Blog action day 2010: More MDGs per drop

Pim is my nephew. He has many friends and a wide, tender loving family. Love blinds and we forgot to take him to regular health checks. Pim has been stumbling and is seriously ill. But he can be cured and made into a serious marathon runner again.

In the mid-80s Ben Bagadion of the Philippines  National Irrigation Administration was the champion of Participatory Irrigation Management (PIM) and Irrigation Management Transfer (IMT) in community based smallholder systems. PIM and IMT were seen as panacea, also for large canal systems. IFAD (and many others) adopted the philosophy and strengthening water user associations (WUA) became the buzz word of the '90s and beyond. We reflected this belief in our corporate approaches, learning products,  RIMS and Office of Evaluation work.

Today, some 25 years later, the international water community was shaken wide awake when informed at the Asian Development Bank (ADB) conference on Water Crisis and Choices that PIM was ill, seriously ill. After assessing PIM in Asia, IWMI found a success rate of 40%. That is a politically correct way of not saying that 60% of PIM failed. They even downplay the success rate stating that it is mostly the 'good' cases to get documented.

This is serious food for thought. Luckily there are plenty of caveats, if's and but's. Non-paddy (I.e. mixed farming), smaller systems in more isolated or peripheral community based settings seem to fare better. That would be us. No time for complacency. Better safe than sorry. The work of Office of Evaluation dates from 2000. So IWMI and Policy and Technical Advisory Division will be concluding an assessment on PIM and WUA performance in our portfolio worldwide to draw lessons for the future.

A future in which improved water productivity in terms of 'More MDGs per drop' will be key, especially under the poverty exacerbating climate change conditions and adverse terms of negotiating and decision-making power affecting our target groups over the sustainable use of the, correction: their, natural resource base.

For IFAD, live from Manila, Rudolph Cleveringa

The Investment Forum discusses innovative financing for food security

The Asia and the Pacific Region has emerging financial products and services for financing food security-related activities, which address the numerous market imperfections and high uncertainties due to the vagaries of weather that are constantly faced by the small-scale farmers, small and medium food service providers and other agribusiness entities in the food chain. This session of the Investment Forum, facilitated by Sana Jatta from IFAD featured case studies on mitigating risks associated with commodity price and weather volatility as well as other food security risks.

Ganesh Thapa shares innovations, good practices and lessons learned from financing food security activities

High food prices and dietary changes provided new incentives for the private sector to invest in the food sector. Despite of this, the private sector remains a minor investor in the food and agriculture sector due to limited access to finance. Credit financing for smallholders is traditionally considered a high risk business and involves high transaction and supervision costs. Innovative financing schemes show approaches and practices to address these problems.

Value chain financing responds to problems tied with access to credit by interlinking two separate transactions as a substitute for collateral. For instance, loans for purchase of inputs are linked to the sale of output as a condition for the loan. Some examples of innovative financing include:

• Warehouse receipts
• Contract farming
• Trade finance
• Other commodity-finance instruments such as repurchase agreements, export receivable financing, factoring and Islamic trade finance.

The following risk-reducing mechanisms deal with the reduction of covariate risks and indemnity against losses:

• Index-based weather insurance
• Index-based livestock insurance
• Guarantee schemes
• Micro-insurance

Credit delivery mechanisms link informal financial intermediaries with formal ones is a widespread practice in many countries. Examples include: India’s self-help groups (SHG) linkage banking, Cambodia’s AMRET-village association linkage banking and improving market access through cooperative strengthening, China.

Lessons for replication and scaling up

Small producers should be given options for direct or indirect linkages with buying companies. This can be achieved by enhancing awareness and building capacity of private providers, government agencies, rural producers and farmer organizations on new lending approaches, financial innovations and instruments for risk management. Leveraging on technology investments, for instance sharing of power, telecommunications and data network facilities, can also reduce investment costs.

Policy direction should be towards creating an enabling policy and regulatory environment to promote innovative financing schemes in response to financing issues facing small producers. Governments should provide sufficient legal and regulatory environment for the development of warehouse receipts, other collateral mechanisms and supply chain financing and minimize direct competition between state-owned enterprises and private sector to entice private investment. Policies should be directed at improving current financing models through the development of new risk-reducing instruments, better monitoring and more effective regulation of warehouses, and the use of innovations in ICT to test the effectiveness of credit delivery mechanisms.

