CAPITAL REQUIREMENTS FOR AGRICULTURE IN DEVELOPING COUNTRIES TO Josef Schmidhuber, Jelle Bruinsma and Gerold Boedeker 2

Transcription

1 Exper Meeing on How o Feed he World in 2050 Food and Agriculure Organizaion of he Unied Naions Economic and Social Developmen Deparmen CAPITAL REQUIREMENTS FOR AGRICULTURE IN DEVELOPING COUNTRIES TO Josef Schmidhuber, Jelle Bruinsma and Gerold Boedeker 2 TABLE OF CONTENTS Summary and conclusions... 2 Inroducion... 3 Mehodology and Measuremen: Wha has been measured, wha no, and how... 3 The Resuls Projeced capial socks and invesmen needs How resources will be pu o work: Performance indicaors for agriculural producion, capial socks, labour and land References Annex 1: Lis of counries included in he analysis Annex 2: Cumulaive invesmen requiremens over 2005/07 o 2050 in billion 2009 US$ by region LIST OF TABLES Table 1: Cumulaive invesmen over 2005/07 o 2050 in billion 2009 US$... 8 Table 2: Growh raes of agriculural producion, percen p.a Table 3: Cumulaive invesmen over 2005/07 o 2050 by region Table 4: Gross value of agriculural producion by region (billion 2004/06 ICP$) Table 5: Gross value of producion per agriculural labourer (2004/06 ICP$ per person) Table 6: Aggregae self-sufficiency raios (in percen) by region Table 7: Agriculural labour force (millions) by region Table 8: Capial sock per worker (in 2009 US$1000 per person) Table 9: Harvesed land per agriculural labourer (ha per person) Table 10: ICORs and invesmen raes in primary agriculure LIST OF BOXES Box 1: Pas FAO esimaes of invesmen requiremens... 4 Box 2: Lis of capial iems included... 5 Box 3: Derivaion of invesmen requiremen esimaes... 6 LIST OF FIGURES Figure 1: Capial socks in primary agriculure and downsream indusries, sub-saharan Africa and Eas Asia... 8 Figure 2: Toal annual (public and privae) invesmen requiremens in developing counries... 9 Figure 3: Regional income rajecories: agriculure versus non-agriculure Paper presened a he FAO Exper Meeing on How o Feed he World in 2050, June 2009, Rome. 2 Global Perspecive Sudies Uni, FAO. The views expressed in his informaion produc are hose of he auhor(s) and do no necessarily reflec he views of FAO.

2 2 Exper Meeing on How o Feed he World in 2050 SUMMARY AND CONCLUSIONS June 2009 Cumulaive gross invesmen requiremens for developing counries agriculure add up o a oal of nearly US$9.2 rillion over he nex 44 years (2005/ ). This amoun would be necessary o remain consisen wih FAO s long-erm oulook for global agriculure (World agriculure: owards 2030/50). Broken down by ype of invesmen, more han US$5.5 rillion or 60 percen of he oal would be required o replace he exising capial sock (or new capial iems ha are being added and subsequenly depreciaed over he 44 year period o 2050); he res, i.e. abou US$3.6 rillion would need o be added o he exising capial sock o increase (nearly double) oupu and raise produciviy. Broken down by aciviy, primary agriculure accouns for abou US$5.2 rillion of he oal, while he remaining US$4.0 rillion is absorbed by downsream needs (processing, ransporaion, sorage, ec.). Wihin primary agriculure, mechanizaion accouns for he single bigges invesmen iem (25 percen) followed by expansion and improvemen of irrigaion (nearly 20 percen). Broken down ino annual amouns, he cumulaive invesmens resul in yearly averages of abou US$210 billion gross and US$83 billion ne, respecively. All esimaes, gross and ne, cumulaive and annual, are in consan 2009 dollars. A sriking feaure of he oulook is ha he annual ne addiions o he capial sock (growh invesmens) exhibi a noiceable decline over ime, which resuls in a slow-down in he annual ne capial requiremen. These ne invesmens accoun for 55 percen of he oal a he beginning of he projecion period and for merely 30 percen owards The change in ne invesmens reflecs a number of differen facors. Firs and obviously, incremenal producion needs o decline alongside declining incremenal needs. Parly offseing his decline is a shif owards more capial-inensive forms of producion wih a growing replacemen of labour by capial. A hird, facor, again supporing he declining ne capial needs is a somewha higher overall efficiency of inpu use in he fuure. Growh accouning resuls suggess ha overall growh will be characerised by a growing subsiuion of labour wih capial and moderae oal facor produciviy growh. There are, however, marked regional differences. In Lain America, for insance, growh will be capial and produciviy-based, wih negaive labour conribuions. In sub-saharan Africa, by conras, growh will be heavily labour and moderaely capial based, wih limied efficiency gains. The analysis of performance indicaors suggess ha here are marked regional differences in he capaciy of agriculure o generae incomes and reduce povery. Projecions for he gross value of producion for insance sugges ha revenues generaed by an agriculural labourer in sub-saharan Africa will rise only by 50 percen over he nex four decades. The expeced growh in food markes will no suffice o lif revenues significanly. The analysis of expeced revenues, capial socks and land available per labourer suggess ha oo many people in sub-saharan Africa will remain dependen on a labour-inensive, capial-saving form of small-scale agriculure, in which oo many farmers will have oo few resources and revenues o share. The povery reducion poenial in he projeced revenue/capial sock rajecory in sub-saharan Africa should hus be limied. This poses quesions as o wha alernaive income sources could be apped. Emerging opions include new opporuniies ha arise from higher energy prices and a producion of bioenergy feedsocks; income opporuniies from he provision of environmenal services; or a greaer expor orienaion of producion. All hree growh opions call for a know-how and a capial-inensive form of agriculure and hus run couner o he facor endowmen ha characerises Africa s smallholder srucure. One opion o overcome hese consrains would be hrough increased invesmens in resource-pooling insiuions. The available capial sock per worker was idenified as an imporan explanaory variable for iner-regional differences in performance. A farmer in Lain America has on average 10 imes more capial available han his colleague in sub-saharan Africa. Behind he absrac aggregae of capial per farmer are a large range of ools and equipmen ha make agriculure in Lain America so much more producive han in Africa. I includes more and beer mechanizaion, racors, illers and combines, irrigaion, sorage and processing plans, and oher elemens of an efficien downsream secor. Moreover, Lain American farmers have muliples of suppor capial in beer infrasrucure, research insiuions, available roads, or elecriciy. Rural roads per hecare for insance amoun o km in Lain America compared o km, i.e. less han half

