Title: Millennium Development Goal of Halving Poverty in Asia and the Pacific Region: Roles of Agriculture and Institutions Ganesh Thapa and Raghav Gaiha International Fund for Agricultural Development (IFAD) Rome Agricultural and Rural Development for
1Millennium Development Goal of Halving Poverty
in Asia and the Pacific Region Roles of
Agriculture and Institutions Ganesh Thapa and
Raghav GaihaInternational Fund for Agricultural
Development (IFAD)RomeAgricultural and Rural
Development for Reducing Poverty and Hunger in
Asia In Pursuit of Inclusive and Sustainable
Growth Policy Forum Organized by IFPRI at ADB,
Manila, Philippines, August 9-10, 2007
2Introduction
- Achievement of MDG 1 in Asia/Pacific Region is of
considerable importance, as the region accounted
for 64 of the worlds 982 million poor in 2004 - Extreme poverty in the developing world is
overwhelmingly rural ? rural and agricultural
development has a vital role in poverty
reduction. - Although various MDGs are interrelated, IFAD
study focuses on halving the proportion of the
dollar poor.
3Determinants of Poverty
Endogenous
Exogenous or predetermined
Adapted from Rodrik et al. (2002), Hoff
(2003), and Bardhan (2005)
4Methodology
- Stage 1 identification assessment of
determinants of income inequality (e.g. land
inequality), institutions (historical
geographical factors), and openness (e.g.
institutions, geographical factors). - Stage 2 determinants of per capita income (such
as lagged agricultural income per capita,
openness, geographical factors, institutions). - Stage 3 analysis of determinants of dollar poor
(e.g. income, income inequality, institutions,
and geographical factors).
5Methodology (continued)
- Model estimated using a database compiled from
FAO, World Bank, UN, and other research studies - 5 institutional quality indicators used include
voice and accountability, political stability and
absence of violence, control of corruption, rule
of law, and an aggregate index of institutional
quality. - Simulations carried out to deepen understanding
of policy choices in attaining MDG 1. - These include enhancing agricultural productivity
and overall growth, reduction of income
inequality, and institutional improvements.
6Findings
- Poverty elasticity with respect to GDP per capita
ranges from -0.69 to -0.92, depending on the
institutional quality variant. - Required growth rates range from 3.01 to 4.02
(actual growth rate of 0.86 during 1985-98) - East Asia actual growth rate gt required rate
under different institutional variants - South Asia actual rate lt what is required, in
all cases ? need for growth acceleration is thus
greater
7Findings (continued)
- Agricultural income per capita, through its
contribution to GDP per capita, makes a
substantial contribution to poverty reduction. - Required rates of agricultural growth gtgt actual
rates (entire sample, East Asia, South Asia) - Institutional quality impacts poverty through
income, and not directly. - Openness ceases to have any effect on income
(after allowing for variation in index of
openness due to institutional quality and
geographical factors)
8Findings (continued)
- Even modest improvements in institutional quality
are associated with significantly positive
effects on income and, consequently, on poverty - Head-count index declines markedly, assuming
voice and accountability index of top 30
performers, and historic growth of agri. income
(China, Bangladesh, India, Sri Lanka, Indonesia) - Both South and East Asia record substantially
lower head-count values for 2015, relative to
base line - An alternative formulation points to the
importance of human capital in influencing
institutional quality, which in turn has a
positive impact on income
9Nature of Poverty in Asia/Pacific in 2015
- Even when Asia/Pacific region achieves MDG 1 by
2015, the bulk of remaining poor will be
indigenous peoples, women and other marginalized
groups living in less-favoured areas - Vietnam share of ethnic minorities in total poor
is projected to increase to 42 by 2010, up from
20 in 1993 - China ethnic minorities are 9 of population but
40 of poor concentrated in most remote mountain
areas, with difficult agro-ecological conditions - India poverty level for scheduled tribes
projected to decline from 51 in 1994 to 29 in
2015 (2.56 annual decline) compared to 31 and
8 for others (6 annual decline)
10Towards a Strategy of Pro-Poor Growth
Institution Building
- Agricultural Productivity
- The analysis points to the important role of
agri. growth in overall growth process and in
reducing poverty - Although agricultures share of GDP has fallen
over time, it continues to be important for
employment - Agricultures success in less favoured areas
conditional on significant policy and
institutional reforms that ensure equitable
access to land, markets, credit, extension
11Towards a Strategy of Pro-Poor Growth
Institution Building
- Agricultural Service Delivery
- Need to focus on improving responsiveness of
technology innovation system to needs of poor
farmers in LFAs, rather than on promoting
specific technologies - Strong prospects for improving farmers
productivity and livelihoods through conventional
approaches, investments in biotechnology can be
complementary - Develop capacities of farmer organizations to
enable smallholders to voice their technology
needs
12Towards a Strategy of Pro-Poor Growth
Institution Building
- Agricultural Service Delivery
- Promote vertical integration of smallholders in
value chains in a manner that protects their
interests (e.g. contract farming for supply to
supermarkets) - Promote policy reforms and enabling legal
framework for private sector participation in
agri research, extension, seed and marketing - Support PPP, esp. in infrastructure development
13Towards a Strategy of Pro-Poor Growth
Institution Building
- Institutional Quality
- Domestic institutions of conflict management can
mitigate severity of economic hardship due to
external shock (Korea, Thailand vs. Indonesia
after Asian crisis) - A rigid view of institutional reforms may be too
demanding in some contexts (e.g. China) - Maintaining reform momentum, and political and
institutional continuity make a significant
difference to growth and poverty reduction
(Vietnam)
14Towards a Strategy of Pro-Poor Growth
Institution Building
- Institutional Quality
- Capture of local governments in a context of
acute inequality of endowments - Mechanisms of informal cooperation work well in
some activities and not in others, even when the
group size is small and members are family
related - Strengthening of social capital (norms of equity,
productivity and participation, and creating
space for new roles at the grassroots) has a high
payoff
15Towards a Strategy of Pro-Poor Growth
Institution Building
- Institutional Quality
- Greater attention must be given to conflict
prevention through a more inclusive process of
rural development - A major priority is to reallocate resources to
build social infrastructure, expand livelihood
options and strengthen local institutions of
conflict management
16Some Issues for Discussion
- Primacy of institutions in a pro-poor strategy of
growth ? sharper focus of development projects on
institutional quality - Greater clarity in linking and adapting locally
appropriate poverty indicators to dollar-a-day
criterion for impact assessment - Need to ensure that the poor are able to seize
income-earning opportunities in a globalized
environment ? need for policies that facilitate
effective linkages with market ? focus on
infrastructure, research, extension, deregulation
17Some Issues for Discussion
- Sequencing of policy reforms ? creating more
competitive environment for farm and non-farm
activities, without causing severe hardships to
disadvantaged groups (indigenous peoples, women) - Cost-effectiveness of investments in
less-favoured areas in roads, markets, etc. and
their production and poverty impacts not well
understood (given diversity of such areas in pop.
Density, livelihood options, vulnerability) - Creation of conditions for disadvantaged groups
to benefit from non-farm activities (e.g. through
acquisition of new skills, easier access to
credit, marketing networks)
18Some Issues for Discussion
- Need to strengthen voice and accountability
mechanisms for the poor (e.g. through easier
access to official records, producer groups,
womens associations) - Need for public-private partnerships to overcome
coordination failures (govt, NGOs, markets)