Food Security & Development in the Arab World - In Transition?
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Food Security & Development in the Arab World - In Transition?

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IFPRI Policy Seminar "Food Security & Development in the Arab World - In Transition?" presentation by Nadim Khouri, Deputy Executive Secretary, United Nations Economic & Social Commission for Western ...

IFPRI Policy Seminar "Food Security & Development in the Arab World - In Transition?" presentation by Nadim Khouri, Deputy Executive Secretary, United Nations Economic & Social Commission for Western Asia at IFPRI on November 7, 2012.

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  • Western Asia and North Africa-increase from 13 to 25 million of undernourished. Increase in undernourished in Western Asia from 18 million in 2007-2009 to 21 million in 2010-2012; Western Asia: Iraq, Jordan, Kuwait, Lebanon, Saudi Arabia, Syria, Turkey, UAE, Yemen Around 4 million of undernourished in Northern Africa (2010-2012), same as in 2007-2009Northern Africa: Algeria, Egypt, Libya, Morocco, TunisiaFor info:A wide consensus exists on the political transition to a multi-party democracy. The debate around economic transition is more contentious: private vs public intervention to tackle growth, unemployment and poverty. The debate around economic transition is likely to affect the political transition as a number of dynamics may contribute to public grievance. These dynamics are as follows:Tackling the potential trade-off between balance social cohesion and macroeconomic stability due to populist pressure on social spendingHigh short-term socio-economic expectations from the public that are unlikely to be satisfied because of time lag of economic reformsIncrease in instability, weakened institutions, and power vacuum combined with low capacity of new governments may give new room for free riding, exclusionary practices and predatory behaviorHigher short-term unemployment and poverty rates of people (particularly the youth) who are concentrated around the poverty lines and in marginal areasFurther increase in concentration of urban poverty as people migrate from rural areas that may have an impact on social fabric and stabilityWith decrease in FDI inflows and increase in short-term capital outflows, exchange rates are expected to suffer a downward pressureWeakened investors’ confidence and higher risk of financial operations lead to higher risk premia and sovereign borrowing costs, wider spread in credit default swaps and debt markets, making public and private borrowing more costly thereby negatively affecting investment decisionsRisk of higher inflation (particularly for Egypt, Syria and Yemen) that negatively affects the poor by eroding their purchasing power
  • EGYPT:Poverty rates have high variance (close to 0 in Suez but 60% in Assiut)1/5 of Egyptians are calorie-deprived (receive less than 80% of required cal intake)14% of under-5 are stuntingThe largest per-capita consumer and importer of wheat in the worldGeographic patterns of caloric deprivation (centre states) and nutrition deficiency (Upper Egypt)A puzzle: under-5 stunting higher in lower Egypt than Upper Egypt unlike povertySyriaInstability has affected PP of Syrians due to depreciation of the Syrian Pound and increase of import prices30% of rural pop is estimated to be vulnerableInstability has also affected domestic ag production in Syria through:Restrictions of movements and increase in transport costsRise in prices of inputs (fuel, fertilizers, feed) and production factors (labor, capital) resulting in increase of overall production costsIncrease in renting costs of equipments Many moneylenders now lend only in USDYemen45% of population is below poverty line and nearly half of children are stuntedFood insecure are concentrated in rural areas (ag wage laborer HH) and in the western part of the countryThe country is almost entirely dependent on food imports and therefore highly vulnerable to commodity price volatility that combined with currency depreciation has reduced PPFood price spikes are reported by far as the main shock events for HHsThe number of the severely food insecure almost doubled between 2009 and 2011, from 12% to 22%Food purchase on credit has increased by 43% and makes ¼ of total food purchaseMalnutrition is increasing (13% of under-5 are acutely malnourished) despite HH spend on qat about 10% (> health + edu expenditure)Particularly vulnerable are IDPs and refugees from Horn of Africa
  • Key messages: In MENA countries unlike all countries in the world, for the same level of GDP the government effectiveness and regulatory quality show low raking. Opposite to the world trend, increase in GDP in Arab countries does not translate in the increased government effectiveness and improved quality of regulationWhen it comes to doing business, MENA region, together with Latin America and Caribbean are only ahead of South Asia and Sub-Saharan Africa. The region is significantly behind OECD high income countries, as well as Eastern Europe and Central Asia
  • Key messages: The indicators show eitherstagnation or deterioration of governance in Arab countries. Black dotted lines represent Arab countries in transition. The two important governance indicators that show deterioration are Corruption and Voice and Accountability. The two indicators show co-movement over the last decade. Corruption and oppression over the years show a pressure build-up, which have culminated in political and social movements from January 2011 until today.Other indicators show different trends, mainly stagnant if not slightly improving.