3 Capial requiremens for agriculure in developing counries o Schmidhuber e al. ha disance in sub-saharan Africa. Likewise, rural elecriciy supplies per worker are 50 imes higher in Lain America compared o sub-saharan Africa. INTRODUCTION This paper is an inerim repor on ongoing work a FAO o esimae invesmen requiremens in developing counries agriculure. The esimaes presened in he paper are far from final and he narraive of fuure rends and developmens is far from complee. Esimaes cover mos capial iems, wihou however singling ou areas for public involvemen, neiher of domesic nor of foreign funding sources. Nor has any aemp been made o gauge incremenal invesmen needs required o aain cerain developmen goals such as MDG-1 or he arge se by he World Food Summi. This also means ha imporan invesmen areas such as agriculural research or rural infrasrucure are excluded. These will be covered in laer work. Likewise, an iem of major concern o public invesmen, namely ensuring access o food for he mos needy (e.g. hrough social safey nes) 3 is no deal wih here. Insead, he esimaes presened in his paper embody a broad range of capial iems needed o achieve he 2030 and 2050 crop and livesock producion levels in developing counries as foreseen in he baseline oulook of he laes FAO perspecive sudy (FAO, 2006a). The majoriy of hese capial iems relae o primary agriculure. In addiion, a number of aciviies covered relae o downsream indusries of primary agriculure, noably various forms of processing, sorage and markeing. The ne addiions o and replacemen of obsolee capial socks make up oal invesmen requiremens. Tradiionally, he lion s share of capial needs was covered by privae farmers and by enrepreneurs in he relaed upsream and downsream indusries (including capial oulays in non-moneized forms). Some capial iems such as irrigaion developmen, rural infrasrucure and agriculural research, will require public inervenion. However, no effor has been made o measure he needed or desired level of public secor engagemen. This can vary widely across capial iems and counries, and any quaniaive assessmen would need o sar from a deailed and disaggregaed basis. One such assessmen is planned as a follow-up o his assessmen. I will be based on he invesmen assessmen and he baseline projecions underlying his paper and will gauge he incremenal public capial requiremens needed o reach a more ambiious oucome/developmen goal, such as a complee eradicaion of hunger wihin a shorer ime span. METHODOLOGY AND MEASUREMENT: WHAT HAS BEEN MEASURED, WHAT NOT, AND HOW Impued versus acual The basic goal of his assessmen was o gauge he amoun of capial ha will be required o produce he oal amouns of crops and livesock producs projeced in FAO s long-erm oulook o 2030 and 2050, i.e. he hecares of land o be developed, o be irrigaed, o be pu under permanen crops; he numbers of racors, combines, implemens or merely handools, he increases in livesock herds, sheds, ec. This means ha all invesmens are impued esimaes, no necessarily acual invesmens. Likewise, capial socks are impued and no necessarily acual, dio for changes in capial socks, i.e. ne invesmens and depreciaion. 3 Accouning for over a fifh of he incremenal annual public invesmen as esimaed in he FAO (2003) Ani-Hunger Programme.

4 4 Exper Meeing on How o Feed he World in June 2009 Box 1: Pas FAO esimaes of invesmen requiremens The 1981 publicaion Agriculure: Toward 2000 (FAO, 1981) gave an esimae of average annual gross invesmen over he 20 year period for 90 developing counries (excluding China) of US$69 billion in 1975 dollars, US$47 billion for invesmen in primary agriculure (of which abou a hird for invesmen in replacemen) and US$22 billion for invesmen in supporing capial sock. Separae esimaes are given for (ne) invesmen in foresry and fisheries. These invesmen esimaes refer o oal invesmen required, i.e. he sum of privae and public invesmen. The 1988 FAO sudy World agriculure: oward 2000 is an updae of he 1981 sudy and follows he same mehodology. For 93 developing counries (excluding China) he esimae of annual (average over he 17 year period 1982/ ) gross invesmen amouns o US$88 billion in 1980 dollars. Invesmens in primary agriculure are esimaed a US$50 billion (nearly 60 percen for invesmen in replacemen), and invesmen in supporing capial sock a US$38 billion. No esimaes are given for invesmen in foresry and fisheries. The invesmen esimaes of he Technical Background documen No 10 for he 1995 World Food Summi, Invesmen in agriculure: evoluion and prospecs, were based on he FAO sudy Alexandraos, N. (1995), World agriculure: oward The esimaes given in his publicaion refer o he group of 93 developing counries and are hose needed o achieve he producion projecions of he laer publicaion (i.e. he WFS arge is no considered and 637 million people are lef undernourished in 2010). The esimae for annual (average over ) gross invesmen in 1993 dollars is US$ 129 billion, of which US$86 billion in primary agriculure (US$61 billion for replacemen) and US$43 billion in suppor (or pos-producion) invesmen. To his are added US$37 billion worh of invesmens in public suppor services (mainly echnology generaion and ransfer) and rural infrasrucure, wo caegories no covered in earlier sudies. The oal hen amouns o US$166 billion of which abou hree-quarers (US$125 billion) is privae and one-quarer (US$41 billion) is public invesmen. The nex FAO exercise giving invesmen esimaes (of a slighly differen naure) was: FAO (1999), Invesmen in agriculure for food securiy: Siuaion and resource requiremens o reach he World Food Summi objecives, CFS:99/Inf 7 4. The esimaes are an updae of he 1995 esimaes (sill for developing counries only) bu his ime refer o wha is needed o reach he WFS arge of halving he number of undernourished people in They are: an annual (average over ) gross invesmen in 1995 dollars of US$140 billion, of which US$93 billion (US$66 billion for replacemen) in primary agriculure and US$47 billion in suppor (or posproducion) invesmen. To his is added an US$40 billion of invesmen in public suppor services and rural infrasrucure. The oal amouns o US$180 billion. The laes FAO publicaion giving invesmen esimaes is FAO s (2003), Ani-Hunger Programme. The esimaes given refer o wha is needed o reach he WFS arge in They cover only invesmen incremenal o expeced fuure public invesmen. Annual (average over ) invesmen in 2002 dollars of US$23.8 billion of which US$2.3 billion for produciviy improvemens, US$7.4 billion for naural resource developmen, US$7.8 billion for rural infrasrucure, US$1.1 billion for knowledge generaion and US$5.2 billion for ensuring access o food. These impued invesmens and capial socks can differ from acual invesmens and capial socks for a number of reasons. If, for insance, farmers work wih excessively depreciaed capial socks (old racors, illers, hreshers, sheds, ec.), acual capial socks would be lower han he impued ones and vice versa. Conversely, some invesmens may no enirely or no always ranslae ino moneary expendiures. For insance, when a farmer builds a sorage faciliy for his cereal crop or a shed for his grazing animals, hese aciviies may no or no fully be refleced in he acual value of he capial socks; hey are, however, par of 4 Also repored in: FAO (2001), Mobilizing resources o figh hunger, CFS:2001/Inf. 7.

