Poor Countries Must Invest in Farming to Tackle Hunger, says FAO

Poor country governments should invest more in “public goods” for agriculture in order to tackle rural poverty and hunger, the UN’s Food and Agriculture Organization has said.

The FAO’s flagship annual report on the “State of Food and Agriculture,” which was released on 6 December, shines a spotlight on the need for increased investment in the sector - and also finds that on-farm investment by farmers themselves is currently by far the most significant investment source.

Farmers in low- and middle-income countries invest more than US$170 billion a year in their farms, the agency says, with annual investment in on-farm agricultural capital stock exceeding government investment by more than four to one. Domestic spending by farmers and businesses therefore dwarfs public support from governments, overseas development aid, or foreign companies.

The FAO also emphasises that investment per farm worker has been lowest in South Asia and sub-Saharan Africa - two world regions where progress in improving food security has been particularly slow. “Those parts of the world where hunger and poverty are most severe have seen stagnant or negative rates of investment over the past three decades both by farmers and governments,” the authors warn.

The report argues that “transparent and stable trade policies” are a key element in creating “a good general investment climate.” It also warns governments to take care not to discriminate inadvertently against farmers through other policies such as exchange rates or taxation.

Current WTO rules place few restrictions on support for agriculture which does not distort trade and production - including support for research, advisory services, rural infrastructure, and other ‘public goods’ that the FAO says are needed. The WTO allows these and similar payments to be notified as “green box” payments, which are exempt from cuts or any ceiling at the global trade body.

Both China and India have dramatically increased their farm support in recent years, notifying almost all payments as causing not more than minimal trade distortion - although levels of support per agricultural worker remain low.

Quality and quantity

While African countries signed up to the Maputo Declaration in 2003, committing to allocate at least ten percent of national budgets to agriculture and rural development within five years, the report says that only seven nations have done so to date.

Burkina Faso, Guinea, Ethiopia, Niger, Mali, Malawi, and Senegal have met the target, while nearly twice as many others are on their way towards it. However, some two dozen countries have either not made a clear move towards the goal or have moved away from it.

The declining share of agriculture in government spending is mostly due to increased spending on other priorities, rather than governments providing less money to farming, the agency says. “On average, governments in all regions currently spend more on defence than on agriculture,” the report notes.

The FAO blames the low government spending levels on several factors - including poor governance, corruption, powerful interest groups, and long lead times and diffuse benefits for farm investments. “Strengthening rural institutions and promoting transparency in decision-making can improve the performance of governments and donors,” the report finds.

The FAO report instead urges governments to consider supporting the poorest smallholders through social transfers and safety-net schemes, which it says can be critical in enabling them to overcome their lack of savings and access to credit, and their lack of insurance against risk.