globalization,rural sector transformation, and poverty
DESCRIPTION
IAMO Forum 2007 Halle, June 27-29, 2007TRANSCRIPT
International perspectives on poverty and transition in rural areas
Globalization,
Rural Sector Transformation,
and Poverty
Joachim von Braun
International Food Policy Research Institute
IAMO Forum 2007
Halle, June 27-29, 2007
Joachim von Braun, IFPRI, June 2007
Overview
1. Issues and conceptual framework to
assess globalization – poverty links
2. Key drivers of globalization
- 1) Markets and trade
- 2) Investment & capital flows
- 3) Information & innovation
and impact on poverty
3. Policy and research implications
Joachim von Braun, IFPRI, June 2007
Context of change around the
world food and agriculture system
1. Global economy’s fast growth
2. Governance and decentralization
3. Energy price and climate change
4. Health risks and agriculture
5. breakthroughs in science and
technology
6. Urban/rural change & migration
Not all global change is “globalization”
Joachim von Braun, IFPRI, June 2007
Questions
1. what are the effects of globalization of
the agri-food system on the poor?
2. Institutional challenges of (erstwhile)
transforming economies & globalization:
how did globalization impact on poverty
in these economies?
Joachim von Braun, IFPRI, June 2007
Patterns in TCs: Growth
Source: WDI 2006
ETH UZB VIET UKR CHIN
RUSS
FED POL HUN
LOW
&
MID
Y
Agriculture, value added (annual % growth)
1990
-94 1.4 -0.1 3.3 -8.0 4.6 -7.2 -4.2 -7.5 2.2
2000
-04 3.5 6.0 3.8 6.8 3.4 7.1 2.6 7.4 3.1
GDP growth (annual %)
1990
-94 0.7 -3.5 7.3 -12.3 10.9 -8.8 1.1 -3.2 2.8
2000
-04 5.2 4.8 7.2 8.4 9.2 6.9 3.1 4.4 4.9
Joachim von Braun, IFPRI, June 2007
Towards urbanization of poverty?
199318.88
81.13
2002
24.67
75.33
urban share of the poor (%)
rural share of the poor (%)
Source: Ravallion et al., 2007
Note: Poverty line is set at $1.08/day
Urban and rural share of the poor (%)
Joachim von Braun, IFPRI, June 2007
Mixed Evidence: Poverty headcount ratio at
$1 and $2 a day (PPP) as % of total population
Share of people living on less than $1 a day
(% of population)
0
10
20
30
40
50
60
70
1981 1984 1987 1990 1993 1996 1999 2002
East Asia & Pacif ic Europe & Central Asia
Latin America & Caribbean Middle East & North Africa
South Asia Sub-Saharan Africa
Share of people living on less than $2 a day
(% of population)
0
10
20
30
40
50
60
70
80
90
100
1981 1984 1987 1990 1993 1996 1999 2002
East Asia & Pacific Europe & Central Asia
Latin America & Caribbean Middle East & North Africa
South Asia Sub-Saharan Africa
Source: Based on data from the 2006 WDI database
Note: 2002 data are preliminary
Joachim von Braun, IFPRI, June 2007
Regional Hunger Trends
Source: Wiesmann, 2006
11.412.6
40.3
27.9
22.5
9.48.4
15.1
32
27.3
7.98.0
11.9
26.627
6.07.5
10.9
25.125.4
6.6 5.6
0
5
10
15
20
25
30
35
40
45
Sub-Saharan
A frica
So uth A sia So utheast
A sia
N ear East &
N o rth A frica
Lat in A merica
& C aribbean
Eastern
Euro pe &
F o rmer So viet
Unio n
GH I 1981
GH I 1992
GH I 1997
GH I 2003
Joachim von Braun, IFPRI, June 2007
What is “globalization
of agriculture and food systems”?
Definition: Global integration—across national borders—of
production, processing, marketing, retailing, and
consumption of
agriculture and food itemsSource: von Braun and Diaz-Bonilla (2007)
Joachim von Braun, IFPRI, June 2007
Conceptual framework: drivers and examples
of changes at different levels of analysis
Source: von Braun, 2007
MARKETS INVESTMENT &
CAPITAL FLOWS
INFORMATION &
INNOVATION
SOCIAL POLICY
LE
VE
L I
GL
OB
AL
IZA
TIO
N
Exo
gen
ou
s fa
cto
rs
Increased access to outputs, inputs, labor
Expansion of FDI
Improved ICTs
Innovation & IPR
Aid; human right to
food
LE
VE
L II
DO
ME
ST
IC
PO
LIC
Y
Market opening
Competition policy
Political &
institutional changes
Technology policy
Public R&D investments
Pro-poor social
actions
LE
VE
L II
I
HO
US
EH
OL
DS
RIGHTS
PRICES
EMPLOYMENT HOUSEHOLD
ENDOWMENTS
PRODUCTION CONSUMPTION
Joachim von Braun, IFPRI, June 2007
1) Markets and trade
Joachim von Braun, IFPRI, June 2007
1. Trade: Stagnation of developing countries’ export shares,
more global integration on the import side
Agriculture trade in percent of production
Data source: World Bank, WDI 2005
Export/Production 1960s 1970s 1980s 1990s 2000-02
Latin America and the Caribbean 23.6 24.7 24.5 26.7 31.4
Sub-Saharan Africa a 28.5 23 17.2 15.3 13.2
Asia Developing 5.4 5.7 6.4 6.4 6.4
All Three Regions 12.1 11.8 11.3 11.0 11.6
Import/Production 1960s 1970s 1980s 1990s 2000–02
Latin America and the Caribbean 6.7 8.6 11.2 14 15.7
Sub-Saharan Africa a 8.1 9.4 12.6 12.3 13.5
Asia Developing 7.1 7.7 9.2 8.9 8.8
All Three Regions 7.1 8.0 10.0 10.1 10.5
a Does not include South Africa.