5 Capial requiremens for agriculure in developing counries o Schmidhuber e al. he impued capial as hey absorb resources wih posiive opporuniy coss and reflec a shif away from consumpion ino invesmen. As a consequence, he esimaed invesmen numbers and capial socks may no or no always correspond o hose from oher sources such as naional accouns. While his means ha deviaions from acual capial socks are unavoidable in he shor-run, impued and acual capial socks and invesmen requiremens should converge in he longer-run, a he laes afer one full depreciaion period of he iem wih he longes lifespan. The oulook o 2050 should hus be sufficienly long o ensure convergence. A any rae, he advanage of he calculaion of impued capial socks is ha he resuls are comparable across counries and over ime. Invesmen areas and uni coss In order o derive capial needs from producion projecions, changes in agriculural oupus were linked o 26 differen capial iems. For every capial iem, specific uni coss and a specific lifeime and hus depreciaion periods were chosen. The impued values are obained by muliplying he physical quaniies (hecares, numbers, ec. in he base year and he years 2030 and 2050) wih an average uni cos expressed in consan 2009 US dollars. While he calculaions have been underaken on he basis of 93 individual developing counries, specificiy for uni coss and depreciaion periods has been limied o regional averages. Of he 26 capial iems, 14 relae o primary agriculure (including some non-convenional ones such as "esablishmen of permanen crops", "herd increases" and "working capial") and 12 relaed o he agriculural downsream secor (see Box 2 for a lising of he capial iems). Invesmen in agriculural downsream aciviies covers sorage, processing and markeing of agriculural producs. They are included for he sake of compleeness alhough hey may no always or enirely be aribuable o agriculure and agriculural developmen. No covered are invesmens relaed o manufacuring and disribuion of agriculural inpus such as ferilizer. Likewise, expendiures in agriculural research could no be esimaed as par of he invesmen requiremens. For all invesmen iems, boh primary and downsream secors, uni coss have been idenified. Obviously, he absolue levels of he invesmen requiremens are coningen on facors such as he assumed uni coss, he capial (inpu) absorbed per uni of agriculural aciviy or he assumed lifespan of a capial iem 5. Depreciaion and gross invesmen The addiions in he capial socks beween he base year (2005/07) and he years 2030 and 2050 amoun o he cumulaive ne invesmen requiremens over he projecion periods. Subsequenly, requiremens for replacemen invesmen are derived for he capial goods which mus be replaced periodically. For each capial iem a specific lifeime has been idenified. For example, permanen crops are assumed o have a life span of 25 years, racors one of 15 years, and so on. For many capial iems replacemen invesmens exceed ne invesmens. Esimaes for replacemen invesmen are added o he ne requiremens o obain esimaes of gross invesmen (see Box 3 for a summary explanaion). Box 2: Lis of capial iems included Crop producion: Developmen of arable land under crops Soil and waer conservaion Flood conrol Expansion and improvemen of irrigaion Esablishmen of permanen crops (cirus, oher frui, oil palm, coconus, cocoa, coffee, ea and rubber) Mechanizaion (racors and equipmen) Oher power sources and equipmen (increase in number of draf animals; equipmen for draf animals; handools) Working capial (50 percen of he increase in he cos of ferilizer and seed) 5 Invesmens in physical unis are, in general, more robus han hose in moneary erms as i proves difficul o assemble appropriae uni value coss for he various invesmen iems.

6 6 Exper Meeing on How o Feed he World in 2050 Livesock producion: Increase in livesock numbers (cale and buffaloes, sheep and goa, pigs, poulry) Housing and equipmen for commercial producion of pigs and poulry Developmen of grazing land Downsream suppor services: Invesmen in milk producion, processing Invesmen in mea producion, processing Dry sorage (cereals, pulses, oilseeds, cocoa, coffee, ea, obacco and sugar) Cold sorage (bananas, fruis and vegeables, livesock producs) Rural markeing faciliies Assembly and wholesale markes for fruis and vegeables Milling of cereals Processing of oilseeds, sugar crops, fruis and vegeables Ginning of seed coon Oher processing June 2009 Counry coverage Capial sock and invesmen calculaions are performed for he 93 developing counries covered in he FAO 2006 sudy (see he lis of counries in Annex 1; noe ha counries in ransiion in Cenral Asia are no included). Endogeneiy and echnology shifs The projecions of fuure invesmen needs are linked o and derived from he projecions of 40 individual agriculural producion aciviies, assuming cerain echnologies and/or complee echnology packages (froniers). Over an oulook horizon of more han 40 years, invesmens requiremens will no only be defined by a given, curren sage of echnology, bu also encompass shifs o new froniers. Depending on facors such as he farm size or opporuniy coss of farm labour, farmers will shif o new echnology levels. While imporan, hese shifs have no been aken ino accoun in an explici manner. Insead, links have been esablished indirecly by associaing oupu levels (e.g. crop yields) wih a cerain package of inpu requiremens; in many cases, his is done in a sep-wise linear manner and is mean o emulae he shifs in echnology. To make assumpion more ransparen and hese echnology shifs more explici, fuure revisions herefore will aemp o include such fronier shifs direcly, wih links o changes in he overall level of developmen and/or farm size. Box 3: Derivaion of invesmen requiremen esimaes The projecions o 2050 cover 40 agriculural producion aciviies (34 relaing o crop producion and 6 relaed o livesock producion) in 93 developing counries. Each aciviy draws on a cerain amoun of curren inpus and capial sock services. For each of he 26 capial iems disinguished, he value of capial sock, CS, is calculaed for each year covered in he model ( = 2005/07, 2010, 2015, 2030 and 2050) muliplying he physical quaniy, Q (hecares, numbers, ec.) wih an average uni cos, P, expressed in 2009 US dollars. For each capial iem, he ne invesmen in any year, I n, is defined as he ne increase in he value of capial sock over ha year, or as he growh of capial sock, g, imes capial sock, CS, a he beginning of he year. The growh rae is esimaed as he annual growh of capial sock over he period preceding he year in quesion (excep for he base year): n I = g CS (1) Replacemen invesmen in any year is equal o he gross annual invesmen of L years earlier, where L is he economic life of he capial good in quesion. Gross annual invesmen, I g, is defined as he sum of ne annual invesmen and replacemen invesmen in he same year: g n g I = I + I (2) L

