The Position of Agriculture in Developing Countries' Economy and Society and the Role of Investments. Lubos Smutka, Ph.D.

Transcription

1 The Position of Agriculture in Developing Countries' Economy and Society and the Role of Investments Lubos Smutka, Ph.D. CULS in Prague

2 Agriculture is the mother of all arts. When it is well conducted, all other arts prosper. When it is neglected, all other arts decline. Xenophon, ( BC)

3 For developing countries agriculture is connected with their economy, population, culture, policy and rural areas development Growth in agriculture is interconnected with the growth of Economy and Poverty alleviation Investments (both public and private) play a very important role in developing countries agriculture

4 Population = 7 bil. World Almost 1 bil. People living around the world suffer because of undernurishment 80% of world population = developing countries 20% of world population = developed countries USA+JAP+EU = 50% world GDP 70% of world population live under world GDP/cap average value, 20% of them live for less then 2 USD/day

5 Population Growth

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8 Germany: The Melander family of Bargteheide - 2 adults, 2 teenagers Food expenditure for one week: Euros or $500.07

9 Chad: The Aboubakar family of Breidjing Camp - 3 adults, 3 kids Food expenditure for one week: 685 CFA Francs or $1.23

10 Agriculture One of the most important activity in developing countries

11 Developing countries

12 Population and agriculture

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14 World Agriculture World agricultural production and population development in Years 2006 agricultural production (billion tonnes) population (billion inhabitants)

15 Agricultural and Food Production Development

16 Food production per capita

17 Demand for food in relation to income development

18 Developed vs. Developing countries Developed countries share in global agricultural production cc. 1/3, share in total value of global trade in agricultural products 2/3 and only 20% of global population, cc 2% of all undernourished Developing countries 4/5 of total population

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20 Price development of selected agrarian commodities in

21 Food Security Risk

22 Current Situation

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24 THE REASONS OF BAD SITUATION IN DEVELOPING COUNTRIES S AGRICULTURE I. Economic Reasons -Liberalization -Price development -Global food market and the role of distributers -Investment Policy -Energy policy II. Political Reasons -instability - wars and internal conflicts III. Global environment problems -Climate changes -Unsustainable natural sources exploitation

25 Investments

26 Sources of Investments in Agriculture

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39 A number of trends have been cited as key drivers which have increased investor s and the public s awareness and interest in the sector, including: the dramatic rise in commodity prices since 2006 (attributed to increased global demand for food while crop yield increases have flattened resulting in decreasing carry-out stocks); increased consumption of animal protein and processed foods in developing economies driven by growing populations with rising disposable incomes and a dramatic demographic shift from rural areas to urban agglomerations; competition for land use and pressure on resources required for crop production (urbanization encroaching on arable land, shrinking surface and ground water and the impact of climate change); the economic downturn beginning in 2008 which has compelled investors to seek out real assets and opportunities to diversify their investment portfolios.

40 As an emerging asset class, investment in farmland and agricultural infrastructure offers the following attractions: strong long-term macroeconomic fundamentals; attractive historical returns on land investment; a mix of current income and capital appreciation; uncorrelated returns with the equities market; a strong hedge against inflation.

41 Key policies to promote investments in agriculture Macroeconomic ensure undistorted exchange rate policy, removal of implicit taxes and market barriers, nondiscriminatory taxation, macroeconomic stability, and government credibility. Trade facilitate exports, participate in trade negotiations, reduce protection on importsubstitute goods with relatively low and uniform tariffs, and remove nontariff barriers (while providing protection from acute price volatility). Labor ensure agricultural employment meets core labor standards, especially with regard to child labor, hazardous work, and equal employment opportunities for women. Competition reevaluate the role of marketing boards, promote competition in input markets, establish labeling regulations for grades and standards. Environment/natural resource use establish sustainable management, internalize externalities where possible, and develop markets for pollution and carbon credits. Land develop land markets, security of tenure, titling and recording of land transactions, and land reform for fair distribution of land ownership. Technology maintain public good research activities and foster private sector participation in research and extension. Welfare and food security establish social safety net programs to cope in times of extreme price changes and natural disasters.

42 Principles for for Responsible Investments in Agriculture Principle 1: Existing rights to land and associated natural resources are recognized and respected. Principle 2: Investments do not jeopardize food security but rather strengthen it. Principle 3: Processes relating to investment in agriculture are transparent, monitored, and ensure accountability by all stakeholders, within a proper business, legal, and regulatory environment. Principle 4: All those materially affected are consulted, and agreements from consultations are recorded and enforced. Principle 5: Investors ensure that projects respect the rule of law, reflect industry best practice, are viable economically, and result in durable shared value. Principle 6: Investments generate desirable social and distributional impacts and do not increase vulnerability. Principle 7: Environmental impacts of a project are quantified and measures taken to encourage sustainable resource use, while minimizing the risk/magnitude of negative impacts and mitigating them.

43 Sustainable investments Sustainable agriculture integrates environmental health, economic viability, and social equity to ensure long-term productivity of natural resources and improved livelihoods. It helps reduce the risks in developing countries of complex problems like climate change and water scarcity important because agriculture constitutes approximately 70 percent of water consumption in the developing world, increasingly competing with demand for domestic, industrial, and ecosystem services. Improving soil quality, while reducing erosion, salinization, and other forms of degradation to achieve greater resilience to drought, better fertilizer efficiency, and reduced greenhouse gas emissions. Minimizing the use of pesticides and herbicides by applying integrated pest management, crop rotation, and crop diversification. Employing environmental management systems to ensure proper treatment of solid waste, manure, and waste water. Ensuring the safe storage, application, and disposal of agricultural chemicals. Maintaining habitats to support wildlife and conserve biodiversity.

44 Solidarity (redistribution) Solution Economic Level Infrastructural Level Labor level Social Level Political Level Environmental Level Complex approach

45 Thank You Very Much for Your Attention Ass. Prof. Ing. Lubos Smutka, Ph.D. Department of Economics CULS in Prague