Investment and Resource Mobilization

Transcription

1 1of 38 F A O P o l i c y L e a r n i n g P r o g r a m m e Module 3: Investment and Resource Mobilization Investment and Resource Mobilization

2 2of 38 Investment and Resource Mobilization By Michael Wales, Principal Adviser Investment Centre, FAO, Rome, Italy of the FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS About EASYPol The EASYPol home page is available at: This presentation belongs to a set of modules which are part of the EASYPol Training Path Policy Learning Programme Module 3: Investment and Resource Mobilization, Session 1: Investment in agriculture and rural development EASYPol has been developed and is maintained by the Agricultural Policy Support Service, Policy Assistance and Resource Mobilization Division, FAO.

3 3of 38 Introduction 854 million chronically undernourished people Almost no progress towards WFS goals or MDG 1 Lack of investment one of principal constraints to increasing agricultural production 50% decline in IFI lending to agriculture International commitments not reaching agriculture Need greater domestic resource commitment Need to improve absorptive capacity of the sector

4 4of 38 Objectives After reading this module, you should know about [the main approaches to]: Public and private investment in agriculture Aid harmonization FAO s role through the Investment Centre

5 5of 38 Why invest in agriculture? (I) Consensus by development partners about MDGs and need to tackle rural poverty Commitment by governments at World Food Summit 1996 to promote public and private investment in agriculture 70% or more of poor people live in rural areas

6 6of 38 Why invest in agriculture? (II) Their livelihoods are predominantly in agriculture Investing in agriculture will directly impact poverty and help achieve MDG1 it not only raises incomes but also directly impacts food security and nutrition

7 7of 38 Public investment in agriculture (I) Investment in agriculture is essential but not alone health & education, infrastructure the purpose is to stimulate private investment Public investment has been falling especially in Africa developing country governments fail to invest Renewed commitment in Africa Maputo Declaration 10%

8 8of 38 Public investment in agriculture (II) Why has public investment declined? disillusionment with the sector poor performance reluctant to commit scarce resources new reduced role for government: provide public goods less interventionist divestment - privatization more role for private sector

9 9of 38 Public investment in agriculture (III) Limited programme formulation capacity reliance on external assistance limited training capacity in public administration decline of higher education in Africa poor incentives high staff turnover

10 10 of 38 Public investment in agriculture (IV) New training approaches needed formal, informal, on-the-job greater role for the private sector in planning National ownership and leadership the current central theme of development implies greater domestic capacity

11 11 of 38 Private investment in agriculture (I) The biggest investors are small farmers who: are small, private entrepreneurs are driven by need for food and for profit invest in seeds, fertilizer, tools and their own labour

12 12 of 38 Private investment in agriculture (II) Major obstacles to their investment lack of credit insecure land tenure poor roads and transport infrastructure high trader margins = low prices/high costs poor links with agribusiness supply chain

13 13 of 38 Private investment in agriculture (III) Major natural hazards drought flood pests & disease Man-made hazards commodity price fluctuations lack of information conflict

14 14 of 38 Private investment in agriculture (IV) Commercialisation essential to increase marketed output private sector needs predictable environment but, doing business in Africa difficult Public sector must set regulations grades & standards legal framework food safety & standards workers rights

15 15 of 38 Private investment in agriculture (V) Agribusiness the key develops supply chains transmits incentives uses international standards But faces huge problems poor roads, railways, markets = high costs lack of standards to define products lack of contract enforcement complexity of dealing with many small producers

16 16 of 38 Aid harmonization (I) Paris Declaration 2005 on aid effectiveness multilateral and bilateral donors agreed on new aid environment Main elements predictability of aid flows national ownership alignment with national strategies & systems harmonization

17 17 of 38 Aid harmonization (II) Outputs of Paris new aid architecture PBAs SWAps basket funding DBS Implications for programmes new programme cycle complex donor-government-beneficiary coordination procurement & monitoring

18 18 of 38 Implications for programme design process Greater consultation More partners priorities must be reflected Better understanding of national systems More capacity building of national systems Greater flexibility of design Results framework More costly process Often longer process

19 19 of 38 Public financial management (PFM) The core national system that must work Central to governance Untied financing through national budgets Demands confidence in the system by donors financial management, control & accountability

20 20 of 38 PER as an analytical tool for service delivery Assess service delivery against norms and across sectors Strengthening sectoral planning, budgeting and execution Tracking sectoral expenditures (COFOG) Impact per $ in budget

21 21 of 38 What benefits to developing countries? Greater ownership But more responsibility & accountability More flexibility Greater volume of assistance Simpler, harmonized procedures for reporting Greater choice in sourcing technical assistance Broader impact on creating national capacity