7 Capial requiremens for agriculure in developing counries o Schmidhuber e al. Equaion (2) can be approximaed as: I g n I = L ( g ) (3) Cumulaive ne invesmen CI n over any of he periods disinguished in he model (2005/07 o 2010, 2010 o 2015, 2015 o 2030 ad 2030 o 2050) is defined (and calculaed) as he ne increase in capial sock over ha period: n CI = CS CS 1 (4) Cumulaive gross invesmen is defined (and calculaed) in a manner similar o annual gross invesmen: n g CI CI = L g ( ) (5) Toal annual and cumulaive ne and gross invesmens are simply derived by adding up over he 26 capial iems. Public and/or privae No disincion has been made wih respec o he poenial source of he required capial. Therefore, he amouns include all poenial sources; ha is privae and public boh of foreign and domesic provenance. The way capial socks are financed currenly suggess ha he larges par of oal invesmens comes from privae domesic sources. And he selecion of capial iems in his assessmen suggess ha privae sources (domesic and foreign) would be he prime source of capial, a leas if i is assumed ha public invesmens should be limied o aciviies where public goods are produced (hunger and povery reducion, environmenal susainabiliy, social cohesion, ec.). The public hand can play a role eiher in funding hese invesmens direcly or by helping link, pool and promoe privae flows. Typically, such invesmens include he creaion and mainenance of infrasrucure, large-scale irrigaion schemes, or research and developmen of new crop varieies and animal breeds. Depending on he level of public engagemen, hese invesmens can help arac furher privae flows (crowding in) or, if oo massive, replace privae engagemen (crowding ou effecs). Privae public parnerships would aim a maximising he former and minimising he laer. THE RESULTS Projeced capial socks and invesmen needs Provisional resuls for invesmen requiremens for primary agriculure and is downsream indusries in developing counries show ha he oal over he 44-year period 2005/07 o 2050 could amoun o almos US$ 9.2 rillion (2009 dollars), 57 percen of which for primary agriculure and he remainder for suppor services (Table 1). Wihin primary agriculure, abou a quarer of all capial needs sem from projeced mechanizaion needs and almos a fifh (18.5 percen) from a furher expansion and improvemen of irrigaion.

8 8 Exper Meeing on How o Feed he World in 2050 Table 1: Cumulaive invesmen over 2005/07 o 2050 in billion 2009 US$ ne depreciaion gross Toal for 93 developing counries oal invesmen in primary producion of which in crop producion Land developmen, soil conservaion and flood conrol Expansion and improvemen of irrigaion Permanen crops esablishmen Mechanizaion Oher power sources and equipmen Working capial of which in livesock producion Herd increases Mea and milk producion oal invesmen in downsream suppor services Cold and dry sorage Rural and wholesale marke faciliies Firs sage processing June 2009 Broken down by ype of invesmen, 60 percen or US$5.5 rillion will be needed o replace exising capial socks, he oher 40 percen or US$3.7 rillion would be growh invesmens and hus ne addiions o he exising capial sock. A deailed accoun of secor-specific invesmen projecions is available in Annex 2. The share of invesmens in primary agriculure is expeced o fall in all regions, again a considerably differen raes. Invesmens in downsream aciviies in urn rise in all regions. Perhaps surprisingly a firs sigh, he fases growh in downsream aciviies is expeced for sub-saharan Africa, albei from a relaively low absolue level. The region s food sysem is he leas maure and growh reflecs a gradual move away from a heavy reliance on primary producion only. Eas Asia, by conras, already has he mos maure sysem, higher levels of grain, sugar, mea and milk processing and hus exhibis he smalles growh in nonprimary growh, bu a much higher absolue levels (Figure 1). Figure 1: Capial socks in primary agriculure and downsream indusries, sub-saharan Africa and Eas Asia sub-saharan Africa Eas Asia billion US$ oal processing primary agriculure billion US$ processing primary agriculure

9 Capial requiremens for agriculure in developing counries o Schmidhuber e al. Figure 2: Toal annual (public and privae) invesmen requiremens in developing counries 250 Toal annual invesmen requiremens in developing counries (in 2009 US$) billion US$ GROSS DEPRECIATION NET A sriking feaure of he oulook is ha he annual ne addiions o he capial sock (growh invesmens) exhibi a noiceable decline over ime and resul in a slow-down in he annual ne capial requiremen. Growh invesmens accoun for 55 percen of he oal a he beginning of he projecion period and for merely 30 percen owards 2050 (Figure 2). For he aggregae of he developing counries as a whole, his reflecs a number of differen facors. Firs, and obviously, a declining incremenal producion need (Table 2), driven by declining populaion growh and growing saiaion levels of per capia consumpion for food and fibre, also drive down incremenal invesmen needs. For developing counries as a whole, overall agriculural producion grew a a rae of 3.5 percen over he las 46 years and is expeced o grow a a rae of less han half ha level over he nex 44 years. While he decline in producion dynamics suppors he projeced slow-down in capial needs, here will be a counervailing shif owards more capial-inensive forms of producion and a growing replacemen of labour by capial. This explains he more moderae decline in incremenal capial needs han is suggesed by he expeced levelling of oupu growh. And hird, here is he impac of a change in he overall efficiency of inpu use, or oal facor produciviy (TFP). This is derived as he residual elemen of oupu growh ha canno be explained by growing inpu use, i.e. neiher by changes in labour nor by changes in capial and land. While no TFP accouning is available for he pas, fuure TFP growh is expeced o be moderaely posiive for developing counries as a whole, albei a raes of considerable difference across regions.

10 10 Exper Meeing on How o Feed he World in 2050 Table 2: Growh raes of agriculural producion, percen p.a / / Developing counries idem, excl. China and India sub-saharan Africa Near Eas/Norh Africa Lain America and Caribbean Souh Asia Eas Asia June 2009 For he aggregae of all developing counries, he relaive imporance of hese facors (from 2005 o 2050), renders he following shares: (ne) change in capial: +71 percen, in agriculural labour: -16 percen, in land use: +25 percen, and in oal facor produciviy: +20 percen6. This suggess a moderae decline in he role of labour inpus and an equally moderae replacemen of labour wih capial. Obviously, he aggregae hides vasly divergen developmens in he various regions and for insance a much larger capial/labour subsiuion in Lain America (capial: +62 percen, labour: -73 percen, land: +49 percen, TFP: +62 percen) and no such shif a all in sub-saharan Africa (capial: +48 percen, labour: +59 percen, land: +28 percen, TFP: -35 percen). Colloquially pu, sub-saharan Africa would coninue o grow by ranspiraion, while Lain America could furher grow by efficiency gains or inspiraion. A breakdown by region suggess ha Asia would accoun for he larges par of global invesmen needs (57 percen); China and India alone accoun for some 40 percen. Lain America would absorb abou 20 percen and sub-saharan Africa and he Near Eas and Norh Africa region for he remaining 23 percen of capial needs (Table 3). Asia s high share reflecs he region s large agriculural base, is high overall oupu and is relaively capial-inensive forms of agriculural producion (irrigaion, mechanizaion, erracing, ec.). Growh raes for Asia, however, would be more modes. This is in sark conras o sub-saharan Africa, where he overall level of invesmen requiremens is expeced o be relaively modes, reflecing he region s generally labour-inensive, capial-saving forms of producion, while growh raes are projeced o be higher, reflecing a very gradual shif o a more capial-inensive form of agriculure and moderaely rising per capia producion levels driven by a doubling of is populaion and consumer base. Table 3: Cumulaive invesmen over 2005/07 o 2050 by region ne depreciaion gross crop producion livesock producion suppor services oal share in oal billion 2009US$ % 93 developing counries excl. China and India sub-saharan Africa Lain America /Caribbean Near Eas / Norh Africa Souh Asia Eas Asia Broken down ino annual insalmens over he 44-year oulook period, he oal gross needs of US$9.2 rillion amoun o annual capial requiremens of nearly US$210 billion. Over ime, a larger share of he ne invesmen requiremens would occur in he early years and decades of he oulook, reflecing, iner alia, higher incremenal invesmen needs in hese years. Thereafer he slowdown in producion growh would also be refleced in a levelling-off of incremenal invesmen needs. This fronloading effec could have imporan policy implicaions and lend iself o imporan policy messages. As indicaed, his assessmen does no provide an assessmen of public vs. privae financing, neiher from domesic nor from foreign sources. If curren privae/public shares were o be applied o he projecions, 6 The underlying growh accouning approach applied here assumes a uniform, consan real wage across all income sraa.

