TWN Info Service on WTO and Trade Issues (Oct08/23)
31 October 2008
Third World Network

United Nations: Don't forget the food crisis
Published in SUNS #6580 dated 31 October 2008

Geneva, 30 Oct (Kanaga Raja) -- With the attention of the international community focussed on the mounting global financial crisis, there is the danger that the food crisis that emerged in 2008 is being sidelined, the United Nations Department of Economic and Social Affairs (UN-DESA) has warned.

In its latest policy brief, DESA said that the crisis continues to pose a global humanitarian and development challenge even as food prices begin to fall back.

It noted that between 109 and 126 million people may have fallen below the $1 per day poverty line since 2006 due to the increase in food prices, with the vulnerable populations in South Asia and Sub-Saharan Africa (SSA) affected most.

Other things being equal, the incidence of extreme poverty in SSA may have risen by almost 8 percentage points, implying that the recent food price increases have more than offset the poverty reduction achieved before the crisis, between 1990 and 2004.

The crisis has multiple causes, including longstanding policy failures with respect to the agricultural sector in many developing countries.

But one of the clear challenges emerging from this crisis is the need for scaling-up investment in order to meet the increasing demand for foodstuffs worldwide, said the paper, noting however that part of the problem is that prices for many agricultural products fell persistently from the late 1980s until 2002, providing weak incentives for agricultural investment.

The paper attributed this trend to a perverse mixture of misguided policy interventions in both developed and developing countries, along with poorly designed liberalization measures. Although food prices have increased since 2002, in both nominal and real terms, after adjusting for inflation, they are still well below the levels of a quarter century ago.

"But weak price incentives are only part of the story." said the paper, pointing out that government support has traditionally played a prominent role in guaranteeing food security in many countries.

Such support in developing countries has weakened in recent decades as part of broader market reforms. This is in contrast to income support to farmers in developed countries which has increased from about $299 billion at the end of the eighties to almost $365 billion in 2007.

At the same time, said the paper, farmers in developing countries have also suffered from a relative neglect of public investment in rural infrastructure, including roads, irrigation systems, access to water and storage capacity and lack of institutional support.

Adequate rural infrastructure is essential to "crowd in" private investment in agriculture. In 2003, African governments committed themselves to raise the share of spending in agriculture to 10% by 2008 in support of the Comprehensive African Agriculture Development Programme (the Maputo Declaration Goal). However, the commitment is unlikely to be met and does not exclusively address food production.

The paper also noted that government spending on agriculture in developing countries decreased, on average, from over 11% of total outlays in 1980 to only 5.5% in 2005, while agricultural investment has been particularly low (and declining) as a share of total public expenditures in Sub-Saharan Africa and Latin America. Even as a percentage of agricultural output, investment spending has decreased from over 10% in 1980 to an average of 8.5% in the 1990s and 2000s.

The picture looks better for agricultural R&D spending by developing countries, which almost doubled as a share of GDP between 1981 and 2000, surpassing developed countries. However, said the paper, nearly all the increase was in China and India, whereas spending declined in Latin America and Sub-Saharan Africa.

Donors have also neglected agriculture. The share of total official development assistance (ODA) for agriculture declined from 13% in the early 1980s to 2.9% in 2005-06. In absolute terms, aid for agriculture dropped from $10.3 billion in 1980 to $2.4 billion in 2006 (in constant 2000 dollars).

In addition, said the paper, ODA allocated to other productive activities and economic infrastructure, which can have positive externalities for agriculture, also suffered from significant drops in international support during the same period.

It noted that the upshot of weakening investment and agricultural support measures in developing countries is that yield growth in major food crops has stalled, falling short of growth in food demand.

The paper called for public and private resources to be mobilized to compensate for the massive under-investment suffered by the agricultural sector over the past two decades. In order to return to the levels of three decades ago, government spending in agriculture would need to double or triple in most developing countries.

Noting that the United Nations, through a High-Level Task Force on the Food Crisis, has proposed a Common Framework of Action (CFA) as a comprehensive and broad strategy to approach this deep-rooted and multifaceted crisis, the paper said that the challenge now is to integrate this framework for action into broader national development strategies.

The CFA estimates that an additional $25 to $40 billion will have to be invested every year for food and nutrition security, social protection, agricultural development and better functioning of food markets.

According to the paper, approximately one third of the additional resources would be needed for immediate food assistance and short-term budgetary and balance-of-payments support, and two thirds for investments in rural infrastructure, education, clean water and agricultural research. The largest sums need to be invested in South Asia, followed by Latin America, although on a per capita basis, Africa will require the greatest investment push.

The paper stressed that the international community must do its part by increasing aid allocated to long-term investments in agriculture. Many important commitments have already been made during events in 2008, such as the G8 commitment of over $10 billion to address both short and long-term needs, the World Bank's new $1.2 billion Global Food Response Program to speed assistance to the neediest countries and other announcements made in the World Food Summit in Rome and at the UN High Level Event on the Millennium Development Goals.

However, these still fall short of bridging the gap identified in the CFA. In order to regain lost ground in reducing rural poverty, initial support and reform programmes should be targeted at small producers of food, especially in sub-Saharan Africa, since they are the most vulnerable and least productive group.

In Asia, it has been estimated that increasing agricultural productivity to feasible levels could lift about 220 million people out of poverty - a third of the region's mostly rural poor.

In view of the present global financial crisis, it is more important than ever to strengthen the development finance architecture, not only to limit the negative effects of the crises and to enable countries to respond effectively, but also to ensure that the internationally agreed development goals can be met without diverting either external or domestic resources away from ensuring food security, said the paper.

It concluded that the key challenge is to secure adequate resources for the required long-term investments in agriculture and rural development. This will require a well-coordinated effort by the international community that needs to be sustained over an extended period of time.