  • Transition countries suffer from a set of multiple instability factors: political turmoil, commodity price shocks and natural shocks (given countries high dependence on imports and poor natural resources-arid areas and limited access to water). Vulnerability to shocks makes poor households risk averse in their asset-allocation strategy , which is even more pronounced in TCs often characterized by a cascading series of a combination of political instability, natural shocks, and international price shocks with the result of ever-decreasing food-security levels and passing up more risky but more profitable businesses.
  • Types of subsidies: most of the countries -food subsidies on particular products (flour, meat, milk, sugar, cooking oil); Waived VAT and customs tariffs on imports of cooking oil and raw and white sugar, allocating transfers to state-run consumer corporations to subsidize particular products-rice, sugar, frozen poultry and to implement income-generating projects in poor areas (Jordan).Salaries: raise for civil servants, military and retirees (Jordan, Egypt), payment of 50% employer contribution to the mandatory social security, reduction in hours of work (Tunisia), unemployment benefit program of USD390, USD520 minimum wage (Oman), Unemployment allowance setting, minimum wage instituted for nationals working in the public sector (Saudi Arabia), Public sector pay raise (Algeria).Taxes: Suspending special sales tax, reducing fuel tax, postponement of tax declaration and payments for 2010 to 2011 (Tunisia), 25% cut in housing installment payments (Bahrain).Infrastructure: Accelerating public infrastructure investment project and support pilot projects in telecommunication sector (Tunisia), Construction of public housing by at least 6000 units per year (Bahrain), USD4 billon for construction of new housing (Kuwait), 0.5 million new houses to be built with budget of USD67 billion (Saudi Arabia)
  • Jobs: Egypt to permanently hire the temporary contract employees (around 450 000), Recruitment of 20 000 new civil servants and a plan to have additional jobs for private sector (Tunisia), Setting up an employment program for educated unemployed. Half of 4303 graduates will be hired by the government, the other integrated into autonomous public establishments. The new budget law has provided 18 802 new job positions (Morocco); 20 000 new jobs at Ministry of interior (Bahrain), A new public sector employment program covering 50 000 citizens (Oman), 60 000 new security jobs in the Ministry of Interior, 500 new jobs at Ministry of Commerce and Industry (Saudi Arabia), up to 2.5 million public sector jobs and sustainable job creation in agriculture by creating 100 000 new farms. Restrictive monetary policy – Syria is implementing restrictive monetary policy to save its currencyNew institutions and organizations: Tunisian ministry of Regional and Local Development, Egyptian and Lebanese Food banks (charity organizations).
  • Simulations using a global computable general equilibrium model (CGE)Sim1: All tariffs barriers between Arab countries and regions are removed in 2013Sim2: In addition to Sim1, transportation cost is reduced by 50 per cent between all Arab countriesSim3:In addition Sim1 and Sim2, Sim3 consider the adoption of a custom union between all Arab countries that covers all non-agriculture sectors.Sim4:In addition to Sim1, Sim2 and Sim3, Sim4 suppose that all future flows of non-Arab migrants in Arab oil producing countries are substituted by workers from the Arab countries and that 20 per cent of non Arab migrants in oil producing countries are substituted by Arab migrants.Preliminary results for info:Changes in intra-Arab trade according to the different policy scenariosUnder the 1st scenario, of full implementation of intra-Arab trade, it is predicted that intra-Arab trade would increase by around 10 percent. Under the 2nd scenario, of FTA plus 50% decrease in transport cost, intra-Arab trade is predicted to increase by around 38.5%.In scenario 3 and 4 the application of common external tariff would also increase trade with non-Arab partners as the market access will increase in both directions. This explains why the impact on intraregional trade is smaller in scenario 3 and 4.Share of the intra-Arab trade in total trade. The business as usual scenario shows 8.5% share of intra-Arab trade in total trade. Under the scenario 2 (Full implementation of free trade agreement and 50% reduction in transport costs), the share of intra-regional trade will increase by 3 points.