11 Capial requiremens for agriculure in developing counries o Schmidhuber e al. 70 percen or US$150 billion of he US$210 billion would come from privae sources, he remaining 30 percen or US$60 billion would have o be provided by public sources, boh foreign (ODA) and domesic. HOW RESOURCES WILL BE PUT TO WORK: PERFORMANCE INDICATORS FOR AGRICULTURAL PRODUCTION, CAPITAL STOCKS, LABOUR AND LAND How much will be produced by whom? In 2005, Eas Asia alone accouned for nearly half of he developing world s agriculural oupu. Measured in ICPs 7, US$554 billion dollars came from ha region and i was followed by Lain America and Souh Asia which produced an annual agriculural oupu of US$ billion each and he Near Eas/Norh Africa region and sub-saharan Africa wih a mere US$95 billion and US$98 billion respecively per year (Table 4). A look a he long-erm growh pah o 2050 suggess a dynamic ha is quie differen from he curren raes and levels. Sub-Saharan Africa, currenly he region wih abou lowes agriculural oupu, is expeced o show he fases growh and could nearly riple is producion o US$263 billion by Eas Asia, by conras, currenly he larges producer, will see an increase in oupu by merely 53 percen (Table 4). By large measure, his reflecs he fac ha sub-saharan Africa has o mee he food needs for he larges populaion increase of all regions and will do so from is own agriculural producion base. Eas Asia by conras will only see a very modes overall growh in is populaion o 2050 falling o zero growh beween 2030 and Moreover, he region has already aained relaively high per capia consumpion levels (2870 kcal/person/day in 2000) which will rise only moderaely o levels somewha above 3200 kcal/person/day. I will, jus like sub-saharan Africa, feed is populaion from is own agriculural resources, wih self-sufficiency declining only very moderaely; in fac, he only region ha is expeced o sep up producion significanly beyond is own needs is Lain America wih self-sufficiency raes projeced o rise from 118 percen o 130 percen; Lain America will hus cover he moderaely growing deficis of all oher regions. Table 4: Gross value of agriculural producion by region (billion 2004/06 ICP$) /2005 Developing counries sub-saharan Africa Lain America and Caribbean Near Eas / Norh Africa Souh Asia Eas Asia In order o mee hese producion increases, he various regions will have o pu more money o work in agriculure, mobilize more capial, land and labour. How much more resources he various regions will commi, wha role incremenal capial, land and labour will play will be discussed in he nex secion. The saring poin for his analysis is he expeced oupu per person which will serve as he basis for he discussion of how efficienly land, labour and capial will be used. The laer will be based on an oulook for labour and capial inensiy of producion and explore he scope and limis of agriculure o creae incomes and help reduce povery. 7 ICP or inernaional commodiy prices are used in order o avoid he use of exchange raes for obaining counry aggregaes and o faciliae inernaional comparaive analysis of produciviy. These inernaional prices, expressed in so-called inernaional dollars, are derived using a Geary-Khamis formula for he agriculural secor. This mehod assigns a single price o each commodiy. For example, one meric on of whea has he same price regardless of he counry where i was produced.

12 12 Exper Meeing on How o Feed he World in June 2009 How much oupu per person? Probably he mos imporan indicaor 8 from a developmenal perspecive is he evoluion of agriculural oupu per person employed in agriculure (per capia gross value of producion, AgGVP/PC). I is a firs proxy for how much revenue people employed in agriculure generae and how revenues will evolve over he long-run o I can also provide hins as o how big he conribuion of agriculure o overall povery reducion will be and how rapid he agriculural ransformaion is likely o evolve. A firs inspecion of he levels and rends of oupu per labourer across regions reveals vasly divergen rends (Table 5). In 2005, by far he highes level of agriculural oupu per person was aained in Lain America and, despie he high iniial levels, no slowdown in growh per agriculural labourer is expeced for he region. On he conrary, agriculural oupu per person is projeced o rise faser han in any oher region and nearly quadruple o US$18,173 per person by On he oher end of he specrum is sub-saharan Africa, where oupu per agriculural labourer is he lowes oday and will remain he lowes by far over he nex decades. In fac he gap o all oher regions is even expeced o widen as AgGVP/PC is expeced o grow by less hen 50 percen in 45 years. Table 5: Gross value of producion per agriculural labourer (2004/06 ICP$ per person) /2005 Developing counries sub-saharan Africa Lain America and Caribbean Near Eas / Norh Africa Souh Asia Eas Asia This raises he quesion as o wha forces drive hese divergen regional rends and wha he differen pahs mean for povery reducion hrough agriculure. The firs quesion can only be answered by analysing he rends in he underlying variables. The wo facors involved are obviously rends in he overall value of oupu on he one hand and he evoluion of he agriculural labour force on he oher. Table 6: Aggregae self-sufficiency raios (in percen) by region Developing counries sub-saharan Africa Lain America and Caribbean Near Eas / Norh Africa Souh Asia Eas Asia Growh in overall agriculural oupu will be he highes in sub-saharan Africa. As discussed above, his reflecs high growh in consumpion and he fac ha much of he added needs are expeced o be me by domesic producion. Self-sufficiency will decline only moderaely from 97 percen in 2005 o 95 percen in 2050 (Table 6). Oupu will also rise in Lain America, albei less rapidly and predominanly for expor markes o make up for he slighly rising deficis of oher regions. Tha means ha he difference in he growh of oupu per worker is almos enirely due o he second facor, i.e. he changes in he agriculural labour force. In fac, he agriculural labour force of sub-saharan Africa is projeced o nearly double o 2050, while i will fall o nearly half in Lain America o 24 million (Table 7). The mere numerical descripion of hese rends does no allow o draw any inferences on he desirabiliy of he associaed developmen pahs. Wha can be said, however, is ha even he near ripling of agriculural oupu in sub-saharan Africa will no suffice o make a significan difference in revenues per person lef working in agriculure. When combined wih he oulook for capial socks (Table 8) and he land available per labourer (Table 9), i can also be said ha oo many people will remain dependen on a labour-inensive, 8 Ideally, performance should be measured as gross margins (reurns on variable coss) or ne margins (reurns on oal coss) of producion; his however would require a complee accouning for variable and fixed coss of producion.

