1. Agriculture for Development Chişinău, May 12 th, 2008

2. World Development Report 2008 22 Main WDR 2008 message  For sustainable development and poverty reduction, agriculture must be given a much more prominent place in the development agenda  Today there are improved opportunities to use agriculture for development  But not business as usual  More and better investments  Multisectoral & decentralized approaches tailored to local situations

3. World Development Report 2008 3  Agrarian structures — from collective to individual, from public to private (plots, farms, enterprises)  Role of state — from directing input & output allocations to providing public goods and a regulatory framework  Agricultural policy objectives — from food security & social service provision to food safety, quality & competitiveness  Heterogeneity across countries and within countries Unique context of transitional countries

4. World Development Report 2008 4 Agriculture based countries Mainly SS-Africa Albania, Moldova, Kirghiz Rep Transforming countries Mainly Asia, MENA Tajikistan, Uzbekistan, Romania Urbanized countries Mainly LAC, Bulgaria, Hungary, Poland, Russia, Ukraine Agriculture’s share in growth 1990-2005 Rural poor/total poor, 2002 Functions of agriculture differ in the three worlds of agriculture 0100% 80% 0 50% 20%

5. Four Functions of Agriculture for Development 1.Lead sector for growth 2.Source of livelihoods  Poverty reduction 3.Food security 4.A way of better managing natural resources

6. World Development Report 2008 6  Large sector for GDP growth  Affordable food and wage competitiveness  Strong growth linkages 1. A trigger for overall growth in early stages Accelerating agricultural growth in agriculture-based countries Successes: China, India, Vietnam Successes: China, India, Vietnam

7. World Development Report 2008 7  2.5 billion people related to agriculture,  800 m smallholders  75% of poor are rural and the majority will be rural to about 2040 Global extreme poverty 2002, $1.08 a day Global Urban poor 287 mill. South Asia rural 407 mill. Sub-Saharan Africa rural 229 mill. East Asia rural 218 mill. LAC rural 27 mill. ECA rural 5 mill. MENA rural 5 mill. 2. A source of livelihoods

8. World Development Report 2008 8 GDP growth from agriculture benefits the income of the poor 2-4 times more than GDP growth from non-agriculture (43 countries) Growth from agriculture is especially effective for poverty reduction

9. World Development Report 2008 9 Agriculture and poverty in Europe and Central Asia Recovery in Eastern Europe and Central Asian agriculture is accompanied by a sharp drop in rural poverty

10. World Development Report 2008 10 Agricultural growth and poverty reduction in Moldova In Moldova too, restoration of agricultural growth, after a strong initial downturn, has been associated with declining poverty Poverty rates Moldova Agricultural growth

11. World Development Report 2008 11 3. Agriculture and its key role for food security  Agriculture plays a key role in providing; 1. Food availability: globally, nationally and locally  Food prices and volatility 2. Access to food: a critical source of income to purchase food 3. Utilization of food: e.g., high nutritional status  Domestic and global shocks place additional strain on import capacity and therefore food availability Domestic price shocks: Maize in Malawi and Ethiopia Global price shocks: Rice and Maize

12. World Development Report 2008 12 Important user of natural resources:  80% of fresh water resources  40% of land area  21+ % of greenhouse gas emissions Contributions to greenhouse gas emissions Developing country agriculture & deforestation 21.4 Developing country other sources 15.2 Industrialized countries 63.4 Successes Watershed management, and environmental services Successes Watershed management, and environmental services 4. A way of managing natural resources and the environment

13. Improved Opportunities to Use Agriculture for Development 1.Incentives 2.Markets 3.Innovations

14. World Development Report 2008 14 Improved opportunities--Incentives Agriculture is now protected in ECA countries

15. World Development Report 2008 15 Changing diets ̶ high value products and non- traditional exports Developing and transition country exports Developing and transition country consumption Meat Cereals Horticulture Improved opportunities--Markets Meat Cereals Horticulture

16. World Development Report 2008 16 Moldova is shifting to high value exports Note: Traditional products comprise tobacco and derived products, sugar, cotton, jute, coffee, tea, spices, and natural rubber latex. Million US$ Net agricultural exports

