Economic growth, demographic transforma4on and inclusive food security: Emerging challenges and opportuni4es Upali Wickramasinghe Senior Interna5onal Consultant FAO Regional Office for Asia and the Pacific Presenta5on made in the Macroeconomic Policy and Financing for Development (MPDF) Seminar Series Friday, 17 June 216, 1-11:3 Hrs. Mee5ng Room H UNCC, United Na5ons Economic and Social Commission for Asia and the Pacific, Bangkok, Thailand. Note: Author is responsible for the ideas expressed, and should not be a>ributed to the FAO or its affiliated ins4tu4ons
Undernourishment (Prevalence and number) declined??? Source: FAO (215) Next 15-2 years
An extended development trilogy Economic Growth (policies, demographic change, innovations and technologies) Food Security Equity (social, institutional) Stability (Climate change, disasters and cyclical variaions )
Real per-capita GDP increased significantly 14 La4n America & Caribbean 12 PPP Interna4onal dollars 199-214 1 8 6 4 Middle East & North Africa Easrtern Asia South-Eastern Asia Asia and the Pacific Oceania Southern Asia 2 Sub-Saharan Africa 199 1995 2 25 21 215
Slowing down of economic growth 1. Growth rate (GDP pc PPP Int $ 211-214) 8. 6. Percentage 4. 2.. -2. Easrtern Asia Southern Asia South-Eastern Asia Oceania LAC MENA SSA Asia-Pacific 1991-21-1 211-14 Long-term growth projections (ADB 211, 215; UN 216) predict a growth slowdown New normal for several reasons: o Delayed recovery o Moderate prospects of China and India o Weak economic performance of large global players o Conditional convergence due to slow growth of labour force
Popula'on (millions) 5 45 4 35 3 25 2 15 Asia s popula5on change 195-21 Asia's popula'on change 195-21 (millions) (projec'ons: medium fer'lity) Fer5lity rates have declined (total births per woman declined) People live longer More children survive beyond five years 1 5 Per cent 4. 3.5 3. 2.5 2. 1.5 1..5. -.5-1. 195 1955 196 1965 197 1975 198 1985 199 1995 2 25 21 215 22 225 23 235 24 245 25 255 26 265 27 275 28 285 29 295 21 Eastern Asia South-Eastern Asia Central Asia Southern Asia Oceania Rate of popula/on growth 1951-25 (projec/ons: medium fer/lity) 1951 1954 1957 196 1963 1966 1969 1972 1975 1978 1981 1984 1987 199 1993 1996 1999 22 25 28 211 214 217 22 223 226 229 232 235 238 241 244 247 25 WORLD ASIA Central Asia Eastern Asia South-Eastern Asia Southern Asia Oceania The share of children aged -14 in the total popula5on decline sharply Share of the working age popula5on 15-64 has been rising with each region and country reaching peak levels at different 5me periods The share of aged popula5on 65+ will outstrip that of children for the first 5me in known history
Elements of demographic transi5on The aged share of children -14 and 65+ of Asia and the world Children aged -14 as a share of the total popula6on 45. 4. 35. 3. 25. 2. 15. 1. 5.. 5. 45. 4. 35. 3. 25. 2. 15. 1. 5.. 195 1955 196 1965 197 1975 198 1985 199 1995 2 25 21 215 22 225 23 235 24 245 25 255 26 265 27 275 28 285 29 295 21 195 1955 196 1965 197 1975 198 1985 199 1995 2 25 21 215 22 225 23 235 24 245 25 255 26 265 27 275 28 285 29 295 21 World Asia Central Asia Eastern Asia age -14 Asia Age 65+ Asia Age -14 World Age 65+ World South-Eastern Asia Southern Asia Oceania Popula'on aged 15-64 as a share of the total popula'on Popula'on aged 65+ as a share of the total popula'on 75. 4. 7. 35. 3. 65. 25. 6. 2. 15. 55. 1. 5. 195 1955 196 1965 197 1975 198 1985 199 1995 2 25 21 215 22 225 23 235 24 245 25 255 26 265 27 275 28 285 29 295 21 5.. 195 1955 196 1965 197 1975 198 1985 199 1995 2 25 21 215 22 225 23 235 24 245 25 255 26 265 27 275 28 285 29 295 21 World Asia Central Asia Eastern Asia World Asia Central Asia Eastern Asia South-Eastern Asia Southern Asia Oceania South-Eastern Asia Southern Asia Oceania
Food security implica5ons Rural-urban migra5on and urbaniza5on Significant rural-urban migra5on à more people will begin to live in ci5es than in ci5es within the next 1-2 years Popula5ons in urban agglomera5ons are increasing China: 63 million in 197 to 278 million in 21 (83 million of this, ager 2) India: 43 million in 197 to 164 million in 21 APR: 223 million in 198 to 619 million in 21 (increase of 396 mil) Implica5ons à Urban food security becomes a cri5cal component à Men migrate to urban centres leaving agriculture largely to women à new issues: labour, technology appropriate for women à Despite migra5on, rural popula5on is s5ll rising in absolute terms à rural employment is an issue (in 214, 53% of the total popula5on or 2.1 billion lived in rural areas, compared to 6% in 196)
Food security implica5ons Food produc5on and availability Larger, more urban popula5on with higher income à quan5ty and quality of food demanded à increased pressure for rural agriculture to produce more and quality foods Widespread, chronic and con5nuing loss of farmland due to urbaniza5on, pollu5on and erosion à food produc5on under increasing constraints Access to food (poverty, inequality and exclusion) APR s growth in food produc5on largely input driven, but becoming difficult due to poten5al labour constraints Labour force change à economic growth (48% of forecasted reduc5on of economic growth is explained by demographic transforma5on (ADB, 211) à demographic change à alter growth prospects à access to food New migrants to ci5es à increase in under-served seklements à demand for processed or cooked foods à food safety Rise in working age popula5on à a higher demand for calories and nutri5on à structure of agricultural produc5on will have to be different
