Food Crisis - Is Regional Trade the Answer: The Case of COMESA

FOOD CRISIS – IS REGIONAL TRADE THE ANSWER: THE CASE OF COMESA Cris MUYUNDA, PhD Senior Agricultural Advisor, COMESA

OUTLINE OF PRESENTATION
COMESA OVERVIEW : MARKET PARAMETERS
STATE OF AGRICULTURE & FOOD SECURITY SITUATION
MAJOR ISSUES OF CONCERN OVER FOOD PRICES
RESPONSE FROM COMESA and NEPAD
MALAWI FOOD SECURITY SUCCESS STORY
A CASE FOR EXPANDING REGIONAL TRADE
KEY TRANSPORTATION AND RELATED ISSUES
CONCLUSIONS-IS REGIONAL TRADE THE ANSWER?

COMESA OVERVIEW : KEY PARAMETERS
FORMED IN 1994 FROM PTA, itself est. 1982
POPULATION : 400 million – big potential market
19 Member States: 9 Landlocked; 4 are Island (3 very small)
Intra-COMESA trade: US$7.5 billion (2007); Extra-COMESA exports: US$90 billion ; total trade US$160 billion
US$3.4 billion (about 40%) of intra COMESA-trade is food and agricultural raw materials

AGRICULTURE IN COMESA
32% of COMESA GDP
65% of Raw Materials for Industry: Agricultural commodities are major drivers for growth in intra-COMESA trade.
80% of employment

COMESA AGRICULTURAL SECTOR CHALLENGES TECHNOLOGICAL CONSTRAINTS MARKET RELATED CONSTRAINTS POLICY RELATED CONSTRAINTS Low Productivity

SITUATION ON THE GROUND IN COMESA
Low Yields characterize COMESA agriculture
Biggest Customer of the WFP
Low Value, Uncompetitive Agriculture

(1) PER CAPITA AGRICULTURAL PRODUCTION IS FALLING

(2) TRADE VALUE AS % OF GDP HIGH (62%) BUT WORLD SHARE OF TRADE LOW (2%)

(3) NET RESULT: HUNGER MAP

FOOD SECURITY SITUATION IN COMESA
DISCOUNTING EMEGENCY FOOD AID DUE TO UNFORESEEN ISSUES:
2004/2005: 11 MEMBER STATES WERE IN FOOD DEFICITS AND REQUIRED EXTERNAL FOOD
2005/2006: 5 MEMBER STATES EXPERIENCED FOOD DEFICITS, BUT THE WHOLE REGION HAD A SURPLUS OF 550,000 MT.
2006/2007: 2 MEMBER STATES EXPERIENCED FOOD DEFICITS, BUT WHOLE REGION HAD A SURPLUS OF 1,500,000 MT.
2007/2008: …….(assessments ongoing, about 5 will need external support)
OVERALL: MAJOR INFRASTRUCTURE / DISTRIBUTION CHALLENGE

NEGATIVE IMPACT OF HIGH PRICES
AFFECTS POVERTY LEVELS (Studies indicate 10% increase in food prices leads to 2.3% increase in poverty in COMESA)
HAS IMPACT ON NUTRITIONAL STATUS OF THE CONTINENT WHERE ALREADY SOME 200 MILLION PEOPLE ARE CHRONICALLY MALNOURISHED
HAS IMPACT ON POLITICAL SITUATION NATIONALLY, REGIONALLY
COULD AFFECT PEACE AND SECURITY SITUATION

POSITIVE IMPACT OF HIGH PRICES
HIGH FOOD PRICES BRING ECONOMIC GROWTH IN AGRICULTURAL LED ECONOMIES: AGRICULTURE is 32% of COMESA GDP
GROWTH REDUCES POVERTY: 1% INCREASE IN OVERALL GROWTH ELIMINATES 6 MILLION PEOPLE OUT OF POVERTY

MAJOR FOOD SECURITY SUCCES STORY : MALAWI
2004/2005: SERIOUS FOOD DEFICIT: 800,000 MT; INTERNATIONAL FOOD APPEAL
2005/2006: 400,000 MT FOOD SURPLUS
2006/2007: 1,200,000 MT FOOD SURPLUS

MALAWI: MAJOR CONTRIBUTING FACTORS TO LAND LOCKED COUNTRY “SUCCESS”
FERTILISER SUBSIDY PROGRAM
POLICY FOCUS: BUDGET IS ON THE INCREASE
COMPREHENSIVE FOCUS: IRRIGATION, FERTILIZER, MARKETING (ACTIVE COMMODITY EXCHANGE)