13 Capial requiremens for agriculure in developing counries o Schmidhuber e al. capial-saving form 9 of small-scale agriculure. The povery reducion poenial of his form of agriculure should remain limied by he very virue ha oo many farmers will have oo few revenues o share. Table 7: Agriculural labour force (millions) by region /2005 Developing counries 1,330 1,353 1, sub-saharan Africa Lain America and Caribbean Near Eas / Norh Africa Souh Asia Eas Asia Source: FAO Saisics Division This is no o sugges ha povery reducion effors and sraegies should ignore small-scale agriculure. On he conrary, he fac ha more han 70 percen of he poor reside in rural areas and mos depend on smallscale agriculure suggess ha povery reducion sraegies have o sar from and fully embrace small scale farmers; bu while a smallholder srucure is he saring poin for povery reducion, i canno be an objecive in is own righ, paricularly in sub-saharan Africa. For one hing, he expeced growh in is domesic food markes is oo limied o engender much improved incomes for a growing number of farmers; for anoher, agriculural expor markes would remain elusive for an under-capialised form of small-scale agriculure. If he marke poenial is limied o he food needs, new markes (e.g. energy markes), new non-marke income possibiliies (paymens carbon offses, climae change miigaion programmes, paymen schemes for environmenal services) or sraegies for a complee exi from agriculure need o be found o generae income possibiliies for is young and rapidly growing labour force. Bu neiher will he povery reducion poenial be significan in Lain America s large scale agriculure, a leas in absolue erms. There are simply oo few people remaining in he secor oday o be brough ou of povery in he fuure. Those remaining in agriculure, however, will produce agriculural oupu large enough o make a living from i. In andem wih he rising oupu per person, Lain America will coninue o pursue is curren expor-orienaion. The overall rae of self-sufficiency is expeced o rise from 118 percen o 130 percen by 2050 (Table 6). The region will coninue and even expand is role as he world s agriculural power house and make up for he less dynamic growh in oher regions. An alernaive way of aaining higher incomes and ensuring livelihoods, hough no covered in his oulook, would be o raise revenues no covered in agriculural producion. Opions include revenues ha could be raised hrough he provision of environmenal services and in paricular conribuions o Green House Gas (GHG) abaemen and he enry ino he carbon marke. I is imporan o noe in his conex ha agriculure is, wih a share of over 30 percen (including deforesaion), no only one of he main sources of global GHG emissions bu would also provide a significan poenial for climae change miigaion. These funds could help farmers adop carbon-saving producion echnologies, reduce carbon fooprins of radiional echnologies and, a he same ime, increase produciviy and profiabiliy of agriculural producion. Promising opions include a shif o no-ill and conservaion agriculure, more efficien milk and ruminan mea producion sysems (FAO, 2006b) or a ransiion from paddy o upland rice producion. Anoher income alernaive could arise from an increased producion of agriculural feedsocks for he energy marke. The energy marke is so large ha i would no be subjec o demand consrains and would allow more farmers o draw revenues from oherwise increasingly sauraed markes. For small scale farmers, bioenergy could help overcome he on farm power consrain, he facor ha ofen limis agriculural produciviy growh he mos. For larger scale farmers, bioenergy offers a new poenial o produce for a marke ha is in essence characerized by perfecly elasic demand and a marke ha will absorb any incremenal producion as long as agriculural feedsocks are compeiive as inpu ino he energy marke, i.e. as long as energy prices are above pariy prices in he energy marke. In essence his necessiaes high energy 9 The capial sock available per worker will no increase in sub-saharan Africa, while i will riple in Lain America (Table 8).

14 14 Exper Meeing on How o Feed he World in June 2009 prices. The perfecly elasic demand also means ha food prices will be deermined by energy prices and ha poor food consumers could be priced ou of he food markes by less elasic energy consumers. The success of such a diversificaion ino new areas of agriculural aciviies will be coningen on wheher smallholder agriculure has a comparaive advanage for hese new markes. Typically, smallholder agriculure is labour-inensive and capial-saving and in paricular know-how deficien. Many of he emerging income opions, by conras, require know-how and capial and seldom unskilled labour. Tapping ino carbon offse schemes under he Clean Developmen Mechanism (CDM), for insance, is mosly limied o large projecs and large farmers and a large share of hese CDM projecs was graned o he large holdings or ourigh agriculural indusries in Lain America. The adminisraive hurdles of such schemes are simply o onerous for smallholders o mee. Likewise, commercial bioenergy producion is highly know-how and capial inensive; Brazilian ehanol producion for insance has become more profiable as i became more labour-saving. The discrepancy beween facor needs and facor endowmens of smallholders means ha hey are unlikely o have a comparaive advanage for hese alernaive income sources; in fac, heir facor endowmen is precisely he opposie of he facor requiremens needed for such aciviies. Opions o overcome a lack of capial and know-how exis. One opion would be o improve or creae he insiuional seing ha allows a pooling of smallholder resources and creae enough human and financial capial o overcome he resource limis. Co-operaives can play an imporan role in pooling resources; public invesmens can suppor and foser hese effors. There are numerous examples for successful resource pooling, paricularly for new bioenergy projecs. In Thailand, for insance, 4000 farmers have pooled resources in a co-operaive o se-up a cassava based bio-ehanol projec in he Chok Chai disric of Nakhon Rachasima; hrough he counry s Agriculural Co-operaive Federaion hey even esablished a joinvenure wih a US-based energy company o overcome remaining capial consrains and arac he necessary know-how o operae a large-scale ehanol plan. These examples sugges ha he comparaive disadvanage of small-scale farming for new marke opporuniies can be overcome and ha he new markes could be apped by small scale operaors if heir resources can be pooled. In urn his will require a srenghening of rural insiuions and hus public invesmens. The greaes needs bu also he greaes poenials for insiuional improvemens lie in sub- Saharan Africa. The quaniaive assessmens of he insiuion-relaed invesmens requiremens will be provided in he companion paper o his assessmen a a laer sage. Why will oucomes be so differen? The correlaes of success An imporan facor ha helps explain difference in he oupu per worker is he capial sock per labourer available. Taking again he wo exreme cases of Lain America and sub-saharan Africa, he esimaes summarized in Table 8 sugges ha a farm worker in he former region has on average 10 imes more capial available han his colleague in he laer. Behind he absrac aggregae of capial per farmer are a large range of ools and equipmen ha make agriculure in Lain America so much more producive han in Africa. I includes more and beer mechanizaion, racors, illers and combines, irrigaion, sorage and processing plans, and oher elemens of an efficien downsream secor. And, while no included in he esimaes, Lain American farmers have muliples of suppor capial in beer infrasrucure, research insiuions, available roads and elecriciy. Equally imporan is reliabiliy of hese supplies, rendering fewer off-hours in erms of elecriciy supplies or irrigaion waer availabiliy. Rural roads per hecare for insance amoun o km in Lain America compared o km, i.e. less han half ha disance in sub-saharan Africa. Likewise, rural elecriciy supplies per worker are 50 imes higher in Lain America compared o sub- Saharan Africa. Table 8: Capial sock per worker (in 2009 US$1000 per person) /2005 Developing counries sub-saharan Africa Lain America and Caribbean Near Eas / Norh Africa Souh Asia Eas Asia