Give me a place to stand and a lever long enough, I will move the Earth Archimedes - 287 to 212 B.C. Cartoon: https://cartoonstudio.wordpress.com/category/cartoons/page/2/
Economic growth and structural transformation A. Sectoral transition away from agriculture to more diversified economy with a higher relative share of manufactures and services in GDPà does not mean agriculture becomes irrelevant B. Spatial tendency towards increased urbanisation C. Institutional transformation from informal rules to formal legislation D. Falling death rates and declining birth rates demographic transition
Share of agriculture in GDP and in total employment Share of agriculture in GDP and per capita GDP Employment share in agriculture 6 9 Agriculture as a share of GDP (%) 5 4 3 2 1 y = 1.3664x 2-29.158x + 156.8 R² =.73793 Shara of labour force in agriculture (%) 8 7 6 5 4 3 2 1 y = 2.3477x 2-52.625x + 295.89 R² =.77461 4 5 6 7 8 9 1 11 12 GDP per capita (logarithmic scale) 5 6 7 8 9 1 11 12 Per capita GDP (logarithmic scale) Agriculture's share in GDP (%) Agriculture's share in employment (%) 9 8 7 6 5 4 3 2 1 Japan Korea, Rep. Australia New Zealand Turkey China Malaysia Iran Sri Lanka Philippines Thailand Indonesia Bangladesh India Uzbekistan Viet Nam Pakistan AVA in GDP (1981-9) AVA in GDP (211-13) SAE (%) (1981-9) SAE (211-13) Lao PDR Cambodia Nepal 9 8 7 6 5 4 3 2 1 The gap between the two shares generally declines with economic growth, but in the APR, the gap declines slowly à surplus agricultural labour is not gelng integrated with the rest of the economy (urban industrial and services industries such as ICTs)
Labour misalloca5on across countries significantly high Agricultural productivity gap (APG) = (!!!! ) (!!!! )!!!!, where!! is the share of agriculture in GDP and!! is the share of agriculture in total employment. APG = 1, if the labour market is competitive i.e., wage = value of marginal product. For further explanations and global estimates, see Gollin et al. (213). 6. Agricultural Produc4vity Gap (ra4o) 5. 4. 3. 2. 1. 1.2 1.2 1.7 2.1 2.4 2.4 2.8 3.3 3.4 3.5 3.5 3.6 3.7 3.8 4. 4.5 4.9 5.1 5.2. New Zealand Malaysia Australia Cambodia Pakistan Iran Uzbekistan Turkey Nepal Japan Korea, Rep. Philippines Indonesia Viet Nam India Thailand Bangladesh China Sri Lanka Lao PDR GAP 1981-9 GAP 211-13
Agricultural value added per worker is below per capita GDP across many countries Agricultural value added per worker as a share of per capita GDP 18. 16. 14. 12. 1. 8. 6. 4. 2.. China Thailand Sri Lanka Indonesia India Nepal Lao PDR Philippines Fiji Turkey Bangladesh New Zealand Korea, Rep. Japan Australia Pakistan Malaysia 1981-9 211-3
With economic growth, convergence between agricultural value added per worker and the share of per capita GDP is expected, but divergence is observed across countries including in dynamic regions Uzbekistan Malaysia Australia Korea, Rep. Bangladesh Cambodia Philippines Nepal Indonesia Vietnam China RaBo between Ag VA per worker & per-capita GDP..5 1. 1.5 2. 2.5 211-14 1991-
Although NOT as clear as the sectoral transforma5on, economic growth is associated with a spa5al transforma5on consis5ng of: rural-urban migra5on (decline in rural popula5on as a share of total popula5on) spa5al re-organiza5on and agglomera5on of economic ac5vi5es 1 2 3 4 In the APR: it is observed that: a sharp decline in the share of rural population as a % of total population But, spatial re-organization and agglomeration is far behind, having implications for economies of scale and high unit of costs of providing public services e.g., health care, schooling, electricity and ICT
Agricultural land: fragmenta4on and consolida4on Average farm sizes across the world (hectares) 193 196 2 Asia 4.1 2.6 1 Africa 65 3.5 2.2 Australia / New Zealand North & Central America 1428 /26 1843 / 231 3243 / 223 75 99 117.8 Europe 13.5 1.7 12.4 All others except Oceania (Hectares) 25 2 15 1 5 193 195 196 197 198 199 2 World Africa 2 18 16 14 12 1 8 6 4 2 Oceania (Hectares) South America 228 83.4 75 World 57 17.9 4.8 North and Central America Asia Oceania South America Europe The APR holds: 9 per cent of the total number of land holdings in the world 93 per cent farm holdings with the opera5onal land holding sizes less than 2 hectares in the world. Only 1 per cent of those farm holdings with opera5onal area of over 2 hectares. Of this: China (196 million) and India (117 million) together contribute to 75 per cent of the world s total es5mated smallholder family farms, holding less than 2 hectares of land. Other countries with large smallholder farms: Bangladesh (13 million), Indonesia (22 million) and Viet Nam (11 million).
