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

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Presentation given by Cris Muyunda (COMESA) at the 7th Brussels Development Briefing - Brussels, 16 October 2008 - http://brusselsbriefings.net/

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

  1. 1. FOOD CRISIS – IS REGIONAL TRADE THE ANSWER: THE CASE OF COMESA Cris MUYUNDA, PhD Senior Agricultural Advisor, COMESA
  2. 2. OUTLINE OF PRESENTATION <ul><li>COMESA OVERVIEW : MARKET PARAMETERS </li></ul><ul><li>STATE OF AGRICULTURE & FOOD SECURITY SITUATION </li></ul><ul><li>MAJOR ISSUES OF CONCERN OVER FOOD PRICES </li></ul><ul><li>RESPONSE FROM COMESA and NEPAD </li></ul><ul><li>MALAWI FOOD SECURITY SUCCESS STORY </li></ul><ul><li>A CASE FOR EXPANDING REGIONAL TRADE </li></ul><ul><li>KEY TRANSPORTATION AND RELATED ISSUES </li></ul><ul><li>CONCLUSIONS-IS REGIONAL TRADE THE ANSWER? </li></ul>
  3. 3. COMESA OVERVIEW : KEY PARAMETERS <ul><li>FORMED IN 1994 FROM PTA, itself est. 1982 </li></ul><ul><li>POPULATION : 400 million – big potential market </li></ul><ul><li>19 Member States: 9 Landlocked; 4 are Island (3 very small) </li></ul><ul><li>Intra-COMESA trade: US$7.5 billion (2007); Extra-COMESA exports: US$90 billion ; total trade US$160 billion </li></ul><ul><li>US$3.4 billion (about 40%) of intra COMESA-trade is food and agricultural raw materials </li></ul>
  4. 4. AGRICULTURE IN COMESA <ul><li>32% of COMESA GDP </li></ul><ul><li>65% of Raw Materials for Industry: Agricultural commodities are major drivers for growth in intra-COMESA trade. </li></ul><ul><li>80% of employment </li></ul>
  5. 5. COMESA AGRICULTURAL SECTOR CHALLENGES TECHNOLOGICAL CONSTRAINTS MARKET RELATED CONSTRAINTS POLICY RELATED CONSTRAINTS Low Productivity
  6. 6. SITUATION ON THE GROUND IN COMESA <ul><li>Low Yields characterize COMESA agriculture </li></ul><ul><li>Biggest Customer of the WFP </li></ul><ul><li>Low Value, Uncompetitive Agriculture </li></ul>
  7. 7. (1) PER CAPITA AGRICULTURAL PRODUCTION IS FALLING
  8. 8. (2) TRADE VALUE AS % OF GDP HIGH (62%) BUT WORLD SHARE OF TRADE LOW (2%)
  9. 9. (3) NET RESULT: HUNGER MAP
  10. 10. FOOD SECURITY SITUATION IN COMESA <ul><li>DISCOUNTING EMEGENCY FOOD AID DUE TO UNFORESEEN ISSUES: </li></ul><ul><li>2004/2005: 11 MEMBER STATES WERE IN FOOD DEFICITS AND REQUIRED EXTERNAL FOOD </li></ul><ul><li>2005/2006: 5 MEMBER STATES EXPERIENCED FOOD DEFICITS, BUT THE WHOLE REGION HAD A SURPLUS OF 550,000 MT. </li></ul><ul><li>2006/2007: 2 MEMBER STATES EXPERIENCED FOOD DEFICITS, BUT WHOLE REGION HAD A SURPLUS OF 1,500,000 MT. </li></ul><ul><li>2007/2008: …….(assessments ongoing, about 5 will need external support) </li></ul><ul><li>OVERALL: MAJOR INFRASTRUCTURE / DISTRIBUTION CHALLENGE </li></ul>
  11. 11. NEGATIVE IMPACT OF HIGH PRICES <ul><li>AFFECTS POVERTY LEVELS (Studies indicate 10% increase in food prices leads to 2.3% increase in poverty in COMESA) </li></ul><ul><li>HAS IMPACT ON NUTRITIONAL STATUS OF THE CONTINENT WHERE ALREADY SOME 200 MILLION PEOPLE ARE CHRONICALLY MALNOURISHED </li></ul><ul><li>HAS IMPACT ON POLITICAL SITUATION NATIONALLY, REGIONALLY </li></ul><ul><li>COULD AFFECT PEACE AND SECURITY SITUATION </li></ul>
  12. 12. POSITIVE IMPACT OF HIGH PRICES <ul><li>HIGH FOOD PRICES BRING ECONOMIC GROWTH IN AGRICULTURAL LED ECONOMIES: AGRICULTURE is 32% of COMESA GDP </li></ul><ul><li>GROWTH REDUCES POVERTY: 1% INCREASE IN OVERALL GROWTH ELIMINATES 6 MILLION PEOPLE OUT OF POVERTY </li></ul>
  13. 13. MAJOR FOOD SECURITY SUCCES STORY : MALAWI <ul><li>2004/2005: SERIOUS FOOD DEFICIT: 800,000 MT; INTERNATIONAL FOOD APPEAL </li></ul><ul><li>2005/2006: 400,000 MT FOOD SURPLUS </li></ul><ul><li>2006/2007: 1,200,000 MT FOOD SURPLUS </li></ul>
  14. 14. MALAWI: MAJOR CONTRIBUTING FACTORS TO LAND LOCKED COUNTRY “SUCCESS” <ul><li>FERTILISER SUBSIDY PROGRAM </li></ul><ul><li>POLICY FOCUS: BUDGET IS ON THE INCREASE </li></ul><ul><li>COMPREHENSIVE FOCUS: IRRIGATION, FERTILIZER, MARKETING (ACTIVE COMMODITY EXCHANGE) </li></ul>
