World development report 2008: Agriculture for Development docx

Agriculture for

Development

world development report 2008

world development report2008

Agriculture for

Development

world development report2008

Agriculture for

Development

THE WORLD BANK

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© 2007 The International Bank for Reconstruction and Development / The World Bank

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Washington DC 20433

Telephone: 202-473-1000

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E-mail: [email protected]

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1 2 3 4 5 10 09 08 07

This volume is a product of the staff of the International Bank for Reconstruction and Devel￾opment / The World Bank. The fi ndings, interpretations, and conclusions expressed in this

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fax: 202-522-2422; e-mail: [email protected].

Cover design by Chris Lester of Rock Creek Strategic Marketing and Bill Pragluski of

Critical Stages.

Typesetting by Precision Graphics.

Printed in the United States by Quebecor World.

Cover photos by World Bank staff members, clockwise from top left: milk thermometer,

Lillian Foo; wheat threshing, Alexander Rowland; Holstein cow, Lillian Foo; supermarket

beans, Lillian Foo; Andean woman and baby at market, Curt Carnemark/World Bank

Photo Library; cotton plant, Arne Hoel.

Softcover Hardcover

ISBN-13: 978-0-8213-6807-7 ISBN-13: 978-0-8213-6808-4

ISSN: 0163-5085 ISSN: 0163-5085

eISBN-13: 978-0-8213-6809-1 DOI: 10.1596/978-0-8213-7235-7

DOI: 10.1596/978-0-8213-7233-3

Foreword xiii

Acknowledgments xv

Abbreviations and Data Notes xvii

Overview 1

What can agriculture do for development? 2

What are effective instruments in using agriculture for development? 8

How can agriculture-for-development agendas best be implemented? 18

Part I What can agriculture do for

development? 26

1 Growth and poverty reduction in agriculture’s

three worlds 26

The structural transformation 27

The three worlds of agriculture for development 29

Agriculture’s development potential shortchanged 38

The political economy of agricultural policy 42

A new role for agriculture in development 44

focus A: Declining rural poverty has been a key factor in aggregate

poverty reduction 45

2 Agriculture’s performance, diversity,

and uncertainties 50

Productivity growth in developing countries drove agriculture’s

global success 50

Growth across regions and countries has been uneven 53

Differences in performance refl ect different underlying conditions 54

Opportunities for a new agriculture through diversifi cation 58

Future perspectives: confronting challenges and rising uncertainties 61

Conclusion—a continuing production challenge 68

focus B: Biofuels: the promise and the risks 70

Contents

v

3 Rural households and their pathways out of poverty 72

Three complementary pathways out of rural poverty: farming, labor,

and migration 73

The variation in rural households’ income strategies 74

Rural occupations and income sources 77

Household behavior when markets and governments fail: rational,

despite appearances 82

Rural household asset positions: often low and unequal 84

Pervasive risks and costly responses 89

Smallholder challenges to compete 90

Conclusions 92

focus C: What are the links between agricultural production and

food security? 94

Part II What are effective instruments for using

agriculture for development? 96

4 Reforming trade, price, and subsidy policies 96

Agricultural protection and subsidies in developed countries 96

Agricultural taxation in developing countries 98

Simulated gains from trade liberalization 103

Scope for achieving potential gains 110

Transitional support 112

Public investment for long-term development 114

Conclusions 116

5 Bringing agriculture to the market 118

Food staples: improving commodity trading and risk management 118

Traditional bulk export commodities: maintaining international

competitiveness 122

Higher-value urban markets: linking producers to modern supply chains 124

Higher-value exports: meeting product standards 128

Conclusion 133

focus D: Agribusiness for development 135

6 Supporting smallholder competitiveness through

institutional innovations 138

Land policies for secure rights and reallocating resources 138

Financial services for smallholders 143

Insurance to manage risk 147

vi CONTENTS

