- Feasible. Policies and programs will not ship for Africa's Development (NEPAD). be implemented or have significant impacts The emerging agenda to achieve the over- if they are not politically feasible, if admin- all goal, as articulated below, can provide istrative capacity to implement is weak, and a useful basis for the country assessments if financial resources are inadequate. proposed under CAADP. Although the three worlds of agriculture provide a broad typology of countries, they Structural features of agriculture- also hide considerable diversity among the based countries countries in each world. The agriculture- Specific structural features of agriculture- for-development agendas therefore must based countries must be considered in be adjusted to be country specific. designing the agenda to achieve the overall growth, poverty reduction, and food secu- Agriculture-based countries-- rity goals. However, the diversity across accelerating growth, poverty Sub-Saharan African countries and across reduction, and food security regions within countries is huge in terms Sub-Saharan African countries account for of size, agricultural potential, transport 89 percent of the rural population in agri- links, reliance on natural resources, and culture-based countries, so they are the state capacity. focus in this subsection. Aided by improved macroeconomic and sectoral policies and Diverse local conditions. The path to pro- higher commodity prices, real agricultural ductivity growth in Sub-Saharan Africa GDP growth in Sub-Saharan Africa has will differ considerably from that of Asia accelerated from 2.3 percent per year in the (chapter 2). Diverse agroecologies produce 1980s, to 3.3 percent in the 1990s, and to 3.8 a wide range of farming systems. Eight percent per year between 2000 and 2005. crops--maize, rice, wheat, millet, sorghum, Rural poverty has started to decline in 10 of cassava, yams, and bananas/plantains--are 13 countries analyzed over the 1990­2005 major food staples in Africa, compared 230 WORLD DEVELOPMENT REPORT 2008 B O X 1 0 . 2 Comprehensive Africa Agricultural Development Program The CAADP developed by the African Union · implementation by individual countries, · Policy dialogue and review arrangements through its NEPAD initiative aims to help Afri- coordination by regional economic com- are set up to monitor commitments and can countries reach a higher path of economic munities, and facilitation by the NEPAD progress, including institutional arrange- growth through agricultural-led development secretariat ments for coordination and review, and that eliminates hunger, reduces poverty and mechanisms and capacities to facilitate Consistent with the NEPAD principles of food insecurity, and enables expansion of the transition to evidence-based and ownership and accountability, the CAADP exports. CAADP provides a common frame- outcome-oriented policy planning and process at the country level is initiated on a work (rather than a set of supranational implementation. demand-driven basis, through consultation programs) reflected in the key principles and with regional economic communities and The shared CAADP framework around targets defined and set by the Africa Heads of their member countries. It is a three-part common principles and targets can help State and Governments, in order to (i) guide process: stimulate and broaden performance bench- country strategies and investment programs, marking, mutual learning, and harmonization (ii) allow regional peer learning and review, · A country assessment of progress and per- of country development efforts. and (iii) facilitate greater alignment and har- formance toward CAADP targets and princi- Currently, two of the main regional eco- monization of development efforts. ples is completed. The assessment includes nomic communities--the Common Market The main principles and targets that define identifying the gaps in alignment of poli- for Eastern and Southern Africa (COMESA) the CAADP framework are the following: cies, strategies, and investments, including and the Economic Community of West · agriculture-led growth as a main strategy to development assistance, to the growth and African States (ECOWAS), which together achieve the Millennium Development Goal spending targets. cover about 40 African countries--have of poverty reduction · A country CAADP compact is established taken strong leadership and ownership of · a 6-percent average annual agricultural that includes needed actions and com- the agenda and are now working with their growth rate at the national level mitments by national governments, the member states on accelerating its implemen- private sector, the farming community, and · an allocation of 10 percent of national bud- tation. About a dozen countries in the two development partners active in the country gets to the agricultural sector (compared regions are preparing for country roundtable to close the gaps identified in the country with the current 4 percent) discussion following the three-part process assessment. The compact guides country described above. The process is expected to · use of regional complementarities and policy and investment responses to meet be completed in the two regions by the end cooperation to boost growth the 6-percent agricultural growth targets, of 2008. · policy efficiency, dialogue, review, and the planning of development assistance accountability--principles shared by all to support country efforts, and the public- NEPAD programs private partnerships as well as business-to- · partnerships and alliances to include business alliances to raise and sustain the farmers, agribusiness, and civil society necessary investments in the agribusiness communities and farming sectors. Source: NEPAD secretariat 2005, 2006. with just two staples in Asia during its Small and landlocked countries. The green revolution--rice and wheat.2 More- majority of the agriculture-based coun- over, livestock are important in most farm- tries in Sub-Saharan Africa are small, ing systems. Heterogeneity complicates the making it difficult for them to achieve scientific task of discovery of new technolo- scale economies in research, training, and gies, but also offers scope for a wide range policy design. Small countries imply small of innovations. markets, unless regional markets are bet- Sub-Saharan agriculture depends over- ter integrated. Nearly 40 percent of Africa's whelmingly on the timing and quantity of population lives in landlocked countries, in rain. Only 4 percent of the arable land is contrast to only 12 percent in other parts of irrigated, less than a fourth that of India at the developing world.3 Landlocked coun- the dawn of its green revolution in the early tries face transport costs that, on average, 1960s. Dependence on rain not only increases are 50 percent higher than in the typical heterogeneity of farming systems, but also coastal country.4 Transport costs accounted increases the vulnerability to weather shocks for about one-third of the farmgate price of and limits the ability to exploit known yield- fertilizers in Malawi, Zambia, and Nigeria enhancing technologies. Although present (chapter 6). High transport costs also make farming systems are largely rain fed, the con- many staples imperfectly tradable, increas- tinent has significant potential for storage of ing price fluctuations and related risks to water and better water management. farmers, marketing agents, and consumers. Emerging national agendas for agriculture's three worlds 231 Conflict and postconflict. More than half Figure 10.1 Policy diamond for agriculture-based countries the world's conflicts in 1999 occurred in 1 Sub-Saharan Africa.5 While the number of Building markets conflicts has declined in recent years, the and value chains negative impacts on growth and poverty are still significant.6 Many of the countries in conflict have a rich agricultural resource base, and reduced conflict offers scope for 2 4 Smallholder-based Facilitate labor mobility rapid growth. For example, in Mozambique revolution; and rural nonfarm in the 10 years following its civil war, per promote exports development capita income increased 70 percent, com- pared with 4 percent in the previous decade, and agricultural value added increased 60 percent.7 3 Securing livelihoods and food security Low population density. Vast distances of subsistence farmers and low population densities in many coun- tries in Sub-Saharan Africa make trade, Source : WDR 2008 team. infrastructure, and service provision costly. Note : The number of diamonds indicates the relative priority for policy attention, assigning 10 points These factors retard agricultural develop- across objectives. ment directly by increasing transportation natural resource management to improve costs, inhibiting technology adoption, rais- livelihoods, food security, and environmen- ing the costs of agricultural and social ser- tal resilience in remote and risky environ- vices, and slowing the emergence of com- petitive product, factor, and credit markets.8 ments (figure 10.1). A balanced approach of transfers and investments for productivity Conversely, areas of low population density growth is needed to achieve both national with good agricultural potential represent and household food security. Prerequisites untapped reserves for continued expansion to success are macroeconomic stability and of area, highlighting priority for good land peace. A continued effort will be needed to policy and investment in infrastructure. consolidate, deepen, and sustain the mac- roeconomic and sector policy reforms. The Human resources. The human capital objectives are as follows: base of African universities and the agricul- tural profession, more generally, is aging as · Improve access to markets and develop a result of the decline in support for train- modern market chains. ing over the past 20 years. The HIV/AIDS · Achieve a large-scale and sustainable epidemic is further weakening capacity of smallholder-based productivity revo- professional staff and farmers (see focus lution for African agriculture, with H). In contrast, major accomplishments emphasis on helping subsistence farmers in rural primary education are ensuring enter the market and fostering sustain- a future generation of literate and numer- able resource management. ate African smallholders and nonfarm · Achieve food security and improve live- entrepreneurs. lihoods for those who remain as subsis- tence farmers, including improving the An agenda for agriculture- resilience of farming systems to climate based countries change. Harnessing agriculture's potential contri- · Capitalize on agricultural growth to bution to African development will require develop the rural nonfarm sector. success in two priority areas: improving smallholder competitiveness in high- and Building markets and value chains. Given medium-potential areas, where returns to the spatial diversity of African agriculture, investment are highest; and selecting invest- the commodity focus of faster growth will ments in agricultural technologies and vary substantially by agroecological zone 232 WORLD DEVELOPMENT REPORT 2008 and ease of access to markets. The strategy Various risks--unpredictable public needs to balance food staples, traditional policies, high transaction costs, and vaga- bulk exports, and higher-value products, ries of weather--increase price volatility in including livestock, with different groups thin markets. Better market information of smallholders likely participating in each. and marketing extension programs can Growth must derive fundamentally from mitigate these risks, and additional tools, enhanced capacity of farmers to understand such as hedging instruments and options, where their best opportunities lie, rather are being piloted for organized smallholders than through centralized prescriptions or in a few countries. Many countries subject standardized solutions. Staple crops domi- to frequent climatic shocks manage pub- nate current production, and they will con- lic grain reserves to reduce price instabil- tinue to do so in the near future to meet ity--with very mixed success. Safeguards growing demand. Nontraditional exports, are needed to ensure that the operations even if they grow quickly, will have only of food reserve agencies do not destabilize a small impact on aggregate agricultural markets--including arm's length "central growth and employment because their share bank" type autonomy, strict rule-based in the agricultural economy is still modest.9 market operations, and contracting opera- Both nontraditional and traditional exports tions to the private sector. But the high risk are important, as are regional export mar- of price volatility remains for both farmers kets for food staples and livestock. In all and consumers in many agriculture-based cases, the efficiency of value chains can be countries. Effective safety nets are funda- improved substantially. mental until incomes rise or market perfor- Agricultural growth will be secured mance improves. and sustained only if markets work better, and this can be achieved through innova- A smallholder-based productivity revolu- tive public-private partnerships to develop tion in agriculture. Large gaps between market chains that exploit new market current yields and what can be economi- opportunities (chapters 5, 6, and 7). Prog- cally achieved with better support services, ress in reforming product markets in Africa especially in high-potential areas (chapter was significant in the 1990s, and continu- 2), provide optimism that the ambitious ing progress is needed to build on those growth targets can be met. Accelerating gains, particularly in facilitating regional adoption requires improved incentives, trade. In many countries, better function- investments in agricultural research and ing input markets are needed at least as extension systems, access to financial ser- much as expanding product markets to vices, "market smart" subsidies to stimulate increase agricultural productivity (chapter input markets, and better mechanisms for 6). Strengthening markets requires "hard" risk management (chapters 6 and 7). (physical) investments in infrastructure, Both the technologies and design of insti- with particular attention to roads and tutional support services will require decen- communications, and "soft" (institutional) tralized approaches to address the hetero- investments for regulation, risk manage- geneity of rainfed agricultural systems. The ment, extension, market information, and need to adapt technologies and services to performing producer organizations. local conditions and to build several support Markets will not work without address- services simultaneously implies a different ing the massive infrastructure deficit. Rural approach from the one applied during the roads to link farmers to towns are the first green revolution in South Asia. In Uganda, priority, particularly to facilitate market decentralized farmer-driven extension with entry of smallholders in areas of good agri- a strong market orientation is improving cultural potential. Regional market integra- adoption rates. The need for decentraliza- tion also demands coordinated infrastruc- tion extends beyond agricultural services, tural development across countries and however, as more vibrant rural areas must effective trader associations that can circu- be served by more competent and better late information about markets and combat financed local governments with greater corruption in transport and customs. participation of civil society organizations. Emerging national agendas for agriculture's three worlds 233 Higher productivity is not possible with- vation along the value chain is one way to out urgent attention to better soil and water ensure that technology is closely linked to management. Sub-Saharan Africa must market demands and services. replace the soil nutrients it has mined for decades. African farmers apply less than Expanding agricultural exports. Food 10 kilograms of fertilizer per hectare, com- staples will form the basis of a smallholder pared with more than 100 kilograms in revolution in most cases, but Sub-Saharan South Asia. Programs to develop efficient Africa has considerable potential to expand fertilizer markets, and agroforestry systems exports to international markets. Both to replenish soil fertility through legumes, OECD and African governments have to need to be scaled up (chapters 6, 7 and 8). do more to promote agricultural export Liberalization of fertilizer markets has growth. Trade barriers in industrial coun- resulted in notable expansion of fertilizer tries continue to impose high costs on use by smallholders in Kenya, and agrofor- African farmers for key export crops such estry in Zambia has improved soil conser- as cotton (chapter 4) and processed foods. vation and yields. African countries continue to tax agricul- Past investments in irrigation in Sub- tural exports--and where export markets Saharan Africa used technologies that were have been liberalized, incomes generally expensive and hard to maintain and that improved (for example, cotton in Zambia depended heavily on management by the and coffee in Uganda). These liberalized public sector. Today, new approaches offer markets require a new role for government, better prospects. Lower-cost small-scale particularly facilitating access to technol- irrigation and cost-effective larger schemes ogy to improve productivity and ensuring are already expanding the irrigated area, fair and efficient operations in the market- and more can be expected in the future ing system. (chapter 8). Examples include the insti- Regional markets offer excellent pros- tutional reforms for large-scale irrigation pects for growth. Cross-border trade bar- management in Mali, which significantly riers need to be reduced so that African increased incomes of rice and vegetable producers and consumers can benefit from farmers, and Nigeria's fadama schemes, participating in larger markets. Consider based on small-scale technologies.10 Effec- Tradenet, an association of grain traders in tive water management in rainfed systems West Africa that uses innovative informa- can also be achieved and needs greater tion technologies to share price information emphasis. and facilitate cross-border trade among its The stagnation of investment in agricul- members (chapter 5). tural research and advisory services must High-value, labor-intensive horticul- be reversed to produce better and more tural and livestock products for external, widely adapted technologies (chapter 7). domestic, and regional markets offer strong Recent examples of technology genera- growth opportunities. But the marketing tion, including the cassava varieties in East and coordination problems for these more Africa resistant to mosaic virus, drought- perishable and quality-sensitive products tolerant maize in southern Africa, and New have to be overcome. Smallholder partici- Rice for Africa (NERICA) have significant pation in this growth will depend on col- payoffs. More investment in research must lective action, as was the case for premium be coupled with continuing reforms of coffee for export in Rwanda and dairy for agricultural research and extension sys- local markets in Kenya. In other instances, tems, replacement of the cohort of agricul- such as green bean exports from Senegal, tural scientists now retiring, and stronger medium-scale farms may be better placed partnerships with producer organizations to capture economies of scale in market- and the private sector. International and ing, and the labor market is the main vehi- regional research efforts, such as through cle through which productivity gains are the CGIAR and the Forum for Agricultural translated into rural poverty reduction. Yet, Research in Africa, are also becoming more insufficient attention has been given to the important. Competitive funding for inno- performance of rural labor markets. 234 WORLD DEVELOPMENT REPORT 2008 Securing the livelihood and food security of processing and value-adding activities. subsistence farmers. Not all smallholders Rural investment climates that are suffi- will be able to farm their way out of poverty. ciently attractive to draw in capital from For those with limited access to resources remittances and locally generated savings and market opportunities, improving pro- magnify these spillovers and create much ductivity in subsistence agriculture can needed employment. allow them to secure their food consump- In addition to policy and institutional tion and health and eventually move into reforms, the above agenda requires signifi- market-oriented farming or other, more cantly higher levels of investment. Public remunerative jobs. In the interim, their spending on agriculture in agriculture- greatest needs are for yield-stabilizing tech- based countries is currently less than half nologies, such as disease-resistant varieties, that in transforming and urbanized coun- that require few purchased inputs (chapter tries as a share of agricultural GDP (chapter 7); resilient farming systems, based on prac- 1), and less than half the NEPAD target of tices such as water harvesting, to reduce 10 percent of national budgets. While effi- their risks; and better access to small live- ciency gains can be made in current spend- stock and off-farm employment. ing, higher levels of spending are needed, Sustainable land and water management including from donors. In addition, much is important to improve productivity and of the investment needs will have to come reduce production risks. Small-scale tech- from rural savings and private sector nologies (treadle pumps) and better soil investment, with the investment climate an and water management techniques (water important determining factor. harvesting, agroforestry, and tied ridges) are being extensively adopted in some areas. Transforming countries-- New ways to manage risks also show some reducing rural-urban income promise. Weather-based index insurance can reduce risks and cover loans to finance gaps and rural poverty new technologies--now being explored in Transforming countries by far make up the Malawi. Ensuring competition and cost- largest portion of the agricultural world, cutting technical and institutional change in with a rural population of 2.2 billion people the food marketing system can also ensure and massive rural poverty (about 600 mil- lower and more stable food prices, which are lion rural people below the $1-a-day pov- especially important for subsistence house- erty line, half the world total). This world holds, many of which are net food buyers. comprises 98 percent of the rural popula- tion in South Asia, 96 percent in East Asia Beyond agriculture through labor mobility and the Pacific, and 92 percent in the Mid- and rural nonfarm development. Greater dle East and North Africa. An overwhelm- geographic labor mobility and improve- ing 81 percent of the poor in these countries ments in skills of younger generations are live in rural areas. central to reducing rural poverty. Because Transforming countries have been the of HIV/AIDS and malaria, better health fastest growing, with gross domestic prod- care and education must be an integral part uct (GDP) growth exceeding 6 percent a year of a broader set of safety nets that protect since 1990, and with China, India, and Viet- the assets of the poor and near-poor from nam recently growing at more than 8 per- drought, disease, and the death of a family cent. Growth has, however, been led by the member (chapter 9). The Food for Educa- manufacturing and service sectors. Agricul- tion programs in the Sahel, which offer tural growth slowed to 2.9 percent a year in incentives for families to keep their children 1993­2005, following the green revolution­ in school during droughts, are examples.11 induced growth in the 1970s and 1980s of Successful agricultural growth spills 3.3 percent. Agriculture accounted for only 7 over to the nonfarm economy, with percent of total GDP growth in 1993­2005. increased demand for products of rural Slower growth in the agriculture sector, a nonfarm industries, especially agricultural rapidly growing nonagricultural sector, and Emerging national agendas for agriculture's three worlds 235 labor markets strongly segmented by labor Africa has a natural geographic advantage skills have widened rural-urban income in these markets, and agricultural exports gaps, adding political pressure to invest in have grown at 4.4 percent a year since 1993. agriculture and rural development. The overall goal of agriculture for devel- Rapid growth of urban incomes and opment in the transforming countries is to demand for high-value products provides reduce massive rural poverty and narrow the major driver for faster agricultural rural-urban income disparities. growth and poverty reduction in these countries, although sustainable produc- Structural features tivity growth in food staples requires con- of transforming countries tinued attention. Markets for higher-value Specific structural features must be consid- products are growing rapidly--6 percent a ered in designing the agriculture-for-devel- year for horticulture in India, for example. opment agenda for these countries, which Many of these markets have substantial also display wide diversity in country and potential for further expansion. Per capita region-specific features (box 10.3). consumption of vegetables is still only 33 kilograms per year in India, compared with Demographic pressures and declining farm 66 in China and 76 in Japan. Livestock prod- sizes. In Asia, the average farm size is ucts and aquaculture also will continue to already quite small--in Bangladesh, China, grow rapidly. Countries in this group could and delta areas of Vietnam, the average do much more to tap expanding global farm size is a mere 0.4­0.5 hectares (chap- markets, capitalizing on the winning com- ter 3). In South Asia, this decline will con- bination of technological sophistication and tinue because the rural population is grow- cheap labor. The Middle East and North ing at 1.5 percent a year and is not expected B O X 1 0 . 3 Middle East and North Africa--agriculture for jobs and as a safety net The Middle East and North Africa (MENA) first Gulf War reduced Iraq's oil output by 95 Closeness to the European Union (EU) and exemplifies how agriculture remains a major percent and its nonoil output by 72 percent, Gulf markets creates opportunities for high- employer, still disproportionately so relative whereas agricultural output fell by only 18 per- value fruit and vegetable exports. Gazan pep- to its share in the economy. Between 1993 cent. According to data from Bir Zeit University, pers sell for NIS 2.0 a kilo in Gaza but would and 2003, while agriculture's share of GDP the percentage of the West Bank and Gaza fetch NIS 5.5 a kilo from wholesalers exporting remained at 14 percent, its share of employ- population engaged in part-time farming rose to the EU. Meanwhile, prices declined at home ment fell from 34 percent to 28 percent. In from 16.8 percent to 32.6 percent at the onset for lack of integration into international mar- absolute terms, however, the agricultural of the second intifada. kets: tomatoes' real price fell 29 percent over labor force continued to grow at 1.2 percent Agriculture's safety-net function attracts 1993­2003 across the region.13 per year. high levels of state support, but this tends to The challenge facing governments is to A growing rural population means declin- be directed at protection and subsidies instead support the dual role of agriculture as a source ing per capita land availability. In some coun- of productivity growth and new sources of of jobs and as a safety net by the following: tries, the scope for improving land productivity income. Of 12 MENA countries,12 11 provide · Putting in place a new generation of rural is limited, so most increases in per capita farm agriculture with trade protection, 11 with income support programs that target the income will have to come from labor leaving domestic price support, 9 with subsidized vulnerable agriculture. Tunisia's land productivity is only credit, and 9 with energy subsidies. These poli- · Supporting quality-oriented supply chains 40 percent lower than Spain's, while its land- cies distort cropping choices and benefit big to penetrate high-value markets, under- labor ratio is 70 percent lower. landowners the most. In Egypt, for example, pinned by private marketing and public Agriculture is the employer of last resort only 9.7 percent of water subsidies reach the rural infrastructure for those with the least human capital and poorest quarter of households. mobility: the aged, the less educated, and Agriculture uses 80 percent of MENA's · Removing market distortions that discour- women. In Tunisia, in 1995, the average farmer scarce water at a time of concern about water's age high-value cropping and induce unpro- was 53 years old, and 88 percent had not gone availability for cities and industry. Much is used ductive water use beyond primary education. In the Arab Repub- to irrigate cereals, for which the return per · Giving rural youth access to the skills to earn lic of Egypt, males are most likely to farm when cubic meter is a tenth of that for higher-value decent livelihoods outside farming employment in other sectors is hardest to find, crops such as vegetables. Of Egypt's 3.4 mil- that is, during young adulthood (ages 15 to 24) lion irrigated hectares, 1.9 million are in wheat Sources: Assad, El-Hamidi, and Ahmed 2000; FAO and after age 55. and rice. Energy subsidies, price supports, and 2004a, FAO 2006a, FAO 2007a; Mirza 2004; Shetty Agricultural employment is also a liveli- trade protection all encourage uneconomical 2006; World Bank 2006b, World Bank 2006w, hood for households affected by conflict. The water use. World Bank 2005h. 236 WORLD DEVELOPMENT REPORT 2008 to peak until at least 2020.14 Because small- Political economy of agricultural policies. scale farming is labor intensive, a criti- The political pressure of farmers to reduce cal question is whether densely populated the rural-urban income gap through pro- Asian countries can efficiently produce tection and subsidies is increasing (chap- cereals and other food staples on farms of ter 4). Because of the large number of poor that size, especially if rural wages rise. people, protecting food prices to raise the Population growth and declining farm incomes of medium and larger farmers size puts pressure on rural employment. may have high costs for poor consumers, India has 80 million marginal farmers with including most small farmers, who are net low asset positions, who turn to off-farm food buyers. Recent evidence from Indo- work for survival.15 In addition, millions of nesia illustrates this tradeoff--an import landless rural households depend on agri- ban on rice to prevent declines in producer cultural wage employment--82 million in prices was the main cause of the increase in India alone. Remunerative employment for poverty headcount from 16 percent in 2005 a burgeoning rural population is one of the to 18 percent in 2006.16 Another form of major challenges of the time, especially in support to farm incomes is through subsi- South Asia and the Middle East and North dies on inputs such as water and fertilizer. Africa--where rural nonfarm employment These are not only regressive in distribut- (and unskilled work more generally) is ing benefits to larger farmers, but subsidies growing slowly. also distort fiscal priorities away from core public goods, such as rural infrastruc- Water scarcity. Fresh water supplies are ture, especially with limited fiscal space in already fully used in many countries, and these countries, and cause environmental escalating demands for industrial, urban, problems (chapter 4). Political capture and environmental uses will reduce the by larger farmers is entrenched in coun- water available to agriculture. Water scar- tries with well-established democracies, city is particularly acute and projected to such as India, and in countries with less worsen with climate change and rising democratic forms of government, such as demand in the Middle East, North Africa, in several countries in the Middle East and and large parts of India and China (chap- North Africa (box 10.3). ters 2 and 8). High reliance on groundwa- ter irrigation in many countries has led to An agenda for transforming countries overpumping, falling groundwater tables in The policy objectives for the transforming aquifers with low recharge, and deteriorat- countries are as follows (figure 10.2): ing groundwater quality. · Promote high-value activities to diver- sify smallholder farming away from Lagging areas. Some rural areas have land-intensive staples as urban incomes prospered with overall economic growth, rise and diets change. but others have stagnated with high levels of poverty. Lagging areas are found in the · Extend the green revolution in food sta- interior of China, several states in eastern ples to areas bypassed by technological and central India, the upland areas of Viet- progress and with large numbers of poor, nam, and drier areas of North Africa. The including many of the extreme poor, and causes are varied--poor agricultural poten- provide safety nets. Promote livestock tial, low investment in roads and irrigation, activities among the landless and small- poor governance, and social marginaliza- holders as a substitute for land. tion (chapter 2). But some of these areas · Provide infrastructure to support the have good potential for agricultural growth diversification of agriculture and of and could be future breadbaskets (as in east- rural economies. ern India). The challenge is to overcome the · Promote the rural nonfarm economy to political economy bottlenecks in lifting the confront the rural employment problem, constraints to growth in these areas. and invest massively in skills for people Emerging national agendas for agriculture's three worlds 237 to migrate to the rapidly growing sectors Figure 10.2 Policy diamond for transforming countries of the economy. 1 Infrastructure to From green revolution to the new agri- support diversification culture. Although the green revolution was largely state led and state supported, the unfolding revolution in high-value agriculture is led by the private sector, with 4 2 Rural nonfarm economy; the state facilitating. For highly perishable High-value skills for successful activities products, infrastructure, credit, and insti- migration tutions link farmers with processors and retail chains (the farm-firm-fork linkages). Scale economies in processing and market- ing exist with fragmenting and shrinking 3 Food staples, farm size, so institutional innovations such livestock; safety nets as contract farming can reduce the transac- tion costs and risks of smallholders. Linking smallholders to processors and retailers can Source : WDR 2008 team. Note : The number of diamonds indicates the relative priority for policy attention, assigning 10 points across also create access to more financial capital objectives. through banks--and provide technology, extension, and buy-back arrangements, while monitoring food safety. areas (chapter 8). Reforming institutions in That this can be done in smallholder irrigation, removing policy distortions such economies is clearly demonstrated by the as water and electricity subsidies, and pro- rising exports of high-value agriculture viding a supportive environment for trade from transforming countries (chapter 2). and macroeconomic policies are all impor- But the way benefits are distributed along tant steps in improving water productivity the value chain depends on the bargaining and meeting competing demands. Broad- power of different players. Smallholders can based reforms require strong champions bargain better as a group than as individu- and equitable allocations of water rights to als. So a high priority is to facilitate collec- overcome the political obstacles. As scar- tive action through producer organizations city worsens, water markets will come into to reach scale in marketing and bargain for play, with support needed for their emer- better prices (chapter 6). gence and eventual regulation. Jordan, for Although diversification to high-value example, has formalized the informal mar- products offers the best prospects for agri- ket by registering, licensing, and metering cultural growth, this will depend on con- all wells, assigning individual quotas. tinued productivity growth in food staples to release resources. In many areas, mar- Making intensive systems more sustain- kets for food staples are not sufficiently able. Reducing the environmental foot- developed, so that the production of food print of intensive agricultural systems, staples for personal consumption is a risk- especially agrochemical and animal waste reducing strategy. Very large countries pollution, is a priority for both improved (China and India) necessarily also produce environmental and human health, and most of their consumption. also to reduce the drag on productivity Both the high-value revolution and the growth from land and water degradation. extension of the green revolution to less- More sustainable agricultural practices will favored areas require better water manage- require a judicious combination of getting ment, in light of mounting scarcity and dete- incentives right (input and output prices), riorating quality. Integrated approaches can application of improved management tech- manage the competition for water among nologies such as integrated pest and nutri- multiple users, especially in water-stressed ent management, and better regulation. 238 WORLD DEVELOPMENT REPORT 2008 Extending the green revolution to lagging provide conditional transfers, such as cash areas. With the shift to the new agricul- grants in Bangladesh conditioned on school ture and the declining farm size in high- attendance, can increase the demand for potential areas, extending the green revo- education, but they will fail unless the qual- lution to less-favored regions can secure ity of rural education is greatly improved the livelihoods of subsistence farmers and (see focus G). bring them to market. Productivity growth in these regions rests on major investments Safety nets for those left behind. Trans- in irrigation and water control, in agricul- forming countries have the largest concen- tural research, and in new approaches to tration of the world's poor, so direct support extension, supported by reforms in pricing through well-designed and well-governed and marketing for grains. employment schemes in rural areas-- With appropriate support and orga- including rural infrastructure, watersheds, nization, even very small-scale and near- and desiltation of canals and ponds--can landless farmers can improve their live- reduce poverty, improve the rural invest- lihoods, especially in livestock. India's ment climate, and restore degraded natu- success in milk production has been built ral resources. India has launched one of on the collective action of marginal farm- the biggest programs--the National Rural ers through the Indian Dairy Cooperatives Employment Scheme--creating basic Network (chapter 5). Smallholders, par- infrastructure in rural areas to raise farm ticularly women, have been major partici- and nonfarm productivity. It protects farm pants in recent successes with aquaculture families from sudden crop failures caused by and small-scale poultry in Bangladesh. droughts or other shocks. Significant moni- toring and accountability mechanisms and Rural development off the farm, linked to rigorous evaluations have to ensure effective towns. With excess population in agricul- and equitable resource use. ture, a lag in urban job creation, and urban congestion, a priority is to promote rural Urbanized countries--linking nonfarm employment in secondary towns smallholders to the new food and to strengthen rural-urban linkages. Labor mobility was, for instance, inhibited markets and providing good jobs by lack of efficient land markets in China Agriculture accounts for a small share of or and by restrictions on land rental in national growth in urbanized countries-- India. The land market is key to consoli- 5 percent from 1993 to 2005. But several dating small farms for efficient operation agricultural subsectors with strong com- and shifting labor to nonfarm activities parative advantages have sustained spec- and migration. Regional and territorial tacular growth--for example, soybeans development of agricultural clusters--with and biofuels in Brazil, fruits and salmon the processing and packaging of high-value in Chile, and vegetables in Guatemala-- products--is another opportunity. In and the agribusiness sector is large. Agri- densely populated countries, urban-based culture remains the dominant source of industries will drive the rural nonfarm sec- growth and poverty reduction for many tor. So, investments in infrastructure and subnational areas. Eighty-eight percent of skills and improvements in the investment Latin America's and Europe and Central climate are the policy priorities. Asia's rural populations are in urbanized countries. Skills for successful migration. Moving Domestic food markets are being trans- out of agriculture, whether to the rural formed, in particular through the super- nonfarm sector or by migrating to urban market revolution. As commercial agri- areas, depends on more and better quality culture expands, driven by economies of education. Massive investments in human scale associated with mechanization and capital are needed to prepare the next gen- marketing, the rural labor market in agri- eration to leave agriculture. Programs that culture and the rural nonfarm economy Emerging national agendas for agriculture's three worlds 239 become more important for linking pro- Moreover, the urban poverty rate of 28 per- ductivity gains in agriculture to rural pov- cent has been rising, reinforced by intense erty reduction. rural-urban migration that absorbed 15 The overall goal in using agriculture for percent of the rural population over the development is to promote the inclusion of 1993­2002 period. smallholders in the new food markets and Rural populations are also changing. to provide good jobs in agriculture and the Migration is selective, leaving behind a rural nonfarm economy. population characterized by feminiza- tion, loss of the more educated, aging, and Structural features a rising share of indigenous people. The of urbanized countries agricultural labor market and the rural The supermarket revolution. In Latin nonfarm economy account for 70 percent America and the Caribbean and in Europe of rural incomes and employ 55 percent of and Central Asia, rising incomes and rapid the active rural labor force. Even so, many urbanization17 have increased the demand smallholders remain partially engaged in for higher-value products, with domestic subsistence farming until they are absorbed food markets growing even faster than in in the agricultural market economy as pro- developed countries.18 Domestic consump- ducers, become employed in agriculture or tion is the main source of demand for the rural nonfarm economy, or migrate.22 agriculture in Latin America, absorbing They are held back in subsistence farming three-quarters of output, with 60 percent by the lack of assets to enter new product of domestic retail sales channeled through markets and the lack of skills to enter better supermarkets. An important issue in using jobs or migrate to towns. agriculture for development is to strive to Added to this are two structural features: maintain the link between modern food large less-favored regions with many of the markets and the national food supply, in extreme rural poor dependent on agri- a context of increasingly globalized food culture (the Meso-American and Andean chains. Plateaus and the Brazilian Northeast) and Traditional exports remain important, stubbornly high inequality that severely accounting for 80 percent of the region's agri- restricts access to assets and participation cultural exports,19 offering new markets as in policy making for the rural poor. they become increasingly decommoditized to adjust to different consumer tastes. High- Weak governance. Modern markets are value exports have been expanding rapidly, largely in place in Latin America, but a with smallholders moving into niche mar- major limiting factor to the agriculture-for- kets, particularly for organic coffee and Fair development agenda, as in other regions, is Trade, dominated in world trade by Latin the weakness of governance of agriculture America.20 But for smallholders, despite and rural areas.23 Agriculture-for-develop- huge challenges in staying competitive, the ment agendas are becoming multisectoral new domestic food market offers the most and multidimensional, but public organi- dynamic market opportunities. zations remain segmented. Ministries of agriculture lack the capacity to promote a Stubbornly high rural poverty and broad vision and strategy for a comprehen- inequality. The paradox in Latin Amer- sive agenda, coordinate across service pro- ica is that while agriculture has been doing viders, regulate market performance, and relatively well as a productive sector with redress broad social asymmetries.24 Decen- a sustained 2.5 percent annual growth in tralization remains incomplete, with local agricultural value added over the past 40 governments lacking capacity and resources years, rural people have not fared well. and accountability mechanisms hardly in Rural poverty remains stuck at 58 million21 place. Civil society organizations represent- (at a $2-a-day poverty line), and the rural ing the rural poor still exercise little voice, poverty rate in 2002 was 46 percent, a share held back from more effective participation largely unchanged over the last 10 years. by deeply entrenched social inequalities. 240 WORLD DEVELOPMENT REPORT 2008 B O X 1 0 . 4 Special features of agriculture in Europe and Central Asia Agricultural production and food demand changed agricultural and food policies in The situation today varies tremendously were massively distorted under communist the 1990s. Prices, exchange rates, and trade across the region. Ten Central and Eastern central planning, imposed from the 1920s in policies were liberalized, subsidies cut, hard European countries, after dramatic institu- the former Soviet Union and since the 1950s budget constraints introduced, property rights tional reforms, have been integrated in the in Central and Eastern Europe. The distortions privatized throughout the agrifood sector, and Common Agricultural Policy of the European resulted from collective property rights, forced production decisions shifted to companies and Union. Productivity growth benefited from organization of production in large-scale col- households. massive foreign investment in the food sector, lective and state farms, centrally controlled The liberalization and privatization of with spillovers to large corporate farms and production, allocation, processing, input provi- farms and food companies initially caused smaller family farms. sion, and marketing, as well as distorted prices dramatic declines in production and consump- In the Caucasus and parts of Central Asia, and state-controlled trading and exchange tion. But since the mid-1990s, better incentives regions with low incomes and high rural pov- rate systems. Direct subsidies to processing and reformed institutions have led to recovery erty, agriculture has shifted toward smallholder and trading companies kept consumer prices and sustained productivity growth. Poverty farming on land that households received and farm input prices low and producer prices increased while agriculture value added was under the land distribution programs. The high. falling, but it has since declined remarkably better labor incentives on these small farms The fall of the Berlin Wall and the disin- with the recovery of agriculture (see figure induced productivity gains. The main constraint tegration of the Soviet Union dramatically below). on smallholder competitiveness is access to credit and to input and output markets. In large parts of Kazakhstan, the Russian Recovery in Eastern European and Central Asian agriculture is accompanied by a sharp Federation, and Ukraine large farms still domi- drop in rural poverty nate, and in some regions, land concentration has taken extreme forms, with vertically inte- Europe and Central Asia Europe and Central Asia grated farm holdings controlling vast areas of Agriculture value added Poverty rate ($2/day) land (mostly grain) in Kazakhstan and Russia. Constant 2000 US$, billions Percent The aftermath of the Russian financial crisis 100 30 (which improved the terms of trade), and the growth of government revenues from mineral 95 and oil exports (which increased government transfers to farms and rural areas and cut 90 20 Urban payment arrears), has been the main engine behind strong growth in output and produc- 85 Rural tivity since 2000. Vertical integration in agricul- ture, with capital injections from domestic and 80 10 foreign companies, also helped. Belarus, Uzbekistan and Turkmenistan, 75 are in the beginning of the process of market reforms. Their main agenda is to build institu- 70 0 1990 1993 1996 1999 2002 2005 1993 1996 1999 2002 tions to make smallholder farming competitive. Sources: Ravallion, Chen, and Sangraula 2007; World Bank 2006y. Source: Swinnen and Rozelle 2006. Eastern European and Central Asian complemented by social assistance delivered countries, also importantly urbanized, through (often conditional) cash transfers have several features that distinguish them targeted to the chronic poor and to regional from Latin America. These distinguishing pockets of poverty. In Brazil, in the context features follow their history of central plan- of a booming agriculture, social security ning and incomplete transitions to market transfers and the rural nonfarm economy economies (box 10.4). were the fastest-growing sources of income for rural households over 1991­2000.25 An agenda for urbanized countries With structural adjustment effectively over After the structural adjustment of the at the macro level, this approach, based on 1980s, Latin American countries have been growth and safety nets, has been costly, cre- striving to accelerate growth in competi- ating dissatisfaction in Brazil and across the tive subsectors of agriculture, supported by continent. public investment to induce private invest- Many countries have turned to an alter- ment in agriculture (but with significant native approach, seeking to reduce rural misinvestment in subsidies). This has been poverty by increasing earned incomes in Emerging national agendas for agriculture's three worlds 241 agriculture and the rural nonfarm econ- Figure 10.3 Policy diamond for urbanized countries omy as opposed to social assistance, thus attempting to reconcile growth with pov- 1 erty reduction, while relying less on social protection. In Ecuador, the Poverty Reduc- tion and Local Rural Development Pro- gram (PROLOCAL) is based on increas- ing the access of the rural poor to assets, 4 2 Territorial development; improving the context for asset use with an Inclusion in new skills for the rural food markets emphasis on territorial development, and nonfarm economy providing social protection. In Peru, the Sierra Exportadora program also builds on increasing access to assets, supporting rural institutions for competitiveness, and pro- 3 viding social protection.26 Subsistence agriculture; social assistance; In this new model, the policy objectives environmental services are as follows (figure 10.3):27 · Source : WDR 2008 team. Include smallholders in the new food Note : The number of diamonds indicates the relative priority for policy attention, assigning 10 points across markets, which requires, among other objectives. instruments, greater access to land and skills for the new agriculture. Improving livelihoods in subsistence agri- culture and providing social assistance. · Improve productivity in subsistence Subsistence farming can be a holding pat- agriculture and provide social assis- tern in the long transition out of low-pro- tance, together with payments for envi- ductivity family farming. Some subsistence ronmental services to create incentives farmers can become viable smallholders, for conservation. diversifying their income to improve their · Follow a territorial approach to pro- well-being, but the agricultural part of their mote the rural nonfarm economy and income (self-employment) in many circum- enhance skills to give access to the jobs stances has little potential for growth. There and investment opportunities offered by are, however, clear social benefits in investing growth of the rural nonfarm economy. in the agricultural part of their incomes for two reasons: it is critical for their food secu- Increasing access to assets for the new rity and basic nutrition, and it sustains their agriculture. Increasing the participation income in the absence of better employment of smallholder farmers in dynamic domestic options. The needed investments include food markets requires paying special atten- more resilient farming systems and bet- tion to deep-rooted inequalities in access to ter coverage of nutritional needs based on assets and public services, inequalities that home production. Improving livelihoods challenge their competitiveness.28 Small- also requires social assistance, especially holders still at the margins of markets can pensions for those too old to be retrained. take advantage of the new opportunities Rural noncontributory pension programs through greater access to land, research, have expanded rapidly, helping the younger training, technical assistance, financial generation gain earlier access to land and services, and farmer organizations. Pro- combating the selective migration of the ducer organizations and contract farming more entrepreneurial out of agriculture. are essential for these smallholders to take part in value chains and cater to supermar- Supplying environmental services. Coun- ket demands. Also important are public- tries in Latin America and the Caribbean private partnerships, with an agribusiness and in Europe and Central Asia have started sector active in organizing smallholders as to set up regulatory mechanisms to protect competitive suppliers in these markets. their environment and introduce payments 242 WORLD DEVELOPMENT REPORT 2008 for environmental services. Regulation instrument, but also by country type, par- needs to be anchored in greatly improved ticularly the capacity to implement reform. governance, and payment schemes must Understanding the likely political, admin- be made financially sustainable, account- istrative, and financial hurdles to reforms able to those who buy the services, and is necessary for successful implementation. expanded over the continent. Different instruments have different levels of political, administrative, and financial Territorial development to create rural feasibility, providing guidelines in compos- jobs. The rural nonfarm economy is ing agriculture-for-development agendas. a source of self-employment and wage employment, but it is highly dual, with Political feasibility high- and low-skill jobs and high- and low- Price and trade policy reform, land reform, value-adding enterprises. Promoting skills and irrigation, while visible and able to for high-productivity jobs can provide a enlist political support, always have gain- pathway out of poverty. The Latin Ameri- ers and losers. These gainer-loser conflicts can countries are pursuing a distinctly ter- make decisions more difficult. Agricul- ritorial approach, promoting clusters of tural research has fewer tradeoffs, but the complementary firms in selected geographic impacts are often less immediate and less locations. Local agricultural production visible than other investments. Education systems can capitalize on the comparative and food programs have no