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Agriculture: Focus on strategic agricultural investments to reduce poverty in developing countries, OECD says

 

02/03/2012 - Agricultural policies to reduce poverty in developing countries should focus on strategic investments to raise productivity and benefit from high food prices, according to a new OECD study.

Agricultural Policies for Poverty Reduction also suggests that countries establish effective social protection systems for rural households.

 

The report, presented 2 March during a seminar at London’s Chatham House, proposes a three-pronged approach to strengthening rural incomes and reducing poverty: improve productivity and competitiveness in the agricultural sector; help households diversify their sources of income; and facilitate the movement of labour from the agricultural sector to better-paid non-farm jobs.

 

The OECD study stresses that policymakers need to accept that rising opportunities will lead many smallholder farmers to leave the agricultural sector. It calls on governments to smooth, rather than impede that adjustment. This means strengthening opportunities within agriculture for farmers with commercial potential while supporting balanced development that allows labour to be pulled – not pushed – out of farming.

 

Many of the poverty reduction policies required are outside the farm sector. Improving rural education and primary healthcare is central. Equally important is the overall investment climate, which depends on peace and political stability, sound macroeconomic management, strong institutions and good governance.

 

Creating opportunities outside agriculture can be difficult, but once the initial obstacles to economic diversification are overcome, structural change can occur very rapidly, the report says. In Korea, agriculture’s share of employment fell from 40% to 16% in just 14 years over the1977-1991 period – a transition which took 53 years in the United States and 68 years in the United Kingdom.

 

Market interventions, such as price guarantees and input subsidies, should be a last resort, because they treat the symptoms rather than the causes of underdevelopment, the report says.

 

Market interventions are a poor alternative to targeted social programmes when it comes to protecting incomes. Nevertheless, in poorer countries where institutions are less developed, and markets fail due to the absence of credit and poor market information, some interventions may be warranted. These can include government efforts to contain the effects of extreme price movements on producers and consumers and to kick-start agricultural markets with strategic subsidies for seed and fertiliser.

 

Given that market interventions often impose an unsustainable budgetary burden, governments that resort to these actions must simultaneously implement policies likely to perform better over the long-term, including greater investment in public goods like agricultural research and rural infrastructure, that the market alone cannot provide, and targeted social assistance to protect incomes, says the report.

 

For more information, journalists should contact the OECD Media Division (tel. + 33 1 4524 9700, news.contact@oecd.org) or the OECD Agriculture website at www.oecd.org/agriculture.

Photo of a rice field © www.shutterstock.com

 

 

 

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