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FOOD CRISIS – IS REGIONAL TRADE THE ANSWER: THE CASE OF COMESA Cris MUYUNDA, PhD Senior Agricultural Advisor, COMESA.

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Presentation on theme: "FOOD CRISIS – IS REGIONAL TRADE THE ANSWER: THE CASE OF COMESA Cris MUYUNDA, PhD Senior Agricultural Advisor, COMESA."— Presentation transcript:

1 FOOD CRISIS – IS REGIONAL TRADE THE ANSWER: THE CASE OF COMESA Cris MUYUNDA, PhD Senior Agricultural Advisor, COMESA

2 OUTLINE OF PRESENTATION COMESA OVERVIEW : MARKET PARAMETERS COMESA OVERVIEW : MARKET PARAMETERS STATE OF AGRICULTURE & FOOD SECURITY SITUATION STATE OF AGRICULTURE & FOOD SECURITY SITUATION MAJOR ISSUES OF CONCERN OVER FOOD PRICES MAJOR ISSUES OF CONCERN OVER FOOD PRICES RESPONSE FROM COMESA and NEPAD RESPONSE FROM COMESA and NEPAD MALAWI FOOD SECURITY SUCCESS STORY MALAWI FOOD SECURITY SUCCESS STORY A CASE FOR EXPANDING REGIONAL TRADE A CASE FOR EXPANDING REGIONAL TRADE KEY TRANSPORTATION AND RELATED ISSUES KEY TRANSPORTATION AND RELATED ISSUES CONCLUSIONS-IS REGIONAL TRADE THE ANSWER? CONCLUSIONS-IS REGIONAL TRADE THE ANSWER?

3 COMESA OVERVIEW : KEY PARAMETERS FORMED IN 1994 FROM PTA, itself est FORMED IN 1994 FROM PTA, itself est POPULATION : 400 million – big potential market POPULATION : 400 million – big potential market 19 Member States: 9 Landlocked; 4 are Island (3 very small) 19 Member States: 9 Landlocked; 4 are Island (3 very small) Intra-COMESA trade: US$7.5 billion (2007); Extra- COMESA exports: US$90 billion ; total trade US$160 billion Intra-COMESA trade: US$7.5 billion (2007); Extra- COMESA exports: US$90 billion ; total trade US$160 billion US$3.4 billion (about 40%) of intra COMESA-trade is food and agricultural raw materials US$3.4 billion (about 40%) of intra COMESA-trade is food and agricultural raw materials

4 AGRICULTURE IN COMESA 32% of COMESA GDP 32% of COMESA GDP 65% of Raw Materials for Industry: Agricultural commodities are major drivers for growth in intra-COMESA trade. 65% of Raw Materials for Industry: Agricultural commodities are major drivers for growth in intra-COMESA trade. 80% of employment 80% of employment

5 COMESA AGRICULTURAL SECTOR CHALLENGES TECHNOLOGICAL CONSTRAINTS MARKET RELATED CONSTRAINTS POLICY RELATED CONSTRAINTS Low Productivity

6 SITUATION ON THE GROUND IN COMESA Low Yields characterize COMESA agriculture Low Yields characterize COMESA agriculture Biggest Customer of the WFP Biggest Customer of the WFP Low Value, Uncompetitive Agriculture Low Value, Uncompetitive Agriculture

7 (1) PER CAPITA AGRICULTURAL PRODUCTION IS FALLING

8 (2) TRADE VALUE AS % OF GDP HIGH (62%) BUT WORLD SHARE OF TRADE LOW (2%)

9 (3) NET RESULT: HUNGER MAP

10 FOOD SECURITY SITUATION IN COMESA DISCOUNTING EMEGENCY FOOD AID DUE TO UNFORESEEN ISSUES: 2004/2005: 11 MEMBER STATES WERE IN FOOD DEFICITS AND REQUIRED EXTERNAL FOOD 2004/2005: 11 MEMBER STATES WERE IN FOOD DEFICITS AND REQUIRED EXTERNAL FOOD 2005/2006: 5 MEMBER STATES EXPERIENCED FOOD DEFICITS, BUT THE WHOLE REGION HAD A SURPLUS OF 550,000 MT. 2005/2006: 5 MEMBER STATES EXPERIENCED FOOD DEFICITS, BUT THE WHOLE REGION HAD A SURPLUS OF 550,000 MT. 2006/2007: 2 MEMBER STATES EXPERIENCED FOOD DEFICITS, BUT WHOLE REGION HAD A SURPLUS OF 1,500,000 MT. 2006/2007: 2 MEMBER STATES EXPERIENCED FOOD DEFICITS, BUT WHOLE REGION HAD A SURPLUS OF 1,500,000 MT. 2007/2008: …….(assessments ongoing, about 5 will need external support) 2007/2008: …….(assessments ongoing, about 5 will need external support) OVERALL: MAJOR INFRASTRUCTURE / DISTRIBUTION CHALLENGE OVERALL: MAJOR INFRASTRUCTURE / DISTRIBUTION CHALLENGE