or few losers, advantages of a territory's agroecology, are highly visible, and usually have strong proximity to urban centers, or institutional political support, but they have costs that and cultural or historical endowments. constrain implementation. Territory-driven development projects go What can be done to improve political beyond community-driven development to feasibility? When there are identifiable gain- create new economic opportunities based ers and losers from reform, strategies can on scale, local synergies, and market access. use research-based evidence for informa- This territorial approach to rural develop- tion and debate, identify administratively ment is being pursued in Eastern Europe as feasible complementary support programs well, building on rural links to towns and to help the losers transit to other sources small cities. of income, and provide compensations--as Poverty reduction based on earned in Mexico's PROCAMPO program to make incomes requires a reassessment of gov- the North American Free Trade Agree- ernance mechanisms, institutions, and ment (NAFTA) politically feasible through agents, many of them in disarray. Minis- decoupled cash transfers. When reforms tries of agriculture have to be redesigned have delayed or less certain consequences, to correspond to the new functions of the commitment devices for future support state and the transformation of agriculture are important. Uganda legislated extension in value chains. And civil society has to be and research reforms through a National engaged as an active participant in gover- Agricultural Advisory Services Act and a nance despite long-standing patterns of National Agricultural Research Act, which social exclusion rooted in deep inequali- committed the government to fund and ties.29 This is a huge agenda (chapter 11). implement them. Improving governance for agriculture and rural areas must be a priority, requiring Administrative capacity experimentation and learning. Capacity to implement is often low--par- ticularly in agriculture-based countries. Political, administrative, Many program designs have erroneously and financial feasibility assumed much higher capacity to imple- Effective implementation requires assessing ment than exists. Others have put in place the feasibility of the policy and investment temporary capacity to assist with implemen- instruments that make up the proposed tation rather than strengthening existing agendas. Feasibility varies significantly by capacity. The result has been unsustainable Emerging national agendas for agriculture's three worlds 243 investments that frustrate good agendas. agriculture-for-development agendas, pos- The lesson is to align long-term programs ing difficult policy dilemmas with resolu- more closely with existing capacity while tion in the political economy arena. providing support to strengthen capacity For the agriculture-based countries, (chapter 11). the policy dilemma is the balance between addressing food security directly by focus- Financial affordability ing on subsistence farming through resil- Many proposed instruments are not finan- ient farming systems and safety nets, such cially affordable within current budget as food aid, or by focusing on the more allocations. Even with greater efficiency in entrepreneurial actors and favored areas current spending, increasing the govern- that can secure growth and deliver food ment budget allocations to agriculture will security through cheaper food and better often be necessary. Infrastructure programs employment opportunities. The imme- (irrigation and roads) are the most costly, diate pressures of poverty and food cri- and the agriculture-based countries require ses drive public expenditures and donor large increases in current budget allocations priorities toward safety nets. But greater and innovative public-private partnerships political and economic stability and better to make these investments. Tanzania is policy instruments can shift the agendas experimenting with providing supplemen- from transfers to growth. New govern- tary funds on a competitive basis to local ment and donor commitments to invest governments to finance medium-scale irri- in agricultural growth signals a greater gation schemes and is focusing national emphasis on earned incomes as opposed public spending on inducing private invest- to transfers. A major increase in foreign ment for irrigation. Food and cash transfer assistance and country budget allocations programs are also costly, requiring efficient to agriculture can provide the resources targeting and credible exit options to make needed to escape the food aid trap and them affordable. move toward growth and sustainable pov- erty reduction. Recognizing the For the transforming countries, the pol- policy dilemmas icy dilemma is in the choice of instruments Do these agriculture-for-development to address the rural-urban income dispar- agendas have a greater likelihood of success ity problem. Farmers' demands for income than in the past? Lessons from experience, assistance and politicians' responses to placed in the perspective of momentous garner votes have met on clientelistic changes in the three worlds of agriculture, grounds, turning to subsidies as the pre- along with new opportunities and new ferred instrument, achieving redistribu- challenges, offer useful guidance. The like- tive gains at a high cost in terms of forgone lihood of success in using agriculture for growth, deficient public health and educa- development can be enhanced by formulat- tion, and low investment in infrastructure ing agendas that are comprehensive, differ- and other public goods. The alternative is entiated, environmentally sustainable, and to raise rural households' earned incomes tailored to political feasibility, administra- in agriculture through diversification and tive capacity, and financial affordability. modernization, in the rural nonfarm econ- Such agendas are based on the agents asso- omy through wage or self-employment, and ciated with each objective on the policy dia- in preparedness to migrate successfully to mond: (1) the agribusiness sector and value urban labor markets. Here, again, recent chains, (2) market-oriented smallholders moves have been away from transfers (mod- and their organizations, (3) a large mass of estly) and toward increased productivity in subsistence farmers with diversified occu- generating incomes (driven in part by the pations, and (4) workers in the agricultural agribusiness sector). labor market and the rural nonfarm econ- For the urbanized economies, the pol- omy. In each case, fundamental tradeoffs icy dilemma is between rapid growth in a have to be addressed in defining national medium to large farm sector (sometimes 244 WORLD DEVELOPMENT REPORT 2008 quite large, with 15,000 to 30,000 hectare ness, and programs of access to land must be farms not uncommon, as in Matto Grosso) expanded to combat persistent inequalities. accompanied by an extensive social safety Smallholders must have more voice, chal- net to compensate the losers and the lenging the traditional social structure. excluded, or earned incomes in a small- What needs to be done is now bet- holder sector that can compete in modern ter understood. Powerful approaches are food markets and nontraditional exports. available to enhance the likelihood of suc- Income diversification in the rural non- cess of agriculture-for-development agen- farm economy is effective to consolidate das. There are signs that solutions are tilt- the competitiveness of the family farm, as ing away from transfers and more toward shown by the resilience of family farms in earned incomes by poor people, agricul- Western and Asian countries. The latter ture's main power in development. Good approach to rural well-being requires con- governance--with macroeconomic stabil- siderable political will. Institutions must be ity, political support, and administrative built to support smallholder competitive- capacity--is in all cases key to success. Strengthening governance, from local to global 11 Agriculture remains one of the most prom- istrative capacity and fiscal resources. Irri- ising instruments for reducing world pov- gation schemes that never worked and agri- erty, as shown throughout this Report. cultural extension systems that have broken c h a p t e r Chapter 10 identified the main elements of down are common examples of this prob- agriculture-for-development agendas. This lem. Policy instruments that do not pose chapter discusses the crucial role of gover- these problems, such as removing subsidies nance in supporting those agendas: What that mainly benefit larger farmers, are polit- are the roles of the state, the private sector, ically difficult to pursue (chapter 4). This and civil society in promoting agriculture dilemma is aggravated by the governance for development? How can agricultural pol- challenges in developing countries: political icy making and policy implementation be and economic instability, limited voice and improved? What can decentralization and accountability, low state capacity, corrup- community-driven development (CDD) tion, and poor rule of law (figure 11.1). add? How can donors make development Governance problems tend to be more assistance to agriculture more effective? severe in agriculture-based countries, And what can the international commu- where the state is especially important for nity do to realize the global agriculture-for- addressing market failures. These coun- development agenda? tries are often afflicted by conflicts and Policy instruments outlined in chapter the postconflict challenges of rebuilding 10 that enjoy strong political support, such agriculture. Many countries face specific as providing infrastructure, services, and governance problems in rural areas, such social safety nets, are demanding of admin- as deeply entrenched political and social Figure 11.1 Agriculture-based and transforming countries get low scores for governance Governance score 2.0 1.5 1.0 0.5 0 ­0.5 ­1.0 Voice and Political Government Regulatory Rule of law Control of accountability stability effectiveness quality corruption Agriculture-based countries Urbanized countries Transforming countries Developed countries Source : Kaufmann, Kraay, and Mastruzzi (2006). Note : The governance indicators aggregate the views on the quality of governance provided by a large number of enterprise, citizen, and expert survey respondents in developed and developing countries. 245 246 WORLD DEVELOPMENT REPORT 2008 structures, that are often linked to unequal declined since the early 1990s.2 Macro- access to land, which perpetuates severe economic stability has improved consider- inequalities and can lead to violent local ably, especially in Africa where it was most conflicts (box 11.1).1 As long as such fun- lacking (chapter 1). Growing regional inte- damental conf licts--often threatening gration and envisaged reforms of global people's lives--remain unresolved, using institutions also hold promise for the agri- agriculture for development remains a dis- culture-for-development agenda. tant goal. There is evidence that the political econ- Governance is essential to realize an omy has been changing in favor of using agriculture-for-development agenda. In agriculture for development. Both civil fact, governance problems are a major rea- society and the private sector are stronger son why many recommendations in the than they were in 1982. Democratization 1982 World Development Report on agricul- and the rise of participatory policy making ture could not be implemented. Today, the have increased the possibilities for small- prospects for overcoming governance prob- holders and the rural poor to raise their lems are more promising than they were in political voice. New politically powerful 1982. The world has turned its attention to private actors have entered agricultural governance. Ongoing processes of democ- value chains, and they have an economic ratization, civil society participation, the interest in a dynamic and prosperous agri- rising weight of agribusiness, public sector cultural sector. management reforms, corruption control, Yet success cannot be taken for granted. and decentralization hold great potential Agriculture may benefit from general for improving agricultural performance. improvements in governance, but its com- The percentage of countries experienc- plexity and diversity make special efforts ing political instability and conflict has necessary. Increasing voice and account- ability in rural areas remains a challenge, even in democratic systems. Rural women face particular challenges to make their B O X 1 1 . 1 Conflicts over land displace millions voices heard. Selecting the right combi- in Colombia nation of policy instruments is not easy, Since the 19th century, Colombia has ungovernable. The ongoing conflict has even if greater political accountability has experienced a long-standing internal con- led to a humanitarian disaster of huge pro- been created. Better organized agricultural flict between peasants and landowners portions. World Bank estimates for interest groups may demand inefficient based on unequal access to land. 1999/2000 put the number of displaced policy instruments, such as price support. Particular segments of the Colombian Colombians resulting from the conflict at peasantry were initially championed by 1.8 million, the highest in the world in Public sector reforms and decentralization two guerrilla forces, the FARC (Fuerzas absolute terms. Massive displacements that are most effective in promoting the Armadas Revolucionarias de Colombia) undermine the government's attempts to agriculture-for-development agenda are and the ELN (Ejército de Liberación Nacio- improve opportunities and address highly specific to countries and contexts. nal) over issues of land. The FARC was inequality--the root of the conflict. Such established in 1966 in response to a gov- conflict and displacement is the source of In addition, reforms of global governance ernment-sponsored attack on a peasant agrarian counterreform--land abandon- need to take agriculture's special problems campaign for land reform. The ELN started ment by internally displaced people into account. This chapter discusses what as an ideological movement motivated by (IDPs), which recent estimates put at 4 mil- the Cuban revolution to fight for the poor lion hectares in Colombia--almost three can be done to strengthen governance in and landless. In retaliation to the peasant times more than what has been redistrib- light of these challenges. guerilla forces and representing land- uted over three decades of government- owners, the AUC (Autodefensas Unidas de sponsored land reform. As the land aban- Changing roles: the state, the Colombia), a paramilitary umbrella organi- doned by IDPs is rarely put to effective zation, was formed in the 1980s and began use, it is associated with productivity private sector, and civil society conducting localized operations against losses that further weaken rural economic The nation state remains responsible for cre- guerrillas in the 1990s. conditions and agricultural competitive- Conflict between these groups has ness, effectively trapping these regions in ating an enabling environment for the agri- acquired a life of its own. It has been a vicious cycle of violence and low eco- culture-for-development agenda, because aggravated by huge amounts of money nomic performance. only the state can establish the fundamental channeled into violence, rent capture conditions for the private sector and civil through natural resources (oil), and the Sources: Deininger, Ibanez, and Querubin drug trade, making parts of the country (2007); World Bank (2002b). society to thrive: macroeconomic stability, political stability, security, and the rule of Strengthening governance, from local to global 247 law. Although these governance dimensions contracts, even in highly developed econo- are not specific to agriculture, few of the mies. Beyond providing these core public agriculture-specific reforms discussed here goods, the state has to facilitate, coordi- can be implemented if they are not in place. nate, and regulate, although the degree of state activism in these roles is debated. The Overcoming market failures while agriculture-for-development agenda also avoiding government failures assigns a strong role to public policy to pro- Although agriculture is a largely private mote poverty reduction and equity, includ- activity, market failures are pervasive ing gender equity, by building productive because of monopoly power, externalities assets and providing safety nets. in natural resources management, scale How can government failures be over- economies in supply chains, nonexclud- come in implementing this agenda, espe- ability in research and development (R&D), cially in agriculture-based countries where and asymmetries of information in market the need to address market failures is the transactions. Adding to the failures are greatest? The agricultural bureaucracies heterogeneity, isolation, spatial dispersion, remaining after structural adjustment are the lack of assets to serve as collateral, and particularly weak, so governance reforms vulnerability to climatic shocks that lead to have to strengthen the capacity of the agri- high transaction costs and risks. Govern- cultural administration. But ultimately the ments try to overcome such market failures level of state involvement in agriculture through regulation, institutional develop- is the outcome of political processes that ment, investments in public goods, and depend on political priorities and ideologi- transfers. cal values. Most governments have also responded to market failure by supplying essentially New state roles--coordinate, private services in agriculture, distribut- facilitate, and regulate ing inputs, providing credit and market- The need for coordination by the public sec- ing products, often through parastatals. tor has increased as the food supply chain Although some countries have had remark- has grown. Coordination failures occur able success with this--enabling them to when farmers or processors are isolated launch the green revolution--the results or disconnected, or when complementary have often been negative and, in some cases, investments are not made by others at dif- disastrous. The results are poor because ferent stages in the supply chain. They may public sector interventions are often ill have increased after the withdrawal of para- informed, poorly implemented, and subject statals in Sub-Saharan Africa, where poor to rent-seeking and corruption, leading to infrastructure, high risks, and high transac- government failures. tion costs discourage private investment. In In view of such problems, strong state such situations, coordinated public, private, interventions were reduced by structural and civil society actions can reduce trans- adjustment in the 1980s and 1990s, which action costs and reduce risks for private emphasized the primary role of the market. investment in critical services for small- The emphasis on "getting prices right" and holder agriculture (chapters 5 and 6). improving the macroeconomic environ- Implementation of the agriculture-for- ment had important positive effects for development agenda also requires coordina- agriculture, such as reducing its tax burden tion across ministries. This agenda is broadly (chapter 4). But it left many market failures cross-sectoral, embracing not only issues of unresolved, creating second-generation agricultural production, but also food safety, problems (chapter 5), especially where a biosafety, animal health, human health and weak private sector could not fill the gap. nutrition, physical infrastructure, environ- There is now general agreement that the mental services, trade and commerce, natu- state must invest in core public goods, such ral disaster management, gender equity, and as agricultural R&D, rural roads, property safety nets. These issues fall under the juris- rights, and the enforcement of rules and diction of different ministries, and even crop 248 WORLD DEVELOPMENT REPORT 2008 production, irrigation, livestock, fisheries, making, budgeting, and policy implemen- and food are often dealt with by specialized tation. Civil society can hold policy makers ministries. These ministries have to engage and the public administration accountable a broad range of stakeholders, including and create incentives for change. To do all the private sector, civil society, and donors this, however, the freedom of association, in the formulation of integrated strategies. the right to information, and the freedom Consequently, policy makers and bureau- of the press are crucial. cracies need new skills as facilitators and Ultimately, better governance is the out- coordinators. come of a long-term political and social Regulation, too, has become more process, conditioned by a country's and important and complex. States are asked to region's history, embedded in its institu- regulate biosafety, food safety, grades and tions, and driven by its social movements. It standards, intellectual property protection, is the citizens of a country and their leaders agricultural input quality, groundwater who reform governance. Donors can only extraction, and environmental protection. support those reforms. The privatization of agricultural markets requires appropriate regulatory frame- Agricultural policy processes works to maintain competitiveness (chap- Building coalitions ter 5). In addition, dozens of international Political commitment to the agriculture- agreements oblige countries to put many for-development agenda requires the for- regulations in place, even when doing so mation of coalitions of stakeholders that is costly. Regulation is not, however, just a support this agenda. At the national level, function of the public sector. The private ministries of agriculture can help form sector can--and often does--engage in such coalitions, but they need to overcome self-regulation and adopt corporate social major challenges. One challenge is coordi- responsibility practices that support the nating across different ministries. Because agriculture-for-development agenda. sectoral interests often dominate broader development objectives, creating high-level Civil society--another way interministerial mechanisms can help, to strengthen governance as in Uganda (box 11.2). Another chal- The third sector comprises producer organi- lenge is managing participatory processes zations and other civil society organizations that involve a broad range of stakehold- and can help to overcome market failures in ers, including donors. A related challenge agriculture while avoiding government fail- is avoiding capture by large-scale farm- ures. Collective action through producer ers, who usually have more influence on organizations can facilitate economies of ministries of agriculture than smallhold- scale--for example, in input supply, exten- ers, and ensuring voice for disadvantaged sion, marketing, and managing common groups, including women, tribal groups, property resources, such as watersheds and and youth. irrigation systems. And the unique compe- Although ministries of agriculture can tencies of many nongovernmental organi- coordinate stakeholders, producer organi- zations (NGOs) can be harnessed to deliver zations are key players in pro-agriculture services, especially at the local government coalitions (box 11.2). They are more effec- and community levels. NGOs can engage in tive if they are joined by parliamentarians, standard setting, such as Fair Trade labeling. NGOs, and academics. Agribusiness can be But collective action can also fail by exclud- an important partner in such coalitions, ing disadvantaged groups, with the benefits especially in transforming and urban- captured only by local elites. ized countries (see focus D). In India, the A vibrant civil society strengthens public agribusiness sector is one of the driving sector governance by giving political voice forces advocating more public spending to smallholders, rural women, and agricul- on agriculture, knowing that it will ben- tural laborers (chapter 1). Civil society orga- efit from accelerated agricultural growth. nizations can monitor agricultural policy The private sector can use its expertise and Strengthening governance, from local to global 249 B O X 1 1 . 2 Translating vision into practice: a former minister's view of Uganda's Plan for Modernizing Agriculture The Plan for Modernizing Agriculture is Ugan- not easily observed, and underappreciated, ments are more used to projects than to a da's strategy to reduce poverty by increasing making the deepening of reforms difficult. program approach requiring cross-sectoral rural household incomes, food security, and Changes in political leadership, inconsistent budgeting and implementation. Accustomed employment, and by transforming subsis- policies, and conflicting interests of ministries to centralized practices, government officials tence agriculture to commercial agriculture. A present additional challenges. Indeed, operat- are now devolving responsibilities, even National Steering Committee of key stakehold- ing in a cross-sectoral environment requires though decentralizing finances remains a ers, chaired by the Ministry of Finance, coor- changes in mindsets and capacities. The Pov- challenge. dinates the Plan. It operates under 13 govern- erty Reduction Sector Support program made Implementation calls for patience, con- ment ministries and agencies as well as local the budget processes participatory, but each sistency, and buy-in from key stakeholders governments, the private sector, civil society, ministry is still constrained by the expenditure to ensure appropriate funding (members of and development partners. ceilings imposed by the Ministry of Finance, parliament make final budgetary decisions). The plan is based on the vision of using making it difficult to fund the planned services. Despite slow progress in a number of areas, agriculture for development and progress has The Plan's multisectoral framework is not the Plan, overall, is emerging as a success. been steady, but slower than expected. Insti- well understood, resulting in uneven integra- Source: Kisamba Mugerwa, personal tutional change is slow, always challenging, tion across different line ministries. Depart- communication, 2007. political weight to promote reforms, for needs. Smallholder organizations can example, through public-private dialogues. strengthen participation. Senegal shows The Working Group on Agriculture and how producer organizations, including Agribusiness in Cambodia's Government- those representing rural women, can form Private Sector Forum is an example. The national umbrella organizations to increase private sector can also contribute to trade their voice in national policy making and policy reforms, as in the case of the Philip- affect policy outcomes (box 11.3). pines Task Force on the World Trade Orga- Participation typically involves stake- nization (WTO) Agreement on Agriculture holder workshops. In India, "scenario Renegotations.3 planning" engaged stakeholders in discus- The challenge in building pro-agricul- sions about the reform of the agricultural tural coalitions, however, is to avoid creat- research system, provoking scientists and ing political pressure for "misinvestment" others to think outside their everyday or to resist reforms (chapter 4). Creating domains and technical competence.5 A political coalitions that support the rights much broader range of approaches can of agricultural laborers is a challenge, too. strengthen the voice of stakeholders and Temporary workers and female employees the rural poor. In "citizen juries," lay people in the Chilean fruit sector have fewer labor deliberate contested issues. And the NGO rights than those enjoyed by employees in Global Voices uses information and com- the rest of the economy. A small number of munication technology (ICT) to engage corporations control the bulk of Chilean thousands of citizens in townhall meetings fruit exports, and they have been able to to deliberate specific policies. oppose reforms of labor rights.4 Using evidence to select policies Strengthening participation and promote policy reform and deliberation Simply creating political commitment for the In line with a growing interest in delibera- agriculture-for-development agenda is not tive democracy, formulation of agricultural enough. Countries need to select the appro- development policies increasingly involves priate mix of policy instruments that meet stakeholders and the broader public. Partic- their needs and priorities (chapter 10). Evi- ipation can create political support in favor dence-based policy making, which involves of the agriculture-for-development agenda. rigorous research and solid monitoring and Such participation incurs transaction costs, evaluation, can facilitate this selection. It can of course, but it identifies policies and pro- use randomized design to evaluate policy grams better tailored to country-specific interventions, as in Mexico's widely quoted 250 WORLD DEVELOPMENT REPORT 2008 B O X 1 1 . 3 Empowering producer organizations and developing a vision for agriculture in Senegal In March 2002, Senegal's new president, et de Coopération des Ruraux; see box 6.10). To country's disparate federations of producer Abdoulaye Wade, announced that the Senega- ensure that the law would reflect the views of organizations, improve communication and lese needed a grand vision for agriculture. This smallholders, the CNCR held 35 consultations cooperation among producer groups, and vision was to be constructed through more at the local level, 11 at the regional level, and 1 ensure that producers spoke with a single than two years of consultations with develop- at the national level. The majority of the propo- voice when engaging with the state and other ment partners, civil society organizations, pro- sitions in the final bill were recommended by development partners. To consult with grass- ducer groups, and government ministries. The the CNCR, which is frequently referenced in it, roots producer organizations, the CNCR uses result is Senegal's Agro-Silvopastoral Law, the indicating the political capital of agricultural the local forums that the organization estab- Loi d'Orientation Agro-Sylvo-Pastorale, a vision producers. lished under a donor-financed project. These of how to modernize agriculture in the next In 2004, the bill was approved by the local forums have been instrumental in involv- 20 years. It provides legal recognition for the National Assembly. The Ministry of Agriculture ing farmers in policy discussions at the local institutional reforms of decentralized services, then engaged in a vast communication cam- level and disseminating information. Today, responsive and accountable to producers and paign to disseminate the law and an adapted the CNCR encompasses 22 federations span- farmer organizations. Its main objective is text, with illustrations and explanations. The ning agriculture, livestock, women, fisheries, to reduce poverty and diminish inequalities text was translated into the country's six and forests. It is also a member of Réseau des between urban and rural populations and national languages: Jola, Mandinke, Pulaar, Organisations Paysannes et de Producteurs Agri- between men and women. Serer, Soninke, and Wolof. coles (ROPPA), a network of peasant and agri- One of the most active groups in the Much of the success can be attributed cultural producer organizations in West Africa, law's elaboration was the national umbrella to the CNCR. Leaders of producer organiza- active in regional agricultural policy making. organization of agricultural producer organiza- tions created CNCR in 1993 with support from tions, CNCR (Conseil National de Concertation international organizations to organize the Sources: Resnick 2006; World Bank 2006c. conditional cash transfer program, Opor- Aligning agricultural policies tunidades. The Mexican congress requires a with budgets biannual impact assessment of federal proj- Aligning agricultural strategies and policies ects as part of a results-based approach to with budgets is important to avoid under- policy design and implementation. The key investment and misinvestment. Investing is is to develop effective mechanisms to inter- more challenging for the agriculture-based nalize evaluation results into a process of countries, given the considerable financial institutional learning and change. resources required for the agriculture-for- Research-based evidence can build development agenda. Donor funding can political support and make policy changes help meet these requirements, but increas- possible.6 Vietnam's liberalization of rice ing the domestic revenue base and improv- policy in 1995­97 was promoted by a ing budget planning and management are study showing that liberalization would national responsibilities. Medium-term not reduce food security and would have expenditure frameworks, based on pro- beneficial effects on farm prices and gram budgets with clear objectives, specific poverty, addressing key concerns of the costing, and transparent planning, align reform's opponents.7 Donors are using financial resources with priorities. Vietnam Poverty and Social Impact Assessments to is pioneering the use of evidence-based promote policy dialogue on agricultural assessments to ensure that agriculture is reforms, such as cotton sector reform in appropriately included in its medium-term Burkina Faso. Such assessments combine expenditure plans (box 11.4). quantitative and qualitative analysis--and In transforming and urbanized coun- involve local stakeholders and experts in tries, the challenge is often to create politi- identifying winners and losers of proposed cal support for reallocating budgetary reforms--to arrive at socially accept- resources from unproductive and ineq- able reform strategies. Another interest- uitable subsidies to more effective policy ing example is Canada's Rural Lens, a law instruments. In 10 Latin American coun- that introduces a mandatory social impact tries, the share of nonsocial subsidies in assessment of policies that affect rural public expenditures in the rural sector was, populations. on average, 48 percent between 1985 and Strengthening governance, from local to global 251 2000.8 Political support for reform can be created by increasing transparency about B O X 1 1 . 4 Vietnam's progress in aligning budgets the distributional effects of such policies with sector priorities to build new coalitions in favor of reform, moving gradually to targeted subsidies, and As part of Vietnam's public administra- rolling and annual expenditure plans. tion reform in 2002, the Ministry of Agri- Recently, it started evidence-based packaging and sequencing reforms in ways culture and Rural Development reorga- assessments of its rural development that reduce opposition (chapter 4). nized its structure and role. Since then, it strategy and selected investment proj- has been steadily becoming more market ects. These reforms need to be deep- Strengthening parliaments oriented, reorganizing the functions and ened and sustained as they endeavor to competencies of its staff, and realigning improve expenditure management at the In democracies, parliaments are expected and refocusing its public expenditures on local level, given the recent decentraliza- to be a key player in agricultural policy new priorities. The ministry is developing tion of public spending. making and budgeting. Yet in emerging a medium-term expenditure framework with clear performance and outcome democracies, especially in Africa, parlia- indicators and preparing three-year Source: World Bank 2006a. mentarians often lack the resources, infor- mation, and support staff to engage in the formulation of agricultural strategies, policies, and budgets. Strengthening the Regional integration can also strengthen capacity of parliamentary committees in governance in support of agriculture. West charge of agriculture, rural development, Africa's experience illustrates the opportu- and finance can thus build support for the nities and the challenges (box 11.5). agriculture-for-development agenda. For example, the difficulty of Uganda's Minis- try of Agriculture to inform, engage, and Governance reforms for better persuade parliamentarians of the merits of policy implementation its Plan for Modernization of Agriculture Strengthening governance is essential not (see box 11.2) is one of the main challenges only for policy making, but also for imple- in securing adequate funding for some of menting agricultural agendas effectively its core public services. and using public resources efficiently. To improve governance for policy implemen- Promoting regional integration tation, it helps to distinguish demand-side Coordinating agricultural policies at the approaches from supply-side approaches regional level across countries can produce (figure 11.2), identifying combinations of synergies and economies of scale to realize approaches that are politically feasible and the agriculture-for-development agenda. fit country conditions. B O X 1 1 . 5 Regional integration: opportunities and challenges in West Africa West African countries engage in numerous Regulation for the Registration of Pesticides. ing on economic integration in West Africa, regional processes aimed to reduce transac- The national agricultural research systems of and even the major ones face challenges in tion costs and capture economies of scale and 21 West and Central African countries capture coordinating and aligning their agricultural cluster effects across a large number of small economies of scale in crop breeding, through policies. ECOWAS has taken the lead in imple- countries. Some take part in the African Peer their collaboration in the West and Central menting the Comprehensive Africa Agriculture Review Mechanism, a regional approach to African Council for Agricultural Research Development Program of the New Partnership improve governance. The Economic Commu- and Development. Farmers in West Africa, for Africa's Development in West Africa. This nity of West African States (ECOWAS) engages including smallholders, are also organized at program needs to be harmonized with the in conflict prevention and resolution, which the regional level: Réseau des Organisations agricultural policy of UEMOA, and with the are important for agricultural development. Paysannes et de Producteurs Agricoles (ROPPA), agricultural policies of each member country. The francophone West African countries that the regional network of agricultural producer In addition, it has to align regional agricultural are members of the African Economic and organizations in West Africa (see box 11.3) policies with appropriate budgets, ensuring Monetary Union (UEMOA) benefit from a sin- is active in regional agricultural policy mak- and monitoring their implementation. gle currency and a customs union. The mem- ing and in developing a regional agricultural ber countries of the Permanent Inter-State research strategy. Sources: African Capacity Building Foundation Committee for Drought Control in the Sahel But regional integration has its challenges. 2006; Resnick 2006; WDR consultation in Bamako, save on regulatory costs through the Common More than 40 different organizations are work- April 2­3, 2007. 252 WORLD DEVELOPMENT REPORT 2008 Figure 11.2 Good fits to country-specific conditions for demand-side and supply-side Because agricultural ministries are part approaches are needed to improve agricultural sector governance of the public administration, and subject to general civil service regulations, essential Characteristics of internal reforms, such as adjusting the sal- Good fit agrarian communities ary structure and recruitment system, are often possible only as part of general public Reforms that improve Demand-side sector reforms. Although public admin- voice and accountability Ability of farmers to istration reform has been on the agenda Political decentralization, demand good Agricultural sector participatory planning governance for a long time, there are some innovative governance new approaches. India is making progress · Efficiency and equity Political in service provision in using e-government (for land records). Good fit economy · Quality of regulation El Salvador, Mexico, and Malaysia subject · Control of corruption government agencies to the ISO 9000 man- · Enforcement of rights, Reforms that improve Supply-side including those to food agement certification of the International public sector capacity Capacity of agricultural Organization for Standardization; certifi- Civil service reform, administration to outsourcing, privatization perform tasks efficiently cation is based on performance orientation and client satisfaction. Internal reforms are required to main- Good fit Problems affecting stream gender in ministries of agricul- performance of agricultural agencies ture. Such reforms need to ensure both the recruitment and advancement of women Source: Birner and Palaniswamy forthcoming. in agriculture ministries, as well as oversee Note: The "good fit" arrows in the figure indicate that strategies to improve agricultural governance need to be context-specific, taking account of, for example, the characteristics of local communities (demand side) or the the delivery of gender-sensitive policies, specific problems that affect the performance of agricultural agencies (supply side). Moreover, demand-side and supply-side approaches need to be well coordinated. programs, and services. Internal reforms of the public admin- Reforming ministries of agricultural istration face major political challenges, and rural development especially if they lay off staff and switch from seniority-based to performance-based Although direct state involvement in agri- remuneration systems. In situations in culture can be reduced--through outsourc- which general reforms are not forthcoming, ing, for example--an effective agricultural it is often advisable to unbundle the public administration remains essential in pursu- administration reform and pilot reforms in ing the agriculture-for-development agenda. key government agencies. Agricultural ministries require new skills Whatever reform path is chosen, creat- and management structures to fulfill their ing a mission-oriented and results-oriented new roles. For example, while outsourcing public service, with staff from the top to the agricultural extension reduces the need to field who are committed to the agriculture- manage large numbers of extension per- for-development agenda, requires vision sonnel directly, it also requires new skills-- and leadership from change agents and selecting and managing contracts, ensuring reform champions (box 11.6). the quality of extension services under con- tracts, controlling for corruption in pro- Rolling back the boundaries curement, and collaborating with farmers' of the state organizations in managing the contracts. Public sector reforms that roll back the Internal reforms are needed to improve boundaries of the state have been discussed the coordination among ministries of food, in previous chapters: agriculture, and rural development, and other sectoral ministries. Several models of coor- · Contracting out is suitable for functions dination have been tried, but solutions need that require public finance but not nec- to be country-specific. Mexico combined its essarily public provision. It is increas- ministries for agriculture and rural develop- ingly used for agricultural advisory ser- ment, whereas Brazil separated them. Uganda vices, as in Uganda (chapter 7). established a coordinating body chaired by · Public-private partnerships go beyond the Ministry of Finance (see box 11.2). outsourcing, creating joint responsibili- Strengthening governance, from local to global 253 ties for financing and providing agri- cultural services and infrastructure, as B O X 1 1 . 6 Making a green revolution through vision with Banrural, which provides financial and leadership services to smallholders in Guatemala (chapter 6). Not all such programs are India's green revolution was possible The Office du Niger irrigation scheme, only because political and administrative covering 60,000 hectares in Mali (chapter suitable for targeting the poor, but they leaders addressed market failures and 8), shows that green revolution successes can free up public resources, which can enabled large numbers of smallholders to are possible in Africa. Rice yields there qua- then be targeted toward the poor under intensify their production. It had the full drupled between 1982 and 2002, thanks in political support of the prime minister, but other institutional arrangements. part to a far-reaching institutional reform, it also required the vision and leadership which empowered farmers to participate · Public-private-civil society partnerships of highly competent officials in the public in the scheme's management through involve third-sector organizations, such as administration. C. Subramaniam, Minister three-party performance contracts, valid of Agriculture from 1964­67, believed in producer organizations, along with pub- for three years. The Office du Niger agency the role of science and in the ability of is accountable to farmers, and joint staff- lic sector agencies and private businesses, smallholders to modernize agriculture. farmer committees set priorities and as with Ghana's Sustainable Uptake of He persuaded the skeptics in parliament outsource maintenance, fully paid for by Cassava as an Industrial Commodity and the planning commission of that role. the farmers. The Minister of Rural Develop- And he spearheaded the reform of institu- ment, Boubacar Sada Sy, and the manager Project (chapter 7). tions and policies to support agriculture, of the agency, Traoré, took the lead in · Devolving management authority to overcoming all kinds of administrative and encouraging smallholder farmers to inten- user groups is widely applied in natural regulatory obstacles. Vision and leader- sify their production. As in India, the reform ship are also required to make intensive champions in the public administration had resource and irrigation management. agriculture environmentally sustainable. the full support of their prime ministers. The opportunities and challenges of M.S. Swaminathan, the scientific leader of devolution to user groups are compa- India's green revolution, is now pioneering Sources: Aw and Diemer 2005; Subramaniam rable to those of CDD, discussed below. an "evergreen revolution." 1995; Swaminathan 1993. · Privatization works best for those ser- vices that do not require state involve- ment. Veterinary services provide a Another promising approach involves pro- good example. In 10 Sub-Saharan coun- ducer organizations in the management tries, the number of private veterinar- boards of, say, agricultural research orga- ians increased from 70 in the mid-1980s nizations. Next to these "short routes" of to 1,780 in 2004.9 At the same time, making service providers accountable to public sector veterinarians continue to farmers is a "long route:" farmers can use play a role. lobbying and voting to induce decision · Service cooperatives, formed and owned makers to take steps to improve the per- by producers, can provide pro-poor formance of agricultural services.10 Freeing agricultural services. In India, dairy the rural vote by reducing vote buying and cooperatives provide services to more promoting multiparty competition helps to than 12 million households, benefiting make this route more effective. Informing women in particular because of their the electorate about service performance role in dairy farming (chapter 6). via accessible media is also essential. Creating accountability to rural women Creating accountability--short and requires special efforts, such as seats for long routes female representatives in management Internal reforms of the agricultural admin- boards, and the use of gender-disaggregated istration and rolling back the boundaries report cards. Promoting rural women's asso- of the state are supply-side approaches. To ciations can help them use both the short and make such reforms work for the poor, it is the long route of creating accountability. important to combine them with demand- side approaches that strengthen the ability Creating effective regulatory of rural people to demand better agricul- agencies for agriculture tural services and hold service providers Effective regulatory agencies create an accountable. For example, in Ethiopia, enabling investment climate for the pri- NGOs are assessing farmer satisfaction vate sector and farmer organizations. with agricultural advisory or irrigation ser- Agricultural regulation has to address vices by piloting the Citizen Report Card. wider development objectives--such as 254 WORLD DEVELOPMENT REPORT 2008 ensuring food safety and public health, by women's groups in India.14 A study of reaching environmental goals, and pro- strategies to reduce corruption in village tecting agricultural laborers. Outsourcing road projects applied a randomized experi- and privatization may require agencies mental design to compare social audits, a to take on new regulatory tasks, such as demand-side approach, and government auditing and antimonopoly regulation. audits, a supply-side approach. The study Regulation has to strike an appropriate suggests that grassroots monitoring may balance among different interest groups, reduce theft more when community mem- avoiding both overregulation and under- bers have substantial private stakes in the regulation, especially if there are risks outcome.15 Another study found that gov- and uncertainties--for example, with ernment audits become more effective a new technology. Regulatory agencies when they are publicized through local need reform to meet this challenge and press or radio.16 New technologies, espe- avoid political and special interest cap- cially ICTs (e-government), can reduce the ture. Solutions need to be country-spe- scope for corruption, as with computeriz- cific, but creating independent regulatory ing land records in Karnataka (chapter 6). agencies and encouraging participation of Despite such evidence, studies on strategies the public in regulation is often promis- to deal with corruption in agriculture are ing. Investing in the capacity to enforce rather scarce; more research would help to agricultural regulation is important, too. identify what works, where, and why, espe- Seed certification is an example. In Tamil cially if public investment in agriculture is Nadu, India, farmers suffered considerable to increase. income losses because they received spu- rious Bt cotton seeds.11 Putting into place Decentralization and performing and fair conflict resolution local governance mechanisms is an integral component of Decentralization--the transfer of politi- effective regulation. cal, administrative, and fiscal authority to lower levels of government--is one Controlling corruption in agriculture governance reform that can support the Corruption can blunt the agriculture-for- agriculture-for-development agenda. By development agenda. Land administration bringing government closer to the people, is often one of the most corrupt government it promises to make policy making and agencies (chapter 6). Large agricultural implementation more responsive to the infrastructure projects, such as those for needs of the (often disenfranchised) peo- irrigation, are also prone to corruption, as ple in rural areas. It can correct govern- is water allocation in public irrigation sys- ment failures in agriculture by ensuring tems.12 Companies may bribe regulators, as greater access to local information and in biotechnology regulation in Indonesia and by mobilizing local social capital for pol- pesticide regulation in India.13 The more the icy enforcement. It can help to meet the state is involved in supplying inputs, such as coordination challenges in the agricul- fertilizer and credit, and in marketing agri- ture-for-development agenda. Moreover, cultural products, the greater is the potential it holds particular promise for better for corruption. That is why rolling back the adjusting policies to meet the diverse state can reduce corruption. local conditions of African agriculture, Both demand-side and supply-side provided sufficient capacity and account- approaches can overcome corruption in ability can be developed at the local level agriculture. Public expenditure manage- (chapter 10). ment reforms and procurement reforms are Decentralization has been widespread. typical supply-side approaches, which are Indeed, 80 percent of all developing coun- often part of general public sector reform. tries have experimented with some form of A successful demand-side example is the it, and 70 percent of Sub-Saharan countries monitoring of food prices in ration shops have pursued political decentralization.17 Strengthening governance, from local to global 255 Yet, locally elected bodies still have lim- Increasing the fiscal contributions ited scope for action because fiscal decen- of local governments tralization has been lagging behind politi- One goal of fiscal decentralization is to cal decentralization, and administrative improve revenue generation while making decentralization of rural service delivery local governments accountable to local tax- varies widely across countries. payers, but subnational governments still contribute little to resources. In Mexico, Identifying appropriate levels state governments contributed 16 percent of decentralization on average of the resources for agriculture, The principle of subsidiarity provides the livestock, and rural development programs basis of a framework for identifying appro- (during 1996­2004), with the remain- priate levels of decentralization for agricul- der coming from tied central transfers. In tural functions. Public functions of strategic Uganda, locally generated revenue is less relevance--such as ensuring food safety than 10 percent of the funds administered and controlling epidemics--need to remain by local councils, with the remainder com- national responsibilities, even though their ing from central government transfers, implementation may require considerable most of which are earmarked conditional administrative capacity at intermediate grants (84 percent in 2000­01).18 and local levels. For agricultural research, Efforts by local governments to raise agroecological zones rather than adminis- local revenue (especially by production trative levels may be the appropriate level levies) have occasionally added a significant of decentralization for efficiency, although tax burden to agriculture with little benefit, not necessarily for political support, which as in Tanzania19 and Uganda.20 In China, illustrates the tradeoffs in identifying the too, local officials had in the past imposed appropriate level of decentralization. Agri- a multiplicity of fees on rural populations, cultural extension, which confronts local leading to large protests. Central authori- heterogeneity and a dispersed clientele, is ties responded in 2004 by prohibiting local often best organized at the lowest tier of officials from raising fees on peasants and government and in close interaction with by abolishing agricultural taxation, but community organizations. without fully compensating local govern- The capacity and the accountability ments, leading to a local public expenditure mechanisms for providing a good or service crisis.21 Improving the fiscal capacity of deserve special attention. In many agricul- local governments will require title services ture-based countries, the deficits are both for real estate assets, more elastic tax bases, central and local. That makes it essential to revenue-sharing funds from better-off to invest in capacity and accountability at dif- poorer regions, and cofinancing funds to ferent levels of government, depending on favor specific investments or groups, such