Veiverne Yuen from Rabobank International shares innovative smallholder business models for food

Rabobank is the leading global food and agribusiness bank, with presence in 48 countries worldwide, total assets of Euro 608 billion, and 59,000 employees. It offers a wide range of financial, advisory, research, and specialized products.

There are three primary ways to invest in agriculture – direct investment in commodities, investing in equities, and primary investment in agriculture (e.g., land and other agricultural assets). With governments’ increased concern on food security, private investors are become increasingly interested in investing in agricultural land.

Developing a platform for engagement should consider the following factors:

Looking at the structure of the food and agri value chain: Upstream is highly fragmented, composed of many smallholders, poorly financed, and numerous retailers. Midstream has numerous players that are rapidly consolidating and integrating systems. Downstream industries are rapidly modernizing, integrating and increasing market control.

New value chain model: Reorganizing primary production capabilities and distribution channels to achieve greater economies of scale, increasing access to competitive markets.

New pricing models driving growth is disintermediation, cutting out the middle players.

Emerging successful agribusiness models include economic clusters (e.g., Northern Economic Region in Malaysia) and food zones. An example of the latter, which involves public-private partnerships, is the China-Singapore Jilin Food production zone. The government provides logistics infrastructure for the private sector’s vertically integrated modern food production and marketing business.

Apiradee Yimlamai from the Bank of Agriculture and Agricultural Cooperatives (BAAC) presents Agricultural Weather Index Insurance in Thailand

Weather risk management is vital for Thailand because of the importance of agriculture in its economy. Also, the country is particularly vulnerable to hydro-meteorological risks. It is ranked among the top six countries most frequently affected by floods and droughts. Moreover, calamity relief becomes an increasing burden in public resources. From 2005-2008 alone the country spent US$ 450 million in ad-hoc disaster relief. Thailand’s BAAC reaches over 80 per cent of farm households and the insurance sector is growing with over 70 non-life insurance companies in the market. Lastly, the country has reliable and good weather data infrastructure.

Two tools to manage risk are the traditional agricultural reinsurance and index insurance contracts. Traditional crop insurance is generally considered a global failure, marred with moral hazard, adverse selection, high monitoring and administrative costs. The challenge, therefore, is to develop an alternative, efficient and cost-effective crop failure insurance program that can be easily reinsured and distributed to individual farmers and at the same time overcome problems associated with traditional crop insurance.

One such response is the weather based insurance programme which offers protection against weather uncertainties that result in volume/output volatility. Index insurance contracts indemnify based on the value of the “index” not on actual losses. Indexes should be highly correlated with losses but cannot be influenced by the insured. Examples of indexes include rainfall, temperature, regional yield and river levels. Such contracts overcome the supply side problems associated with traditional insurance contracts.

Thailand’s weather insurance contract based on the commodity risk management of the World Bank uses market based risk transfer products like weather index-based insurance and price risk management contracts. The World Bank model also involves knowledge transfer and technical assistance to farmers.

The open forum focused on the continuing lack of access of smallholders to financing despite the innovations reported in the session.

Investments for enhancing productivity to increase food production

With world population projected to reach 9 billion by 2050, food production will need to increase by 70 per cent, according to FAO estimates. Thus, enhanced productivity is important, especially in existing cultivable lands where production is small-scale and water resources are highly stressed. This session of the Investment Forum in Manila discussed some of the innovative practices that work at the ground level.

Swift Company of Thailand – promoting good agricultural practices (GAP)

Shifting from traditional farming practices to knowledge-based GAP is a difficult task for smallholder farmers. For Thailand’s Swift Company, this required long-term and intensive training and giving farmers a strong incentive to learn and conform to the guidelines.

Swift Company first implemented GlobalGap standards on organic farming of asparagus in Srakaew Province, Thailand. Swift’s model aims to secure sufficient quantities of premium quality fresh produce that meets highest standards of food safety and ensure that everyone in the chain, from grower to consumer, benefits fairly from the operation.

The contract farming model was designed to address basic problems faced by smallholder farmers. Following risk assessment of target farms, farm owners were organized into groups and, together with the company, they designed production plans to supply predetermined volume of farm produce. Traditional constraints on technology and lack of market information were removed through intensive training and regular meetings and discussions with technical representatives of the company.

Farmers sell all grades of their farm produce at guaranteed prices agreed prior to planting. If at any point in time the market price is higher than the guaranteed base price, the market price is applied. Fair pricing is determined by giving due consideration to farming and logistics cost and the retail price in the target retail market.

