world development report 2008 agriculture for development

1

World Development Report 2008

“75% of the world’s poor are rural and most are involved in

farming. Agriculture remains a

fundamental instrument for development and poverty reduction”

Agriculture for Development

Preliminary version in progress

2

WDR 2008-Agriculture for DevelopmentOutline

1. Agriculture remains fundamental for development, and differentially by context

2. But the powers of agriculture are often under-used

3. There are new opportunities to use agriculture that open multiple pathways out of poverty

4. With new (and lingering) challenges to be addressed

5. Differentiated agendas and improved governance

6. WDR positions on emerging issues

3

Roles: A large economic sector in poor countriesShare of Labor in Agriculture and Shre of Agriculture in GDP

AGO

ARG

AZE

BDI

BEN

BFA

BGD

BGR

BLRBOL

BRACHL

CHN

CIV

CMR

COL

CZE

DOMDZAECU

EGY

ETH

GHA

GINGTMHND

HUN

IDN

IND IRNKEN

KHM

LAO

LKA

MAR

MDG

MEX

MLI

MOZMWI

MYS

NER

NGA

NPL

PAK

PER

PHL

PNG

POL

PRY

ROM

RWA

SDN

SEN

SLV

SVK

SYR

TCD

TGO

THA

TJK

TUN TUR

TZAUGA

UKR

UZB

VEN

VNMYEM

ZAF

ZAR

ZMB ZWE

AGO

ARG

AZE

BDI

BEN

BFA

BGD

BGR

BLR

BOL

BRACHL

CHN

CIV

CMR

COL

CZE

DOM

DZAECU

EGY

ETH

GHA

GIN

GTM

HND

HUN

IDN

IND

IRN

KEN

KHM

LAO

LKA

MAR

MDG

MEX

MLIMOZMWI

MYS

NER

NGA

NPL

PAK

PER

PHL

PNG

POL

PRY

ROM

RWA

SDN

SEN

SLV

SVK

SYR

TCD

TGOTHA

TJK

TUN

TUR

TZAUGA

UKR

UZB

VEN

VNM

YEM

ZAF

ZAR

ZMB

ZWE

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

4.5 5 5.5 6 6.5 7 7.5 8 8.5 9Log of GDP per capita (constant 2000 US$), 1990-2005

Share of Agriculture in GDP Share of Labor in Agriculture

Source: World Bank, DDP,September 2006

The share of agriculture in GDP can be 30-50% in poor countries; the share in employment 60-90%

The share of agriculture in GDP can be 30-50% in poor countries; the share in employment 60-90%

4

Roles: A source of livelihoods for many, but a huge reservoir of poverty

0

100

200

300

400

500

SSA SA EAP MENA ECA LAC

mill

ion

of r

ural

poo

r ($

1 a

day) 1993 2002

2.5 billion people related to agriculture, 1.3 billion smallholders1.9 billion rural poor ($2/day), 800 m extreme rural poor ($1/day)

5

Agriculture

Non-agriculture

-2

-1

0

1

2

3

4

5

6

7

Lowest 2 3 4 5 6 7 8 9 Highest

Expenditure deciles

Expe

ndit

ure

gain

s in

duce

d by

1%

GD

Pgr

owth

(%

)

Fundamental role: Agricultural growth has unique powers for poverty reduction

GDP growth from agriculture especially benefits the poorest GDP growth from agriculture especially benefits the poorest

6

Fundamental role: Impressive successes at rural poverty reduction

3.4

3.6

3.8

4

4.2

1959 1963 1967 1971 1975 1979 1983 1987 1991Years

Log

of H

eadc

ount

inde

x (r

ural

are

as)

4

4.2

4.4

4.6

4.8

5

5.2

Log

of a

vera

ge f

arm

out

put

per

acre

Rural Po(left axis)

Yields(right axis)

2.4

2.9

3.4

3.9

4.4

1980 1983 1986 1989 1992 1995 1998 2001Years

Log

of H

eadc

ount

(ru

ral a

reas

)