  15. 15. COMESA RESPONSES <ul><li>HASTEN REGIONAL INTEGRATION : FREE TRADE AREA; CUSTOMS UNION (2008) </li></ul><ul><li>CAADP: FOUR PILLAR FOCUS TO COMPREHENSIVELY DEVELOP AGRICULTURE (Land/water, Markets/Infr, Tech) </li></ul><ul><li>SPECIFIC FOOD PRICE CRISIS ACTIONS: </li></ul><ul><li>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. </li></ul><ul><li>ACTESA (Independent Institution: Main Medium to Long Term Action): Staple Crops: MAIZE, RICE, CASSAVA, BANANA, BEANS: POLICIES, SERVICES, COMMERCIALIZATION </li></ul><ul><li>Development Corridors; NOT JUST TRANSPORT CORRIDORS </li></ul>
  16. 16. KEY ELEMENTS OF ACTESA – THE REGIONAL MEDIUM TO LONG TERM PLAN FOR STAPLE CROPS DEVELOPMENT: <ul><li>POLICIES </li></ul><ul><li>SERVICES </li></ul><ul><li>COMMERCIALIZATION </li></ul>
  17. 17. CAADP PILLARS <ul><li>LAND AND WATER MANAGEMENT </li></ul><ul><li>TRADE AND MARKETING INFRASTRUCTURE </li></ul><ul><li>FOOD AND NUTRITION SECURITY </li></ul><ul><li>AGRICULTURAL RESEARCH AND TECHNOLOGY ADOPTION </li></ul>
  18. 18. THE CASE FOR ENHANCED REGIONAL TRADE IN COMESA <ul><li>ANNUAL COMESA MAIZE IMPORTS OVER THE PERIOD 2004 – 2007: </li></ul><ul><li>TOTAL: $500 - $850 million </li></ul><ul><li>AMOUNT SOURCED FROM WITHIN COMESA: $30 - $40 million </li></ul><ul><li>HENCE BIG OPPORTUNITY AND SCOPE TO EXPAND </li></ul><ul><li>REGIONAL TRADE </li></ul><ul><li>CURRENT COMMERCIAL FOOD DEMAND IN AFRICA’s URBAN </li></ul><ul><li>MARKETS: $50 billion </li></ul><ul><li>By 2025, this is expected to be: $150 billion </li></ul><ul><li>WILL NEED COMPETITIVENESS IN MOVING FOOD WITHIN THE </li></ul><ul><li>REGION FOR REGIONAL STABILITY </li></ul><ul><li>REGIONAL TRADE ALSO KEY FOR PROVIDING MARKET OUTLET </li></ul><ul><li>FOR RURAL PRODUCERS </li></ul>
  19. 19. KEY TRANSPORTATION/RELATED ISSUES ISSUES <ul><li>LANDLOCKED COUNTRIES, 9 out of 19 countries (up to 55% of commodity costs) </li></ul><ul><li>TRANSPORT DELAYS, World Bank Study (each delayed day at the border is equivalent to 600 -1,000 km of covered distance) </li></ul><ul><li>ISLAND NATIONS, Net Importers of Food – food prices affecting them </li></ul><ul><li>POOR INTEGRATION FOCUS: EXPORT BANS </li></ul>
  20. 20. Additional Transport Challenges <ul><li>Lack of diversified transport systems based on inter and multi modal transport corridors comprising road, rail, water and air transport. </li></ul><ul><li>Poor physical connectivity: number of kilometers of paved road per million people is about 60. </li></ul><ul><li>Compare with Brazil and India: over 1,000 km per million . </li></ul><ul><li>Developed World, the kilometers of paved road per million people is about 20,000 . </li></ul><ul><li>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. </li></ul>
  21. 21. POTENTIAL SOLUTIONS/CONCLUSIONS <ul><li>HARMONIZED ROAD TRANSIT SYSTEMS, COMESA CARRIER’S LICENCE, AXLE LOADING AND MAXIMUM LOADING DIMENSIONS, COMESA YELLOW CARD INSURANCE </li></ul><ul><li>COMMON INVESTMENT AREA , RECOGNISES </li></ul><ul><li>COMESA INVESTOR – REDUCED COST OF </li></ul><ul><li>DOING BUSINESS </li></ul><ul><li>DEVELOPMENT CORRIDORS, not just transport corridors </li></ul><ul><li>CAADP: INCREASED INVESTMENT: 10% by Govt: development of LAND AND WATER, MARKETS/INFRASTRUCTURE, FOOD/NUTRITION SECURITY, TECHNOLOGY/EDUCATION </li></ul><ul><li>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 </li></ul>
  22. 22. IS REGIONAL TRADE THE ANSWER? <ul><li>PARTLY YES, BUT COMPREHENSIVE RESPONSES MUST GO </li></ul><ul><li>BEYOND CREATING INSTRUMENTS FOR TRADE AND ENSURE: </li></ul><ul><li>GOOD POLICIES (Trade, Investment, Specific Sectors) </li></ul><ul><li>SERVICES TO FARMERS (Financial services, </li></ul><ul><li>Contract/Arbitration Services, Grading/Standards, Market </li></ul><ul><li>Information, etc) </li></ul><ul><li>COMMERCIAL INTEGRATION OF PRODUCERS </li></ul><ul><li>(STRENGTHEN PRODUCER ASSOCIATIONS, TRADERS); </li></ul><ul><li>Education/Training in marketing, new technologies uptake </li></ul><ul><li>In Short CAADP implementation, as part and parcel of </li></ul><ul><li>trade promotion, to de al with the suppy-side constraint. </li></ul>
  23. 23. <ul><li>THANK YOU </li></ul>

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