ESCWA Setting priorities for food security in the Arab world Early results of an international collaboration Nadim Khouri, ESCWA Conference Food Secure Arab World, A roadmap for policy and research IFPRI-UNESCWA Beirut, February 2012
ESCWA
Setting priorities for food security in the Arab world Early 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 Dry Areas-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 of California Berkeley; University of Naples Federico II; University of Jordan; Virginia Polytechnic and State University; World Bank
High import dependency of Arab Countries
Source: World Bank, 2010/11 data from the Middle East and North Africa Region
Food prices – World and MENA 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
Percent of arable land and permanent crops
Conflict affected countries and food security
Source: ESCWA
Food security risk Matrix – Arab region
-15
-10
-5
0
5
10
-15 -10 -5 0 5 10 15 20 25 30
Mauritania Syria
Morocco Tunisia
Sudan
Djibouti
Jordan Lebanon
Egypt
Yemen
Saudi Arabia Kuwait
Import dependent, but fiscally sound
Least vulnerable Less import dependent, fiscally strained
Most vulnerable Comoros
Fiscal balance (% GDP) PRICE RISK
Deficit Surplus
Surp
lus
QU
AN
TITY
RIS
K
Foo
d b
alan
ce (
%G
DP
) D
efic
it
Source: ESCWA calculation based on International, Monetary Fund, WEO, WB, Food price forecasts and WDI
Food security risks and vulnerabilities in the Arab Region
Heavy dependence on imports => vulnerable to international food commodity price shocks
Growing population higher than the world rate, particularly in rural areas
Child malnutrition and youth unemployment rise despite GDP growth and poverty reduction
Limited investment in agricultural productivity
Regional political unrests Volatility of petroleum prices and
depletion of natural resources in the region (especially water)
Concentration of the poor in rural areas
Poor transport/storage infrastructure
Algeria
Comoros Djibouti
Egypt
Jordan Lebanon
Mauritania
Morocco
Syria Tunisisa
Yemen
0
1
2
3
4
5
6
-1.5 -1 -0.5 0 0.5 1 1.5
Ave
rage
gro
wth
rat
e o
f G
DP
be
twe
en
19
90
an
d 2
01
0
Annualized change in poverty
Change in poverty 1990-2010
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 communities by improving their access to improved farming technologies and invest in skills and education 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 other near-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
Source: “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
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 basis
2007/2008 international price shocks were translated into domestic price shocks
2. Enhancing agricultural productivity Elasticity of farmer’s response to increased food prices
Source: “Farmers’ response to soaring food prices in the Arab Region”, I. El-Dukheri et al, 2010
Research and infrastructure investment (esp. in irrigation) supported by appropriate policies and institutions, could increase per capita calorie availability by 35% in 2050 – MENA region
Source: “ The future role of agriculture in the Arab region’s food security” Sulser et al. 2011
2. Enhancing agricultural productivity
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.
At current yield levels, Morocco is capable of achieving 85% self-sufficiency in cereals.
Source: “ Modeling the limitations and implicit costs of cereal self-sufficiency-the case of Morocce” Magnan et al. 2010
2. Enhancing agricultural productivity The cost of self-sufficiency: an extreme modeling exercise
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 farmers
Source: “ The potential of small-scale rainfed agriculture to strengthen food security in Arab Countries”,Haddad et al. 2011
2. Enhancing agricultural productivity The unmet potential of rainfed agriculture
Foreign 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 sustainability
Source: “International investment in developing country agriculture”, D. Hallam, 2010
3. Reducing exposure to market volatility
Source: “Grain reserves and food security in the MENA region,”. Wright and Cafiero 2011 “Improving food security in Arab Countries”’, WB, FAO and IFAD, 2009,
The role of storage
Source: USDA for stock-to-use ratio, World Bank for price index of wheat
3. Reducing exposure to market volatility
National Strategic Reserves
Regional or pan-Arab Reserve
Legislative and organizational changes in national procurement rules
Employ financial risk-hedging instruments; Future contracts, options contracts
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
3. Reducing exposure to market volatility
Risk management through strategic purchases
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?)