Agribusiness may help uplift rural poor

Agribusiness may help uplift rural poor

Bungaran Saragih, Minister for Agriculture, Jakarta

Borrowing from Amartya Sen, the Nobel laureate of economics,
the framework on valuing food security and poverty eradication
has both intrinsic and instrumental values. It is invaluable in
itself because poverty is the condition of suffering from a bad
quality of life or living in destitution. Poverty eradication is
necessary to assure the basic right of all people for a healthy,
productive and dignified life.

Poverty eradication is instrumental for achieving all other
development goals such as food security, health security, living
security, education security, employment security, environmental
security and social as well as political participation.

Urban poverty to a large extent is the spill-over effect of
rural poverty. Accordingly, the best strategy on attacking
poverty is a concerted effort for rural development. Since most
rural economies are based on agriculture, then the appropriate
approach to rural development is "agribusiness-led development".

Studies have shown not only that agribusiness-led development
is the most effective strategy for poverty alleviation, it is
also consistent with high economic growth for developing
countries which have large rural populations and where its
economy is largely dependent on agriculture.

Hence, to reach the aptly named millennium development goals
a crucial step would be the adoption of an agribusiness-led
development strategy.

Economic development in developing countries tends to be
biased against agriculture and rural people in favor of the
industrial sector and urban people. So another recommendation
would be a political economy campaign to advocate agribusiness-
led development to reach the millennium development goals to
eradicate poverty.

Our great challenge is to reverse the seemingly persistent
paradox: That developing countries tend to suppress the
agricultural sector, their dominant economic sector, while
developed countries tend to heavily support the agricultural
sector although it is often just a minor slice of their
economies.

With such a paradox of the political economy, agribusinesses
in developing countries surely cannot compete with counterparts
from developed countries. And we all know that developing
countries have a comparative advantage in agriculture while the
developed countries have a comparative advantage in high
technology or knowledge-based industries.

Perhaps, it is now the right time to reach an agreement on "a
new architecture of global economic structure" based on natural
comparative advantage. The developed countries, which do not have
a comparative advantage in agriculture should voluntarily stop
supporting their own agricultural development and hence give way
for agriculture in developing countries to progress.

Further, enabling the rural poor to overcome their poverty may
be the most effective way of developing the rural economy.
Helping the rural poor to help themselves requires targeted and
participatory rural development programs that can be divided into
a system of five components: Business or employment opportunity
creation, capacity building, supporting facility creation,
institutional innovation and incentive and risk protection. This
system approach to the rural poor enablement program is my fifth
recommendation.

The best strategy would be the promotion of agribusiness
development in rural areas. Included in this component are
investments in the production base, such as land, livestock,
ponds, tools and machinery, transportation and marketing
facilities for market creation and marketing efficiency, etc.

Capacity building is intended to increase human resource
quality of the rural poor, provision of innovative technology and
provision of working capital. This can be done through a targeted
extensive service and vocational training, and developing a rural
financial system. Supporting facilities are intended to develop
the agribusiness infrastructure in rural areas such as
irrigation, input supply distribution systems, rural electricity,
etc. Most of these are public investments.

Institutional innovations include agrarian reform, labor
relation reform, and transformation of other business relations
which are so far biased against the rural poor. This is
especially important where "structural poverty" is dominant.
Incentive and risk protection for small scale agribusinesses
includes innovation incentives, investment incentives and
protection against various agribusiness risks.

This component is of particular importance because the rural
poor areas are generally unfavorable for business enterprise
development due to both limited profit prospects and high risks.

Finally, decentralization of project management is a must.
Project implementation units should be located in rural areas.
The roles of non-governmental organizations may be critical in
the project planning and implementation control. This may imply a
radical reconstruction of project governance in some developing
countries.

The above is abridged from the writer's presentation at the
25th anniversary session of the Governing Council of
International Fund for Agricultural Development in Rome on Feb.
19.