transforming rural economies - escap · • rural economic diversification by choice – shift from...

The Least DevelopedCountries Report 2015

Transforming Rural Economies

Dr. Aynul HasanDirector, Macroeconomic Policy and

Development Division

Bangkok, 3 December 2015

Outline• Key messages• LDCs and Rural Transformation:

from MDGs to SDGs• Agricultural productivity• Development of non-farm activities• The Gender Dimension• Transforming Rural Economies: A Policy

Agenda

Key Messages

• LDCs are the battleground on which the SDGs will be won or lost -and rural areas in LDCs are where the battle will be hardest

• The SDGs both highlight the need, and offer the opportunity, for a new and different approach to rural development

• This means poverty-oriented structural transformation (POST), through agricultural upgrading and diversification, exploiting agriculture/non-farm synergies

• Linking demand and supply, differentiating among rural areas, and sequencing investment/interventions, are critical

• Increasing agricultural productivity requires increasing input use and quality, strengthening agricultural R&D and extension, and infrastructure investment

• Financing for productive investment needs to be affordable as well as available, well targeted, and linked to business skills

• "To will the end is to will the means"• Fulfilment of ODA commitments is essential, and the target for ODA

to LDCs should be increased to 0.35 per cent of donor GNI

Launch of The Least Developed Countries Report, 2015

Key Messages

LDCs and Rural Transformation:from MDGs to SDGs

• Absolute goals require us to think differently– We can halve poverty by harvesting “low-hanging fruits"– We can only eradicate poverty by eradicating it

everywhere: “no one is left behind”– We need to focus where it’s most difficult– LDCs are the battleground on which the SDGs will be won

or lost…– …and rural areas in LDCs are where the battle will be

hardest


Context: the 2030 Agenda/SDGs

0

20

40

60

80

100

0 20 40 60 80 100

Poverty Headcou

nt Ratio, 2011 (%

)

Poverty Headcount Ratio, 1990 (%)

Poverty Headcount Ratio, 1990 and 2011 (%)

ODCs (Other)

ODCs (SSA)

African LDCs +HaitiAsian LDCs

Island LDCs

Poverty is much higher in LDCs….

0

20

40

60

80

100

0 20 40 60 80 100

Poverty Headcou

nt Ratio, 2011 (%

)

Poverty Headcount Ratio, 1990 (%)

Poverty Headcount Ratio, 1990 and 2011 (%)

ODCs (Other)

ODCs (SSA)

African LDCs +HaitiAsian LDCs

Island LDCs

POVERTY HALVED BY 2015

POVERTY INCREASED SINCE 1990

…and falling most slowly (if at all)

‐80 ‐70 ‐60 ‐50 ‐40 ‐30 ‐20 ‐10 0 10 20 30 40 50 60 70 80 90

Yemen, Rep. (2005)Nepal (2010)

Lao PDR (2012)Bhutan (2012)

Bangladesh (2010)Afghanistan (2011)Timor‐Leste (2007)

Sao Tome and Principe (2009)Comoros (2004)Zambia (2010)Uganda (2009)

Togo (2011)Tanzania (2012)

Sudan (2009)South Sudan (2009)Sierra Leone (2011)

Senegal (2011)Niger (2008)

Mozambique (2009)Mauritania (2008)

Mali (2010)Malawi (2010)

Madagascar (2010)Liberia (2007)Lesotho (2010)

Guinea‐Bissau (2002)Guinea (2012)Ethiopia (2011)

Equatorial Guinea (2006)Congo, Dem. Rep. (2005)

Chad (2011)Central African Republic (2008)

Burundi (2006)Burkina Faso (2009)

Benin (2011)Angola (2008)

Poverty Headcount Ratio

urban

Poverty rates are twice as high in rural areas as in towns and cities…

rural

The SDGs: a step-change in ambition

• Poverty eradicationmeans doubling the lowest householdincomes globally in just15 years…

• …after they have stagnated for the last 20‐30 years

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1980 1990 2000 2010 2020 2030

$ pe

r person pe

r day (2

005 PP

P)Estimated Global Consumption

Floor, 1981‐2011, and 2030 Target

$1.25‐a‐daybasis

$1.00‐a‐daybasis

MDGs SDGsPre‐MDGs

• This highlights the need for a new model of development

• But efforts to fill the gaps will also change the economic environment for development:– Increased infrastructure increases productivity– Increased infrastructure investment increases demand– Accelerated poverty reduction also generates demand

growth• This provides the opportunity for a new model of

development


Implications of the SDGs

• Income transfers can only be part of the solution– financially unsustainable and logistically infeasible

• Main engine must be primary incomes, from economicactivity

• Requires structural transformation– Increasing labour productivity within sectors– Shifting resources from lower- to higher-productivity

sectors/activities– Keys are labour productivity and technology

• Focus on employment for all at incomes above the poverty line, matched by productivity– Poverty-oriented structural transformation (POST)