COMESA RESPONSES
HASTEN REGIONAL INTEGRATION : FREE TRADE AREA; CUSTOMS UNION (2008)
CAADP: FOUR PILLAR FOCUS TO COMPREHENSIVELY DEVELOP AGRICULTURE (Land/water, Markets/Infr, Tech)
SPECIFIC FOOD PRICE CRISIS ACTIONS:
JOINT REGIONAL PLAN: (i) Inputs supply to accelerate food commodity production – similar to NEPAD response (ii) Improved risk management and vulnerability analysis, and (iii) Enhanced regional market access and easing of modalities for doing business in staple crops.
ACTESA (Independent Institution: Main Medium to Long Term Action): Staple Crops: MAIZE, RICE, CASSAVA, BANANA, BEANS: POLICIES, SERVICES, COMMERCIALIZATION
Development Corridors; NOT JUST TRANSPORT CORRIDORS

KEY ELEMENTS OF ACTESA – THE REGIONAL MEDIUM TO LONG TERM PLAN FOR STAPLE CROPS DEVELOPMENT:
POLICIES
SERVICES
COMMERCIALIZATION

CAADP PILLARS
LAND AND WATER MANAGEMENT
TRADE AND MARKETING INFRASTRUCTURE
FOOD AND NUTRITION SECURITY
AGRICULTURAL RESEARCH AND TECHNOLOGY ADOPTION

THE CASE FOR ENHANCED REGIONAL TRADE IN COMESA
ANNUAL COMESA MAIZE IMPORTS OVER THE PERIOD 2004 – 2007:
TOTAL: $500 - $850 million
AMOUNT SOURCED FROM WITHIN COMESA: $30 - $40 million
HENCE BIG OPPORTUNITY AND SCOPE TO EXPAND
REGIONAL TRADE
CURRENT COMMERCIAL FOOD DEMAND IN AFRICA’s URBAN
MARKETS: $50 billion
By 2025, this is expected to be: $150 billion
WILL NEED COMPETITIVENESS IN MOVING FOOD WITHIN THE
REGION FOR REGIONAL STABILITY
REGIONAL TRADE ALSO KEY FOR PROVIDING MARKET OUTLET
FOR RURAL PRODUCERS

KEY TRANSPORTATION/RELATED ISSUES ISSUES
LANDLOCKED COUNTRIES, 9 out of 19 countries (up to 55% of commodity costs)
TRANSPORT DELAYS, World Bank Study (each delayed day at the border is equivalent to 600 -1,000 km of covered distance)
ISLAND NATIONS, Net Importers of Food – food prices affecting them
POOR INTEGRATION FOCUS: EXPORT BANS

Additional Transport Challenges
Lack of diversified transport systems based on inter and multi modal transport corridors comprising road, rail, water and air transport.
Poor physical connectivity: number of kilometers of paved road per million people is about 60.
Compare with Brazil and India: over 1,000 km per million .
Developed World, the kilometers of paved road per million people is about 20,000 .
Additional cross cutting challenge : Sources of energy: need to aggressively explore hydro-power, bio-fuels and nuclear energy given the abundant resources in the region.

POTENTIAL SOLUTIONS/CONCLUSIONS
HARMONIZED ROAD TRANSIT SYSTEMS, COMESA CARRIER’S LICENCE, AXLE LOADING AND MAXIMUM LOADING DIMENSIONS, COMESA YELLOW CARD INSURANCE
COMMON INVESTMENT AREA , RECOGNISES
COMESA INVESTOR – REDUCED COST OF
DOING BUSINESS
DEVELOPMENT CORRIDORS, not just transport corridors
CAADP: INCREASED INVESTMENT: 10% by Govt: development of LAND AND WATER, MARKETS/INFRASTRUCTURE, FOOD/NUTRITION SECURITY, TECHNOLOGY/EDUCATION
PPPs are key: In COMESA good examples are Alliance for Commodity Trade (ACTESA), Livestock (RELPA), Policy for Markets (AAMP). We need to forge more real impact PPPs

IS REGIONAL TRADE THE ANSWER?
PARTLY YES, BUT COMPREHENSIVE RESPONSES MUST GO
BEYOND CREATING INSTRUMENTS FOR TRADE AND ENSURE:
GOOD POLICIES (Trade, Investment, Specific Sectors)
SERVICES TO FARMERS (Financial services,
Contract/Arbitration Services, Grading/Standards, Market
Information, etc)
COMMERCIAL INTEGRATION OF PRODUCERS
(STRENGTHEN PRODUCER ASSOCIATIONS, TRADERS);
Education/Training in marketing, new technologies uptake
In Short CAADP implementation, as part and parcel of
trade promotion, to de al with the suppy-side constraint.

THANK YOU

Food Crisis - Is Regional Trade the Answer: The Case of COMESA

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Food Crisis - Is Regional Trade the Answer: The Case of COMESA — Presentation Transcript