17. World Development Report 2008 17  Technological innovations—much progress but underinvestment  Conservation farming and sustainable practices, Bt cotton  ICT in financial, marketing and extension services  Institutional innovations—many at early stages  Risk insurance  Rural finance  Marketing “software”—exchanges, information  Stronger producer organizations  Public-private-CSO partnerships Value chains, extension, rural finance Improved opportunities--Innovations

18. Challenges to Effectively Use Agriculture for Development 1.Achieving higher agriculture growth 2.Implementing through better investment 3.Promoting rural nonfarm pathways

19. World Development Report 2008 19 Challenges—Growth  Supporting macro-policy environment and rural investment climate  Consistency of agricultural policies to suport private market development  Property rights for market development  Redefined roles of the state  Core public goods  Regulation and standards  Coordination

20. World Development Report 2008 20 Real international commodity prices have been suppressed by current global trade policies (% of price) Trade share losses to developing countries due to current global trade policies (% point loss to developing country trade shares) Global trade distortions remain pervasive Challenges — Growth

21. World Development Report 2008 Challenges—Connecting small farmers to markets  Policies on agrarian structure  Family farms usually more efficient  Economies of scale in high value markets  Demands of high value markets  SPS standards  Integrated supply chains  Key role of producer organizations and labor markets  Chile vs Central America 21

22. World Development Report 2008 22 Agricultural-based countries spend too little on agriculture Share of Agriculture in GDP (%) Challenges—Public investment Public spending on agric as a share of agricultural GDP (%) Sources: WDR2008, data for Moldova from “Public Expenditures for Agricultural Development” Moldova Agricultural Policy Notes, World Bank. All data in figure is for 2004

23. World Development Report 2008 23 Misinvestment and underinvestment in core public goods Governance challenges ●Political economy of reforms ●New roles of the state ●Vastly improved capacity to implement Governance challenges ●Political economy of reforms ●New roles of the state ●Vastly improved capacity to implement Subsidies have risen at the expense of public goods in India Challenges — Investment

24. World Development Report 2008 24 Agricultural subsidies in Moldova  Farm subsidies but have been growing since 2001  Trade offs for investments in core public goods such as R&D?  Need clear objectives for subsidies such as:  Overcome temporary market failures  Market development and innovation grants  Equity and poverty reduction Total Spending on Agriculture by type

25. World Development Report 2008 25 Subsistence farming Subsistence farming Pathways out of poverty : farming, labor, migration Transition to market Demand for Ag products Efficient markets, value chains Commercial smallholders   $ $     $ $ Social assistance Transition to market: commercialization Rural labor market: Ag, Rural nnofarm, Migration Rural labor market: Ag, Rural nnofarm, Migration Potential of agriculture for development : Multiple pathways out of poverty

26. World Development Report 2008 26 Improve nonfarm employment opportunities Moving beyond agriculture

27. World Development Report 2008 27 Average years of education of rural 18–25 yrs ECA has a good base Moving beyond agriculture

28. World Development Report 2008 28 Key Elements of a Policy Agenda for ECA  Policy objectives  Raising competitiveness and value added of agriculture  Making growth pro-poor and green  Stimulating rural non-farm income growth and exit from agriculture  Key policy issues for agriculture  Improving the rural investment climate Reducing risk from policy changes & policy reversals  Improving access to markets, including to the EU Food safety, standards, certification Reducing barriers to regional trade  Supporting institutions (e.g., credit, tenure security, mkts)  Investment in core public goods (R&D, infrastructure)  Reducing the environmental footprint from agriculture  Fostering broader rural development

29. Postscript Wine as a successful high value export

30. 30 South Australia as a major wine exporter From wool and wheat to wine 80 percent plus exported Exports over a billion dollars annually Rapid growth since 1990 Focus on increasing quality and price Ingredients of success Shared vision and strategy Foreign investment and alliances Branding and GI R&D, training and education Strong producer and trade associations Public-private partnerships Building of tourist industry

31. World Development Report 2008 31 Postscript 2: Tapping Global Wine Markets  Rapid expansion of Australian exports and increasing unit value

32. Thank you www.worldbank.org/WDR2008