4.6

4.7

4.8

4.9

5.0

5.1

5.2

5.3

Log

of a

vera

ge f

arm

out

put

per

acre

Rural P0(left axis)

Yields(right axis)

Headcount index and average farm yieldsRural India 1959-1994

Headcount index and average farm yieldsRural China 1980-2001

Rural poverty fell sharply in India and China as yields roseRural poverty fell sharply in India and China as yields rose

7

Roles: An important user and often mis-user of natural resources

62.9%

15.4%11.4%

6.6%3.8%

0%

20%

40%

60%

80%

Energy Agriculture(excluding land

use change)

Deforestation Industrialprocesses

Waste

Perc

ent

of t

otal

GH

G e

mis

sion

s

Developing countries

Developed countries

Agriculture uses 85% of water withdrawals and causes most of deforestation in developing countries

Contributes to global warming: 21% (up to 35%) of Green House Gases

8

There are three worlds for the roles of agriculture in growth and poverty

ZMB

ZAF

YEM

VNM

VEN UKR

UGA

TZA

TURTUN

TJK

THASLV

SEN

RWA

RUS

ROM

PRY

POL

PHLPER

PAK

NPL

NGANER

MWI

MOZMLI

MEX

MDG

MARLKA

LAO

KHM

KEN

IRN

INDIDN

HUN

HNDGTM

GHA

ETH

EGY

ECU

DOM

COL

CMR

CIV

CHNCHL

BRA BOL

BLR

BGR

BGD

BFA

BEN

BDI

AZE

ZWE

ZAR

TGO

TCD

SYR

SVK

SDN

PNG

MYS

GIN

DZA

CZEARG

AGO

BRA

BRA

CHN

CHN

CHN

IDN

IDN

IND

IND

-0.2

0.0

0.2

0.4

0.6

0.8

0.0 0.2 0.4 0.6 0.8 1.0Share of total poverty in rural areas, 2002

Poverty data from Ravallion et al. 2007Other predicted poverty dataDynamic analysis

Urbanized countries

Agriculture-based countries

Transforming countries

65-70

70-75

90-96

90-96

89-94

96-01

81-85

86-95

70-76

9

Message 1:The role of agriculture for development is fundamental and

differs in the three worlds: growth, equality, inclusion

Message 1:The role of agriculture for development is fundamental and

differs in the three worlds: growth, equality, inclusion

Agricultural-based countries: growthAgriculture essential for growth: large sector, price of food with limited tradability, and comparative advantage where tradable

Importance for poverty and food security

Transforming countries: equalityRapidly growing nonagricultural sectors

Agriculture key to reduce rural-urban income disparities and extreme rural poverty

Urbanized countries: inclusionSubsectors with comparative advantage

Include smallholders as suppliers to modern food markets and provide remunerative employment in agriculture

10

There is also deep heterogeneity across areas, households, and within households

Favored vs marginal areasAgro-ecology, market access, social exclusion

Household heterogeneityMarket-oriented vs subsistence farmingRural non-farm enterprises—low vs. high productivityLabor markets—high vs low skillsMigration—out of vs. into poverty

Intra-household differencesGender roles and decision makingAccess to assets and consumption

Differentiated approaches are required in enhancing the role of agriculture for development

11

WDR 2008-Agriculture for Development1. Agriculture remains fundamental for development,

and differentially by context






12

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)

Under-use as global trade distortions remain pervasive

-3

-4

-4

-5

-7

-12

-15

-21

Sugar

Rice

Processed meat

Wheat

Other grains

Dairy products

Oilseed

Cotton

-9

-2

-18

-21

-5

-7

-34

-27

Sugar

Rice

Processed meat

Wheat

Course grains

Dairy products

Oilseed

Cotton

13

Under-use as taxation of agriculture exports remains high in the agriculture-based and transforming countries