15 Capial requiremens for agriculure in developing counries o Schmidhuber e al. The oulook o 2050 suggess ha he iner-regional differences in capial socks per worker are likely o become more pronounced. Capial socks per worker will roughly double in Eas Asia, Souh Asia and he Near Eas and Norh Africa region while hey will riple in Lain America and compleely sagnae in sub- Saharan Africa. Tha means ha by 2050 a worker in Lain America will have 28 imes he capial available compared o his colleague in sub-saharan Africa. These huge differences in capial inensiy are a he hear of differences in he curren oupu per worker and he divergen growh pahs he wo regions are expeced o ake. As discussed above, a criical elemen in he divergen developmens in labour produciviy across regions is largely a reflecion of he differen developmens in he agriculural labour force of he various regions. Lain America, for insance, will almos halve is labour force while sub-saharan Africa will nearly double i. How imporan his effec is can be appreciaed when agriculural oupu is relaed o land raher han labour (Table 9). Table 9: Harvesed land per agriculural labourer (ha per person) /2005 Developing counries sub-saharan Africa Lain America and Caribbean Near Eas / Norh Africa Souh Asia Eas Asia Oupu per hecare in Lain America is only 2.5 imes higher han in sub-saharan Africa and indeed somewha lower han in Eas Asia. Bu crucially, a worker in Lain America will crop wice as much land by 2050 while arable land available per labourer will furher shrink in sub-saharan Africa. This poses once again - he quesion of how susainable he oulook for sub-saharan Africa s is if i coninues o be based on a farming sysem in which a limied resource base has o be shared wih a rising number of resource users. Even if he basis of he argumen is largely arihmeical, small scale agriculure is unlikely o provide much of a basis for widespread revenue generaion and povery reducion. I also poses he quesion as wheher i needs o be combined wih exi sraegies ha ensuring ha hose lef in he secor have enough resources o generae sufficien income. Wha bang for he buck? ICORs and invesmen raes in primary agriculure In an increasingly globalized world, privae invesors, developmen planners and policy makers alike are ineresed in idenifying invesmen opporuniies in agriculure a home and abroad. A broad and easy-ocalculae indicaor ha helps address his quesion is he Incremenal Capial Oupu Raio (ICOR) 10. High ICORs sugges ha increases in agriculural oupu require high invesmens and vice versa. 10 I mus be noed ha he ICORs and invesmen raes used and presened here are only approximaions and need o be qualified from a number of differen perspecives. One facor is ha numeraor and denominaor of ICORs and invesmen raes are based on differen moneary definiions. The denominaor of he invesmen raes for insance (he value of producion) is based on 2004/06 inernaional commodiy prices, while he numeraor (incremenal capial socks) is based on values in prices of consan 2009 US$; he same qualificaion is o be made in he calculaion of he invesmen raes; anoher facor is ha invesmens include non-moneary elemens (such as an indigenous increase in he herd sizes or self-consruced farm buildings), which oversae invesmen raes and undersaes ICORs. However, as hese shorcomings apply across all regions, hey leave cross-regional comparisons unaffeced and relaive values consisen.

16 16 Exper Meeing on How o Feed he World in 2050 Table 10: ICORs and invesmen raes in primary agriculure invesmen as share of AGVP inpus as share of AGVP 11 invesmen as share of AGDP incremenal capial oupu raio (ICOR) average over 2005/07 o 2050 percen Developing counries excl. China and India sub-saharan Africa Lain America /Caribbean Near Eas / Norh Africa Souh Asia Eas Asia June 2009 The comparison of he ICORs across regions (Table 10) suggess ha changes in agriculural capial socks are expeced o render fairly differen levels of agriculural oupu across he main developing regions. By far he highes ICORs (over 11) are projeced for he Near Eas and Norh Africa (NENA) region, while by far he lowes ICORs (jus over 3) are expeced for sub-saharan Africa. In boh regions, he expeced ICORs are consisen wih curren facor endowmens and expeced facor reurns. High ICORs for he Near Eas and Norh Africa region reflec he fac ha he region has already aained a high level of capial inensiy and is lef wih few opions o sep-up producion hrough an easy expansion of cropland or irrigaion waer use. In fac, he region has virually exhaused is agriculural land base and is also approaching he limis of is renewable waer resources. This makes furher increases in producion a capial-inensive endeavour and ulimaely renders low reurns on fuure addiions o he exising capial sock. Exreme examples include agriculural producion sysems ha operae on ground waer mining or waer supplies from energy-inensive desalinizaion plans; ICORs are paricularly high where such invesmens were geared owards low value oupus such as cereals and oher food saples. Such farming sysems operae a uni producion coss ha ofen exceed inernaional commodiy prices by muliples and can only be susained wih exorbianly high subsidies. From a planning and policy perspecive, his suggess ha a furher expansion of producion in he NENA region has o be weighed agains alernaives such as increased impors of agriculural goods or invesmens in foreign capial socks and crop land. While he region has for long focused on impors, i recenly also pursues he opion o secure domesic supplies hrough foreign direc invesmen in oher regions. An inspecion of he ICORs in oher regions (Table 10) helps explain why much of hese new invesmens are currenly direced o sub-saharan Africa. The low ICORs of jus over 3 sugges ha incremenal capial invesed in Africa s agriculure renders nearly four imes he reurns of invesmens in NENA. This is consisen wih he fac ha Africa s agriculure has abundan land and labour bu suffers from a shorage of capial (working capial as well as fixed capial) ha is needed o make he exising land and labour base more producive. How will farm revenues fare relaive o non-agriculural incomes? As oulined above, he rends in fuure farm revenues exhibi vas differences across regions and people dependen on agriculure in he various regions will see vasly differen growh poenials for heir agriculural income growh poenials. A crucial quesion ha remains open is wheher he projeced revenue pahs in agriculure are more or less favourable han hose ouside of agriculure or, more precisely, more or less favourable han hose of he average income earner (agriculure and non-agriculure combined). The resuls of he comparison beween agriculure and non-agriculure income rajecories are summarized in. Figure 3 depics hree imporan feaures of he projeced income rajecories for he various regions. Firs, he horizonal exension of he pahs capures he projeced income growh for each region. I suggess ha income growh per person is expeced o be much higher in Eas Asia han in any oher region; compared o sub-saharan Africa for insance, income growh is expeced o be hree imes as high and overall he picure 11 The value of inpus as a share of oupu are aken from Alexandraos (1988).

