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INCLUSIVE GROWTH AND RURAL TRANSFORMATION
Should we care?
Dr. Rolando T. Dy Professor, School of Management
University of Asia and the Pacific (UA&P)
August 27, 2015
Davao City
Host: Mindanao Development Authority
Philippines: 40 percent in 2014
46.9 percent in 2000
Thailand: 13.9 percent in 2013
51.5 percent in 2001
Indonesia: 13.8 percent in 2014
21.8 percent in 2006
Vietnam: 17.4 percent in 2010
Philippine Urban Poverty: ~13 percent (c 2010s)
Metro Manila poverty rate: 3.9 percent (2012)
Note: National poverty metrics
Rural Poverty affects Buying Power
http://rksi.org/sites/default/files/document/351/6-country-note-tha.pdf http://www.indonesia-investments.com/finance/macroeconomic-indicators/poverty/item301 http://www.worldbank.org/content/dam/Worldbank/document/vn_PA2012Executive_summary_EN.pdf http://www.tradingeconomics.com/vietnam/poverty-headcount-ratio-at-rural-poverty-line-percent-of-rural-population-wb-data.html Reyes and Valencia (circa 2000a) for rural poverty in 2000.
VICIOUS CIRCLE OF POVERTY
LOW INCOME
LOW SAVINGS/ LOW DEMAND
LOW PRODUCTIVITY
LOW INVESTMENT
Poverty devastates families, communities and nations. It causes instability and political unrest and fuels conflict
-Kofi Annan (1938-)
Low farm productivity and lack of non-farm/ off-farm jobs impact on rural poverty
2008 2009 2010 2011 2012 2014
Philippines 26.5 25.2 25.8
Indonesia 13.3 12.5 12.0 11.3
Vietnam 20.7 17.2
Cambodia 34.0 29.0 22.1 20.5 17.7
Thailand 20.5 19.1 16.9 13.2 Source: World Bank
National Poverty headcount (%)
• Vietnam's poverty rate has fallen from nearly 60 percent to 20 percent in the past two decades (World Bank, 2013)
Total Factor Productivity
• a key measure of the agriculture performance and an important driver of farm incomes.
• It represents how efficiently the agricultural industry uses the resources
https://www.gov.uk/government/statistics/total-factor-productivity-of-the-agricultural-industry
The Philippines trails in Total Agri Factor Productivity (% a year)
Long-Term Medium -Term
1961-2011 2002-2011
Philippines 2.9 2.8
Indonesia 3.7 4.3
Malaysia 4.1 3.3
Thailand 3.2 2.4
Vietnam 4.2 4.2
India 2.8 3.9
Pakistan 3.6 3.0
China 4.3 3.6
http://www.ers.usda.gov/../AgTFPindividualcountries.xlsx
The Philippines lags in farm land productivity, Indonesia leads
Country 1 2 3 4 Average
Philippines 0 2 10 8 3.30
Indonesia 9 7 2 2 1.85
Thailand 5 6 5 3 2.32
Vietnam 5 5 3 3 2.25
Farm Productivity Rankings of 20 Crops, 2013
Ranking by country for every crop. Not all countries will total 20 crops Source of basic data: FAO
Farm Productivity in ASEAN, 2013 (ton per ha)
Country
Rice
Corn
Coco
nut
Sugar
cane
Oil
palm
Bana
na
Coffee
Cassava
Pine
apple
Mango
Philippines 3.9 2.9 4.3 58 11.0 19.4 0.67 10.9 40.5 4.2
Indonesia 5.1 4.8 6.1 75 16.9 56.4? 0.56 22.5 114.8? 10.5
Thailand 2.9 4.4 4.8 76 20.4 11.3 0.98 21.8 24.1 8.3
Viet Nam 5.6 4.4 9.7 65 - 16.5 2.50 17.9 16.8 9.0
Country Cabbage Garlic
Onion Pea
nut
Egg
plant
Rubber Sweet
potato
Tomato Potato
Tobac
co
Philippines 15.1 3.5 9.6 1.1 10.3 0.60 5.7 12.0 14.9 1.56
Indonesia 22.0 6.1 10.1 2.6 11.0 0.87 14.7 17.6 16.3 0.96
Thailand 14.7 5.7 25.6 1.5 15.6 1.60 - 17.8 15.0 2.36
Vietnam 24.4 - 35.9 2.3 - 1.73 10.0 - 13.6 1.93
Source: FAO and industry sources
Source: WTO
ASEAN: Merchandise Trade Balances, 2013
Philippine trade grossly underperforms… Poor crop diversification
Country
Exports
$ B
Imports,
$ B
Surplus
(Deficit)
Indonesia 43 22 +21
Thailand 40 17 +23
Malaysia 30 20 +10
Viet Nam 28 16 +12
Philippines 6.4 7.2 -0.8
Farm Productivity
Raw Materials Non-Farm
Income Farm Income Food Supply
(Local and Export)
Rural Income
Progress Poverty
Jobs Agri-food Mfg
Industries Exports
Import Substitution
CONSUMER MARKETS
Strategic Linkages
Agriculture and Poverty Reduction
• Agriculture reduces poverty directly, by
raising farm incomes, and indirectly,
through job creation and by reducing food prices.