-26-19

-16

5

-49

-25

-50

-40

-30

-20

-10

0

10

20

30

Agriculture-based Transforming Urbanized

Nom

inal

rat

e of

ass

ista

nce

(per

cent

)

1980-84 2000-04

ExportablesExportables

14

Under-use as public spending on agriculture is low in the agriculture-based countries compared to the

share of agriculture in GDP

29

24

14

29

16

10

0

5

10

15

20

25

30

35


perc

ent

1980 2004

4

10

17

4

1112

0

2

4

6

8

10

12

14

16

18


perc

ent

1980 2004

Public spending on Ag/Ag GDPAg GDP/GDP

Transforming countries in 1980 had a much higher share of public spending on agriculture as a share of Ag GDP (10%) than the agriculture-based countries do today (4%) even though they had similar shares of agriculture in GDP

Transforming countries in 1980 had a much higher share of public spending on agriculture as a share of Ag GDP (10%) than the agriculture-based countries do today (4%) even though they had similar shares of agriculture in GDP

15

Mis-use is also pervasive: Subsidies are now four times larger than public investment in Indian agriculture

0

1

2

3

4

5

6

7

1975-79 1980-84 1985-89 1990-94 1995-99 2000-02

Perc

ent

of A

g. G

DP

SubsidiesSubsidies

Public InvestmentPublic Investment

16

-102030405060708090

100

1990 1992 1994 1996 1998 2000 2002 2004

% p

over

ty in

rur

al a

reas

0

2

4

6

8

10

12

14

% O

DA

to a

gric

ultu

re

Under-use as donor support to agriculture has declined while rural poverty remained dominant

% rural poverty% rural poverty

% ODA to Ag% ODA to Ag

17








18

-1

0

1

2

3

4

5

6

-0.4 -0.2 0 0.2 0.4 0.6

Average annual change of macroeconomic score

Agr

icul

ture

gro

wth

rate

1984-19951995-2005

1984-95

1995-2005

Opportunities: Improved macro-economic conditions favorable to agricultural growth in

SS-Africa

0

2

4

6

8

10

1983 1986 1989 1992 1995 1998 2001 2004

Mac

roec

onom

ic s

core

Higher agricultural growth with improved macroeconomic scores since 1995Higher agricultural growth with improved macroeconomic scores since 1995

19-1

0

1

2

3

4

Cereals Sugar Oil crops Horticulture Meat Milk

Ann

ual g

row

th r

ate

of

kcal

/per

son/

day

(%)

1961-75 1976-90 1991-03

Opportunities: Demands for a new agriculture of high value products and non-traditional exports

0

20

40

60

80

100

Cereals Traditionalexports

Oilseeds,feeds and

others

Livestockand fishproducts

Fruits andvegetables

$ b

illio

n (2

000

pric

es) 1980 2004

Diets in the developing world are changing toward higher value

products

Non traditional exports from developing countries are increasing in absolute values and as a share of

total exports

20

Opportunities: Institutional and technical innovations

Institutional innovations—a fertile field (with gaps)• Land administration and markets, with use of IT

• Financial services: microfinance, use of IT

• Risk management: weather insurance

• More effective producer organizations & new approaches to extension using IT

Technological innovations—progress (with under-investment)• Continued spread of improved varieties to rainfed areas and better pest

resistance• GMOs--potential but only Bt cotton widely adopted by smallholders• Conservation agriculture--especially zero tillage• Improved livestock and fish breeds

21

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1992 2002

Farm AgWage NonAgIncome Transfers Other

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1992 2002

Farm AgWage NonAgIncome Transfers Other

Mexico:Sources of income rural population

Bangladesh:Sources of income rural population

Expanding income opportunities in the rural non-farm economy

Rising share of non-agricultural employment and transfers helping diversify rural household incomes

Rising share of non-agricultural employment and transfers helping diversify rural household incomes

22

Opportunities: Agriculture for development goes beyond farming

Promoting rural nonfarm developmentInvestment climate, clusters of agro-industries, entrepreneurship