  • A. Twin-track approach The twin-track approach is consolidated in the practice of the UN system and endorsed as part of one of the Rome Principles for Sustainable Global Food Security. It requires specific and urgentattention to both short- and longer-term interventions to address food insecurity and malnutrition. In this approach, it is important to emphasize “long-term” does not mean action to be started in the future, or after completion of short-term action. Rather, both kinds of interventions, or “tracks”, need to be undertaken simultaneously and in a coordinated manner. S-T intervention focus on immediate eradication of hunger, and medium/long term on elimination of root causes of hunger.Other components are straight-forward. The newly agreed CFS contains core actions at country, regional and global levels necessary to unite and organize in fight against hunger. This framework should be the new starting point for the international community and the Arab region in addressing the challenges and vulnerabilities of countries in transition.
  • To be able to move forward, one of the greatest obstacles the Arab region is facing is funding. Financial resources exist in the region and beyond, but are untapped. Various Arab and international funds are directed elsewhere, while agriculture is receiving very limited resources.We have a window of opportunity to focus on the new framework, derive plans and programmes to mobilize the existing funds and get prepared for the upcoming initiatives, ex. Arab World Initiative for Financing Food Security. A multi-donor Trust Fund is a solution to the financing challenges, in particular for the Twin-Track approach (namely the short-term immediate intervention of fighting hunger and long-term intervention of fighting the root causes of hunger).
  • Key messages: The right chart shows the flow of financial resources, while the left side of the chart shows roots of malfunctioning governance which lead to leakages of these resources. Overall resource leakages in surveyed developing countries are usually in the range of 30-80%. This adds to delays in resource transfers (that can reach many months) and to 20-40% of absence of health care providers and 10-30% of teachers!Leakages and delays in resource transfers tend to penalize rural areas. In a governance deficit environment, service funding and delivery are often regressive.Agglomeration index in the Arab region has been higher than comparators plausibly because of autocratic political systems that provide an “urban premium” to the population unlike democracies that tend to be based on the “median voter theorem”. This tends to accelerate urbanization processes and to increase spatial disparities. While everyone is pushing for increased funding to address resource redistribution, what this tells us is that it does not make sense to increase funds without addressing efficiency of governance (i.e. fighting roots of weak governance). Increase in funding without tackling these would only reinforce rent capture, corruption, leakages, and actual provision of services to local levels.
  • Key messages: Decentralization is the key to controlling the previously underlined roots of weak governance. While objectives of governance are clear, it is critical to include the dimension of governance that ensures empowerment of the civil society, in particular when it comes to delivering services to local levels.
  • The key principle to decentralization is: “decisions and actions should be made at the lowest level except in cases where by reason of scale or the effect of the proposed actions, the tasks would be better achieved at governorate or central levels”.
  • To be more specific, good governance should ensure efficient management of land and legal provisions on land ownership.Currently, the Gini Coefficient in relation to land distribution is high in the MENA region, where governments own the majority of land, the laws are incoherent and little care is taken with regards to the optimal use of land. Manufacturing firms find access to land as their major obstacle to doing business. Also, property taxes and their collections are unexploited.
  • The charts show governance deficit in investments in countries with natural resources.There is a great potential for investment in Sudan and Morocco, which has not been exploited. There is a room for countries of origin, in particular Gulf countries with abundant financial resources to efficiently invest in reliable and pro-development land deals.
  • In the Arab Region , most SSNs are made of subsidies and most subsidies are spent on fuel (3-7% of GDP). 2% of Egyptian GDP is spent on food subsidies alone. Current food subsidies, although inefficient and costly, are more effective in reducing poverty compared to fuel subsidies Targeting methods are mostly geographical or category-based with high leakages and low impact for the poorestReference: World Bank report: Inclusion and Resilience – the way forward for social safety nets in the MENA region, 2012
  • Arab region has constantly been spending more than double the world average on the military expenditure and more than triple the average of the emerging economies from suchEast Asia and the Pacific (EAP) and Latin America and the Caribbean (LAC). At the same time, public health expenditures have been less than half than theworld average and remarkably lower than those in EAP and LAC. In 2007, seven out of the ten countries with the highest military spending to GDP worldwide were from the region.There is room for budgetary reforms to improve efficiency of spending through reallocation to more productive sectors, provision of public goods and services (education, health), focusing on MDGs and fight against hunger.