the agricultural functions to be decentral- as the very poor. ized and the best long-term prospects for creating capacity and accountability. Giving priority to agriculture agendas Decentralization is a political process that Local government institutions need to set shifts power and authority. Like other min- priorities, but what priority should they istries, agricultural ministries at the central assign to an agriculture-for-development level often resist the transfer of their fiscal agenda? Obviously, local political leader- resources and their staff to local govern- ship matters. But the institutional design ments. This resistance limits the possibilities of local government institutions is impor- of elected local bodies created by political tant, too. Special provisions can reduce decentralization to become active players in elite capture and social exclusion. In the agriculture-for-development agenda. India, the panchayati raj (village councils) Creating political support for reform is often reserve seats for women and for members essential to complete an unfinished agenda of scheduled castes and tribes. A study of and realize decentralization's promise. the effects of reserving seats for women in 256 WORLD DEVELOPMENT REPORT 2008 two Indian states found that this partici- and much remains to be learned in design- pation increased investment in the type of ing and implementing CDD projects for infrastructure relevant to women.22 The agriculture. experience in several South Asian coun- tries shows that female local councilors can Implementing agriculture-for- become more effective, if gender-sensitiv- development agendas locally ity training is provided to male and female Like local governments, communities typi- councilors.23 cally concentrate first on meeting basic Decentralization to local governments needs for health, education, and infra- does not necessarily increase public spend- structure. Once they turn to income- ing on agriculture, it may even reduce it in generating activities, however, agricultural the short run, especially if people's most projects--including those that link small- basic needs have not been met. Decentral- holders to high-value markets--become ization in Bolivia, stipulated by the 1994 an important choice. Income-generating Law of Popular Participation, significantly projects often provide private goods, such increased public spending on education, as livestock, rather than public goods, such rural infrastructure, and water and sanita- as health facilities. So, they are often imple- tion, but average investment in agriculture mented with producer groups, rather than fell as a share of total investment.24 the entire community. Such projects need The shift in public spending following special provisions to avoid elite capture. decentralization is not bad news for the Smart ways of providing loans and grants agriculture-for-development agenda, which are needed to avoid undermining agri- recognizes health, education, and rural cultural finance and microfinance insti- infrastructure as preconditions for using tutions. Community-driven watershed agriculture for development. But local gov- development in South India, for example, ernments need the capacity to manage the combines loans with providing seed capital agriculture-specific agenda, as it becomes as grants to the poorest villagers.25 more important over time. For example, Community-driven projects in North- they often neglect agricultural extension, east Brazil that promote agricultural income because it is less visible than physical infra- generation show that success depends not structure and thus associated with fewer only on community capacity but also on electoral rewards. Enhancing the capac- market demand, technical assistance, and ity of the local administration to man- capacity building. The most successful proj- age extension in consultation with local ects are those with little exposure to mar- producer organizations and with support ket risk, such as small irrigation schemes. from central agricultural departments can More complex projects are more dependent increase the relevance and quality of this on technical assistance and training to suc- service to farmers. ceed, requiring effective complementarity between CDD and sectoral approaches.26 Community-driven development Broadly defined, CDD gives community Developing community-level groups and local governments control accountability over planning decisions and investment Developing accountability is an important resources. It is thus related to decentral- condition for enabling communities to ization, and the two approaches can go implement agriculture-for-development hand in hand. CDD mobilizes community agendas on a large scale. Just like markets groups and involves them directly in deci- and states, communities too can fail. sions on public spending, harnessing their Because they do not have formal structures creativity, capabilities, and social capital. of authority and accountability, they can be Local governments seldom reach down riddled with abuses of power, social exclu- this far, especially in early phases of decen- sion, social conservatism, and conflict. tralization. CDD has challenges, however, Hence, CDD projects invest significant Strengthening governance, from local to global 257 resources in changing community practices Donor failures and by encouraging more transparent informa- governance challenges tion flows, broad and gender-sensitive Because donors are accountable to con- community participation in local decision stituencies in their home countries, they making, and participatory monitoring of have incentives to support projects and pro- local institutions. Accountability evolves grams that can be attributed to them. This over time, and solutions need to be specific often leads to fragmented, overlapping, dis- to country context and local conditions. continuous, and sometimes contradictory When paired with predictable resource donor interventions. In Ethiopia, almost flows, CDD operations can change com- 20 donors were supporting more than 100 munity dynamics beyond the project scope agricultural projects in 2005, with high and timeframe. transaction costs and duplicated efforts. In Malawi, inconsistent donor agricultural Encouraging evaluation policies and shifting government priorities and learning have redesigned national food security pro- Once a visionary idea, CDD has become a grams several times.31 reality on a large scale. More than 9 percent Concerned about aid effectiveness, of World Bank lending uses this form of donors now use indicators of good gover- development. Experience shows that CDD nance as criteria to select countries that can speed the implementation of projects, qualify for development assistance. This increase cost-effectiveness, make fiscal practice poses a dilemma for the agricul- transfers more efficient, improve the quality ture-for-development agenda, because agri- of infrastructure, and increase the income culture-based countries tend to be less eli- from agriculture. Considerable experience gible for assistance. Large aid flows involve has been achieved in scaling up,27 but draw- other governance challenges, too, creating ing definitive conclusions requires more scope for corruption and making govern- rigorous impact evaluations.28 Further ments less accountable to their constituen- experimentation, evaluation, and learning cies and parliaments. Agricultural protec- will show what CDD can do to support the tion in donor countries can undermine the agriculture-for-development agenda and assistance available to agriculture in devel- how it can most effectively do it. oping countries, creating a governance challenge that donor countries face--that Aid effectiveness is, policy incoherence (chapter 4). for agricultural programs International financial institutions, bilateral Global and regional initiatives and multilateral development agencies, The global development community-- international NGOs, and other development donors and partner countries alike--has partners all have roles in realizing the agri- committed to the principles of the Paris culture-for-development agenda. Increased Declaration on Aid Effectiveness, which donor funding is essential to finance the was signed in 2005: strengthening national agenda. But development assistance is ownership and government leadership, already a large part of the agricultural bud- aligning donor support to government get in most agriculture-based economies. priorities and procedures, harmonizing For 24 Sub-Saharan countries, official devel- government and donor processes, manag- opment assistance (ODA) averages 28 per- ing resources for development results, and cent of total agricultural spending,29 and for ensuring mutual accountability. Mozambique, Niger, and Rwanda, ODA Several initiatives support these prin- averages more than 80 percent.30 With such ciples in rural development. The Global high dependence, development assistance Donor Platform for Rural Development, a must be effective, strengthening rather than network of 29 donor and development agen- undermining country efforts to improve cies, supports donors and recipient govern- governance in agriculture. ments in the preparation and implementa- 258 WORLD DEVELOPMENT REPORT 2008 tion of joint agricultural programs under the mentation (17 bilateral and multilateral aid effectiveness framework of the Develop- donors supported agriculture in 2005) ment Assistance Committee of the Organi- largely through "basket funding" (pooling sation for Economic Co-operation and donor resources) guided by an agreed-on Development (OECD). The Platform pools agricultural development program. practical experiences and derives guide- Nicaragua's sectorwide Prorural Pro- lines for managing agricultural programs. gram, launched in 2005, addresses some The Regional Unit for Technical Assistance of the difficulties typical in SWAPs. The (RUTA), a regional network to enhance aid government, the private sector, and 15 effectiveness in Central America, supports donors--supplying more than 90 percent cross-country exchanges and provides of donor assistance for agriculture--signed expertise to governments. TerrAfrica, a a Code of Conduct to promote country partnership between African governments, leadership, harmonization, and alignment. regional organizations, civil society, scien- A common fund, set up in 2006, merges tific organizations, and bilateral and multi- the contributions of donor agencies into a lateral donors aims to provide harmonized single account, which is used for the pri- support for sustainable land management orities defined by Nicaraguan institutions. practices in Africa. The Neuchâtel Initia- Although this is a good start, initial trans- tive, an informal group of representatives of action costs have been high and, thus far, bilateral and multilateral donors, develops only four donors have contributed to the common views and guidelines for support single account. to agricultural advisory services.32 A sharper focus on results Government leadership, With the foreseeable increases in aid, donors country ownership, and have to do more to deliver it effectively. sectorwide approaches Incentives are needed to achieve results. Government leadership and country owner- In Tanzania and Uganda, for example, ship are prerequisites for aid effectiveness. implementation performance is influenc- They require that development partners ing budget allocations--more resources go align their assistance to the agricultural to areas and institutions that have a good development strategies of countries. Align- track record in delivering agreed results.35 ing development assistance to a country- The quality of donor support to agricul- owned sectoral strategy is also inherent in ture has also been improving. The share of the sectorwide approach (SWAp), originally World Bank­supported loans to agriculture developed for health and education.33 Under rated satisfactory or higher by the Indepen- this approach, the government and donors dent Evaluation Group increased from 57 agree to support a coherent agricultural percent in 1992 to 88 percent in 2005. Even sector development program, coupled with so, scaling up support to the agriculture- policy and institutional reform. If properly for-development agenda will require more designed, phased, and implemented accord- experimentation, learning, and adjust- ing to government priorities and capacities, ment, using a variety of mechanisms, such agricultural SWAps offer a way to align as adjustable program lending and learning donor support with the government's public and innovation loans.36 Good evaluation expenditure and procurement systems. will be critical to scaling up. In Uganda, a coherent country-led pov- erty reduction strategy was supported by Progress on the global agenda a sound agricultural strategy and institu- Implementing the agriculture-for-develop- tional reforms (see box 11.2). The manage- ment agenda requires more than better gov- ment of aid flows for a coherent pro-poor ernance and donor coordination. Action at expenditure strategy, including that for the global level is essential for countries' rural areas, has resulted in stable long-term agendas to succeed in a dynamic global commitments by donors.34 In Tanzania, environment. Progress in agriculture is also government leadership has overcome frag- essential to meet the great global challenges Strengthening governance, from local to global 259 of the 21st century, including environment, molecular biology revolution is accelerat- health, poverty, and security. The emerging ing the possibilities to increase productiv- global agenda for agriculture has new issues ity, but it is driven by multinational, private and new goals, driven by new actors, cut- sector firms. If these technologies are to ting across sectors. But the institutions and benefit the poor, it is essential to increase mechanisms to implement and finance the public investment in research, to establish global agenda are lagging behind these new effective biosafety protocols and regula- developments. How can they be reformed tions, and to provide access for developing to respond to the new political and eco- countries to genes and techniques protected nomic realities? by intellectual property rights (chapter 7). A global agenda for agriculture Conserving genetic resources for future food in the 21st century security. Genetic resources and seeds have The global agenda identified in this Report been the basis for some of the most success- (chapters 4­9) responds to the rapid ful agricultural interventions to promote changes in food and agricultural systems growth and reduce poverty (chapter 7). and in economic structures, to the need Conserving the world's rich heritage of crop to reduce poverty, and to the challenge of and animal genetic diversity is essential to environmental sustainability. future global food security. Gene banks and in situ resources that provide fair access to Achieving global justice and equity. The all countries and equitably share the ben- Millennium Development Goals, set by efits are a global public good that requires the heads of state at the 2000 UN Millen- global collective action. nium Summit, have become the overarch- ing guide to global justice and equity. Four Reducing transboundary costs from pan- of the goals--those for poverty and hunger, demic animal and plant diseases and inva- gender equity, environmental sustainabil- sive species. Plant and animal diseases and ity, and equitable exchange in international invasive species have spread because of the trade--are closely linked to the agricul- explosion in international travel and trade ture-for-development agenda. International and the growing intensity of agricultural sys- development assistance is one of the major tems. The costs of these diseases potentially instruments for realizing global justice and can become quite high if the diseases spread equity, but other efforts are equally impor- and become prevalent globally, as with tant. For example, export subsidies and Highly Pathogenic Avian Influenza, which import protection by richer countries harm poses huge risks to human health. There is poorer countries' potential to use agricul- a clear case for international cooperation ture for development (chapter 4). Richer both to control infectious plant and livestock countries' emissions of greenhouse gases diseases at their source and to prevent their (GHG) already undermine the productiv- spread between countries in ways that reduce ity of farming systems essential to survival disruptions to trade in agricultural products. of the poor (focus F). The world also seems insufficiently prepared for the threat of bioterrorism that may affect Conducting global R&D for the poor in an the food and agricultural system. era of privatization. Agricultural R&D is an important element of the global agenda, Exercising global environmental steward- because many types of agricultural research ship for sustainable development. The have economies of scale, requiring collective 2002 Earth Summit in Rio wedded the action to capture these economies of scale environmental-sustainability agenda to and produce pro-poor technological spill- the broader development agenda (chapter overs, especially for orphan crops (cassava, 8). As regional or local solutions are usu- millet, beans) and livestock (goats). R&D ally insufficient, global collective action is is also important to enable agriculture to required to slow desertification, deforesta- mitigate and adapt to climate change. The tion, and the loss of biodiversity. Providing 260 WORLD DEVELOPMENT REPORT 2008 food for 9 billion people in 2050 and ramp- this heightens the need for coordinated ing up biofuels production will further efforts across sectors and institutions. intensify competition for precious water and land resources. New players and radically changed roles for existing ones Managing the global commons--climate The Food and Agriculture Organization change. Climate change illustrates the (FAO) of the United Nations was one of the failure to manage the world's most impor- first global institutions created at the end of tant common property resource, its atmo- World War II, acknowledging the need to sphere. It is now accepted that global warm- ensure adequate food for all as a precondi- ing will be most severe closer to the equator, tion to security and peace. With the creation with major impacts on the rural poor (see of the Consultative Group on International focus F). Although the Framework Con- Agricultural Development (CGIAR) in 1971, vention on Climate Change and its Kyoto the international community provided agri- Protocol have achieved much, some major cultural science and technology as a global polluting countries have--until recently-- public good (chapter 7). attached low priority to mitigating climate Efforts to standardize rules, including for change, an example of "free-riding." The trade in agricultural commodities, led to the economic costs of global inaction will be creation of the WTO and a variety of stan- huge. Agriculture is the sector most vul- dard-setting institutions, such as the World nerable to climate change, and crop failures Organization for Animal Health (OIE) and and livestock losses are already imposing Codex Alimentarius (table 11.1). high economic costs on the poor, under- The global institutions and agreements mining food security. However, agricul- for the environment were created in parallel ture also presents major opportunities for to those for agriculture, development, and reducing global greenhouse gas emissions trade, initially with little recognition of one through carbon sequestration, better live- another. Traditional agricultural actors, stock management, and reduced rates of such as the FAO, retained a leadership role deforestation and forest degradation. in important areas despite a decline in tech- nical staff, but they played a rather limited Reducing the transaction costs of trade role in the negotiations of global conven- through rules and standards. Reducing tions on biodiversity, climate change, and barriers and transaction costs in interna- desertification, which were signed at the tional trade needs clear rules of the game Earth Summit in Rio de Janeiro in 1992. that regulate a wide variety of public poli- Traditional specialized intergovernmen- cies set at the national level, including san- tal organizations, designed for a simpler itary and phytosanitary rules and grades agenda in an earlier time, do not fit well into and standards for specific products (chap- the new cross-cutting agenda. Nor have they ter 5). adjusted to the rapid rise of new players. In the 1990s, new actors, especially a The need for better coordination vibrant international NGO community, Many of these issues are interrelated, a hall- entered the global arena, pushing govern- mark of the new global agenda. Animal dis- ments to move ahead on the global devel- eases relate to sanitary standards for trade, opment agenda and complementing public to health, and to the environment. Genetic initiatives with their own interventions, resources relate to efficient management particularly for food security, the envi- of international agricultural research and ronment, and global justice and equity. technology spillovers as well as to the man- The budgets of some of the most influen- agement of intellectual property and the tial of these organizations--Oxfam, the capacity to control plant diseases. Almost World Wide Fund for Nature (WWF), and all of the issues now have environmental, CARE--are comparable to or even exceed poverty, and gender dimensions, and many the FAO budget.37 The new actors are active intersect with human health and trade. All in advocacy and harness private and mixed Strengthening governance, from local to global 261 Table 11.1 Types of global organizations and networks relevant for agriculture Sector/specialization Intergovernmental organizations Other organizations Specialized organizations in the Food and Agriculture Organization of the UN Global networks of farmers organizations (for example, agricultural sector International Federation of Agricultural Producers, Via International Fund for Agricultural Development Campesina)a World Organization for Animal Health Multinational agribusiness enterprises (for example, World Food Program Monsanto, Dow Chemicals)b Global Donor Platform for Rural Development (including Supermarket chainsb bilateral donors) Consultative Group on International Agricultural Development c Cross-sectoral organizations and Codex Alimentarius HarvestPlusc networks that include agriculture Development organizations and World Bank Group Private foundations and funding agencies (for example, funding agencies with agricultural Rockefeller; Gates Foundation)a United Nations Development Programme programs Nongovernmental development organizations (for example, Oxfam, CARE, Catholic Relief Services)a Specialized environmental United Nations Environment Programme Environmental NGOs (for example, World Wide Fund for organizations Nature, Greenpeace)a Intergovernmental Panel on Climate Change International Union for the Conservation of Naturec Global Environmental Facility Specialized organizations in other World Health Organization Multinational pharmaceutical and biotechnology companiesb sectors World Trade Organization International Organization for Standardizationc United Nations Development Fund for Women General global governance bodies G8 Summit; G8+5 United Nations Secretariat, Assembly and Economic and Social Council Source: WDR 2008 team. a. Nongovernmental organizations and networks b. Private sector enterprises c. Organizations with mixed membership (governmental and/or civil society and/or private sector) public-private financing for global public New actors from the developing world goods, which has dramatically risen in the are getting involved. China has a strategy last decade. to support African agriculture,38 and India The Rockefeller and Ford Foundations provides technical assistance to several were among the first philanthropists to sup- countries in Africa. EMBRAPA (Empresa port agricultural development, beginning in Brasileira de Pesquisa Agropecuária) the Bra- Mexico in 1942 and then spearheading the zilian public corporation for agricultural establishment of the international research R&D, recently opened EMBRAPA Africa to centers of the CGIAR. The Gates Founda- provide technical assistance and training to tion has recently become one of the largest Ghanaian scientists. funders of the agriculture agenda, mainly in Sub-Saharan Africa, and the Google and The agriculture-for-development Clinton Foundations are entering agricul- agenda in the new global context ture as well. Given the complexity and the number of The global reach of agribusiness has emerging issues, major cross-cutting forces, dramatically changed the dynamics of and new players, delivering on a complex the global agenda, especially through agriculture-for-development agenda is an integrated supply chains, global con- enormous challenge, one that is well beyond centrations in some industries, and the the capacity of the current international dominance of private R&D in some areas institutional architecture. Many experiences (see focus D). Private business networks on the ground, however, can provide useful such as the Africa Business Roundtable lessons for moving forward (box 11.7). have started to promote investment in Feasibility and institutional require- agriculture. ments differ considerably, depending on the 262 WORLD DEVELOPMENT REPORT 2008 B O X 1 1 . 7 Delivering international public goods Agricultural research sharing of the benefits arising out of their use introduced a wealth of new standards. Yet the The CGIAR is one of the most successful of the for food and agriculture. To support this, the efforts to harmonize standards offer poten- global institutional innovations in the 20th Global Crop Diversity Trust was established in tially very large payoffs. Support for good ana- century. A collective effort with informal gov- 2004 by Bioversity International and the FAO to lytical work to understand the benefits, costs, ernance, it started with 18 members (funders), develop and promote a global genetic conser- and risks is important to inform international a budget of $100 million (in 2007 U.S. dollars), vation system for important crops covered by negotiations. and four research centers in 1971. It has since the treaty. The trust has a target of $250 million Transboundary spread of animal diseases grown to 64 members, 25 of them developing in endowments, with more than $115 million A remarkable example of international collabo- countries, with a budget of $451 million (14 pledged to date. ration in controlling animal diseases is the near percent from developing countries), support- The Treaty on Plant Genetic Resources elimination of rinderpest, a highly contagious ing 15 research centers. Investing in the CGIAR was negotiated for seven years, in response to viral disease in cattle. In the early 1980s, the has paid off handsomely.39 The system helps and in harmony with the the Convention on disease was raging across Africa, with losses countries benefit from scale economies in R&D Biodiversity. Other international agreements estimated at $2 billion in Nigeria alone in (chapter 7). also affect the exchange and conservation of 1979­83, and spreading over much of Asia and Nonetheless, the CGIAR's funding and genetic resources. These include the Trade into Europe. The Global Rinderpest Eradication focus have become issues in maintaining its Related Aspects of Intellectual Property Rights Programme--led by regional organizations relevance. There has been a shift toward coun- (TRIPs) agreement under the WTO, the Con- and supported by the FAO and other donor try-specific, short-run payoffs in development vention on Biodiversity, the Intergovernmental organizations--was created to coordinate activities, driven by preferences of individual Committee on Genetic Resources, Traditional the worldwide eradication of rinderpest by donors rather than by collective action. These Knowledge and Folklore under the World Intel- 2010 through the collaboration of community activities are at the expense of strategic invest- lectual Property Rights Organization. Harmo- animal health workers, herders, NGOs, and ments in international public goods with long- nizing the agreements is an ongoing challenge governments in a systematic surveillance and term payoffs, such as the conservation and because they have been developed in different vaccination program. Today, rinderpest is close improvement of genetic resources, biotech- sectors by government officials from different to being eradicated, although possible circula- nology, plant breeding, and natural resource ministries (trade, agricultures, environment, tion of the virus in the Somali ecosystem is still management. and culture). a concern. The benefit-cost ratio of the pro- The CGIAR also has to interact with a range Food safety and quality gram is estimated between 1.4 and 2.6. of new stakeholders. A good example is the Codex Alimentarius, led by the FAO and WHO, To reduce the risk of disease outbreaks Harvest Plus Program, which uses conventional is a long-standing example of international and transmission, the response of industrial crop breeding to produce crops with increased interagency, public-private sector cooperation countries has been strong where there are risks micronutrient content. The program illustrates in food standards, labeling practice, hygiene, to human health. Commitments to the Global new ways of doing business: It provides fund- and additives. The International Organization Fund for Control of Highly Pathogenic Avian ing to 10 CGIAR centers and collaborates with for Standardization (ISO), a nongovernmental Influenza are now close to $2.5 billion. But universities, government agencies, and NGOs in network of 157 national standards institutions, donor response generally has been reactive both developed and developing countries. The which come together to agree on comparable and not proactive in giving long-term support program works in 20 developing countries and international standards, has sections on agri- to surveillance and early alert systems in devel- has attracted $52.2 million in grants, including culture and on food technology. oping countries. $28.5 million from the Gates Foundation. The Sanitary and Phytosanitary Measures Genetic resources Agreement of the WTO defines transparent The growing movement to manage the rules and standards governing cross-border Sources: http://www.csiro.au; Consultative genetic resource commons spurred the Inter- movements of products. Progress has been Group on International Agricultural Research national Treaty on Plant Genetic Resources (CGIAR) 2006; Global Crop Diversity Trust 2006; modest since countries have different values Mariner, Roeder, and Admassu 2002; Pardey and for Food and Agriculture, which promotes and risks associated with food products, lead- others 2006; Perrings and Gadgil 2006; Pinstrup- the conservation and sustainable use of plant ing to differences in their interest in setting Andersen 2006; Raitzer 2003; Unnevehr 2004; genetic resources and the fair and equitable rules and standards. The private sector has also World Bank 2004a. type of global public good to be provided global importance, require an effective par- (boxes 11.7 and 11.8). Some, such as R&D ticipation of agricultural organizations in a and standard setting, require fairly special- much broader cross-sectoral and long-term ized institutions and long-term commit- institutional setting. ments for funding. Others, like combating transboundary diseases, require flexible Reforming global governance. The need mechanisms for immediate responses and to reform global institutions is widely rec- cross-sectoral coordination. They may be ognized, and various reform options are on dissolved if their purpose, such as eradicat- the table, ranging from management and ing rinderpest, is met. Other elements of the operational reforms to improve the effi- global agenda, such as combating climate ciency of UN agencies, including the FAO, change and managing natural resources of to consolidating the many UN agencies into Strengthening governance, from local to global 263 B O X 1 1 . 8 Global financing for climate change adaptation and mitigation--the urgency of addressing the needs of vulnerable countries and small-scale farmers Without significant investments in adaptation, the CDM of the UNFCCC, but other sources of for attaining equity and justice in tackling climate change will undermine progress in funding could be agreed upon even before the climate change. The challenges of linking attainment of the MDGs in vulnerable develop- negotiation of a new climate treaty to succeed smallholder farmers to global carbon markets ing countries, and especially affect smallholder the Kyoto agreement. A very small share of are in many ways similar to the challenges farming in Sub-Saharan Africa and some other total CDM funding is related to agriculture (3 of linking smallholders to other emerging regions. Although no specific estimates are percent of 2006 funding for biomass projects, markets, and the approaches to achieving available for the funding needs for adaptation 2 percent for animal waste, and only 1 percent this goal presented in chapter 5 are equally in the agricultural sector--a sector especially for agroforestry), and the market share of relevant. As a pilot carbon financing project sensitive to climate change--they are likely to Africa is merely 3 percent. Inclusion of avoided that included smallholders in the Chiapas be large in relation to total current aid flows to deforestation and soil carbon sequestration region in Mexico (chapter 8) shows, the the sector. The present sources of funding for (for example, through conservation tillage) in formation of producer organizations, an adaptation are three funds created by the Mar- the CDM--neither of which are currently eligi- emphasis on capacity strengthening, and rakech Accords in 2001 within the UN Frame- ble--or agreement on new sources of funding the involvement of NGOs can play a key role work Convention on Climate Change (UNFCCC): to include them in carbon markets would open in reducing transactions costs. Innovative the Special Climate Change Fund, the Adapta- up more opportunities for the participation of technology for monitoring carbon emissions, tion Fund (financed through a 2 percent levy agriculture-based countries in Sub-Saharan such as GIS-based methods, will also help. on Clean Development Mechanism (CDM) proj- Africa and other regions, especially if they Importantly, effective community participa- ects), and the Least Developed Countries Fund, can be inclusive of smallholders. The recently tion and inclusion of the most vulnerable as well as the Global Environmental Facility's announced World Bank's pilot Forest Carbon groups in the consultative process and (GEF) program on climate change. However, Partnership Facility is designed to overcome development of adaptation strategies will be the financial resources industrial countries have implementation challenges for carbon pay- needed to ensure that adaptation programs pledged so far are a small fraction of what will ments for avoided deforestation (whether or do not bypass the poorest households, the be needed to finance adaptation in vulnerable not through the CDM) and pave the way for ones most vulnerable to climate risks. developing countries. Future agreements could agriculture to play an active role in reducing add further funding sources, such as a levy on greenhouse gas emissions from deforestation emissions trading. and forest degradation. Sources: Schneider and Lane 2006; Mace 2006; Greenhouse gas mitigation projects in Ensuring that smallholders benefit from Stern 2006; Capoor and Ambrosi 2007; World Bank developing countries are funded through adaptation and mitigation programs is key 2006g; Oxfam International 2007a. just three--one for development, one for ficult to realize. Combating climate change humanitarian affairs, and one for the envi- is an obvious case in point. ronment. Reform of international agencies is a complex geopolitical process that will Tackling coordination. Coordination fail- take considerable time and effort. ures for global public goods--associated Simply reforming some elements of with different interests of countries, beliefs the global governance system will not be about regulatory standards, ineffective enough. New mechanisms are needed to governance mechanisms, and incoherent meet the three big challenges confronting or inconsistent international agreements-- the global governance of agriculture: to raise the transaction costs of global gover- provide political support, coordinate across nance. While new actors play an important sectors, and ensure appropriate funding. role in advancing the global agenda, they The difficulty of these challenges depends also add to the coordination challenges. on the specific element of the agenda. The scope for coordination failures has Political controversy is a major constraint also increased with the proliferation of inter- for establishing rules for international national agreements, many driven by specific trade, but not for conventional agricultural concerns and developed without effective R&D. Setting international food standards participation of agricultural stakeholders. It is relatively inexpensive, whereas funding has been a major challenge to harmonize the requirements are a major obstacle to a bet- international agreements that govern the use ter management of natural resources. Those and exchange of plant genetic resources, as elements of the global agenda that are con- these resources are covered in agreements on fronted with all three challenges--political conservation and use, trade and intellectual controversies, cross-sectoral coordination property rights, the environment, and cul- needs, and high costs--are particularly dif- ture and traditional knowledge (box 11.7).40 264 WORLD DEVELOPMENT REPORT 2008 Overlapping and inconsistent agreements Financing seems most difficult for issues burden developing countries with weak that have long-term payoffs, such as science implementation capacity. Clustering agree- and technology, genetic resources, and cli- ments that deal with related issues is one way mate change. around this inconsistency.41 The most demanding elements of the Issue-specific global networks and global agenda cannot be tackled without partnerships of old and new actors are an recognizing that sustainable development important institutional option to capture is ultimately a matter of global equity and emerging opportunities and react to press- justice. This is particularly obvious in the ing time-bound issues. Examples of such case of climate change: the richer countries partnerships include new programs for bear the major responsibility for global biofortification and the Global Fund for warming to the present, having overused Control of Highly Pathogenic Avian Influ- the global atmospheric commons, though enza. Such pragmatic and flexible networks often inadvertently. Yet, many of the poor- can sometimes be mobilized quickly, as can est farmers are most vulnerable to climate new funding to allow them to function. change.46 Based on the polluter-pays prin- However, proliferation of global partner- ciple, richer countries have a responsibility ships brings new challenges. The primary to assist vulnerable developing countries' issues include holding down the transac- adaptation efforts. The financial resources tion costs of coordinating many actors and that have been pledged until now are far sustaining funding within weak governance below the needs (box 11.8). structures.42 The networks compete for the Yet there is reason for hope: at their 2007 same funds not only with each other but Summit in Heiligendamm, the G8 nations also with traditional organizations.43 Thus, announced that they would "aim to at least it is important to use global partnerships halve global CO2 emissions by 2050."47 for areas in which they have a clear com- Market-based instruments, in particular parative advantage. carbon trading, have already started to play a key role in mitigating climate change. Increasing financial commitments: the And if the institutional challenges of link- political economy of global (in)action. The ing smallholder farmers to global carbon political economy of global action, linked markets can be met, climate mitigation to national political interests and incen- could even become an important income tives, determines the prospects for reform opportunity for them (box 11.8). of global institutions and to finance the global agenda. Coalitions supporting the Enhancing developing country leadership global agriculture-for-development agenda and capacity. Some technically complex need to overcome the political challenges agreements, such as the Agreement on inherent in some elements of the global Trade Related Aspects of Intellectual Prop- agenda and to secure appropriate funding. erty Rights (TRIPs), were developed with When industrial countries have a strong little participation by developing coun- self-interest, progress is obviously easier, as tries, despite the far-reaching implications with Highly Pathogenic Avian Influenza.44 for them. The negotiating and technical The significant element of self-interest capacity of developing countries needs to suggests that additional financing could be strengthened to address their needs. be provided beyond normal development From 2001 to 2004, the WTO increased its assistance channels by directly tapping into support to developing countries for trade the budgets of ministries of agriculture. policy and regulation from $2.5 million to When industrial countries have less $18.9 million, helping countries negotiate, self-interest, leveraging adequate finan- reform, and prepare for integration in the cial support has proven difficult. There is multilateral trading system. Increased par- strong evidence that the global commu- ticipation of developing countries in financ- nity is massively underinvesting in global ing global public goods can also increase public goods for food and agriculture and their participation in governance and own- in localized effects of global externalities.45 ership, as in the CGIAR (box 11.7). Strengthening governance, from local to global 265 Supporting analytical work and advocacy. possibilities for smallholders and the rural Better data and scientific certainty on the poor to raise their political voice. Countries costs of failing to supply particular global are passing laws that promote rural equity, public goods--combined with vigorous as in Mexico and Senegal. New and power- advocacy--can build support for the global ful private actors have entered agricultural agenda. In view of the information asymme- value chains, and they often have an eco- tries, analytical work is important to inform nomic interest in a dynamic and prosper- actors about the benefits and costs of global ous agricultural sector. action--or inaction.48 Nonstate actors and It cannot be assumed, however, that the the media are now highlighting policies in agriculture-for-development agenda will suc- industrial countries that harm develop- ceed even if conditions are better now. Policy ing countries. One example is the pressure makers and stakeholders at all levels, from for agricultural trade reform led by Oxfam, local to global, have to make special efforts an international NGO that is having some to seize these opportunities for realizing the impact on the European Union (EU) sugar agenda. To use the new political space created agreement (chapter 4). The assessments of the by democratization and decentralization and Intergovernmental Panel on Climate Change exercise political voice, smallholders and the (IPCC) and the recent Stern Review49 have rural poor need to form more effective orga- helped raise awareness of the costs of inac- nizations. To strengthen capacity for policy tion. Such analysis can harness the altruism implementation, countries have to iden- and support of industrial countries for global tify the combination of demand-side and public goods, even if poor countries are the supply-side governance reforms that best fit main beneficiaries. their specific conditions. Institutional inno- vations are required to better coordinate the agriculture agenda across different sectors. Moving forward on better Sound agricultural development strat- governance for agriculture egies require stronger capacity for policy Three types of governance problems can analysis and evaluation, and a commitment hamper the agriculture-for-development to evidence-based policy making. And--as agenda. Lack of macroeconomic and politi- past successes show--using agriculture for cal stability limits the development potential development calls for vision and leadership. of the sector. Political economy problems The global agriculture-for-development lead to policy biases and to underinvestment agenda requires specialized institutions that and misinvestment in agriculture. And state have long-term support and commitment, resource and capacity problems cause fail- such as the CGIAR and the standard-setting ures in implementing the policy agenda, bodies. It requires cross-sectoral, issue-spe- especially in agriculture-based countries. cific networks that can capture emerging Macroeconomic and political stabil- opportunities and react quickly to emer- ity have improved in many countries. The gencies. And it requires new mechanisms to antiagriculture bias in macroeconomic pol- ensure that the agenda is well coordinated icies has been reduced as a consequence of and integrated into the overarching tasks of economic reforms. In addition, agriculture the 21st century. Those tasks include ending is likely to benefit from general governance hunger and poverty, combating pandemic reforms that are now high on the agenda diseases, sustaining the environment, miti- and include decentralization, results-based gatig and adapting to climate change, and public sector management, e-govern- providing security. The challenges in deliv- ment, more rights to information, and new ering on the international agenda are consid- accountability mechanisms. erable. But in a global world and on a small Evidence suggests that the political econ- planet, there is considerable mutual interest omy has been changing in favor of agricul- in supporting every country's agriculture- tural and rural development. Both civil for-development agenda. Meeting those society and the private sector are stronger. challenges is ultimately a matter of equity Democratization and the rise of partici- and justice between North and South--and patory policy making have increased the between present and future generations. Bibliographical note This Report draws on a wide range of World Bank docu- through the World Development Report office. The views ments and on numerous outside sources. Background expressed in these papers are not necessarily those of the papers and notes were prepared by CIRAD (Agricultural World Bank or of this Report. Research for Developing Countries), Ursula Aldana, Harold Many people and organizations inside and outside the Alderman, Mubarik Ali, Julian Alston, Jock R. Anderson, World Bank gave comments to the team. Valuable com- Gustavo Anriquez, John Baffes, Arturo Barrera, Kaushik ments, guidance and contributions were provided by Asya Basu, Julio A. Berdegué, Dirk Bezemer, Estelle Biénabe, Akhlaque, Kym Anderson, Richard Anson, Asian Farmers Eran Binenbaum, Genny Bonomi, Norman Borlaug, Colin Association, Doyle Baker, Shawki Barghouti, Brad Barham, Bradford, Sumiter S. Broca, Steven Buck, Piet Buys, Gero Chris Barrett, Priya Basu, Peter Bazeley, Pierre Bélanger, Carletto, Romain Charnay, Carol Chehab, Shaohua Chen, Deepak Bhattasali, Hans Binswanger, Pierre-Marie Bosc, Manuel Chiriboga, Gilles Cliché, Hugo Contreras, Katia Daniel Bradley, Karen McConnell Brooks, Michael Bruen- Covarrubias, Octavio Damiani, Jose Eli da Veiga, Benoit trup, Mark E. Cackler, Michael Carter, Rocio Castro, Hernan Daviron, Benjamin Davis, Junior Davis, Alan de Brauw, Ceballos, Robert Chapman, Robert S. Chase, B. Chinsinga, Niama Nango Dembélé, Priya Deshingkar, Octavio Diaz, Ken Chomitz, CIRAD (Agricultural Research Develop- Stefania DiGiuseppe, Andrew Dorward, Chris Dowswell, ing Countries), C.S. Clark, CORDAID (Netherlands), Eric Svetlana Edmeades, Germán Escobar, Cathy Farnworth, Crawford, Dana Dalrymple, Salah Darghouth, Charlotte John Farrington, Céline Ferre, Michel Fok, William Foster, De Fraiture, Cornelis de Haan, Klaus Deininger, Freddy Rachel Gardner, Paul Glewwe, Michael Goodman, Peter Destrait, Jean-Jacques Dethier, Xinshen Diao, Eugenio Diaz- Hazell, Spencer Henson, Chang-Tai Hsieh, Terry Hurley, Bonilla, Gerhard Dieterle, Charles E. Di Leva, Ariel Dinar, Jenni James, Esteban Jara, David R. Just, Panayotis Karfakis, Josué Dioné, Shanthi Divakaran, Dutch Actors involved Larry Karp, Jonathan Kydd, Peter Lanjouw, Susana Lastar- in Agriculture and Development, Mark Dutz, Carl Eicher, ria-Cornhiel, Qiang Li, Ethan Ligon, Chengfang Liu, Luis Allison Evans, Marcel Fafchamps, Shenggen Fan, Jean Fares, Felipe Lopez-Calva, Niels P. Louwaars, Mark Lundy, Sarah Hilary Sims Feldstein, Erick Fernandes, Tony Fischer, Ade Lyon, Shiva Makki, Carlos Mladinic, Félix Modrego, Siwa Freeman, German Development Organizations, Andrew D. Msangi, Hideyuki Nakagawa, Roberto Martinez Nogueira, Goodland, Ashok Gulati, Jim Harvey, Yujiro Hayami, Wil- Susan Olivia, Jorge Ortega, Keijiro Otsuka, Philip G. Pardey, lem Heemskerk, Richard Henry, Hans Herren, Ulrich Hess, Eija Pehu, Prabhu Pingali, Per Pinstrup-Andersen, Carlos Melissa Hidrobo, John Hoddinott, Heike Hoeffler, Masayo- Pomareda, Colin Poulton, Jules Pretty, Felicity Proctor, shi Honma, International Federation of Agricultural Produc- Julian Quan, Esteban Quinones, Catherine Ragasa, Vijay- ers, International Crops Research Institute for the Semi-Arid endra Rao, Martin Ravallion, Thomas Reardon, Claudia Tropics, International Food Policy Research Institute, Inter- Ringler, Rudi Rocha, Cristián Rodriguez, Lourdes Rodri- national Livestock Research Institute, Steven Jaffee, Willem guez-Chamussy, Mark W. Rosegrant, Scott Rozelle, Elisa- G. Janssen, Ravi Kanbur, Kapil Kapoor, Rabih H. Karaky, beth Sadoulet, William Saint, Prem Sangraula, Ramiro Omar Karapasan, Amir Kassam, Roy Katayama, John Kerr, Sanhueza, Denis Sautier, Alexander Schejtman, Kate Sebas- Nadim Khouri, Renate Kloeppinger-Todd, Anjini Kochar, tian, John M. Staatz, Kostas Stamoulis, Timothy Sulser, Masami Kojima, Sergey Kononov, Bonwoo Koo, Holger A. Nabs Suma, Luca Tasciotti, Timothy Thomas, Isabelle Vag- Kray, Alexander Kremer, Jean Marcel Laferrière, Eric Lam- neron, Alberto Valdés, Cornelius van der Meer, Dominique bin, Florence Lasbennes, Daniel Lederman, Luis-Felipe Lopez Van Der Walle, Hester Vermeulen, Thomas Walker, Steve Calva, Mark Lundy, Kseniya Lvovsky, Eric Manes, William Wiggins, John Wilkinson, Mette Wik, Paul Winters, Stanley Martin, Alex McCalla, Marie-Rose Mercoiret, Jeanot Minla Wood, Jim Woodhill, Takashi Yamano, Alberto Zezza, and Mfou'ou, Stephen D. Mink, Donald Mitchell, Michael Mor- Linxiu Zhang. ris, Megumi Muto, Ijaz Nabi, Rakesh Nangia, John Nash, Background papers for the Report are available either David Nielson, Ian Noble, Bonny Ntare, Netherlands-based on the World Wide Web www.worldbank.org/wdr2008 or Development Organisations, Steven Were Omamo, Bernardo 266 Bibliographical note 267 Ospina, G.B. Oxfam, Stefano P. Pagiola, Lucian Peppelenbos, Other valuable assistance was provided by Gytis Kan- Guillermo Perry, Denis Pesche, Francisco Pichón, Catherine chas, Polly Means, Nacer Mohamed Megherbi, Shunalini R. Ragasa, Dhushyanth Raju, Karl Rich, Sherman Robinson, Sarkar, and Roula I. Yazigi. Merrell J. Tuck-Primdahl and Pierre Rondot, Jim Ryan, Paulo Santos, Alexander Sarris, Kavita Watsa assisted the team with consultations and Carlos Sere, Shekhar Shah, Melinda Smale, Jimmy Smith, dissemination. Steve Staal, Chris Sturgess, Daniel Sumner, Brent Swallow, Despite efforts to compile a comprehensive list, some Johan Swinnen, Erik Thorbecke, C. Peter Timmer, Rob Tripp, who contributed may have been inadvertently omitted. The Manfred van Eckert, Frans van Hoof, Anthony Venables, team apologizes for any oversights and reiterates its grati- Walter Vergara, Bertus Wennink, Melissa Williams, Alan tude to all who contributed to this Report. Winters-Nelson, Jim Woodhill, and Vittoria Zaffarano. We are most grateful to over 100 persons who provided comments in the e-consultation. Background papers Ali, Mubarik. "Horticulture Revolution for the Poor: Nature, Hazell, Peter, Colin Poulton, Steve Wiggins, and Andrew Dor- Challenges and Opportunities." ward. "The Future of Small Farms: Synthesis Paper." Alderman, Harold. "Managing Risk to Increase Efficiency and Henson, Spencer. "New Markets and Their Supporting Institu- Reduce Poverty." tions: Opportunities and Constraints for Demand Growth." Anderson, Jock R. "Agricultural Advisory Services." Just, David R. "A Review of Behavioral Risk Research with Spe- Anríquez, Gustavo, and Genny Bonomi. "Long-Term Farming cial Application to Developing Countries." and Rural Demographic Trends." Karp, Larry. "Income Distribution and the Allocation of Public Berdegué, Julio, Alexander Schejtman, Manuel Chiriboga, Felix Agricultural Investment in Developing Countries." Modrego, Romain Charnay, and Jorge Ortega. "Towards National ------. "Managing Migration from the Traditional to Modern and Global Agendas for Agriculture for Development: Latin Amer- Sector in Developing Countries." ica and the Caribbean." Lastarria-Cornhiel, Susana. "Feminization of Agriculture: Bezemer, Dirk, and Peter Hazell. "The Agricultural Exit Prob- Trends and Driving Forces." lem; An Empirical Assessment." Ligon, Ethan, and Elisabeth Sadoulet. "Estimating the Effects of Buck, Steven, Céline Ferré, Rachel Gardner, Hideyuki Nakagawa, Aggregate Agricultural Growth on the Distribution of Expenditures." Lourdes Rodriguez-Chamussy, and Elisabeth Sadoulet. "Pattern of Lopez-Calva, Luis Felipe. "Migration in Rural Mexico: From Rural Population Movements in Mexico, Brazil, and Zambia." Tlapanalan to Manhatitlan." Buys, Piet, Céline Ferré, Peter Lanjouw, and Timothy Thomas. Martínez Nogueira, Roberto. "New Roles of the Public Sector "Rural Poverty and Geography: Towards Some Stylized Facts in the for an Agriculture for Development Agenda." Developing World." Modrego, Félix, Romain Charnay, Esteban Jara, Hugo Contre- Chiriboga, Manuel, Romain Charnay, and Carol Chehab."Women ras, and Cristian Rodriguez. "Small Farmers in Developing Coun- in Agriculture: Some Results of Household Surveys Data Analysis." tries: Some Results of Household Surveys Data Analysis." Damiani, Octavio. "Rural Development from a Territorial Per- Otsuka, Keijiro, and Takashi Yamano. "The Role of Rural Labor spective: Case Studies in Asia and Latin America." Markets in Poverty Reduction: Evidence from Asia and East Africa." Daviron, Benoit, and Isabelle Vagneron. "Fair Trade: A Quick Pardey, Philip G., Julian Alston, Jenni James, Paul Glewwe, Eran Assessment." Binenbaum, Terry Hurley, and Stanley Wood. "Science, Technology Davis, Benjamin, Paul Winters, Gero Carletto, Katia Covarru- and Skills." bias, Esteban Quinones, Alberto Zezza, Kostas Stamoulis, Genny Pehu, Eija, and Catherine R. Ragasa. "Agricultural Biotechnology." Bonomi, and Stefania DiGiuseppe. "Rural Income Generating Pomareda, Carlos. "Contract Agriculture: Lessons from Experi- Activities: A Cross Country Comparison." ences in Costa Rica." Deshingkar, Priya, and John Farrington. "Rural Labour Markets Poulton, Colin. "Bulk Export Commodities: Trends and Chal- and Migration in South Asia: Evidence from India and Bangladesh." lenges." Dorward, Andrew, Jonathan Kydd, and Colin Poulton. "Tradi- Pretty, Jules. "Agroecological Approaches to Agricultural Devel- tional Domestic Markets and Marketing Systems for Agricultural opment." Products." Quan, Julian, Junior Davis, and Felicity Proctor. "Rural Devel- Escobar, German, Carlos Mladinic, Ramiro Sanhueza and Octa- opment from a Territorial Perspective: Lessons and Potential in vio Diaz. "Rural Territorial Development: The Milk Territory in Sub-Saharan Africa." Southern Chile." Ravallion, Martin, Shaohua Chen, and Prem Sangraula. "New Farnworth, Cathy, and Michael Goodman. "Growing Ethical Evidence on the Urbanization of Global Poverty." Networks: The Fair Trade Market for Raw and Processed Agricul- Reardon, Thomas, and Julio Berdegué. "The Retail-Led Trans- tural Products (in Five Parts), with Associated Studies on Africa formation of Agrifood Systems and its Implications for Develop- and Latin America." ment Policies." 