Opportunities for agricultural growth and transformation in PNG
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Agricultural transformation in PNG can be understood from an agri-food system perspective. This involves (1) rising farm productivity to increase food production and consumption for subsistence farmers, (2) linking farmers to local markets so they can sell surpluses to raise incomes and create local jobs, and (3) engaging the rural non-farm economy so farmers and others start businesses that generate demand and incomes across rural areas. Together these steps can help harness urban markets where urban consumer demand drives more value-addition of agricultural products and diversification opportunities. Currently, PNG's industry and service sectors have contributed more to economic growth than agriculture, but slow agricultural output growth suggests little improvement in rural welfare. Analyzing the full ag
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Opportunities for agricultural growth and transformation in PNG
- 1. Opportunities for agricultural growth and transformation in PNG Emily Schmidt International Food Policy Research Institute October 13, 2022 Port Moresby, Papua New Guinea Hilton Hotel
- 2. Understanding agricultural transformation from an agri-food system perspective Rising farm productivity Higher farm productivity increases food production (and consumption) for subsistence farmers Linking to local markets Farmers supply surplus to markets, thereby raising their incomes & creating local jobs Engaging rural nonfarm economy Farmers & others start nonfarm businesses, generating demand & creating incomes/jobs across the rural economy Harnessing urban markets Urban consumers come to drive demand, leading to more value addition of agric. products (and more opportunities to diversify) 1 2 3 4
- 3. Economic growth in PNG - 5,000 10,000 15,000 20,000 25,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 mn (2010) US$ Agriculture Industry (incl. mining) Services 0 10 20 30 40 50 60 70 0 500 1000 1500 2000 2500 3000 Percent of GPD Dollars / capita (constant 2010 US$) GDP per capita (constant 2010 US$) Agriculture (VA/capita) (constant 2010 US$) Agriculture, value added (% GDP) Real GDP by sector in PNG (2006-2017) Agriculture contribution to GDP per capita in PNG (2006-2017) PNG’s industry (including mining) and service sectors have been the main contributors to overall economic expansion – this is to be expected as economies develop However, slow growth in agricultural output per person (orange line), suggests most rural households experienced very little improvement in welfare indicators
- 4. Input suppliers Imports Farmers Processors Traders Traders Consumers Exports Food Services E A B C Hotels D Manufacturing GDP (ISIC 1010-1311, 1610-1629) Agricultural GDP (ISIC 0111-0322) Services GDP (part of ISIC 4500-4799) Services GDP (ISIC 5610-5630, part of 5510-5590) Other sectors’ GDP (part of ISIC 510-990, 1312-1520, 1701- 4390, 5811-9900) Agri-Food System GDP (AgGDP+): Total value added generated by all agricultural value chains (in constant dollars) A. Agriculture: All crops, livestock, forestry and fishing GDP B. Processing: All agriculture-related manufacturing GDP (incl. food processing, beverages, tobacco, cotton yarn, timber) C. Trade & Transport: Portion of services GDP associated with transporting and trading (retailing, wholesaling) of agri-food products between farms, firms and points of sale. D. Food services: All GDP generated by meal preparation and sale outside the home (e.g., restaurants, street vendors) E. Hotels: Portion of the GDP within the hotels and accommodation sector that is associated with sale of food F. Inputs: All GDP generated during domestic production of inputs used by farmers and processors (excludes inputs produced by the above five sectors) Food systems extend well beyond the farm…
- 5. Structure of the Global Agri-Food System 4% 28% 17% 7% 1% 6% 2% 5% 5% 1% 17% 18% 9.7% 46.4% 29.1% 13.9% 5.7% 12.3% 7.0% 13.2% 11.0% 4.6% 27.0% 30.8% World Low income Lower middle income Upper middle income High income East Asia & Pacific Europe & Central Asia Latin America & Caribbean Middle East & North Africa North America South Asia Sub-Saharan Africa World Income groups Regional groups Note: Does not include PNG or small island economies Input suppliers Farmers Processors Traders Traders Food Services F A B D C Hotels E Sample of countries Global agri-food system is more than twice the size of agriculture itself Agri-food systems in general are more important for poorer countries Note: Small sample
- 6. Total agri-food system GDP+ (including downstream agricultural manufacturing and trade) accounts for 25.9% of GDP in PNG Source: IFPRI estimates for selected Southeast Asian countries (2019) A B C D E 18.3% 13.3% 9.2% 11.6% 17.5% Papua New Guinea Indonesia Philippines Thailand Vietnam 25.9% 31.4% 29.2% 30.3% 25.2% GDP shares (circa 2019) • Within SE Asia and Pacific, Indonesia and Philippines have agri-food systems that are 2.9 and 3.2 times the size of agriculture sector Input suppliers Farmers Processors Traders Traders Food Services F A B D C Hotels E
- 7. Understanding agricultural transformation from an agri-food system perspective Rising farm productivity Higher farm productivity increases food production (and consumption) for subsistence farmers Linking to local markets Farmers supply surplus to markets, thereby raising their incomes & creating local jobs Engaging rural nonfarm economy Farmers & others start nonfarm businesses, generating demand & creating incomes/jobs across the rural economy Harnessing urban markets Urban consumers come to drive demand, leading to more value addition of agric. products (and more opportunities to diversify) 1 2 3 4
- 8. Estimated total calories per person per day from different food sources in PNG (2018) 0 500 1,000 1,500 2,000 2,500 3,000 3,500 Rural Urban Rural Urban Poor Nonpoor Calories / person / day Others Roots Wheat Maize&Sorghum Rice
- 9. Agriculture production is the primary employer of rural households, however non-farm enterprise work is important 66% 50% 59% 53% 61% 56% 57% 27% 40% 38% 41% 27% 31% 34% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Poor households Non-poor households West Sepik Madang East Sepik ARoB Household poverty status Province All HHS Own farm only Own farm + wage labor Own farm + NFE Own farm, wage labor, & NFE
- 10. Opportunities for rural off-farm productivity enhancing activities: Majority of NFEs operate trade stores (both agriculture and non-agriculture sales) About1/3ofsurveyedhouseholdshavea non-farmenterprise(NFE) 1 Input suppliers Farmers Processors Traders Traders Food Services F A B D C Hotels E 0% 20% 40% 60% 80% 100% All NFEs ARoB East Sepik Madang West Sepik Other services Making handicrafts Transport services Trade stores (ag and non-ag) Grain milling/trade Agriculture trade (excl. grain)
- 11. Understanding agricultural transformation from an agri-food system perspective Rising farm productivity Higher farm productivity increases food production (and consumption) for subsistence farmers Linking to local markets Farmers supply surplus to markets, thereby raising their incomes & creating local jobs Engaging rural nonfarm economy Farmers & others start nonfarm businesses, generating demand & creating incomes/jobs across the rural economy Harnessing urban markets Urban consumers come to drive demand, leading to more value addition of agric. products (and more opportunities to diversify) 1 2 3 4
- 12. Thank you