Food Security & Development in the Arab World - In Transition? Food Security & Development in the Arab World - In Transition? Presentation Transcript

  • IFPRI Policy Seminar: Food Security and development in the Arab World: in Transition? Nadim Khouri Deputy Executive Secretary-UN Economic and Social Commission for Western Asia Washington, 7 November, 2012
  • Outline Short-term effect of transition? International community and its role Way forward Where to start first? Knowledge gap
  • Short-term effect of transition?
  • Situation in selected countries:Egypt Poverty rates have high variance (close to 0 in Suez but 60% in Assiut) 1/5 of Egyptians are calorie-deprived (receive less than 80% of required cal intake) 14% of under-5 are stuntingSyria Depreciation of the Syrian Pound and increase of import prices 30% of rural population is estimated to be vulnerableYemen The number of the severely food insecure almost doubled between 2009 and 2011, from 12% to 22% Food purchase on credit has increased by 43% and makes ¼ of total food purchase Malnutrition is increasing (13% of under-5 are acutely malnourished
  • Weak governance indicators MENA with Source: WGI and IMF. GCC Source: Doing Business, 2011
  • Weak Governance indicators
  • Food insecurity in the Arab region - a major obstacleto transition and conflict resolutions Natural Instability Commodity Shock price Shock Vulnerability to shocks makes poor households risk averse in their asset-allocation strategy , which is even more pronounced in TCs often characterized by a cascading series of a combination of political instability, natural shocks, and international price shocks with the result of ever- decreasing food-security levels and passing up more risky but more profitable businesses. Source: ESCWA
  • Changes in food security policiesNew social measuresIncreased subsidies and transfers: Jordan, Syria, Tunisia, Morocco, Bahrain, Saudi Arabia, Kuwait, Iraq, Syria(food subsidies on particular products-flour, meat, milk, sugar, cooking oil; wavedVAT and customs on some imports, transfers to state-run consumer corporations)Raised government salaries: Egypt, Jordan, Syria, Oman, Saudi Arabia, Algeria, Yemen(civil servants, military, retirees, payment of employer contribution to themandatory social security, reduction of working ours, minimumwage, unemployment allowance)Tax breaks: most countries(suspending special sales tax, reducing fuel tax, housing installment payments)Infrastructure: Tunisia, Bahrain, Kuwait, Saudi Arabia(accelerating investment projects, public housing construction)
  • Changes in food security policiesNew social measuresJobs: Egypt, Tunisia, Morocco, Bahrain, Oman, Saudi Arabia, Algeria(permanent hiring of temporary contractors, heavy recruitment in publicsector, employment program development) Restrictive Monetary Policy – Syria(to support the currency) Development of government institutions: Tunisia -Ministry of Regional and Local Development Development of NGOs: Egyptian Food Bank, Lebanese Food Bank
  • Scenarios definition – Benefits of deeper Arab EconomicSimulation exerciseIntegration (Trade)Work in progressScenarios: sim4:sim3+ An ArabSim 1 (FTA): A full implementation of preference for migration quotas inintra-Arab FTA OPC sim3: sim3+aSim2 (TR) =Sim1+ a 50% reduction of common external tariffs (for nonintra-Arab transport costs agriculture productsSim3 (CU) : Sim2+ a customs union for sim2: sim1+ 50% reduction innon agricultural products. The Common transport costexternal tariffs is supposed to be equalto the minimum tariff applied by non oilproducing countries. Countries that havea lower tariff are supposed to maintain sim1: A complete Free trade Areatheir current tariffs.Sim4 (Migration): Sim3+the replacementof 20% of non Arab migrant stock byArab migrants Source: ESCWA 10
  • CFS Framework, 2012New framework for the international community• Components:A. The Twin-Track ApproachB. Increasing smallholder-sensitive investments in agricultureC. Addressing excessive food price volatilityD. Addressing gender issues in food security and nutritionE. Increasing agricultural productivity and production in a socially, economically and environmentally sustainable mannerF. NutritionG. Tenure of land, fisheries and forestsH. Addressing Food Security and Nutrition in Protracted Crisis Core actions defined to unite and organize against hunger at country, regional and global levels Agreed in Rome October, 2012