Production planning and collection stations established in each contracted group facilitate direct daily delivery of produce from the farm to the Company’s packing house. This streamlined the overall supply chain process, thereby reducing handling cost and spillage. The Company provides a well-planned financial assistance program for farmers, including long-term interest-free loans to the group rather than to individual farmers.

Swift recommends that for scaling up international organizations and the public sector should provide sufficient support to basic and applied research on innovative farming from seed development to post-harvest control and handling; assist the private sector, particularly SMEs in developing and applying innovative farming approaches; and develop strong cooperation between public and private sectors for agricultural development planning and implementation. Planning and implementation should give emphasis on sustainability.

The private sector should revise their business orientation and look at both short-term and long-term gains. They should help their suppliers be able to reduce wastage in the supply chain and improve productivity in smallholder farming. They should advocate application of good agricultural practices and environmental protection, thereby balancing monetary gains with responsible acts.

International Rice Research Institute (IRRI)

Rice, typically grown by smallholders, is a primary staple for billions. About 90 per cent of the world’s rice is produced and consumed in Asia. Over 70 per cent of the world’s poor are in Asia. Ultimately, poverty reduction is linked to investments in rice production.

New challenges face global rice production. To meet demand for 2035 and or keep prices affordable, an additional 114 million tons of rice are needed. However, major problems affect smallholder rice production, among which are the effects of economic growth, increasing pressure on land use, climate change, stagnating yields, and less land, water and labor.

IRRI develops stress-tolerant rice varieties, improves water and nutrient management approaches, and establishes approaches to capture greater and significant value for smallholders. It strives to provide reliable information to support decision makers through rice monitoring and forecasting system, global rice model and rice database.

FAO shares innovations and good practices in agricultural water management

Developing extensive new irrigation schemes to grow more food is no solution. Future investments must protect the environmental services that wetlands, rivers and other ecosystems provide. Investments to raise yields and productivity from irrigated land are thus key to producing the extra food needed, while safeguarding the environment from additional stresses. Other options, such as upgrading rainfed farming and increasing international trade in foodgrains must contribute, but they will need to be supplemented by a significant increase in production from irrigated agriculture.

Innovations and good practices in agricultural water management are already being undertaken in Asia-Pacific and other regions. Among these are the following:

• Adapting irrigation design and operation concepts to changing objectives. The Deduru Oya Project, for example, in Sri Lanka blends ancient and new technology. The government has begun building a dam to capture and store the runoff from rainfall during the wet season, and supplies it through a canal to a 1.5 MW powerhouse, provides irrigation water to existing and new areas through numerous tanks.
• Recognizing and supporting farmers’ initiatives. Farm storage tanks make canal irrigation more flexible and reliable for farmers in India and China, for example. In Saurashtra, India water supply is boosted by groundwater recharge movement.
• Innovating in institutional reform and management concepts. China has been successful with its “bounded service provider” model where water-saving incentives are given to contracted water managers who provided irrigation water to small farming villages located within large irrigation systems.
• Expanding capacity and knowledge. Among the concepts in practice are the Jiamakou business model, Andhra Pradesh where farmers manage their groundwater resources, IRRI’s “magic pipe” systems which bridge the gap between research and extension, and FAO’s MASSCOTE which encourages irrigation staff to modernize.
• Decreasing the vulnerability of the poor and vulnerable. A project in the Philippines empowers the poor to invest in shallow tubewells through Farmer Field Schools and adapted financing mechanisms.
• Developing sound integrated water conservation strategies. An example is the use of sound water accounting concepts to develop and monitor integrated water conservation strategies in China.
• Looking beyond irrigation and the water sector. Implementation of non-water support programs such as the National Rural Employment Guarantee Act of India.

The open forum revolved around the need to focus more attention and resources on post-harvest losses, the need for more responsive extension services and strengthened research initiatives.

Highlights of proposed country partnership frameworks on food security

Food security investments in the region need an enabling environment and innovative partnerships. This session featured proposed partnership frameworks for food security by India, Bangladesh, Lao PDR and the Pacific.

India

Vibrant and dynamic food supply chains and novel public-private partnerships are emerging, but more needs to be done to tackle food and nutrition security. The participants suggested the following opportunities for partnerships:

• replicating these dynamic food supply chains in less progressive states
• productivity enhancement for food and high-value crops
• transparency and better mechanisms for social audits, and
• access to basic goods and services by extremely poor people.

These basic goods include clean drinking water, fuels, health services, education, as well as innovative women participation in the labour force.