Expanding and formalizing rural labor marketsSkills, working conditions, gender inclusiveness

Investing for successful out-migrationManage huge population transitions

Providing social safety netsSafety nets for welfare and risk-taking

23

Opportunities open multiple pathways out of poverty for rural households

Pathways out of poverty: not by agriculture alone

Farming

Agricultural wage employment; wage and self-employment in the rural non-farm economy

Migration and remittances

Recognize important gender dimensions to each pathway at household level and within household labor allocation

24

Opportunities: New actors and new rolesA redefined role for the state

Regulation, decentralization, and partnershipsPrivate and corporate sector

Agribusiness and the supermarket revolutionCivil society

Rapid increase in producer organizationsGrowing role of NGOs

New philanthropy

New opportunities for public-private-civil society partnerships in using agriculture for development

25

From opportunities to objectives: a policy diamondSocio political context

GovernanceMacro fundamentalsAgricultural policy

Socio political context Governance

Macro fundamentalsAgricultural policy

3Improve livelihoods in

subsistence agriculture and low skill rural occupations

4Increase employment in

agriculture and the RNFE; enhance skills

1Access to markets

Establish efficient value chain

2Enhance smallholder

competitivenessFacilitate market entry

Pathways out of poverty: farming, labor, migration

Social transition Social transition

Demand for Ag products

Demand for Ag products

26

Message 2:The new agriculture is market- and value

chain-driven, opening multiple pathways out of poverty for rural households

Message 2:The new agriculture is market- and value

chain-driven, opening multiple pathways out of poverty for rural households

Message 3: Livelihoods and food security for poor rural populations can be improved by developing more resilient farming systems, facilitating

market entry, and improving skills

Message 3: Livelihoods and food security for poor rural populations can be improved by developing more resilient farming systems, facilitating

market entry, and improving skills

27








28

Rise of supermarkets: A challenge for the inclusion of smallholders

MexicoS. Africa

Argentina

ChileColombia

ThailandPhilippines

Ecuador

Guatemala

Indonesia

BulgariaKenya

Nicaragua

China

Bangladesh

Brazil

S. KoreaCosta Rica

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0 2 4 6 8 10 12 14 16 18 20GDP, $000 per capita (PPP)

Shar

e of

sup

erm

arke

ts in

ret

ail f

ood

India

Czech R

29

Message 4: Reducing agriculture’s large environmental footprint

is an inevitable requirement for success, and providing environmental services one of the

development contributions of agriculture

Message 4: Reducing agriculture’s large environmental footprint

is an inevitable requirement for success, and providing environmental services one of the

development contributions of agriculture

Key for this are removing perverse input subsidies, better definition of property rights, wider use of conservation technologies, devolution to communities of control over common property resources, and developing markets for environmental services

30-8 0

-6 0

-4 0

-2 0

0

2 0

4 0

6 0

8 019

82

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

y e a r

perc

enta

ge

-3 0

-2 5

-2 0

-1 5

-1 0

-5

0

5

1 0

1 5

2 0

2 5

ra in fa ll v a r ia t io n a ro u n d th e m e a nG D P g ro w th

-8 0

-6 0

-4 0

-2 0

0

2 0

4 0

6 0

8 019

82

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

y e a r

perc

enta

ge

-3 0

-2 5

-2 0

-1 5

-1 0

-5

0

5

1 0

1 5

2 0

2 5


-8 0

-6 0

-4 0

-2 0

0

2 0

4 0

6 0

8 019

82

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

y e a r

perc

enta

ge

-3 0

-2 5

-2 0

-1 5

-1 0

-5

0

5

1 0

1 5

2 0

2 5


-8 0

-6 0

-4 0

-2 0

0

2 0

4 0

6 0

8 019

82

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

y e a r

perc

enta

ge

-3 0

-2 5

-2 0

-1 5

-1 0

-5

0

5

1 0

1 5

2 0

2 5


-10.0

-5.0

0.0

5.0

10.0

15.0

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

Years

Real

GD

P gr

owth

(%)