Developing effi cient input markets 150

Producer organizations in a context of value chains and globalization 153

Institutional innovations—still a work in progress 157

7 Innovating through science and technology 158

Genetic improvement has been enormously successful, but not everywhere 159

Management and systems technologies need to complement genetic

improvement 163

Investing more in R&D 165

Institutional arrangements to increase the effi ciency and effectiveness of

R&D systems 169

Using available technology better: extension and ICT innovations 172

Moving forward 176

focus E: Capturing the benefi ts of genetically modifi ed organisms for

the poor 177

8 Making agricultural systems more environmentally

sustainable 180

Drivers of resource degradation 181

Improving agricultural water management 182

Greening the green revolution 188

Managing intensive livestock systems 189

Reversing degradation in less-favored areas 190

Payment for environmental services 197

Conclusions 199

focus F: Adaptation to and mitigation of climate change in agriculture 200

9 Moving beyond the farm 202

Rural employment: a daunting challenge 202

Agricultural wage employment 205

Rising rural nonfarm employment 209

Wages and earnings in the rural labor market 212

Labor supply: migration and the urban economy 214

Schooling, training, and transition to the labor market 216

Providing safety nets to reduce vulnerability 219

A fi nal word on rural labor markets and migration: the need for

policy attention 221

focus G: Education and skills for rural development 222

focus H: The two-way links between agriculture and health 224

Contents vii

Part III How can agriculture-for-development

agendas best be implemented? 226

10 Emerging national agendas for agriculture’s

three worlds 226

New opportunities and challenges 226

The proposed approach 227

Agriculture-based countries—accelerating growth, poverty reduction,

and food security 229

Transforming countries—reducing rural-urban income gaps and

rural poverty 234

Urbanized countries—linking smallholders to the new food markets and

providing good jobs 238

Political, administrative, and fi nancial feasibility 242

Recognizing the policy dilemmas 243

11 Strengthening governance, from local to global 245

Changing roles: the state, the private sector, and civil society 246

Agricultural policy processes 248

Governance reforms for better policy implementation 251

Decentralization and local governance 254

Community-driven development 256

Aid effectiveness for agricultural programs 257

Progress on the global agenda 258

Moving forward on better governance for agriculture 265

Bibliographical note 266

Endnotes 269

References 285

Selected indicators 321

Selected agricultural and rural indicators 322

Selected world development indicators 333

Index 355

viii CONTENTS

Boxes

1 What is the future for the global food supply? 8

1.1 Rural population dynamics 29

1.2 Cross-country evidence on the effect of agricultural growth

on poverty reduction 30

1.3 Large countries have regional heterogeneity that replicates

the three worlds of agriculture 33

1.4 Agriculture’s comparative advantage in Sub-Saharan

Africa 34

1.5 A role for agriculture in Africa’s mineral-rich

countries 35

1.6 Supporting farmers without a strong fi scal base: lessons

from Thailand 36

2.1 The green revolution in food staples that didn’t happen:

Sub-Saharan Africa’s variegated palette 55

2.2 Population density and the defi nitions of “rural” 58

2.3 Why are there lagging regions in countries with high

agricultural growth? 59

2.4 The global environmental footprint of expanding

livestock 61

2.5 Substantial potential for expanding irrigation in Sub￾Saharan Africa—in the right way 65

3.1 Establishing the relative importance of the different

pathways 75

3.2 Constructing comparable measures of income across

countries 76

3.3 The challenge of drastic demographic changes from

selective migration 81

3.4 Returning to the farm in Zambia—subsistence agriculture,

AIDS, and economic crisis 86

3.5 New technologies and positive discrimination policies

reduce social inequalities in India 88

3.6 Pastoralists’ precarious livelihoods 89

3.7 Are farms becoming too small? 92

4.1 Types of instruments that distort trade 97

4.2 The political economy of agricultural reforms in developed

countries 99

4.3 Nominal rates of assistance 100