268 WORLD DEVELOPMENT REPORT 2008 Rosegrant, Mark W., Siwa Msangui, Timothy Sulser, and Claudia Walker, Thomas. "Participatory Varietal Selection, Participatory Ringler. 2006b. "Future Scenarios for Agriculture: Plausible Futures Plant Breeding, and Varietal Change." to 2030 and Key Trends in Agricultural Growth." Wik, Mette, Prabhu Pingali, and Sumiter Broca. "Global Agri- Sautier, Denis, Hester Vermeulen, Michel Fok, and Estelle Bié- cultural Performance: Past Trends and Future Prospects." nabe. "Case Studies of Agri-Processing and Contract Agriculture in Wilkinson, John, and Rudi Rocha. "Agri-Processing and Devel- Africa." oping Countries." Schejtman, Alexander, Julio Berdegué, and Félix Modrego. Zezza, Alberto, Paul Winters, Benjamin Davis, Gero Carletto, "Income Diversification through Agricultural Development." Katia Covarrubias, Esteban Quinones, Kostas Stamoulis, Panayotis Sebastian, Kate. "GIS/Spatial Analysis Contribution to 2008 Karfakis, Luca Tasciotti, Stefania DiGiuseppe, and Genny Bonomi. WDR: Technical Notes on Data & Methodologies." "Rural Household Access to Assets and Agrarian Institutions: A Staatz, John, and Niama Nango Dembele. "Agriculture for Cross Country Comparison." Development in Sub-Saharan Africa." Zhang, Linxiu, Scott Rozelle, Chengfang Liu, Susan Olivia, Alan Valdés, Alberto, and William Foster. "Making the Labor Market de Brauw, and Qiang Li. "Feminization of Agriculture in China: a Way out of Rural Poverty. Rural and Agricultural Labor Markets Debunking the Myth and Measuring the Consequence of Women in Latin America and the Caribbean." Participation in Agriculture." Background Notes CIRAD (Agricultural Research for Developing Countries). Otsuka, Keijiro. "The Asian Farm Size Dilemma." "Experiences with the Development and Diffusion of Conservation Pinstrup-Andersen, Per. "The Organization of International Agriculture in Ashanti and Brong Ahafo Regions of Ghana." Agricultural Research." Baffes, John. "The Political Economy of the US Cotton Program." Rao, V. "Culture is Changing in India's Villages." Basu, Kaushik. "How Poor Farmers Behave." Saint, William. "Growing the People who can Make African Borlaug, Norman, and C. Dowswell. "In Search of an African Agriculture Grow: Human Capital Development for African Agri- Green Revolution: Looking Beyond Asia." culture." Bradford, Colin. "Food and Agriculture in Global Governance." Van der Meer, Cornelius L. J."Agricultural Development, Private Edmeades, Svetlana. "Main Messages and Supporting Evidence Sector Development and Rural Livelihoods: About Synergies." for Public Expenditure on Agriculture." Van der Walle, Dominique. "Impacts of Road Infrastructure on Hsieh, Chang-Tai, and Elisabeth Sadoulet. "Agriculture and Markets and Productivity." Development." World Development Report 2008 Team. "Income and Employ- Louwaars, Niels P. "International Policy: the Seeds of Confusion." ment from a Cross-section of Household Surveys." Makki, Shiva S. "Global Actors and Market Concentration in Agribusiness." Endnotes Overview 15. Fish is now the second largest export from Uganda (Kig- 1. The latest world rural poverty figures are for 2002. gundu 2006). Kenya has become the world's third largest flower 2. World Bank 1982. exporter. 3. For much of the developing world, smallholders are defined 16. Humphrey, McCulloch, and Ota 2004; Maertens and Swin- as operating a farm of 2 ha or less. nen 2006. 4. Hayami 2005. 17. Dorosh and Haggblade 2003; Haggblade, Hazell, and Rear- 5. Pardey and others 2006. don forthcoming. Nonetheless, their quantification remains dif- 6. The best estimate of the contribution of emissions from ficult because of simultaneity problems. Time-series evidence land-use change (mainly from deforestation) is 20 percent, with a from countries with fast-growing agriculture traces the impact likely range from 10 to 30 percent (Watson and others 2000). of many changes at once. Few panel data are available, and they 7. Staatz and Dembele 2007. produce ambiguous results. Most attempts at quantifying agricul- 8. Vyas 2007. tural growth links thus rely on simulations done with models that 9. Reardon and Berdegué 2006. inevitably resort to strong behavioral assumptions. 18. Diao and others 2003. Chapter 1 19. Several prominent analysts have argued that Korea is one 1. Defined as living on less than $1.08 a day in 1993 purchas- clear example of a country that did not invest in raising its agricul- ing power parity dollars (Ravallion, Chen, and Sangraula 2007). tural productivity before starting rapid industrialization (Amsden The latest year for which global rural poverty data are available 1989; Ban, Moon, and Perkins 1980). This interpretation is based is 2002. on Korea's phenomenal growth after the Korean War, which was 2. Bairoch 1973. largely the result of rapid industrialization. However, careful anal- 3. Ravallion and Chen 2007; World Bank 2007c. ysis shows that this was preceded by heavy investments in rural 4. Excluding South Africa. infrastructure (mainly roads), irrigation, fertilizer, and higher- 5. De Ferranti and others 2005. yielding seed varieties during the first half of the 20th century, 6. Ravallion, Chen, and Sangraula 2007. generating important initial conditions that contributed to the 7. This decomposition abstracts from indirect effects of urban- industrial take-off thereafter (Kang and Ramachandran 1999). ization on rural poverty through remittances and rural wage 20. Datt and Ravallion 1998b; Fan 1991; Rosegrant and Hazell changes through tighter rural labor markets (see focus A). Yet, 2001; Timmer 2002. it also conservatively assumes that all rural-urban migrants are 21. Diao and others 2003. poor, which is unlikely because migrants are usually the more edu- 22. http://iresearch.worldbank.org/PovcalNet/jsp/index.jsp. cated and entrepreneurial (see chapter 9). 23. Based on poverty lines defined in each country (Warr 8. Schultz 1978; Hayami 2005; and de Gorter and Swinnen 2001). 2002 particularly emphasize the importance of the relative income 24. The hukou or household registration system has increas- hypothesis (as opposed to absolute poverty) in understanding ingly been relaxed over the past years. agricultural policy making. 25. Fields 2005; Karp 2007b. 9. Delgado, Minot, and Tiongco 2005. 26. McCulloch, Weisbrod, and Timmer 2007; Ravallion and 10. Based on data reported in social accounting matrices con- Chen 2007. structed for these countries by the International Food Policy 27. Dong 2006; Mellor 1999. Research Institute for the early 2000s. 28. Wang and others 2006. 11. This is called the "real wage good" effect (Hsieh and Sadou- 29. Ravallion and Chen 2007. let 2007). 30. Bonschab and Klump 2006; van de Walle and Cratty 2004. 12. Christiaensen and Demery 2007; Ravallion 1990. 31. Ravallion and Datt 1996; Suryahadi, Suryadarma, and 13. Minten and Barrett forthcoming. Sumarto 2006; Warr 2001. 14. The consensus holds that the increase is largely from a 32. Ravallion and Datt 2002. genuine increase in Ghana's cocoa production and not just from 33. Haggblade, Hazell, and Reardon forthcoming. increased cross-border smuggling from Côte d'Ivoire because of 34. Ravallion 2005. price differences. 35. Foster and Rosenzweig 2004. 269 270 WORLD DEVELOPMENT REPORT 2008 36. Hayami 1998. Focus A 37. de Janvry, Sadoulet, and Nong 2007. See Amsden 1991, 1. Byerlee, Diao, and Jackson 2005. Hayami, Kikuchi, and Marciano 1996, and Kikuchi 1998 for case 2. United Nations 2006. studies from Taiwan, China, and the Philippines. 3. Ravallion, Chen, and Sangraula 2007. 38. Hossain 2004; Kijima and Lanjouw 2005. 4. Ravallion, Chen, and Sangraula 2007. 39. Anríquez and López 2007. 5. Yang 1999; Ravallion and Chen 2007. 40. De Ferranti and others 2005; Ferreira, Leite, and Litchfield 6. Migration's contribution to rural poverty reduction is com- 2006; Figueiredo, Helfand, and Levine 2007; Paes de Barros 2003. puted here using the $2.15 poverty line rather than the $1.08 41. Ellis 2005; Maxwell 2005. extreme poverty line, because it is unrealistic to think that all 42. Martin and Mitra 2001. migrants are extremely poor. 43. Krueger, Schiff, and Valdés 1991. 7. The expressions for these decomposition are as follows: 44. Deininger and Okidi 2003. Poverty-neutral migration: 45. Fan, Zhang, and Zhang 2004. r(H r r ) + S (H u u u ) + (H u r )(S u u ) 46. Thorbecke and Wan Jr. 2004; Teranishi 1997. Optimal levels Ht - Ht -1= St t - Ht -1 t t - Ht -1 t -1- Ht -1 t - St -1 Rural contribution Urban contribution Urban ­ rural migration of taxation in contexts where agriculture (most often agricultural exports) forms the base of tax and foreign exchange earnings are All migrants poor: discussed in World Bank 2000a. Ht - Ht u u u u u u u -1= St Ht - St r r r r -1Ht -1 + St ( r -1- St r) + S t -1Ht - St -1Ht -1+ St - St ( -1 )(H -1) t 47. Alston and others 2000. Rural contribution Urban contribution Urban contribution 48. Inocencio and others 2005. (on urban population) (on migrants) 49. Fan and Chan-Kang 2004. where H, Hu, and Hr are respectively the total, urban, and rural 50. In China, public spending on agriculture increased by 15 poverty rates, Su and Sr are respectively the urban and rural popu- percent a year between 1995 and 2005, compared with a virtual lation shares, and the subscript t denotes time. stagnation in the first half of the 1990s (China's 11th Five Year 8. Renkow 2005. Plan). Government of India: Planning Commission 2006; World 9. Only in Ecuador are poverty rates lower in areas with higher Bank 2004d). agricultural potential. And in Cambodia and Kenya poverty rates 51. López and Galinato 2006. are very high everywhere and do not appear to be lower in favor- 52. The statistical code of the Organisation for Economic Co- able areas. See Minot, Baulch, and Epprecht 2003 for Vietnam; operation and Development/Development Assistance Committee Benson, Chamberlin, and Rhinehart 2005 for Malawi; Buys and (OECD/DAC) for "agriculture" does not include "rural devel- others 2007 for the other countries. opment" (which is classified as multisector aid) or "food aid" 10. In Thailand almost 50 percent of all poor live in areas with (a subcategory of general program assistance). The recent trend high agropotential and good access to large cities and thus mar- toward program-based approaches and multisectoral projects is kets. A recent study for Central America also found a high share not reflected here. of the poor living in areas of good accessibility in Guatemala and 53. The OECD Creditor Reporting System (CRS) reports com- Nicaragua (World Bank 2004e). mitments , not the funds actually disbursed. 11. Jalan and Ravallion 2002. 54. This includes both Sub-Saharan and North Africa. 55. Anderson, Feder, and Ganguly 2006. Chapter 2 56. de Gorter and Swinnen 2002. 1. Wik, Pingali, and Broca 2007. 57. The political consensus on food security in itself was not 2. This chapter presents data according to World Bank regions, enough, however, to make the green revolution happen. The auto- which can be related to the typology introduced in chapter 1 in biography of C. Subramaniam, the minister of agriculture at that the following way: agriculture-based: Sub-Saharan Africa (SSA); time, reveals how much leadership it took to persuade the skeptics, transforming: South Asia (SA), East Asia and Pacific (EAP), and including parliamentarians, that modernizing India's agriculture Middle East and North Africa (MENA); urbanized: Eastern on the basis of science and technology was feasible (Visvanathan Europe and Central Asia (ECA), and Latin America and the Carib- 2003). bean (LAC) (see table 1.1). 58. Bates 1981. 3. Evenson and Gollin 2003; IRRI pers. comm. and CIMMYT 59. Djurfeldt, Jirstroml, and Larsson 2005 point out that two pers. comm. policy beliefs held by the ruling urban elites were important for this 4. FAO 2006a. policy choice: (1) that smallholders are resistant to change, and (2) 5. Based on studies of decomposition of agricultural growth that large-scale production is superior. In India such beliefs were by Fan and Pardey 1997, Huang and Rozelle 1995, McKinsey and also common prior to the green revolution, but there were strong Evenson 2003, and Mundlak, Larson, and Butzer 2004. political incentives to include smallholders in the ongoing efforts 6. Bruinsma 2003. to improve food production (Swaminathan 1993). 7. Ruttan 2002; Timmer 2002. 60. Suri 2006. 8. Mundlak, Larson, and Butzer 2004. 61. Anderson 2004. 9. Based on studies of decomposition of agricultural growth 62. Mercoiret 2005. by Fan and Pardey 1997, Huang and Rozelle 1995, McKinsey and 63. Bates 1981. Evenson 2003, and Mundlak, Larson, and Butzer 2004. Endnotes 271 10. Fan, Zhang, and Zhang 2002; McKinsey and Evenson 2003; and the recent FAO interim report projections to 2030/2050 (FAO Rozelle and others 2003. 2006d). 11. Huang and Rozelle 1996. Trade conditions seen today are presumed to continue out to 12. Lusigi and Thirtle 1997; Thirtle, Hadley, and Towsend 1995. 2050. Projections for water requirements, infrastructure capacity 13. Binswanger, Khandker, and Rosenzweig 1993; Fan, Zhang, expansion, and water use efficiency improvement are conducted by and Zhang 2002; Mundlak, Larson, and Butzer 2004. IMPACT-WATER, an IFPRI model. Energy use and production are 14. Foster and Rosenzweig 1996. loosely coupled to the International Energy Agency (IEA) 2004 ref- 15. Frisvold and Ingram 1995. erence scenario-a scenario that lies central in the range of available 16. Fan, Zhang, and Zhang 2004. energy projections. Climate change data were developed through col- 17. Ali and Byerlee 2002; Huang and Rozelle 1995. laborative work with the Integrated Model to Assess the Global Envi- 18. World Bank 2006r. ronment (IMAGE-2) of the Netherlands Environmental Assessment 19. A reliable growing period is defined as greater than 150 days. Agency based on downscaled data from the Climate Research Unit of 20. Binswanger and Pingali 1988. the University of East Anglia. The climate change impacts of the refer- 21. Morris and others 2007. ence scenario are comparable to medium scenarios such as the IPCC- 22. Henao and Baanante 2006. B2 scenario. For the simulations of the reference world, the medium 23. Köhlin 2006. climate sensitivity value of the Third Assessment Report (2.5°C rise 24. Chamberlin, Pender, and Yu 2006. in global temperature over the next 50 years) is used, which has been 25. Some of the differences between the country examples cited adjusted slightly in the latest Intergovernmental Panel on Climate here might be a result of differences in the level of disaggregation Change (IPCC) 2001 report to a level of 3.0°C (IPCC 2007a). of population density data, but the heterogeneity can be found 49. Numbers on past growth in meat and cereal demand are across a wide variety of countries, independent of data quality. from the FAO. 26. Based on Ali 2006. 50. Rosegrant and others 2006b. 27. Joshi, Singh Birthal, and Minot 2006. 51. Cassman and others 2003. 28. Ali 2006. 52. World Bank 2007i. 29. World Bank 2007a. 53. Scherr and Yadav 1996. 30. Agricultural GDP in constant 2000 reais (Instituto de Pes- 54. Sebastian 2007. quisa Economica Aplicada (IPEA) 2006. 55. Comprehensive Assessment of Water Management in Agri- 31. World Bank 2005j. culture 2007; International Assessment of Agricultural Science 32. Aldana 2006. and Technology for Development IAASTD 2007; United Nations 33. World Bank 2006f. Development Program 2006. 34. World Bank 2006e. 56. Comprehensive Assessment of Water Management in Agri- 35. Ali 2006; Dinham 2003. culture 2007. 36. Delgado and others 1999. 57. United Nations Development Program 2006. 37. De Haan and others 2001. 58. World Bank 2006t. 38. World Bank 2007b. 59. Comprehensive Assessment of Water Management in Agri- 39. FAO 2004d. culture 2007. 40. FAO 2004d. 60. United Nations Development Program 2006. 41. FAO 2004d. 61. Stern 2006. 42. Belasco 2006. 62. African Development Bank and others 2007. 43. Bruinsma 2003; FAO 2006d; Rosegrant and others 2006b. 63. Parry, Rosenzweig, and Livermore 2007; Warren 2006. 44. World Bank 2006d. 64. Estimates prepared by Warren 2006 for Stern 2006, based 45. World Bank 2007i. on the integrated crop-climate and socioeconomic model devel- 46. Barreto and others 2006. oped by the International Institute for Applied Systems Analysis. 47. Sauven 2006. These results assume a high degree of adaptation, international 48. Description of IFPRI's reference case: The reference case in trade, and no CO2 fertilization. Estimates vary by the assumed the IFPRI model is a no-new-policies scenario by design. It imag- special-report-on-emission scenarios of greenhouse gas emissions, ines a world developing over the next decades as it does today, with- technological development, economic growth, and socioeconomic out anticipating deliberate interventions requiring new or intensi- conditions, as developed by the IPCC. fied policies in response to the projected developments. Population 65. Darwin and others 1995, as reported in Schmidhuber and projections are taken from the medium variant projections of the Tubiello forthcoming; Fischer, Shah, and Velthuizen 2002; Reilly United Nations (2004), with global population increasing from and others 1996. slightly more than 6.1 billion in 2000 to more than 8.2 billion in 66. Fischer, Shah, and Velthuizen 2002, as reported by Schmid- 2050. Economic growth follows loosely the assumptions of the huber and Tubiello forthcoming. TechnoGarden Scenario of the Millennium Ecosystem Assessment 67. The World Bank projects real crude oil prices to fall by (2005) but with adjustments to align with World Bank medium- about half between 2006 and 2015. Others, such as the Inter- term projections. Agricultural productivity values are based on national Energy Agency in Paris, expect real crude oil prices to the Millennium Ecosystem Assessment (TechnoGarden Scenario) remain near current levels for the next several decades. 272 WORLD DEVELOPMENT REPORT 2008 68. Rosegrant and others 2006a. Chapter 3 69. Schmidhuber 2007. 1. In this chapter, rural households are defined as those in areas 70. FAO 2000. defined as "rural" according to country-specific definitions (see 71. U.S. Congressional Research Service 2004. chapter 2). 72. U.S. Department of Agriculture (USDA) 2006. 2. Chapter 2 discussed many of the public goods that partly 73. Baffes 2006. determine the rural context (roads, market access, agroecological 74. U.S. Department of Agriculture: Economic Research Ser- environment) and affect the returns on assets. vice 2004. 3. De Weerdt 2006; Krishna and others 2006; Larwanou, 75. U.S. Congressional Research Service 2004. Abdoulaye, and Reij 2006. 76. Lucas, Jones, and Hines 2006. 4. Peters 2006; World Bank 2006n. 77. Murray 2007. 5. Du, Park, and Wang 2005; Foster and Rosenzweig 2004; Kijima 78. Cassman and others 2003; Reynolds and Borlaug 2006. and Lanjouw 2004; Lanjouw 2007; Lokshin, Bontch-Osmolovski, 79. Bruinsma 2003. and Glinskaya 2007; McCulloch, Weisbrod, and Timmer 2007. 80. Cassman and others 2003. 6. Beegle, De Weerdt, and Dercon 2006; De Weerdt 2006; 81. Alexandratos 2005. Krishna 2006b; McCulloch, Weisbrod, and Timmer 2007; Nargis 82. Alexandratos 2005. and Hossain 2006. 7. Davis and others 2007; Deichmann, Shilpi, and Vakis 2006; Focus B Haggblade, Hazell, and Reardon 2005. 1. Current technologies use agricultural feedstocks such as 8. Mansuri 2007b; Quisumbing, Estudillo, and Otsuka 2004. sugar and maize for ethanol and rapeseed, soybean, and palm oil 9. Lucas 1987; Mansuri 2007b; McCarthy and others for biodiesel. 2006;Rozelle, Taylor, and de Brauw 1999. 2. U.S. Department of Agriculture (USDA) 2007. 10. Knight and Song 2003 for China and World Bank 2006n 3. Garten Rothkopf (international advisory firm) 2007. for Malawi. Calculations for Mexico based on ENIGH (National 4. International Energy Agency (IEA) 2004; Garten Rothkopf Survey of Household Incomes & Expenditures 2004). (international advisory firm) 2007. 11. Large-scale commercial farmers are not considered, as the 5. Koplow 2006. chapter focuses on pathways out of poverty. 6. World Bank 2007d. 12. These households are not necessarily autarkic, and within 7. U.S. Department of Agriculture (USDA) 2007. subsistence farmers, there can be both net buyers and net sellers of 8. World Bank 2007d. food (see chapter 4). Most of these households engage in markets 9. Schmidhuber 2007. for food, labor, or manufactured goods, but in a more limited way 10. World Bank 2007d. than others. 11. Cellulosic ethanol technologies may result in substantial 13. Note that this quantification does not accurately reflect social and environmental benefits; in most cases, however, they all aspects of migration as a livelihood strategy, as those house- are probably 10 to 15 years away (if ever) from becoming commer- holds that chose to exit are not captured by the surveys. The clas- cially viable as they are currently used only on a pilot basis (Inter- sification captures households that have remained but derive the national Energy Agency (IEA 2004). Technologies are tested on a majority of their income from public and private transfers. Many pilot-plant scale in individual process steps but are not integrated. of these are older and female-headed households. In addition to Scaling up the integrated process could take at least a decade. such households, migration is a key household livelihood strategy 12. U.S. Department of Agriculture (USDA) 2007. for many young and educated people who exit rural areas. 13. U.S. Department of Agriculture (USDA) 2007. 14. The share of diversified households is, logically, higher 14. In the extreme, trucking ethanol from midwestern states when agricultural wage labor, nonagricultural wage labor, and in the United States to the coastal cities rather than transporting nonagricultural self-employment are considered as separate gasoline in pipelines would consume considerably more energy, income sources. in the form of diesel. 15. We use the term "dualism" to put emphasis on the sharp con- 15. Farrell and others 2006; Hill and others 2006; Kartha 2006; trast that exists among activities, recognizing that there is a contin- review of studies reported in Worldwatch Institute 2006 and uum in the implications (such as income levels) across dual types. Kojima, Mitchell, and Ward 2006. 16. http://faostat.fao.org. 16. Koplow 2006. 17. Yet in Ghana and Nigeria, where the vast majority of farm- 17. Commission of the European Communities 2006. ers are subsistence-oriented, these farmers sell a larger share of 18. Turner and others 2007. total marketed production from all types of households (54 per- 19. FBOMS (Fórum Brasileiro de ONGs e Movimentos Sociais) cent and 32 percent, respectively). 2006. 18. Deere 2005; Dolan and Sorby 2003; Newman 2001; Zhang 20. Worldwatch Institute 2006. and others 2007. See also chapter 9. 21. United Nations Conference on Trade and Development 19. Regional averages were calculated using available house- (UNCTAD) 2006b; Worldwatch Institute 2006. holds and labor force surveys in each region. For each country, 22. Kojima, Mitchell, and Ward 2006. surveys from 2000 or the nearest year available were used, and Endnotes 273 the population was adjusted to 2000 population (as reported by 32. The labor market imperfections can be the result of wages the UN). The calculations for East Asia and the Pacific (EAP) that are higher than the competitive equilibrium to guarantee suf- exclude China but include Cambodia, Fiji, Indonesia, Marshall ficient caloric intake (Leibenstein 1986). Islands, Thailand, Timor-Leste, and Vietnam, which account for 33. de Janvry, Fafchamps, and Sadoulet 1991; Von Braun, 66 percent of the population of East Asia outside of China. South Hotchkiss, and Innmink 1989. Asia (SA) includes Bangladesh, Bhutan, India, and Pakistan, which 34. Bandiera and Rasul 2006; Basu 2006b; Conley and Udry accounts for 97 percent of the region's population. Sub-Saharan 2004; Duflo, Kremer, and Robinson 2006; Foster and Rosenzweig Africa (SSA) includes Angola, Benin, Burundi, Burkina Faso, 1995. Cameroon, Cape Verde, Chad, the Democratic Republic of Congo, 35. Basu 2006a; Bourguignon and Chiappori 1994; Carter and Ethiopia, Ghana, Gambia, Kenya, Lesotho, Madagascar, Mozam- Katz 1997; Goldstein and Udry 2006; McPeak and Doss 2006; bique, Rwanda, Senegal, Sierra Leone, Sao Tome and Principe, Udry 1996; Udry and others 1995. South Africa, Uganda, and Zambia, which represents 55 percent 36. Baland and Platteau 1996; McCarthy 2004; Ostrom 1990. of the population of the region. Latin America and the Caribbean 37. Duflo and Udry 2004. (LAC) includes Bolivia, Brazil, Chile, Colombia, Costa Rica, the 38. Men still work only three-fourths of the time women do, Dominican Republic, Ecuador, Guatemala, Guyana, Haiti, Hondu- reflecting culturally assigned housework responsibilities (New- ras, Jamaica, Mexico, Nicaragua, Peru, Panama, Paraguay, and El man 2001. Salvador, representing 85 percent of the population of the region. 39. Katz 1995; Von Braun, Hotchkiss, and Innmink 1989; Von Middle East and North Africa (MENA) includes Egypt, Jordan, Braun and Webb 1989; Warner and Campbell 2000. Morocco, and Yemen, representing 47 percent of the population of 40. Hall and Patrinos 2006; World Bank 2003i; Zezza and oth- the region. Europe and Central Asia (ECA) includes Albania, Bos- ers 2007. nia & Herzegovina, Croatia, Kyrgyz Republic, Macedonia, Poland, 41. World Bank 2003i. Romania, Russia, Tajikistan, Turkey, and Ukraine, representing 74 42. Jayne and others 2006b. Yet in a study in rural Uganda, de percent of the region's population of the region. See World Devel- Walque 2004 found that this pattern reversed because the more opment Report 2008 Team 2007. educated seemed to be more responsive to education campaigns 20. Katz 2003; Lastarria-Cornhiel 2006; Ramachandran 2006. and learn faster how to protect themselves. Even so, the loss of Note that female self-employment in agriculture might not be cap- active adults, even if formally uneducated, can lead to loss of tured well by surveys. Deere 2005, for example, discusses several knowledge for production of high-value cash crops (Yamano and reasons for underreporting bias in Latin America. Jayne 2004). 21. Barrett and others 2005; Haggblade, Hazell, and Reardon 43. Gillespie 2006; Thirumurthy, Graff-Zivin, and Goldstein forthcoming; Otsuka and Yamano 2006. 2005. 22. Based on analysis of household surveys from 66 countries 44. Reviewing evidence of 40 Sub-Saharan Africa countries, (see footnote 33 and World Development Report 2008 Team 2007 Monasch and Boerma 2004 found that AIDS orphans are more on the sources). See also Davis and others 2007; Reardon and oth- likely to be in rural areas in some countries, but not in others. ers forthcoming. 45. Anríquez and Bonomi 2007. 23. de Brauw and Harigaya forthcoming; Macours and Vakis 46. Andre and Platteau 1998; de Janvry, Sadoulet, and Finan 2006; Ratha and Shah 2006; Rogaly and Rafique 2003; World Bank 2005; Otsuka and Yamano 2006. 2005a. 47. Benfica 2006. 24. Anríquez and Bonomi 2007; Anríquez 2003; Lohmar, 48. When most of the farms are small, but most of the land is Rozelle, and Zhao 2001; World Bank 2006s; World Bank 2005a. in big farms, the mode of the distribution of farm size is low, while 25. Otsuka and Yamano 2006 show evidence from Bangladesh, the mode of the distribution of total farmland is much higher- the Philippines, and Thailand. hence the distributions are bimodal. This bimodality of land dis- 26. Despite selection, the overall effect of migration on educa- tributions was first discussed by Johnston and Kilby 1975, who tion level might well be positive, because of a positive incentive indicated that for most countries the unimodal structure is more effect (see Stark, Helmenstein, and Prskawetz 1997) for a theo- productive because it equalizes the marginal product of labor retical model and Boucher, Stark, and Taylor 2005 for empirical across farms. More recently, Vollrath 2007 has shown a robust evidence from rural Mexico) and because of the use of remittances negative relationship between land inequality and agricultural to cover the schooling costs of other household members. productivity. 27. Anríquez and Bonomi 2007. 49. Part of the apparent increase of small farms in Bangladesh 28. de Janvry and others 2006; Gertler, Martinez, and Rubio- is a result of a change in methodology in the agricultural census, Codina 2006; Mansuri 2007a; Taylor and Mora 2006; Yang 2006; as the 1977 census did not include plots below a minimum size Yang and Choi forthcoming. threshold (Anríquez and Bonomi 2007). 29. Frankenberg, Smith, and Thomas 2003; Macours and Swin- 50. Zezza and others 2007. nen 2006; Owen 1966. 51. This can be inferred from the fact that the size of this age 30. Jalan and Ravallion 2002. cohort declines both in rural and urban areas. So the decline in 31. de Janvry and Sadoulet 2006b; Singh, Squire, and Strauss rural areas is not from rural-urban migration. In fact, if anything, 1986. evidence suggests reverse migration in later years. 274 WORLD DEVELOPMENT REPORT 2008 52. Boucher, Barham, and Carter 2005; De Ferranti and others Focus C 2004; Macours, de Janvry, and Sadoulet 2004; Rao and Walton 1. FAO 2002. 2004. 2. FAO 2006c. 53. Agarwal 1994; Deere and Doss 2006; Deere and León 2003; 3. Derived from the food balance sheet-food grown by a coun- World Bank 2005k. try, augmented by the food imported and food aid, and reduced 54. Jacobs 2002; Quisumbing and others 2001; World Bank by storage losses, amounts used as seed and animal feed, and food 2006n. exported-the measure is adjusted by an inequality function to pro- 55. Fafchamps, Udry, and Czukas 1998; Lybbert and others duce an estimate of the number of individuals undernourished. In 2004; Rogg 2006; Seré 2006. this sense, it captures an access-adjusted availability of food. 56. Davis and others 2007; Zezza and others 2007. 4. Staple food is defined as cereals, pulses, roots, and tubers. 57. Fafchamps and Minten 2002; La Ferrara 2003; Munshi 5. Sen 1981. 2003; Putnam, Leonardi, and Nanetti 1993; World Bank 2006s. 6. Sanchez and others 2005. 58. Agoua, Mercoiret, and Ouikoun 2000; Bernard and others 7. Katz 1994. 2006; Kaburie and Ruvuga 2006. 8. FAO 2006c; United Nations Children's Fund (UNICEF) 2007. 59. de Janvry and Sadoulet 2004; Society for Elimination of 9. Alderman 2005. Rural Poverty (SERP) 2006. 10. This term reflects the fact that, except in severe cases, the 60. Carter and Barrett 2006; Dercon 2004; Hoddinott 2006; impact of micronutrient malnutrition is invisible, unlike energy Lybbert and others 2004; McPeak 2004. deficiency, which results in short-statured underweight people. 61. Christiaensen and Sarris 2007; Christiaensen and Subbarao 11. http://www.gainhealth.org. 2005; Dercon, Hoddinott, and Woldehanna 2005; González and 12. Darnton-Hill and others 2005. Lopez 2007; Krishna 2006a. 62. Alderman and Paxson 1992; Binswanger and Rosenzweig Chapter 4 1993; Fafchamps and Pender 1997. 1. Hayami and Godo 2004. 63. Gaiha and Thapa forthcoming; Rasmussen 2004; Santos 2. OECD 2006b. 2006. 3. OECD 2006b. 64. Gaiha and Thapa forthcoming. 4. Baffes and de Gorter 2005. 65. Cavendish 1999. 5. Schiff and Valdés 1992. 66. Alderman, Hoddinott, and Kinsey 2006; de Janvry and oth- 6. Derived from Easterly 2006. ers 2006; Jensen 2000; Thomas and others 2004. 7. Townsend 1999. 67. Barrett 2007; Behrman and Deolalikar 1990; Dercon and 8. In contrast, currency overvaluation effects were included Krishnan 2000; Fafchamps 1998. in the net taxation estimates for the agriculture-based and trans- 68. Anríquez and Bonomi 2007; Von Braun 2003. forming countries, where the black market premiums for foreign 69. Berry and Cline 1979; Carter 1984. While some have argued currency were historically large. that land quality differences or unobserved plot characteristics 9. The countries included in the analysis are Bulgaria, the Czech can help explain the inverse relationship (Assuncao and Braido Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, forthcoming; Benjamin 1995, others have shown that the inverse Slovakia, and Slovenia. relationship persists even after controlling for land quality and 10. Anderson forthcoming. other plot characteristics (Heltberg 1998; Kimhi 2006). 11. Anderson and Martin 2005; Bouët 2006a; Polaski 2006. 70. Feder 1985; Kevane 1996; World Bank 2003g; Zimmerman Including estimates of domestic agricultural taxation would likely and Carter 2003. Insurance and credit markets failures often coin- add to the costs. Bouët 2006b reviewed 15 studies assessing the cide because of common underlying conditions such as spatial dis- impact of full trade liberalization, which is indicative of the costs persion, heterogeneity, seasonality, and covariant risk (Binswanger of current policies. While estimates of the implicit costs differ, the and McIntire 1987; Binswanger and Rosenzweig 1993). relative roles of sources of distortions and the distribution of costs 71. Karp 2007a. across regions are similar across studies. The implicit welfare costs 72. Similarly, important tradeoffs might exist related to land of current agricultural trade policies as a percent of the costs of consolidation policies aimed at reducing the fragmentation of the all trade policies had a median of 66 percent across 10 studies; farm of one household into multiple small plots. While consoli- 38 percent of the costs were estimated to be borne by developing dation might decrease transaction costs, it can increase risk (for countries across 15 studies (median estimate); developing-country example, plots that are geographically separated are less likely to policies accounted for 55 percent of these costs across 8 studies; be hit by the same plague). Moreover, consolidation policies leave and on average tariffs accounted for more than 90 percent of the room for elite capture, and fair and transparent mechanisms for cost of agricultural trade policies across 4 studies. reallocating land across different households can be hard to design 12. The $17 billion cost is a conversion to 2005 GDP and prices and implement. Policies that force a minimum plot size can result of the static share of the $26 billion 2015 estimate in Anderson, in important distortions, coming with a potential efficiency and Martin, and van der Mensbrugghe 2006b. Other studies provide equity cost (Vranken and others 2007. higher and lower estimates (see footnote 11). Endnotes 275 13. Anderson, Martin, and Valenzuela 2006; Francois, Van 56. López and Galinato 2006. Meijl, and Van Tongeren 2005; Hertel and Keeney 2005,. 57. Fan, Sukhadeo, and Rao 2004. 14. Anderson and Valenzuela forthcoming. 58. Chand and Kumar 2004. 15. Anderson, Martin, and van der Mensbrugghe 2006a. 59. Allcott, Lederman, and López 2006; Esteban and Ray 2006. 16. Baffes 2007. 60. See Bardhan 2002 for a discussion of the advantages and 17. Anderson, Martin, and van der Mensbrugghe 2006a; FAO disadvantages of decentralization. 2005b. 61. Lederman, Loayza, and Soares 2006. 18. Aziz and others 2001. 19. Baffes 2005. Chapter 5 20. Anderson and Valenzuela forthcoming. 1. Fafchamps, Minten, and Gabre-Madhin 2005. 21. Alston, Sumner, and Brunke 2007. 2. Kohls and Uhl 1985. 22. Panagariya 2005; Tangerman 2005. 3. Shepherd 1997. 23. Ashraf, McMillan, and Zwane 2005. 4. These are being implemented by the Kenyan and Malawi 24. Anderson, Martin, and van der Mensbrugghe 2006a. Agricultural Commodity Exchanges; the Mozambique Agricul- 25. Hertel and others 2007. tural Marketing Information System (SIMA); and by Manobi, 26. Ravallion and Lokshin 2004. which is currently expanding these activities to Burkina Faso, 27. Baffes and Gardner 2003. Ghana, Mali, Tanzania, Uganda, and Zambia (see http://www. 28. Ivanic and Martin 2006. manobi.sn/sites/?M=6&SM=20&IDPresse=22). 29. Hertel and Reimer 2005; Winters 2002. 5. Fafchamps, Minten, and Gabre-Madhin 2005; Kleih, Oko- 30. Minot and Goletti 2000. boi, and Janowski 2004; Temu and Msuya 2004. 31. Ravallion 1990. 6. Gabre-Madhin and Goggin 2005; United Nations Confer- 32. Nicita 2004. ence on Trade and Development (UNCTAD) 2006a. 33. Bussolo and others 2006; Isik-Dikmelik 2006; Klytchnikova 7. Trading in forward and futures contracts in India was lim- and Diop 2006. ited to a few commodities (such as oilseeds, sugar, and cotton) 34. Martin and Ng 2004. after broader futures trading was banned in 1952. In 2004 the ban 35. Anderson, Martin, and van der Mensbrugghe 2006a Martin on futures trading for 54 agricultural commodities was removed and Anderson 2006; Polaski 2006. (World Bank 2005f), but it was reintroduced for wheat in 2006. 36. Anderson, Martin, and Valenzuela 2006; Hertel and Keeney 8. Narender 2006; Sahadevan 2005. 2005. 9. These included the fortnightly turnover of futures trading 37. Anderson and Valenzuela forthcoming. for guar seed, chick peas, black legumes, soybean oil, cane sugar, 38. Laborde and Martin 2006. guar gum, and lentils (Narender 2006). 39. Martin and Anderson 2006. 10. Dana, Gilbert, and Shim 2006; Dana, Gravelet-Blondin, 40. Hertel and others 2007. and Sturgess 2007; Dorward, Kydd, and Poulton 2006. 41. Staatz and Dembele 2007; World Bank 2004c. 11. Avalos-Sartorio 2006; Hazell, Sheilds, and Sheilds 2005; 42. World Bank 2004c. Mitchell and Le Vallee 2005,. 43. World Bank 2004c. 12. Cummings, Rashid, and Gulati 2006; Dorward, Kydd, and 44. Baffes and Gardner 2003. Poulton 2006; Umali-Deininger and Deininger 2001. 45. Winters 2006. 13. Dawe 2001; Myers 2006; Timmer 2002. 46. FAO 2006b; Winters 2006. 14. Dorward, Kydd, and Poulton 2006. 47. Foster and Valdés 2005. 15. Byerlee, Jayne, and Myers 2006. 48. Baunsgaard and Keen 2005. 16. Malawi, despite having these reserves, disrupted domestic 49. World Bank 2000a. trade by imposing an export ban, which undercut the other price- 50. Consumption taxes are theoretically more efficient than stabilization measures. trade taxes. A simplified example of a 1 percentage point reduc- 17. World Bank 2006p. tion in the tariff rate on a final consumption good replaced with 18. The widespread adoption of genetically modified cotton a 1 percentage point increase in the corresponding domestic tax varieties in major producing countries, such as Australia, China, on consumption of the same good can provide a useful illustra- and the United States, was a major contributor to significant tion. The price faced by the consumer and tax revenues will be increases in productivity and global output (Poulton 2007). unchanged, but domestic producers will face prices closer to world 19. Poulton 2007. market levels. 20. Mayer and Fajarnes 2005. 51. International Monetary Fund 2005. 21. In Cameroon, this led to the "homogenization" of exported 52. World Bank 2004b. cocoa beans, with most cocoa being exported as "fair fermented" 53. Ashraf, McMillan, and Zwane 2005. quality rather than the high-quality "good fermented" cocoa, and 54. Coady, Dorosh, and Minten 2007. to a decline in the price premium paid on high-quality beans (Tol- 55. Binswanger 1989; Schiff and Montenegro 1997. lens and Gilbert 2003). 276 WORLD DEVELOPMENT REPORT 2008 22. Baffes, Lewin, and Varangis 2005; Tollens and Gilbert 46. Reardon and Timmer 2006. 2003. 47. Reardon and Berdegué 2002; Reardon and Timmer 2006. 23. KILLICAFE, a farmer-owned company, facilitates market- 48. Flores, Reardon, and Hernandez 2006. ing and provides technical assistance to members to improve pro- 49. For example, farmers growing peanuts in Senegal (Warning ductivity and quality. Its export sales of specialty coffee exceed and Key 2002), poultry in India (Ramaswami, Birthal, and Joshi $500,000 annually. The quality improvement enabled farmers to 2006), and maize in Indonesia (Simmons, Winters, and Patrick receive a 70 percent price premium (www.technoserve.org/news/ 2005). TZCoffeeSectorBrief.pdf). 50. Balsevich, Berdegué, and Reardon 2006; Dries and Reardon 24. Akiyama, Baffes, and Varangis 2001. 2005; Hu and others 2004. 25. Akiyama and others 2003; Bonjean, Combes, and Sturgess 51. Gutman 1997. Rodríguez and others 2002 note that while 2003. general-line small shops folded quickly, those in specialized niches, 26. Akiyama, Baffes, and Varangis 2001; Shepherd and Farolfi particularly bakeries and fresh fish, meat,and fruit and vegetable 1999. shops, were better able to compete. 27. Winter-Nelson and Temu 2002. 52. Mukherjee and Patel 2005. 28. Bonjean, Combes, and Sturgess 2003; Poulton 2007; Tsch- 53. Some examples are Xincheng and SanLu in China (Hu and irley, Zulu, and Shaffer 2004. others 2004), Homegrown in Kenya (Boselie, Henson, and Weath- 29. Poulton 2007. erspoon 2003), Konzum in Croatia (Dries, Reardon, and Swinnen 30. Bonjean, Combes, and Sturgess 2003. 2004), Hortifruit in Central America (Berdegué and others 2003), 31. Regmi and Gehlar 2005. and ITC in India (DeMaagd and Moore 2006). 32. CII-McKinsey & Co. 1997. 54. Minten, Randrianarison, and Swinnen 2006; Swinnen and 33. Marketing survey covering 78 wholesale markets handling Maertens 2005. mangoes, tomatoes, potatoes, tumeric, and maize in the Tamil 55. Reardon and Berdegué 2002. Nadu, Maharashtra, Orissa, and Uttar Pradesh, India (World Bank 56. World Bank 2005d. 2007f). 57. Buzby, Frenzen, and Rasco 2001; Henson 2006. 34. Shilpi and Umali-Deininger 2006. 58. Unnevehr 2003. 35. Reardon and Berdegué 2006. 59. http://www.eurepgap.org/Languages/English/about.html. 36. Asosiación Nacional de Tiendas de Autoservicios y Distri- 60. Henson and Caswell 1999; Jha 2002; OECD 2003; Wilson buidoras (ANTAD) 2005; Goldman and Vanhonacker 2006; Rear- and Abiola 2003. don, Pingali, and Stamoulis 2006. 61. Jaffee and Henson 2004; World Bank 2005d. 37. See Reardon and Berdegué 2002 for Latin America, Ber- 62. Otsuki, Wilson, and Sewadeh 2001 is widely referenced. degué and others 2005 for Central America, Dries, Reardon, and 63. Calvin, Flores, and Foster 2003. Swinnen 2004 for Central and Eastern Europe, Schwentesius and 64. Compliance costs are the additional costs necessarily incurred Gómez 2002 for Mexico, Reardon and Farina 2002 for Brazil, and by government and private players in meeting the requirements to Weatherspoon and Reardon 2003 for Africa. comply with a given standard in a given external market. They may 38. Reardon and Berdegué 2006. include upgrades to official surveillance or inspection systems, 39. Berdegué and others 2005; Boselie, Henson, and Weather- investments in laboratory testing capacities, changes in production spoon 2003; Dries, Reardon, and Swinnen 2004; Natawidjaja and or manufacturing processes or technologies, upgrades of farm or others 2006. factory infrastructure, and certification and testing costs. 40. Similar figures have been obtained in Costa Rica and Brazil 65. Umali-Deininger and Sur 2006; World Bank 2005c. (Reardon and Berdegué 2006). 66. See Jaffee 2005 for Indian spices, Minten, Randrianarison, 41. Boselie, Henson, and Weatherspoon 2003; Dries and Rear- and Swinnen 2006 for Madagascar vegetables, Manarungsan, don 2005; Manalili 2005. Naewbanij, and Rerngjakrabhet 2005 for Thai vegetables, and 42. Reardon and Berdegué 2006; Reardon and others 1999. Dries, Reardon, and Swinnen 2004 for various examples in East- 43. Modern retailers in Vietnam signaled to consumers their ern Europe. supply chain food-safety assurance procedures during and after 67. Maertens and Swinnen 2006. the avian flu crisis, which won many consumers away from wet 68. World Bank 2005f. markets and into supermarkets in Ho Chi Minh City (Phan and 69. World Bank 2005d. Reardon 2006). 70. The Standards and Trade Development Facility provides 44. These studies looked at tomatoes in Guatemala (Hernán- project preparation and project grants to developing countries dez, Reardon, and Berdegué 2007), Indonesia (Natawidjaja and seeking to comply with SPS standards and hence gain or maintain others 2006), and Nicaragua (Balsevich, Berdegué, and Reardon market access (Standards and Trade Development Facility, http:// 2006); kale in Kenya (Neven, Odera, and Reardon 2006); lettuce www.standardsfacility.org). in Guatemala (Flores, Reardon, and Hernandez 2006); guavas 71. For animals, organic means they were reared without the in Mexico (Berdegué and others 2006a); and produce in China routine use of antibiotics and without the use of growth hormones. (Wang and others 2006). At all levels, organic food is produced without the use of geneti- 45. Berdegué and others 2003; Dries, Reardon, and Swinnen cally modified organisms. 2004. 72. Farnworth and Goodman 2007. Endnotes 277 73. Dimitri and Oberholtzer 2006; International Federation of 17. Deininger and Jin 2003. Organic Agriculture Movements (IFOAM) 2006. 18. Deininger and Chamorro 2004; Deininger and Jin 2007; 74. Farnworth and Goodman 2007; Henson 2006. Macours, de Janvry, and Sadoulet 2004. 75. Becchetti and Costantino 2006; Murray, Raynolds, and 19. Deininger, Ayalew, and Alemu 2006. Taylor 2006; Utting-Chamorro 2005. 20. Cain 1981; Kranton and Swamy 1999; World Bank 2003h. 76. Mendoza and Bastiaensen 2003; Zehner 2002. 21. Nagarajan, Deininger, and Jin forthcoming. 77. Lernoud and Fonseca 2004. 22. Bardhan and Mookherjee 2006. 78. Henson 2006. 23. Bird and Slack 2004. 79. Akiyama and Larson 1994; FAO 2004d. 24. Banerjee and Iyer 2005; Nugent and Robinson 2002. 80. China's high-value agricultural exports nearly doubled 25. Appu 1996; Deininger 1999; Lutz, Heath, and Binswanger from $4.2 billion in 1994 to $8 billion in 2004, while its processed 1996. food exports more than tripled from $2.6 billion to $8 billion. 26. Banerjee, Gertler, and Ghatak 2002. 81. FAO 2004d. 27. World Bank 2007f. 82. Henson 2006. 28. Zeller 2003. 29. Boucher, Carter, and Guirkinger 2006. Focus D 30. Sarris, Savastano, and Tritten 2004. 1. FAO 2007b. 31. Boucher, Carter, and Guirkinger 2006. 2. World Bank 2003f 32. Peck Christen and Pearce 2005. 3. Freeman and Estrada-Valle 2003. 33. Pearce and others 2005. 4. van der Meer 2007. 34. Consultative Group to Assist the Poor (CGAP) 2004. 5. Reardon, Henson, and Berdegué forthcoming. 35. Adams, Graham, and Von Pischke 1984. 6. The major agrochemicals include herbicides, insecticides, 36. The World Development Report 1989: Financial Systems fungicides, and other chemicals used in agriculture. and Development offered a sharp critique of these programs. By 7. Mercier Querido Farina and dos Santos Viegas 2003. the end of the decade, most donors and governments were lifting 8. da Silveira and Borges 2007. financially repressive policies and sharply scaling back state-led 9. ETC Group Communiqué 2005. agricultural credit programs (World Bank 1989). 10. Tirole 1998. 37. Coffey 1998. 11. Murphy 2006. 38. Cuevas and Fischer 2006; Nair and Kloeppinger-Todd 2007; 12. FAO 2004b; International Coffee Organization 2007; Inter- World Bank 2007g. national Cocoa Organization (ICO) 2006; Vorley 2003. 39. Aeshliman 2007. 13. Morisset 1998. 40. Consultative Group to Assist the Poor (CGAP) 2006b. 14. World Bank 2006v 41. Consultative Group to Assist the Poor (CGAP) 2006a. 15. van der Meer 2007. 42. Nair and Kloeppinger-Todd 2006. 16. http://www.tetrapak.com. 43. Conning 2005. 17. http://www.danone.com; http://www.grameen-info.org. 44. Fleisig and de la Peña 2003. 18. http://www.cocoasustainability.mars.com/News/article5. 45. de Janvry, McIntosh, and Sadoulet 2006. htm. 46. Hess 2003; Skees and Barnett 2006. 47. Just 2006. Chapter 6 48. McPeak 2006. 1. Ayalew, Dercon, and Gautam 2005; Deininger and Jin 2006; 49. McCord, Botero, and McCord 2005. Place and Otsuka 2002. 50. Hazell 1992. 2. Alden-Wily 2003. 51. Sarris, Karfakis, and Christiaensen 2006. 3. Deininger, Ayalew, and Yamano 2006. 52. Gine, Townsend, and Vickery 2006. 4. Chauveau and others 2006. 53. Factors affecting demand for fertilizer are discussed in 5. Burns 2006. Kelly 2006. 6. Goldstein and Udry 2006. 54. Yanggen and others 1998. 7. In cases of polygamy, wives beyond the first receive their own 55. For a discussion of how risk affects fertilizer use decisions, individual certificate. see Anderson and Hardaker 2003. 8. Deere and León 2001. 56. Morris 1998. 9. Deininger and Castagnini 2006. 57. For a discussion of the logistical challenges facing fertilizer 10. Khadiagala 2001. distributors, see Gregory and Bumb 2006. 11. Raju, Akella, and Deininger 2006. 58. Jayne and others 2003; Kherallah and others 2002. 12. Transparency International India 2005. 59. For initiatives in Sub-Saharan Africa, see Minot and others 13. Government of Kenya 2004. 2006 and Morris and others 2007. 14. Lobo and Balakrishnan 2002. 60. FAO 2005a; International Center for Soil Fertility and Agri- 15. World Bank 2007e. cultural Development 2003. 16. Swinnen and Vranken 2006. 61. Crawford, Jayne, and Kelly 2006. 278 WORLD DEVELOPMENT REPORT 2008 62. Borlaug and Dowswell 2007. 8. InterAcademy Council 2004; Quisumbing 1996. 63. Kelly, Adesina, and Gordon 2003. 9. Byerlee and Eicher 1997. 64. Duflo, Kremer, and Robinson 2006. 10. CIMMYT, personal communication. 65. Van der Meer and Noordam 2004. 11. Falusi and Afolami 2000; Nweke, Spencer, and Lynman 66. Other initiatives to support entrepreneurial input distribu- 2002. tors in Africa include Seeds of Development (http://www.sodp. 12. Africa Rice Center, personal communication, 2007; Kijima, org/) and African Agricultural Capital (http://www.aac.co.ke/). Sserunkuuma, and Otsuka 2006. 67. Bramel and Remington 2005. 13. International Center for Tropical Agriculture (CIAT) 68. An association is a nonprofit organization that enables 2006. members to collaborate for services, information exchanges, and 14. Joshi and others 1996. representation. In some countries, professional organizations refer 15. Walker 2007. to themselves as "societies" rather than associations. A cooperative 16. Joshi and others 1996; Walker 2007. engages in collective commercial activities such as buying inputs or 17. Sperling, Loevinsohn, and Ntabomvura 1993; Walker selling members' products. Benefits are distributed to each member 2007. proportionately to the volume of transactions with the cooperative, 18. Gollin 2006. rather than to the member's capital contribution; capital contri- 19. Blackeslee 1987. bution is remunerated at a fixed interest rate, with a limit on the 20. Maintenance research is also essential for the productivity amount. Cooperatives benefit from a specific fiscal regime, distinct of livestock. In South Africa, cattle disease losses are closely related from that of enterprises, and are often tax exempt. to expenditures on livestock health. Previous studies that ignored 69. Overseas Cooperative Development Council 2007. Well- this maintenance found low returns on livestock improvement in known cooperative brand names include Land O'Lakes, Welch's, South Africa. But when maintenance effects are accounted for, the Sunkist, Blue Diamond, and Ocean Spray. returns on livestock research are about 40 percent (Townsend and 70. Mauget and Koulytchizky 2003. Thirtle 2001). 71. Banerjee and others 2001. 21. Stokstad 2007. 72. http://www.agro-info.net. 22. Long and Hughes 2001. 73. Mercoiret, Pesche, and Bosc 2006. 23. See http://www.promusa.org. 74. National Dairy Development Board Web site (http://www. 24. Kamuze 2004. nddb.org). 25. Karamura and others 2006. 75. http://www.juanvaldez.com/. 26. CIMMYT 2006. 76. Chen and others forthcoming; Mercoiret, Pesche, and Bosc 27. Lantican, Pingali, and Rajaram 2003. 2006; Stockbridge 2003. 28. Xu and others 2006. 77. Bernard, de Janvry, and Sadoulet 2005. 29. Smale and Drucker forthcoming. 78. Berdegué 2001. 30. Narrod and Pray 2001. 79. Berdegué 2001. 31. Steinfeld and others 2006. 80. Brock and McGee 2004. 32. Thibier and Wagner 2002. 81. Hussi and others 1993. 33. Leksmono and others 2006. 82. By 1995, 20 percent of the village cooperatives and unions 34. Asian Development Bank 2005; Dey and others 2000. were not free to set consumer prices, and 13 percent were not free 35. Fuglie and others 2002. to set producer prices. Twenty-four percent of the unions and 7 36. McGaw, Witcombe, and Hash 1997; Gibson 2002; Pablico percent of the village cooperatives were experiencing interference 2006. in staff recruitment or removing redundant staff, and 24 percent 37. World Bank 2004h. of the unions still had political appointees on their boards (World 38. Pretty 2006. Bank Operations Evaluation Department 1998). 39. See http://www.rolf-derpsch.com/siembradirecta.htm. 83. Collion and Rondot 2001; Mercoiret, Pesche, and Bosc 40. Consultative Group on International Agricultural Research 2006. Science Council (CGIAR) 2006b. 84. World Bank 2006c. 41. French Agricultural Research Centre for International Development 2006. Chapter 7 42. Angus 2001. 1. Conway 1999. 43. Consultative Group on International Agricultural Research 2. Evenson and Gollin 2003. Science Council (CGIAR) 2006a. 3. Evenson and Rosegrant 2003. 44. Waibel and Pemsl 1999. 4. See Web site at http://www.indiastat.com. 45. Zeddies and others 2001. 5. Reynolds and Borlaug 2006. 46. InterAcademy Council 2004. 6. "Slow magic" refers to the long-term but high payoff of 47. CIRAD 2006. investment in R&D (Pardey and Beintema 2001). 48. See Web site at http://www.icipe.org. 7. Adoption is high for wheat, which is an important crop only 49. World Bank 2006u. in Ethiopia. 50. Tripp 2006. Endnotes 279 51. Barrett 2003. 3. Huang and others 2002; Qaim 2005. 52. This section is based largely on Pardey and others 2007. 4. Fok, Liang, and Wu 2005; Pemsl, Waibel, and Gutierrez 53. Alston and others 2000. 2005; Yang and others 2005. 54. Many of these studies do not consider technological spill- 5. Pray and others 2002; Sakiko 2007; Smale and others 2006. overs from other countries (Maredia and Byerlee 2000). But 6. Gandhi and Namboodiri 2006. econometric studies and metastudies that include costs of all pro- 7. There was an observed reduction in the coefficient of varia- grams, successful or not, and spillovers show high returns (Alston tion of yields in on-farm field trials in India from 0.69 for conven- and others 2000; Raitzer 2003). tional cotton to 0.57 for transgenics (Qaim 2003). 55. Pardey and others 2007. 8. Bennett, Morse, and Ismael 2006; Gandhi and Namboodiri 56. Pardey and others 2007. 2006; Herring 2007; Qaim and others 2006; Stone 2007. 57. Beintema and Stads 2006. 9. James 2006. 58. Alston and Pardey 1993; Hayami, Kikuchi, and Morooka 10. In an International Food Policy Research Institute study of 1989. 15 developing countries, the public research pipeline for transgenic 59. Byerlee and Traxler 2001; Maredia and Byerlee 2000. food crops included 201 genetic transformation events in 45 dif- 60. Alston 2002. ferent crops (Cohen 2005). In addition, the Grand Challenges in 61. Pardey and others 2007. Global Health Initiative, a public-private partnership, has ongoing 62. Gardner and Lesser 2003; Pardey and others 2007. research projects on staple crops such as banana, rice, sorghum, 63. Gisselquist, Nash, and Pray 2002. and cassava for increased levels of key micronutrients. 64. Kremer and Zwane 2005. 11. Huang and others 2005. 65. Sobel 1996. 12. Life-years are computed as the number of beneficiaries 66. Masters 2005. multiplied by the average expected number of years of extra life 67. Eicher 2006. per beneficiary. 68. World Bank 2005g. 13. Stein, Sachdev, and Qaim 2006. 69. Byerlee and Traxler 2001. 