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WASHINGTON, DC, October 19, 2007 – The latest World Development Report says greater investment in agriculture in transforming economies, most of which are in Asia, is vital to the welfare of 600 million rural poor people living in those countries.
Titled ‘Agriculture for Development’, the report warns that the international goal of halving extreme poverty and hunger by 2015 will not be reached unless neglect and underinvestment in the agricultural and rural sectors over the past 20 years is reversed.
“Rural poverty accounts for an extraordinary 82 percent of total poverty in transforming countries,” said Robert B. Zoellick, World Bank Group President. “A greater focus on agriculture is essential when considering population pressures, declining farm sizes, water scarcity and environmental contamination, and the need to develop lagging high poverty areas.”
In transforming economies such as China, India and Morocco, agriculture contributed an average 7 percent to growth in GDP between 1995 and 2003, though the sector accounts for about 13 percent of the economy and employs just over half the labor force. The report recommends that in these countries, where 2.2 billion people live in the countryside, the agricultural agenda should focus on reducing the disparity between rural and urban incomes and raising the incomes of the rural poor.
According to the WDR, for the poorest people, GDP growth originating in agriculture is about four times as effective in reducing poverty as GDP growth originating outside the sector.
“Agricultural growth has been highly successful in reducing rural poverty in East Asia over the past 15 years,” said Francois Bourguignon, World Bank Chief Economist and Senior Vice President, Development Economics. “The challenge is to sustain and expand agriculture’s unique poverty-reducing power, especially in South Asia where the number of rural poor people is still rising and will likely exceed the number of urban poor for at least another 30 years.”
The report says agriculture can provide pathways out of poverty for millions of rural poor who would otherwise be left behind in transforming economies. It says one way out is through a high-value agricultural revolution. Incentives to diversify into high-value horticulture, poultry, fish and dairy products could be provided via pricing reforms and an overhaul of subsidy supports for cereals.
For its part, the World Bank is committed to increasing its support for agriculture and rural development, following a decline in lending in the 1980s and 1990s. In FY07 commitments reached $3.1 billion, marking an increase for the fourth straight year.
According to the report, the livelihoods of subsistence farmers can be improved by increasing the productivity of staple crops in lagging regions, a move that would require major investments in soil and water management and in agricultural research. It also calls for an improved investment climate for agribusiness.
“Rapidly transforming economies must move from the green revolution to focus on new high-value agriculture—with fast-growing urban incomes and demand for high-value products in cities becoming the drivers of agricultural growth and poverty reduction,” said Alain de Janvry, Co-Team Leader on the report. “Globally, countries must deliver a level playing field for trade, while farmer organizations and other local groups need more say in setting policies.”
The report also says that a major priority for transforming economies should be to reduce the environmental footprint of intensive agriculture, especially in agrochemical and animal waste production. Given concerns over water scarcity in transforming economies, the report calls for reform of institutions dealing with irrigation and the removal of water and electricity subsidies.
For the poorest of the poor in rural areas, the report advocates improving the investment climate for rural nonfarm business and job schemes in rural areas. Job programs could entail building rural roads, planting trees in denuded areas, and working to de-silt canals and ponds.
The 2008 WDR uses a typology of countries based on the contribution of agriculture to overall growth, 1990-2005 and the share of rural poor in the total number of poor (2002 US$2-a-day level). In agriculture-based countries (mostly Africa), agriculture contributes asignificant(>20%) share of overall growth. In transforming countries (mostly in Asia), nonagricultural sectors dominate growth but a great majority of the poor are in rural areas. In urbanized countries (mostly in Latin America and Europe and Central Asia), the largest number of poor people are in urban areas, although poverty rates are often highest in rural areas.