Structural transformation

• Increasing labour productivity– in agriculture– in non-farm activities

• Shifting resources– from lower to higher-value crops in agriculture– from agriculture to non-farm production - rural economic

diversification• Again, the keys are productivity and technology• Harnessing the synergies between agriculture and the

non-farm economy


Structural transformation of the rural economy

Agricultural productivity

0

10

20

30

40

50

60

70

80

90

100

Industry Services Agriculture

Sectoral Labour Productivity (Value Added per Worker), 2011‐13 (Developed Countries = 100)

developed countries

other developing countries

LDCs

LDCs' productivity gap in agriculture iswider than in industry or services

0

1

2

3

4

0

20

40

60

80

per cen

t

LDC Agricultural Productivity Trends (Final Output per Worker) as % of Developed and Other Developing Countries, 1980/84‐2010/12

Relative to other developingcountries (left‐hand scale)

Relative to developed countries(right‐hand scale)

…and it has been widening for decades

• Quantity of conventional inputs, irrigation– Low in African and island LDCs; higher in Asian LDCs

• Technology - R&D; agricultural extension services– Greater agroecological diversity makes this more problematic

in Africa than in Asia

• Human Capital - education, health, nutrition– Evidence suggests minimum 4 years' education needed

• Public investment and policies - knowledge-building, infrastructure

• Agroecological conditions - climate change


Determinants of agricultural productivity

0

0.5

1

1.5

2

2.5

3

3.5

1981 1990 2000 2008

Public Expenditure on Agricultural R&D (% of agricultural GDP)

World

Low‐income

Middle‐income

High‐income

Agricultural R&D spending has fallen, whilst growing elsewhere

Development of non-farm activities

• An important determinant of diversification and agricultural upgrading

• RNFE development is more difficult further from towns• But increasing rural-urban access is two-edged

– Wider markets and increased access to inputs; but– Loss of natural protection– Disadvantages cf established urban suppliers

• Identifying the right policies is critical• So is recognising the very different opportunities and

priorities in peri-urban, intermediate, remote and isolatedrural areas


Urban Proximity

• Remote and isolated areas have the greatest need for diversification, but the least opportunities

• Similarly among households: poorer households– are forced into diversification by low agricultural incomes– but have limited capital and access to finance, and less

education– face great human costs in case of financial losses– "enterpreneurship by necessity" in activities with low entry

barriers, low productivity and limited returns• Shift to dynamic "entrepreneurship by choice" is critical to

poverty-oriented structural transformation


Contradiction between need and opportunity

The Gender Dimension

• Women are around half the rural and agricultural workforce

• But they face major additional constraints– Double burden of care and productive work– Disproportionate share of (unpaid) family labour– Limited control over commercial proceeds from

agriculture and non-farm activities– Limited access to finance, markets

• Relieving thes constraints can make an important contribution to transformation


Gender Constraints

0

20

40

60

80

100

Burkina Faso

Gam

bia

Guine

a

Mali

Sene

gal

Ethiop

ia

Haiti

Lesotho

Madagascar

Malaw

i

Mozam

biqu

e

Ugand

a

Zambia

Banglade

sh

Myanm

ar

Nep

al

Comoros

Agricultural Landholders by Gender (%)

female

male

Women's access to land is limited by customary law and practice….

West Africa Other Africa & Haiti Asia Island

0

20

40

60

80

100

Ethiopia Madgascar Tanzania Nepal Yemen

Gender Wage Gaps in Selected LDCs (%)

…and there are large gender gaps in wages

Transforming Rural Economies: A Policy Agenda

• Agricultural upgrading– Extend cultivated area where possible/sustainable– Diversify towards higher-value crops– Increase yield/productivity through technology and input

use– Market differentiation to raise prices

• Rural economic diversification by choice– Shift from survivalist "entrepreneurship by necessity" to

dynamic "entrepreneurship by choice"; – Enterprise expansion, not microenterprise proliferation– Rural electrification as a key driver


Policy Directions

• Maximise synergies between agriculture and RNFE – increase staple production + local food stocks, to ensure

reliable access– agro-processing - value-addition and tradability– low-season employment, to off-set seasonality of

agricultiure• Foster demand linkages

– Non-staple and processed foods– Basic consumer goods and services– Agricultural input supply

• Sequence investment– Interventions to foster supply response to increasing demand


Policy Directions

ODA/Development Cooperation

• The considerable investment needs to meet the SDGs in LDCs willneed to come mainly from ODA

• SDG17 is for "developed countries to implement fully their ODA commitments– The 0.7% and 0.15-0.2% commitments are explicitly included– This also implicitly includes aid effectiveness commitments, including

on country ownership, untying, etc• Since LDCs' account for 40-50% of SDG shortfalls, 0.35% would be

more consistent with the 0.7% overall target• Support to productive sectors is important, as well as social sectors, to

make gains economically sustainable• ODA shorfalls would leave a stark choice:

– Miss the goals, or– Borrow unsustainably debt crisis, as in the 1970s/80s


Policy Directions

Thank you

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