Setting priorities for food security in the Arabworld ESCWAEarly results of an international collaboration Nadim Khouri, ESCWA Conference Food Secure Arab World, A roadmap for policy and research IFPRI-UNESCWA Beirut, February 2012
Outline: Early results of a growing collaboration A three-pronged food security strategy for the Arab states region; Preliminary findings with immediate policy implications: Safety nets Agriculture productivity Improved markets and financing; Agenda for further policy research and implementation for now and the future.
Agricultural Research Corporation Sudan; American University of Beirut; Economic and Social Commission for Western Asia;International Center for Agricultural Research in the Dry Areas-Jordan; International Center for Agricultural Research in the DryAreas-Syria; International Institute for Environment and Development; International Fund for Agricultural Development;International Food Policy Research Institute; Food and Agriculture Organization; University of California Davis; University ofCalifornia Berkeley; University of Naples Federico II; University of Jordan; Virginia Polytechnic and State University; World Bank
Food prices – World and MENA region Source: World Bank, 2010/11 data from the Middle East and North Africa Region
Net trade in food Vulnerable countries with high cereal import dependency and large fiscal deficit: Comoros, Djibouti, Jordan, Lebanon, Morocco, Palestine, Somalia, Tunisia, Yemen; Less dependent countries but fiscally strained: Syria, Sudan and Egypt; Dependent but fiscally sound: Bahrain, Qatar, UAE, Kuwait, Libya, Algeria, Saudi Arabia, Iraq, Oman Sources: Adapted from “Improving food security in Arab Countries”’, WB, FAO and IFAD 2009
Conflict affected countries and food security Source: ESCWA
Food security risk Matrix – Arab region 10 Syria Surplus Mauritania 5 Less import dependent, fiscally Least vulnerable strainedFood balance (%GDP) 0 QUANTITY RISK Tunisia Morocco Egypt Sudan Saudi Arabia -5 Kuwait Lebanon Jordan Djibouti -10 Yemen Deficit Comoros Import dependent, but fiscally sound Most vulnerable -15 -15 -10 -5 0 5 10 15 20 25 30 Deficit Fiscal balance (% GDP) PRICE RISK Surplus Source: ESCWA calculation based on International, Monetary Fund, WEO, WB, Food price forecasts and WDI
Food security risks and vulnerabilities in the Arab Region Change in poverty 1990-2010 Heavy dependence on imports => 6 vulnerable to international food commodity price shocksAverage growth rate of GDP between 1990 Lebanon Jordan Growing population higher than Yemen 5 Syria Tunisisa the world rate, particularly in rural Egypt areas 4 Morocco Child malnutrition and youth unemployment rise despite GDP and 2010 Mauritania 3 growth and poverty reduction Algeria Limited investment in agricultural Comoros 2 productivity Djibouti Regional political unrests 1 Volatility of petroleum prices and depletion of natural resources in 0 the region (especially water) -1.5 -1 -0.5 0 0.5 Annualized change in poverty 1 1.5 Concentration of the poor in rural areas Poor transport/storage infrastructure Source: World Bank, UNSD, compiled by ESCWA
Policies and programs that were used to address the recent price shocks in Arab countries Programs use categorical targeting approaches, and are not limited to the poor. Most cash-transfer programs are small (<1% of GDP). Difficult to remove or scale back. In the wake of crisis, governments are expected to reduce food subsidies in light of pressures to expand public expenditures to stimulate the economy.
What should Arab countries do? A proposed three-pillar strategy to address food security includes: 1. Strengthening safety nets, family planning services and education to cope with rising consumption;2. Enhancing agricultural productivity through optimization of investments to increase productivity and profitability;3. Reducing exposure to market volatility, enhancing rural livelihoods through cost-effective investments.Source: “Improving food security in Arab Countries”’, WB, FAO and IFAD, 2009
Illustration of possible outcome of the three pillar strategy• Management of overall consumption levels reduce quantity and price risks;• Increasing domestic production reduce quantity risks;• Smoothing exposure to market volatility by better management of imports reduce price risks.