Land use dynamics 199 to 212 Agricultural land per unit of agricultural labour Hectares 6. 5. 4. 3. 2. Per unit land availability increased: Japan, Malaysia, Korea, R., China, Turkey, Thailand 1.. Tajikistan Pakistan Cambodia Uzbekistan Iran Nepal India Philippines PNG Fiji Sri Lanka Indonesia Bangladesh Lao PDR Vietnam Thailand Turkey China Korea, Rep. Malaysia Japan 199 212 5. 4. 3. 2. 1.. -1. Change in agricultural land per unit of agricultural labour Per unit land availability decreased: Tajikistan, Pakistan, Cambodia, Uzbekistan, Iran, Nepal, India and Philippines -2. Tajikistan Pakistan Cambodia Uzbekistan Iran Nepal India Philippines PNG Fiji Sri Lanka Indonesia Bangladesh Lao PDR Vietnam Thailand Turkey New Zealand China Korea, Rep. Malaysia Japan
Agricultural land: fragmenta4on and consolida4on India - Number of operational holdings (in ') India&'&Area&operated&per&opera.onal&holdings& 1 2.# 8 15.# 6 4 1.# 2 5.# 197-71 1976-77 198-81 1985-86 199-91 1995-96 2-1 25-6 21-11.# 197)71# 1976)77# 198)81# 1985)86# 199)91# 1995)96# 2)1# 25)6# 21)11# Marginal Small Semi-Medium Medium Large Marginal# Small# Semi)Medium# Medium# Large# Japan - Farm housheolds by size of land holding Korea - Farm households by size of land holding 2,5 1 2, 8 1,5 6 1, 4 5 2 1995 2 21 22 23 24 25 1995 1996 1997 1998 1999 2 21 22 23 24 25 Less than 1 ha* 1-2 ha 2-5 ha** Less than 1 ha* 1-2 ha 2-5 ha** 12" 1" 8" 6" 4" 2" " Australia 1997*98" 21*11" <"5" 5"*"25" >"25" Number of holdings & average area (ha) 7 6 5 4 3 2 1 Thailand 19. 18. 18.3 2. 18. 16. 5.8 mil 5.9 mil 5.6 mil 14. 3.5 12. 3.1 3.1 1. 8. 6. 4. 2.. 1993 23 213 Area of holding Million (ha) Number of holdings (in millions) Average area of holding (ha) Area of holdings (million ha)
Compe55veness of smallholders Efficient in produc5vity per unit of hectare, but mostly in subsistence with likle economies of scale à marginally integrated with markets and value chains including credit, inputs, services, technology, R&D à EFFICIENTLY POOR?? Small farms are generally labour intensive à if real wages are kept low, they can be compe55ve. Rising real wages in high-performing countries e.g., China, India and Indonesia à farms are becoming uncompe55ve à rising demand for food imports à who can supply food??
What could be done? Produc5vity improvement + opportuni5es for surplus labour outside of agriculture (??) (Otsuka, 213; 215); Lieu and Yamauchi, 216) Ins5tu5onal arrangements for land use (e.g., land rights transfer from small to large farmers; designing property rights to facilitate the emergence of commercial farm opera5ons) Promo5on of smallholder market par5cipa5on (as called by the Rio+2 document; the L Aquila summit, etc.)
Agricultural infrastructure and public services Agriculture & rural development policy Agricultural endowment (land, labour, capital) Farmers cul5va5on decisions Market transac5on costs Agricultural produc5on Marketable surplus Benefits > Costs of market par4cipa4on Households begins to diversify income sources & specialise in crops YES (B>C) farmers par5cipate in markets Higher farm income Families begin to invest in educa5on Rural economy begins to diversify Decline in labour produc5vity differences across sectors Convergence of labour produc4vity (and payments) across ruralurban areas, and agriculture-industryservices sectors NO (B<C) farmers avoid markets Subsistence agriculture Agribusiness transi4on and structural transforma4on Agriculture begins to release labour to sectors with higher produc5vity