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?)