Specific Policies, programs and investments 1. Strengthening safety nets 2. Enhancing agricultural productivity 3. Reducing exposure to market volatility
1. Strengthening safety nets What types of safety nets - to protect small farmers and the poor?Most effective safety-net: increase the productive capacity of rural communitiesby improving their access to improved farming technologies and invest in skills andeducation of people from rural areas.Cash transfers to most vulnerable;Safety nets need to target rural poor;Most favorable programs are: cash transfers, followed by food stamps or othernear-cash assistance;Least desirable options: direct subsidies and food distribution. Sources: “Improving food security in Arab Countries”’, WB, FAO and IFAD, 2009 “What types of safety nets would be most efficient and effective for protecting small farmer and the poor against volatile food prices?” A. Alwang et al, 2010
2. Enhancing agricultural productivity 2007/2008 international price shocks were translated into domestic price shocks Investments in research, rural finance and infrastructure Better management of existing water resources through water harvesting and supplementary irrigation Grass-roots farmer led R&D Knowledge dissemination to small farmers Access for private firms to public funds on competitive basisSource: “Improving food security in Arab Countries”’, WB, FAO and IFAD, 2009 “Farmers’ response to soaring food prices in the Arab Region”, I. El-Dukheri et al, 2010
2. Enhancing agricultural productivity Elasticity of farmer’s response to increased food pricesSource: “Farmers’ response to soaring food prices in the Arab Region”, I. El-Dukheri et al, 2010
2. Enhancing agricultural productivity Research and infrastructure investment (esp. in irrigation) supported by appropriate policies and institutions, could increase per capita calorie availability by 35% in 2050 – MENA regionSource: “ The future role of agriculture in the Arab region’s food security” Sulser et al. 2011
2. Enhancing agricultural productivity The cost of self-sufficiency: an extreme modeling exerciseAt current yield levels, Morocco is capable of achieving 85% self-sufficiency in cereals. This would require land to be diverted from high value crops HVCs, with opportunity cost USD 1.03 billion in gross revenue. The absolute value of the Value Tradeoff Elasticity (VTE) is increasing as the proportion of land in cereals increases. The land set aside for cereals is of increasingly high potential for HVCs – self sufficiency in cereals will be very costly. Source: “ Modeling the limitations and implicit costs of cereal self- sufficiency-the case of Morocce” Magnan et al. 2010
2. Enhancing agricultural productivity The unmet potential of rainfed agriculture Greater investment in research and extension Encouragement of private sector participation Creating policies to encourage technology adoption, market participation and more sustainable use of natural resources by smallholder farmersSource: “ The potential of small-scale rainfed agriculture to strengthen food security in Arab Countries”,Haddad et al. 2011
3. Reducing exposure to market volatilityForeign land acquisitions Principles for responsible agricultural investments: 1.Respect for land and resource rights 2. Food security and rural development 3. Transparency, good governance and enabling environment 4. Consultation and participation 5. Economic viability and responsible agro-enterprise investing 6. Social sustainability 7. Environmental sustainabilitySource: “International investment in developing country agriculture”, D. Hallam, 2010
3. Reducing exposure to market volatilityThe role of storage National Strategic Reserves Regional or pan-Arab Reserve Legislative and organizational changes in national procurement rules Employ financial risk- hedging instruments;Source: USDA for stock-to-use ratio, World Bank for price index of wheat Future contracts, options contractsSource: “Grain reserves and food security in the MENA region,”. Wright and Cafiero 2011 “Improving food security in Arab Countries”’, WB, FAO and IFAD, 2009,
3. Reducing exposure to market volatility Risk management through strategic purchases Stockpiling may be effective-but costly, driven by political considerations- crowding out effect on private investments “Spot” purchasing proven and transparent – but vulnerable to market volatilities Forward Contracts – strong capacity for stock management and demand forecasting is required Financial “hedging” products, - may need to be modified to be Sharia- compliant for use in the Arab region Suitable for the Region: Bilateral and Multilateral agreements with the major producers Source: “Grain import dependency in the MENA region: risk management options” Sadler and Magnan 2011
Areas for policy research, definition, implementation Assistance to transitions to Democracy: Smart cash transfer and other safety net interventions; Scaling up: More public funds to rural areas, increased agricultural productivity, local markets promotion, infrastructure—a race with “ashaeriya”; Assistance to Somalia, Yemen, others; Longer Term—but we need to start immediately: Human resources: women, capacity building, attracting innovators; Evaluation of the 2009 LAS pan-Arab investment program for food security; More lessons from on-the-ground successes in land, water, fertilizer management and rainfed agriculture and adaptation to climate change; Innovative models for equitable large (and small…) scale investments in food production between Arab countries; Intensify biotechnology advances in improving food supply (not necessarily GMOs); Studies on integration of the agricultural markets of the Arab region (a common agricultural policy?)