14. Byerlee 1996. 70. See Web site at http://www.fontagro.org. 15. Eicher, Maredia, and Sithole-Niang 2006. 71. Spielman, Hartwich, and von Grebmer 2006. 16. Edmeades and Smale 2006 72. Pardey and others 2007. 17. Pingali 2007; Spielman, Cohen, and Zambrano 2006. 73. In Spanish, Produce means "farm, go farm!" 18. Byerlee and Fischer 2002; Pingali 2007. 74. Kangasniemi 2002. When used, there has often been little 19. Spielman, Cohen, and Zambrano 2006. accountability of the funded scientists to farmers. 20. Brookes and Barfoot 2006; International Council for Sci- 75. Uruguay, with commercialized agriculture, has by law ence 2003; Task Force of the International Life Science Institute implemented a levy for all agricultural research, matched by pub- (ILSI) International Food Biotechnology Committee 2001; The lic funding to the level of 0.4 percent (see Allegri 2002). Royal Society 2002. 76. Levies are feasible for products that pass through a narrow 21. FAO 2004e; Sanvido and others 2006. processing or marketing chain or where the producers are concen- 22. Pray and others 2006. trated and well organized. They are not applicable to traditional 23. Cross-boundary movement of transgenics is regulated by staples, such as cassava. the Cartagena Protocol under the Convention on Biodiversity, but 77. Christiaensen and Demery 2007. the focus is on living modified organisms, such as seed intended 78. Anderson, Feder, and Ganguly 2006. for testing and commercial production. 79. Anderson 2007; Qamar 2002. 24. Gruere and Bouët 2006; Nielson and Anderson 2001. 80. Singh 2007. 25. Bernauer 2003. 81. Blackden and others 2006; Doss and Morris 2001; Moore 26. Barrett and Brunk 2007. and others 2001. 27. New Partnership for Africa's Development Secretariat 82. Ekwamu and Brown 2005; Ellis and others 2006. 2006. 83. Sulaiman V. and Hall 2002. 84. Cuéllar and Kandel 2006; Uliwa and Fischer 2004. Chapter 8 85. van den Berg and Jiggins 2007. 1. Rosegrant and Hazell 2001. 86. Feder, Murgai, and Quizon 2004; Godtland and others 2. Estimates suggest that the germiplasm improvement, largely 2004; Tripp, Wijeratne, and Piyadasa 2005. through the green revolution, saved around 80 million hectares 87. International Telecommunication Union (ITU) 2006. of land in developing countries throught the 1990s (Nelson and 88. Muto 2006. Maredia 2007). 89. Sullivan 2005. 3. Millennium Ecosystem Assessment 2005. 90 Lio and Liu 2006. 4. Tiffen, Mortimore, and Gichuki 1994 and Pagiola 1994 show in Kitui/Machakos in Kenya that even expensive conserva- Focus E tion measures such as terraces have been widely adopted by poor 1. James 2006. farmers with no access to formal credit markets. 2. FAO 2004e; Smale and others 2006. 5. Ruben and Pender 2004. 280 WORLD DEVELOPMENT REPORT 2008 6. Jackson 1993. 49. World Bank 2005i. 7. Boserup 1965; Tiffen, Mortimore, and Gichuki 1994. 50. Gilbert and others 2006. 8. Cleaver and Schreiber 1994; Place, Pender, and Ehui 2006. 51. FAO 2007c. 9. Messer, Cohen, and Marchione 2001. 52. Gilbert and others 2006. 10. Comprehensive Assessment of Water Management in Agri- 53. Dixon, Gibbon, Gulliver 2001. culture 2007; Hazell and Wood forthcoming; Sebastian 2007. 54. Scherr and Yadav 1996. 11. Millennium Ecosystem Assessment 2005. 55. Bojo 1996. 12. United Nations Development Program 2006. 56. Cohen, Shepherd, and Walsh 2005. 13. Shah and others 2003. 57. Cohen, Brown, and Shepherd 2006. 14. Comprehensive Assessment of Water Management in Agri- 58. World Bank 2007h. culture 2007. 59. Palmieri and others 2003. 15. Howe 2002. 60. Area of forests in mosaic lands is about 16 percent of total 16. Millennium Ecosystem Assessment 2005. forest cover in tropical areas, as calculated from World Bank 17. Comprehensive Assessment of Water Management in Agri- 2007i. culture 2007; International Assessment of Agricultural Science 61. World Bank 2007i. and Technology for Development IAASTD) 2007; Rockström and 62. Scherr and McNeely 2006. Barron 2007. 63. Fan and Hazell 2001. 18. Feuillette 2001; García-Mollá 2000; Moench and others 64. World Bank 2007i. 2003. 65. Shively and Pagiola 2004. 19. Comprehensive Assessment of Water Management in Agri- 66. Rudel 2005. culture 2007; World Bank 2006t. 67. World Bank 2007h. 20. World Bank 2005h. 68. Rockström and Barron 2007. 21. de Wit and Stankiewicz 2006. 69. Nkonya and others 2007. 22. World Bank 2006l. 70. McIntire, Bouzart, and Pingali 1992. 23. Aw and Diemer 2005. 71. ICRAF, personal communication, 2007. 24. World Bank 2006o. 72. de Graaff 1996; Helben 2006; Reij and Steeds 2003. 25. Gulati, Meinzen-Dick, and Raju 2005. 73. Erenstein 1999. 26. Dinar 2007. 74. See Tripp 2006 and Ruben and Pender 2004 for useful 27. World Bank 2006x. reviews. 28. An example of a canal automation system is Total Chan- 75. Pender, Place, and Ehui 2006. nel Control technology, which includes gates and other regulating 76. Tripp 2006. structures, remotely controlled by a host computing site. A feature 77. Gebremedhin, Pender, and Tesfaye 2006. of this innovative technology is the ability to accurately control 78. International Fund for Agricultural Development (IFAD) and measure water flow. 2005b. 29. Nayar and Aughton 2007. 79. Uphoff 2001. 30. Pongkijvorasin and Roumasset 2007. 80. Jackson 1993. 31. Bastiaanssen and Hellegers 2007. 81. Westermann, Ashby, and Pretty 2005. 32. Molle and Berkoff 2006. 82. Knox, Meinzen-Dick, and Hazell 2002. 33. Backeberg 2005; Kuriakose and others 2005; United 83. As shown in a recent Consultative Group on International Nations Development Program 2006; World Bank 2006x; Zwart- Agricultural Research Science Council (CGIAR) 2006a study, eveen 1997. more powerful win-win options are elusive. 34. World Bank 2006x. 84. Pagiola and Platais forthcoming. 35. Aw and Diemer 2005; Saleth and Dinar 2005. 85. Pagiola and Platais forthcoming. 36. World Bank 2005h. 86. Pagiola and others forthcoming. 37. World Bank 2003b. 87. Tipper 2004. 38. World Bank 2006l. 39. International Fund for Agricultural Development (IFAD) Focus F 2001. 1. Long and others 2007. 40. Millennium Ecosystem Assessment 2005. 2. Stern 2006; Parry, Rosenzweig, and Livermore 2007. 41. Fowler and Hodgkin 2004; McNeely and Scherr 2003. 3. Estimates by Warren 2006 based on data prepared by Parry 42. Heisey and others 1997. and others 2004. Scenario without the CO2 fertilization effect. 43. World Bank 2003d. 4. Long and others 2007. 44. Pingali and Rosengrant 1994; Susmita, Meisner, and 5. Crop yields are particularly sensitive to heat stress during Wheeler 2007. flowering, so a small temperature increase, if it occurs during this 45. Pretty 2006. critical stage, can have a far greater impact on yields, and this is 46. Pingali, Hossaim, and Gerpacio 1997. not included in crop-climate model predictions (Challinor and 47. Forss and Lundström 2004; Forss and Sterky 2000. others 2006; Schlenker and Roberts 2006). 48. Steinfeld and others 2006. 6. Dasgupta and others 2007. Endnotes 281 7. Intergovernmental Panel on Climate Change (IPCC) 2007a. 11. Jayachandran 2006. 8. Survey of 9,500 farmers in 11 African countries, conducted 12. Foster and Rosenzweig 1994. under the "Climate Change Impacts on and Adaptation of Agro- 13. Sundaram and Tendulkar 2007. ecological Systems in Africa" project funded by the Global Envi- 14. Dev 2002. ronment Facility (GEF). 15. Hurst, Termine, and Karl 2005, citing Olney and others 2002. 9. Maddison 2006. 16. Hurst, Termine, and Karl 2005. 10. Very similar evidence emergence from another recent Cen- 17. Valdés and Foster 2006. ter for Environmental Economics and Policy in Africa survey of 18. Hurst, Termine, and Karl 2005. 727 farmers in the Limpopo River Basin in South Africa (Gbeti- 19. For Brazil, Mexico and Nicaragua, see Valdés and Foster bouo 2006). 2006. For Poland, see World Bank 2001. For Poland this tax also 11. Kurukulasuriya and others 2006; African Development applies to urban incomes. Bank and others 2007. 20. Ureta 2002. 12. Vergara and others forthcoming; Vergara 2005. 21. Jayaraman and Lanjouw 1999; Otsuka and David 1994. 13. Arndt, Hazell, and Robinson 2000. 22. Escobal, Reardon, and Agreda 2000; Jarvis and Vera- 14. International Research Institute for Climate and Society Toscano 2004. (IRI) and others 2007. 23. Valdés and Foster 2006. 15. This initiative was funded by the Least Developed Coun- 24. Valdés and Foster 2006. tries Fund, implemented by the GEF. 25. Haggblade, Hazell, and Reardon forthcoming. 16. Stern 2006. 26. Hurst, Termine, and Karl 2005. 17. Stern 2006. 27. Rural Investment Climate Assessment surveys for Bangla- 18. Stern 2006. desh, Indonesia, Nicaragua, Pakistan, Sri Lanka, and Tanzania; 19. Intergovernmental Panel on Climate Change 2007b. and 2004 VLSS for Tanzania, available online at http://iresearch. 20. World Bank 2007i using data from Tomich and others 2005 worldbank.org/InvestmentClimate/. These estimates consider only the landowners' forgone profits 28. The World Bank's Rural Investment Climate Assessment from conversion and assume that displaced labor can find alter- Program has so far expanded to Bangladesh, Indonesia, Nicara- nate employment at the going wage. gua, Pakistan, Sri Lanka, and Tanzania. Designed to be the coun- 21. Sathaye and others forthcoming cited after World Bank terpart of the Bank's Investment Climate Surveys, Rural Investment 2007i. Climate surveys collect information on rural nonagricultural 22. Steinfeld and others 2006; Stern 2006. enterprises and perceptions of the main hurdles to their operation 23. World Bank 2007i. and development. 29. Damiani 2007. Chapter 9 30. Sundaram and Tendulkar 2007. 1. Measuring labor force participation and assigning workers 31. World Bank 2004g. to a specific sector of activity are difficult for reasons inherent to 32. Araujo, de Janvry, and Sadoulet 2002. the rural household pattern of activity. Many women will declare 33. Hanson 2005. themselves as not in the labor force if they consider their main 34. Hanson 2005. activity as being responsible for household care, even if they are 35. Estimates are computed assuming that, in the absence of active on the farm or in the household business. In addition, to migration, natural population rates for urban and rural areas avoid double counting, statistics report only the main activity would be equal, thus providing a conservative measure of migra- of workers. The overall participation in any sector of activity or tion. Reclassification of rural areas into urban has not been taken type of employment is thus underestimated. Asymmetric under- into account, although it may account for some of the urbaniza- reporting of wage workers may occur if farming their own land is tion, independent of migration. considered the main activity, even when it is not the main source 36. See, for example, Hoddinott 1994, Lanzona 1998, Li and of income. Following common terminology, nonfarm refers to Zahniser 2002, Matsumoto, Kijima, and Yamano 2006, and Zhao employment in the nonagricultural sectors, be it self-employment 1999. or wage employment. Off-farm employment includes agricultural 37. Quisumbing and McNiven 2005. wage employment and nonfarm employment. 38. McCulloch, Weisbrod, and Timmer 2007. 2. Cramer and Sender 1999; Erlebach 2006; Sender, Oya, and 39. Otsuka and Yamano 2006; Satterthwaite and Tacoli 2003. Cramer forthcoming. 40. Banerjee and Newman 1993. 3. Basu 2006a 41. World Bank 2007c. 4. Cramer and Sender 1999; Erlebach 2006; Johnston 1997; 42. Otsuka and Yamano 2006. Sender, Oya, and Cramer forthcoming. 43. Foster and Rosenzweig 1993. 5. Deshingkar and Farrington 2006. 44. Gurgand 2003. 6. Hurst, Termine, and Karl 2005. 45. Duflo 2001. 7. Glinkskaya and Jalan 2005. 46. de Brauw and others 2002; Du, Park, and Wang 2005; 8. World Bank 2003g. Kashisa and Palanichamy 2006. 9. Jarvis and Vera-Toscano 2004. 47. Fafchamps and Quisumbing 1999; Jolliffe 2004; Laszlo 10. Kochar 1997. 2004. 282 WORLD DEVELOPMENT REPORT 2008 48. Orazem and King forthcoming. Focus H 49. Cherdchuchai 2006; Quisumbing, Estudillo, and Otsuka 1. Hawkes and Ruel 2006; Perry and others 2002. 2004; Takahashi 2006. 2. Lipton and de Kadt 1988. 50. Kochar 2000. 3. World Health Organization (Regional Office for Africa) 51. Hanushek and Woessmann 2007; OECD 2004; World Bank 2006. 2006z. 4. Mutero and others 2005; Snowden 2006; Keiser and others 52. World Bank 2005e. 2005. 53. Nishimura, Yamano, and Sasaoka forthcoming. 5. Amarcher and others 2004. 54. Rawlings and Rubio 2005. 6. Mutero, McCartney, and Boelee 2006. 55. de Janvry and Sadoulet 2006a; Rugh and Bossert 1998. 7. Snowden 2006. 56. Ravallion and Wodon 2000; Schady and Araujo 2006; 8. The study compared farmers who complained of malaria- Schultz 2001. like symptoms for two or more days in a month to those with 57. The noncontributory pensions applied in Bolivia (BONO- symptoms for one or no days (Girardin and others 2004). SOL) cover both urban and rural areas. 9. Keiser, Singer, and Utzinger 2005. 58. Levy 2007. 10. van der Hoek 2003; Mutero and others 2005. 59. Edmonds forthcoming, using data from UNICEF's Mul- 11. World Health Organization (WHO) 2003. tiple Indicator Cluster Surveys; http://www.childinfo.org/MICS2/ 12. Goldman and Tran 2002. MICSDataSet.htm. 13. Yanggen and others 2003; Cole, Carpio, and León 2000. 60. Ratha 2005. 14. The health effects of herbicide use were not significant in 61. Alderman and Haque 2006. the estimation results. This could be due to the much higher num- 62. Clay, Riley, and Urey 2004. ber of insecticide poisonings compared with herbicide poisonings 63. Galasso, Ravallion, and Salvia 2004; Ravallion and others (Pingali, Marquez, and Palis 1994). 2005. 15. Pingali, Marquez, and Palis 1994; Rola and Pingali 1993. 64. Morton and others 2006. 16. Hruska and Corriols 2002. 17. United Nations Joint Programme on HIV/AIDS (UNAIDS) Focus G 2006. 1. Edmonds and Pavcnink 2005. 18. Binswanger 2006. 2. De and Dreze 1999. 19. Gillespie and Kadiyala 2005 3. Chaudhury and others 2006. 20. Staatz and Dembele 2007. 4. World Bank 2006z. 21. Gillespie and Kadiyala 2005. 5. De and Dreze 1999. 22. Jayne and others 2006b. 6. United Nations Educational Scientific and Cultural Orga- 23. Abbot and others 2005. nization 2006. 24. Gillespie 2006. 7. FAO and UNESCO 2003. 25. Taylor, Latham, and Woolhouse 2001. 8. Johanson and Adams 2004. 26. United Nations Systemwide Influenza Coordinator and 9. Johanson and Adams 2004. World Bank 2007. 10. Johanson and Adams 2004. 27. Zinsstag and others 2007. 11. http://www.oportunidades.gob.mx. 28. World Bank and others 2006. 12. FAO and UNESCO 2003. 13. Muir-Leresche 2003. Chapter 10 14. EARTH (Escuela de Agricultura de la Región Tropical 1. Gabre-Madhin and Haggblade 2004. Húmeda) University, located in Costa Rica-a private, nonprofit 2. FAO 2006a. university dedicated to education in the agricultural sciences and 3. Collier 2006; Staatz and Dembele 2007. natural resources. 4. Limao and Venables 2001. 15. Juma 2006. 5. International Institute of Strategic Studies (IISS) 2000. 16. Barrera 2007. 6. Ndulu 2007. 17. Section based on Saint 2007. 7. Staatz and Dembele 2007. 18. International Food Policy Research Institute (IFPRI) 8. Hayami and Platteau 1997. 2004. 9. Diao and others 2003; Staatz and Dembele 2007. 19. Stads and Beintema 2006. 10. Pender and Nkonya 2007. 20. www.saa-tokyo.org/english. 11. Staatz and Dembele 2007. 21. Eicher 2006. 12. Algeria, the Arab Republic of Egypt, the Islamic Republic of 22. Eicher 2006. Iran, Iraq, Jordan, Lebanon, Libya, Morocco, the Syrian Arab Repub- 23. United Nations Educational Scientific and Cultural Orga- lic, Tunisia, West Bank and Gaza, and the Republic of Yemen. nization 2006. 13. FAO 2006a. Endnotes 283 14. Vyas 2007. 19. Brosio 2000. 15. Vyas 2007. 20. Bahiigwa, Mdoe, and Ellis 2005. 16. World Bank 2006m. 21. Lin, Tao, and Liu 2007. 17. Eighty percent of the population according to country defi- 22. Chattopadhyay and Duflo 2004. nitions of urban, but only 56 percent using the OECD definition 23. Asian Development Bank 2004. based on population density (De Ferranti and others 2005). 24. Faguet 2004. 18. Wilkinson and Rocha 2006. 25. Hayward 2006. 19. Comisión Económica de las Naciones Unidas para America 26. Zyl, Sonn, and Costa 2000. Latina y el Caribe (CEPAL) 2006; FAO 2004c. 27. Binswanger forthcoming; Binswanger and Nguyen 2006. 20. Farnworth and Goodman 2007; Henson 2006; Lyon 2006. 28. Wassenich and Whiteside 2004; World Bank 2005m. 21. Ravallion, Chen, and Sangraula 2007. 29. OECD 2006a. 22. Berdegué and others 2006b. 30. The percentage would be lower, if disbursement data rather 23. De Ferranti and others 2004. than commitment data are used. However, available disbursement 24. Martínez Nogueira 2007. databases are incomplete or are not disaggregated by sector. 25. Helfand and Levine 2005. 31. Blackie and others 2006; Chinsinga 2007; Evans, Cabral, 26. Pichon 2007. and Vadnjal 2006; Harrigan 2003. 27. Inter-American Development Bank 2005. 32. See http://www.donorplatform.org, http://www.ruta.org, 28. World Bank 2005o. and http://www.neuchatelinitiative.net. 29. Martínez Nogueira 2007. 33. SWAps aim to subsume all significant funding in a single policy and expenditure program under government leadership Chapter 11 and to adopt common approaches across the sector, while relying 1. See Binswanger, Deininger, and Feder 1995 for a historical on government procedures to disburse and account for all funds review of the governance challenges arising from land relations. (Foster, Brown, and Naschold 2000). 2. Goldstone and others 2005. 34. Mosley and Suleiman 2007. 3. Herzog and Wright 2006. 35. World Bank 2005b. 4. Julio Berdegué, personal communication, 2007. 36. World Bank 2005b. 5. Riikka Rajalahti and Willem Janssen, personal communica- 37. Alex McCalla, personal communication, 2007. tion, 2007. 38. Forum on China-Africa Cooperation at http://www.fmprc. 6. Sabatier and Jenkins-Smith 1993. gov.cn/eng/; People's Republic of China 2006. 7. Ryan 1999. 39. Raitzer 2003. 8. López and Galinato 2006. 40. Louwaars 2007. 9. C. de Haan, personal communication, 2007. 41. Oberthür 2002. 10. World Bank 2003i. 42. Lele and Gerrard 2003. 11. Sharma 2007. 43. World Bank 2004a. 12. Huppert and Wolff 2002; Rinaudo 2002; Wade 1982, Wade 44. Winter-Nelson and Rich 2006. 1984. 45. Lele and Gerrard 2003; Raitzer and Kelley forthcoming. 13. BBC News 2005; Fredriksson and Svensson 2003. 46. Stern 2006. 14. Ackerman 2004. 47. http://www.g-8.de/nn_92452/Content/EN/Artikel/__g8- 15. Olken 2007. summit/2007-06-07-g8-klimaschutz__en.html. 16. Finan and Ferraz 2005. 48. Unnevehr 2004. 17. Work 2002. 49. Stern 2006. 18. Bahiigwa, Rigby, and Woodhouse 2005. 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Agricultural inputs and the environment Table A4. Agricultural output and trade Technical notes Selected world development indicators Introduction Classification of economies by region and income Table 1. Key indicators of development Table 2. Poverty Table 3. Millennium Development Goals: eradicating poverty and improving lives Table 4. Economic activity Table 5. Trade, aid, and finance Table 6. Key indicators for other economies Technical notes 320 WORLD DEVELOPMENT REPORT 2008 A1. Agricultural and rural sector variables Rural population Agricultural employment and labor force Agriculture value added Total Share of Average agricultural Employment women in Average $ per annual % % total employment in agriculture agricultural annual % agricultural Total millions growth population thousands % total labor force % $ millions growth worker % GDP 2003­05a 1990­2005 2003­05a 2002­04a 2002­04a 2003­05a 2003­05a 1990­2005 2003­05a 2003­05a Albania 1.7 ­1.3 55.3 668 58.1 44.9 1,452 3.0 1,022 23.4 Algeria 12.1 0.0 37.4 2,069 20.9 52.2 7,572 4.3 1,021 9.7 Angola 7.3 0.8 47.4 .. .. 53.8 1,747 4.6 159 8.1 Argentina 3.9 ­0.7 10.1 .. 1.2 8.6 14,700 2.7 4,159 10.3 Armenia 1.1 ­0.4 35.7 .. 45.7 21.4 778 2.9 2,340 23.0 Australia 2.4 ­0.3 12.0 383 4.1 40.5 18,704 2.9 21,919 3.4 Austria 2.8 0.4 34.0 204 5.4 43.3 4,554 1.1 12,865 1.8 Azerbaijan 4.0 1.4 48.6 .. 39.9 52.4 1,013 2.8 484 11.9 Bangladesh 104.8 1.6 75.3 30,451 51.7 51.5 11,303 3.2 157 21.0 Belarus 2.8 ­1.5 28.2 .. .. 22.6 1,989 ­0.9 1,797 10.0 Belgium 0.3 ­1.3 2.8 75 1.8 28.2 3,253 1.5 19,753 1.1 Benin 4.9 2.7 60.2 .. .. 46.2 1,274 5.5 311 32.1 Bolivia 3.3 0.7 36.3 .. .. 35.4 1,132 2.9 300 15.2 Bosnia and Herzegovina 2.1 ­1.4 54.8 .. .. 52.3 748 0.1 5,098 10.3 Brazil 30.2 ­1.6 16.4 16,627 20.8 19.1 39,213 4.1 1,489 6.6 Bulgaria 2.4 ­1.5 30.2 284 9.9 35.7 2,140 2.6 4,693 10.7 Burkina Faso 10.5 2.6 82.1 .. .. 46.9 1,296 3.6 110 31.0 Burundi 6.6 1.6 90.3 .. .. 53.3 235 ­1.7 36 38.3 Cambodia 11.2 1.9 80.9 .. 60.3 55.4 1,710 3.8 181 33.7 Cameroon 7.4 0.5 46.3 .. .. 45.1 2,966 5.1 386 20.9 Canada 6.4 ­0.1 20.0 436 2.7 45.9 14,687 0.6 20,082 2.2 Central African Republic 2.5 1.9 62.1 .. .. 51.1 723 3.9 262 55.2 Chad 7.1 2.8 75.1 .. .. 51.8 1,042 3.9 155 26.1 Chile 2.1 ­0.6 12.7 801 13.5 12.9 4,934 3.7 2,076 5.7 China 784.5 ­0.4 60.5 .. 44.1 47.7 246,982 3.7 292 12.7 Hong Kong, China 0.0 .. 0.0 9 0.3 .. 109 .. .. 0.1 Colombia 12.2 0.8 27.6 .. 20.6 19.9 11,285 ­0.7 1,346 12.5 Congo, Dem. Rep. 38.2 2.4 68.4 .. .. 53.1 3,018 ­0.1 88 47.9 Congo, Rep. 1.6 2.3 40.2 .. .. 59.8 255 .. 176 5.7 Costa Rica 1.7 0.6 38.8 262 15.3 10.1 1,473 3.2 1,833 8.7 Côte d'Ivoire 9.9 1.8 55.4 .. .. 39.9 3,415 2.5 426 22.7 Croatia 1.9 ­0.9 43.7 270 16.1 33.4 2,024 ­0.8 6,855 7.1 Czech Republic 2.7 0.4 26.4 215 4.5 28.8 3,004 0.8 4,045 3.1 Denmark 0.8 0.0 14.5 85 3.1 24.5 3,895 3.0 22,260 1.9 Dominican Republic 3.2 ­0.3 34.1 .. 15.9 18.5 2,544 4.1 1,934 11.8 Ecuador 4.9 0.4 37.7 .. 9.0 15.9 2,260 1.1 699 7.0 Egypt, Arab Rep. 41.6 2.0 57.3 .. 28.7 48.2 12,244 3.3 497 15.6 El Salvador 2.7 0.4 40.5 480 19.0 8.1 1,421 0.9 695 9.6 Eritrea 3.4 2.2 80.9 .. .. 51.4 119 ­1.7 37 17.1 Ethiopia 58.9 1.9 84.2 .. .. 40.4 3,893 2.4 64 43.9 Finland 2.0 0.4 38.9 121 5.1 35.4 4,863 1.5 18,515 3.1 France 14.2 ­0.2 23.5 1,006 4.2 33.9 42,432 1.1 25,639 2.4 Georgia 2.2 ­0.9 47.7 1,124 54.2 39.8 853 ­6.1 1,061 18.4 Germany 20.5 ­0.2 24.8 892 2.4 37.4 24,594 0.8 14,241 1.0 Ghana 11.5 1.1 53.0 .. .. 44.8 3,389 3.8 283 37.3 Greece 4.5 0.6 41.0 649 14.5 49.2 10,482 ­0.5 8,065 5.9 Guatemala 6.5 1.6 53.2 .. 38.7 9.0 6,381 2.7 1,117 22.8 Guinea 6.0 2.2 67.4 .. .. 48.6 666 4.4 88 19.5 Haiti 5.2 0.5 61.8 .. .. 34.3 720 .. 143 27.9 Honduras 3.8 1.9 53.9 .. 36.2 21.4 898 2.3 410 13.4 Hungary 3.4 ­0.3 34.0 226 5.7 24.5 3,802 0.3 3,588 4.5 India 771.9 1.4 71.5 .. .. 37.5 123,324 2.5 219 19.3 Indonesia 115.6 ­0.5 53.1 41,652 44.6 43.5 38,429 2.3 421 14.9 Iran, Islamic Rep. 22.6 ­0.3 33.6 .. .. 43.2 17,892 3.2 1,058 11.2 Ireland 1.6 0.6 39.8 120 6.6 6.3 3,820 .. 10,582 2.5 Israel 0.6 1.7 8.4 46 2.0 20.3 .. .. .. .. Italy 18.9 0.0 32.5 1,087 5.0 41.8 36,477 1.2 14,380 2.4 Jamaica 1.2 0.2 47.2 .. 19.7 29.5 461 ­1.5 912 5.6 Japan 43.8 ­0.3 34.3 2,927 4.6 42.7 74,849 ­0.7 19,177 1.7 Jordan 1.0 0.6 18.1 59 3.8 69.1 284 0.1 505 2.8 Kazakhstan 6.4 ­0.7 42.9 2,465 34.8 26.2 3,036 ­3.0 1,137 7.6 Kenya 26.6 2.3 79.5 .. .. 49.0 4,166 2.6 169 28.2 Korea, Rep. 9.3 ­1.3 19.4 1,982 8.7 45.6 22,416 1.0 6,922 3.7 Kuwait 0.0 0.1 1.7 .. .. 0.0 221 6.1 8,078 0.5 Kyrgyz Republic 3.3 1.2 64.3 982 52.7 36.1 669 3.0 549 34.1 Lao PDR 4.4 1.8 79.7 .. .. 48.6 1,157 4.5 264 46.8 Latvia 0.7 ­0.7 32.1 .. 14.1 30.0 507 ­1.2 2,046 4.2 Lebanon 0.5 0.4 13.5 .. .. 38.7 1,149 1.9 11,485 6.5 Lithuania 1.1 ­0.3 33.3 245 17.2 25.7 1,191 0.7 2,743 6.0 Macedonia, FYR 0.6 ­1.6 31.9 117 20.9 38.4 589 ­0.1 2,811 13.2 Selected indicators 321 A1. Agricultural and rural sector variables (continued) Rural population Agricultural employment and labor force Agriculture value added Total Share of Average agricultural Employment women in Average $ per annual % % total employment in agriculture agricultural annual % agricultural Total millions growth population thousands % total labor force % $ millions growth worker % GDP 2003­05a 1990­2005 2003­05a 2002­04a 2002­04a 2003­05a 2003­05a 1990­2005 2003­05a 2003­05a Madagascar 13.3 2.6 73.4 5,859 78.0 49.6 1,303 1.9 99 28.7 Malawi 10.5 1.6 83.2 .. .. 56.3 627 6.2 66 37.8 Malaysia 8.4 ­0.5 33.8 .. 14.7 26.7 10,843 1.2 2,898 9.2 Mali 9.2 2.1 70.0 .. .. 46.3 1,658 2.9 161 37.2 Mauritania 1.8 2.7 59.7 .. .. 52.8 357 ­1.9 231 25.6 Mexico 24.8 0.5 24.3 6,670 16.7 12.6 24,339 1.7 1,091 3.9 Moldova 2.1 ­0.8 53.4 869 44.4 30.4 417 ­5.3 505 20.0 Mongolia 1.1 1.3 43.3 414 42.3 45.0 353 ­3.4 626 24.3 Morocco 12.5 0.0 42.0 4,048 44.8 57.4 7,515 1.3 719 15.6 Mozambique 12.9 1.3 66.3 .. .. 59.5 1,220 5.2 83 23.1 Namibia 1.3 1.8 65.4 .. .. 41.3 548 3.0 595 11.0 Nepal 22.5 1.8 84.7 .. .. 44.1 2,458 2.9 99 38.6 Netherlands 3.3 ­2.5 20.5 232 2.9 31.9 11,339 1.6 23,396 2.2 New Zealand 0.6 0.5 13.9 160 8.2 34.3 .. 2.2 .. .. Nicaragua 2.1 0.9 41.4 .. 18.6 10.1 751 4.0 777 17.9 Niger 11.2 3.2 83.3 .. .. 47.7 1,089 3.2 93 39.9 Nigeria 72.7 1.2 52.7 .. .. 38.1 16,463 4.0 430 22.1 Norway 1.0 ­0.9 22.9 86 3.7 36.0 3,614 1.7 17,486 1.6 Oman 0.7 0.9 28.5 .. .. 6.3 444 3.7 525 1.9 Pakistan 99.5 2.0 65.5 19,593 42.1 42.0 20,537 3.5 272 22.7 Panama 1.0 ­1.1 30.2 202 17.0 3.6 1,031 4.1 1,551 7.8 Papua New Guinea 5.0 2.4 86.6 .. .. 49.3 1,539 3.2 355 41.9 Paraguay 2.4 0.8 42.1 .. 32.3 4.8 1,352 3.4 584 21.3 Peru 7.6 0.8 27.6 .. 0.8 20.5 4,738 4.9 610 7.4 Philippines 31.1 ­0.1 38.1 11,544 37.2 24.5 12,949 2.4 429 14.7 Poland 14.5 ­0.1 38.0 2,597 18.6 40.0 10,760 1.3 1,627 4.7 Portugal 4.5 ­0.9 43.0 635 12.5 58.7 4,714 ­1.0 3,607 3.2 Romania 10.0 ­0.4 46.1 3,287 34.6 45.6 8,445 0.2 3,404 12.5 Russian Federation 38.7 ­0.1 26.9 .. 10.8 27.7 27,578 ­0.4 2,037 5.3 Rwanda 7.3 0.6 81.8 .. .. 53.9 785 4.8 98 41.6 Saudi Arabia 4.3 0.9 19.2 304 4.7 8.9 9,819 1.6 5,523 4.2 Senegal 6.7 2.2 58.6 .. .. 48.9 1,299 2.7 157 17.5 Serbia 3.9b ­2.0b 47.9b .. .. 40.1 3,270b .. 1,851b 17.1b Sierra Leone 3.2 0.9 60.0 .. .. 46.4 478 .. 150 46.2 Singapore 0.0 .. 0.0 5 0.3 0.0 93 ­2.4 19,959 0.1 Slovak Republic 2.4 0.2 43.8 125 5.7 27.5 1,620 4.1 3,700 4.0 Slovenia 1.0 ­0.1 49.0 84 9.2 46.2 711 0.0 29,206 2.6 South Africa 19.1 0.8 41.2 .. 11.3 25.5 5,565 1.3 947 3.1 Spain 10.0 0.4 23.4 1,005 5.7 33.2 31,709 2.4 12,372 3.5 Sri Lanka 16.5 1.1 84.8 2,540 34.7 35.1 3,276 1.4 353 17.9 Sudan 21.4 0.8 60.1 .. .. 38.1 7,572 9.1 371 36.1 Sweden 1.4 ­0.1 15.8 92 2.1 34.3 4,620 ­0.1 16,600 1.6 Switzerland 1.9 ­0.9 25.2 162 4.1 38.1 4,029 ­2.1 9,481 1.3 Syrian Arab Republic 9.2 2.4 49.5 1,813 30.3 65.2 5,827 5.6 1,196 25.8 Tajikistan 4.9 2.0 75.1 .. .. 52.2 422 ­0.1 210 24.2 Tanzania 28.6 2.3 76.2 .. .. 53.6 4,797 3.7 167 45.8 Thailand 43.3 0.8 67.9 15,178 44.4 46.3 16,164 1.8 554 10.1 Togo 3.6 1.9 60.6 .. .. 42.1 829 3.1 242 41.9 Tunisia 3.5 0.4 35.1 .. .. 41.7 3,310 2.4 1,432 12.1 Turkey 23.7 0.2 33.2 7,509 34.3 64.2 31,585 1.1 1,545 12.7 Turkmenistan 2.6 1.7 54.0 .. .. 51.9 1,204 ­5.7 793 19.9 Uganda 24.4 3.1 87.5 .. 69.1 49.2 2,167 3.9 101 32.4 Ukraine 15.3 ­0.9 32.3 .. 19.5 31.0 6,786 ­2.1 1,035 11.7 United Kingdom 6.2 ­0.3 10.4 384 1.3 23.4 18,633 0.1 18,879 1.0 United States 57.4 ­0.5 19.5 2,753 1.9 25.3 133,850 3.5 23,066 1.3 Uruguay 0.3 ­1.7 8.1 .. 4.4 12.9 1,528 1.9 4,156 11.0 Uzbekistan 16.3 2.0 63.2 .. .. 45.4 3,188 2.6 486 30.7 Venezuela, RB 1.8 ­3.9 7.1 990 10.3 5.5 3,583 2.1 1,678 4.5 Vietnam 60.7 1.0 74.0 24,721 59.9 49.0 9,936 4.2 182 21.7 West Bank and Gaza 1.0 3.3 28.4 77 15.5 70.5 .. .. .. .. Yemen, Rep. 14.9 3.1 73.1 .. .. 44.0 1,578 5.0 168 14.3 Zambia 7.5 2.7 65.0 .. .. 47.1 1,047 3.0 136 20.7 Zimbabwe 8.3 0.7 64.5 .. .. 53.7 744 0.6 95 17.6 a. Data refer to the average for the period shown or for an earlier period depending on data availability. b. Data refer to Serbia and Montenegro. 322 WORLD DEVELOPMENT REPORT 2008 A2. Agricultural policy variables Agricultural spending Food aid Infrastructure Official Development Nominal rates of Assistance (ODA) to assistance, Government spending agriculture % of border prices Public R&D In cereals Rural spending in by recipient population Rural 2000 agriculture % country access to an household- international % agriculture agriculture 2004 prices % total ODA 1,000 tons all-season access to $ millions value added value added $ millions to country grain equiv. road % electricity % 2004 2004 2000 2003­05a 2003­05a 1980­84a 2000­04a 2003­05a 1993­2004b 1995­2003b Albania .. .. .. 11.5 3.1 .. .. 17.2 31 99.8 Algeria .. .. .. 11.5 2.6 .. .. 34.8 .. .. Angola .. .. .. 7.1 1.0 .. .. 153.1 .. .. Argentina 1,236 2.8 .. 7.4 6.6 ­19.2 ­15.8 .. .. .. Armenia .. .. .. 13.4 4.5 .. .. 25.4 .. 98.6 Australia .. .. 3.38 .. .. .. .. .. .. .. Austria .. .. .. .. .. .. .. .. .. .. Azerbaijan .. .. .. 16.4 5.7 .. .. 29.3 67 .. Bangladesh 838 1.7 0.44 53.7 2.4 ­3.8 3.9 326.0 37 18.7 Belarus .. .. .. 0.5 1.0 .. .. .. 64 .. Belgium .. .. .. .. .. .. .. .. .. .. Benin .. .. 0.40 36.8 7.0 .. .. 18.6 32 5.5 Bolivia 202 6.8 .. 81.3 8.4 .. .. 93.0 .. 29.0 Bosnia and Herzegovina .. .. .. 9.2 1.7 .. .. .. .. 99.0 Brazil 15,304 36.6 .. 18.0 5.0 ­23.7 2.0 .. 53 .. Bulgaria .. .. .. .. .. .. 3.1 98.0 .. .. Burkina Faso 294 6.9 0.71 64.5 8.6 .. .. 36.1 25 0.2 Burundi .. .. 0.36 14.1 4.1 .. .. 75.2 19 0.4 Cambodia .. .. .. 62.0 10.9 .. .. 27.1 81 9.0 Cameroon 223 1.5 .. 30.7 3.7 ­17.8 ­0.8 18.4 20 21.0 Canada .. .. .. .. .. .. .. .. .. .. Central African Republic .. .. .. 8.8 8.1 .. .. 5.5 .. 0.3 Chad .. .. .. 19.8 5.4 .. .. 46.6 5 0.1 Chile 422 7.5 .. 4.9 5.1 4.2 6.7 .. .. .. China 114,948 11.3 0.43 199.3 8.5 ­50.8 0.9 45.9 97 .. Hong Kong, China .. .. .. .. .. .. .. .. .. .. Colombia 644 2.1 .. 48.5 5.7 3.9 28.6 12.1 .. .. Congo, Dem. Rep. .. .. .. 18.6 0.5 .. .. 92.9 26 .. Congo, Rep. .. .. 1.53 0.4 0.1 .. .. 9.1 .. .. Costa Rica 165 5.5 .. 11.2 14.5 .. .. .. .. .. Côte d'Ivoire 217 4.0 0.86 5.7 1.7 ­57.3 ­41.4 30.6 .. 22.5 Croatia .. .. .. 2.8 1.4 .. .. .. .. .. Czech Republic .. .. .. .. .. .. 21.9 .. .. .. Denmark .. .. 3.14 .. .. .. .. .. .. .. Dominican Republic 319 4.8 .. 7.7 5.3 ­30.7 2.5 5.2 .. .. Ecuador 295 8.2 .. 21.8 8.6 9.9 12.2 23.3 .. .. Egypt, Arab Rep. 4,338 11.4 0.72 44.8 3.9 ­13.3 ­9.2 16.8 .. .. El Salvador 9 2.9 .. 6.9 4.0 .. .. .. .. .. Eritrea .. .. 1.73 9.6 3.2 .. .. .. .. 2.1 Ethiopia 930 4.3 0.38 129.4 6.4 ­14.4 ­8.2 1,288.0 32 0.4 Finland .. .. .. .. .. .. .. .. .. .. France .. .. .. .. .. .. .. .. .. .. Georgia .. .. .. 10.8 3.8 .. .. 63.1 .. 99.7 Germany .. .. .. .. .. .. .. .. .. .. Ghana 127 0.7 0.47 57.0 3.3 ­25.2 ­2.4 74.1 61 20.9 Greece .. .. .. .. .. .. .. .. .. .. Guatemala 187 1.7 .. 10.6 3.8 .. .. 67.1 55 .. Guinea .. .. 0.46 13.5 6.0 .. .. 36.7 22 1.5 Haiti .. .. .. 44.8 7.7 .. .. 106.9 .. 5.2 Honduras .. .. .. 54.2 6.6 .. .. 64.2 .. 35.0 Hungary .. .. .. .. .. .. 26.8 .. .. .. India 70,154 11.7 0.34 417.1 11.9 2.5 15.1 106.4 61 48.1 Indonesia 3,609 3.1 0.21 134.0 3.7 15.3 36.5 191.8 94 89.9 Iran, Islamic Rep. .. .. 0.52 2.0 1.6 .. .. 12.4 .. .. Ireland .. .. .. .. .. .. .. .. .. .. Israel .. .. .. .. .. .. .. .. .. .. Italy .. .. .. .. .. .. .. .. .. .. Jamaica .. .. .. 4.1 4.2 .. .. 11.5 .. .. Japan .. .. 3.62 .. .. .. .. .. .. .. Jordan .. .. 2.05 2.7 0.3 .. .. 98.3 .. .. Kazakhstan .. .. .. 2.4 1.3 .. .. .. 77 .. Kenya 396 4.1 2.68 112.4 10.4 ­29.9 3.7 149.5 44 4.3 Korea, Rep. 23,089 76.8 1.73 .. .. .. .. .. .. .. Kuwait .. .. .. .. .. .. .. .. .. .. Kyrgyz Republic .. .. .. 8.5 4.2 .. .. 57.7 76 99.6 Lao PDR .. .. .. 39.3 13.0 .. .. 21.7 64 .. Latvia .. .. .. .. .. .. 30.8 90.0 .. .. Lebanon .. .. .. 5.6 3.0 .. .. 11.0 .. .. Lithuania .. .. .. .. .. .. 26.7 .. .. .. Macedonia, FYR .. .. .. 7.5 2.9 .. .. .. .. .. Selected indicators 323 A2. Agricultural policy variables (continued) Agricultural spending Food aid Infrastructure Official Development Nominal rates of Assistance (ODA) to assistance, Government spending agriculture % of border prices Public R&D In cereals Rural spending in by recipient population Rural 2000 agriculture % country access to an household- international % agriculture agriculture 2004 prices % total ODA 1,000 tons all-season access to $ millions value added value added $ millions to country grain equiv. road % electricity % 2004 2004 2000 2003­05a 2003­05a 1980­84a 2000­04a 2003­05a 1993­2004b 1995­2003b Madagascar .. .. 0.25 31.4 2.8 ­51.4 0.7 49.2 25 5.2 Malawi 173 7.4 0.49 60.5 9.5 .. .. 116.5 38 1.0 Malaysia 2,988 12.7 1.58 2.5 0.8 ­5.7 2.3 .. .. .. Mali 383 10.5 1.01 61.9 8.4 .. .. 27.9 .. 2.2 Mauritania .. .. 0.99 43.9 15.5 .. .. 75.5 .. 2.5 Mexico 5,893 17.0 .. 6.5 2.8 .. .. .. .. .. Moldova .. .. .. 13.6 7.2 .. .. 20.2 .. 98.9 Mongolia .. .. .. 6.5 4.0 .. .. 37.6 36 27.8 Morocco 1,039 5.4 1.00 23.2 2.5 ­35.3 ­2.6 .. .. .. Mozambique .. .. .. 58.7 4.7 .. .. 171.5 .. 2.1 Namibia .. .. .. 7.7 5.0 .. .. 10.3 57 .. Nepal 259 2.1 0.27 45.3 7.5 .. .. 46.6 17 17.4 Netherlands .. .. .. .. .. .. .. .. .. .. New Zealand .. .. .. .. .. .. .. .. .. .. Nicaragua .. .. .. 52.0 5.2 .. ­9.9 47.9 28 41.3 Niger .. .. 0.20 26.4 4.6 .. .. 66.3 37 0.2 Nigeria 1,560 7.1 0.38 17.5 0.6 13.5 ­5.7 16.4 47c 27.9 Norway .. .. 3.61 .. .. .. .. .. .. .. Oman .. .. .. 0.9 11.0 .. .. .. .. .. Pakistan .. .. 0.24 102.4 2.6 ­14.2 ­2.7 45.8 61 69.0 Panama 155 10.5 .. 3.3 6.1 .. .. .. .. .. Papua New Guinea .. .. 0.78 10.4 3.1 .. .. .. 68 2.9 Paraguay 363 5.0 .. 6.7 10.8 .. .. .. .. .. Peru .. .. .. 47.1 10.1 .. .. 59.7 43 .. Philippines 2,395 5.0 0.41 38.8 7.1 0.8 27.0 80.2 .. .. Poland .. .. .. .. .. .. 5.0 .. .. .. Portugal .. .. 3.05 .. .. .. .. .. .. .. Romania .. .. .. .. .. .. 56.4 0.6 89 .. Russian Federation .. .. .. .. .. .. 6.2 47.4 81 .. Rwanda .. .. .. 31.7 5.9 .. .. 43.8 .. 0.9 Saudi Arabia .. .. .. 0.3 3.5 .. .. .. .. .. Senegal .. .. 1.02 61.8 7.1 ­30.3 ­12.1 29.1 .. 6.0 Serbiad .. .. .. .. 42.4 .. .. 35.4 .. .. Sierra Leone .. .. .. 12.2 2.8 .. .. 44.4 .. .. Singapore .. .. .. .. .. .. .. .. .. .. Slovak Republic .. .. .. .. .. .. 25.4 .. .. .. Slovenia .. .. .. .. .. .. 72.3 .. .. .. South Africa .. .. 3.04 13.2 1.8 21.4 ­1.5 .. 21 .. Spain .. .. 1.63 .. .. .. .. .. .. .. Sri Lanka 655 5.3 0.64 93.4 7.2 ­7.5 ­3.8 66.9 .. .. Sudan .. .. 0.17 7.4 0.5 ­18.8 ­1.7 523.7 .. .. Sweden .. .. .. .. .. .. .. .. .. .. Switzerland .. .. .. .. .. .. .. .. .. .. Syrian Arab Republic .. .. 0.58 2.4 1.9 .. .. 12.7 .. .. Tajikistan .. .. .. 33.7 14.8 .. .. 86.3 74 96.2 Tanzania .. .. 0.40 104.6 5.7 ­59.1 ­25.9 120.2 38 1.1 Thailand 5,502 11.7 .. 19.8 3.9 ­0.1 7.6 0.7 .. .. Togo 55 1.6 0.75 1.1 1.5 .. .. 2.9 .. 2.4 Tunisia 1,387 15.7 0.70 3.2 0.7 .. .. .. .. .. Turkey .. .. .. 6.9 0.5 .. .. .. .. .. Turkmenistan .. .. .. 0.4 2.6 .. .. .. .. .. Uganda 459 4.1 0.50 46.6 3.5 ­16.7 1.0 245.4 .. 2.4 Ukraine .. .. .. 2.6 0.4 .. ­12.7 104.6 .. .. United Kingdom .. .. .. .. .. .. .. .. .. .. United States .. .. 2.65 .. .. .. .. .. .. .. Uruguay 103 3.0 .. 1.2 3.3 .. .. .. .. .. Uzbekistan .. .. .. 11.3 5.4 .. .. .. 57 99.3 Venezuela, RB 209 4.5 .. 9.0 20.1 .. .. .. .. .. Vietnam .. .. 0.13 217.2 7.8 .. 20.6 .. 84 72.3 West Bank and Gaza .. .. .. .. .. .. .. 116.3 .. .. Yemen, Rep. .. .. .. 34.0 8.7 .. .. 82.2 21 26.0 Zambia 66 3.8 0.62 41.4 3.0 ­25.5 ­30.5 129.7 .. 2.9 Zimbabwe 355 9.3 .. 6.9 3.6 ­46.7 ­72.9 238.8 .. 8.3 a. Data refer to the average for the period shown or for an earlier period depending on data availability. b. Data are for the latest year available in the period shown. c. Data are for eight states. d. Data refer to Serbia and Montenegro. 324 WORLD DEVELOPMENT REPORT 2008 A3. Agricultural inputs and the environment Land Agro­chemical inputs Environment Arable and permanent cropland Gini index Irrigated land Fertilizer use Pesticide kilograms use of nutrients hundred Renewable Share of per hectare grams per internal Annual hectares arable of arable hectare of freshwater freshwater Average per capita land and Average and arable and resourcesb withdrawals annual thousands (agricultural permanent annual permanent permanent per capita for agriculture deforestationd hectares pop.) cropland % % growth cropland cropland cu. m. % total % 2003­05a 2003­05a Year Index 2001­03a 1990­2003 2003­05a 2000­02a 2005 2002c 1990­2005 Albania 699 0.5 1998 0.84 49.5 ­0.9 76 .. 8,595 62 0.0 Algeria 8,215 1.1 2001 0.65 6.9 1.1 13e .. 341 65 ­1.8 Angola 3,590 0.3 .. .. 2.3 0.0 3e .. 9,284 60 0.2 Argentina 28,900 8.2 2002 0.85 5.4 0.0 47e .. 7,123 74 0.4 Armenia 555 1.7 .. .. 51.2 0.0 21 .. 3,017 66 1.2 Australia 48,799 57.2 .. .. 5.2 2.0 47 .. 24,202 75 0.2 Austria 1,454 4.1 2000 0.59 0.3 0.0 220 21.1 6,680 1 ­0.2 Azerbaijan 2,064 1.0 .. .. 70.5 0.4 12 .. 966 68 0.0 Bangladesh 8,417 0.1 1996 0.48 54.3 3.8 198 3.7 740 96 0.1 Belarus 5,636 5.1 .. .. 2.3 0.0 185 .. 3,805 30 ­0.5 Belgium 863 5.2 2000 0.56 4.6 8.6 .. .. 1,145 .. 0.1 Benin 2,917 0.7 .. .. 0.4 2.0 0e .. 1,221 45 1.9 Bolivia 3,256 0.9 .. .. 4.1 0.5 6e .. 33,054 81 0.4 Bosnia and Herzegovina 1,109 7.6 .. .. 0.3 5.1 41 .. 9,086 .. 0.1 Brazil 66,600 2.5 1996 0.77 4.4 0.8 136e 10.5 29,066 62 0.5 Bulgaria 3,480 7.6 .. .. 16.5 ­6.4 145 .. 2,713 19 ­0.6 Burkina Faso 4,900 0.4 1993 0.42 0.5 1.5 7e .. 945 86 0.3 Burundi 1,355 0.2 .. .. 1.6 2.6 1e .. 1,338 77 3.2 Cambodia 3,852 0.4 2004 0.69 7.0 0.6 3 .. 8,571 98 1.3 Cameroon 7,160 0.9 .. .. 0.4 1.1 8e 0.9 16,726 74 0.9 Canada 52,115 72.9 1991 0.64 1.5 0.8 51e .. 88,238 12 0.0 Central African Republic 2,024 0.7 .. .. 0.1 5.9 .. .. 34,920 4 0.1 Chad 3,630 0.5 .. .. 0.8 5.3 .. .. 1,539 83 0.6 Chile 2,307 1.0 1997 0.58 82.4 1.2 249e .. 54,249 64 ­0.4 China 115,632 0.1 2004 0.41 47.5 1.2 395e .. 2,156 68 ­1.7 Hong Kong, China .. .. .. .. .. .. .. .. .. .. .. Colombia 3,690 0.4 .. .. 23.3 2.2 173 166.7 46,990 46 0.1 Congo, Dem. Rep. 7,800 0.2 1990 0.37 0.1 0.7 .. .. 15,639 31 0.3 Congo, Rep. 547 0.4 .. .. 0.4 3.7 .. .. 55,515 9 0.1 Costa Rica 525 0.7 .. .. 20.6 3.2 365e 225.3 25,975 53 0.4 Côte d'Ivoire 6,900 0.9 2001 0.65 1.1 0.5 10e .. 4,231 65 ­0.1 Croatia 1,345 4.6 2003 0.67 0.4 12.4 122 .. 8,485 .. ­0.1 Czech Republic 3,292 4.4 2000 0.92 0.7 0.0 130 11.4 1,290 2 0.0 Denmark 2,265 12.9 2000 0.51 19.6 0.2 116 12.5 1,108 43 ­0.8 Dominican Republic 1,596 1.2 .. .. 17.2 1.8 .. 35.8 2,218 66 0.0 Ecuador 2,524 0.8 2000 0.71 33.0 0.4 89 26.3 32,657 82 1.4 Egypt, Arab Rep. 3,469 0.1 2000 0.38 100.1 1.7 572 .. 24 86 ­3.5 El Salvador 910 0.4 .. .. 4.9 0.9 66e .. 2,587 59 1.4 Eritrea 565 0.2 .. .. 3.7 ­0.6 1e .. 636 97 0.3 Ethiopia 11,769 0.2 2002 0.47 2.6 4.3 3e 0.6 1,712 94 0.9 Finland 2,228 8.5 .. .. 2.9 0.0 128 5.6 20,396 3 ­0.1 France 19,597 11.8 2000 0.58 13.3 1.9 204 45.5 2,932 10 ­0.5 Georgia 1,066 1.3 2004 0.65 44.1 0.2 24 .. 12,985 59 0.0 Germany 12,078 7.0 2000 0.63 4.0 0.0 217 21.3 1,297 20 ­0.2 Ghana 6,385 0.5 .. .. 0.5 0.3 4e 0.1 1,370 66 1.7 Greece 3,800 2.9 2000 0.58 37.4 1.4 119 26.0 5,223 80 ­0.9 Guatemala 2,050 0.4 .. .. 6.4 0.6 90e .. 8,667 80 1.1 Guinea 1,750 0.2 1995 0.48 5.6 0.5 2e .. 25,104 90 0.6 Haiti 1,100 0.2 .. .. 8.4 0.4 .. .. 1,524 94 0.6 Honduras 1,428 0.7 1993 0.66 5.6 1.2 41e 25.1 13,311 80 2.5 Hungary 4,805 4.5 .. .. 4.8 0.8 115 9.4 595 32 ­0.6 India 169,583 0.3 1991 0.58 32.7 1.4 107 .. 1,152 86 ­0.4 Indonesia 36,500 0.4 1993 0.46 12.7 0.2 91 .. 12,867 91 1.6 Iran, Islamic Rep. 18,092 1.1 2003 0.75 42.7 0.7 51 .. 1,883 91 0.0 Ireland 1,203 3.3 2000 0.44 .. .. 452 16.3 11,781 0 ­3.4 Israel 402 2.7 1995 .. 45.4 0.1 1,608 .. 116 62 ­0.7 Italy 10,525 4.1 2000 0.80 24.9 0.1 137 61.3 3,114 45 ­1.3 Jamaica 284 0.6 1996 0.79 8.8 0.0 26e .. 3,541 49 0.1 Japan 4,714 1.2 1995 0.59 54.7 ­0.7 364 .. 3,365 62 0.0 Jordan 275 0.5 1997 0.78 27.3 1.2 498 17.0 129 75 0.0 Kazakhstan 22,562 8.5 .. .. 15.7 0.1 7 .. 4,978 82 0.2 Kenya 5,212 0.2 .. .. 1.8 4.1 44e 3.5 604 64 0.3 Korea, Rep. 1,839 0.6 1990 0.34 47.1 ­1.0 389 120.5 1,344 48 0.1 Kuwait 18 0.7 .. .. 77.0 13.9 886 .. .. 52 ­6.7 Kyrgyz Republic 1,391 1.1 2002 0.90 76.0 0.2 14 .. 9,041 94 ­0.3 Lao PDR 1,074 0.2 1999 0.41 17.2 2.1 .. .. 33,616 90 0.5 Latvia 1,032 4.2 2001 0.58 2.1 0.7 87 .. 7,259 13 ­0.4 Lebanon 313 3.1 1999 0.69 33.2 1.7 96e .. 1,197 67 ­0.8 Lithuania 1,725 4.0 2003 0.62 0.4 ­6.5 143 2.9 4,569 7 ­0.5 Macedonia, FYR 612 2.9 .. .. 9.0 ­3.0 18 .. 2,655 .. 0.0 Selected indicators 325 A3. Agricultural inputs and the environment (continued) Land Agro­chemical inputs Environment Arable and permanent cropland Gini index Irrigated land Fertilizer use Pesticide kilograms use of nutrients hundred Renewable Share of per hectare grams per internal Annual hectares arable of arable hectare of freshwater freshwater Average per capita land and Average and arable and resourcesb withdrawals annual thousands (agricultural permanent annual permanent permanent per capita for agriculture deforestationd hectares pop.) cropland % % growth cropland cropland cu. m. % total % 2003­05a 2003­05a Year Index 2001­03a 1990­2003 2003­05a 2000­02a 2005 2002c 1990­2005 Madagascar 3,550 0.3 .. .. 30.6 0.4 3e 0.3 18,113 96 0.4 Malawi 2,590 0.3 .. .. 2.3 8.9 23e .. 1,250 80 0.8 Malaysia 7,585 2.0 .. .. 4.8 0.5 203e .. 22,882 62 0.4 Mali 4,840 0.5 .. .. 5.0 11.8 .. .. 4,438 90 0.7 Mauritania 500 0.3 .. .. 9.8 0.2 .. .. 130 88 2.4 Mexico 27,300 1.2 .. .. 23.2 0.7 67e .. 3,967 77 0.5 Moldova 2,148 2.6 .. .. 13.9 ­0.4 10 .. 258 33 ­0.2 Mongolia 1,200 2.1 .. .. 7.0 0.4 4e .. 13,626 52 0.7 Morocco 9,376 0.9 1996 0.62 15.5 1.3 52e .. 962 87 ­0.1 Mozambique 4,580 0.3 .. .. 2.7 1.0 5e .. 5,068 87 0.2 Namibia 820 0.9 1997 0.36 1.0 4.7 2e .. 3,052 71 0.8 Nepal 2,484 0.1 2002 0.49 47.2 1.0 12 .. 7,305 96 1.6 Netherlands 940 1.9 2000 0.57 60.0 0.1 564 85.2 674 34 ­0.4 New Zealand 3,372 10.2 .. .. 8.5 0.1 300e 9.8 79,778 42 ­0.5 Nicaragua 2,161 2.2 2001 0.72 2.8 0.2 28e 19.1 36,840 83 1.4 Niger 14,500 1.2 .. .. 0.5 1.0 0e .. 251 95 2.3 Nigeria 33,400 0.9 .. .. 0.8 1.2 6e .. 1,563 69 2.4 Norway .. .. .. .. .. 2.5 .. .. 82,625 11 ­0.2 Oman 80 0.1 .. .. 88.4 1.9 .. 12.1 390 90 0.0 Pakistan 22,110 0.3 2001 0.41 81.1 0.9 167 6.1 336 96 1.6 Panama 695 1.0 2001 0.75 6.2 3.2 33e .. 45,613 28 0.1 Papua New Guinea 875 0.2 .. .. .. .. .. .. 136,059 .. 0.4 Paraguay 3,136 1.4 1991 0.93 2.1 0.3 75e 21.5 15,936 71 0.8 Peru 4,310 0.6 1994 0.86 27.9 0.1 73e 11.7 57,780 82 0.1 Philippines 10,700 0.4 2002 0.57 14.5 0.0 84e .. 5,767 74 2.2 Poland 12,794 1.9 2002 0.70 0.7 0.0 126 5.7 1,404 8 ­0.2 Portugal 2,334 1.8 1999 0.75 27.2 0.3 113 55.9 3,602 78 ­1.5 Romania 9,845 4.0 .. .. 31.2 ­0.1 41 8.7 1,955 57 0.0 Russian Federation 123,970 9.2 .. .. 3.7 ­1.8 13 .. 30,135 18 0.0 Rwanda 1,470 0.2 .. .. 0.7 8.3 .. 0.9 1,051 68 ­3.4 Saudi Arabia 3,798 2.1 .. .. 42.7 0.1 99e .. 104 89 0.0 Senegal 2,507 0.3 1999 0.50 4.6 4.0 22e 1.6 2,213 93 0.5 Serbiae 3,751 2.1 .. .. 0.8 ­10.9 .. 8.0 5,456 .. ­0.4 Sierra Leone 645 0.2 .. .. 5.0 0.5 .. .. 28,957 92 0.6 Singapore 1 0.2 .. .. .. .. .. .. 138 .. 0.0 Slovak Republic 1,426 3.3 .. .. 12.6 ­3.6 95 20.3 2,339 .. 0.0 Slovenia 203 8.3 1991 0.62 1.5 4.6 330 69.6 9,348 .. ­0.4 South Africa 15,712 2.7 .. .. 9.5 2.1 49e 15.6 955 63 0.0 Spain 18,614 7.3 .. .. 20.7 0.9 108 17.4 2,562 68 ­2.2 Sri Lanka 1,916 0.2 .. .. 34.4 2.2 137e .. 2,548 95 1.2 Sudan 17,420 0.9 .. .. 11.0 0.1 4e .. 828 97 0.8 Sweden 2,681 9.6 .. .. 4.3 0.0 105 6.1 18,949 9 0.0 Switzerland 433 1.0 1990 0.50 5.8 0.0 198 33.4 5,432 2 ­0.4 Syrian Arab Republic 5,602 1.1 .. .. 24.0 4.3 73 5.3 368 95 ­1.6 Tajikistan 1,057 0.5 .. .. 68.2 0.0 .. .. 10,122 92 0.0 Tanzania 5,100 0.2 1996 0.38 3.5 1.8 13e .. 2,183 89 1.0 Thailand 17,687 0.6 1993 0.47 26.6 1.3 113e 10.1 3,269 95 0.6 Togo 2,630 0.8 1996 0.42 0.3 0.0 6e .. 1,871 45 2.9 Tunisia 4,930 2.1 .. .. 8.0 1.1 26e .. 419 82 ­4.3 Turkey 26,409 1.3 2001 0.58 19.5 2.0 75 9.8 3,150 74 ­0.3 Turkmenistan 2,266 1.5 .. .. 89.1 1.2 .. .. 290 98 0.0 Uganda 7,350 0.3 1991 0.59 0.1 0.0 1e .. 1,353 40 1.8 Ukraine 33,375 5.1 .. .. 6.8 ­1.5 15 .. 1,128 52 ­0.2 United Kingdom 5,784 5.9 2000 0.66 3.0 0.3 299 50.7 2,408 3 ­0.6 United States 177,851 30.6 2002 0.78 12.5 0.6 114 .. 9,446 41 ­0.1 Uruguay 1,412 3.8 2000 0.79 14.3 3.8 122e 25.3 17,848 96 ­4.4 Uzbekistan 5,040 0.8 .. .. 87.4 0.1 .. .. 623 93 ­0.5 Venezuela, RB 3,400 1.6 1997 0.88 16.9 1.5 135e .. 27,185 47 0.6 Vietnam 8,920 0.2 1998 0.50 33.9 0.2 245 20.8 4,410 68 ­2.5 West Bank and Gaza 222 0.6 .. .. .. .. .. .. .. .. .. Yemen, Rep. 1,669 0.2 .. .. 31.4 2.5 2e .. 195 95 0.0 Zambia 5,289 0.7 .. .. 2.8 15.0 .. .. 6,873 76 0.9 Zimbabwe 3,350 0.4 .. .. 5.2 4.7 30e .. 945 79 1.4 a. Data refer to the average for the period shown or for an earlier period depending on data availability. b. River flows from other countries are not included because of data unreliability. c. Data refer to the most recent year available for 1987­2002. d. Negative numbers indicate an increase in forest area. e. World Bank staff estimates for arable land and permanent cropland for 2004­05. f. Data refer to Serbia and Montenegro. 326 WORLD DEVELOPMENT REPORT 2008 A4. Agricultural output and trade Cereal production High-value agricultural products Fruits and vegetable Total food Production Yield Meat production production production Trade average average average average per capita Net Agricultural annual % kilograms annual % annual % annual % average cereal Agricultural Agricultural exports kilograms growth per growth kilograms growth kilograms growth annual % imports imports exports % total per capita 1990­ hectare 1990­ per capita 1990­ per capita 1990­ growth $ millions $ millions $ millions exports 2003­05a 2005 2003­05a 2005 2003­05a 2005 2003­05a 2005 1990­2004 2003­05a 2003­05a 2003­05a 2003­05a Albania 161 ­1.5 3,371 2.7 26 2.9 281 3.4 3.2 104 351 41 9.9 Algeria 122 2.9 1,438 3.7 18 1.8 186 4.9 1.1 1,286 3,422 49 0.2 Angola 49 7.3 583 4.8 9 2.4 47 0.5 2.1 .. .. .. .. Argentina 941 4.0 3,850 2.9 105 0.4 283 1.6 1.8 ­2,798 862 16,577 47.5 Armenia 127 3.2 1,936 1.4 18 0.2 342 2.3 1.8 69 221 18 2.8 Australia 1,925 3.9 1,946 0.5 206 2.0 269 2.8 1.7 ­3,146 4,509 17,019 19.5 Austria 590 0.1 5,978 0.8 115 0.8 197 2.5 0.6 ­9 6,577 4,639 4.5 Azerbaijan 246 6.5 2,595 4.4 17 4.0 247 4.7 0.5 160 345 226 6.4 Bangladesh 285 3.2 3,535 2.8 3 2.7 28 2.5 1.2 339 2,249 482 7.2 Belarus 604 ­1.2 2,758 0.4 66 ­2.1 239 4.0 ­1.8 208 1,459 1,063 8.0 Belgium 265 .. 8,788 .. 174 .. 292 .. 0.4 ­447 21,442 24,556 8.2 Benin 135 5.1 1,144 1.8 6 1.3 76 3.2 2.6 75 217 220 82.5 Bolivia 162 3.6 1,851 1.9 49 3.7 165 2.2 1.8 82 230 560 25.1 Bosnia and Herzegovina 303 2.6 3,627 ­0.1 11 ­3.1 251 3.1 ­1.7 119 816 114 6.8 Brazil 339 3.4 3,133 3.6 106 5.7 249 1.7 2.7 817 3,545 26,656 27.7 Bulgaria 733 ­1.9 3,279 ­0.3 28 ­6.6 184 ­5.7 ­1.4 ­141 832 954 9.8 Burkina Faso 263 3.6 1,040 2.1 17 4.2 24 0.0 1.3 52 114 245 83.1 Burundi 38 ­0.4 1,324 ­0.3 3 ­3.2 265 0.3 ­2.0 11 18 38 43.4 Cambodia 379 6.0 2,231 4.0 16 4.2 58 0.8 1.9 14 76 50 2.2 Cameroon 102 4.3 1,532 3.4 14 1.8 229 2.8 0.7 216 432 604 25.2 Canada 1,626 ­0.7 3,018 0.8 166 4.4 99 1.0 0.3 ­3,077 15,024 22,486 7.1 Central African Republic 49 6.5 1,046 1.5 32 4.0 77 1.5 1.6 9 24 1 1.6 Chad 165 5.4 741 1.2 13 2.0 22 1.0 0.8 .. .. .. .. Chile 240 2.0 5,621 2.5 70 5.5 469 3.2 1.7 142 1,727 5,941 19.9 China 313 0.0 5,095 1.2 58 6.3 390 9.3 4.4 ­520 26,232 22,968 3.8 Hong Kong, China .. .. .. .. .. .. .. .. .. 450 8,912 189 0.9 Colombia 109 1.3 3,821 3.5 36 2.1 202 2.4 0.3 564 1,822 3,611 21.2 Congo, Dem. Rep. 27 0.1 772 ­0.2 4 0.2 52 ­2.7 ­4.5 .. .. .. .. Congo, Rep. 3 3.1 790 0.9 8 2.8 82 3.2 ­0.7 .. .. .. .. Costa Rica 47 ­1.4 3,140 ­0.1 47 2.1 1,066 4.2 0.6 148 603 2,108 33.5 Côte d'Ivoire 92 1.5 1,719 6.0 10 2.4 153 1.5 0.4 283 781 3,241 50.3 Croatia 649 1.5 4,549 1.0 31 ­0.1 183 0.3 0.5 73 1,372 658 8.6 Czech Republic 725 1.0 4,716 1.4 83 ­0.9 76 ­3.1 ­1.0 ­95 3,460 2,212 3.4 Denmark 1,685 0.6 6,088 0.7 438 2.7 61 ­1.5 ­0.2 ­162 7,695 14,589 19.7 Dominican Republic 68 2.3 4,138 0.5 40 3.4 212 0.6 ­1.7 156 640 289 35.5 Ecuador 185 2.6 2,695 2.9 45 6.2 611 3.0 1.4 170 699 2,893 36.9 Egypt, Arab Rep. 296 3.5 7,545 2.3 20 4.8 329 4.4 2.1 1,061 3,296 1,143 13.9 El Salvador 124 ­0.2 2,530 2.4 20 3.8 77 1.2 ­0.3 110 770 408 30.9 Eritrea 26 ­2.6 297 ­4.5 .. .. 6 ­2.8 ­2.6 78 162 6 60.1 Ethiopia 157 5.8 1,213 0.9 8 2.8 27 6.7 1.8 248 339 377 85.0 Finland 731 0.9 3,187 ­0.5 73 1.0 49 0.7 ­0.4 71 2,670 1,416 2.4 France 1,045 1.1 6,893 0.8 115 0.8 317 0.4 ­0.1 ­4,814 33,167 35,395 8.8 Georgia 154 3.2 2,050 ­0.3 24 ­0.2 233 ­2.3 1.3 103 306 85 13.8 Germany 551 1.9 6,614 1.4 85 0.5 63 ­1.4 0.1 ­1,529 48,859 34,613 3.9 Ghana 91 3.6 1,437 1.5 8 1.7 160 6.2 3.1 162 820 1,818 56.4 Greece 449 ­0.3 3,905 0.7 42 ­0.9 673 ­0.6 ­0.6 331 5,360 3,390 22.0 Guatemala 95 ­1.6 1,747 ­0.6 20 4.2 241 4.2 0.6 204 981 1,515 41.5 Guinea 130 4.4 1,476 2.6 6 5.6 180 1.3 0.8 57 124 13 2.4 Haiti 45 ­0.6 824 ­1.4 12 4.3 142 0.2 ­1.1 .. .. .. .. Honduras 77 ­2.1 1,475 0.2 29 5.7 305 1.2 ­0.7 169 590 787 52.6 Hungary 1,377 1.0 4,719 0.7 107 ­1.9 327 ­0.7 ­0.4 ­381 2,201 3,581 6.6 India 219 1.4 2,417 1.6 6 3.2 118 3.8 0.9 ­1,797 5,117 8,867 10.8 Indonesia 298 1.5 4,278 0.8 12 2.6 97 4.3 0.8 1,003 4,923 10,606 15.1 Iran, Islamic Rep. 321 2.2 2,407 3.3 24 2.7 398 4.0 2.1 827 2,776 1,701 3.7 Ireland 539 1.2 7,442 1.1 253 0.6 59 ­1.2 ­0.8 352 4,262 7,505 7.3 Israel 43 ­1.4 3,171 ­0.2 86 7.4 454 0.7 ­0.3 538 2,252 1,541 4.1 Italy 359 0.8 5,043 1.1 69 0.2 568 0.1 ­0.1 ­523 31,957 19,320 5.6 Jamaica 0 ­8.8 1,162 ­1.2 39 3.0 248 1.6 0.2 124 583 219 16.3 Japan 92 ­1.2 5,849 0.5 24 ­1.0 119 ­1.6 ­1.1 5,270 49,915 2,560 0.5 Jordan 15 ­4.9 1,418 1.6 26 3.9 282 2.3 ­0.7 326 1,194 410 13.3 Kazakhstan 905 ­2.4 1,048 1.3 49 ­4.9 196 9.5 ­2.5 ­446 878 919 4.5 Kenya 101 0.9 1,682 ­0.1 15 2.1 119 3.6 ­0.6 132 429 1,077 54.0 Korea, Rep. 142 ­0.8 6,238 0.6 36 3.5 296 1.4 0.7 1,992 12,317 2,697 1.1 Kuwait 1 14.9 2,578 1.0 .. .. 92 11.1 10.7 174 1,152 51 0.3 Kyrgyz Republic 325 2.4 2,776 2.3 37 ­0.7 191 8.1 2.2 22 101 118 18.3 Lao PDR 490 5.6 3,648 3.5 17 5.4 176 13.0 3.8 .. .. .. .. Latvia 476 0.5 2,436 3.1 32 ­8.1 100 ­3.5 ­4.7 ­1 681 342 8.2 Lebanon 38 5.2 2,493 1.7 50 7.5 447 ­2.1 ­2.3 120 1,190 201 14.0 Lithuania 806 1.5 3,083 4.1 60 ­3.8 144 ­0.2 ­2.4 ­72 1,042 1,087 11.4 Macedonia, FYR 295 ­0.3 3,074 1.6 14 ­2.4 447 0.8 ­0.2 43 377 216 12.7 Selected indicators 327 A4. Agricultural output and trade (continued) Cereal production High-value agricultural products Fruits and vegetable Total food Production Yield Meat production production production Trade average average average average per capita Net Agricultural annual % kilograms annual % annual % annual % average cereal Agricultural Agricultural exports kilograms growth per growth kilograms growth kilograms growth annual % imports imports exports % total per capita 1990­ hectare 1990­ per capita 1990­ per capita 1990­ growth $ millions $ millions $ millions exports 2003­05a 2005 2003­05a 2005 2003­05a 2005 2003­05a 2005 1990­2004 2003­05a 2003­05a 2003­05a 2003­05a Madagascar 191 2.0 2,369 1.2 16 0.8 68 0.8 ­1.9 90 182 387 74.0 Malawi 141 2.6 1,149 1.8 5 2.5 90 3.3 3.7 41 167 413 85.0 Malaysia 93 1.0 3,321 1.0 51 2.2 73 1.3 1.4 643 5,594 10,562 8.5 Mali 245 3.2 979 1.4 20 3.5 72 2.6 ­0.3 50 175 340 35.9 Mauritania 53 1.1 953 1.2 30 3.7 10 1.6 ­0.6 41 112 84 25.6 Mexico 299 1.4 3,009 1.4 52 3.6 253 3.7 1.1 2,158 13,251 8,400 4.4 Moldova 620 0.5 2,592 ­1.5 23 ­6.6 386 ­4.1 ­2.4 6 237 274 32.4 Mongolia 50 ­12.0 690 ­2.8 73 ­1.6 23 7.3 ­0.7 48 120 91 10.8 Morocco 233 0.5 1,243 0.4 20 2.6 255 2.9 0.6 727 1,967 2,133 21.4 Mozambique 99 10.5 925 7.7 5 1.1 23 ­0.9 0.9 150 289 245 17.0 Namibia 54 2.7 441 2.0 .. .. 20 7.0 ­2.2 42 290 598 28.7 Nepal 288 2.7 2,286 1.8 10 2.4 97 4.0 0.8 12 343 139 21.2 Netherlands 111 2.3 8,308 0.8 188 ­0.7 290 0.5 ­1.5 872 25,562 43,339 15.5 New Zealand 218 0.9 7,360 2.5 356 1.1 512 2.3 1.8 137 1,551 10,044 53.6 Nicaragua 175 5.0 1,781 0.8 31 5.7 51 ­1.7 3.3 65 289 567 77.4 Niger 246 3.3 409 2.1 7 ­0.3 57 6.3 0.5 92 195 75 26.2 Nigeria 177 1.7 1,368 1.3 8 2.6 133 3.4 0.7 594 1,925 61 0.3 Norway 298 ­0.3 4,161 0.5 62 2.0 45 ­1.3 ­1.1 329 3,222 4,756 5.6 Oman 2 0.7 2,332 0.7 .. .. 186 2.6 1.6 118 969 384 2.7 Pakistan 203 2.8 2,456 2.4 13 2.0 68 2.5 0.9 ­715 2,703 1,666 12.1 Panama 114 0.3 1,851 0.1 54 4.0 284 ­2.5 ­1.5 77 462 739 83.6 Papua New Guinea 2 6.9 3,539 3.3 .. .. 398 2.5 ­0.1 84 199 324 17.1 Paraguay 300 4.9 2,236 0.9 65 ­0.2 135 0.0 0.8 ­66 200 1,233 81.2 Peru 139 6.8 3,426 2.5 37 5.3 210 6.1 4.1 415 1,321 2,461 19.3 Philippines 236 2.3 2,916 2.5 28 5.6 217 2.6 0.9 794 3,073 2,342 6.0 Poland 698 0.6 3,212 0.7 91 0.9 230 0.9 ­0.4 ­103 5,515 6,261 8.7 Portugal 106 ­2.1 2,533 2.3 67 1.3 401 0.3 ­0.2 717 6,415 1,859 5.3 Romania 872 0.3 3,288 0.8 46 ­3.7 332 1.8 0.9 225 2,005 716 3.1 Russian Federation 506 ­1.2 1,842 2.0 34 ­3.7 131 2.9 ­1.4 ­598 12,426 2,798 1.5 Rwanda 39 2.8 1,029 ­1.3 6 4.0 319 0.1 ­1.0 10 43 30 59.9 Saudi Arabia 135 ­3.5 4,559 0.2 31 3.6 151 0.8 ­1.3 1,573 6,689 954 0.7 Senegal 115 1.6 1,089 1.6 11 2.0 65 6.4 ­1.5 345 818 448 34.1 Serbiab 1,030 0.4 4,194 2.4 102 ­0.5 343 0.5 2.5 ­100 767 814 19.7 Sierra Leone 58 ­5.2 1,223 ­0.1 .. .. 79 1.4 ­2.5 34 71 38 91.4 Singapore .. .. .. .. .. .. 5 9.3 ­14.3 214 4,602 2,844 1.5 Slovak Republic 611 26.7 4,099 3.8 72 ­4.0 85 ­4.9 .. ­57 1,478 1,000 3.7 Slovenia 262 1.2 5,282 2.4 90 0.6 167 ­0.6 1.9 127 1,089 425 2.7 South Africa 274 1.9 2,882 4.3 42 2.0 171 2.5 ­0.2 235 2,278 3,198 8.1 Spain 470 1.4 3,052 2.2 125 3.3 700 1.7 1.4 1,535 21,850 24,080 13.5 Sri Lanka 155 1.5 3,438 1.3 7 5.2 72 0.5 ­0.1 219 968 1,260 22.9 Sudan 144 2.4 .. 0.8 10 ­0.5 92 3.4 1.9 288 635 469 13.8 Sweden 588 0.4 4,803 0.8 61 0.6 38 0.7 ­0.2 ­99 6,870 3,440 2.9 Switzerland 135 ­1.8 6,076 0.0 59 ­0.7 109 ­1.2 ­1.0 243 5,912 2,707 2.3 Syrian Arab Republic 307 2.6 1,786 4.2 23 5.3 236 2.6 1.3 185 1,163 967 16.5 Tajikistan 136 10.7 2,240 6.8 .. .. 155 1.1 ­2.1 46 66 113 16.3 Tanzania 126 2.2 1,403 ­0.1 10 1.9 69 0.4 ­1.2 122 319 583 44.1 Thailand 527 3.0 3,044 2.4 31 1.8 178 1.5 0.9 ­2,244 4,875 15,550 16.3 Togo 132 3.6 1,031 2.4 6 1.8 31 ­1.0 ­0.4 22 75 122 31.0 Tunisia 222 ­0.4 1,540 1.2 25 3.9 333 2.9 0.0 297 1,100 854 9.3 Turkey 465 0.7 2,397 0.7 22 2.2 516 2.2 ­0.5 ­105 4,615 6,197 10.1 Turkmenistan 594 12.1 2,878 3.9 45 7.1 215 3.6 4.5 14 189 255 10.2 Uganda 87 3.0 1,559 0.6 9 1.9 384 1.4 ­0.6 109 265 371 74.0 Ukraine 688 ­0.4 2,439 ­1.1 35 ­5.2 207 1.0 ­2.0 ­662 2,114 3,213 10.7 United Kingdom 360 ­0.1 7,085 0.8 56 ­0.7 49 ­2.6 ­1.0 322 36,159 12,700 3.7 United States 1,253 1.2 6,443 2.3 133 2.1 225 1.1 0.6 ­9,847 57,568 61,974 8.5 Uruguay 660 3.7 4,115 3.9 178 1.7 219 2.0 2.1 ­220 332 1,674 58.9 Uzbekistan 237 8.6 3,627 7.4 23 1.6 206 1.0 ­0.3 .. .. .. .. Venezuela, RB 132 3.8 3,310 1.8 52 4.6 147 1.6 0.7 407 1,800 208 0.5 Vietnam 475 5.0 4,641 3.1 32 7.0 162 5.6 3.8 ­512 1,382 4,591 26.5 West Bank and Gaza .. .. .. .. .. .. 222 0.5 .. .. .. .. .. Yemen, Rep. 23 ­2.6 740 ­1.2 12 5.4 63 3.7 ­0.2 347 1,045 194 4.5 Zambia 107 ­0.6 1,732 1.3 .. .. 32 0.0 ­0.9 35 171 278 19.4 Zimbabwe 85 ­3.3 673 ­3.7 16 3.4 30 1.5 0.0 217 426 813 42.2 a. Data refer to the average for the period shown or for an earlier period depending on data availability. e. Bank staff estimates for arabable and permanent cropland for 2004-2005. f. Data refer to Serbia and Montenegro. 