A New Agenda for the Poor: Agriculture for Development

Francois Bourguignon is chief economist and senior vice president of development economics at the World Bank. He oversaw the World Development Report 2008: Agriculture for Development, upon which this commentary is largely based. Visit www.worldbank.org/wdr2008 to read the report.

Washington -- Record food and grain prices, the rush to develop biofuels, trade talks heating up among the countries of Africa, the Caribbean and the European Union -- agriculture is in the news.

Yet boom times rarely reach small, poor farmers in the developing world. Some farmers in developing countries will benefit from higher prices, but such brief windfalls will not be enough to make a dent on rural poverty. That kind of turnaround will require a new "agriculture for development" agenda.

Widening the benefits of today's "new agriculture" requires a serious course correction by the World Bank, donors and governments. From the mid 1980s through the 1990s, agriculture in the developing world suffered serious under-investment and mis-investment.

Indeed, only 4 percent of public expenditures in sub-Saharan Africa were devoted to the sector during that period, even though 75 percent of the region's rural poor rely on farming for their livelihoods.

Likewise, agriculture received only 4 percent of official development assistance for developing countries.

Agriculture can pay off for the worst off -- GDP growth originating in the sector can be up to four times more effective in reducing extreme poverty than GDP growth originating outside the sector. This is because farming is a source of livelihood for an estimated 86 percent of rural people (2.5 billion people) and provides jobs for 1.3 billion smallholders and landless workers.

With more goods to sell and rapidly expanding agricultural markets, opportunities abound to use agriculture more effectively for development. But farmers in the developing world need better deals for the commodities they export, easier access to markets, rural financial services to support investments, and new technologies to raise their productivity.

Governments must assume a whole range of new functions, civil society organizations must be empowered, and the private sector must bring its innovations to bear on the sector. This must happen not just in the irrigated fields of China, but also to the men and women farmers of Malawi, Ethiopia and Liberia.

Agriculture's potential should be harnessed worldwide, though in different ways. In sub-Saharan Africa, it must trigger economic growth; in Asia, it must reduce the rapidly growing rural-urban income disparities; and in Latin America, it must provide smallholder farmers business opportunities in modern food markets.

Sub-Saharan Africa has a comparative advantage in agriculture, albeit an imperfect one. There, agricultural growth is a primary source of food security and, in many places, of competitive wages. The continent needs a decentralized smallholder revolution to manage diverse and largely rain-fed farming systems, and strong producer organizations to empower smallholders.

Groups of producers working with advisers under the World Bank-funded Ugandan National Agricultural Advisory services program have achieved incomes 25 percent higher than their neighbors operating on their own.

In Nigeria, matching grants have enabled farmers to adopt small irrigation pumps that benefited 2.3 million households.

Large investments are needed in infrastructure, from roads to irrigation. These must be backed by regional agreements to achieve economies of scale in food markets and in research and development, along with investments in rural health and education. Reforms and rehabilitation of formerly moribund large irrigation schemes in Mali along the Niger River tripled rice yields and generated new jobs, so we know it is possible.

In Asia, rising rural-urban disparities and the concentration of the poor in rural areas make concerns over social inclusion paramount. There are excellent opportunities for a rural renaissance based on a transition of smallholder farming to high-value crops and livestock, agricultural labor markets that offer regulated wages and social protection. The rural non-farm economy also needs a boost, and poor people in the countryside need access to education and opportunities so they can compete in modern economies.

In Latin America, the supermarket revolution is creating dynamic new markets but also threatening the survival of smallholders. The challenge of the day is to integrate these smallholders with modern food market supply chains. For those left behind, much progress has been made in social protection through programs such as Bolsa Familia in Brazil and Oportunidades in Mexico.

The environmental footprint of agriculture is massive, but agriculture can also provide important environmental services. The sector's impact -- whether from overuse of water or from conversion of forests to farmland -- is the consequence of incomplete property rights, perverse incentives (such as free power to run irrigation pumps), lack of local control over resources, and the failure of markets to reward environmental services such as carbon capture and watershed management.

Climate change is already hurting the poor in mountain agriculture and in the tropics, where farming systems must urgently adapt to rising temperatures and to more unstable weather.

Despite agriculture's promise, preliminary calculations have identified total public investment needs for sub-Saharan African agriculture to be at least $8 billion (in United States dollars) annually, yet total public sector funding for the region currently amounts to only $3.6 billion, leaving an unfunded gap in public funding of $4.4 billion per annum. Priorities are agricultural research, roads, irrigation and institutional development.

Realizing an "agriculture for development" agenda requires generosity, accountability and a willingness to do things differently.