17 Capial requiremens for agriculure in developing counries o Schmidhuber e al. sugges a coninuaion of he growh paerns seen over he las hree decades. Income growh is also projeced o be high in Souh Asia, followed by Lain America and he Near Eas and Norh Africa region. The second feaure is capured by he slope of he rajecories. The seeper he slope, he higher he agriculural growh prospecs relaive o overall growh. A slope seeper han he 45 degree diagonal denoes ha agriculure ouperforms he average of a region. Clearly, ha is no expeced for any of he regions; insead, rajecories are raher fla for all regions and move furher away from an equal (45 degree) diagonal on he way o This unequal growh is paricularly pronounced for all regional aggregaes of sub- Saharan Africa and Asia. The hird feaure sems from he locaion of a rajecory above or below he diagonal. Locaions above (below) denoe wheher agriculural incomes are above (below) average incomes, boh for he saring and he end year. As can be seen immediaely from, he only region where agriculural incomes are above average incomes is Lain America, while he reverse is he case for all oher regions. And even for Lain America, i should be noed ha verical axis depics agriculural GVP raher han agriculural GDP, i.e. agriculural incomes are oversaed by he amoun of working capial employed. Given he relaive advanced sage of agriculure in Lain America, he effec of overesimaion of incomes could be quie considerable; aking his ino accoun, i is probable ha in no region agriculural incomes are above average ones, neiher in he base year nor in Figure 3: Regional income rajecories: agriculure vs. non-agriculure Growing income gaps beween agriculure and non agriculure across mos regions log [AG_GVP / person (1000 US$)] SSAF 2050 LATI 2050 NENA 2050 EASI 2050 SASI log[gdp/person (1000 US$)] In summary, his means ha he projeced income rajecories sugges a largely negaive oulook for agriculure. In no region will agriculural labourers be able o accomplish he same income growh as heir

18 18 Exper Meeing on How o Feed he World in June 2009 peers ouside of agriculure. The only excepion is Lain America, where farm revenues are slighly above average incomes and where growh raes in farm revenues - on average jus mach hose of he region s economy. The oulook also suggess a growing divergence beween agriculural and non-agriculural incomes and hus probably an even sronger concenraion of povery in rural areas. The resuls are likely o even undersae he rue agriculure vs. non-agriculure income gap for wo reasons. Firs, agriculural income growh is compared o average income growh. Where agriculure accouns for a large share of he oal economy, his would furher increase he difference o non-agriculural incomes. Second, he populaion projecions for agriculure are hose for agriculural labour force, which is jus a subse of he overall agriculural populaion. If agriculural incomes were o divided over he larger agriculural populaion, his would furher widen he gap o non-agriculural incomes. I mus be emphasized here ha hese resuls are sill highly preliminary; hey need o be veed furher and confirmed by projecions for AG-GDP, raher han hose for AG-GVP only. The growing divergence may also bring o he fore a possible shorcoming of he underlying parial equilibrium approach. No doub, pas developmens show ha considerable and even growing rural urban income differences can persis over exended periods of ime, bu a growing income divergence over more han four decades may become unenable and sugges ha hihero exogenous assumpions such as he projecions for agriculural labour force or even populaion general projecions may need o be endogenized. Rising income gaps would ulimaely raise he pressure o leave rural areas (push) and arac cheap labour o more remuneraive urban areas and non-farm environmens (pull). The prospec of a widening income gap beween farm and non-farm incomes has also given rise o new iniiaives o provide suppor o developing counries farmers. FAO is currenly examining various possibiliies of such suppor measures; he decisive crierion for hese measures is ha hey help farmers o cach-up o average incomes aained in an economy or region wihou inroducing new or augmening exising measures ha disor inernaional compeiion, resource allocaion and rade. Scope, opions and limis of such measures will be discussed a he Summi on World Food Securiy in November 2009.

19 Capial requiremens for agriculure in developing counries o Schmidhuber e al. REFERENCES Alexandraos, N. (ed.) (1988), World agriculure: owards 2000, an FAO Sudy, Belhaven Press, London and New York Universiy Press, New York. Alexandraos, N. (ed.) (1995), World agriculure: owards 2010, an FAO Sudy, J. Wiley and Sons, Chicheser, UK and FAO, Rome. FAO (1980), Agriculure oward 2000: Esimaion of invesmen requiremens, (mimeo), Global Perspecive Sudies Uni, Rome. FAO (1981), Agriculure: owards 2000, Rome. FAO (1996), Invesmen in agriculure: evoluion and prospecs, Technical Background Documen No. 10 for The World Food Summi, Rome. FAO (1999), Invesmen in agriculure for food securiy: Siuaion and resource requiremens o reach he World Food Summi objecives, CFS:99/Inf 7, Rome. FAO (2001), Mobilizing resources o figh hunger, CFS:2001/Inf. 7, Rome. FAO (2003), Ani-Hunger Programme, Rome. (available a fp://fp.fao.org/docrep/fao/006/j0563e/j0563e00.pdf) FAO (2006a), World agriculure: owards 2030/2050 Inerim repor, Rome. (available a hp:// FAO (2006b), Livesock s long shadow: Environmenal issues and opions, Rome. (available a hp://

20 20 Exper Meeing on How o Feed he World in June 2009 ANNEX 1: LIST OF COUNTRIES INCLUDED IN THE ANALYSIS Africa, sub-saharan Angola Benin Boswana Burkina Faso Burundi Cameroon Cenral Afr. Rep. Chad Congo Côe d'ivoire Dem. Rep. of Congo Erirea Ehiopia Gabon Gambia Ghana Guinea Kenya Lesoho Liberia Madagascar Malawi Mali Mauriania Mauriius Mozambique Niger Nigeria Rwanda Senegal Sierra Leone Somalia Sudan Swaziland Togo Uganda Unied Rep. of Tanzania Zambia Zimbabwe Lain America and Caribbean Argenina Bolivia Brazil Chile Colombia Cosa Rica Cuba Dominican Rep. Ecuador El Salvador Guaemala Guyana Haii Honduras Jamaica Mexico Nicaragua Panama Paraguay Peru Suriname Trinidad and Tobago Uruguay Venezuela Near Eas/Norh Africa Afghanisan Algeria Egyp Iran, Islamic Rep. Iraq Jordan Lebanon Libyan Arab Yam. Morocco Saudi Arabia Syrian Arab Rep. Tunisia Turkey Yemen Souh Asia Bangladesh India Nepal Pakisan Sri Lanka Eas Asia Cambodia China Dem. Rep. of Korea Indonesia Lao Malaysia Myanmar Philippines Rep. of Korea Thailand Vie Nam