328 WORLD DEVELOPMENT REPORT 2008 Technical notes ies, natural resources, and the use of agricultural inputs as well as the socioeconomic aspects of primary agricultural produc- Table A1. Agricultural and rural sector variables tion. Also included is research concerning the onfarm storage and Rural population is calculated as the difference between the total processing of agricultural products. Not included are research population and the urban population. The country-specific defini- activities in support of agrochemical, agricultural machinery, tion of an urban area is used (United Nations, World Urbaniza- or food processing industries, as well as the more basic and dis- tion Prospects, and World Bank estimates). The country-specific cipline-oriented research activities undertaken by departments definition of an urban area is used. such as microbiology and zoology. However, strict delineations Agricultural employment refers to the number of workers in have not always been possible (Agricultural Science and Technol- agriculture. Most agricultural workers are self-employed. Agri- ogy Indicators, Consultative Group on International Agricultural culture corresponds to division 1 (ISIC revision 2) or tabulation Research). categories A and B (ISIC revision 3) and includes hunting, forestry, Official Development Assistance (ODA) in agriculture com- and fishing (International Labour Organization, Key Indicators of prise flows that meet the Development Assistance Committee the Labour Market database). (DAC) definition of ODA and are made to the countries and ter- Share of women in the agricultural labor force includes women ritories on the DAC list of aid recipients. The three criteria are: (1) ages 15 and older who meet the ILO definition of the economi- they are provided by the official sector, (2) they promote economic cally active population (both employed and unemployed) as the development and welfare as the main objective, and (3) they are percentage of total economically active population engaged in or provided at concessional financial terms (if a loan, they have a seeking work in agriculture, hunting, fishing or forestry (Food and grant element of at least 25 percent, calculated at a discount rate Agriculture Organization of the UN, and data files). of 10 percent). ODA for agriculture includes agricultural sector Agriculture value added Agriculture corresponds to the Inter- policy, agricultural development and inputs, crop and livestock national Standard Industrial Classification (ISIC), revision 3, divi- production, and agricultural credit, cooperatives, and research. sions 1­5 and includes forestry, hunting, and fishing, as well as The nominal rate of assistance (NRA) to farmers is defined as cultivation of crops and livestock production. Value added is the the price of their product in the domestic market (plus any direct net output of a sector after adding up all outputs and subtracting output subsidy) less its price at the border, expressed as a percent- intermediate inputs. It is calculated without making deductions for age of the border price (adjusting for transport costs and quality depreciation of fixed assets or depletion and degradation of natu- differences). To capture distortions in input markets in countries ral resources. Growth rates are calculated using the least squares where they are important, the NRA is adjusted (expressed as out- method from constant price data in the local currency (World Bank put price equivalent) to account for direct input subsidies and dif- national accounts data and OECD National Accounts data files). ferences between the international prices of inputs and the prices that farmers pay for these inputs. If a country distorts its market for foreign currency, efforts are made to account for the difference Table A2. Agricultural policy variables between the exchange rate used by the importers (assumed to be Government spending on agriculture includes all nonrepayable the parallel exchange rate) and the exporters (a weighted average payments, whether current or capital, and whether a benefit or of the parallel and official exchange rates) and an estimated equi- service was delivered for the payments. Government spending on librium exchange rate (Development Economics Vice Presidency agriculture includes: administration of agricultural land conserva- of the World Bank and Anderson, forthcoming). tion affairs and services; reclamation or expansion of arable land; Food aid in cereals includes three categories: (1) emergency construction or operation of flood control; irrigation and drainage food aid is destined for victims of natural or manmade disasters; systems; research and development; administration of agrarian (2) project food aid supports specific poverty-reduction and disas- reform and land settlement; administration of affairs and services ter-prevention activities; and (3) program food aid, which is usu- designed to stabilize or improve farm prices and farmers' incomes; ally supplied on a government-to-government basis as a resource public information and statistics collected; administration of vet- transfer for balance-of-payments or budgetary support. Deliver- erinary affairs and services; administration of forestry affairs and ies of food aid in cereals refer to quantities of cereal (expressed services; outlays in the form of loans, transfers, and subsidies; and in grain equivalents) that actually reached the recipient country all aspects of forest management including operation or support (World Food Programme, 2007). of reforestation work, forest fire fighting, and extension services Rural population access to an all-season road measures the to forest operators; and administration of commercial or sport number of rural people who live within 2 km (typically equiva- fishing and hunting affairs and services (International Monetary lent to a 20-minute walk) of an all-season road as a proportion Fund's Government Finance Statistics Yearbook). of the total rural population. An "all-season road" is a road that Public R&D spending in agriculture includes spending by is motorable all year by the prevailing means of rural transport government, nonprofits, and universities whether financed from (often a pick-up or truck that does not have four-wheel-drive). fiscal sources, or from contributions from the private sector Predictable interruptions of short duration during inclement and international grants and loans. R&D activities undertaken weather (e.g. heavy rainfall) are accepted, particularly on low vol- by international institutions are excluded. Research expendi- ume roads (World Bank). ture data include all expenditures (salaries, operating costs, and Access to electricity, or the electrification rate, is defined as the capital) in the following areas: crops, livestock, forestry, fisher- percentage of rural households with an electricity connection. This Selected indicators 329 is consistent with various formulations of questions employed in resources per capita are calculated using the World Bank's popu- household surveys such as "Does your household have electricity?" lation estimates (World Resources Institute, supplemented by the or "What is the main source of lighting in your home?" (World FAO's AQUASTAT data). Bank, based on data from various household surveys, including Annual freshwater withdrawals, agriculture (percent of total Demographic and Health Surveys (DHS), Living Standard Mea- freshwater withdrawal) refer to total water withdrawals, not surement Study (LSMS) surveys, and others). counting evaporation losses from storage basins. Withdrawals also include water from desalination plants in countries where they are a significant source. Withdrawals can exceed 100 percent of total Table A3. Agricultural inputs renewable resources where extraction from nonrenewable aquifers and the environment or desalination plants is considerable or where there is significant Arable and permanent cropland includes arable land which is water reuse. Withdrawals for agriculture are total withdrawals for defined by the FAO as land under temporary crops (double-cropped irrigation and livestock production. Data are for the most recent areas are counted once), temporary meadows for mowing or for pas- year available for 1987­2002 (World Resources Institute, supple- ture, land under market or kitchen gardens, and land temporarily mented by the FAO's AQUASTAT data). fallow. Land abandoned as a result of shifting cultivation is excluded. Average annual deforestation refers to the permanent con- Permanent cropland is land cultivated with crops that occupy the version of natural forest area to other uses, including shifting land for long periods and need not be replanted after each harvest, cultivation, permanent agriculture, ranching, settlements, and such as cocoa, coffee, and rubber. This category includes land under infrastructure development. Deforested areas do not include flowering shrubs, fruit trees, nut trees, and vines, but excludes land areas logged but intended for regeneration or areas degraded by under trees grown for wood or timber (Food and Agriculture Orga- fuel wood gathering, acid precipitation, or forest fires. Negative nization of the UN and data files). numbers indicate an increase in forest area (Food and Agriculture Land Gini index measures the extent that land distribution in Organization of the UN, Global Forest Resources Assessment). rural areas, among individuals or households, deviates from a per- fectly equal distribution. A land Gini index of 0 represents perfect equality, while an index of 1.0 implies perfect inequality. Table A4. Agricultural output and trade Irrigated area refers to areas purposely provided with water, Cereal production per capita refers to crops harvested for dry including land irrigated by controlled flooding (Food and Agricul- grain only. Cereals are the sum of production of wheat, rice, ture Organization, Production Yearbook and data files). maize, barley, oats, rye, millet, sorghum, buckwheat, and mixed Land Gini index measures the extent that land distribution in grains. Cereal crops harvested for hay or harvested green for food, rural areas, among individuals or households, deviates from a per- feed, or silage, and those used for grazing are excluded. (Food and fectly equal distribution. A land Gini index of 0 represents perfect Agriculture Organization of the UN and data files). equality, while an index of 1.0 implies perfect inequality. Land Meat production is the sum of meat from animals slaughtered Gini indexes for the 1990 round of agricultural censuses were in countries, irrespective of their origin, and comprises bovine, computed by FAO (http://www.fao.org/ES/ess/census/gini/table1. pig, sheep and goat, equine, chicken, turkey, duck, goose or guinea asp), and Ginis for the 2000 round of agricultural censuses were fowl, rabbit, and other meats (including camel, game) (Food and calculated from land distribution tabulations into 7 to 19 class Agriculture Organization of the UN and data files). sizes (http://www.fao.org/ES/ess/census/wcares/default.asp). For Fruits and vegetables is the sum of production of individual Cambodia, China, Vietnam, the Gini index was calculated from vegetable crops and fruits and berries grown mainly for human national data sources. consumption. Vegetables are temporary crops cultivated prin- Fertilizer consumption measures the quantity of plant nutri- cipally for human consumption both as field crops and garden ents used per unit of arable and permanent cropland. Fertilizer crops, in the open and under protective cover. Vegetables culti- products cover nitrogenous, potash, and phosphate fertilizers vated mainly for animal feed or cultivated only for their seeds are (including ground rock phosphate). Traditional nutrients--ani- excluded. Most fruit crops are permanent: mainly trees, bushes mal and plant manures--are not included. The time reference for and shrubs, but vines and palms are also included. Production fertilizer consumption is the crop year (July through June) (Food data of fruits crops relate to fruits actually harvested (Food and and Agriculture Organization of the UN and data files). Agriculture Organization of the UN and data files). Pesticide use refers to insecticides, fungicides, herbicides, dis- Food production per capita covers food crops that are con- infectants, and any substance intended for preventing, destroying, sidered edible and that contain nutrients. To construct the index, attracting, repelling, or controlling any pest, including unwanted production quantities of each commodity are weighted by interna- species of plants or animals during the production, storage, trans- tional prices. This method assigns a single price to each commod- port, distribution, and processing of food, agricultural commodi- ity so that, for example, one metric ton of wheat has the same price, ties, or animal feeds that may be administered to animals for the regardless of where it is produced. Coffee and tea are excluded control of ectoparasites. (Food and Agricultural organization of because, although edible, they have no nutritive value (Food and the UN, Summary of World Food and Agricultural Statistics). Agriculture Organization of the UN and data files). Renewable internal freshwater resources per capita refer to Net cereal imports presented in U.S. dollars, are cereal imports internal renewable resources (internal river flows and groundwa- less exports. Cereals include wheat, rice, maize, barley, oats, rye, ter from rainfall) in the country. Renewable internal freshwater millet, sorghum, buckwheat, and mixed grains (World Bank staff 330 WORLD DEVELOPMENT REPORT 2008 estimates from the COMTRADE database maintained by the chased by the importer plus the cost of transport and insurance to United Nations Statistics Division). the frontier of the importing country--the cost, insurance, and Agricultural imports and exports presented in U.S. dollars, are freight (c.i.f.) value. The value of exports is recorded as the cost defined by the Standard International Trade Classification (SITC), of the goods delivered to the frontier of the exporting country for revision 1 codes as follows: SITC 0 (food and live animals); SITC 1 shipment--the free on board (f.o.b.) value (World Bank staff esti- (division 121 only); SITC 2 (divisions 211, 212, 222, 223, 231, 263, mates from the COMTRADE database maintained by the United 264, 265, 268, 291, 292); and and all SITC 4 divisions. The value of Nations Statistics Division). imports is generally recorded as the cost of the goods when pur- Selected world development indicators In this year's edition, development data are presented in six tables or do not adequately adhere to international standards, the data presenting comparative socioeconomic data for more than 130 are not shown. economies for the most recent year for which data are available The data presented are generally consistent with those in World and, for some indicators, for an earlier year. An additional table Development Indicators 2007. However, data have been revised and presents basic indicators for 75 economies with sparse data or with updated wherever new information has become available. Differ- populations of less than 2 million. ences may also reflect revisions to historical series and changes in The indicators presented here are a selection from more than methodology. Thus data of different vintages may be published in 800 included in World Development Indicators 2007. Published different editions of World Bank publications. Readers are advised annually, World Development Indicators reflects a comprehensive not to compile data series from different publications or differ- view of the development process. Its opening chapter reports on ent editions of the same publication. Consistent time-series data the Millennium Development Goals, which grew out of agree- are available on World Development Indicators 2007 CD-ROM and ments and resolutions of world conferences in the 1990s, and were through WDI Online. formally recognized by the United Nations General Assembly after All dollar figures are in current U.S. dollars unless otherwise member states unanimously adopted the Millennium Declaration stated. The various methods used to convert from national cur- at the Millennium Summit in September 2000. In September 2005 rency figures are described in the Technical notes. the United Nations World Summit reaffirmed the principles in Because the World Bank's primary business is providing lend- the 2000 Millennium Declaration and recognized the need for ing and policy advice to its low- and middle-income members, ambitious national development strategies backed by increased the issues covered in these tables focus mainly on these econo- international support. The other five main sections recognize mies. Where available, information on the high-income econo- the contribution of a wide range of factors: human capital devel- mies is also provided for comparison. Readers may wish to refer to opment, environmental sustainability, macroeconomic perfor- national statistical publications and publications of the Organisa- mance, private sector development and the investment climate, tion for Economic Co-operation and Development (OECD) and and the global links that influence the external environment for the European Union for more information on the high-income development. World Development Indicators is complemented by economies a separately published database that gives access to over 1,000 data tables and 800 time-series indicators for 222 economies and Classification of economies regions. This database is available through an electronic subscrip- and summary measures tion (WDI Online) or as a CD-ROM. The summary measures at the bottom of most tables include economies classified by income per capita and by region. GNI per Data sources and methodology capita is used to determine the following income classifications: Socioeconomic and environmental data presented here are drawn low-income, $905 or less in 2005; middle-income, $906 to $11,115; from several sources: primary data collected by the World Bank, and high-income, $11,116 and above. A further division at GNI per member country statistical publications, research institutes, and capita $3,595 is made between lower-middle-income and upper- international organizations such as the United Nations and its spe- middle-income economies. The classification of economies based cialized agencies, the International Monetary Fund (IMF), and the on per capita income occurs annually, so the country composition OECD (see the Data Sources following the Technical notes for a of the income groups may change annually. When these changes in complete listing). Although international standards of coverage, classification are made based on the most recent estimates, aggre- definition, and classification apply to most statistics reported by gates based on the new income classifications are recalculated for countries and international agencies, there are inevitably differ- all past periods to ensure that a consistent time series is main- ences in timeliness and reliability arising from differences in the tained. See the table on classification of economies at the end of capabilities and resources devoted to basic data collection and this volume for a list of economies in each group (including those compilation. For some topics, competing sources of data require with populations of less than 2 million). review by World Bank staff to ensure that the most reliable data Summary measures are either totals (indicated by t if the aggre- available are presented. In some instances, where available data are gates include estimates for missing data and nonreporting coun- deemed too weak to provide reliable measures of levels and trends tries, or by an s for simple sums of the data available), weighted 331 332 WORLD DEVELOPMENT REPORT 2008 averages (w), or median values (m) calculated for groups of econo- that is currently under international administration pursuant to mies. Data for the countries excluded from the main tables (those UN Security Council Resolution 1244 (1999); any exceptions are presented in Table 5) have been included in the summary mea- noted. sures, where data are available, or by assuming that they follow the trend of reporting countries. This gives a more consistent aggre- Technical notes gated measure by standardizing country coverage for each period Because data quality and intercountry comparisons are often shown. Where missing information accounts for a third or more of problematic, readers are encouraged to consult the Technical notes, the overall estimate, however, the group measure is reported as not the table on Classification of Economies by Region and Income, available. The section on Statistical methods in the Technical notes and the footnotes to the tables. For more extensive documentation provides further information on aggregation methods. Weights see World Development Indicators 2007. used to construct the aggregates are listed in the technical notes Readers may find more information on the WDI 2007, and for each table. orders can be made online, by phone, or fax as follows: For more information and to order online: http://www.world- Terminology and country coverage bank.org/data/wdi2006/index.htm. The term country does not imply political independence but may To order by phone or fax: 1-800-645-7247 or 703-661-1580; Fax refer to any territory for which authorities report separate social 703-661-1501 or economic statistics. Data are shown for economies as they were To order by mail: The World Bank, P.O. Box 960, Herndon, VA constituted in 2006, and historical data are revised to reflect cur- 20172-0960, U.S.A. rent political arrangements. Throughout the tables, exceptions are noted. Unless otherwise noted, data for China do not include data Symbols for Hong Kong, China; Macao, China; or Taiwan, China. Data .. for Indonesia include Timor-Leste through 1999 unless other- means that data are not available or that aggregates cannot wise noted. Montenegro declared independence from Serbia and be calculated because of missing data in the years shown. Montenegro on June 3, 2006, so this edition lists data for Serbia; any exceptions are noted. Data from 1999 onward for Serbia for 0 or 0.0 most indicators exclude data for Kosovo, a territory within Serbia means zero or less than half the unit shown. Classification of economies by region and income, FY2008 East Asia and the Pacific Latin America and the Caribbean South Asia High income OECD American Samoa UMC Argentina UMC Afghanistan LIC Australia Cambodia LIC Belize UMC Bangladesh LIC Austria China LMC Bolivia LMC Bhutan LMC Belgium Fiji LMC Brazil UMC India LIC Canada Indonesia LMC Chile UMC Maldives LMC Czech Republic Kiribati LMC Colombia LMC Nepal LIC Denmark Korea, Dem. Rep. LIC Costa Rica UMC Pakistan LIC Finland Lao PDR LIC Cuba LMC Sri Lanka LMC France Malaysia UMC Dominica UMC Germany Marshall Islands LMC Dominican Republic LMC Sub-Saharan Africa Greece Micronesia, Fed. Sts. LMC Ecuador LMC Angola LMC Iceland Mongolia LIC El Salvador LMC Benin LIC Ireland Myanmar LIC Grenada UMC Botswana UMC Italy Northern Mariana Islands UMC Guatemala LMC Burkina Faso LIC Japan Palau UMC Guyana LMC Burundi LIC Korea, Rep. Papua New Guinea LIC Haiti LIC Cameroon LMC Luxembourg Philippines LMC Honduras LMC Cape Verde LMC Netherlands Samoa LMC Jamaica LMC Central African Republic LIC New Zealand Solomon Islands LIC Mexico UMC Chad LIC Norway Thailand LMC Nicaragua LMC Comoros LIC Portugal Timor-Leste LIC Panama UMC Congo, Dem. Rep. LIC Spain Tonga LMC Paraguay LMC Congo, Rep. LMC Sweden Vanuatu LMC Peru LMC Côte d'Ivoire LIC Switzerland Vietnam LIC St. Kitts and Nevis UMC Equatorial Guinea UMC United Kingdom St. Lucia UMC Eritrea LIC United States St. Vincent and the Grenadines UMC Ethiopia LIC Europe and Central Asia Suriname LMC Gabon UMC Other high income Gambia, The Albania LIC LMC Uruguay UMC Andorra Ghana Armenia LIC LMC Venezuela, RB UMC Antigua and Barbuda Guinea Azerbaijan LIC LMC Aruba Guinea-Bissau Belarus LIC LMC Middle East and North Africa Bahamas, The Kenya Bosnia and Herzegovina LIC LMC Algeria LMC Bahrain Lesotho Bulgaria LMC UMC Djibouti LMC Barbados Liberia Croatia LIC UMC Egypt, Arab Rep. LMC Bermuda Madagascar Georgia LIC LMC Iran, Islamic Rep. LMC Brunei Darussalam Malawi Hungary LIC UMC Iraq LMC Cayman Islands Mali Kazakhstan LIC UMC Jordan LMC Channel Islands Mauritania Kyrgyz Republic LIC LIC Lebanon UMC Cyprus Mauritius Latvia UMC UMC Libya UMC Estonia Mayotte Lithuania UMC UMC Morocco LMC Faeroe Islands Mozambique Macedonia, FYR LIC LMC Oman UMC French Polynesia Namibia Moldova LMC Syrian Arab Republic LMC LMC Greenland Niger Montenegro UMC Tunisia LMC LIC Guam Nigeria Poland UMC West Bank and Gaza LMC LIC Hong Kong, China Rwanda Romania UMC Yemen, Rep. LIC LIC Isle of Man São Tomé and Principe Russian Federation UMC LIC Israel Senegal Serbia UMC LIC Kuwait Seychelles Slovak Republic UMC UMC Liechtenstein Sierra Leone Tajikistan LIC LIC Macao, China Somalia Turkey UMC LIC Malta South Africa Turkmenistan LMC UMC Monaco Sudan Ukraine LMC LIC Netherlands Antilles Swaziland Uzbekistan LIC LMC New Caledonia Tanzania LIC Puerto Rico Togo LIC Qatar Uganda LIC San Marino Zambia LIC Saudi Arabia Zimbabwe LIC Singapore Slovenia Taiwan, China Trinidad and Tobago United Arab Emirates Virgin Islands (U.S.) Source: World Bank data. Note: This table classifies all World Bank member economies, and all other economies with populations of more than 30,000. Economies are divided among income groups according to 2006 GNI per capita, calculated using the World Bank Atlas method. The groups are: low income (LIC), $905 or less; lower middle income (LMC), $906­3,595; upper middle income (UMC), $3,596­11,115; and high income, $11,116 or more. 333 Table 1. Key indicators of development Gross national PPP gross national Life Carbon Population Population income (GNI)a income (GNI)b Gross expectancy Adult dioxide age domestic at birth literacy emissions Average Density composition product rate per capita annual people per % per capita Male Female % ages metric Millions % growth sq. km Ages 0­14 $ billions $ per capita $ billions $ per capita % growth years years 15 and older tons 2006 2000­06 2006 2006 2006 2006 2006 2006 2005­06 2005 2005 2000­05c 2003 Albania 3 0.4 115 26 9.3 2,960 18 5,840 4.7 73 79 99 1.0 Algeria 33 1.5 14 29 101.2 3,030 230d 6,900d 1.5 70 73 70 5.1 Angola 16 2.8 13 46 32.4 1,980 39d 2,360d 11.4 40 43 67 0.6 Argentina 39 1.0 14 26 201.4 5,150 602 15,390 7.4 71 79 97 3.4 Armenia 3 ­0.4 107 20 5.8 1,930 18 5,890 13.7 70 76 99 1.1 Australia 21 1.2 3 19 738.5 35,990 699 34,060 1.4 78 83 .. 17.8 Austria 8 0.5 100 15 326.2 39,590 289 35,130 3.0 77 82 .. 8.7 Azerbaijan 8 0.9 103 25 15.7 1,850 51 5,960 33.1 70 75 .. 3.5 Bangladesh 144 1.9 1,109 35 69.9 480 338 2,340 4.9 63 65 47 0.3 Belarus 10 ­0.5 47 15 32.8 3,380 86 8,810 10.8 63 74 .. 6.3 Belgium 10 0.4 347 17 404.7 38,600 368 35,090 3.1 77 82 .. 9.9 Benin 9 3.1 79 44 4.7 540 10 1,160 1.1 54 56 35 0.3 Bolivia 9 1.9 9 38 10.3 1,100 27 2,890 2.8 63 67 87 0.9 Bosnia and Herzegovina 4 0.3 76 16 11.7 2,980 .. .. 5.7 72 77 97 4.9 Brazil 189 1.4 22 28 892.8 4,730 1,661 8,800 2.4 67 75 89 1.6 Bulgaria 8 ­0.8 71 14 30.7 3,990 78 10,140 6.7 69 76 98 5.6 Burkina Faso 14 3.1 50 47 6.3 460 18d 1,330d 2.9 48 49 24 0.1 Burundi 8 3.1 305 45 0.8 100 6d 710d 1.3 44 46 59 0.0 Cambodia 14 2.0 81 37 6.9 480 42d 2,920d 8.4 54 61 74 0.0 Cameroon 17 1.9 36 41 18.1 1,080 40 2,370 1.6 46 47 68 0.2 Canada 33 0.9 4 17 1,177.4 36,170 1,127 34,610 2.0 78 83 .. 17.9 Central African Republic 4 1.3 7 43 1.5 360 5d 1,280d 2.1 39 40 49 0.1 Chad 10 3.3 8 47 4.8 480 12d 1,230d ­1.1 43 45 26 0.0 Chile 16 1.1 22 24 114.9 6,980 185 11,270 3.0 75 81 96 3.7 China 1,312 0.6 141 21 2,641.6 2,010 10,153e 7,740e 10.1 70 74 91 3.2 Hong Kong, China 7 0.8 6,728 14 199.5 28,460 268 38,200 5.9 79 85 .. 5.6 Colombia 46 1.5 41 31 125.0 2,740 347d 7,620d 5.4 70 76 93 1.3 Congo, Dem. Rep. 59 2.8 26 47 7.7 130 43d 720d 1.9 43 45 67 0.0 Congo, Rep. 4 3.0 12 47 3.8 950 4 940 3.7 52 54 85 0.4 Costa Rica 4 1.8 86 28 21.8 4,980 47d 10,770d 6.4 77 81 95 1.5 Côte d'Ivoire 18 1.6 58 42 16.0 870 29 1,550 2.3 45 47 49 0.3 Croatia 4 ­0.2 79 15 41.4 9,330 61 13,680 4.7 72 79 98 5.4 Czech Republic 10 ­0.1 132 14 129.5 12,680 219 21,470 6.2 73 79 .. 11.4 Denmark 5 0.3 128 19 280.7 51,700 198 36,460 3.0 76 80 .. 10.1 Dominican Republic 10 1.6 199 32 27.4 2,850 80 8,290 9.0 69 75 87 2.3 Ecuador 13 1.4 48 32 38.1 2,840 59 4,400 3.1 72 78 91 1.8 Egypt, Arab Rep. 75 1.9 76 33 101.7 1,350 354 4,690 4.9 68 73 71 2.0 El Salvador 7 1.8 337 34 17.8 2,540 37d 5,340d 2.2 68 74 81 1.0 Eritrea 5 4.1 45 45 0.9 200 5d 1,090d ­4.0 53 57 .. 0.2 Ethiopia 73 2.0 73 44 12.9 180 87d 1,190d 6.8 42 43 36 0.1 Finland 5 0.3 17 17 213.6 40,650 185 35,150 5.3 76 82 .. 13.0 France 61 0.6 111 18 2,297.8 36,550f 2,059 33,740 1.7 77 84 .. 6.2 Georgia 4 ­1.0 64 18 6.9 1,560 16 3,690 10.3 68 75 .. 0.8 Germany 82 0.0 236 14 3,018.0 36,620 2,623 31,830 2.9 76 82 .. 9.8 Ghana 23 2.1 99 39 11.8 520 59d 2,640d 4.2 57 58 58 0.4 Greece 11 0.3 86 14 241.0 21,690 273 24,560 4.2 77 82 96 8.7 Guatemala 13 2.4 119 43 34.1 2,640 62d 4,800d 2.1 64 72 69 0.9 Guinea 9 1.9 37 44 3.7 410 22 2,410 0.8 54 54 29 0.2 Haiti 9 1.4 314 37 4.1 480 13d 1,490d 0.9 52 53 .. 0.2 Honduras 7 2.3 66 39 8.8 1,200 26d 3,540d 3.9 67 71 80 0.9 Hungary 10 ­0.3 112 15 110.1 10,950 184 18,290 4.2 69 77 .. 5.8 India 1,110 1.5 373 32 906.5 820 4,217d 3,800d 7.7 63 64 61 1.2 Indonesia 223 1.3 123 28 315.8 1,420 881 3,950 4.3 66 70 90 1.4 Iran, Islamic Rep. 69 1.4 42 28 207.6 3,000 587 8,490 4.4 70 73 82 5.7 Ireland 4 1.7 61 20 191.9 45,580 151 35,900 4.7 77 82 .. 10.4 Israel 7 1.9 325 28 128.7 18,580 176 25,480 3.4 78 82 .. 10.2 Italy 59 0.5 199 14 1,875.6 32,020 1,789 30,550 2.0 78 83 98 7.7 Jamaica 3 0.5 246 31 9.3 3,480 11 4,030 2.3 69 73 .. 4.1 Japan 128 0.1 350 14 4,900.0 38,410 4,229 33,150 2.4 79 86 .. 9.6 Jordan 6 2.4 63 37 14.7 2,660 35 6,210 4.0 71 74 91 3.3 Kazakhstan 15 0.5 6 23 58.0 3,790 119 7,780 9.4 61 72 .. 10.7 Kenya 35 2.3 62 43 20.5 580 46 1,300 3.1 50 48 74 0.3 Korea, Rep. 48 0.5 490 18 856.6 17,690 1,152 23,800 4.7 74 81 .. 9.5 Kuwait 3 2.9 148 24 77.7 30,630 74d 29,200d 5.3 75 80 93 32.7 Kyrgyz Republic 5 0.9 27 31 2.6 490 10 1,990 1.6 65 72 .. 1.1 Lao PDR 6 1.6 25 40 2.9 500 12 2,050 5.8 62 65 69 0.2 Latvia 2 ­0.6 37 14 18.5 8,100 35 15,350 12.6 66 77 100 2.9 Lebanon 4 1.2 396 28 22.2 5,490 22 5,460 ­1.1 70 75 .. 4.8 Lithuania 3 ­0.5 54 16 26.7 7,870 51 14,930 8.1 65 77 100 3.7 Macedonia, FYR 2 0.2 80 19 6.2 3,060 16 7,610 2.9 71 76 96 5.2 Madagascar 19 2.7 33 44 5.3 280 18 960 2.3 55 57 71 0.1 Malawi 13 2.2 140 47 2.3 170 9 720 6.2 41 40 .. 0.1 Malaysia 26 1.9 78 32 141.4 5,490 291 11,300 4.2 71 76 89 6.4 Mali 14 3.0 11 48 6.1 440 16 1,130 2.5 48 49 24 0.0 Mauritania 3 2.9 3 43 2.3 740 8d 2,600d 8.7 52 55 51 0.9 334 Table 1. Key indicators of development (continued) Gross national PPP gross national Life Carbon Population Population income (GNI)a income (GNI)b Gross expectancy Adult dioxide age domestic at birth literacy emissions Average Density composition product rate per capita annual people per % per capita Male Female % ages metric Millions % growth sq. km Ages 0­14 $ billions $ per capita $ billions $ per capita % growth years years 15 and older tons 2006 2000­06 2006 2006 2006 2006 2006 2006 2005­06 2005 2005 2000­05c 2003 Mexico 104 1.0 55 30 820.3 7,870 1,189 11,410 3.6 73 78 92 4.1 Moldova 4 ­1.3 117 18 3.7 1,100g 11 2,880 5.2 65 72 99 1.8 Mongolia 3 1.2 2 30 2.3 880 6 2,280 7.1 65 68 98 3.2 Morocco 30 1.1 68 31 58.0 1,900 152 5,000 6.0 68 73 52 1.3 Mozambique 20 2.0 26 44 6.9 340 25d 1,220d 6.6 41 42 .. 0.1 Namibia 2 1.3 2 41 6.6 3,230 17d 8,110d 3.6 47 47 85 1.2 Nepal 28 2.1 193 39 8.1 290 45 1,630 ­0.1 62 63 49 0.1 Netherlands 16 0.5 483 18 698.5 42,670 615 37,580 2.6 77 82 .. 8.7 New Zealand 4 1.1 15 21 112.4 27,250 112 27,220 1.1 78 82 .. 8.7 Nicaragua 5 1.1 43 38 5.2 1,000 21d 4,010d 1.7 68 73 77 0.8 Niger 14 3.4 11 49 3.7 260 12d 830d 0.1 45 45 29 0.1 Nigeria 145 2.5 159 44 92.4 640 152 1,050 3.4 46 47 69 0.4 Norway 5 0.6 15 19 308.9 66,530 203 43,820 2.5 78 83 .. 9.9 Oman 3 1.2 8 34 23.0 9,070 37 14,570 2.2 73 76 81 12.8 Pakistan 159 2.4 206 38 122.3 770 398 2,500 4.1 64 65 50 0.8 Panama 3 1.8 44 30 16.1 4,890 25 7,680 6.4 73 78 92 1.9 Papua New Guinea 6 2.1 13 40 4.6 770 14d 2,410d 1.8 56 57 57 0.4 Paraguay 6 2.0 15 37 8.4 1,400 31d 5,070d 1.9 69 74 93 0.7 Peru 28 1.5 22 32 82.7 2,920 172 6,080 6.5 68 73 88 1.0 Philippines 85 1.8 284 35 120.2 1,420 506 5,980 3.5 69 73 93 1.0 Poland 38 ­0.1 124 16 312.2 8,190 565 14,830 5.9 71 79 .. 8.0 Portugal 11 0.6 116 16 191.6 18,100 229 21,580 0.9 75 81 94 5.5 Romania 22 ­0.7 94 15 104.4 4,850 212 9,820 8.2 68 75 97 4.2 Russian Federation 142 ­0.5 9 15 822.4 5,780 1,656 11,630 7.3 59 72 99 10.3 Rwanda 9 2.4 375 43 2.3 250 12d 1,270d 3.0 43 46 65 0.1 Saudi Arabia 24 2.3 12 37 289.2 12,510 384d 16,620d 3.8 71 75 83 13.7 Senegal 12 2.4 62 42 8.9 750 22 1,840 1.0 55 58 39 0.4 Serbia 7 ­0.2 84 .. 29.0 3,910h .. .. 6.0 70k 76k 96k .. Sierra Leone 6 3.7 79 43 1.4 240 5 850 4.9 40 43 35 0.1 Singapore 4 1.5 6,376 19 128.8 29,320 139 31,710 6.6 78 82 93 11.4 Slovak Republic 5 0.0 112 16 53.2 9,870 95 17,600 8.3 70 78 .. 7.0 Slovenia 2 0.1 99 14 37.7 18,890 48 23,970 5.4 74 81 100 7.7 South Africa 47 1.2 39 32 255.3 5,390 555d 11,710d 3.9 47 49 .. 7.9 Spain 44 1.3 87 14 1,200.7 27,570 1,221 28,030 3.6 77 84 .. 7.4 Sri Lanka 20 0.4 306 24 25.7 1,300 99 5,010 6.6 72 77 91 0.5 Sudan 37 2.0 16 39 29.9 810 80d 2,160d 10.7 55 58 61 0.3 Sweden 9 0.3 22 17 394.2 43,580 317 35,070 4.2 78 83 .. 5.9 Switzerland 7 0.6 186 16 425.9 57,230 305 40,930 2.6 79 84 .. 5.5 Syrian Arab Republic 19 2.5 106 36 30.7 1,570 77 3,930 2.6 72 76 81 2.7 Tajikistan 7 1.2 47 38 2.6 390 9 1,410 5.6 61 67 99 0.7 Tanzania 39 2.6 45 42 13.4 350i 29 740 3.3 46 47 69 0.1 Thailand 65 0.9 127 23 193.7 2,990 592 9,140 4.2 68 74 93 3.9 Togo 6 2.7 116 43 2.2 350 9d 1,490d -1.0 53 57 53 0.4 Tunisia 10 1.0 65 25 30.1 2,970 86 8,490 4.1 72 76 74 2.1 Turkey 73 1.3 95 29 393.9 5,400 661 9,060 4.8 69 74 87 3.1 Turkmenistan 5 1.4 10 31 .. ..j .. .. .. 59 67 .. 9.2 Uganda 30 3.4 152 50 8.9 300 45d 1,490d 1.5 49 51 67 0.1 Ukraine 47 ­0.9 80 14 90.6 1,950 350 7,520 8.3 62 74 99 6.6 United Kingdom 60 0.2 249 18 2,425.2 40,180 2,148 35,580 2.6 77 81 .. 9.4 United States 299 1.0 33 21 13,446.0 44,970 13,233 44,260 2.4 75 81 .. 19.9 Uruguay 3 0.1 19 24 17.6 5,310 37 11,150 6.8 72 79 .. 1.3 Uzbekistan 27 1.2 62 32 16.2 610 60 2,250 5.8 64 71 .. 4.8 Venezuela, RB 27 1.8 31 31 164.0 6,070 201 7,440 8.5 71 77 93 5.6 Vietnam 84 1.3 271 29 58.1 690 278 3,300 6.9 68 73 .. 0.9 West Bank and Gaza 4 3.9 621 45 4.5 1,230 .. .. -1.7 71 76 92 .. Yemen, Rep. 22 3.1 41 46 16.4 760 20 920 0.2 60 63 54 0.9 Zambia 12 1.7 16 46 7.5 630 12 1,000 4.3 39 38 .. 0.2 Zimbabwe 13 0.6 34 39 4.5 340 25 1,950 -5.4 38 37 89 0.9 World 6,518s 1.2w 50w 28w 48,481.8t 7,439w 66,596t 10,218w 2.8w 66w 70w 82w 4.0w Low income 2,403 1.9 85 36 1,562.3 650 6,485 2,698 6.1 58 60 61 0.8 Middle income 3,086 0.9 45 25 9,415.4 3,051 24,613 7,976 6.3 68 73 90 3.5 Lower middle income 2,276 0.9 81 25 4,635.2 2,037 15,977 7,020 7.9 69 73 89 2.9 Upper middle income 810 0.8 20 25 4,789.7 5,913 8,763 10,817 4.9 66 74 94 5.3 Low & middle income 5,489 1.3 57 30 10,977.7 2,000 31,089 5,664 6.0 64 67 79 2.4 East Asia & Pacific 1,900 0.9 120 23 3,539.1 1,863 12,958 6,821 8.6 69 73 91 2.8 Europe & Central Asia 460 0.0 20 20 2,205.8 4,796 4,444 9,662 6.8 64 74 98 6.8 Latin America & Caribbean 556 1.3 28 30 2,650.3 4,767 4,891 8,798 4.2 69 76 90 2.4 Middle East & North Africa 311 1.8 35 33 771.2 2,481 2,005 6,447 3.6 68 72 73 3.4 South Asia 1,493 1.7 312 33 1,142.7 766 5,140 3,444 6.9 63 64 58 1.0 Sub-Saharan Africa 770 2.3 33 43 648.3 842 1,565 2,032 3.2 47 48 59 0.7 High income 1,029 0.7 31 18 37,528.9 36,487 35,692 34,701 2.6 76 82 99 12.8 a. Calculated using the World Bank Atlas method. b. PPP is purchasing power parity; see Technical notes. c. Data are for the most recent year available. d. The estimate is based on regression; others are extrapolated from the latest International Comparison Program benchmark estimates. e. Based on a 1986 bilateral comparison of China and United states (Ruoen and Kai 1995), employing a different methodology than that used for other countries. This interim methodology will be revised in the next few years. f. The GNI and GNI per capita estimates include the French overseas departments of French Guiana, Guadeloupe, Martinique, and Réunion. g. Excludes data for Transnistria. h. Excludes data for Kosovo and Metahia. i. Data refer to mainland Tanzania only. j. Estimated to be lower middle income ($906­$3,595). k. Data are for Serbia and Montenegro together. 335 Table 2. Poverty National poverty line International poverty line Population below the poverty line Population below the poverty line Population Poverty Population Poverty below gap at below gap at Survey Rural Urban National Survey Rural Urban National Survey $1 a day $1 a day $2 a day $2 a day year % % % year % % % year % % % % Albania 2002 29.6 19.8 25.4 .. .. .. .. 2004a <2 <0.5 10.0 1.6 Algeria 1988 16.6 7.3 12.2 1995 30.3 14.7 22.6 1995a <2 <0.5 15.1 3.8 Angola .. .. .. .. .. .. .. .. .. .. .. .. .. Argentina 1995 .. 28.4 .. 1998 .. 29.9 .. 2004b 6.6 2.1 17.4 7.1 Armenia 1998­99 50.8 58.3 55.1 2001 48.7 51.9 50.9 2003a <2 <0.5 31.1 7.1 Australia .. .. .. .. .. .. .. .. .. .. .. .. .. Austria .. .. .. .. .. .. .. .. .. .. .. .. .. Azerbaijan 1995 .. .. 68.1 2001 42.0 55.0 49.6 2001a 3.7 0.6 33.4 9.1 Bangladesh 1995­96 55.2 29.4 51.0 2000 53.0 36.6 49.8 2000a 41.3 10.3 84.0 38.3 Belarus 2000 .. .. 41.9 .. .. .. .. 2002a <2 <0.5 <2 <0.5 Belgium .. .. .. .. .. .. .. .. .. .. .. .. .. Benin 1995 25.2 28.5 26.5 1999 33.0 23.3 29.0 2003a 30.9 8.2 73.7 31.7 Bolivia 1997 77.3 53.8 63.2 1999 81.7 50.6 62.7 2002b 23.2 13.6 42.2 23.2 Bosnia and Herzegovina 2001­02 19.9 13.8 19.5 .. .. .. .. .. .. .. .. .. Brazil 1998 51.4 14.7 22.0 2002­03 41.0 17.5 21.5 2004b 7.5 3.4 21.2 8.5 Bulgaria 1997 .. .. 36.0 2001 .. .. 12.8 2003a <2 <0.5 6.1 1.5 Burkina Faso 1998 61.1 22.4 54.6 2003 52.4 19.2 46.4 2003a 27.2 7.3 71.8 30.4 Burundi 1990 36.0 43.0 36.4 .. .. .. .. 1998a 54.6 22.7 87.6 48.9 Cambodia 1997 40.1 21.1 36.1 2004 38.0 18.0 35.0 2004a 66.0 27.2 89.8 54.2 Cameroon 1996 59.6 41.4 53.3 2001 49.9 22.1 40.2 2001a 17.1 4.1 50.6 19.3 Canada .. .. .. .. .. .. .. .. .. .. .. .. .. Central African Republic .. .. .. .. .. .. .. .. 1993a 66.6 38.1 84.0 58.4 Chad 1995­96 67.0 63.0 64.0 .. .. .. .. .. .. .. .. .. Chile 1996 .. .. 19.9 1998 .. .. 17.0 2003b <2 <0.5 5.6 1.3 China 1996 7.9 <2 6.0 1998 4.6 <2 4.6 2004a 9.9 2.1 34.9 12.5 Hong Kong, China .. .. .. .. .. .. .. .. .. .. .. .. .. Colombia 1995 79.0 48.0 60.0 1999 79.0 55.0 64.0 2003b 7.0 3.1 17.8 7.7 Congo, Dem. Rep. .. .. .. .. .. .. .. .. .. .. .. .. .. Congo, Rep. .. .. .. .. .. .. .. .. .. .. .. .. .. Costa Rica 1992 25.5 19.2 22.0 .. .. .. .. 2003b 3.3 1.6 9.8 4.0 Côte d'Ivoire .. .. .. .. .. .. .. .. 2002a 14.8 4.1 48.8 18.4 Croatia .. .. .. .. .. .. .. .. 2001a <2 <0.5 <2 <0.5 Czech Republic .. .. .. .. .. .. .. .. 1996b <2 <0.5 <2 <0.5 Denmark .. .. .. .. .. .. .. .. .. .. .. .. .. Dominican Republic 2000 45.3 18.2 27.7 2004 55.7 34.7 42.2 2004b 2.8 0.5 16.2 4.9 Ecuador 1995 56.0 19.0 34.0 1998 69.0 30.0 46.0 1998b 17.7 7.1 40.8 17.7 Egypt, Arab Rep. 1995­96 23.3 22.5 22.9 1999­00 .. .. 16.7 1999­00a 3.1 <0.5 43.9 11.3 El Salvador 1995 64.8 38.9 50.6 2002 49.8 28.5 37.2 2002b 19.0 9.3 40.6 17.7 Eritrea 1993­94 .. .. 53.0 .. .. .. .. .. .. .. .. .. Ethiopia 1995­96 47.0 33.3 45.5 1999­00 45.0 37.0 44.2 1999­00a 23.0 4.8 77.8 29.6 Finland .. .. .. .. .. .. .. .. .. .. .. .. .. France .. .. .. .. .. .. .. .. .. .. .. .. .. Georgia 2002 55.4 48.5 52.1 2003 52.7 56.2 54.5 2003a 6.5 2.1 25.3 8.6 Germany .. .. .. .. .. .. .. .. .. .. .. .. .. Ghana 1992 .. .. 50.0 1998­99 49.9 18.6 39.5 1998­99a 44.8 17.3 78.5 40.8 Greece .. .. .. .. .. .. .. .. .. .. .. .. .. Guatemala 1989 71.9 33.7 57.9 2000 74.5 27.1 56.2 2002b 13.5 5.5 31.9 13.8 Guinea 1994 .. .. 40.0 .. .. .. .. .. .. .. .. .. Haiti 1987 .. .. 65.0 1995 66.0 .. .. 2001b 53.9 26.6 78.0 47.4 Honduras 1998­99 71.2 28.6 52.5 2004 70.4 29.5 50.7 2003b 14.9 4.4 35.7 15.1 Hungary 1993 .. .. 14.5 1997 .. .. 17.3 2002a <2 <0.5 <2 <0.5 India 1993­94 37.3 32.4 36.0 1999­00 30.2 24.7 28.6 2004­05a 34.3 7.9 80.4 35.0 Indonesia 1996 .. .. 15.7 1999 34.4 16.1 27.1 2002a 7.5 0.9 52.4 15.7 Iran, Islamic Rep. .. .. .. .. .. .. .. .. 1998a <2 <0.5 7.3 1.5 Ireland .. .. .. .. .. .. .. .. .. .. .. .. .. Israel .. .. .. .. .. .. .. .. .. .. .. .. .. Italy .. .. .. .. .. .. .. .. .. .. .. .. .. Jamaica 1995 37.0 18.7 27.5 2000 25.1 12.8 18.7 2004a <2 <0.5 14.4 3.3 Japan .. .. .. .. .. .. .. .. .. .. .. .. .. Jordan 1997 27.0 19.7 21.3 2002 18.7 12.9 14.2 2002­03a <2 <0.5 7.0 1.5 Kazakhstan 1996 39.0 30.0 34.6 .. .. .. .. 2003a <2 <0.5 16.0 3.8 Kenya 1994 47.0 29.0 40.0 1997 53.0 49.0 52.0 1997a 22.8 5.9 58.3 23.9 Korea, Rep. .. .. .. .. .. .. .. .. 1998b <2 <0.5 <2 <0.5 Kuwait .. .. .. .. .. .. .. .. .. .. .. .. .. Kyrgyz Republic 2001 51.0 41.2 47.6 2003 .. .. 41.0 2003a <2 <0.5 21.4 4.4 Lao PDR 1993 48.7 33.1 45.0 1997­98 41.0 26.9 38.6 2002a 27.0 6.1 74.1 30.2 Latvia .. .. .. .. .. .. .. .. 2003a <2 <0.5 4.7 1.2 Lebanon .. .. .. .. .. .. .. .. .. .. .. .. .. Lithuania .. .. .. .. .. .. .. .. 2003a <2 <0.5 7.8 1.8 Macedonia, FYR 2002 25.3 .. 21.4 2003 22.3 .. 21.7 2003a <2 <0.5 <2 <0.5 Note: For data comparability and coverage, see the technical notes. Figures in italics are for years other than those specified. 336 Table 2. Poverty (continued) National poverty line International poverty line Population below the poverty line Population below the poverty line Population Poverty Population Poverty below gap at below gap at Survey Rural Urban National Survey Rural Urban National Survey $1 a day $1 a day $2 a day $2 a day year % % % year % % % year % % % % Madagascar 1997 76.0 63.2 73.3 1999 76.7 52.1 71.3 2001a 61.0 27.9 85.1 51.8 Malawi 1990­91 .. .. 54.0 1997­98 66.5 54.9 65.3 2004­05a 20.8 4.7 62.9 24.3 Malaysia 1989 .. .. 15.5 .. .. .. .. 1997b <2 <0.5 9.3 2.0 Mali 1998 75.9 30.1 63.8 .. .. .. .. 2001a 36.1 12.2 72.1 34.2 Mauritania 1996 65.5 30.1 50.0 2000 61.2 25.4 46.3 2000a 25.9 7.6 63.1 26.8 Mexico 2000 42.4 12.6 24.2 2004 27.9 11.3 17.6 2004a 3.0 1.4 11.6 4.2 Moldova 2001 64.1 58.0 62.4 2002 67.2 42.6 48.5 2003a <2 <0.5 20.8 4.7 Mongolia 1998 32.6 39.4 35.6 2002 43.4 30.3 36.1 2002a 10.8 2.2 44.6 15.1 Morocco 1990­91 18.0 7.6 13.1 1998­99 27.2 12.0 19.0 1998­99a <2 <0.5 14.3 3.1 Mozambique 1996­97 71.3 62.0 69.4 .. .. .. .. 2002­03a 36.2 11.6 74.1 34.9 Namibia .. .. .. .. .. .. .. .. 1993b 34.9 14.0 55.8 30.4 Nepal 1995­96 43.3 21.6 41.8 2003­04 34.6 9.6 30.9 2003­04a 24.1 5.4 68.5 26.8 Netherlands .. .. .. .. .. .. .. .. .. .. .. .. .. New Zealand .. .. .. .. .. .. .. .. .. .. .. .. .. Nicaragua 1993 76.1 31.9 50.3 1998 68.5 30.5 47.9 2001a 45.1 16.7 79.9 41.2 Niger 1989­93 66.0 52.0 63.0 .. .. .. .. 1995a 60.6 34.0 85.8 54.6 Nigeria 1985 49.5 31.7 43.0 1992­93 36.4 30.4 34.1 2003a 70.8 34.5 92.4 59.5 Norway .. .. .. .. .. .. .. .. .. .. .. .. .. Oman .. .. .. .. .. .. .. .. .. .. .. .. .. Pakistan 1993 33.4 17.2 28.6 1998­99 35.9 24.2 32.6 2002a 17.0 3.1 73.6 26.1 Panama 1997 64.9 15.3 37.3 .. .. .. .. 2003b 7.4 2.1 18.0 7.5 Papua New Guinea 1996 41.3 16.1 37.5 .. .. .. .. .. .. .. .. .. Paraguay 1991 28.5 19.7 21.8 .. .. .. .. 2003b 13.6 5.6 29.8 13.8 Peru 2001 77.1 42.0 54.3 2004 72.1 42.9 53.1 2003b 10.5 2.9 30.6 11.9 Philippines 1994 53.1 28.0 40.6 1997 50.7 21.5 36.8 2003a 14.8 2.9 43.0 16.3 Poland 1993 .. .. 23.8 .. .. .. .. 2002a <2 <0.5 <2 <0.5 Portugal .. .. .. .. .. .. .. .. .. .. .. .. .. Romania 1994 27.9 20.4 21.5 .. .. .. .. 2003a <2 0.5 12.9 3.0 Russian Federation 1994 .. .. 30.9 .. .. .. .. 2002a <2 <0.5 12.1 3.1 Rwanda 1993 .. .. 51.2 1999­00 65.7 14.3 60.3 2000a 60.3 25.6 87.8 51.5 Saudi Arabia .. .. .. .. .. .. .. .. .. .. .. .. .. Senegal 1992 40.4 23.7 33.4 .. .. .. .. 2001a 17.0 3.6 56.2 20.9 Serbia .. .. .. .. .. .. .. .. .. .. .. .. .. Sierra Leone 1989 .. .. 82.8 2003­04 79.0 56.4 70.2 1989a 57.0 39.5 74.5 51.8 Singapore .. .. .. .. .. .. .. .. .. .. .. .. .. Slovak Republic .. .. .. .. .. .. .. .. 1996b <2 <0.5 2.9 0.8 Slovenia .. .. .. .. .. .. .. .. 1998a <2 <0.5 <2 <0.5 South Africa .. .. .. .. .. .. .. .. 2000a 10.7 1.7 34.1 12.6 Spain .. .. .. .. .. .. .. .. .. .. .. .. .. Sri Lanka 1990­91 22.0 15.0 20.0 1995­96 27.0 15.0 25.0 2002a 5.6 0.8 41.6 11.9 Sudan .. .. .. .. .. .. .. .. .. .. .. .. .. Swaziland .. .. .. .. .. .. .. .. 2001­01a 47.7 19.4 77.8 42.4 Sweden .. .. .. .. .. .. .. .. .. .. .. .. .. Switzerland .. .. .. .. .. .. .. .. .. .. .. .. .. Syrian Arab Republic .. .. .. .. .. .. .. .. .. .. .. .. .. Tajikistan .. .. .. .. .. .. .. .. 2003a 7.4 1.3 42.8 13.0 Tanzania 1991 40.8 31.2 38.6 2000­01 38.7 29.5 35.7 2000­01a 57.8 20.7 89.9 49.3 Thailand 1994 .. .. 9.8 1998 .. .. 13.6 2002a <2 <0.5 25.2 6.2 Togo 1987­89 .. .. 32.3 .. .. .. .. .. .. .. .. .. Tunisia 1990 13.1 3.5 7.4 1995 13.9 3.6 7.6 2000a <2 <0.5 6.6 1.3 Turkey 1994 .. .. 28.3 2002 34.5 22.0 27.0 2003a 3.4 0.8 18.7 5.7 Turkmenistan .. .. .. .. .. .. .. .. .. .. .. .. .. Uganda 1999­00 37.4 9.6 33.8 2002­03 41.7 12.2 37.7 .. .. .. .. .. Ukraine 2000 34.9 .. 31.5 2003 28.4 .. 19.5 2003b <2 <0.5 4.9 0.9 United Kingdom .. .. .. .. .. .. .. .. .. .. .. .. .. United States .. .. .. .. .. .. .. .. .. .. .. .. .. Uruguay 1994 .. 20.2 .. 1998 .. 24.7 .. 2003b <2 <0.5 5.7 1.6 Uzbekistan 2000 30.5 22.5 27.5 .. .. .. .. 2003a <2 <0.5 <2 0.6 Venezuela, RB 1989 .. .. 31.3 .. .. .. .. 2003b 18.5 8.9 40.1 19.2 Vietnam 1998 45.5 9.2 37.4 2002 35.6 6.6 28.9 .. .. .. .. .. West Bank and Gaza .. .. .. .. .. .. .. .. .. .. .. .. .. Yemen, Rep. 1998 45.0 30.8 41.8 .. .. .. .. 1998a 15.7 4.5 45.2 15.0 Zambia 1998 83.1 56.0 72.9 2004 78.0 53.0 68.0 2004a 63.8 32.6 87.2 55.2 Zimbabwe 1990­91 35.8 3.4 25.8 1995­96 48.0 7.9 34.9 1995­96a 56.1 24.2 83.0 48.2 a. Expenditure base. b. Income base. 337 Table 3. Millennium Development Goals: eradicating poverty and improving lives Achieve Eradicate universal Combat extreme poverty primary Promote gender Reduce child HIV/AIDS and and hunger education equality mortality Improve maternal health other diseases Maternal mortality Prevalence ratio per HIV Percentage of child Gender parity 100,000 live Births attended prevalence share of malnutrition Primary ratio in primary Under-five births by skilled % of poorest % of children completion and secondary mortality rate Modeled health staff population quintile in under 5 rate (%) school per 1,000 estimates % of total ages 15­49 national Survey consumption 1990­ 2000­ 1990­ 2000­ year or income 95a 06a 1991 2005 1991 2005 1990 2005 2000 95a 06a 2005 Albania 2004b 8.2 .. 14 .. 97 96 97 45 18 55 .. 98 .. Algeria 1995b 7.0 13 10 79 96 83 99 69 39 140 77 96 0.1 Angola .. .. .. 31 35 .. .. .. 260 260 1,700 .. 45 3.7 Argentina 2004c,d 3.1 2 4 .. 99 .. 102 29 18 82 96 95 0.6 Armenia 2003b 8.5 .. 3 90 91 .. 103 54 29 55 .. 98 0.1 Australia 1994d 5.9 .. .. .. .. 101 97 10 6 8 100 99 0.1 Austria 2000d 8.6 .. .. .. 104 95 97 10 5 4 100 .. 0.3 Azerbaijan 2001b 7.4 .. 7 .. 94 100 97 105 89 94 .. 88 0.1 Bangladesh 2000b 8.6 68 48 49 76 .. 103 149 73 380 10 13 <0.1 Belarus 2002b 8.5 .. .. 95 100 .. 100 19 12 35 .. 100 0.3 Belgium 2000d 8.5 .. .. 79 .. 101 98 10 5 10 .. .. 0.3 Benin 2003b 7.4 .. 30 21 65 49 73 185 150 850 .. 75 1.8 Bolivia 2002d 1.5 15 8 .. 101 .. 98 125 65 420 47 67 0.1 Bosnia and Herzegovina 2001b 9.5 .. 4 .. .. .. .. 22 15 31 97 100 <0.1 Brazil 2004d 2.8 .. .. 93 105 .. 102 60 33 260 72 97 0.5 Bulgaria 2003b 8.7 .. .. 85 98 99 96 19 15 32 .. 99 <0.1 Burkina Faso 2003b 6.9 33 38 21 31 62 78 210 191 1,000 42 38 1.8f Burundi 1998b 5.1 .. 45 46 36 82 84 190 190 1,000 .. 25 3.3 Cambodia 2004b 6.8 .. 36 .. 92 73 87 115 87 450 .. 44 1.6 Cameroon 2001b 5.6 15 18 56 62 83 84 139 149 730 58 62 5.5g Canada 2000d 7.2 .. .. .. .. 99 98 8 6 6 98 98 0.3 Central African Republic 1993b 2.0 23 24 27 23 60 .. 168 193 1,100 46 44 10.7 Chad .. .. .. 37 18 32 41 60 201 208 1,100 .. 14 3.5 Chile 2003d 3.8 1 1 .. 123 100 98 21 10 31 100 100 0.3 China 2004d 4.3 13 8 103 98 87 99 49 27 56 .. 97 0.1h Hong Kong, China 1996d 5.3 .. .. 102 110 103 95 .. .. .. .. 100 .. Colombia 2003d 2.5 8 7 70 97 107 104 35 21 130 86 96 0.6 Congo, Dem. Rep. .. .. 34 31 46 39 .. 73 205 205 990 .. 61 3.2 Congo, Rep. .. .. .. .. 54 57 85 90 110 108 510 .. 86 5.3 Costa Rica 2003d 3.5 2 .. 79 92 101 102 18 12 43 98 99 0.3 Côte d'Ivoire 2002b 5.2 24 17 43 .. 65 68 157 195 690 45 68 7.1 Croatia 2001b 8.3 1 .. 85 91 102 101 12 7 8 100 100 <0.1 Czech Republic 1996d 10.3 1 .. .. 102 98 101 13 4 9 99 100 0.1 Denmark 1997d 8.3 .. .. 98 99 101 102 9 5 5 .. .. 0.2 Dominican Republic 2004d 4.0 10 5 61 92 .. 105 65 31 150 93 99 1.0 Ecuador 1998b 3.3 .. 12 91 101 .. 100 57 25 130 .. 75 0.3 Egypt, Arab Rep. 1999­2000b 8.6 17 9 .. 98 81 93 104 33 84 46 74 <0.1 El Salvador 2002d 2.7 11 10 41 87 102 98 60 27 150 51 92 0.9 Eritrea .. .. 44 40 19 51 .. 72 147 78 630 21 28 2.4 Ethiopia 1999­2000b 9.1 48 38 26 58 68 81 204 127 850 .. 6 1.4 Finland 2000d 9.6 .. .. 97 100 109 102 7 4 6 100 100 0.1 France 1995d 7.2 .. .. 104 .. 102 100 9 5 17 99 .. 0.4 Georgia 2003b 5.6 .. .. .. 87 98 101 47 45 32 .. 92 0.2 Germany 2000d 8.5 .. .. 100 94 99 99 9 5 8 .. .. 0.1 Ghana 1998­99b 5.6 27 22 63 72 79 94 122 112 540 44 47 2.2f Greece 2000d 6.7 .. .. 99 100 99 99 11 5 9 .. .. 0.2 Guatemala 2002d 2.9 27 23 .. 74 .. 92 82 43 240 34 41 0.9 Guinea 2003b 7.0 27 33 17 55 46 75 234 160 740 31 56 1.5 Haiti 2001d 2.4 28 17 27 .. 95 .. 150 120 680 20 24 3.8 Honduras 2003d 3.4 18 17 65 79 108 107 59 40 110 45 56 1.5 Hungary 2002b 9.5 .. .. 93 94 100 99 17 8 16 .. 100 0.1 India 2004­05b 8.1 53 .. 68 90 70 89 123 74 540 34 43 0.9 Indonesia 2002b 8.4 34 28 91 101 93 97 91 36 230 37 72 0.1 Iran, Islamic Rep. 1998b 5.1 16 .. 91 96 85 105 72 36 76 .. 90 0.2 Ireland 2000d 7.4 .. .. .. 98 104 103 9 6 5 .. 100 0.2 Israel 2001d 5.7 .. .. .. 101 105 100 12 6 17 .. .. .. Italy 2000d 6.5 .. .. 104 100 100 99 9 4 5 .. .. 0.5 Jamaica 2004b 5.3 5 4 90 82 102 101 20 20 87 .. 97 1.5 Japan 1993d 10.6 .. .. 101 .. 101 100 6 4 10 100 .. <0.1 Jordan 2002­03b 6.7 6 4 72 100 101 101 40 26 41 87 100 .. Kazakhstan 2003b 7.4 8 .. .. 114 102 98 63 73 210 100 .. 0.1 Kenya 1997b 6.0 23 20 .. 95 94 96 97 120 1,000 45 42 6.7 Korea, Rep. 1998d 7.9 .. .. 98 101 99 100 9 5 20 98 100 <0.1 Kuwait .. .. .. .. .. 100 97 102 16 11 5 .. 100 .. Kyrgyz Republic 2003b 8.9 .. 7 .. 97 .. 100 80 67 110 .. 99 0.1 Lao PDR 2002b 8.1 40 40 46 76 75 84 163 79 650 .. 19 0.1 Latvia 2003b 6.6 .. .. .. 89 100 100 18 11 42 100 100 0.8 Lebanon .. .. .. 4 .. 90 .. 102 37 30 150 .. 93 0.1 Lithuania 2003b 6.8 .. .. 89 90 .. 99 13 9 13 .. 100 0.2 Macedonia, FYR 2003b 6.1 .. .. 98 97 99 99 38 17 23 .. 99 <0.1 Madagascar 2001b 4.9 34 42 33 58 98 .. 168 119 550 57 51 0.5 Malawi 2004­05b 7.0 30 22 28 57 81 99 221 125 1,800 55 56 14.1 Malaysia 1997d 4.4 20 11 91 92 101 106 22 12 41 .. 97 0.5 Mali 2001b 6.1 .. 33 11 38 59 75 250 218 1,200 .. 41 1.8k Mauritania 2000b 6.2 48 32 33 45 67 98 133 125 1,000 40 57 0.7 Note: For data comparability and coverage, see the technical notes. Figures in italics are for years other than those specified. 338 Table 3. Millennium Development Goals: eradicating poverty and improving lives (continued) Achieve Eradicate universal Combat extreme poverty primary Promote gender Reduce child HIV/AIDS and and hunger education equality mortality Improve maternal health other diseases Maternal mortality Prevalence ratio per HIV Percentage of child Gender parity 100,000 live Births attended prevalence share of malnutrition Primary ratio in primary Under-five births by skilled % of poorest % of children completion and secondary mortality rate Modeled health staff population quintile in under 5 rate (%) school per 1,000 estimates % of total ages 15­49 national Survey consumption 1990­ 2000­ 1990­ 2000­ year or income 95a 06a 1991 2005 1991 2005 1990 2005 2000 95a 06a 2005 Mexico 2004b 4.3 .. .. 86 100 98 101 46 27 83 .. 83 0.3 Moldova 2003b 7.8 .. 4 .. 92 105 102 35 16 36 .. 100 1.1 Mongolia 2002b 7.5 12 13 .. 95 109 108 108 49 110 .. 97 <0.1 Morocco 1998­99b 6.5 10 10 47 80 70 88 89 40 220 40 63 0.1 Mozambique 2002­03b 5.4 27 24 27 41 72 83 235 145 1,000 .. 48 16.1 Namibia 1993d 1.4 26 24 78 74 108 105 86 62 300 68 76 19.6 Nepal 2003­04b 6.0 49 45 51 76 59 93 145 74 740 7 19 0.5 Netherlands 1999d 7.6 .. .. .. 100 97 98 9 5 16 .. .. 0.2 New Zealand 1997d 6.4 .. .. 100 .. 100 104 11 6 7 100 .. 0.1 Nicaragua 2001b 5.6 11 10 44 76 109 102 68 37 230 .. 67 0.2 Niger 1995b 2.6 43 40 17 28 57 72 320 256 1,600 15 16 1.1 Nigeria 2003b 5.0 39 29 .. 80 79 85 230 194 800 31 35 3.9 Norway 2000d 9.6 .. .. 100 99 102 100 9 4 16 .. .. 0.1 Oman .. .. 23 .. 65 93 89 98 32 12 87 91 95 .. Pakistan 2002b 9.3 38 38 .. 63 .. 75 130 99 500 19 31 0.1 Panama 2003d 2.5 6 .. 86 97 .. 101 34 24 160 86 93 0.9 Papua New Guinea 1996b 4.5 .. .. 47 54 80 87 94 74 300 .. 41 1.8 Paraguay 2003d 2.4 4 5 71 89 99 99 41 23 170 67 77 0.4 Peru 2003d 3.7 11 7 .. 99 96 100 78 27 410 .. 73 0.6 Philippines 2003b 5.4 30 28 86 97 100 103 62 33 200 53 60 <0.1 Poland 2002b 7.5 .. .. 98 97 101 99 18 7 13 .. 100 0.1 Portugal 1997d 5.8 .. .. 95 104 103 102 14 5 5 .. 100 0.4 Romania 2003b 8.1 6 3 96 99 99 100 31 19 49 99 99 <0.1 Russian Federation 2002b 6.1 3 6 93 94 104 99 27 18 67 .. 99 1.1 Rwanda 2000b 5.3 29 23 33 39 96 100 173 203 1,400 26 39 3.0 Saudi Arabia .. .. 15 .. 56 85 84 98 44 26 23 .. 93 .. Senegal 2001b 6.6 22 23 42 50 69 91 149 119 690 47 58 0.9 Serbia 2003b,e 8.3 .. 2e .. .. .. .. 28e 15e 11e .. 92e 0.2e Sierra Leone 1989b 1.1 29 27 .. .. 67 80 302 282 2,000 .. 42 1.6 Singapore 1998d 5.0 .. 3 .. .. 95 .. 8 3 30 .. 100 0.3 Slovak Republic 1996d 8.8 .. .. 96 94 .. 100 14 8 3 .. 99 <0.1 Slovenia 1998b 9.1 .. .. 95 102 .. 99 10 4 17 100 100 <0.1 South Africa 2000b 3.5 9 .. 75 99 104 101 60 68 230 82 92 15.6i Spain 2000d 7.0 .. .. .. 108 104 102 9 5 4 .. .. 0.6 Sri Lanka 2002b 7.0 33 29 97 .. 102 102 32 14 92 94 96 <0.1 Sudan .. .. 34 41 41 50 78 89 120 90 590 86 87 1.6 Sweden 2000d 9.1 .. .. 96 .. 102 100 7 4 2 .. .. 0.2 Switzerland 2000d 7.6 .. .. 53 95 97 96 9 5 7 .. .. 0.4 Syrian Arab Republic .. .. 13 7 89 111 85 94 39 15 160 77 70 .. Tajikistan 2003b 7.9 .. .. .. 102 .. 88 115 71 100 .. 71 0.1 Tanzania 2000­01b 7.3 29 22 61 72j 97 .. 161 122 1,500 44 43 7.0g Thailand 2002b 6.3 18 .. .. 82 95 100j 37 21 44 .. 99 1.4 Togo .. .. .. .. 35 65 59 73 152 139 570 .. 61 3.2 Tunisia 2000b 6.0 9 4 74 99 86 103 52 24 120 81 90 0.1 Turkey 2003b 5.3 10 4 90 87 81 89 82 29 70 76 83 .. Turkmenistan 1998b 6.1 .. 12 .. .. .. .. 97 104 31 .. 97 <0.1 Uganda 2002b 5.7 26 23 .. 56 82 98 160 136 880 38 39 6.4l Ukraine 2003b 9.2 .. 1 94 95 .. 94 26 17 35 .. 100 1.4 United Kingdom 1999d 6.1 .. .. .. .. 98 102 10 6 13 .. .. .. United States 2000d 5.4 1 2 .. .. 100 100 11 7 17 .. 99 0.6 Uruguay 2003c,d 5.0 5 .. 94 91 .. 106 23 15 27 .. 99 0.5 Uzbekistan 2003b 7.2 .. 8 .. 97 94 98 79 68 24 .. 96 0.2 Venezuela, RB 2003d 3.3 5 4 43 92 105 103 33 21 96 .. 95 0.7 Vietnam 2004b 7.1 45 28 .. 94 .. 96 53 19 130 .. 90 0.5m West Bank and Gaza .. .. .. 5 .. 98 .. 104 40 23 .. .. 97 .. Yemen, Rep. 1998b 7.4 39 46 .. 62 .. 66 139 102 570 16 27 .. Zambia 2004b 3.6 25 23 .. 78 .. 93 180 182 750 51 43 15.6n Zimbabwe 1995­96b 4.6 16 .. 99 80 92 96 80 132 1,100 69 .. 20.1 World 30w ..w ..w 88w ..w 94w 95w 75w 411w ..w 62w 0.9w Low income 46 .. 59 76 .. 88 147 115 684 33 41 1.7 Middle income 15 12 92 97 .. 99 58 37 150 .. 87 0.6 Lower middle income 16 13 94 97 .. 98 62 40 154 .. 85 0.3 Upper middle income .. .. 88 98 99 100 46 30 139 .. 93 1.6 Low & middle income 31 22 78 86 .. 94 104 82 451 .. 60 1.0 East Asia & Pacific 20 15 99 98 .. 99 59 33 117 .. 87 0.2 Europe & Central Asia .. 5 93 95 98 96 49 33 60 .. 94 0.6 Latin America & Carib. .. .. 82 98 99 101 54 31 194 73 87 0.6 Middle East & N. Africa 16 14 77 91 .. 94 80 52 183 .. 73 0.1 South Asia 53 .. 65 84 69 88 129 83 564 30 37 0.7 Sub-Saharan Africa 32 29 49 61 .. 86 185 163 919 46 44 5.8 High income .. .. .. 97 100 100 12 7 14 .. .. 0.4 a. Data are for the most recent year available. b. Refers to expenditure shares by percentiles of population, ranked by per capita expenditure. c. Urban data. d. Refers to income shares by percentiles of population, ranked by per capita income. e. Data are for Serbia and Montenegro together. f. Survey data, 2003. g. Survey data, 2004. h. Includes Hong Kong, China. i. Survey data, 2002. j. Data are for 2006. k. Survey data, 2001. l. Survey data, 2004­2005. m. Survey data 2005. n. Survey data 2001/02. 339 Table 4. Economic activity External General balance Household gov't. Gross of goods GDP Agricultural final cons. final cons. capital and implicit Gross domestic product productivity Value added as % of GDP expenditure expenditure formation services deflator Avg. Agricultural value annual added per worker Avg. annual $ millions % growth 2000 $ Agriculture Industry Services % of GDP % of GDP % of GDP % of GDP % growth 2006 2000­06 1990­92 2001­03 2006 2006 2006 2006 2006 2006 2006 2000­06 Albania 9,136 5.3 773 1,314 23 22 56 90 9 26 ­24 3.8 Algeria 114,727 5.0 1,911 2,067 8 61 30 33 12 30 24 8.1 Angola 44,033 11.1 183 160 7 74 19 67 ..a 8 25 68.2 Argentina 214,058 3.6 6,764 9,272 9 35 56 66 8 21 5 12.2 Armenia 6,406 12.6 1,428 2,645 19 47 34 71 11 30 ­13 4.3 Australia 768,178 3.1 22,405 31,218 3 27 70 59 18 26 ­3 3.6 Austria 322,444 1.7 12,048 20,587 2 31 68 56 18 21 5 1.6 Azerbaijan 20,122 15.6 1,085 1,033 9 67 24 30 9 38 23 7.3 Bangladesh 61,961 5.6 246 308 20 28 52 76 6 25 ­7 4.1 Belarus 36,945 8.1 1,977 2,513 9 43 47 51 19 30 0 31.1 Belgium 392,001 1.7 21,356 36,043 1 24 75 53 23 21 2 1.9 Benin 4,775 3.8 368 578 32 13 54 78 15 20 ­13 3.3 Bolivia 11,163 3.3 670 746 14 26 60 61 13 13 13 6.0 Bosnia and Herzegovina 11,296 5.1 .. 