Joachim von Braun, IFPRI, June 2007
Regional trade trendsAgriculture trade in percent of total merchandise trade
Agr. Exports/Total Merchandize 1980 1990 2000 2003
Transition countries 7.6 5.9 5.3 5.5
Latin America and Caribbean 27.8 26.1 17.4 20.6
Sub-Saharan Africa a 19.8 20.0 15.2 16.9
East and Southeast Asia 13.3 7.7 3.7 3.8
South Asia 33.8 18.6 10.8 10.6
Data source: FAO, 2004; Note: a Does not include South Africa
Agr. Imports/Total Merchandise 1980 1990 2000 2003
Transition countries 18.4 14.1 9.3 8.4
Latin America and Caribbean 11.6 12.3 9.0 10.3
Sub-Saharan Africa a 15.4 16.3 17.1 17.9
East and Southeast Asia 14.2 8.0 4.8 4.7
South Asia 13.8 10.3 9.3 9.3
Joachim von Braun, IFPRI, June 2007
But: global increased trade in processed
and high-value goods
Data source: based on data from FAOSTAT 2006
World export value (billions of US$)
0
10
20
30
40
50
60
70
80
90
100
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
Coarse Grains
Fruits & vegetables
Meat
Milk
Joachim von Braun, IFPRI, June 2007
Poverty effects: Trade
• Empirical results mixed
• Trade reform impacts at household levele.g. Hertel et al., 2003 (Brazil)
Higher poverty in non-agricultural and wage dependent households
Lower poverty in agriculture-dependent households
Winners (majority) and losers;
effect of trade liberalization on poor households’ income small
Source: von Braun (2007)
Joachim von Braun, IFPRI, June 2007
Estimations of welfare benefits of trade
liberalization: studies 1999 - 2006
Source: Bouët, IFPRI, 2006
Joachim von Braun, IFPRI, June 2007
2) Investment & capital flows
Joachim von Braun, IFPRI, June 2007
Drivers:
(2) Investment and capital flows
0
20
40
60
80
100
Agriculture, hunting,
forestry and fishing
Food, beverages and
tobacco
Industrial countries Developing countries
Source: based on data from UNCTAD, 2004
FDI in food and Agriculture
as % of world total FDI
1990 and 2004
0
20
40
60
80
100
Agriculture, hunting,
forestry and fishing
Food, beverages and
tobacco
Industrial countries Developing countries
Transition countries
1990
2004
Joachim von Braun, IFPRI, June 2007
Poverty effects: FDI
• Other: Economic growth through forward and backward linkages + knowledge spillovers;
• government revenue from corporate taxes for pro-poor investmentsVietnam: FDI in rural areas, direct impact on poverty
insignificant (Nguyen, 2003)
Reduced
Poverty
FDI
Capital / Knowledge
Intensive Sector
Labor Intensive
Sector
Increased
Poverty
Unskilled labor Skilled labor
Source: von Braun (2007)
Joachim von Braun, IFPRI, June 2007
With a blending target of 15 percent of
transport fuel…
3) Information & innovation
Joachim von Braun, IFPRI, June 2007
Ongoing technological advances
Privatization of national telecom.