  • Way forward1. Funding gap? GAFSP is currently absent from the region WB is in the process of developing the Arab World Initiative for Financing Food Security, but the size is unknown Arab funds are involved in food security. However, given their size, their contribution is seen as insufficient. Multi-donor Trust Fund highly needed for both short and long term interventions: 1. S-T: address the most vulnerable/fight hunger 2. L-T (but start immediately): investment to increase productivity, reduce market volatility, education and family planning, reform of safety net programmes
  • Way Forward2. Rethinking governance-control corruption/resource reallocation Government Sector Budget Inefficiency Leakages Rent Capture/Misappr. Corruption Actual resource transferred and utilized 13 Food Security
  • Way Forward2. Rethinking governance - decentralization Source: Global Forum for Reinventing Government, UN 2007
  • Way Forward2. Rethinking governance - decentralization Equity through local and provincial decision-making Key principle to decentralization Decisions and actions should be made at the lowest level except in cases where by reason of scale or the effect of the proposed actions, the tasks would be better achieved at governorate or central levels. Examples: National Conventions –National /Central vs. Land use planning – Governorate/Provincial vs. Municipal development –Local/Municipal
  • Way forward3. Enhance ownership and management of land Gini Coeffficient and Land distribution  Majority government owned land  Incoherent land management strategies and laws-Egypt: 45 laws;  Inelastic land supply – states ill-equipped to ensure pareto- optimal use of land (ex. military use); 37% of manufacturing firms identify access to land as a major obstacle to doing business;  untapped property tax collection (estimated tax Source: Majid (2004). potential for Baghdad is 300 mln USD/year)
  • 3. Enhance ownership and management of landTargeted Countries Governance deficit and land deals in Arab Countries Countries of Origin Source: ILC, 2012.
  • Way forward4. Reform Social Safety Net Programmes and FiscalExpenditures  Most subsidies are spent on fuel (3-7% of GDP).  Food subsidies, although inefficient and costly, are more effective in reducing poverty compared to fuel subsidies Targeting methods are mostly geographical or category-based with high leakages and low impact for the poorest Source: WB, 2012.
  • 4. Reform Social Safety Net Programmes and FiscalExpenditures Crowding-out Effect of Military Expenditures vs. Social Expenditures? (% of GDP) Military expenditure Public education Public health Country average expenditure average expenditure average 2000- 2005- 2001- 2005- 2000- 2005- 2004 2009 2004 2008 2004 2009 Bahrain - 3.10 2.79 2.66 Egypt 4.80 4.06 2.32 2.12 Iraq - - 1.01 2.58 Jordan - - 4.86 5.30 Kuwait 6.30 4.24 2.49 1.92 Lebanon 2.64 2.46 3.44 3.93 Oman 4.05 3.72 2.56 1.99 Qatar 2.14 - 2.37 2.07 KSA 7.27 5.97 2.99 2.78 Sudan - - 1.07 1.88 Syria - 5.09 2.21 1.45 UAE 5.73 1.84 1.09 2.44 1.81 Yemen 9.63 5.15 2.42 1.62 Arab Region 6.40 5.28 5.07 3.95 2.57 2.44 EAP 4.69 4.28 LAC 3.19 3.51 World average 2.39 2.48 4.33 4.45 5.64 5.76 Source: The World Bank Development Indicator (WDI) database (2011) .
  • Where to start first? AOAD Strategy and Emergency Plan agreed by Arab States exist and despite some skepticism efforts built in developing them cannot be ignored A revision of the Strategy and Emergency Plan could be the first step towards reigniting regional efforts in fight against food insecurity
  • Knowledge GapTransition and Food Security  How to break a vicious circle of persistent conflict and chronic food insecurity?Human Development and Food Security  Alternatives to subsidy systems ?  What policies to fight malnourishment?  Alternative mechanisms to empower women farmers?Economic Governance and Legal Framework  What regulatory apparatus for land ownership and management, FDIs?  What types of food reserves at country and regional levels?  Which institutions to address governance challenges at local levels?  Are Egyptian and Lebanese Food Banks replicable?
  • Knowledge GapIncreased productivity and profitability  Cost/benefit analysis of water re-use, water harvesting and other methods  What policies to discourage waste of water?  Policies to stimulate investment in rain-fed agriculture?  Regional R&D fund and R&D institutions?  Energy and fertilizers export-regional comparative advantage to be exploited?Regional Governance  How to mobilize funds for the implementation of the AOAD Strategy plan?  Rethinking coordination strategies among UN, research organization, regional organizations, funds? A new formal and permanent multi-stakeholder platform?  Trade policy in agriculture – intra and inter-regional trade? Role of food safety standards in agricultural trade? How critical are safety standards as opposed to trade agreements in boosting cross-border agricultural trade?