5,696 10 25 64 99 26 19 ­45 2.8 Brazil 1,067,962 3.0 1,507 2,790 5 31 64 60 20 17 3 9.3 Bulgaria 31,483 5.6 2,493 6,313 9 32 59 69 18 32 ­19 4.4 Burkina Faso 6,205 5.7 143 163 .. .. .. .. .. .. .. 4.0 Burundi 807 2.5 110 80 35 20 45 87 28 12 ­28 7.0 Cambodia 7,193 9.4 .. 297 34 27 39 85 4 20 ­9 3.3 Cameroon 18,323 3.6 389 596 20 34 46 72 10 18 ­1 2.4 Canada 1,251,463 2.6 28,224 37,590 .. .. .. 55 20 21 4 2.5 Central African Republic 1,486 ­0.6 290 407 54 21 25 .. .. .. .. 2.1 Chad 6,541 14.3 179 226 21 55 25 52 6 22 21 8.6 Chile 145,841 4.3 3,618 4,795 6 47 48 58 11 22 9 6.8 China 2,668,071 9.8 254 368 12 47 41 44 11 41 4 3.4 Hong Kong, China 189,798 5.0 .. .. 0 9 91 58 8 22 12 ­3.1 Colombia 135,836 3.9 3,406 2,951 12 34 54 72 8 19 1 6.7 Congo, Dem. Rep. 8,543 4.7 186 154 46 28 27 88 7 16 ­12 35.7 Congo, Rep. 7,385 4.5 .. .. 4 73 22 17 14 24 45 4.7 Costa Rica 22,145 4.8 3,143 4,283 9 30 61 66 14 26 ­5 9.8 Côte d'Ivoire 17,484 0.1 601 761 21 24 55 65 8 12 16 2.9 Croatia 42,653 4.7 4,748 8,957 7 31 62 59 18 30 ­8 3.7 Czech Republic 141,801 4.0 .. 4,564 3 39 58 49 22 27 2 2.3 Denmark 275,237 1.6 15,157 35,696 2 25 74 48 26 21 5 2.3 Dominican Republic 30,581 3.9 2,254 4,108 12 26 61 75 7 24 ­6 18.6 Ecuador 40,800 5.1 1,686 1,486 6 46 48 64 13 24 ­1 10.4 Egypt, Arab Rep. 107,484 4.0 1,531 1,975 15 36 49 71 12 19 ­2 6.4 El Salvador 18,306 2.4 1,633 1,616 10 30 60 93 11 16 ­20 3.1 Eritrea 1,085 2.7 .. 64 17 23 60 81 42 19 ­42 15.4 Ethiopia 13,315 5.7 .. 149 48 13 39 94 12 20 ­26 4.6 Finland 209,445 2.8 15,425 29,735 3 30 68 54 23 20 4 1.0 France 2,230,721 1.5 22,234 39,220 2 21 77 57 24 20 ­1 1.9 Georgia 7,550 7.8 2,388 1,404 13 26 61 79 9 29 ­17 6.2 Germany 2,906,681 0.9 14,025 23,475 1 30 69 59 19 17 5 0.9 Ghana 12,906 5.3 302 331 38 21 41 78 14 32 ­25 21.1 Greece 244,951 4.4 7,563 9,114 5 21 74 67 16 24 ­7 3.4 Guatemala 35,290 2.8 2,149 2,274 23 19 58 86 4 25 ­16 7.1 Guinea 3,317 2.9 149 193 13 37 50 84 5 13 ­3 17.2 Haiti 4,961 ­0.3 .. .. .. .. .. .. .. .. .. 17.7 Honduras 9,235 4.0 976 1,110 13 30 56 77 18 30 ­26 7.8 Hungary 112,899 4.3 4,134 5,080 4 31 65 66 10 23 1 5.2 India 906,268 7.4 332 381 18 28 55 58 11 33 ­3 4.1 Indonesia 364,459 4.9 483 556 12 42 46 67 7 24 2 9.6 Iran, Islamic Rep. 222,889 5.7 1,953 2,330 10 45 45 46 12 33 9 17.4 Ireland 222,650 5.3 .. .. 2 37 60 44 16 25 15 3.4 Israel 123,434 1.9 .. .. .. .. .. 59 28 18 ­5 1.3 Italy 1,844,749 0.7 11,536 21,113 2 27 71 59 20 21 0 2.8 Jamaica 10,533 1.8 2,013 1,944 5 31 64 69 17 30 ­16 10.6 Japan 4,340,133 1.6 20,196 33,546 2 30 68 57 18 23 2 ­1.4 Jordan 14,176 6.3 1,892 1,099 3 32 66 102 16 26 ­44 2.6 Kazakhstan 77,237 10.1 1,745 1,389 7 39 54 49 13 25 13 12.9 Kenya 21,186 3.8 335 327 28 17 55 76 15 17 ­9 4.6 Korea, Rep. 888,024 4.6 5,677 9,948 3 40 57 54 15 30 1 2.0 Kuwait 80,781 7.3 .. 13,048 .. .. .. 28 15 20 37 8.3 Kyrgyz Republic 2,695 3.8 676 929 33 20 47 101 19 17 ­37 5.3 Lao PDR 3,404 6.4 360 458 45 29 26 72 ..a 32 ­4 10.3 Latvia 20,116 8.6 1,790 2,442 4 21 75 65 17 38 ­20 6.1 Lebanon 22,722 3.7 .. 24,436 6 22 71 89 16 21 ­25 1.7 Lithuania 29,791 7.9 .. 4,072 5 34 61 66 17 28 ­11 2.1 Macedonia, FYR 6,217 2.1 2,256 2,964 13 29 58 79 19 22 ­20 2.3 Madagascar 5,499 2.7 187 179 28 15 57 78 9 25 ­11 11.5 Malawi 2,232 4.1 72 130 36 20 45 92 17 16 ­25 14.5 Malaysia 148,940 5.1 3,803 4,570 8 52 40 46 13 19 23 3.7 Mali 5,929 5.7 204 227 37 24 39 79 ..a 24 ­3 3.8 Mauritania 2,663 5.0 574 385 17 44 39 62 19 23 ­5 11.4 Note: For data comparability and coverage, see the technical notes. Figures in italics are for years other than those specified. 340 Table 4. Economic activity (continued) External General balance Household gov't. Gross of goods GDP Agricultural final cons. final cons. capital and implicit Gross domestic product productivity Value added as % of GDP expenditure expenditure formation services deflator Avg. Agricultural value annual added per worker Avg. annual $ millions % growth 2000 $ Agriculture Industry Services % of GDP % of GDP % of GDP % of GDP % growth 2006 2000­06 1990­92 2001­03 2006 2006 2006 2006 2006 2006 2006 2000­06 Mexico 839,182 2.3 2,247 2,704 4 27 69 68 12 22 ­1 6.7 Moldova 3,266 6.8 1,286 725 17 21 62 104 17 31 ­51 10.9 Mongolia 2,689 6.6 .. 684 21 44 35 45 15 36 4 14.2 Morocco 57,307 4.4 1,438 1,515 17 29 54 60 21 26 ­7 1.1 Mozambique 7,608 8.2 108 137 22 29 49 70 10 25 ­5 11.9 Namibia 6,372 4.7 811 1,057 11 31 58 42 24 30 4 4.9 Nepal 8,052 2.7 196 208 39 21 39 79 10 30 ­19 4.5 Netherlands 657,590 1.0 24,056 37,337 2 24 74 49 24 19 8 2.4 New Zealand 103,873 3.3 20,180 26,310 .. .. .. 59 18 25 ­1 2.2 Nicaragua 5,369 3.2 .. 1,901 19 29 51 91 8 30 ­29 7.6 Niger 3,544 3.7 170 172 .. .. .. 79 12 19 ­9 2.1 Nigeria 114,686 5.9 592 843 23 58 19 39 22 21 18 15.7 Norway 310,960 2.1 20,055 32,649 2 43 55 42 20 21 17 3.3 Oman 24,284 3.0 1,005 1,128 2 56 42 45 23 18 14 1.8 Pakistan 128,830 5.4 589 691 20 27 53 81 8 20 ­9 6.8 Panama 17,097 5.1 2,363 3,557 7 16 76 66 12 20 2 1.7 Papua New Guinea 5,654 2.0 390 473 42 39 19 .. .. .. .. 7.8 Paraguay 9,110 2.9 1,596 1,939 21 19 60 87 9 21 ­17 10.7 Peru 93,269 4.9 930 1,428 7 34 60 66 8 20 7 3.5 Philippines 116,931 4.8 905 1,017 14 33 53 84 9 15 ­7 5.2 Poland 338,733 3.6 1,502 1,967 5 32 64 62 19 20 ­1 2.3 Portugal 192,572 0.6 4,640 5,925 3 25 72 65 21 22 ­9 3.1 Romania 121,609 6.0 2,196 3,477 11 38 52 73 13 24 ­10 19.6 Russian Federation 986,940 6.4 1,824 2,226 6 38 56 49 17 21 13 17.0 Rwanda 2,494 5.1 192 222 41 21 38 85 13 21 ­20 6.6 Saudi Arabia 309,778 4.2 7,867 13,964 4 59 37 26 23 16 34 6.3 Senegal 8,936 4.5 249 249 18 18 64 77 14 24 ­15 2.3 Serbia 31,808 5.3 .. .. 13 26 62 78 21 21 ­21 21.7 Sierra Leone 1,443 12.3 .. .. 47 25 28 89 11 15 ­15 8.3 Singapore 132,158 5.0 22,695 28,313 0 35 65 38 11 19 32 0.2 Slovak Republic 55,049 5.1 .. 3,999 4 32 65 57 19 29 ­5 4.4 Slovenia 37,303 3.7 11,310 32,311 3 34 63 54 19 27 ­1 4.8 South Africa 254,992 4.1 1,796 2,391 3 30 67 64 20 20 ­4 6.5 Spain 1,223,988 3.2 9,515 18,691 3 29 67 58 18 30 ­5 4.2 Sri Lanka 26,967 4.8 705 737 16 26 57 76 8 27 ­11 8.8 Sudan 37,565 6.9 346 707 31 35 34 70 16 25 ­11 10.0 Sweden 384,927 2.6 21,463 30,116 1 28 71 48 27 17 8 1.5 Switzerland 379,758 1.2 22,228 22,348 .. .. .. 60 12 20 7 1.0 Syrian Arab Republic 34,902 4.0 2,357 3,406 25 33 42 63 14 21 2 6.8 Tajikistan 2,811 9.1 395 379 24 26 50 87 8 15 ­9 20.3 Tanzaniab 12,784 6.5 245 283 45 17 37 70 18 19 ­7 7.3 Thailand 206,247 5.4 501 586 10 46 44 61 9 29 1 2.7 Togo 2,206 2.3 354 404 44 24 32 85 10 18 ­13 1.0 Tunisia 30,298 4.6 2,431 2,431 11 28 60 62 14 24 0 2.4 Turkey 402,710 5.6 1,788 1,764 13 22 65 67 12 27 ­6 21.8 Turkmenistan 10,496 .. 1,222 .. 20 40 40 46 13 23 18 .. Uganda 9,322 5.6 187 230 32 25 44 78 14 25 ­17 5.4 Ukraine 106,111 7.7 1,194 1,433 10 33 57 71 14 17 ­3 12.6 United Kingdom 2,345,015 2.4 22,506 25,876 1 26 73 65 22 17 ­4 2.5 United States 13,201,819 2.8 20,797 36,216 1 22 77 70 16 19 ­5 2.4 Uruguay 19,308 2.3 5,714 6,743 9 30 61 72 11 18 ­1 10.1 Uzbekistan 17,178 5.7 1,274 1,524 28 29 42 47 15 26 11 27.7 Venezuela, RB 181,862 3.4 4,548 5,899 .. .. .. 46 11 21 22 28.2 Vietnam 60,884 7.6 215 290 21 41 38 64 6 35 ­5 6.3 West Bank and Gaza 4,059 0.2 .. .. .. .. .. 95 32 27 ­54 3.2 Yemen, Rep. 19,057 3.9 273 348 .. .. .. .. .. .. .. 13.0 Zambia 10,907 4.9 161 205 16 25 59 67 15 27 ­9 19.6 Zimbabwe 5,010 ­5.6 244 266 22 27 51 64 26 14 ­3 286.6 World 48,244,879t 3.0w 753w 872w 3w 28w 69w 61w 17w 21w 0w Low income 1,611,831 6.5 315 363 20 28 51 63 11 29 ­4 Middle income 10,049,512 5.6 530 708 9 36 55 59 13 26 2 Lower middle income 4,734,576 7.6 388 521 12 43 45 56 11 33 1 Upper middle income 5,316,864 3.9 2,139 2,723 6 31 63 61 15 21 3 Low & middle income 11,661,911 5.7 444 557 10 35 55 60 13 26 2 East Asia & Pacific 3,636,593 8.6 303 412 12 46 42 50 11 36 4 Europe & Central Asia 2,493,602 5.7 1,844 1,938 9 30 61 60 15 24 1 Latin America & Caribbean 2,945,193 3.1 2,152 2,856 6 30 63 64 14 20 2 Middle East & North Africa 730,103 4.1 1,581 1,928 11 41 48 58 14 26 1 South Asia 1,142,319 6.9 340 393 18 28 54 63 10 31 ­4 Sub-Saharan Africa 709,500 4.7 304 325 15 32 52 67 17 21 ­4 High income 36,583,031 2.3 14,997 24,438 2 26 72 62 18 20 0 a. Data on general government final consumption expenditure are not available separately; they are included in household final consumption expenditure. b. Data refer to mainland Tanzania only. 341 Table 5. Trade, aid, and finance Merchandise trade External debt Domestic Official credit High Current Foreign development provided Manufactured technology account direct assistance or Present by banking Exports Imports exports exports balance investment official aida Total value sector Net migration % of total % of merchandise manufactured % of $ millions $ millions exports exports $ millions $ millions $ per capita $ millions GNI % of GDP thousands 2006 2006 2005 2005 2006 2005 2005 2005 2005 2006 2000­05a Albania 791 3,049 80 1 ­671 262 102 1,839 19 49 ­110 Algeria 52,822 21,005 2 1 .. 1,081 11 16,879 21 4 ­140 Angola 35,100 11,600 .. .. 5,138 ­1,304 28 11,755 59 ­4 175 Argentina 46,569 34,159 31 7 8,053 4,730 3 114,335 73 31 ­100 Armenia 1,004 2,194 71 1 ­254 258 64 1,861 36 8 ­100 Australia 123,280 139,585 25 13 ­40,633 ­34,420 .. .. .. 117 593 Austria 138,423 139,012 80 13 10,259 9,057 .. .. .. 128 180 Azerbaijan 5,897 5,050 13 1 167 1,680 27 1,881 18 14 ­100 Bangladesh 12,050 16,100 90 0 ­176 802 9 18,935 22 58 ­500 Belarus 19,739 22,323 52 3 ­1,512 305 6 4,734 20 27 0 Belgium 371,953 355,919 79 9b 9,328 31,959 .. .. .. 111 180 Benin 570 990 13 0 ­288 21 41 1,855 23c 10 99 Bolivia 3,863 2,819 11 9 498 ­277 63 6,390 38c 39 ­100 Bosnia and Herzegovina 3,312 7,305 .. .. ­1,261 299 140 5,564 52 52 115 Brazil 137,470 88,489 54 13 14,199 15,193 1 187,994 34 82 ­229 Bulgaria 15,030 23,048 59 5 ­5,010 2,614 80 16,786 68 43 ­43 Burkina Faso 430 1,450 8 10 .. 20 50 2,045 22c 14 100 Burundi 55 420 6 6 ­256 1 48 1,322 131 50 192 Cambodia 3,770 4,900 97 0 ­356 379 38 3,515 58 6 10 Cameroon 3,770 3,170 3 2 .. 18 25 7,151 14c 8 6 Canada 387,551 357,274 58 14 21,441 34,146 .. .. .. 224 1,041 Central African Republic 120 210 36 0 .. 6 24 1,016 67 17 ­45 Chad 3,750 1,200 .. .. .. 705 39 1,633 31c 5 219 Chile 58,996 38,490 14 5 5,256 6,667 9 45,154 52 83 30 China 969,073 791,614 92 31 160,818 79,127 1 281,612 14 138 ­1,900 Hong Kong, China 322,664d 335,753 96d 34 20,575 35,897 1 .. .. 135 300 Colombia 24,391 26,162 36 5 ­2,909 10,375 11 37,656 43 35 ­120 Congo, Dem. Rep. 2,300 2,800 .. .. .. 402 32 10,600 123 3 ­237 Congo, Rep. 6,780 1,800 .. .. 903 724 362 5,936 156 ­9 ­10 Costa Rica 8,216 11,520 66 38 ­959 861 7 6,223 36 45 84 Côte d'Ivoire 8,715 5,300 20 8 ­12 266 7 10,735 69 18 ­339 Croatia 10,376 21,488 68 12 ­3,175 1,761 28 30,169 89 81 100 Czech Republic 95,106 93,198 88 13 ­6,052 4,454 27 39,719 51 49 67 Denmark 92,543 86,277 65 22 6,696 5,238 .. .. .. 189 46 Dominican Republic 6,437 11,160 .. .. ­500 1,023 8 7,398 37 49 ­148 Ecuador 12,362 11,215 9 8 ­59 1,646 16 17,129 60 18 ­400 Egypt, Arab Rep. 13,702 20,595 31 1 2,103 5,376 13 34,114 36 105 ­525 El Salvador 3,513 7,628 60 4 ­786 517 29 7,088 48 47 ­143 Eritrea 10 400 .. .. .. 11 81 736 57 139 229 Ethiopia 1,050 4,710 11 0 ­1,786 265 27 6,259 21c 54 ­140 Finland 76,777 68,295 84 25 9,517 3,978 .. .. .. 82 33 France 490,145 533,407 80 20 ­27,667 70,686 .. .. .. 116 722 Georgia 993 3,681 40 23 ­1,162 450 69 1,911 28 25 ­248 Germany 1,112,320 910,160 83 17 146,874 32,034 .. .. .. 132 1,000 Ghana 3,550 5,940 12 9 ­812 107 51 6,739 26c 32 12 Greece 20,840 63,157 56 10 ­29,565 640 .. .. .. 114 154 Guatemala 6,025 11,920 57 3 ­1,387 208 20 5,349 20 33 ­300 Guinea 900 900 .. .. ­162 102 20 3,247 35 16 ­425 Haiti 476 1,875 .. .. 54 10 60 1,323 24 25 ­140 Honduras 1,929 5,418 36 2 ­86 464 95 5,242 37 41 ­150 Hungary 73,719 76,514 84 25 ­6,212 6,436 30 66,119 69 68 65 India 120,168 174,376 70 5 .. 6,598 2 123,123 16 64 ­1,350 Indonesia 103,964 78,393 47 16 929 5,260 11 138,300 55 42 ­1,000 Iran, Islamic Rep. 75,200 51,100 9 3 .. 30 2 21,260 13 46 ­1,250 Ireland 112,882 72,347 86 .. ­5,331 ­29,730 .. .. .. 180 188 Israel 46,449 49,985 83 14 6,841 5,585 70 .. .. 85 115 Italy 409,572 436,083 85 8 ­27,724 19,585 .. .. .. 113 1,125 Jamaica 1,964 5,352 66 .. ­1,079 682 13 6,511 93 61 ­100 Japan 647,137 577,472 92 22 170,517 3,214 .. .. .. 302 270 Jordan 5,144 11,475 72 5 ­2,311 1,532 115 7,696 65 116 130 Kazakhstan 37,986 23,224 16 2 ­1,797 1,975 15 43,354 106 34 ­200 Kenya 3,450 7,320 21 3 ­495 21 22 6,169 29 40 25 Korea, Rep. 325,681 309,309 91 32 6,093 4,339 ­1 .. .. 107 ­80 Kuwait 54,496 16,314 .. .. 32,634 250 1 .. .. 72 264 Kyrgyz Republic 780 1,694 27 2 ­203 43 52 2,032 54 12 ­75 Lao PDR 980 1,090 .. .. .. 28 52 2,690 63 7 ­115 Latvia 6,089 11,316 57 5 ­4,280 730 70 14,283 104 89 ­20 Lebanon 2,814 9,647 70 2 ­1,881 2,573 61 22,373 114 196 0 Lithuania 14,067 19,215 56 6 ­3,244 1,032 73 11,201 52 42 ­30 Macedonia, FYR 2,401 3,763 72 1 ­81 100 113 2,243 40 24 ­10 Madagascar 830 1,380 22 1 ­554 29 50 3,465 37c 10 ­5 Malawi 620 1,020 16 7 .. 3 45 3,155 58c 20 ­30 Malaysia 160,556 130,989 75 55 19,980 3,966 1 50,981 46 125 150 Mali 1,350 1,600 .. .. ­438 159 51 2,969 30c 14 ­134 Mauritania 1,270 700 .. .. .. 115 62 2,281 117c .. 30 Note: For data comparability and coverage, see the technical notes. Figures in italics are for years other than those specified. 342 Table 5. Trade, aid, and finance (continued) Merchandise trade External debt Domestic Official credit High Current Foreign development provided Manufactured technology account direct assistance or Present by banking Exports Imports exports exports balance investment official aida Total value sector Net migration % of total % of merchandise manufactured % of $ millions $ millions exports exports $ millions $ millions $ per capita $ millions GNI % of GDP thousands 2006 2006 2005 2005 2006 2005 2005 2005 2005 2006 2000­05a Mexico 250,292 268,169 77 20 ­1,475 18,772 2 167,228 26 40 ­3,983 Moldova 1,033 2,585 39 3 ­399 199 49 2,053 70 35 ­250 Mongolia 1,529 1,489 21 0 84 182 83 1,327 63 25 ­50 Morocco 12,559 23,302 65 10 1,110 1,552 22 16,846 34 90 ­550 Mozambique 2,420 2,970 7 8 ­761 108 65 5,121 28c 8 ­20 Namibia 2,720 2,730 41 3 634 .. 61 .. .. 66 ­1 Nepal 760 2,100 74 0 153 2 16 3,285 34 .. ­100 Netherlands 462,083 416,121 68 30 57,448 40,416 .. .. .. 188 110 New Zealand 22,449 26,441 31 14 ­9,373 1,979 .. .. .. 145 102 Nicaragua 1,035 2,977 11 5 ­800 241 144 5,144 46 73 ­210 Niger 540 800 8 3 ­231 12 37 1,972 25c 8 ­28 Nigeria 52,000 23,000 2 2 24,202 2,013 46 22,178 34 9 ­170 Norway 121,505 64,120 17 17 56,074 3,285 .. .. .. 10 84 Oman 22,340 10,730 6 2 4,717 715 12 3,472 14 35 ­150 Pakistan 16,917 29,825 82 2 ­3,608 2,183 11 33,675 30 42 ­1,239 Panama 1,039 4,833 9 1 ­378 1,027 6 9,765 90 91 8 Papua New Guinea 4,300 2,010 6 39 640 34 45 1,849 55 23 0 Paraguay 1,906 6,090 13 7 ­22 64 9 3,120 54 18 ­45 Peru 23,431 15,327 17 3 2,456 2,519 14 28,653 49 15 ­510 Philippines 47,028 51,980 89 71 2,338 1,132 7 61,527 67 49 ­900 Poland 109,731 124,178 78 4 ­7,925 9,602 40 98,821 39 33 ­200 Portugal 43,255 66,538 75 9 ­18,281 3,200 .. .. .. 163 276 Romania 32,458 51,160 80 3 ­8,504 6,630 42 38,694 51 27 ­270 Russian Federation 304,520 163,867 19 8 94,467 15,151 9 229,042 40 21 917 Rwanda 135 485 10 25 ­52 8 64 1,518 18c 10 43 Saudi Arabia 208,867 64,995 9 1 87,131 .. 1 .. .. 47 285 Senegal 1,510 3,505 43 12 ­513 54 59 3,793 34c 24 ­100 Serbia 6,428 13,172 .. 6 .. .. .. .. .. 24 ­339 Sierra Leone 220 390 .. .. ­103 59 62 1,682 41c 11 472 Singapore 271,772d 238,652 81d 57 33,212 20,071 2 .. .. 73 200 Slovak Republic 41,580 45,698 84 7 .. 1,908 44 23,654 61 50 3 Slovenia 23,208 24,039 88 5 ­959 541 31 .. .. 76 22 South Africa 58,412 77,280 57e 7 ­16,276 6,257 15 30,632 14 83 75 Spain 206,186 318,757 77 7 ­106,344 22,789 .. .. .. 178 2,846 Sri Lanka 6,860 10,226 70 1 ­647 272 61 11,444 48 44 ­442 Sudan 5,320 7,400 0 0 ­2,768 2,305 50 18,455 88 19 ­532 Sweden 147,266 126,301 79 17 23,643 10,679 .. .. .. 125 152 Switzerland 147,457 141,373 93 22 63,494 15,420 .. .. .. 188 100 Syrian Arab Republic 8,750 9,670 11 1 ­1,061 427 4 6,508 27 32 200 Tajikistan 1,401 1,680 .. .. ­21 54 37 1,022 41 15 ­345 Tanzania 1,687 3,970 14 1 ­536 473 39 7,763 22c,f 11 ­345 Thailand 130,575 128,600 77 27 3,230 4,527 ­3 52,266 32 101 231 Togo 630 1,200 58 0 ­206 3 14 1,708 74 17 ­4 Tunisia 11,513 14,865 78 5 ­303 723 38 17,789 69 73 ­29 Turkey 85,142 137,032 82 2 ­23,155 9,805 6 171,059 59 59 ­30 Turkmenistan 5,280 3,111 .. .. .. 62 6 1,092 16 .. ­10 Uganda 991 2,600 17 14 ­131 257 42 4,463 29c 10 ­5 Ukraine 38,368 45,035 69 4 2,531 7,808 9 33,297 53 46 ­173 United Kingdom 443,358 600,833 77 28 ­79,966 158,801 .. .. .. 179 948 United States 1,037,320 1,919,574 82 32 ­856,669 109,754 .. .. .. 230 6,493 Uruguay 4,106 4,775 32 2 ­457 711 4 14,551 116 32 ­104 Uzbekistan 5,365 3,915 .. .. .. 45 7 4,226 34 .. ­300 Venezuela, RB 63,250 29,800 9 3 27,167 2,957 2 44,201 48 13 40 Vietnam 39,605 44,410 53 6 217 1,954 23 19,287 38 75 ­200 West Bank and Gaza .. .. .. .. .. .. 304 .. .. 9 11 Yemen, Rep. 8,100 5,840 4 5 1,215 ­266 16 5,363 32 5 ­100 Zambia 3,689 2,920 9 1 .. 259 81 5,668 29 16 ­82 Zimbabwe 1,920 2,100 28 1 .. 103 28 4,257 85 93 ­75 World 12,063,483t 12,278,444t 75w 22w 974,283s 17w ..s 167w .. Low income 323,706 388,830 50 4 20,522 17 379,239 55 ­4,690 Middle income 3,305,551 2,934,082 64 21 260,273 15 2,363,139 77 ­14,021 Lower middle income 1,689,269 1,480,026 73 27 150,874 19 1,146,475 103 ­9,750 Upper middle income 1,615,598 1,450,813 57 16 109,399 3 1,216,664 53 ­4,271 Low & middle income 3,629,251 3,323,081 64 21 280,795 20 2,742,378 74 ­18,711 East Asia & Pacific 1,468,437 1,243,894 81 34 96,898 5 621,223 121 ­3,847 Europe & Central Asia 830,238 834,338 52 7 73,687 12 834,484 36 ­1,730 Latin America & Caribbean 661,934 601,583 54 15 70,017 11 727,628 57 ­6,811 Middle East & North Africa 280,881 210,805 20 3 13,765 88 152,724 52 ­2,768 South Asia 157,727 236,737 72 4 9,869 6 191,479 61 ­2,484 Sub-Saharan Africa 232,065 201,520 33 4 16,559 43 214,841 47 ­1,070 High income 8,435,922 8,960,432 78 22 693,488 0 195 18,604 Note: Regional aggregates include data for economies that are not specified elsewhere. World and income group totals include aid not allocated by country or region. a. Annual average. b. Includes Luxembourg. c. Data are from debt sustainability analysis undertaken as part of the Heavily Indebted Poor Countries (HIPC) initiative. d. Includes re-exports. e. Data on total exports and imports refer to South Africa only. Data on export commodity shares refer to the South African Customs Union (Botswana, Lesotho, Namibia, and South Africa). f. GNI refers to mainland Tanzania only. g. World total computed by the UN sums to zero, but because the aggregates shown here refer to World Bank definitions, regional and income group totals do not equal zero. 343 Table 6. Key indicators for other economies Population Gross Life Adult Carbon age Gross national income PPP gross national domestic expectancy Literacy dioxide Population composition (GNI)a income (GNI)b product at birth rate emissions Avg. density per capita annual % people per % $ $ $ $ per capita % Male Female % ages metric Thousands growth sq. km Ages 0­14 millions per capita millions per capita growth Years Years 15 and older tons 2006 2000­06 2006 2006 2006 2006 2006 2006 2005­06 2005 2005 2000­04c 2003 Afghanistan .. .. .. .. 8,092 ..d .. .. .. .. .. 28 .. American Samoa 60 1.5e 298 .. .. ..f .. .. .. .. .. .. 5.1 Andorra 67 0.5e 143 .. .. ..g .. .. .. .. .. .. .. Antigua and Barbuda 84 1.5 190 .. 937 11,210 1,129 13,500 6.9 .. .. .. 5.0 Aruba 101 0.7e 533 .. .. ..g .. .. .. .. .. 97 21.8 Bahamas, The 327 1.4 33 28 .. ..g .. .. .. 68 74 .. 5.9 Bahrain 740 1.6 1,042 27 10,288 14,370 13,436 18,770 5.3 73 76 87 31.0 Barbados 270 0.2 628 19 .. ..g .. .. .. 73 78 .. 4.4 Belize 297 2.9 13 36 1,084 3,650 1,977 6,650 2.1 69 74 .. 2.9 Bermuda 64 0.4 1,276 .. .. ..g .. .. .. 76 81 .. 7.9 Bhutan 647 2.4 14 38 915 1,410 3,681h 5,690h 5.8 63 65 .. 0.6 Botswana 1,758 0.0 3 37 10,380 5,900 21,534 12,250 4.0 35 34 81 2.3 Brunei Darussalam 381 2.2 72 29 .. ..g .. .. ­0.5 75 79 93 12.7 Cape Verde 518 2.3 129 39 1,105 2,130 3,100h 5,980h 3.7 68 74 81 0.3 Cayman Islands 46 2.2e 177 .. .. ..g .. .. .. .. .. .. 7.1 Channel Islands 150 0.4 .. 16 .. ..g .. .. .. 76 83 .. .. Comoros 614 2.1 275 42 406 660 1,233h 2,010h ­1.6 61 64 .. 0.2 Cuba 11,286 0.2 103 19 .. ..i .. .. 5.2 75 79 100 2.3 Cyprus 765 1.6 83 19 13,633 18,430 15,898 21,490 1.3 77 82 97 10.1 Djibouti 806 2.0 35 41 857 1,060 2,046h 2,540h 3.2 52 55 .. 0.5 Dominica 72 0.2 97 .. 287 3,960 470 6,490 3.5 .. .. .. 2.0 Equatorial Guinea 515 2.3 18 45 4,246 8,250 5,226h 10,150h ­7.0 42 43 87 0.3 Estonia 1,341 ­0.4 32 15 15,307 11,410 23,522 17,540 11.8 67 78 100 13.5 Faeroe Islands 48 0.2e 35 .. .. ..g .. .. .. .. .. .. 13.7 Fiji 853 0.9 47 31 2,815 3,300 5,292 6,200 2.7 66 71 .. 1.3 French Polynesia 260 1.6 71 27 .. ..g .. .. .. 71 76 .. 2.8 Gabon 1,406 1.7 5 40 7,032 5,000 7,465 5,310 ­0.4 53 54 84 0.9 Gambia, The 1,553 2.8 155 40 488 310 3,059h 1,970h 2.1 55 58 .. 0.2 Greenland 57 0.2 0 .. .. ..g .. .. .. .. .. .. 10.0 Grenada 108 1.1 318 .. 478 4,420 845 7,810 4.9 .. .. .. 2.1 Guam 172 1.7 312 30 .. ..g .. .. .. 73 78 .. 24.9 Guinea-Bissau 1,633 3.0 58 48 307 190 1,355h 830h 1.2 44 47 .. 0.2 Guyana 751 0.2 4 29 849 1,130 3,515h 4,680h 4.8 61 67 .. 2.2 Iceland 299 1.0 3 22 15,122 50,580 10,930 36,560 1.8 79 83 .. 7.6 Iraq .. .. .. .. .. ..i .. .. .. 74 .. Isle of Man 77 0.9 134 .. .. .. .. .. .. .. .. .. .. Kiribati 101 1.7 138 .. 124 1,230 902h 8,970h 4.2 .. .. .. 0.3 Korea, Dem. Rep. 22,569 0.5 187 25 .. ..d .. .. .. 61 67 .. 3.5 Lesotho 1,789 0.0 59 38 1,839 1,030 7,764h 4,340h 3.1 34 36 82 .. Liberia 3,380 1.6 35 47 469 140 .. .. 4.7 42 43 52 0.1 Libya 5,965 2.0 3 30 44,011 7,380 .. .. 3.6 72 77 84 8.9 Liechtenstein 35 0.8e 218 .. .. ..g .. .. .. .. .. .. .. Luxembourg 462 0.9 178 19 35,133 76,040 27,519 59,560 5.0 76 82 .. 22.1 Macao, China 463 0.7 16,422 15 .. ..g .. .. 16.2 78 82 91 4.1 Maldives 337 2.5 1,123 40 902 2,680 .. .. 16.0 68 67 96 1.4 Malta 405 0.6 1,266 17 5,491 13,610 7,517 18,630 1.9 78 81 .. 6.2 Marshall Islands 65 3.6 363 .. 196 3,000 .. .. 0.6 .. .. .. .. Mauritius 1,253 0.9 617 24 6,833 5,450 16,934 13,510 2.7 70 77 84 2.6 Mayotte 187 3.9e 499 .. .. ..f .. .. .. .. .. .. .. Micronesia, Fed. Sts. 111 0.6 159 39 264 2,380 869h 7,830h ­1.2 67 69 .. .. Monaco 33 0.3e 16,718 .. .. ..g .. .. .. .. .. .. .. Montenegro 606 ­1.7 44 .. 2,317 3,860 .. .. 7.7 72 77 .. .. Myanmar 50,962 1.1 78 29 .. ..d .. .. 3.9 58 64 90 0.2 Netherlands Antilles 184 0.7 230 22 .. ..g .. .. .. 73 80 96 22.7 New Caledonia 238 1.9 13 28 .. ..g .. .. .. 72 78 .. 8.3 Northern Mariana Islands 82 2.6e 172 .. .. ..f .. .. .. .. .. .. .. Palau 20 0.8e 44 .. 162 7,990 .. .. 5.2 .. .. .. 12.3 Puerto Rico 3,929 0.5 443 22 .. ..g .. .. .. 74 82 90 0.5 Qatar 828 5.2 75 22 .. ..g .. .. 1.4 72 77 89 63.0 Samoa 186 0.7 66 40 421 2,270 1,188h 6,400h 2.0 68 74 99 0.8 San Marino 29 1.1j 477 .. .. ..g .. .. .. .. .. .. .. Sao Tome and Principe 160 2.3 167 39 124 780 .. .. 4.6 62 65 85 0.6 Seychelles 86 0.9 186 .. 741 8,650 1,420h 16,560h 3.0 .. .. 92 6.6 Solomon Islands 489 2.6 17 40 331 680 1,062h 2,170h 2.8 62 64 .. 0.4 Somalia 8,485 3.2 14 44 .. ..d .. .. .. 47 49 .. .. St. Kitts and Nevis 48 1.5 134 .. 428 8,840 614 12,690 3.8 .. .. .. 2.7 St. Lucia 166 1.0 272 28 848 5,110 1,157 6,970 4.1 72 76 .. 2.0 St. Vincent and the Grenadines 120 0.5 307 29 470 3,930 839 7,010 3.6 70 75 .. 1.7 Suriname 452 0.7 3 30 1,446 3,200 3,667 8,120 5.3 67 73 90 5.0 Swaziland 1,126 1.2 65 40 2,737 2,430 5,822 5,170 2.5 42 41 80 0.9 Timor-Leste 1,029 4.5 69 41 865 840 .. .. ­6.7 56 58 .. 0.2 Tonga 102 0.4 142 35 223 2,170 879h 8,580h 1.8 71 74 .. 1.1 Trinidad and Tobago 1,309 0.3 255 21 17,461 13,340 21,281 16,260 12.2 67 73 98 22.1 United Arab Emirates 4,636 5.9 55 22 103,460 23,950 103,637h 23,990h 3.4 77 82 89 33.4 Vanuatu 215 2.0 18 39 369 1,710 706h 3,280h 3.6 68 71 .. 0.4 Virgin Islands (U.S.) 109 0.0 310 24 .. ..g .. .. .. 77 80 .. 124.3 Note: For data comparability and coverage, see the technical notes. Figures in italics are for years other than those specified. a. Calculated using the World Bank Atlas method. b. PPP is purchasing power parity; see Definitions. c. Data are for the most recent year available. d. Estimated to be low income ($905 or less). e. Data are for 2003­2006. f. Estimated to be upper middle ($3,596­$11,115). g. Estimated to be high income ($11,116 or more). h. The estimate is based on regression; others are extrapo- lated from the latest International Comparison Program benchmark estimates. i. Estimated to be lower middle income ($906­3,595). j. Data are for 2004­2006. 344 Selected indicators 345 Technical notes 2007 CD-ROM. Unless otherwise noted, growth rates are computed using the least-squares regression method (see Statistical methods These technical notes discuss the sources and methods used to below). Because this method takes into account all available obser- compile the indicators included in this edition of Selected World vations during a period, the resulting growth rates reflect general Development Indicators. The notes follow the order in which the trends that are not unduly influenced by exceptional values. To indicators appear in the tables. exclude the effects of inflation, constant price economic indicators Sources are used in calculating growth rates. Data in italics are for a year or period other than that specified in the column heading--up to The data published in the Selected World Development Indicators two years before or after for economic indicators and up to three are taken from World Development Indicators 2007. Where pos- years for social indicators, because the latter tend to be collected sible, however, revisions reported since the closing date of that edi- less regularly and change less dramatically over short periods. tion have been incorporated. In addition, newly released estimates of population and gross national income (GNI) per capita for 2006 Constant price series are included in table 1 and table 6. The World Bank draws on a variety of sources for the statistics An economy's growth is measured by the increase in value added published in the World Development Indicators. Data on external produced by the individuals and enterprises operating in that econ- debt for developing countries are reported directly to the World omy. Thus, measuring real growth requires estimates of GDP and Bank by developing member countries through the Debtor Report- its components valued in constant prices. The World Bank collects ing System. Other data are drawn mainly from the United Nations constant price national accounts series in national currencies and and its specialized agencies, from the International Monetary recorded in the country's original base year. To obtain comparable Fund (IMF), and from country reports to the World Bank. Bank series of constant price data, it rescales GDP and value added by staff estimates are also used to improve currentness or consistency. industrial origin to a common reference year, 2000 in the current For most countries, national accounts estimates are obtained from version of the World Development Indicators. This process gives rise member governments through World Bank economic missions. to a discrepancy between the rescaled GDP and the sum of the res- In some instances these are adjusted by staff to ensure conformity caled components. Because allocating the discrepancy would give with international definitions and concepts. Most social data from rise to distortions in the growth rate, it is left unallocated. national sources are drawn from regular administrative files, spe- cial surveys, or periodic censuses. Summary measures For more detailed notes about the data, please refer to the The summary measures for regions and income groups, presented World Bank's World Development Indicators 2007. at the end of most tables, are calculated by simple addition when they are expressed in levels. Aggregate growth rates and ratios are Data consistency and reliability usually computed as weighted averages. The summary measures Considerable effort has been made to standardize the data, but full for social indicators are weighted by population or subgroups of comparability cannot be assured, and care must be taken in inter- population, except for infant mortality, which is weighted by the preting the indicators. Many factors affect data availability, com- number of births. See the notes on specific indicators for more parability, and reliability: statistical systems in many developing information. economies are still weak; statistical methods, coverage, practices, For summary measures that cover many years, calculations and definitions differ widely; and cross-country and intertemporal are based on a uniform group of economies so that the composi- comparisons involve complex technical and conceptual problems tion of the aggregate does not change over time. Group measures that cannot be unequivocally resolved. Data coverage may not be are compiled only if the data available for a given year account complete because of special circumstances or for economies experi- for at least two-thirds of the full group, as defined for the 2000 encing problems (such as those stemming from conflicts) affecting benchmark year. As long as this criterion is met, economies for the collection and reporting of data. For these reasons, although which data are missing are assumed to behave like those that pro- the data are drawn from the sources thought to be most authorita- vide estimates. Readers should keep in mind that the summary tive, they should be construed only as indicating trends and char- measures are estimates of representative aggregates for each topic acterizing major differences among economies rather than offering and that nothing meaningful can be deduced about behavior at precise quantitative measures of those differences. Discrepancies the country level by working back from group indicators. In addi- in data presented in different editions reflect updates by countries tion, the estimation process may result in discrepancies between as well as revisions to historical series and changes in methodol- subgroup and overall totals. ogy. Thus readers are advised not to compare data series between editions or between different editions of World Bank publications. Table 1. Key indicators of development Consistent time series are available from the World Development Population is based on the de facto definition, which counts all res- Indicators 2007 CD-ROM and in WDI Online. idents, regardless of legal status or citizenship, except for refugees not permanently settled in the country of asylum, who are gener- Ratios and growth rates ally considered part of the population of the country of origin. For ease of reference, the tables usually show ratios and rates of Average annual population growth rate is the exponential rate growth rather than the simple underlying values. Values in their of change for the period (see the section on statistical methods original form are available from the World Development Indicators below). 346 WORLD DEVELOPMENT REPORT 2008 Population density is midyear population divided by land area. tion. Because definition and methodologies of data collection dif- Land area is a country's total area excluding areas under inland fer across countries, data need to be used with caution. bodies of water and coastal waterways. Density is calculated using Carbon dioxide emissions (CO2) measures those emissions the most recently available data on land area. stemming from the burning of fossil fuels and the manufacture of Population age composition, ages 0­14 refers to the percentage cement. These include carbon dioxide produced during consump- of the total population that is ages 0­14. tion of solid, liquid, and gas fuels and from gas flaring. Carbon Gross national income (GNI--is the broadest measure of dioxide per capita is CO2 divided by the mid-year population. national income, measures total value added from domestic and The Carbon Dioxide Information Analysis Center (CDIAC), foreign sources claimed by residents. GNI comprises gross domes- sponsored by the U.S. Department of Energy, calculates annual tic product (GDP) plus net receipts of primary income from for- anthropogenic emissions of CO2. These calculations are derived eign sources. Data are converted from national currency to current from data on fossil fuel consumption, based on the World Energy U.S. dollars using the World Bank Atlas method. This involves Data Set maintained by the UNSD, and from data on world cement using a three-year average of exchange rates to smooth the effects manufacturing, based on the Cement Manufacturing Data Set of transitory exchange rate fluctuations. (See the section on statis- maintained by the U.S. Bureau of Mines. Each year the CDIAC tical methods below for further discussion of the Atlas method.) recalculates the entire time series from 1950 to the present, incor- GNI per capita is GNI divided by midyear population. It is con- porating its most recent findings and the latest corrections to its verted into current U.S. dollars by the Atlas method. The World database. Estimates exclude fuels supplied to ships and aircraft Bank uses GNI per capita in U.S dollars to classify economies for engaged in international transportation because of the difficulty analytical purposes and to determine borrowing eligibility. of apportioning these fuels among the countries benefiting from PPP Gross national income, which is GNI converted into inter- that transport. national dollars using purchasing power parity (PPP) conversion factors, is included because nominal exchange rates do not always Table 2. Poverty reflect international differences in relative prices. At the PPP rate, The World Bank produced its first global poverty estimates for one international dollar has the same purchasing power over developing countries for World Development Report 1990 using domestic GNI that the U.S. dollar has over U.S. GNI. PPP rates household survey data for 22 countries (Ravallion, Datt, and van allow a standard comparison of real price levels between coun- de Walle 1991). Incorporating survey data collected during the tries, just as conventional price indexes allow comparison of real last 15 years, the database has expanded considerably and now values over time. The PPP conversion factors used here are derived includes 440 surveys representing almost 100 developing coun- from price surveys covering 118 countries conducted by the Inter- tries. Some 1.1 million randomly sampled households were inter- national Comparison Program. For Organisation for Economic viewed in these surveys, representing 93 percent of the population Co-operation and Development (OECD) countries data come of developing countries. The surveys asked detailed questions on from the most recent round of surveys, completed in 1999; the sources of income and how it was spent and on other household rest are either from the 1996 survey, or data from the 1993 or ear- characteristics such as the number of people sharing that income. lier round and extrapolated to the 1996 benchmark. Estimates for Most interviews were conducted by staff of government statistics countries not included in the surveys are derived from statistical offices. Along with improvements in data coverage and quality, models using available data. the underlying methodology has also improved, resulting in better PPP GNI per capita is PPP GNI divided by midyear population. and more comprehensive estimates. Gross domestic product (GDP) per capita growth is based on GDP measured in constant prices. Growth in GDP is considered Data availability a broad measure of the growth of an economy. GDP in constant prices can be estimated by measuring the total quantity of goods Since 1979 there has been considerable expansion in the number and services produced in a period, valuing them at an agreed set of of countries that field such surveys, the frequency of the surveys, base year prices, and subtracting the cost of intermediate inputs, and the quality of their data. The number of data sets rose dramati- also in constant prices. See the section on statistical methods for cally from a mere 13 between 1979 and 1981 to 100 between 1997 details of the least-squares growth rate. and 1999. The drop to 41 available surveys after 1999 reflects the Life expectancy at birth is the number of years a newborn lag between the time data are collected and the time they become infant would live if patterns of mortality prevailing at its birth available for analysis, not a reduction in data collection. Data cov- were to stay the same throughout its life. Data are presented for erage is improving in all regions, but Sub-Saharan Africa continues males and females separately. to lag, with only 28 of 48 countries having at least one data set avail- Adult literacy rate is the percentage of persons aged 15 and able. A complete overview of data availability by year and country above who can, with understanding, read and write a short, simple can be obtained at http://iresearch.worldbank.org/povcalnet/. statement about their everyday life. In practice, literacy is difficult to measure. To estimate literacy using such a definition requires Data quality census or survey measurements under controlled conditions. The problems of estimating poverty and comparing poverty Many countries estimate the number of literate people from self- rates do not end with data availability. Several other issues, some reported data. Some use educational attainment data as a proxy related to data quality, also arise in measuring household living but apply different lengths of school attendance or level of comple- standards from survey data. One relates to the choice of income Selected indicators 347 or consumption as a welfare indicator. Income is generally more were designed for comparing aggregates from national accounts, not difficult to measure accurately, and consumption comes closer to for making international poverty comparisons. As a result, there is the notion of standard of living. And income can vary over time no certainty that an international poverty line measures the same even if the standard of living does not. But consumption data are degree of need or deprivation across countries. not always available. Another issue is that household surveys can Early editions of World Development Indicators used PPPs from differ widely, for example, in the number of consumer goods they the Penn World Tables. Recent editions use 1993 consumption PPP identify. And even similar surveys may not be strictly comparable estimates produced by the World Bank. Recalculated in 1993 PPP because of differences in timing or the quality and training of sur- terms, the original international poverty line of $1 a day in 1985 vey enumerators. PPP terms is now about $1.08 a day. Any revisions in the PPP of a Comparisons of countries at different levels of development country to incorporate better price indexes can produce dramati- also pose a potential problem because of differences in the rela- cally different poverty lines in local currency. tive importance of consumption of nonmarket goods. The local Issues also arise when comparing poverty measures within market value of all consumption in kind (including own produc- countries. For example, the cost of living is typically higher in tion, particularly important in underdeveloped rural economies) urban than in rural areas. One reason is that food staples tend to should be included in total consumption expenditure. Similarly, be more expensive in urban areas. So the urban monetary pov- imputed profit from the production of nonmarket goods should be erty line should be higher than the rural poverty line. But it is not included in income. This is not always done, though such omis- always clear that the difference between urban and rural poverty sions were a far bigger problem in surveys before the 1980s. Most lines found in practice reflects only differences in the cost of liv- survey data now include valuations for consumption or income ing. In some countries the urban poverty line in common use has from own production. Nonetheless, valuation methods vary. For a higher real value--meaning that it allows the purchase of more example, some surveys use the price in the nearest market, while commodities for consumption--than does the rural poverty line. others use the average farmgate selling price. Sometimes the difference has been so large as to imply that the Whenever possible, the table uses consumption data for decid- incidence of poverty is greater in urban than in rural areas, even ing who is poor and income surveys only when consumption data though the reverse is found when adjustments are made only for are unavailable. In recent editions there has been a change in how differences in the cost of living. As with international compari- income surveys are used. In the past, average household income sons, when the real value of the poverty line varies it is not clear was adjusted to accord with consumption and income data from how meaningful such urban-rural comparisons are. national accounts. But in testing this approach using data for some By combining all this information, a team in the World Bank's 20 countries for which income and consumption expenditure data Development Research Group calculates the number of people were both available from the same surveys, income was found to living below various international poverty lines, as well as other yield a higher mean than consumption but also higher inequality. poverty and inequality measures that are published in World When poverty measures based on consumption and income were Development Indicators. The database is updated annually as new compared, these two effects roughly cancelled each other out: sta- survey data become available, and a major reassessment of prog- tistically, there was no significant difference. So recent editions ress against poverty is made about every three years. use income data to estimate poverty directly, without adjusting average income measures. Do it yourself: PovcalNet Recently, this research team developed PovcalNet, an interactive International poverty lines Web-based computational tool that allows users to replicate the International comparisons of poverty estimates entail both con- calculations by the World Bank's researchers in estimating the ceptual and practical problems. Countries have different defini- extent of absolute poverty in the world. PovcalNet is self-con- tions of poverty, and consistent comparisons across countries can tained and powered by reliable built-in software that performs be difficult. Local poverty lines tend to have higher purchasing the relevant calculations from a primary database. The underly- power in rich countries, where more generous standards are used, ing software can also be downloaded from the site and used with than in poor countries. Is it reasonable to treat two people with the distributional data of various formats. The PovcalNet primary same standard of living--in terms of their command over com- database consists of distributional data calculated directly from modities--differently because one happens to live in a better-off household survey data. Detailed information for each of these is country? also available from the site. Poverty measures based on an international poverty line attempt Estimation from distributional data requires an interpolation to hold the real value of the poverty line constant across countries, method. The method chosen was Lorenz curves with flexible func- as is done when making comparisons over time. The commonly tional forms, which have proved reliable in past work. The Lorenz used $1 a day standard, measured in 1985 international prices and curve can be graphed as the cumulative percentages of total con- adjusted to local currency using purchasing power parities (PPPs), sumption or income against the cumulative number of people, was chosen for the World Bank's World Development Report 1990: starting with the poorest individual. The empirical Lorenz curves Poverty because it is typical of the poverty lines in low-income coun- estimated by PovcalNet are weighted by household size, so they are tries. PPP exchange rates, such as those from the Penn World Tables based on percentiles of population, not households. or the World Bank, are used because they take into account the local PovcalNet also allows users to calculate poverty measures under prices of goods and services not traded internationally. But PPP rates different assumptions. For example, instead of $1 a day, users can 348 WORLD DEVELOPMENT REPORT 2008 specify a different poverty line, say $1.50 or $3. Users can also Gender parity ratio in primary and secondary school is the specify different PPP rates and aggregate the estimates using alter- ratio of the female gross enrollment rate in primary and secondary native country groupings (for example, UN country groupings or school to the male gross enrollment rate. groupings based on average incomes) or a selected set of individual Eliminating gender disparities in education would help to countries. PovcalNet is available online at http://iresearch.world- increase the status and capabilities of women. This indicator is bank.org/povcalnet/. an imperfect measure of the relative accessibility of schooling for Survey year is the year in which the underlying data were girls. With a target date of 2005, this is the first of the targets to fall collected. due. School enrollment data are reported to the UNESCO Institute Rural poverty rate is the percentage of the rural population for Statistics by national education authorities. Primary education living below the national rural poverty line. provides children with basic reading, writing, and mathematics Urban poverty rate is the percentage of the urban population skills along with an elementary understanding of such subjects as living below the national urban poverty line. history, geography, natural science, social science, art, and music. National poverty rate is the percentage of the population living Secondary education completes the provision of basic education below the national poverty line. National estimates are based on that began at the primary level, and aims at laying foundations for population-weighted subgroup estimates from household surveys. lifelong learning and human development, by offering more sub- Population below $1 a day and population below $2 a day are ject-or skill-oriented instruction using more specialized teachers. the percentages of the population living on less than $1.08 a day Under-five mortality rate is the probability that a newborn and $2.15 a day at 1993 international prices. As a result of revisions baby will die before reaching age five, if subject to current age- in PPP exchange rates, poverty rates for individual countries can- specific mortality rates. The probability is expressed as a rate per not be compared with poverty rates reported in earlier editions. 1,000. The main sources of mortality date are vital registration sys- Poverty gap is the mean shortfall from the poverty line (count- tems and direct or indirect estimates based on sample surveys or ing the nonpoor as having zero shortfall), expressed as a percent- censuses. To produce harmonized estimates of under-five mortal- age of the poverty line. This measure reflects the depth of poverty ity rates that make use of all available information in a transparent as well as its incidence. way, a methodology that fits a regression line to the relationship between mortality rates and their reference dates using weighted least squares was developed and adopted by both UNICEF and the Table 3. Millennium Development Goals: World Bank. eradicating poverty and improving lives Maternal mortality ratio is the number of women who die Proportion of population below $1 a day (PPP$) is the percentage from pregnancy-related causes during pregnancy and childbirth, of the population living on less than $1.08 a day at 1993 interna- per 100,000 live births. The values are modeled estimates based on tional prices. As a result of revisions in PPP exchange rates, poverty an exercise carried out by the World Health Organization (WHO) rates for individual countries cannot be compared with poverty and United Nations Children's Fund (UNICEF). In this exercise rates reported in earlier editions. maternal mortality was estimated with a regression model using Prevalence of child malnutrition is the percentage of children information on fertility, birth attendants, and HIV prevalence. under five whose weight for age is less than minus two standard This cannot be assumed to provide an accurate estimate of mater- deviations from the median for the international reference popu- nal mortality in any country in the table. lation ages 0­59 months. The reference population, adopted by Births attended by skilled health staff are the percentage of the World Health Organization in 1983, is based on children from deliveries attended by personnel trained to give the necessary super- the United States, who are assumed to be well nourished. Esti- vision, care, and advice to women during pregnancy, labor, and the mates of child malnutrition are from national survey data. The postpartum period, to conduct deliveries on their own, and to care proportion of children who are underweight is the most com- for newborns. The share of births attended by skilled health staff mon indicator of malnutrition. Being underweight, even mildly, is an indicator of a health system's ability to provide adequate care increases the risk of death and inhibits cognitive development in for pregnant women. Good antenatal and postnatal care improves children. Moreover, it perpetuates the problem from one genera- maternal health and reduces maternal and infant mortality. But tion to the next, as malnourished women are more likely to have data may not reflect such improvements because health informa- low-birth-weight babies. tion system are often weak, material deaths are underreported, and Primary completion rate is the percentage of students complet- rates of maternal mortality are difficult to measure. ing the last year of primary school. It is calculated by taking the Prevalence of HIV is the percentage of people ages 15­49 who total number of students in the last grade of primary school, minus are infected with HIV. Adult HIV prevalence rates reflect the rate the number of repeaters in that grade, divided by the total number of HIV infection in each country's population. Low national prev- of children of official graduation age. The primary completion rate alence rates can be very misleading, however. They often disguise reflects the primary cycle as defined by the International Stan- serious epidemics that are initially concentrated in certain locali- dard Classification of Education (ISCED), ranging from three or ties or among specific population groups and threaten to spill over four years of primary education (in a very small number of coun- into the wider population. In many parts of the developing world tries) to five or six years (in most countries) and seven (in a small most new infections occur in young adults, with young women number of countries). Because curricula and standards for school especially vulnerable. The estimates of HIV prevalence are based completion vary across countries, a high rate of primary comple- on extrapolations from data collected through surveys and from tion does not necessarily mean high levels of student learning. surveillance of small, nonrepresentative groups. Selected indicators 349 Table 4. Economic activity services comprise all transactions between residents of a coun- try and the rest of the world involving a change in ownership of Gross domestic product is gross value added, at purchasers' prices, general merchandise, goods sent for processing and repairs, non- by all resident producers in the economy plus any taxes and minus monetary gold, and services. any subsidies not included in the value of the products. It is cal- The GDP implicit deflator reflects changes in prices for all final culated without deducting for depreciation of fabricated assets or demand categories, such as government consumption, capital for- for depletion or degradation of natural resources. Value added is mation, and international trade, as well as the main component, the net output of an industry after adding up all outputs and sub- private final consumption. It is derived as the ratio of current to tracting intermediate inputs. The industrial origin of value added constant price GDP. The GDP deflator may also be calculated is determined by the International Standard Industrial Classifica- explicitly as a Paasche price index in which the weights are the tion (ISIC) revision 3. The World Bank conventionally uses the U.S. current period quantities of output. dollar and applies the average official exchange rate reported by the National accounts indicators for most developing countries International Monetary Fund for the year shown. An alternative are collected from national statistical organizations and central conversion factor is applied if the official exchange rate is judged to banks by visiting and resident World Bank missions. Data for diverge by an exceptionally large margin from the rate effectively high-income economies come from the Organization for Eco- applied to transactions in foreign currencies and traded products. nomic Cooperation Gross domestic product average annual growth rate is calcu- lated from constant price GDP data in local currency. Agricultural productivity refers to the ratio of agricultural Table 5. Trade, aid, and finance value added, measured in constant 1995 U.S. dollars, to the num- Merchandise exports show the free on board (f.o.b.) value of goods ber of workers in agriculture. provided to the rest of the world valued in U.S. dollars. Value added is the net output of an industry after adding up all Merchandise imports show the c.i.f. value of goods (the cost of out-puts and subtracting intermediate inputs. The industrial origin the goods including insurance and freight) purchased from the rest of value added is determined by the International Standard Indus- of the world valued in U.S. dollars. Data on merchandise trade come trial Classification (ISIC) revision 3. from the World Trade Organization (WTO) in its annual report. Agriculture value added corresponds to ISIC divisions 1­5 and Manufactured exports comprise the commodities in Standard includes forestry and fishing. Industrial Trade Classification (SITC) sections 5 (chemicals), 6 Industry value added comprises mining, manufacturing, con- (basic manufactures), 7 (machinery and transport equipment), and struction, electricity, water, and gas (ISIC divisions 10­45). 