Food Security & Development in the Arab World - In Transition?

Nadim KhouriDeputy Executive Secretary-UN Economic and Social Commission for

Western AsiaWashington, 7 November, 2012

IFPRI Policy Seminar: Food Security and development in the Arab World: in

Transition?

Outline

Short-term effect of transition? International community and its role Way forward Where to start first? Knowledge gap

Short-term effect of transition?

Situation in selected countries:

Egypt Poverty rates have high variance (close to 0 in Suez but 60% in Assiut) 1/5 of Egyptians are calorie-deprived (receive less than 80% of

required cal intake) 14% of under-5 are stunting

Syria Depreciation of the Syrian Pound and increase of import prices 30% of rural population is estimated to be vulnerable

Yemen The number of the severely food insecure almost doubled between

2009 and 2011, from 12% to 22% Food purchase on credit has increased by 43% and makes ¼ of total

food purchase Malnutrition is increasing (13% of under-5 are acutely malnourished

Weak governance indicators

MENA with GCCSource: WGI and IMF.

Source: Doing Business, 2011

Weak Governance indicators

Food insecurity in the Arab region - a major obstacle to transition and conflict resolutions

Natural Shock

Instability Commodity price Shock

Source: ESCWA

Vulnerability to shocks makes poor households risk averse in their asset-allocation strategy , which is even more pronounced in TCs often characterized by a cascading series of a combination of political instability, natural shocks, and international price shocks with the result of ever-decreasing food-security levels and passing up more risky but more profitable businesses.

Changes in food security policies New social measures

Increased subsidies and transfers: Jordan, Syria, Tunisia, Morocco, Bahrain, Saudi Arabia, Kuwait, Iraq, Syria

(food subsidies on particular products-flour, meat, milk, sugar, cooking oil; waved VAT and customs on some imports, transfers to state-run consumer corporations)

Raised government salaries: Egypt, Jordan, Syria, Oman, Saudi Arabia, Algeria, Yemen

(civil servants, military, retirees, payment of employer contribution to the mandatory social security, reduction of working ours, minimum wage, unemployment allowance)

Tax breaks: most countries(suspending special sales tax, reducing fuel tax, housing installment payments)

Infrastructure: Tunisia, Bahrain, Kuwait, Saudi Arabia(accelerating investment projects, public housing construction)

Changes in food security policies New social measures

Jobs: Egypt, Tunisia, Morocco, Bahrain, Oman, Saudi Arabia, Algeria(permanent hiring of temporary contractors, heavy recruitment in public sector, employment program development)

Restrictive Monetary Policy – Syria (to support the currency)

Development of government institutions: Tunisia -Ministry of Regional and Local Development

Development of NGOs: Egyptian Food Bank, Lebanese Food Bank

Scenarios definition

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Scenarios:

Sim 1 (FTA): A full implementation of intra-Arab FTA

Sim2 (TR) =Sim1+ a 50% reduction of intra-Arab transport costs

Sim3 (CU) : Sim2+ a customs union for non agricultural products. The Common external tariffs is supposed to be equal to the minimum tariff applied by non oil producing countries. Countries that have a lower tariff are supposed to maintain their current tariffs.

Sim4 (Migration): Sim3+the replacement of 20% of non Arab migrant stock by Arab migrants

sim4:sim3+ An Arab preference for

migration quotas in OPC

sim3: sim3+a common external

tariffs (for non agriculture products

sim2: sim1+ 50% reduction in transport

cost

sim1: A complete Free trade Area

Simulation exercise – Benefits of deeper Arab Economic Integration (Trade)Work in progress

Source: ESCWA

CFS Framework, 2012New framework for the international community

• Components:A. The Twin-Track ApproachB. Increasing smallholder-sensitive investments in agricultureC. Addressing excessive food price volatilityD. Addressing gender issues in food security and nutritionE. Increasing agricultural productivity and production in a socially, economically

and environmentally sustainable mannerF. NutritionG. Tenure of land, fisheries and forestsH. Addressing Food Security and Nutrition in Protracted Crisis

Core actions defined to unite and organize against hunger at country, regional and global levels

Agreed in Rome October, 2012

Way forward 1. Funding gap?

GAFSP is currently absent from the region WB is in the process of developing the Arab World Initiative for Financing Food

Security, but the size is unknown Arab funds are involved in food security. However, given their size, their

contribution is seen as insufficient.

Multi-donor Trust Fund highly needed for both short and long term interventions:

1. S-T: address the most vulnerable/fight hunger2. L-T (but start immediately): investment to increase productivity,

reduce market volatility, education and family planning, reform of safety net programmes

Way Forward2. Rethinking governance-control corruption/resource reallocation

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Government Sector Budget

Inefficiency Leakages

Rent Capture/Misappr.

