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  • 1. The Sustainability Challenge for FDI: How to Have it Work for All Abdallah Al-Dardari Milena Muhadinovic Director Associate Economic Affairs OfficerEconomic Development and Economic Development and Globalization Division Globalization Division UN ESCWA UN ESCWA February 7 2012.
  • 2. Increasing Urbanization population Land and Food import water dependency constraintsClimate FOOD Food priceschange SECURITY volatility
  • 3. Rethinking development in the Arab region Poverty reduction Limited fiscal space Low public investment in Long term Food agricultureprospects for Social economic insecurity as cohesion growth a threat to Decreasing ODA to agriculture Public Commercial bank finances lending for agriculture
  • 4. Share of food bill in total merchandise imports The food share in household consumption versus GDP per capita 70 Food imports as % of merchandise imports, 2010Household spendings on food (% of total consumption) Morocco 60 Djibouti 30.10 Sudan Algeria Mauritania (2009) 29.00 50 Syria Yemen (2009) 27.82 Egypt 40 Egypt, Arab Rep. 19.08 Tunisia Libya Algeria 16.30 30 Lebanon Kuwait Saudi Arabia Lebanon 16.30 20 Jordan 16.23 Saudi Arabia 15.72 10 Syrian Arab Republic (2009) 15.05 0 Sudan (2009) 14.93 0 10,000 20,000 30,000 40,000 50,000 60,000 Malawi 13.61 GDP per capita Oman 12.28 Bahrain 11.94 Tunisia 9.35 The relationship between development level and Qatar 8.24 the share of food in household consumption OECD members 7.43 World 7.41 United Arab Emirates 6.90 0 5 10 15 20 25 30 35 Source: World Development Indicators
  • 5. Rural/urban poverty in selected countries70 65.5 61.26050 45 40.140 33.1 30.1 30.3 30.8 28.930 27 27.2 25.4 23.3 22.5 22.1 20.7 19.720 18.7 18.3 17.3 16 15.1 14.5 13.9 12.9 12 12.6 9.2 10.1 9.910 8.3 4.8 3.6 1.7 0 Urban Rural Source: World Development Indicators
  • 6. Governments’ responses to 2007-2008 global food crisis Budget Macroeconomy Labor market and social transfers balance Increase of Increase of Increase of Increase of targeted other Reduction of food or energy Reductio public sector transfers to the social import tariffs subsidies n of taxes salaries poor transfers 2010 (% of GDP)Algeria x -2.7Bahrain -7.8Egypt x x x x -8.1Jordan x x x x x -5.4Kuwait x x 17.4Lebanon x x x -7.2Libya 9.2Morocco x x -4.2Oman x 6.2SaudiArabia x x x 7.7Syria x x x -4.8Tunisia x x -1.2Yemen x x x -4Source: Adapted from Breisinger et al. (2011) Economics of the Arab Awakening: From Revolution toTransformation and Food Security (IFPRI)
  • 7. 10 Mauritania Syria Surplus 5 Less import dependent, Least vulnerable fiscally strainedFood balance (%GDP) QUANTITY RISK 0 Tunisia Morocco Sudan Saudi Arabia Egypt Kuwait -5 Lebanon Jordan Djibouti -10 Yemen Deficit Comoros Most vulnerable Import dependent, but fiscally sound -15 -15 -10 -5 0 5 10 15 20 25 30 Fiscal balance (% GDP) Deficit Surplus PRICE RISKSource: ESCWA calculations based on data from FAOSTAT, IMF and World Development Indicators
  • 8. Arab countries running price risk and quantity risk to a different degree Arable land (% of total land) Comoros 43.0 Syrian Arab Republic Tunisia 18.2 25.6 • GCC countries fiscally sound so 18.0 more exposed to quantity risk MoroccoOccupied Palestinian Territory 16.8 Lebanon 14.1 Iraq World 11.9 10.7 • de-coupling of oil and food Low & middle income Sudan 8.7 10.6 prices Algeria 3.1 Egypt, Arab Rep. 2.8 Yemen, Rep. 2.4 1.8 • MDEs fiscally constrained but Bahrain Saudi Arabia 1.7 have more potential for Jordan 1.7 Somalia 1.6 Qatar 1.1 Libya United Arab Emirates 1.0 0.8 agricultural production Kuwait 0.6 Mauritania 0.4 Oman 0.2 Djibouti 0.0 0.0 10.0 20.0 30.0 40.0 50.0Source: World Development Indicators
  • 9. FAO estimates $83 billion annually to beinvested in agriculture in order to meet food needs in 2050