Bangladesh

Bangladesh’s National Food Policy Plan of Action and its attendant Comprehensive Investment Plan cover four components for achieving food security: availability, access, utilization, and absorption, and is supported by a number of programs. It considers the challenge of mobilizing adequate financial and technical resources as the greatest in implementing the plan. The Government of Bangladesh urged development partners and the Partnership Framework to take a positive and proactive role in the implementation of the plan by reviewing their investment portfolio and aligning interventions around the identified investment priorities.

Lao People’s Democratic Republic

Lao PDR considers greater investment in food and agriculture through enhanced biodiversity by opening its abundant agriculture land to foreign direct investments as its major approach to meeting its MDGs in poverty, hunger, and health. Its approach is not so much to attract official development assistance funding, but rather private sector funds. They need support for innovative land use contract arrangements and regulations.

Pacific Sub-region

The key elements of food security in the sub-region cover availability, access, nutrition, and stability, with emphasis on developing traditional and healthier food crops. Because of small population, and archipelagic, small, and numerous islands of the Pacific, focus will be towards improving food supply chains at the national and regional levels, facilitating trade, and enhancing productivity of nutritious food. The region’s food security programme will be imbedded in local structures supporting and building on ongoing initiatives, link strongly with donor and NGO-supported activities and the private sector, and collaborate with activities of relevant national and regional projects operating at country levels.

Former Primer Minister of New Zealand – James Bolger – makes an inspiring speech at the Investment Forum in Manila

James Bolger, Chairman, Advisory Council, World Agricultural Forum and former Prime Minister of New Zealand joined the Investment Forum, organized by ADB, FAO and IFAD, as the eminent speaker.

The world today is facing innumerable problems, from terrorist threats to food crisis, trade constraints and financial crisis, which altogether contribute to the worsening of poverty and hunger in many parts of the world. The great challenge is how to meet the food and nutritional needs of the 9 billion people on earth in 2050 when we are not meeting the basic needs of 6.5 billion people today.

“It is a time for new thinking as yesterday’s thinking will not solve tomorrow’s problems”

According to Mr Bolger, the Forum’s theme of “Food for All” is a difficult task. But it is possible through innovative partnerships – a partnership that would focus on addressing the needs of the 3 billion citizens that live on less than US$ 2.5 a day. The partnership should aim to move food consumption from those spending too much to those who need to consume more to achieve dignity in life. This partnership is a contrary to the approach of most economic theorists who emphasised individuals and firms acting in their self-interest rather than in the interest of the broader community. To succeed, there is a need for a new paradigm to recognize the needs of an integrated world community – a partnership between public policy and the needs of the people.

There also needs to be a vital partnership among water and land resources, science and technology, finance and people. The world’s population survives on 0.75 per cent of total water on earth. Fresh water is the most valuable resource in the planet. The United Nations forecast that over 60 per cent of the world’s population will soon be living in water challenged regions. As part of the new partnership to produce Food for All, every country and community must develop strategies to achieve the most beneficial use of water. New thinking is also required for the use of land. Every year, large areas of land are lost to food production due to desertification, saline poisoning, erosion and growing demands of urban growth. There should be more stringent requirements for the use of land and water. After all, they support life. Making minor adjustments will not feed tomorrow’s world. To have food for all will need radical re-thinking on how the world moves forward. We need to have more responsible and wiser use of land and water.

“The world will need to utilise all the responsible science available to produce the food required”

Science and technology will continue to reshape food production. Science may change the costs as we move forward. However, science should be used wisely in addressing the challenge of providing Food for All. Attention should also be given to the nutritional and medicinal values of tomorrow’s food.

Agriculture feeds the world. However, agricultural development and food production should be done with minimum environmental impact and more environmental benefits. We need to ensure that the commercial world’s development of higher producing, pest resistant and environmentally friendly plants are made available to farmers. To achieve this, a partnership is required between plant breeders who need markets, growers who need new generation seeds and governments that see this as necessary to produce more food for their people.

“The world needs to accept that no single model fits all”

Countries and societies have different cultures, levels of development, and situations that require different approaches. The present economic and trade model has started to fail the world and we can expect this to continue in the future. Priorities must change. Have we got our spending priorities right? The answer is an emphatic no. The developed world has to do more to help the developing world, at least give 7 cents for every 10 dollars.

In today’s world no single nation can hide and prosper alone. To the contrary, no matter how powerful, countries need to make every effort to gain the cooperation of other like minded nations.