11 NEGATIVE IMPACT OF HIGH PRICES AFFECTS POVERTY LEVELS (Studies indicate 10% increase in food prices leads to 2.3% increase in poverty in COMESA) AFFECTS POVERTY LEVELS (Studies indicate 10% increase in food prices leads to 2.3% increase in poverty in COMESA) HAS IMPACT ON NUTRITIONAL STATUS OF THE CONTINENT WHERE ALREADY SOME 200 MILLION PEOPLE ARE CHRONICALLY MALNOURISHED HAS IMPACT ON NUTRITIONAL STATUS OF THE CONTINENT WHERE ALREADY SOME 200 MILLION PEOPLE ARE CHRONICALLY MALNOURISHED HAS IMPACT ON POLITICAL SITUATION NATIONALLY, REGIONALLY HAS IMPACT ON POLITICAL SITUATION NATIONALLY, REGIONALLY COULD AFFECT PEACE AND SECURITY SITUATION COULD AFFECT PEACE AND SECURITY SITUATION

12 POSITIVE IMPACT OF HIGH PRICES HIGH FOOD PRICES BRING ECONOMIC GROWTH IN AGRICULTURAL LED ECONOMIES: AGRICULTURE is 32% of COMESA GDP HIGH FOOD PRICES BRING ECONOMIC GROWTH IN AGRICULTURAL LED ECONOMIES: AGRICULTURE is 32% of COMESA GDP GROWTH REDUCES POVERTY: 1% INCREASE IN OVERALL GROWTH ELIMINATES 6 MILLION PEOPLE OUT OF POVERTY GROWTH REDUCES POVERTY: 1% INCREASE IN OVERALL GROWTH ELIMINATES 6 MILLION PEOPLE OUT OF POVERTY

13 MAJOR FOOD SECURITY SUCCES STORY : MALAWI 2004/2005: SERIOUS FOOD DEFICIT: 800,000 MT; INTERNATIONAL FOOD APPEAL 2004/2005: SERIOUS FOOD DEFICIT: 800,000 MT; INTERNATIONAL FOOD APPEAL 2005/2006: 400,000 MT FOOD SURPLUS 2005/2006: 400,000 MT FOOD SURPLUS 2006/2007: 1,200,000 MT FOOD SURPLUS 2006/2007: 1,200,000 MT FOOD SURPLUS

14 MALAWI: MAJOR CONTRIBUTING FACTORS TO LAND LOCKED COUNTRY SUCCESS FERTILISER SUBSIDY PROGRAM FERTILISER SUBSIDY PROGRAM POLICY FOCUS: BUDGET IS ON THE INCREASE POLICY FOCUS: BUDGET IS ON THE INCREASE COMPREHENSIVE FOCUS: IRRIGATION, FERTILIZER, MARKETING (ACTIVE COMMODITY EXCHANGE) COMPREHENSIVE FOCUS: IRRIGATION, FERTILIZER, MARKETING (ACTIVE COMMODITY EXCHANGE)

15 COMESA RESPONSES HASTEN REGIONAL INTEGRATION: FREE TRADE AREA; CUSTOMS UNION (2008) HASTEN REGIONAL INTEGRATION: FREE TRADE AREA; CUSTOMS UNION (2008) CAADP: FOUR PILLAR FOCUS TO COMPREHENSIVELY DEVELOP AGRICULTURE (Land/water, Markets/Infr, Tech) CAADP: FOUR PILLAR FOCUS TO COMPREHENSIVELY DEVELOP AGRICULTURE (Land/water, Markets/Infr, Tech) SPECIFIC FOOD PRICE CRISIS ACTIONS: SPECIFIC FOOD PRICE CRISIS ACTIONS: (i) JOINT REGIONAL PLAN: (i) Inputs supply to accelerate food commodity production – similar to NEPAD response (ii) Improved risk management and vulnerability analysis, and (iii) Enhanced regional market access and easing of modalities for doing business in staple crops. (ii) ACTESA (Independent Institution: Main Medium to Long Term Action): Staple Crops: MAIZE, RICE, CASSAVA, BANANA, BEANS: POLICIES, SERVICES, COMMERCIALIZATION (iii) Development Corridors; NOT JUST TRANSPORT CORRIDORS

16 KEY ELEMENTS OF ACTESA – THE REGIONAL MEDIUM TO LONG TERM PLAN FOR STAPLE CROPS DEVELOPMENT: POLICIES POLICIES SERVICES SERVICES COMMERCIALIZATION COMMERCIALIZATION

17 CAADP PILLARS LAND AND WATER MANAGEMENT LAND AND WATER MANAGEMENT TRADE AND MARKETING INFRASTRUCTURE TRADE AND MARKETING INFRASTRUCTURE FOOD AND NUTRITION SECURITY FOOD AND NUTRITION SECURITY AGRICULTURAL RESEARCH AND TECHNOLOGY ADOPTION AGRICULTURAL RESEARCH AND TECHNOLOGY ADOPTION

