Development Cooperation Approaches and

Pro-Poor Growth Strategies

Sachin ChaturvediMarch 5-7, 2012

What is Pro-Poor Growth ?

• Little consensus on what exactly is the pro-poor growth.

• Debate between proponents of growth and poverty reduction, highlighting the diversity of regional and country experiences in promoting development

• Whether the main focus of development strategies should be on growth or on poverty and/or inequality

What is Pro-Poor Growth ? Studies Definition Strategy /Objectives

Baulch and McCullock (2000)

“pro-poor growth” means that poverty falls morethan it would have if all incomes had grown at the same rate

distributional shifts so income of ‘poor’ should grow faster than that of non-poor.

Ravallion and Chen, 2003.

“pro-poor growth” is growth that reduces poverty

what happens to distribution and to average living standards

What Options for Pro-Poor Growth!

Macro

vs.

Sectoral

Approach

What Options for Pro-Poor Growth!

• Is Export-led Growth Passe?

• Export led growth (ELG) vs. Domestic Demand led Growth (DDLG)

• Inclusive Growth

Which Sector for pro-poor!• Gallup et. al. 2001 shows that for every 1 per cent growth in

the agricultural GDP, the positive impact on the poorest is greater that that from similar growth in manufacturing or services.

• Thirtle et al. 2001 demonstrates multiplier effects of agriculture, in the range of 1.35 to 4.62.

• Of course such a growth impetus has to have some pre-conditions like equitable distribution of resources (de Janvry and Sadoulet 1996).

• Locating poor in different sectors.

• Focus on Agriculture: Nexus between agriculture and Poverty

Why has Agriculture become relatively Stagnant ?

• Splitting up holdings between one generation and the next has led to farming on the edge of poverty, without slack to absorb disturbances

• This requires government to step in to smooth out negative shocks to the system (latest example: energy prices)

• Over time this has created a complex patchwork of controls, regulations and subsidies which are difficult to remove in a system on the edge of poverty

• Access to technology at cost-effective terms

• Self-regulating criticality is a term from systems theory. It denotes a system with built-in corrective action to maintain the overall state at the edge of chaos

Poverty Headcount Ratio (at $1.25 a day PPP)

0

10

20

30

40

50

60

70

1999 2002 2005 2008

Time

Per

cen

tag

e o

f P

op

ula

tio

n

East Asia & Pacific (developing only) Latin America & Caribbean (developing only) Middle East & North Africa (developing only)South Asia Sub-Saharan Africa (developing only)

Rural Population

0

10

20

30

40

50

60

70

80

2000 2005 2010

Time

Per

sen

tag

e o

f T

ota

l Po

pu

lati

on

East Asia & Pacific (developing only) Latin America & Caribbean (developing only) South Asia

Sub-Saharan Africa (developing only) Middle East & North Africa (developing only)

Agriclultural Value Added (% GDP)

0

5

10

15

20

25

30

2000 2005 2010

Time

Per

cen

tag

e o

f GD

P

East Asia & Pacific (developing only) Latin America & Caribbean (developing only)

South Asia Sub-Saharan Africa (developing only)

Agriculture Value Added Per Worker

0500

1000150020002500300035004000

2000 2005 2009

Time

Con

stan

t US

D 2

000

East Asia & Pacific (developing only) Latin America & Caribbean (developing only)South Asia Sub-Saharan Africa (developing only)

Salient Features of Agricultural Sector

• Contribution of Primary agricultural activities varies. Developing countries on an average have share of 13 per cent but that for LA 8 per cent and South Asia has 28 per cent

• Extended Agriculture has LA 30 per cent.

• In India share in GDP has declines from 45 per cent in early 70s to 16 per cent but the population dependent is still around 57 per cent.

• This compares with 44% in China (2002) and 21 % in Brazil (2004).

• Technology and innovations have proved to be a key source for growth and competitiveness in any economy

• Average Real income of small farmers in South India rose by 90 per cent and that of landless labour by 125 per cent between 1973-1994 (WB 2001)

• In order to ensure technological competitiveness, technology foresight is becoming an essential element of the strategy process in many organizations.

• A 1% increase in labour productivity in agriculture reduces the number of people living on less tht USD 1 a day by between 0.6 % and 1.2% (Thirtle et. al. 2001)

Salient Features of Agricultural Sector

The Key Question

• Stagnating agricultural results can abort economic take-off

• To avoid this happening the agricultural system has to be reformed

• Scale is the key issue. To illustrate: average farm size has to increase from 1.5 HA to (say) 10 HA

• This will drastically cut agricultural employment which needs to be replaced by creating new alternative employment opportunities

• How can this agricultural reform programme be achieved ?

Technology foresight for technology and innovation policy

- Essential changes and trends in the economical environment.

- Key issues in globalisation, internationalisation, integration, regulation, development of the information society, technological change in society.

- Sustainable development and sustainable growth, aging and other long-term changes in society.

- Changes and trends in national innovation and production systems, such as dynamics and long-term development of industrial clusters and the business environment.

• Programmes are the main tool for putting technology strategy into practice.

• Technology strategy only provides a starting point for planning a new programme, that is why technology foresight is an essential part of the programme process as such.

• Technology foresight is part of the concept phase of the programme, when the rationale and goals for the new programme are analysed and set.

• Many programmes use foresight tools and mechanisms at the beginning of the programme, to ensure a common vision between participants.

Shedding light on future agriculture policy and

technology options

1. Low

Growth

1993-1998

1998-2002

GDP 6.7 5.5

Agriculture 4.7 1.8

0

10

20

30

40

50

60

70

2.H

igh

Sto

cks

, m. m

t

Min. Norm Actual

3. New Challenges

•Impact of WTO •Climate change•Dynamic urban demand •Private sector development•Biotechnology •Globalized information systems………..

What is likely in Agriculture ?

* More info-intensive world* China and India the “big stories” in the world economy* Escalating energy (and other commodities) prices

continue* Escalating water prices* Abrupt climate change* Scale enlargement in agriculture

Key Drivers

Global competition Access to markets

Investments Rural income

Better livelihoods

Rural/urban differential low Rural NFsector

Pressure on Commercialagriculture ag-enterprises

Is the Development Cooperation Policy alone can

meet these challenges??

Development Cooperation and ‘Development Compact’

* Trade

- Market Access

- Domestic Support Policies

- NTBs/Standards

* Investment

- Enterprise Development

- Markets/Value Chain

* Technology

- Productivity

- Value Chains

* Sectoral approach – central approach

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Way Forward

* South shares similar poverty and infrastructure issues

* When successful solutions are found they need to be transferred if we really want to implement change.

* North’s Strength in Technology and its adaption.

* Reaching out to the rural poor with research and technologies is a key challenge

* Small Farms, value chains and rural economy.

* Indigenous Institutions and their adoption.

* Narrow Development Gap – LDC Centric Approach

Title - 22