Finally, Mr Bolger urged leaders to make resources and expertise available for shifting to this development paradigm and empowering the bottom poor. But action and political will are needed now. He pointed out that the issues discussed are not outside our ability to solve. They can be resolved with our current state of knowledge. And the growth of knowledge continues.

Haruhiko Kuroda, Jacques Diouf and Kanayo Nwanze open the Investment Forum in Manila

The Asian Development Bank (ADB), the Food and Agriculture Organization of the United Nations (FAO) and IFAD met in Manila at the first regional forum on food security to showcase Asia and the Pacific as an attractive region for increased public- and private-sector investments in food security-related initiatives.

The event started yesterday with a ‘Ribbon Cutting Ceremony’ of the Marketplace – a place where private-sector companies and civil society organizations were invited to exhibit their innovative products and services in the areas of productivity enhancement, financial services, connectivity improvements, natural resources management and climate resilience. Ursula Schaefer-Preuss, Vice President for Knowledge Management and Sustainable Development (ADB) formally opened the Marketplace together with Hiroyuki Konuma, Assistant Director General and Regional Representative for Asia and the Pacific (FAO RAP), and Ganesh Thapa, Regional Economist (IFAD). They encouraged the delegates to engage with the exhibitors, taking the opportunity to explore possible future partnerships in food security ventures, network and exchange ideas and good practices to address the challenge of ensuring food security.

In his welcoming statement, Haruhiko Kuroda, President of ADB, pointed out that the Asia and Pacific Region is rebounding from the recent global economic and food crisis with a projected growth of 7.5 per cent for 2010, signalling a return to dynamic growth rates in the coming years. However, global food prices have remained 85 per cent higher than their 2003 levels. FAO and OECD projections show a continued increase in food prices for 2010-2019. ADB Strategy 2010 gives high importance to food security as the underlying component for sustainable and inclusive economic growth. ADB has committed US$ 2 billion a year to implement its Operational Plan for Food Security in Asia and the Pacific and hopes that this amount will help complement and galvanize the work of ADB’s development partners, the public and private sectors, and civil society organizations. Mr Kuroda stressed that it is time for the organizations represented in the Forum to move out of their comfort zones and forge new partnerships, collaborative arrangements, networks, and alliances with the single objective of achieving ‘Food for All’.

Jacques Diouf, Director-General (FAO) joined Mr Kuroda through a video message stating that during the past three years, world hunger has increased dramatically as a result of soaring food prices and the global financial and economic crisis. In 2009, there were 1 billion hungry people in the world. In Asia and the Pacific alone, the number of undernourished people increased by over 60 million in 2009 reaching 642 million! Mr Diouf pointed out that the sheer magnitude of food insecurity is the result of low priority that has been given to agriculture in economic development policies. In December 2007, FAO launched the Initiative on Soaring Food Prices to facilitate access by small farmers to indispensable agricultural inputs. Such inputs worth US$ 8 million have been provided to over 140,000 small farm households in 24 countries in Asia and the Pacific. Through the European Union’s ‘Food Facility’ programme, FAO has also made available US$ 100 million to benefit 250,000 households in the region. In 2009 in L’Aquila, through the Food Security Initiative, the G-8 committed to mobilize US$ 20 billion over three years for food security and agriculture. The G8 in Toronto a few days ago kept the same commitment. These are steps in the right direction, provided they are implemented effectively and rapidly.

Kanayo Nwanze, President (IFAD) also welcomed the participants through a video message stressing that the Investment Forum is different to global forums that generally focus on making political commitments to address food security issues. The Forum provides a unique opportunity to discuss concrete investment plans to increase investments to strengthen food security in the region. Mr Nwanze stressed that long-term growth in agricultural productivity is imperative for food security. Productivity growth expands supplies, reduces prices, increases the incomes of smallholder farmers and ensures affordable and adequate food for poor and disadvantaged people. There is significant potential to raise agricultural productivity and food production in the region by providing crop management, expanding the use of modern varieties, strengthening rural infrastructure, improving post-harvest technologies and funding research and development. There is also a need to strengthen livelihoods in the face of greater climatic uncertainty. Although the challenges are many, there are promising opportunities such as the development of agri-food industry led by private sector investments, market openings that provide important linkages between small producers and markets, and a high level of political commitment among national governments to making long-term investments in agriculture. ADB, FAO and IFAD are developing a regional partnership framework to support countries through coordinated food security engagements that take into account their specific priorities and constraints, hoping that other development partners will also join this initiative.