18 THE CASE FOR ENHANCED REGIONAL TRADE IN COMESA ANNUAL COMESA MAIZE IMPORTS OVER THE PERIOD 2004 – 2007: TOTAL: $500 - $850 million AMOUNT SOURCED FROM WITHIN COMESA: $30 - $40 million HENCE BIG OPPORTUNITY AND SCOPE TO EXPAND REGIONAL TRADE CURRENT COMMERCIAL FOOD DEMAND IN AFRICAs URBAN MARKETS: $50 billion By 2025, this is expected to be: $150 billion WILL NEED COMPETITIVENESS IN MOVING FOOD WITHIN THE REGION FOR REGIONAL STABILITY REGIONAL TRADE ALSO KEY FOR PROVIDING MARKET OUTLET FOR RURAL PRODUCERS

19 KEY TRANSPORTATION/RELATED ISSUES ISSUES LANDLOCKED COUNTRIES, 9 out of 19 countries (up to 55% of commodity costs) LANDLOCKED COUNTRIES, 9 out of 19 countries (up to 55% of commodity costs) TRANSPORT DELAYS, World Bank Study (each delayed day at the border is equivalent to ,000 km of covered distance) TRANSPORT DELAYS, World Bank Study (each delayed day at the border is equivalent to ,000 km of covered distance) ISLAND NATIONS, Net Importers of Food – food prices affecting them ISLAND NATIONS, Net Importers of Food – food prices affecting them POOR INTEGRATION FOCUS: EXPORT BANS POOR INTEGRATION FOCUS: EXPORT BANS

20 Additional Transport Challenges Lack of diversified transport systems based on inter and multi modal transport corridors comprising road, rail, water and air transport. Lack of diversified transport systems based on inter and multi modal transport corridors comprising road, rail, water and air transport. Poor physical connectivity: number of kilometers of paved road per million people is about 60. Poor physical connectivity: number of kilometers of paved road per million people is about 60. Compare with Brazil and India: over 1,000 km per million. Compare with Brazil and India: over 1,000 km per million. Developed World, the kilometers of paved road per million people is about 20,000. Developed World, the kilometers of paved road per million people is about 20,000. Additional cross cutting challenge: Sources of energy: need to aggressively explore hydro-power, bio-fuels and nuclear energy given the abundant resources in the region. Additional cross cutting challenge: Sources of energy: need to aggressively explore hydro-power, bio-fuels and nuclear energy given the abundant resources in the region.

21 POTENTIAL SOLUTIONS/CONCLUSIONS HARMONIZED ROAD TRANSIT SYSTEMS, COMESA CARRIERS LICENCE, AXLE LOADING AND MAXIMUM LOADING DIMENSIONS, COMESA YELLOW CARD INSURANCE HARMONIZED ROAD TRANSIT SYSTEMS, COMESA CARRIERS LICENCE, AXLE LOADING AND MAXIMUM LOADING DIMENSIONS, COMESA YELLOW CARD INSURANCE COMMON INVESTMENT AREA, RECOGNISES COMMON INVESTMENT AREA, RECOGNISES COMESA INVESTOR – REDUCED COST OF DOING BUSINESS DEVELOPMENT CORRIDORS, not just transport corridors DEVELOPMENT CORRIDORS, not just transport corridors CAADP: INCREASED INVESTMENT: 10% by Govt: development of LAND AND WATER, MARKETS/INFRASTRUCTURE, FOOD/NUTRITION SECURITY, TECHNOLOGY/EDUCATION CAADP: INCREASED INVESTMENT: 10% by Govt: development of LAND AND WATER, MARKETS/INFRASTRUCTURE, FOOD/NUTRITION SECURITY, TECHNOLOGY/EDUCATION PPPs are key: In COMESA good examples are Alliance for Commodity Trade (ACTESA), Livestock (RELPA), Policy for Markets (AAMP). We need to forge more real impact PPPs PPPs are key: In COMESA good examples are Alliance for Commodity Trade (ACTESA), Livestock (RELPA), Policy for Markets (AAMP). We need to forge more real impact PPPs

22 IS REGIONAL TRADE THE ANSWER? PARTLY YES, BUT COMPREHENSIVE RESPONSES MUST GO BEYOND CREATING INSTRUMENTS FOR TRADE AND ENSURE: GOOD POLICIES (Trade, Investment, Specific Sectors) SERVICES TO FARMERS (Financial services, Contract/Arbitration Services, Grading/Standards, Market Information, etc) COMMERCIAL INTEGRATION OF PRODUCERS (STRENGTHEN PRODUCER ASSOCIATIONS, TRADERS); Education/Training in marketing, new technologies uptake In Short CAADP implementation, as part and parcel of trade promotion, to deal with the suppy-side constraint.

23 THANK YOU THANK YOU


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