4.4 Signifi cant progress in reducing the antiagricultural bias in

China and India 102

4.5 The political economy of agricultural reforms in developing

countries 104

4.6 Simulating the effects of trade liberalization with global

models 105

4.7 Net buyers and net sellers of food staples within a

country 109

4.8 Examples of subsidies in India and Zambia 116

5.1 Impacts of road infrastructure on markets and

productivity 120

5.2 Innovative uses of information technology to link farmers

to markets in India and West Africa 121

5.3 Price stabilization through international trade: saving $200

million in Bangladesh 123

5.4 Zambia and Burkina Faso: contrasting experiences in

liberalizing domestic cotton markets 124

5.5 Linking small farmers to high-value chains: Three

approaches 129

5.6 Employment gains and reduced poverty in rural

Senegal 131

6.1 Benefi ts from community-driven land certifi cation in

Ethiopia 140

6.2 Improving the effi ciency of land administration services in

Georgia 141

6.3 How land rentals can increase productivity and equity in

China 142

6.4 Rental markets and the impact of restrictions in

India 143

6.5 Banrural SA: from ill-performing agrarian bank to

profi table public-private fi nancial institution 146

6.6 Mongolia’s index-based livestock insurance 149

6.7 Is there a rationale for fertilizer subsidies? 152

6.8 Thriving rural input supply retailers as agrodealers in

Africa 153

6.9 Producer organizations with international

memberships 155

7.1 When zero means plenty: the benefi ts of zero tillage in

South Asia’s rice-wheat systems 164

7.2 Using legumes to improve soil fertility 165

7.3 Stronger IPRs in developing countries: effect on small

farmers 167

7.4 Sub-Saharan Africa’s agricultural R&D challenge 168

7.5 Long-term capacity development in Ghana 169

7.6 IPR options to give the poor access to modern

science 171

7.7 Mexican farmers lead research through PRODUCE

foundations 172

7.8 Adding value to a poor farmer’s crop: cassava in Colombia

and Ghana 173

7.9 Private agribusiness and NGOs: leading ICT provision to

farmers in India 176

8.1 Restoring the northern Aral Sea—by doubling the Syr

Darya’s fl ow 185

8.2 Resource degradation in rice-wheat systems of South

Asia 188

8.3 Integrated pest management to control the Andean potato

weevil in Peru 189

8.4 Managing poultry intensifi cation in Thailand 190

Contents ix

x CONTENTS

8.5 Four trajectories: disappearing or rebounding forests,

misery or growth 193

8.6 Agroforestry parklands in Niger turn back the desert and

restore livelihoods 194

8.7 Two tales of community-driven management, watersheds,

and pastures 196

8.8 Managing drought and livestock in pastoral areas of the

Middle East and North Africa 197

9.1 Horticulture development in Maharashtra 209

9.2 A women’s cooperative in India 211

9.3 Child labor: pervasive in agriculture 219

9.4 The gradual but incomplete move toward cash-based food

aid 220

10.1 Four policy objectives of the agriculture-for-development

agenda form a policy diamond 228

10.2 Comprehensive Africa Agricultural Development

Program 230

10.3 Middle East and North Africa—agriculture for jobs and as a

safety net 235

10.4 Special features of agriculture in Europe and Central

Asia 240

11.1 Confl icts over land displace millions in Colombia 246

11.2 Translating vision into practice: a former minister’s view of

Uganda’s Plan for Modernizing Agriculture 249

11.3 Empowering producer organizations and developing a

vision for agriculture in Senegal 250

11.4 Vietnam’s progress in aligning budgets with sector

priorities 251

11.5 Regional integration: opportunities and challenges in West

Africa 251

11.6 Making a green revolution through vision and

leadership 253

11.7 Delivering international public goods 262

11.8 Global fi nancing for climate change adaptation and

mitigation—the urgency of addressing the needs of

vulnerable countries and small-scale farmers 263

Figures

1 The number of poor rose in South Asia and Sub-Saharan

Africa from 1993 to 2002 ($1-a-day poverty line) 3

2 Agriculture’s contribution to growth and the rural share in

poverty distinguishes three types of countries: agriculture￾based, transforming, and urbanized 5

3 GDP growth originating in agriculture benefi ts the poorest

half of the population substantially more 6

4 Public spending on agriculture is lowest in the agriculture￾based countries, while their share of agriculture in GDP is