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

Vari

abili

ty in

Rai

nfal

l (M

eter

)

Real GDP grow th (%)

Variability in Rainfall (Meter)

The rising cost of climatic instability on agriculture-based countries must be urgently

addressed

Ethiopia 1982-2000

Zimbabwe 1978-1993

Rainfall & GDP growth

31








32

Agenda for agriculture-based countries (SS-Africa): agriculture for growth

Structural features 1Diverse local conditions Building marketsSmall and landlocked and value chains

countries ++Low population density

Deficits in human 2 4resources Smallholder-based Facilitate labor

Limited food tradability revolution mobility and ruralSome foreign exchange Promote exports nonfarm development

constraints ++++ +

Access tomarkets 3

Securing livelihoodsand food security ofsubsistence farmers

+++

Policy diamond for agriculture-based countries

33

Agenda for transforming countries (Asia, MENA): agriculture to reduce disparities

Structural features 1Demographic pressures Infrastructure to& declining farm sizes support diversification

Water scarcity +Lagging areas

Political economy of 4ag policies 2 Rural nonfarm economy;

High value activities Skills for successful+++ migration

+++

3Food staples and

livestock;safety nets

+++

Policy diamond for transforming countries

34

Agenda for urbanized countries (LAC, ECA): agriculture for social inclusion and jobs

Structural features 1Supermarket revolution Resilient rural poverty &

high inequality Weak governance for

agriculture 2 4Inclusion in Territorial development;

new food markets skills for the rural++++ nonfarm economy

+++

3Subsistence agriculture;

social assistance;environmental services

+++

Policy diamond for urbanized countries

35

Improving governance to implement agriculture-for-development agendas

Double weakness of governance as a hurdleGovernance weakest in agriculture-based countries

Governance weak in agriculture vs other sectors

Global governance needed for successful national agendas

Improving governance at national, local, and global levelsNational and local: Inter-sectoral coordination, Min of Ag., decentralization

Global: Coordinate sectoral agencies for complex and inter-related issues (trade, climate change, diseases, IPGs)

New corporate and philanthropic actors

Message 5: Using agriculture for development requires fixing the current serious deficiencies in local, national,

and global governance for agriculture

Message 5: Using agriculture for development requires fixing the current serious deficiencies in local, national,

and global governance for agriculture

36

Managing the political economy of agriculture-for-development agendas

Political management of regressive subsidies, price distortions, and restrictive trade policies

Roles of information, decentralization, new actors

Coalitions of interests on specific policiesWinners and losers: role of dealmakers

Need to explore potential pathways to reformRole of second best instruments and of sequencing

37








38

Doha must progressEmphasis on anti-poor policies such as cotton subsidies

But even more important is to introduce complementary supportingpolicies for investment and smallholder response

Food staples (special products) may need protection but only as part of transition strategies

Recognize gainer-loser tradeoffs especially for the poor by country

And only use as clear transition policies at best

Subsidies can be used to trigger change“Market smart” subsidies can be needed to assist learning and promote market development when there are economies of scale

WDR positions on emerging issues

39

WDR positions (cont.)

Public investment in agriculture must increase Especially in Africa, but emphasize quality first

GMOs have unrealized potential for the poorOffer promise but need public R&D (or private incentives) and efficient regulatory frameworks

IPRs are not the immediate constraint, but innovative formulas are needed to build capacity for the future

Biofuels will be important, but require cautionImprove efficiency, and recognize food and environmental tradeoffs

Climate change requires immediate attentionUrgency of funding adaptation for poor countries

Extend carbon financing to provide agriculture incentives

40

Development of WDR: used a collaborative approach to raise issues,

suggest an approach.Follow up on WDR: pursue a

collaborative effort to customize and implement.