monopolies in many developing
countries in 1980s and 1990s
Drivers:
ICT and information flows
Joachim von Braun, IFPRI, June 2007
Drivers: ICT Revolution
Fixed line and mobile phone subscribers
(Per 1,000 people)
0
100
200
300
400
500
1975 1978 1981 1984 1987 1990 1993 1996 1999 2002
Data source: World Bank, 2006
Internet users
(Per 1,000 people)
0
50
100
150
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
World
Low income
Middle income
Joachim von Braun, IFPRI, June 2007
Poverty effects: ICT
(macro-level results)
• ICTs reduce transaction costs + open
markets + additional network externalities
• Tele-density is positively associated with
growth:
- 10 more mobiles per 100 people increase
GDP p.c. by 0.6% (Wavermann et. al., 2004)
- Minimum threshold: around 15% to get
strongest growth effects, actual is only 6%
Torero and von Braun, 2006
Regional integration: trading Systems in Comesa
Warehouse Receipt
Commodity Exchange
IFPRI
Uganda Commodity
Exchange
Warehouse Receipt
EU
Commodity Exchanges
• ACE
• MACE
Warehouse Receipt
• ZACA
SAFEX
EAGC
• Rules of Trade
•Contracts
KACE
Joachim von Braun, IFPRI, June 2007
Consequences of limited rural access
• Rural households willing to pay more than prevailing
tariff rates per local call:
Peru: US$ 0.25 to 0.35
Bangladesh: US$ 0.10 to 0.26
Source: Torero and von Braun, 2006
Poverty effects: ICT
(micro-level results)
Joachim von Braun, IFPRI, June 2007
Science and technology
• Rapid expansion of R&D spending:- China: 2007 = No. 2 (136 Bill.$; 926.000
Scientists) ; USA = 330 Bill$; EU = 230 Bill$)
- India: fast growth
- Africa’s new policy (AU Summit)
• Rural / Agriculture science and R&D?
9 of 17 innovations scoring highest in the 2006 RAND assessment relate to rural & agric.
• China, India, Brazil go global with their innovation systems in agriculture (in different ways; research, higher education)
Joachim von Braun, IFPRI, June 2007
0%
20%
40%
60%
80%
100%Middle East-North Africa
Latin America-Caribbean
Other Asia-Pacific
India
China
Sub-Saharan Africa
Developed
Global Public Agricultural R&D: 1981 and 2000
1981
$15.2 billion*
2000
$23.0 billion*
* in 2000 international prices
Joachim von Braun, IFPRI, June 2007
A changing environment for
innovation
• Introduction of patent rights for
agricultural inventions under TRIPS
agreement
• Bio-safety regimes and reduced exchange
(e.g. genetic resources)
- Technology spillover pathways to
developing countries for productivity
enhancement reduced
- Less global public goods research when
we need more of it (climate, etc.)
Joachim von Braun, IFPRI, June 2007
3. Policy implications for pro-poor
globalization
• Global and national market & trade policy
• Facilitation of capital and aid flows
• Development in rural areas, where the poor are (ICT, and infrastructure)
• Enhancing the global innovation systems
• Rural social protection policy
Joachim von Braun, IFPRI, June 2007
Toward global social policies
• Global social policy ? Promising but not comprehensive efforts: - Human right to food
- Global emergency aid
- Disaster response
- Child labor in agriculture
- Global health policy initiatives
• Innovations in social policy [e.g. conditional cash transfers]
• G8 call for social protection
Source: von Braun, 2007
Joachim von Braun, IFPRI, June 2007
Food
retailers
top 10:$777bln
• Wal-Mart
• Carrefour
• Royal Ahold
• Metro AG
• Tesco
C o
n s
u m
e r s
$4
,00
0 b
illion
The world food system globalizes:
global value added and competitiveness ?
Food
processors
and traders
top 10: $363 bln
• Nestle
• Cargill
• Unilever
• ADM
• Kraft Foods
Agricultural
input
industry
top 10: $37 bln
• Syngenta
• Bayer
• BASF
• Monsanto
• DuPont
Farms
Agricultural
value added:
$1,315 bln
450 million
>100 ha: 0.5%
< 2 ha: 85%
Source: von Braun, 2005
Joachim von Braun, IFPRI, June 2007
What future for the small farms?
Farm Size (ha) % of all farmsNumber of farms
(millions)
< 2 85 387
2 - 10 12 54
10 - 100 2.7 12
> 100 0.5 2
Total 100 455
The numbers still increase in Africa and South Asia
Source: von Braun, 2003
Joachim von Braun, IFPRI, June 2007
Where will be the jobs?
sectoral & spatial labor flows
in global employment …2020 (Bill.)
Farm Services &
Industry
Rural areas
Services &
Industry-
Urban areas
Total
2005 0.9 0.6 1.5 3.0
2020 0.6 1.0 1.9 3.5
Change
2005-
2020
- 0.3 +0.4 +0.4 +0.5
Estimates based on ILO economically active populations projections
and own estimates of sector shares, J. von Braun, 2005
Joachim von Braun, IFPRI, June 2007
Small farms and small businesses
can participate
From a 2 ha. rice farm to fruit
processing firm
in Uttar Pradesh: training (her),
banking was key;
and the road
+25 jobs
Joachim von Braun, IFPRI, June 2007
Questions & preliminary answers
1. what are the effects of globalization of the agri-food system on the poor?
• Generally favorable but mixed;
• exclusion of the poorest in rural areas
2. (erstwhile) transforming economies + globalization: how did globalization impact on poverty in these economies?
• Strong evidence of poverty reducing growth
• domestic policies more important than global context
And all these remain research issues