highest 7

5 Developing countries are taxing agricultural exportables

less 11

6 Domestic consumption and exports of high-value products

in developing countries are growing rapidly 13

7 The yield gap for cereals between Sub-Saharan Africa and

other regions has widened 15

8 Agriculture and deforestation are heavy contributors to

greenhouse gas emissions 17

9 The four policy objectives of the agriculture-for￾development agenda form a policy diamond 19

10 Agricultural growth in Sub-Saharan Africa has increased as

macroeconomic conditions improved 20

11 The urban-rural income disparity has increased in most of

the transforming countries 21

12 Agriculture-based and transforming countries get low

scores for governance 23

1.1 Cereal yields are up and poverty is down in South Asia, but

cereal yields and poverty were unchanged in Sub-Saharan

Africa 27

1.2 As countries develop, the shares of GDP and labor

in agriculture tend to decline, but with many

idiosyncrasies 28

1.3 Agriculture-based, transforming, and urbanized countries

constitute agriculture’s three worlds 31

1.4 Price and wage effects dominated the long-run elasticity of

rural poverty to cereal yields in India, 1958–94 33

1.5 The ratio of food processing to agricultural value added

rises with incomes 37

1.6 Labor productivity has been a more important source

of growth in agriculture than in nonagriculture,

1993–2005 39

1.7 Macroeconomic policy and agricultural growth have

improved in Sub-Saharan Africa 40

1.8 Offi cial development assistance to agriculture declined

sharply between 1975 and 2004 41

2.1 Cereal yields rose, except in Sub-Saharan Africa 51

2.2 Modern inputs have expanded rapidly but have lagged in

Sub-Saharan Africa 52

2.3 Growth in agricultural GDP per agricultural population is

lowest in Sub-Saharan Africa 53

2.4 Stagnation in Sub-Saharan African agriculture may be

over 54

Contents xi

2.5 There are big differences across regions in agricultural

potential and access to markets 57

2.6 Per capita food consumption in developing countries is

shifting to fruits and vegetables, meat, and oils 60

2.7 High value exports are expanding rapidly in developing

countries 61

2.8 Slower growth in cereal and meat consumption is projected

for the next 30 years 62

2.9 Developing countries will become even bigger markets for

cereals exported largely by developed countries 63

2.10 Arable and permanent cropland per capita of the

agricultural population is falling in Sub-Saharan Africa and

South Asia 63

2.11 Water scarcity affects millions of people in Asia and the

Middle East and North Africa 64

2.12 Growth rates of yields for major cereals are slowing in

developing countries 67

2.13 Exploitable yield gaps are high for maize in Africa 67

3.1 Real per capita income varies widely for each livelihood

strategy 77

3.2 In most countries, the vast majority of rural households

participate in agriculture 78

3.3 Sources of income vary between poor and rich 79

3.4 Women’s reported participation in agricultural self￾employment relative to men’s varies by region 80

3.5 Rural-urban gaps in educational attainment are

large 84

3.6 Farm size distributions are often bimodal 87

3.7 Yields on small farms lag behind large farms in staples in

Brazil and Chile 91

4.1 Progress has been slow in reducing overall support to

agricultural producers in the OECD, but there has been

some move to less-distorting “decoupled” payments 97

4.2 For agriculture-based countries, net agricultural taxation

fell in 9 of 11 countries 100

4.3 Developing countries are taxing exportables less 101

4.4 For transforming countries, 9 of 10 either increased

protection or reduced taxation 102

4.5 For urbanized countries, 6 of 7 either increased protection

or reduced taxation 103

4.6 Estimated real international commodity price increases

following complete trade liberalization 106

4.7 The corresponding gain in the estimated trade shares of

developing countries 106

4.8 Latin America and Sub-Saharan Africa are expected to

have higher agricultural output growth under global trade

reforms 107

4.9 Subsidies have risen while public goods investments have

declined in India 115

5.1 Layers of intermediaries characterize Ghana’s maize

markets 119

5.2 Wholesale prices in Ethiopia fl uctuate within a wide

import-export parity band 122

5.3 World prices for traditional bulk exports continue to

decline 123

5.4 Food consumption expenditures in Indonesia are shifting

from cereals to higher-value and prepared foods 125

5.5 Rising per capita incomes drive supermarket

growth 125

5.6 Transport, handling, and packaging are major costs for

French bean exports in Bangladesh 129

6.1 Credit-constrained rural households use fewer inputs and

have lower incomes 144

6.2 Transport costs make up about one-third of the farmgate

price of urea fertilizer in African countries, 2005 151

6.3 More than a third of Zambia’s 2004/05 public budget for

agriculture went to fertilizer subsidies 151

7.1 Improved varieties have been widely adopted, except in

Sub-Saharan Africa 159

7.2 Estimated returns to agricultural R&D are high in all

regions—averaging 43 percent 166

7.3 Financing for extension services, the traditional and the

new approach 175

8.1 Dependence on groundwater irrigation is highest in the

Middle East and South Asia 184

8.2 Groundwater aquifers in India are being depleted 186

8.3 With PES, degraded pasture has been converted to

sustainable land use in Nicaragua 198

9.1 Agriculture is not enough to absorb new rural

workers 203

9.2 The share of wage workers in agricultural employment rises

with per capita income 205

9.3 The share of wage labor in agricultural employment is

rising in many countries 206

9.4 Formal employment in Brazilian agriculture has become

more cyclical 207

9.5 Labor requirements are considerably higher for vegetables

than for cereals 209

9.6 Retail trade and services dominate nonfarm wage

employment 210

9.7 Most rural nonfarm enterprises have only one or two