• Agri growth also reduces poverty -- it creates employment for the poor.
- World Bank (http://siteresources.worldbank.org/SOUTHASIAEXT/Resources/223546-1171488994713/3455847-1192738003272/Brief_AgPovRedctn_web.pdf)
Agriculture and Poverty Reduction
Agribusiness
promotes inclusive growth by creating economic growth, farm and non-farm
employment, and reducing poverty.
Marketingunwired.com
careerfair.co.za
“Broad-based growth is
growth that includes all major income groups,
ethnic groups and women, and that
significantly reduces
poverty.”
INCLUSIVE GROWTH
“Allows people to contribute to and
benefit from economic growth.”
“Focuses on economic
growth which is necessary and
crucial condition for
poverty reduction.”
Three pillars: • high, sustainable growth • broader access to opportunities • safety nets
“Participation and benefit sharing.”
Broader objectives than increasing income and GDP. Translate into gains in human development and increased well-being Benefit all groups Reduce poverty and inequality Increasing active participation in the economy Promote the sustainable use of natural resources and climate protection.
CAFOD DISCUSSION PAPER AUGUST 2014 (WWW.CAFOD.ORG.UK)
www.cafod.org.uk/
Key Elements of Inclusive Growth
www.youtube.com
Factors of Production
www.slideshare.net
Entrepreneurship
Why Management matters for Productivity •Better managed organizations within
the same industry and country tend to earn more profits, grow faster •Organizations with good
management practices tend to operate in highly competitive markets
http://www.esrc.ac.uk/_images/Management%20and%20productivity_tcm8-23566.pdf
www.efficientlifeskills.com
• Centrally managed estates for small holders
• FELDA
• FELCRA
Malaysia
• Nucleus-smallholders schemes in rubber and oil palm
Indonesia
• Farmers’ Associations
Taiwan
• Contract Farming
• Good public research and extension services
• Great infra
Thailand
• Strong agriculture research
• Good extension services to small farms
Vietnam
Agribusiness Models in Southeast and East Asia
Strategic Thinking • No one-size-fits-all strategy
• Options: independent small farm, cooperative farm, corporate farm, nucleus estate-outgrowers, consolidate-develop, production villages with multi-block farms.
• Achieve high productivity using good agriculture practice (GAP) from site and seedling selection, fertilization and maintenance
• Management is key.
MOVING AHEAD • Understand market demand
• Compare income and cashflow of alternative crops
• Push inclusive growth close to home
• Build the right capabilities for inclusive growth; give the farmers the choice
• Overcome biases and ideologies
Acknowledgment: Caudillo, Houben and Noor (2015) www.mckinsey.com/insights/
BREAK THE POVERTY CIRCLE History suggests the necessity of productivity increases in small farm agriculture.
…. there are virtually no examples of mass poverty reduction since 1700 that did not start with sharp rises in employment and self-employment income due to higher productivity in small family farms.
Jayne et al., 2010
Poverty is the worst form of violence.
- Mahatma Gandhi (1869-1948)
The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.
- Franklin D. Roosevelt (1882-1945)
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