  • 10. How to finance: the food import bill and agricultural investment? Arable land (% on total land) Comoros 43.0 Syrian Arab Republic 25.6 Tunisia 18.2• Limited fiscal space + Low public Morocco Occupied Palestinian… 18.0 16.8 spending on agriculture Lebanon 14.1 Iraq 11.9 World 10.7 Low & middle income 10.6 Sudan 8.7 Algeria 3.1 Egypt, Arab Rep. 2.8 Yemen, Rep. 2.4 Bahrain 1.8 Saudi Arabia 1.7 Jordan 1.7 Somalia 1.6 Qatar 1.1 Libya 1.0• Private investment and FDI to fill United Arab Emirates Kuwait 0.8 0.6 0.4 the investment gap in the Mauritania Oman 0.2 Djibouti 0.0 agricultural sector in those 0.0 10.0 20.0 30.0 40.0 50.0 countries which have the West Bank and Gaza Agricultural irrigated land (% of total) 4.63 potential for agricultural Tunisia 3.89 Syrian Arab Republic 10.05 Morocco FDI for technology transfer and 4.11 modern agricultural techniques Lebanon 19.94 0.00 5.00 10.00 15.00 20.00 25.00
  • 11. ‘Responsible FDI’Investing country Receiving country Food security Technology transfer Poverty reductionRelief on public finances Food security Job creation Trade balance Increased tax base improvements Infrastructure Positive sum game
  • 12. Receiving country• The responsibility lays upon the particular state to crowd-in large investments in agriculture by undertaking investments in infrastructure (especially in rural areas)• Comprehensive agricultural development (backward and forward linkages) + complimentary investments
  • 13. ‘Land grab’ issue• The amount of land acquired by foreign investors in Africa estimated at up to 20 million hectares• i.e. Sudan: only 13 per cent of the arable land is cultivated and only 1 per cent of this is land under foreign control*• Alternatives to land acquisition*OECD Global Forum on International Investment, Session 2.2
  • 14. Key success factors for FDI in agriculture• Enforceable property rights and contractual agreements for both locals and investors• Sharing of benefits• Inclusion and empowerment of local community• Transfer of agricultural techniques and technology for greater productivity• FDI directed more towards rural areas
  • 15. Final considerations• FDI should be made part of a comprehensive rural development strategy, as well as the overall macroeconomic framework of particular countries• ESCWA’s involvement in ensuring key success factors to be implemented
  • 16. Thank you!UN Economic and Social Commission for Western AsiaEconomic Development and Globalization DivisionP.O. Box 11-8575, Riad el-Solh, Beirut – Lebanon aldardari@un.org muhadinovic@un.org
  • 17. Hyperlinked slides following
  • 18. External debt stocks total (DOD, current US$)40,000,000,00035,000,000,00030,000,000,00025,000,000,00020,000,000,00015,000,000,00010,000,000,000 5,000,000,000 0 2000 2005 2009 2010 Djibouti Jordan Egypt, Arab Rep. Lebanon Mauritania Morocco Sudan Tunisia Yemen, Rep. Source: World Development Indicators
  • 19. Public spending on agriculture vs defense millions of respective national currencies Egypt Jordan25,000 1,00020,000 80015,000 60010,000 400 5,000 200 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Defense Agriculture, forestry, fishing, and hunting Defense Agriculture, forestry, fishing, and hunting Lebanon 1,400 1,200 1,000 800 600 400 200 0 2000 2001 2002 2003 2004 2005 2006 2007 Defense Agriculture, forestry, fishing, and hunting Source: International Monetary Fund, Government Finance Statistics Database
  • 20. Aid flows to agriculture mainly targetedsub-Saharan Africa (31%) and South andCentral Asia (22%). The share of aid to agriculture in DAC members’ aid programmes has declined sharply from 17% in late 1980s to 6% in recent years. Source: OECD, Measuring Aid to Agriculture, April 2010, OECD-DAC
  • 21. Trend in cereal import dependency in the Arab world and cereals price index 250 70 60 200 cereal import dependency of the Arab region (%) 50 150 40 cereals price index 30 100 20 50 10 0 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Cereals price index (left axis) Cereal import dependency (right axis)Source: ESCWA calculations based on data from FAOSTAT, IMF and World Development Indicators

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