Thank youwww.worldbank.org/WDR2008

41

World Development Report 2008

APPENDIX TABLES

42

WDR chapter outline1. Growth and poverty in agriculture’s three worlds2. Agriculture’s performance, diversity, and uncertainties3. Rural households and their pathways out of poverty4. Realizing gains from trade, price, and subsidy policy reforms5. Bringing agriculture to the market6. Supporting smallholder competitiveness through institutional

innovations7. Innovating through science and technology8. Making agricultural systems more environmentally sustainable9. Moving beyond the farm10. Emerging national agendas for agriculture’s three worlds11. Strengthening governance, from local to global

43

Short focus sections

Declining rural poverty has been a key factor in aggregate poverty reduction

What can biofuels do for agriculture and the environment?

What are the links between agricultural production and food security?

Agribusiness for development

Capturing the benefits of GMOs for the poor

Adaptation and mitigation of climate change in agriculture

Education and skills for rural development

The two-way links between agriculture and health

44

Characteristics of the three worlds

Agric-based Transforming Urbanized

Rural population (million) 417 2,220 255

Agriculture GDP growth rate* 4.0 2.9 2.2

Non Agriculture GDP growth rate* 3.5 7.0 2.7

Agricultural % of GDP growth 32 7 5

Number of poor ($1/day) 170 592 32

% of rural poor in total 70 81 45

*Growth rates correspond to the 1993-2005 period

45

Heterogeneity across smallholders: Sources of household income differ by country

context

41

4 7

13

38

4

19 39

39

2418

47

3 1 3

0%

20%

40%

60%

80%

100%

Ghana Vietnam Guatemala

Migration & remittances

Agricultural wage &RNFEDiversified sources

Market-oriented farming

Subsistence-orientedfarming

• Subsistence

farming high in

Ghana

• Market-oriented

farming and

diversification high

in Vietnam

• Non-farm incomes

and diversification

high in Guatemala

• Subsistence

farming high in

Ghana

• Market-oriented

farming and

diversification high

in Vietnam

• Non-farm incomes

and diversification

high in Guatemala

46

Technological innovations: Sustained gains in yields, but falling behind in Sub-Saharan Africa

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Yie

lds (

ton/

ha)

Developed CountriesAsia DevelopingLatin American and the CaribbeanSub-Saharan Africa

47

0

10

20

30

40

50

1991

1993

1995

1997

1999

2001

2003

2005

Shar

e of

par

ticip

atin

g ho

useh

olds

(%

)

Contract farmers

Estate farm workers

Total participants

Household participation

Smallholder inclusion and employment as two options for rural poverty reduction

Incidence of poverty and extreme poverty among participating households

0

10

20

30

40

50

60

non-participants

estate farmworkers

contractfarmers

Shar

e of

hou

seho

lds

(%) Poverty

Extreme poverty

Green bean export production in Senegal: Participants – whether as contract farmers or as farm workers in estates –

had higher income than non participating households

Green bean export production in Senegal: Participants – whether as contract farmers or as farm workers in estates –

had higher income than non participating households

48

Agricultural population transitions: the need to prepare surplus populations

Urban

Rural

0.0

1.0

2.0

3.0

4.0

5.0

1950 1970 1990 2010 2030

Bill

ion

peop

le

EAP SA

SSA

LAC

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1950 1970 1990 2010 2030

Bill

ion

peop

le

Populationin developing countries

will remain predominantly rural until 2020

Rural population has been declining in Latin America and East Asia

since 1995 due to slower population growth and rapid urbanization

49

The increasing land and water constraints on agriculture must be addressed

LACECA

MENA

EAP

SA

SSA

0

20

40

60

80

100

120

140

160

180

1961

1967

1973

1979

1985

1991

1997

2003

Inde

x of

cro

plan

d pe

r ag

popu

latio

n (1

961=

100)

Water scarcity affects millions in Asia and over 60 percent of population in the

Middle East and North Africa

Cropland per capita of agricultural population is falling in Asia and Africa

-

10

20

30

40

50

60

70

SSA SA EAP MENA ECA LAC

Perc

ent

(%)

% of population in absolute water scarcity

world development report 2008 agriculture for development

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