Corruption

Actual resource transferred and utilized

Food Security

Way Forward2. Rethinking governance - decentralization

Source: Global Forum for Reinventing Government, UN 2007

Decisions and actions should be made at the lowest levelexcept

in cases where by reason of scale or the effect of the proposed actions, the tasks would be better achieved at governorate or central levels.

Examples:National Conventions –National /Central

vs. Land use planning – Governorate/Provincial

vs. Municipal development –Local/Municipal

Equity through local and provincial decision-making

Key principle to decentralization

Way Forward2. Rethinking governance - decentralization

Way forward 3. Enhance ownership and management of land

Gini Coeffficient and Land distribution

Source: Majid (2004).

Majority government owned land

Incoherent land management strategies and laws-Egypt: 45 laws;

Inelastic land supply – states ill-equipped to ensure pareto-optimal use of land (ex. military use);

37% of manufacturing firms identify access to land as a major obstacle to doing business;

untapped property tax collection (estimated tax potential for Baghdad is 300 mln USD/year)

3. Enhance ownership and management of landTargeted Countries

Countries of Origin

Source: ILC, 2012.

Governance deficit and land deals in Arab Countries

Way forward 4. Reform Social Safety Net Programmes and Fiscal Expenditures

Source: WB, 2012.

Most subsidies are spent on fuel (3-7% of GDP).

Food subsidies, although inefficient and costly, are more effective in reducing poverty compared to fuel subsidies

Targeting methods are mostly geographical or category-based with high leakages and low impact for the poorest

CountryMilitary expenditure

averagePublic education

expenditure averagePublic health

expenditure average

 2000-2004

2005-2009

2001-2004

2005-2008

2000-2004

2005-2009

Bahrain 4.40 3.36 - 3.10 2.79 2.66Egypt 3.24 2.50 4.80 4.06 2.32 2.12Iraq 2.38 4.54 - - 1.01 2.58Jordan 5.74 5.22 - - 4.86 5.30Kuwait 6.92 3.79 6.30 4.24 2.49 1.92Lebanon 4.91 4.29 2.64 2.46 3.44 3.93Oman 11.89 9.86 4.05 3.72 2.56 1.99Qatar 3.88 2.25 2.14 - 2.37 2.07KSA 9.80 8.93 7.27 5.97 2.99 2.78Sudan 3.77 4.24 - - 1.07 1.88Syria 5.49 4.22 - 5.09 2.21 1.45UAE 8.40 5.73 1.84 1.09 2.44 1.81Yemen 6.16 4.62 9.63 5.15 2.42 1.62Arab Region 6.40 5.28 5.07 3.95 2.57 2.44EAP 1.49 1.58 3.98 3.79 4.69 4.28LAC 1.35 1.36 4.18 3.96 3.19 3.51World average 2.39 2.48 4.33 4.45 5.64 5.76

4. Reform Social Safety Net Programmes and Fiscal Expenditures

Crowding-out Effect of Military Expenditures vs. Social Expenditures? (% of GDP)

Source: The World Bank Development Indicator (WDI) database (2011).

Where to start first?

AOAD Strategy and Emergency Plan agreed by Arab States exist and despite some skepticism efforts built in developing them cannot be ignored

A revision of the Strategy and Emergency Plan could be the first step towards reigniting regional efforts in fight against food insecurity

Knowledge Gap

Transition and Food Security How to break a vicious circle of persistent conflict and chronic food insecurity?

Human Development and Food Security Alternatives to subsidy systems ? What policies to fight malnourishment? Alternative mechanisms to empower women farmers?

Economic Governance and Legal Framework What regulatory apparatus for land ownership and management, FDIs? What types of food reserves at country and regional levels? Which institutions to address governance challenges at local levels? Are Egyptian and Lebanese Food Banks replicable?

Knowledge GapIncreased productivity and profitability

Cost/benefit analysis of water re-use, water harvesting and other methods What policies to discourage waste of water? Policies to stimulate investment in rain-fed agriculture? Regional R&D fund and R&D institutions? Energy and fertilizers export-regional comparative advantage to be exploited?

Regional Governance How to mobilize funds for the implementation of the AOAD Strategy plan? Rethinking coordination strategies among UN, research organization, regional

organizations, funds? A new formal and permanent multi-stakeholder platform? Trade policy in agriculture – intra and inter-regional trade? Role of food safety standards

in agricultural trade? How critical are safety standards as opposed to trade agreements in boosting cross-border agricultural trade?