workers, mostly self-employed, Indonesia, 2005 210

9.8 Wages are much higher in rural nonfarm employment

than in agricultural employment in India, Mexico, and

Uganda 212

9.9 For workers with no education, wages in agricultural and

rural nonfarm employment are not so different across

sectors 212

9.10 Agricultural wages have been declining in most Latin

American countries 213

9.11 Agricultural wages have been rising in most Asian and

African countries 214

xii CONTENTS

9.12 Labor productivity in rural nonfarm self-employment is

heterogeneous in Indonesia 215

9.13 Growth of manufacturing and service employment in

Mexico is a function of distance to an urban center with

more than 250,000 inhabitants 215

9.14 Average years of education in rural areas, by age 216

10.1 Policy diamond for agriculture-based countries 231

10.2 Policy diamond for transforming countries 237

10.3 Policy diamond for urbanized countries 241

11.1 Agriculture-based and transforming countries get low

scores for governance 245

11.2 Good fi ts to country-specifi c conditions for demand￾side and supply-side approaches are needed to improve

agricultural sector governance 252

Tables

1 Characteristics of three country types, 2005 5

1.1 Demographic and economic characteristics of three country

types, 2005 31

1.2 Poverty in three country types, 2002 32

1.3 Public spending in agriculture-based countries is

low 41

3.1 Changing market participation among farming households

in Vietnam 74

3.2 Typology of rural households by livelihood strategies in

three country types 76

3.3 Changes in farm size and land distribution 87

4.1 Nominal rates of assistance by commodity in developing

countries 101

4.2 Estimated cost distribution of current trade

policies 105

4.3 Illustrative poverty effects from agricultural trade reform in

developed and developing countries 108

5.1 Public and private options for strengthening farmer links to

the market 128

5.2 Public and private sector roles to enhance trade-related SPS

compliance and quality management capacity 132

7.1 Total public agricultural R&D expenditures by region, 1981

and 2000 167

7.2 Assets of public and private sectors in agribiotechnology

research 171

7.3 Ways of providing and fi nancing agricultural advisory

services 174

8.1 Agriculture’s environmental problems onsite and

offsite 181

9.1 Rural households’ diverse sources of income 204

9.2 Rural employment by sector of activity, selected

countries 205

9.3 Average years of education of rural 18–25 year olds, selected

countries 217

11.1 Types of global organizations and networks relevant for

agriculture 261

Maps

2.1 Agroecological zones in agricultural areas 56

2.2 Market access in agricultural areas of Africa, Asia, and

Latin America 56

8.1 Overexploitation has caused severe water stress in many

river basins 183

8.2 Many deforestation hotspots are in tropical areas 192

Foreword

xiii

Agriculture is a vital development tool for achieving the Millennium Development Goal

that calls for halving by 2015 the share of people suffering from extreme poverty and hun￾ger. That is the overall message of this year’s World Development Report (WDR), the 30th in

the series. Three out of every four poor people in developing countries live in rural areas,

and most of them depend directly or indirectly on agriculture for their livelihoods. This

Report provides guidance to governments and the international community on designing

and implementing agriculture-for-development agendas that can make a difference in the

lives of hundreds of millions of rural poor.

The Report highlights two major regional challenges. In much of Sub-Saharan Africa,

agriculture is a strong option for spurring growth, overcoming poverty, and enhancing food

security. Agricultural productivity growth is vital for stimulating growth in other parts of

the economy. But accelerated growth requires a sharp productivity increase in smallholder

farming combined with more effective support to the millions coping as subsistence farm￾ers, many of them in remote areas. Recent improved performance holds promise, and this

Report identifi es many emerging successes that can be scaled up.

In Asia, overcoming widespread poverty requires confronting widening rural-urban

income disparities. Asia’s fast-growing economies remain home to over 600 million rural

people living in extreme poverty, and despite massive rural-urban migration, rural poverty

will remain dominant for several more decades. For this reason, the WDR focuses on ways

to generate rural jobs by diversifying into labor-intensive, high-value agriculture linked to

a dynamic rural, nonfarm sector.

In all regions, with rising land and water scarcity and the added pressures of a globalizing

world, the future of agriculture is intrinsically tied to better stewardship of natural resources.

With the right incentives and investments, agriculture’s environmental footprint can be

lightened, and environmental services harnessed to protect watersheds and biodiversity.

Today, rapidly expanding domestic and global markets; institutional innovations in

markets, fi nance, and collective action; and revolutions in biotechnology and information

technology all offer exciting opportunities to use agriculture to promote development. But

seizing these opportunities will require the political will to move forward with reforms that

improve the governance of agriculture.

Ultimately, success will also depend on concerted action by the international develop￾ment community to confront the challenges ahead. We must level the playing fi eld in inter￾national trade; provide global public goods, such as technologies for tropical food staples;

help developing countries address climate change; and overcome looming health pandem￾ics for plants, animals, and humans. At stake are the livelihoods of 900 million rural poor,

who also deserve to share the benefi ts of a sustainable and inclusive globalization.

Robert B. Zoellick

President

World Bank Group