8 (miscellaneous manufactured goods), excluding division 68. Services value added correspond to ISIC divisions 50­99. High technology exports are products with high R&D inten- Household final consumption expenditure is the market value sity. They include high-technology products such as in aerospace, of all goods and services, including durable products (such as cars, computers, pharmaceuticals, scientific instruments, and electrical washing machines, and home computers), purchased by house- machinery. holds. It excludes purchases of dwellings but includes imputed rent Current account balance is the sum of net exports of goods and for owner-occupied dwellings. It also includes payments and fees services, net income, and net current transfers. to governments to obtain permits and licenses. Here, household Foreign direct investment is net inflows of investment to consumption expenditure includes the expenditures of nonprofit acquire a lasting management interest (10 percent or more of vot- institutions serving households, even when reported separately by ing stock) in an enterprise operating in an economy other than the country. In practice, household consumption expenditure may that of the investor. It is the sum of equity capital, re-investment include any statistical discrepancy in the use of resources relative of earnin gs, other long-term capital, and short-term capital, as to the supply of resources. shown in the balance of payments. Data on the current account General government final consumption expenditure includes balance, private capital flows, and foreign direct investment are all government current expenditures for purchases of goods and drawn from the IMF's Balance of Payments Statistics Yearbook and services (including compensation of employees). It also includes International Financial Statistics. most expenditures on national defense and security, but excludes Official development assistance or official aid from the high- government military expenditures that are part of government income members of the Organisation for Economic Co-operation capital formation. and Development (OECD) are the main source of official external Gross capital formation consists of outlays on additions to the finance for developing countries, but official development assis- fixed assets of the economy plus net changes in the level of invento- tance (ODA) is also disbursed by some important donor countries ries and valuables. Fixed assets include land improvements (fences, that are not members of OECD's Development Assistance Com- ditches, drains, and so on); plant, machinery, and equipment pur- mittee (DAC). DAC has three criteria for ODA: it is undertaken by chases; and the construction of buildings, roads, railways, and the the official sector; it promotes economic development or welfare like, including commercial and industrial buildings, offices, schools, as a main objective; and it is provided on concessional terms, with hospitals, and private dwellings. Inventories are stocks of goods held a grant element of at least 25 percent on loans. by firms to meet temporary or unexpected fluctuations in produc- Official development assistance comprises grants and loans, tion or sales, and "work in progress". According to the 1993 SNA net net of repayments, that meet the DAC definition of ODA and are acquisitions of valuables are also considered capital formation. made to countries and territories in part I of the DAC list of aid External balance of goods and services is exports of goods and recipients. Official aid comprises grants and ODA-like loans, net services less imports of goods and services. Trade in goods and of repayments, to countries and territories in part II of the DAC 350 WORLD DEVELOPMENT REPORT 2008 list of aid recipients. Bilateral grants are transfers in money or in variable in the relevant period. The regression equation takes the kind for which no repayment is required. Bilateral loans are loans form extended by governments or official agencies that have a grant ele- ment of at least 25 percent and for which repayment is required in ln Xt = a + bt, convertible currencies or in kind. which is equivalent to the logarithmic transformation of the com- Total external debt is debt owed to nonresidents repayable in pound growth equation, foreign currency, goods, or services. It is the sum of public, pub- licly guaranteed, and private non-guaranteed long-term debt, use Xt = Xo (1 + r)t. of IMF credit, and short-term debt. Short-term debt includes all debt having an original maturity of one year or less and interest in In this equation, X is the variable, t is time, and a = log Xo arrears on long-term debt. and b = ln (1 + r) are the parameters to be estimated. If b* is the Present value of debt is the sum of short-term external debt least-squares estimate of b, the average annual growth rate, r, is plus the discounted sum of total debt service payments due on obtained as [exp(b*) ­ 1] and is multiplied by 100 to express it as public, publicly guaranteed, and private nonguaranteed long-term a percentage. external debt over the life of existing loans. The calculated growth rate is an average rate that is represen- The main sources of external debt information are reports to tative of the available observations over the entire period. It does the World Bank through its Debtor Reporting System from mem- not necessarily match the actual growth rate between any two ber countries that have received World Bank loans. Additional periods. information has been drawn from the files of the World Bank and the IMF. Summary tables of the external debt of developing coun- Exponential growth rate tries are published annually in the World Bank's Global Develop- The growth rate between two points in time for certain demo- ment Finance. graphic data, notably labor force and population, is calculated Domestic credit provided by banking sector includes all credit from the equation to various sectors on a gross basis, with the exception of credit to the central government, which is net. The banking sector includes r = ln (pn /p1)/n, monetary authorities, deposit money banks, and other banking institutions for which data are available (including institutions where pn and p1 are the last and first observations in the period, that do not accept transferable deposits but do incur such liabili- n is the number of years in the period, and ln is the natural loga- ties as time and savings deposits). Examples of other banking rithm operator. This growth rate is based on a model of con- institutions include savings and mortgage loan institutions and tinuous, exponential growth between two points in time. It does building and loan associations. Data are from the IMF's Interna- not take into account the intermediate values of the series. Note tional Finance Statistics. also that the exponential growth rate does not correspond to the Net migration is the net total number of migrants during the annual rate of change measured at a one-year interval which is period, that is, the total number of immigrants, less the total given by number of emigrants, including both citizens and noncitizens. Data shown in the table are five-year estimates. Data are from the (pn ­ pn ­ 1 )/pn ­ 1 . United Nations Population Division's World Population Prospects: The 2006 Revision. World Bank Atlas method Table 6. Key indicators for other economies In calculating GNI and GNI per capita in U.S. dollars for certain operational purposes, the World Bank uses the Atlas conversion See Technical notes for Table 1. Key indicators. factor. The purpose of the Atlas conversion factor is to reduce the impact of exchange rate fluctuations in the cross-country com- Statistical methods parison of national incomes. The Atlas conversion factor for any This section describes the calculation of the least-squares growth year is the average of a country's exchange rate (or alternative rate, the exponential (endpoint) growth rate, and the World Bank's conversion factor) for that year and its exchange rates for the two Atlas methodology for calculating the conversion factor used to preceding years, adjusted for the difference between the rate of estimate GNI and GNI per capita in U.S. dollars. inflation in the country and that in Japan, the United Kingdom, the United States, and the Euro Zone. A country's inflation rate is Least-squares growth rate measured by the change in its GDP deflator. The inflation rate for Least-squares growth rates are used wherever there is a sufficiently Japan, the United Kingdom, the United States, and the Euro Zone, long time series to permit a reliable calculation. No growth rate representing international inflation, is measured by the change in is calculated if more than half the observations in a period are the SDR deflator. (Special drawing rights, or SDRs, are the IMF's missing. unit of account.) The SDR deflator is calculated as a weighted aver- The least-squares growth rate, r, is estimated by fitting a lin- age of these countries' GDP deflators in SDR terms, the weights ear regression trendline to the logarithmic annual values of the being the amount of each country's currency in one SDR unit. Selected indicators 351 Weights vary over time because both the composition of the SDR where et* is the Atlas conversion factor (national currency to and the relative exchange rates for each currency change. The SDR the U.S. dollar) for year t, et is the average annual exchange rate deflator is calculated in SDR terms first and then converted to U.S. (national currency to the U.S. dollar) for year t, pt is the GDP defla- dollars using the SDR to dollar Atlas conversion factor. The Atlas tor for year t, pt S$is the SDR deflator in U.S. dollar terms for year t, conversion factor is then applied to a country's GNI. The resulting Yt is the Atlas GNI per capita in U.S. dollars in year t, Yt is current $ GNI in U.S. dollars is divided by the midyear population to derive GNI (local currency) for year t, and Nt is the midyear population GNI per capita. for year t. When official exchange rates are deemed to be unreliable or unrepresentative of the effective exchange rate during a period, Alternative conversion factors an alternative estimate of the exchange rate is used in the Atlas The World Bank systematically assesses the appropriateness of formula (see below). official exchange rates as conversion factors. An alternative con- The following formulas describe the calculation of the Atlas version factor is used when the official exchange rate is judged to conversion factor for year t : diverge by an exceptionally large margin from the rate effectively applied to domestic transactions of foreign currencies and traded S$ S$ p p p p products. This applies to only a small number of countries, as * 1 e t t t shown in Primary data documentation table in World Develop- t t e t / e t / e t 3 2 S$ 1 S$ p p p p t 2 t 1 ment Indicators 2007. Alternative conversion factors are used in t 2 t 1 the Atlas methodology and elsewhere in the Selected World Devel- and the calculation of GNI per capita in U.S. dollars for year t: opment Indicators as single-year conversion factors. Yt = (Yt/Nt)/et*, $ Index Access to resources and assets food security and, 94­95 financial services, 13, 143­144 future risks and challenges, 61­69, 227 household asset positions, 8­9, 84­89 global, 26, 53­54 human capital endowments, 84­85 industrial growth and, 7, 26, 35 information, 82­83 linkages with other economic sectors, 34 land ownership patterns and trends, 85­87, 138­139 macroeconomic policy biases against, 39­40, 98 land reform strategies, 142­143 rationale for agriculture as lead sector for development, 6­7 land rental and sales markets, 9, 141­142 regional variation within countries, 59 livestock, 88 in Sub-Saharan Africa, 51, 53­54, 68, 229 social capital, 84, 88­89 success stories, 26, 35 social conflict arising from, 245­246 in transforming economy countries, 35, 234, 235 water, 9, 64, 187­188 in urbanized countries, 238, 239 See also Property rights See also Productivity, agricultural Africa Agricultural strategies agriculture development goals, 231­232 implementation, 226­228, 242­243 assistance for agricultural development, 24, 41­42, 261 agenda development and implementation, 18­19, 22­25, 243­244 educational attainment, 84 agribusiness for development, 135­137 export markets, 122, 123­124, 233 in agriculture-based economies, 1, 7, 19­21, 231­234 farm size, 92, 182 challenges, 72­73, 226, 227 food demand, 34 classification of economies and, 4, 30, 229 food supply and access, 32, 62, 65, 160, 161 failures of, 7­8, 38 input markets, 148, 151-153 future prospects, 265 insurance access, 148 global context, 261­265 labor market, 205, 213 governance needs, 2, 245, 246­248, 251­254, 265 mineral-rich countries, 35 household strategy selection, 82­84 political economy, 42­43 importance of smallholders in, 90­91, 92 price instability, 121 in less-favored areas, 56­57, 192, 196­197 property rights, 139 macroeconomic and price policies and, 39­40 regional trade agreements, 111 official development assistance and, 257­258 research investment, 21, 22, 153 opportunities for implementing and improving, 8, 25, 44, 226­227 transportation infrastructure, 119, 150­151, 230 policy objectives, 228 water access and use, 84 political feasibility, 229, 242, 246, 265 women in, 78­79, 138, 213 rural employment and, 17­18, 37, 72, 73, 74, 202 See also East Africa; North Africa; Sub-Saharan Africa; staple crop sector, 6­7, 12, 32­33 West Africa; specific country success stories, 35, 73 Agribusiness, 135­137, 261 technological innovation for, 176 Agricultural growth tradable crop sector, 12, 34­35 agroecological conditions and, 54 in transforming economies, 2, 21­22, 36­37, 234­235, 236­238 climate change effects, 200 in urbanized economies, 2, 22­23, 38, 238­239, 240­242 current state, 50 Agriculture-based economies diversification, 58­61 agricultural imports, 106 effects of trade liberalization, 106, 107 agriculture-for-development agenda, 1, 19­21, 229, 231­234, 243 employment patterns and trends, 205­206 definition and characteristics, 4, 29­32 energy supply and, 66 diversity among, 229­230 environmental issues, 15­16, 63­64, 188, 199 fertilizer use and markets, 233 favored and less-favored areas, 55­57 food availability, 95 353 354 INDEX Agriculture-based economies (continued) ownership concentration, 135 governance problems, 245­246 pest control, 164 growth strategy, 6­7, 34­35 private­public partnerships to improve access, 170­171 human resources, 231 for sustainable agricultural practice in less-favored areas, 193 market development goals, 231­232 yield stability, 161­162 opportunities for productivity gains, 67 See also Genetically modified organisms policy dilemmas in development agenda, 243 Bolivia, 145, 206, 217, 256 public spending allocation, 7, 40, 234 Brazil rationale for agriculture as lead sector for development, 6­7 agricultural growth, 39, 238 staple crop sector, 6­7, 32­33 agriculture governance, 252, 256 structural features, 229­231 biofuels production, 17, 27, 70, 71 tax policies, 10, 98­100 educational system, 222 tradable crop sector, 33­34, 233 effects of trade liberalization, 11 See also Sub-Saharan Africa employment and labor, 206, 207­208, 209 Agriculture policy historical structural transformation, 30 agricultural productivity gains and, 53 land ownership patterns and trends, 85 for agroenterprise development, 136­137 nontraditional agricultural exports, 60 budgeting for, 250­251, 255, 256 poverty reduction experience, 38, 53, 107­108 challenges in poverty reduction, 72­73 public spending in rural areas, 82 coalition-building for agriculture-for-development agenda, 248­249 regional variation in agricultural growth, 59 community-driven development, 256­257 research and development investment, 166, 261 decentralization, 254­255 social assistance in, 240 in developed countries, 96­98 terms-of-trade reforms, 107­108 evidence-based policy making, 249­250 Bt cotton, 15, 163, 177 government ministries for, 247­248, 252 Bulgaria, 76, 82 health­agriculture linkage, 224 Burkina Faso, 11, 14, 32, 88, 95, 106, 109, 123­124, 146 market failure response, 83 Burundi, 11, 68, 95, 106 official development assistance, 41­42 parliamentary processes, 251 policy dilemmas in development agenda, 243­244 Cambodia, 249 political environment, 42­44, 96, 103, 236, 248 Carbon sequestration and trading, 4, 17, 198, 201, 264 price-stabilization interventions, 121­122 Central Asia process, 42­43 agriculture in, 240 public spending allocation, 40­41 classification of economies in, 4 reducing government role, 252­253 labor patterns and trends, 202, 204 regional coordination, 251 land supply, 63 smallholder heterogeneity and, 93 population distribution, 238 for smallholder participation in domestic procurement systems, Cereal production 127­128 biofuels market, 70­71 tax policy in developing countries, 98­103 biotechnology accomplishments, 159­160 transition to trade liberalization, 112­114, 117 effects of trade liberalization, 106­107 trends, 96, 116 future consumption, 61, 62 Albania, 88 for meat production, 59­60 Aquaculture, 59, 60, 162 price projections, 62 Argentina, 61­62, 101, 106, 115, 127, 163, 220 productivity patterns and trends, 51, 54, 66, 67 Armed conflict, 231 Chad, 11, 95, 106 Australia, 97 Child labor, 219 Avian flu, 190, 225 Chile, 38, 39, 60, 80, 206, 208­209, 223, 238, 249 China agricultural productivity, 67 Bangladesh, 60, 73, 85, 95, 110, 123, 202, 206, 209­210 aquaculture, 60 Benin, 11, 106, 119 biotechnology applications, 177 Biodiversity, 188, 191, 259 communication technology, 175 Biofuels, 17, 27, 61, 66, 70­71 economic growth, 234 Biotechnology educational access and outcomes, 217 accomplishments, 15, 159­161 environmental degradation, 53 future prospects, 15, 67, 158, 161, 162­163 foreign assistance from, 261 global governance, 263 historical structural transformation, 4, 30 Index 355 horticultural production, 58 Deforestation, 191 household incomes, 75 Developed countries labor patterns and trends, 27, 218 agriculture policies, 96­98 land rental market, 141 climate change and, 264 local governance, 255 global costs of current trade policies, 103­105 migration patterns, 216 producer organizations, 154 nontraditional agricultural exports, 60 research and development investment, 166 organic food production, 132 Developing countries population patterns and trends, 36, 40 agricultural tax policy, 98­103 poverty patterns and trends, 36, 37 assistance to developing countries, 261 recent agricultural performance, 6, 7, 26, 35, 40, 52, 53, 67 effects of trade liberalization on commodity prices, 105­107 recent agricultural reforms, 26, 40, 43, 53 employment patterns, 77 research and development investment, 14, 166 global costs of current trade policies, 103­105 rural area employment, 22 greenhouse gas emissions, 17 total factor productivity, 52 market development agenda, 133­134 as transforming economy, 4 participation in global governance, 264 vegetable consumption, 235 population patterns and trends, 4­5, 26, 29 water supply, 64 recent agricultural growth, 50­53 Climate change research and development investment, 14, 166, 170 adaptation to, 4, 65, 158, 200­201 See also Economic development and poverty reduction, agricultural practices to reduce, 17, 201, 260 agricultural strategies for; specific country agriculture's contribution, 4, 17 Diversified household income strategies, 74, 75, 76, 79 effects, 64­65, 260 Doha Round, 11, 97, 110­111 food security and, 65, 200 Dominican Republic, 137 global governance and cooperation, 262, 263 Drought, 89, 90 implications for water availability, 65, 185 responsibilities of developed countries, 17, 264 Codex Alimentarius, 260 East Africa, 15­16, 51 Collective action East Asia among smallholders, 92 classification of economies in, 4 cooperative resource management, 83 educational attainment, 216 farmer-to-farmer extension, 174­175 food access, 94 financial cooperatives, 146 irrigated land, 9, 51 irrigation projects, 194 labor patterns and trends, 204, 209 social network as household asset, 84, 88­89 market access, 54 for sustainable agricultural practice in less-favored areas, 195­197 rural­urban poverty patterns, 3, 28­29 women's cooperatives, 211 Eastern Europe, 4, 63, 144, 238, 240 See also Producer organizations Economic development Colombia, 155, 173, 198, 246 agriculture as lead sector for, 6­7 Commodity futures exchanges, 120­121 agriculture's comparative advantage, 3, 7, 34­35 Communication technology, 146­147, 175 classification of countries and economies, 4, 29­30 Community-driven development, 24, 256­257 current contribution of agriculture, 3, 229 Comprehensive Africa Agricultural Development Program, 229 shortcomings of past development strategies, 7­8 Conservation (zero) tillage, 16, 163­164, 165, 194 structural transformation in, 27­28 Consultative Group on International Agricultural Research, 24, Ecuador, 76, 83, 88, 224, 240 159, 163, 168, 170, 178, 233, 260, 264, 265 Education Corruption, 141, 254 access, 9­10, 222 Costa Rica, 198, 206, 223 for agriculture professions, 223, 231 Côte d'Ivoire, 100, 124 cash transfer programs to promote, 218­219 Cotton, 106, 124, 125 employment and, 216­218, 222 Credit higher education, 222 costs of constrained access, 144 intergenerational transmission, 217 current shortcomings in rural access, 143­144 investment to reduce poverty, 218­219 insurance access and, 148 for labor market development, 18 intermediation, 147 migration and, 215­216, 238 reputational collateral, 147 needs of rural youth, 222­223 rural access, 89 quality, 217­218 See also Microfinance rate of return, 217 356 INDEX Education (continued) food availability, 95 reasons for dropping out, 222 food security risks, 68 rural­urban divide, 84, 216 land certification program, 140 second-chance programs, 222­223 land rental market, 141 trends, 84 livestock ownership, 88 vocational, 222 malaria in, 224 Egypt, 79 market access, 56­57 El Salvador, 252 official development assistance, 257 Employment staple crop market, 32 in agriculture, 77, 202, 205­209 European Union, 11, 97, 98 in agriculture-based economies, 3 Extension services, 173­175 challenges in rural areas, 204 decentralization, 255 contractual arrangements, 206­207, 208 education for, 223 education and, 216­218, 222 effect of AIDS mortality, 225 retail trade and services, 209 Extensive agriculture systems, 180­181 in rural areas, 3, 17­18, 22, 37, 72, 79, 204, 209­211, 234 rural household income patterns, 74­77, 203 seasonal variation, 206 Fair Trade market, 60­61, 132, 133 self-employment, 213­214 Farm size, 85, 90­91, 235­236, 243­244 transformation in economic development, 18, 27 Farmer Field School, 175 in transforming countries, 22, 36, 236, 238 Fertilizer transitions from rural poverty, 73 costs, 66, 150­151 in urbanized countries, 239, 242 demand, 150, 152­153 women in agriculture, 78­79 energy use and, 66 working conditions in agriculture, 207­208 environmental effects, 188 See also Labor market government role in promoting, 151 Energy supply and costs, 65­66, 66, 227. See also Biofuels market development, 150­151 Environmental issues supply constraints, 150­151 agricultural productivity and, 153, 180, 191 use patterns and trends, 51 agriculture-related risks, 10, 15­16, 180, 188, 199 Financial services agriculture's role in environmental protection, 2, 4, 26, 199 for agroenterprise development, 136 agroecological conditions and agriculture development, 54 constraints to delivery, 143 biofuels, 17, 70, 71 cooperatives and self-help groups, 146 carbon sequestration and trading, 4, 17, 198, 201, 264 current shortcomings in rural access, 143­144, 157 cooperative resource management, 83 fertilizer market, 151 drivers of resource degradation, 181 information technology, 146­147 in extensive agricultural systems, 180, 181 intermediation, 147 global agenda, 259­260 leasing, 147 green revolution effects, 180 providers in rural areas, 143 high-input farming, 188 rationale for improved delivery, 143, 144 horticultural production, 59 state-owned agricultural banks, 145­146 in intensive agricultural systems, 180­181, 189 strategies for improving agricultural sector, 13, 143­147 in less-favored agricultural areas, 190­197 See also Microfinance land degradation, 63­64 Fisheries management, 2 livestock production, 60, 189­190 See also Aquaculture market pressures for sustainable agriculture, 189 Food and Agriculture Organization, 24, 61, 260, 262­263 obstacles to improving agricultural practices, 189, 199 Food security 94-95 payment for environmental services, 197­199, 241­242 agricultural production linkage, 94­95, 229 population growth and, 181­182, 191 biofuels production and, 70­71 strategies for improving agricultural practices, 188, 192­193, 199 climate change and, 65, 200 sustainable agricultural practices, 163­165, 181, 193­195 , 229 definition, 94 in transforming countries, 237 food supply­food security relationship, 50, 95 in urbanized countries, 241­242 future prospects, 50, 61­69 water management, 184­185 hidden hunger, 95 See also Climate change; Water use and supply instability, 229 Ethiopia protections during transition to trade reform, 112­113 agricultural imports, 95, 106 trade and, 94­95,106 environmental degradation in, 191 Ford Foundation, 261 Index 357 Forestry, 2 global context, 261­265 agroforestry, 194 government failures, 247 deforestation, 191 for implementation of agriculture-for-development agenda, greenhouse gas emissions in deforestation, 17 23­24, 242­243, 245, 246­248, 251­254, 265 Forum for Agricultural Research in Africa, 233 in irrigation management, 16, 185, 187 France, 154 labor regulation, 18, 207, 208 local, 255­256 market failure response, 83, 247 Gambia, 83 official development assistance and, 257, 258 Gates Foundation, 261 opportunities for improvement, 138, 242 Gene banks, 259 producer organization relationships, 154, 156­157 Genetically modified organisms, 177­179 property rights issues, 138­143 application, 163 reducing state role, 252­253 concerns, 67, 163, 178 regulatory reform, 253­254 current use, 67, 177­178 in urbanized countries, 239­240 definition, 177 See also Political economy; Public spending disease and pest resistance, 188 Green revolution, 26, 66, 159, 160, 180 food crop applications, 177­178 Guatemala, 77, 83­84, 145­146, 238 future challenges, 178­179 Guinea-Bissau, 95 historical and technical development, 159 obstacles to development, 15, 178 regulatory environment, 178­179 Haiti, 95 See also Biotechnology Health problems, 224-225 Georgia, 141 agricultural working conditions, 207 Ghana agriculture-related, 10, 224 agricultural development experience, 35 effects on agriculture, 10, 224 agricultural growth and poverty reduction, 6 global context, 262 cassava market, 173 irrigation and, 10, 224 cocoa market, 12 livestock production and, 10, 60, 189, 190, 224, 225, 259 conservation tillage, 164 malnutrition, 95 educational access and outcomes, 217 rural health services, 84­85 household incomes, 75, 76, 77 transboundary costs, 259 land ownership patterns and trends, 88 vulnerabilities of rural households, 89 research and development in, 169 High-value markets staple crop market, 32 agricultural labor market and, 208­209 tradable crop sector, 33 domestic markets, 125­128 Global Donor Platform for Rural Development, 257­258 export markets, 128­133 Global organizations market saturation concerns, 133 agricultural, 260 market share, 125 coordination, 260, 263­264 opportunities, 12, 15, 21, 60­61 developing country participation, 264 smallholder participation, 12, 237 evolution, 260­261 specialty markets, 132­133 global agenda for agriculture, 258­260 trends, 60, 124­125, 235, 239 governance, 261­265 in urbanized countries, 239 implementation of agriculture-for-development agenda, HIV/AIDS, 10, 85, 225 24, 257­258 Honduras, 144 reform of international institutions, 262­263 Horticulture See also specific organization high-value markets, 208 Governance market growth, 58 accountability, 253, 255, 256­257 production structure, 59 in agriculture-based countries, 245­246 risks, 58­59 biotechnology regulation, 178­179 Human capital civil society role in, 248 See Employment; Labor market; Education; Health community organizations for resource management and, 195­196 current status, 138 decentralization, 23­24, 232, 254­256 India extension service activities, 173­174 agricultural insurance, 149 food staple price risk management, 121­122 agricultural subsidies, 41 358 INDEX India (continued) property rights information, 139 agriculture governance, 252 trends, 175 anti-discrimination efforts, 88 Information technologies, 82, 119­120, 146­147, 175 biotechnology applications, 177 Inputs, agricultural. See Fertilizer; Seed market; Transportation commodity futures exchanges, 121 and refrigeration communication technology, 175 Insurance dairy production, 238 access to credit and, 148 economic growth, 234 agricultural application, 14, 147­149 education, 217, 222 basis risk, 149 extension service activities, 173­174 government role, 149­150 farmer suicides, 92 informal community risk management, 148 financial services delivery, 143­144, 146 microfinance role in risk management, 148 food supply, 95 rural access, 89 foreign assistance from, 261 shortcomings in rural delivery, 14 historical structural transformation, 4, 30 weather-indexed, 149 horticultural production, 58, 235 Intellectual property rights, 150, 166, 169, 171, 178, 263 irrigation management, 186 Intensive agriculture systems, 180­181, 188, 237 labor market, 202, 206, 207, 216, 218 International Food Policy Research Institute, 61 land, 85, 141­142 International Fund for Agricultural Development, 24 malaria in, 224 Irrigation market information systems, 119­120 access equity, 187­188 political environment, 43, 255­256 climate change and, 9, 200 postharvest losses, 126 environmental concerns, 16, 180, 183 producer organizations, 14, 155 future prospects, 9, 64, 182, 184 public spending in agriculture, 115 governance, 16, 185, 187 recent agricultural performance, 35, 37 health issues, 224 regional variation in agricultural growth, 59 integrated water management, 184­185 research and development investment, 14, 166 less-favored areas for agriculture, 57 rural poverty, 46 malaria risk and, 10 rural safety net programs, 220 political issues in reform, 187 rural technology investment, 88 productivity effects, 9 rural transportation system investment, 53 recent agricultural growth, 51 total factor productivity, 52 share of agricultural production, 64, 182 vegetable consumption, 235 strategies for improving productivity, 185­186, 233 Indigenous groups subsidies, 185­186 access to education, 84 technologies for sustainable agricultural practice, 193­194 property rights, 139 water markets, 186­187 Indonesia water use in, 182­183 agricultural development experience, 35 educational access and outcomes, 217 Japan, 11, 97, 235 employment and labor, 209, 214 historical structural transformation, 30 migration patterns, 216 Kenya poverty patterns and trends, 36 agroforestry, 194 public spending in agriculture, 115 educational system, 218 rice import ban, 236 environmental degradation in, 191 rural financial service delivery, 146 extension service activities, 173­174 successful transitions from rural poverty, 73 food availability, 95 total factor productivity, 52 information and communication technology, 175 Industrial growth, agricultural growth and, 7, 26, 34, 35 input market support, 153 Information access land administration services, 141 communication technology for, 175 public spending in agriculture, 115 for enhancing financial services delivery, 146­147 rural safety net programs, 220 extension services, 173­175 staple crop sector, 32 to improve insurance risk assessment, 150 tradable crop sector, 33, 34 market information systems, 119­120 Korea, Republic of, 97 Index 359 Labor market environmental threats in, 191 child labor, 219 livestock management, 194 effects of trade reforms, 110 local decision-making in resource management, 195­197 gender role norms, 83 out-migration, 191, 192 high-value agricultural production and, 208­209 population patterns, 56­57, 191 household division of labor, 83­84 public investment rationale, 192 interrelationships of labor markets, 214 technologies for sustainable resource management, 193­195, 199 migration effects, 215 Livestock regulation, 18, 207, 208, 249 climate change and, 201 rural area characteristics, 5, 17, 202 environmental concerns, 15, 60, 180, 189­190 safety net programs, 18 genetic modification, 162 transformation in economic development, 27 global context, 262 See also Employment, agricultural; Wages health risks, 60, 189, 190, 224, 225, 259 Land household asset endowments, 88 administrative services, 141 insurance, 149 degradation, 63­64, 180, 191 intensive practice, 189, 194 distress sales, 141, 142 rural ownership patterns, 88 future challenges, 63­64 safety net programs, 220 household asset positions, 84 in transforming countries, 238 integrated management systems, 193 See also Aquaculture; Meat production markets, 9, 141­142 obstacles to access and efficient use, 9, 85­88, 140 ownership, 78 Macroeconomic policies, 39­40, 98, 265 productivity, 233 Madagascar, 33, 75, 95, 119 reform strategies, 9, 142­143 Malaria, 10, 224 scarcity, 63 Malawi See also Property rights food availability, 95 Landlocked countries, 230 household incomes, 75 Latin America input market support, 153 agricultural growth, 53 land ownership patterns and trends, 88 agricultural growth and poverty reduction, 6 life expectancy, 85 agricultural subsidies, 250­251 official development assistance, 257 agricultural tax policies, 101 recent agricultural reforms, 73 agriculture's share of economy, 26 staple crop sector, 32 classification of economies in, 4 subsistence farmers, 78 conservation tillage, 163 tradable crop sector, 34 educational attainment, 84, 216 transportation infrastructure, 119 effects of trade liberalization, 107, 117 weather-indexed insurance, 149 high-value markets, 26 Malaysia, 53, 252 labor patterns and trends, 27, 204, 209, 213 Mali, 11, 32, 106, 109, 187, 223 land ownership patterns and trends, 85, 86 Manufactured goods, 34­35 land supply, 63 Market-oriented smallholders, 75, 78, 135 population distribution, 238 Meat production remittances from migrants, 219 future prospects, 61 territorial approach to rural development, 242 genetically modified organisms, 162 water supply, 64 grain use for, 59­60 women in agriculture, 79 growth, 52, 59 Leasing, 147 in populated areas, 15, 60, 189, 190 Lesotho, 225 See also Aquaculture; Livestock Less-favored areas for agriculture Mexico agricultural development strategies in, 56­57, 192­193 agriculture governance and policies, 11, 98, 249­250, 252 agricultural practices in, 190 educational investments, 218­219, 222 definition and characteristics, 55­56, 190 effects of trade reforms, 110 development needs, 68 employment and labor, 212, 214, 216 distribution, 190 nontraditional agricultural exports, 60 employment patterns, 79 payment for environmental services, 198 360 INDEX Mexico (continued) global development, 260­261 poverty reduction outcomes, 108 for implementation of agriculture-for-development agenda, property rights regime, 139 23, 248­249 public spending in rural areas, 82, 255 in market governance, 248 research programs, 172 North Africa rural safety net programs, 220 classification of economies in, 4 weather-indexed agricultural assistance, 149 educational attainment, 9, 84, 216 Microfinance, 89, 144­145 labor patterns and trends, 202, 204 intermediation and, 147 market access, 54 regulatory obstacles to, 145 water supply, 64 risk management applications, 148 North American Free Trade Agreement, 98 women's participation, 13, 89 Middle East classification of economies in, 4 Official development assistance educational attainment, 9, 84, 216 agricultural development, 41­42 labor patterns and trends, 202, 204 governance and, 257, 258 market access, 54 for implementation of agriculture-for-development agenda, water supply, 64 24, 257­258 Migration Organic foods, 60­61, 132, 189 education and, 238 Organisation for Economic Co-Operation and Development, HIV prevalence and, 225 10, 97, 105­106, 112, 124, 258 household income strategies, 75­76 Oxfam, 260, 265 labor market outcomes, 36, 215 migrant characteristics, 215­216 motivation, 80 Pakistan, 52, 53, 78, 217 obstacles to, 29 Panama, 78 as pathway out of rural poverty, 18, 68, 72, 73, 80 Payment for environmental services, 197­199 patterns, 215 Peru, 59, 144, 189, 206, 217 remittances from migrants to rural households, 74, 82, 215, 219 Pesticide exposure, 10, 59, 188, 207, 224­225 rural population patterns and, 81 Pest management, 164, 188 rural poverty reduction and, 29, 36 Philanthropic organizations, 260­261 in urbanized countries, 239 Philippines, 85, 177, 216, 217, 220, 224 urban-to-rural, 82 Political economy Millennium Development Goals, 1, 26, 94, 259 agricultural policy making and, 1­2, 42­44, 96, 103, 236, 248 Mobile phones, 147, 175 decentralization, 254­255 Mongolia, 146, 149, 196 developed country agricultural policies, 98 Morocco, 184­185, 187, 191, 222­223 global governance, 263, 264 Mortality implementation of agriculture-for-development agenda, 22­23, disease-related, 10 229, 242, 245, 246, 248­251 HIV/AIDS, 85, 225 irrigation services and regulation, 187 malnutrition, 95 power and influence, 42­43 pesticide exposure-related, 10 producer organization autonomy, 156 Mozambique, 53, 79, 85, 106, 225, 231 public spending in agriculture, 11, 115­116 research and development investment, 166­167, 168 transition to trade liberalization, 117 Namibia, 222 Population patterns and trends Nepal, 76, 78, 86­88, 95 aging, 216 Neuchâtel Initiative, 258 agricultural growth and, 53 New Partnership for Africa's Development, 21, 229 in agriculture-based economies, 4, 231 New Zealand, 97 developing world, 29 Nicaragua, 16, 78, 144, 175, 198, 258 environmental effects, 181­182, 191 Niger, 11, 60, 68, 73, 95 106, 194 in favorable agroecological areas, 54 Nigeria, 35, 53, 75, 95, 100 future prospects, 61­62 Nitrogen-fixing legumes, 164­165 HIV/AIDS effects, 85 Nominal rate of assistance, 98­100 in less-favored areas, 57, 191 Nongovernmental organizations rural areas in developing countries, 1, 3, 4­6, 26, 35, 36, 54 agricultural governance, 196 rural employment and, 202 extension service activities, 174 transformation in economic development, 27 Index 361 transforming economy countries, 21, 35, 234, 235­236 in market governance, 248 urbanized economies, 37, 238 negotiating expertise, 156 See also Migration; Mortality in policy formulation and service delivery, 253 Poverty, 45­49 rationale, 153­154, 237 agricultural growth and, 53­54 regional and international cooperation, 154, 156­157 classification of economies, 4, 29­30 in research and development, 172 effects of global trade liberalization, 107­108 for smallholder participation in high-value markets, 237 investment in education and, 218­219 support and assistance for, 156­157 market failure and, 82­83 women in, 89 recent history, 3­4, 29, 53 Producer support estimate, 97 in rural areas, 1, 3­4, 26, 28­29 Productivity, agricultural urbanization, 27 agribusiness for development, 135 pathways, 1, 2­4, 10, 72, 74 in agriculture-based countries, 67, 232­233 Prices biotechnology accomplishments, 159­160 agribusiness, 135­137 climate change effects, 65 agricultural exports, 100 environmental degradation and, 180, 191 biofuels, effects of, 70­71 farm size and, 90­91, 235­236 bulk export commodity trends, 122 food security and, 94 cereal markets, 51, 62 future prospects, 68 climate change effects, 65 growth patterns, 36, 38­39 costs of water, 185­186 health problems and, 84­85, 224, 225 effects of trade liberalization, 11, 105­107, 117 high-input farming, 188 energy costs, 65­66 household asset positions and, 84 food staple protection rationale, 112­113, 121­122 human capital investment and, 53 household capacity to respond to changes, 82 irrigated land, 9, 185­186 market information systems, 119­120 land reform outcomes, 142­143 policy biases against agriculture, 39­40 land rental and, 141 risk management, 232 malnutrition effects, 95 staple crop markets, 12, 32 migrant remittance effects, 74, 82 subsidies linked to, 10 nonfarm employment and, 37 variability in rural areas, 90 property rights and, 138, 139 Private sector prospects for improvement, 66­67 agribusiness for development, 135­137 recent growth, 50­53 concentration of ownership, 135­136 research and development rationale, 165­166, 233 expanded role in policy formulation and service delivery, staple crop markets, 6­7, 32­33 252­253 trends, 188 extension service activities, 174 Property rights in implementation of agriculture-for-development agenda, challenges in designing, 139 248­249 customary tenure, 139 input market investment incentives, 150­151, 152­153 dispute resolution, 140 market development agenda, 8, 134, 232 documentation, 139­140 political influence, 22­23 environmental protection and, 2, 16 regulatory environment in agriculture, 248 as obstacle to economic development, 9 research and development investment, 14, 166, 168­169, rationale for protection of, 138­139 170­172, 178 titling practices, 139 rural financial service delivery, 145­146 See also Land Processed foods, 125 Public spending Producer organizations agricultural assistance in developing countries, 99­101 challenges for, 14, 155­156 agricultural development, 40­41 characteristics and functions, 14, 92, 154­155 agricultural productivity gains and, 52­53 in developed countries, 154 agriculture-for-development in agriculture-based economies, equity concerns in operations of, 155­156 20­21, 234 governance accountability and, 253 biotechnology, 15 government relationship, 154, 156­157 current inefficiencies, 115, 117 historical development, 14, 88­89, 154 education investment, 218­219 in implementation of agriculture-for-development agenda, to enhance rural employment opportunities, 211 248­249 extension services, 173­175 managerial capacity, 156 to improve market efficiency, 133­134 362 INDEX Public spending (continued) nonfarm employment, 37, 72, 73, 74, 76, 79, 202, 204, 209­211, investment for long-term development, 114­115 212­214, 234, 238, 242 in less-favored areas, 192 population patterns, 3, 4­6, 54 in market infrastructure, 11, 114­115, 127­128, 133­134 poverty patterns and trends, 3­4, 26, 28­29, 35­36 political factors, 11, 115­116 rationale for labor market improvement, 17­18 research and development investment, 166, 167­168, 170­172 return migration, 82 rural financial service delivery, 145­146 safety net programs, 219­220 rural safety net programs, 219­220 social capital in, 84, 88­89 social assistance for subsistence farmers, 241 sources of poverty reduction in, 33 support for agroenterprise development, 136­137 strategies for enhancing employment opportunities, 211 transition to trade liberalization, 114, 117 in urbanized countries, 239, 242 See also Subsidies, agricultural wages and earnings, 212­214 Russia, 126, 240 Rwanda, 11, 79, 95, 106 Regional trade agreements, 111­112, 233 Remittances, 74, 82, 215, 219 Research and development, 14­15 Sanitary and phytosanitary standards, 12, 129­132, 262 accomplishments and benefits, 14, 158­159, 165­166 Sectorwide approach, 258 farmer participation in, 172 Seed market future challenges, 159, 176 demand, 150, 152 future of agricultural productivity, 66­67, 233 improved cereal varieties, 51 global context of agriculture-for-development program, 170, 262 investment incentives, 150 institutional arrangements, 169­172, 176, 255 obstacles to development, 150 intellectual property rights protection, 166, 169, 171, 178 outcomes of expansion efforts, 150 investment patterns and trends, 14­15, 166, 178 research and development, 166 long-term capacity development for, 169, 176 Senegal, 14, 23, 34, 88, 89, 131, 172 opportunities for improving, 15, 176 Share of economy, agriculture's political economy, 166­167, 168 agribusiness, 135 public­private partnerships, 170­172 in agriculture-based countries, 3 seed market, 150 developing countries', 50­51 spillover effects, 167­168 livestock production, 52 strategies for increasing investment in, 168­169 recent growth, 50 sustainable agriculture, 165 transformation in economic development, 27­28 value chain innovation, 171­172 Smallholders Risk, 144 agricultural strategies, 1, 10­17, 90­91, 92, 232­233 exposure, 10, 13, 128 in agrofood value chains, 136­137 household behavior due to, 72­73 benefits of biofuels market, 71 management, 12, 14, 18, 118, 147-150 characteristics of rural areas, 5­6 pervasive, 89­90 collective action and cooperation, 92, 153­154. price, 12, 121 See also Producer organizations production, 67­68 competitive disadvantages, 91­92 Rockefeller Foundation, 153, 261 compliance with sanitary standards for exports, 131 Rural areas definition and characteristics, 91 agriculture-related household income, 77­79 farm size, 90 characteristics of transforming economies, 35­36 financial services access, 144­146 cooperative resource management, 83 future of agriculture, 8, 92 economic vulnerabilities, 89­90 heterogeneity among, 93 educational, 9­10, 84, 217­218, 222­223 income sources, 74­77 employment patterns, 3, 72, 204 land reform strategies, 9 health services, 84­85 participation in domestic supermarket procurement, 127­128 household asset positions, 84­89 political influence, 22­23, 43 household responses to market imperfections, 82­83 social networks, 88­89 income sources, 74­77, 203 successful transitions from rural poverty, 73 investment climate, 210­211 transition to high-value markets, 237 labor market transition, 18 in urbanized economies, 22, 241 noncontributory pensions, 219 Social capital, 84, 88­89 Index 363 South Africa, 53, 177, 120­121 rural employment patterns, 17 South Asia tradable crop sector, 34­35, 233 classification of economies in, 4 trade taxes, 113 educational attainment, 9, 84, 216 water supply, 64 food access, 94 See also Agriculture-based economies green revolution, 26 Subsidies, agricultural irrigated land, 9, 51 for biofuels production, 70 labor patterns and trends, 202, 204, 209 in developed countries, 96­98 market access, 54 forms of, 10 political participation, 256 global costs, 103­105 rural­urban poverty patterns, 3­4 groundwater mining, 185­186 women in agriculture, 79 to improve insurance access, 149 Specialty markets, 132­133 input, 12­13, 151­152, 189 Sri Lanka, 209 obstacles to environmentally-sensitive practice, 189 Staple crop sector poverty reduction and, 36 biotechnology accomplishments, 160 transition to full trade liberalization, 11 characteristics, 32 vs. long-term capital investment, 114­115 commodity exchanges, 120­121 Subsistence farming, 5 diversity among agriculture-based economies, 229­230 development objectives, 19, 20, 22 food availability and, 95 HIV/AIDS and, 86 importance of, 118 household income patterns, 75, 78 market characteristics, 118, 119 as source of marketed products, 78 market information systems, 119­120 successful transition to market, 73 poverty reduction strategies and, 6­7, 12, 32­33 in urbanized countries, 241 price risk management, 12, 121­122 Sudan, 11, 32, 53, 95, 106 protections during transition to trade reform, 112­113 Supermarkets, 12, 22, 59, 126­128, 135, 239 strategies for improving market efficiency, 118 Structural transformation in economic development, 4, 27­28 Sub-Saharan Africa Taiwan, China, 217 agricultural performance, 19, 26, 50, 51, 53­54, 68, 229 Tanzania, 73, 95, 124, 146, 175, 209­210, 224, 243, 258 agricultural professionals in, 223 Tax policy agricultural strategies, 1, 19­21, 227 in agriculture-based economies, 98­100 agriculture-based economies in, 4 agriculture policy in developing countries, 98­103 agriculture input markets, 12­13 indirect taxation, 98 agriculture's comparative advantage, 34­35 labor regulation, 207, 208 development needs, 68, 229 local administration, 255 educational attainment, 9, 84, 216 opportunities for improvement, 103 effects of trade liberalization, 106, 107 political factors in, 44, 103 environmental degradation in, 191 in transforming economies, 100­101 fertilizer access, 150, 151, 233 transition to trade liberalization, 113­114, 117 food staples, 54 trends, 10, 102­103, 116 food supply projections, 62 in urbanized economies, 101­102 green revolution and, 160 Technology development and adoption irrigated land, 9, 51, 64, 230, 233 adoption decisions in poor households, 82­83 labor patterns and trends, 27, 202, 204, 209 in agricultural productivity gains, 52 land supply, 63­64 biofuels, 17 macroeconomic policies, 39 capacity building for, 173 manufactured exports, 34­35 environmental effects, 182 market access, 54, 57 extension services, 173­175 official development assistance, 257 future challenges, 158, 165 population distribution, 4­5, 231 importance of, in development promotion, 15, 176 population pressures, 9, 68 Indian investment, 88 poverty patterns and trends, 3­4, 19 institutional context, 158, 165 public spending, 40­41 irrigation practices, 186, 193­194, 233 regional diversity, 19­20 market-driven innovation, 158 research investment, 14­15, 166, 168 market information systems, 119­120 364 INDEX Technology development and adoption (continued) future of agriculture in, 50, 68 obstacles to, 172­173 household income patterns, 75­76 for property surveying and demarcation, 139­140 lagging areas, 236, 238 prospects for productivity increases, 13 migration patterns, 215 subsidies for, 13 policy dilemmas in development agenda, 243 sustainable agricultural practices, 163­165, 193­195, 199 policy needs, 30 See also Biotechnology; Genetically modified organisms; political context, 236 Research and development population patterns, 21, 35, 234, 235­236 Territorial approach to development, 242 productivity patterns, 39 Thailand, 11, 36, 52, 85, 107­108, 146, 190, 216­217 public spending allocation, 7, 40 Tradable crop sector rural poverty reduction, 36­37, 236 costs of current trade policies, 104­105 rural­urban divide in, 1­2, 8, 21, 35­36, 234­235, 243 current market characteristics, 122­123 shortcomings of past development strategies, 8 definition, 30­32 strategies for economic development and poverty reduction, economic significance, 34 21­22, 234­235, 236­238 effects of trade liberalization on commodity prices, 105­107 tax policies, 10, 100­101 food security and, 94­95 water supply, 236, 237 foreign exchange value, 34 Transportation high-value markets, 12, 60­61, 125­133 challenges for landlocked countries, 230 liberalization of domestic markets, 123­124 costs, 66, 119 patterns and trends, 33 domestic market supply chains, 125­126 productivity, 12 fertilizer costs, 150­151 strategies for economic development and poverty reduction, food staples market, 119 7, 12, 233 rural infrastructure investment, 53, 133­134, 232 transforming countries' exports, 235 Turkey, 16, 114, 191, 195, 217 See also Trade policy TradeNet, 120, 233 Uganda, 39­40, 43, 73, 79, 86, 95, 161, 175, 153, 218, 223, 252, Trade policy 255, 258 in agriculture-based countries, 100, 233 Ukraine, 115 in developed countries, 97­98 United States, 70, 71, 97, 106, 154 Doha Round negotiations, 110­111 Urbanized economies effects of full liberalization, 11, 103­110, 116­117 agricultural economy in, 3, 37, 38, 77, 238­239 equilibrium modeling, 103 agriculture-for-development agenda, 22­23, 243­244, 250­251 equity and justice issues, 259 definition and characteristics, 29, 30 export commodities trade reform in Africa, 123­124 effects of trade liberalization, 117 future reform goals, 117, 260 environmental services payments, 241­242 global costs of current trade policies, 103­105 governance qualities, 239­240 modeling of trade liberalization, 103­110 household income patterns, 75­76 poverty reduction outcomes, 107­110 migration patterns, 215 regional trade agreements, 111­112 policy dilemmas in development agenda, 243­244 sanitary and phytosanitary standards, 129­132 policy needs, 30 in transforming economies, 100­101 political functioning in, 43 transition to full trade liberalization, 11, 112­114, 117 population patterns, 37 trends, 102­103, 116 poverty patterns, 239 in urbanized countries, 101­102 rural nonfarm economy, 242 water conservation and, 186 smallholder access to assets, 241 See also Tradable crop sector strategies for economic development and poverty reduction, Training and visit model of extension, 173 2, 38, 238­239, 240­242 Transforming economies structural features, 239­240 agricultural economy in, 3, 51, 77, 234­235 subsistence farming in, 241 agriculture-for-development agenda, 243,250­251 tax policies, 10, 101­102 definition and characteristics, 4, 29, 30, 234­235 Uruguay Round, 96 employment patterns, 236 environmental protection in, 237 farm size in, 235­236 Vietnam, 11, 53, 60, 73, 76, 78, 88, 109, 141, 211, 234, 250 Index 365 Wages Women agricultural, 202 access to education, 84 interrelationships of labor markets, 214 agricultural role, 20, 78­79, 204 migration effects, 215 in governance, 252, 253 minimum wage laws, 208 agriculture professionals, 223 piece-rate, 207 division of labor, 83­84 rural economy, 202, 212­214 economic shock effects, 90 staple crop sector prices and, 32 educational attainments, 216 trends, 213 employment and labor patterns, 204, 209, 213 weather-related variation, 206 food security, 95 Water use and supply household decision-making, 83 access, 9 land ownership and inheritance, 86­88, 138, 140 agriculture's impact, 4, 64, 182­183 male out-migration from rural areas, 74 climate change implications, 64­65, 185 microfinance access, 13, 89 environmental concerns, 16, 182, 183 political participation, 255­256 future prospects, 64, 182, 184 resource management organizations in less-favored areas, 195 integrated management strategies, 184­185, 193 role expectations, 83 in less-favored areas, 55­56 rural cooperatives, 211 payment for environmental services, 198 social networks, 89 population distribution and, 64, 182 water rights and access, 187­188 saline intrusions, 183 World Development Report (1982), 22, 50, 246 strategies for agriculture-based economies, 234 World Organization for Animal Health, 260 in transforming countries, 21, 236, 237 World Trade Organization, 11, 98, 260, 264 water markets, 186­187 Weather-related risk, 20, 89, 90 Yemen, 95 employment and, 206 microfinance and, 144­145 in Sub-Saharan Africa, 230 Zambia, 10, 12, 32, 86, 95, 100, 115, 124, 151 trends, 90 Zero tillage. See Conservation tillage weather-indexed insurance, 149 Zimbabwe, 100 West Africa, 120, 251 Zoonotic diseases, 225 E C O - A U D I T Environmental Benefits Statement The World Bank is committed to Saved: preserving endangered forests and · 76 trees natural resources. The Office of the · 53 million BTUs of Publisher has chosen to print the total energy World Development Report 2008 · 8,487 pounds of on recycled paper with 30 percent postconsumer fiber in accordance CO2 equivalent greenhouse gases with the recommended standards for paper usage set by the Green · 27,821 gallons of Press Initiative, a nonprofit program waste water supporting publishers in using fiber · 4,603 pounds of that is not sourced from endangered solid waste forests. For more information, visit www.greenpressinitiative.org. I n the 21st century, agriculture continues to be a fundamental instrument for sustainable development and poverty reduction. Three of every four poor people in developing countries live in rural areas--2.1 billion living on less than $2 a day and 880 million on less than $1 a day--and most depend on agriculture for their livelihoods. Given where they are and what they do best, promoting agriculture is imperative for meeting the Millennium Development Goal of halving poverty and hunger by 2015 and reducing poverty and hunger for several decades thereafter. Agriculture alone will not be enough to massively reduce poverty, but it is an essential component of effective development strategies for most developing countries. With the last World Development Report on agriculture completed 25 years ago, it is necessary to redefine how agriculture can be used for development, taking account of the vastly different context of opportunities and challenges that has emerged. To do this, the Report--Agriculture for Development-- addresses three main questions: · What can agriculture do for development? Agriculture has effectively served as a basis for growth and reduced poverty in many countries, but many more countries could benefit if governments and donors were to reverse years of policy neglect and remedy their underinvestment and misinvestment in agriculture. · What are effective instruments in using agriculture for development? They include increasing the assets of poor households, making smallholders--and agriculture in general--more productive, and creating opportunities in the rural nonfarm economy that the rural poor can seize. · How can agriculture-for-development agendas best be implemented? By designing policies and decision-making processes suited to each country's economic and social conditions, mobilizing political support, and improving the governance of agriculture. This year's Report marks the 30th year the World Bank has been publishing the World Development Report. ISBN 978-0-8213-6807-7 SKU 16807