22 22 of 38 GDPRD: Organisation and Governance 29 members at present (bi- and multilateral) Board (fee-paying members) Steering Committee (SC) is the decision-making body (6 members) Operational Management by Platform Secretariat in Germany managed by GTZ

23 23 of 38 GDPRD Focus areas Applying the Paris Declaration to the agriculture sector: 1. Policy dialogue and outreach 2. Shared learning 3. Aid effectiveness Moving towards a Code of Conduct for donors

24 24 of 38 Key lessons for public policy (I) Public policy to create a favourable environment for investment ensure profitability returns to investment good governance transparency macroeconomic stability political stability support services rural finance, venture capital, microfinance

25 25 of 38 Key lessons for public policy (II) Provide public infrastructure roads main & farm-to-market water supply rural electricity agro-industries irrigation water supply Public-private partnerships possible in some instances

26 26 of 38 Key lessons for public policy (III) Regulatory framework create a safe and predictable environment to reduce risks and costs grades & standards national & international standards on pesticide use, humane treatment of livestock Public sector role set the laws & regulations undertake control, inspection & approval enforce & operate

27 27 of 38 Key lessons for public policy (IV) Land tenure secure land tenure is crucial unlocks rural finance Market information public systems mobile phones privately contracted MIS Research & extension public role staple products, standards private role commercial products

28 28 of 38 Key lessons for public policy (V) Strengthened PFM systems crucial in new aid environment install efficient, modern systems long term capacity building at all levels democratic oversight of programmes accountability donor confidence

29 29 of 38 Key lessons for public policy (VI) Right public and private mix can unlock agricultural production government rigorously defines public good functions monitors and trims expenditures creates attractive environment for private sector domestic and FDI partners with private sector in infrastructure

30 30 of 38 FAO Investment Centre: achievements Over 40 years of agriculture investment design Over 1,600 projects/programmes US$82 billion in investment by IFI partners Annually about US$3 billion investment Over 30% of IFI projects in agriculture Began as the World Bank Cooperative Programme (CP) Investment Support Programme (ISP) added later See notes for details

31 31 of 38 Facts & figures In biennium, TCI received US$21.7 million from FAO This is just 3% of the total FAO budget TCI delivered services worth US$48.6 million This is almost 2.5 times the amount of resources contributed by FAO FAO overall delivers just 1.1 times the resources it receives See notes for details

32 32 of 38 How is the extra delivery funded? TCI earns income from delivering its services to: international financing institutions (IFIs) FAO TCP, other Trust Funds e.g NMTIPs for Africa under CAADP bilaterals TCI s income is over US$30 million per biennium US$23 million from World Bank See notes for details

33 33 of 38 How is FAO s contribution used? FAO cost-shares each task with the IFIs from 25% to 33% Viewed as the member governments share See notes for details

34 34 of 38 What are TCI s strengths? FAO cost-sharing allows TCI to give independent advice honest broker Helping donors without project preparation capacity Drawing upon FAO technical expertise Ensuring high quality outputs Strengthening national design capacity on-the-job SRO role in capacity building Costab SEPSS RuralInvest See notes for details

35 35 of 38 Conclusions Agriculture s share of aid stagnant Need to: find innovative financing mechanisms improve effectiveness in using resources raise the visibility of agriculture improve investment planning by ministries of agriculture

36 36 of 38 Further readings FAO, Investment Centre, Operational Guideline. The Agronomist's Contribution to Investment Centre Missions. FAO, Rome, Italy. FAO, Investment Centre. The Design of Agricultural Investment Projects - Lessons from Experience. Technical Paper No. 5, FAO, Rome, Italy FAO, Investment Centre. Guidelines for the Design of Agricultural Investment Projects. Technical Paper No. 7. FAO, Rome, Italy. FAO, Investment Centre. Sociological Analysis in Agricultural Investment Project design. Technical Paper No. 9. FAO, Rome, Italy. FAO, Investment Centre. Rural Invest. WB, Costab Reference Manual, World Bank, Washington DC, USA. WB, 2003.A User s Guide to Poverty and Social Impact Analysis (PSIA). World Bank, Washington DC, USA.

37 37 of 38 Links to Module 3 : Sessions 1-8 FAO Policy learning programme Module 3: Investment and Resource Management Session 1: Investment in agriculture & rural development Session 2: Environment for private investment in agriculture & rural development Session 3: Sources and uses of financial resources Session 4: Strategies for increasing farm financing resources Session 5: Risk mitigation in agricultural investment Session 6: Sector-wide approaches (SWAps) Session 7: Socio-economic & livelihood analysis FAO Policy learning programme Capacity Building Programme on Policies and Strategies for Agricultural and Rural Development

38 38 of 38 T h a n k y o u!