RESOURCE PAPERS

Investing in land and water: the fight against hunger and poverty in the developing Asia - R.B. Singh

Dr. R.B. Singh, Assistant Director - General and Regional Representative
for Asia and The Pacific, Food and Agriculture Organization
Regional Office for Asia and the Pacific, Bangkok, Thailand

Sustained agricultural growth has been the engine of broad - based economic development, food security and poverty alleviation in most developing countries. Together with labour, capital and technology, land and water constitute the aggregate resource base for agricultural production. Judicious and efficient use of these resources underpins sustained and enhanced agricultural productivity and food security. This calls for increased investment in agriculture, and especially in land and water development.

Unfortunately, contrary to the desired course, investment in land and water and agriculture as a whole is decreasing. The reasons behind the apparent contradiction from a perspective of land and water should be examined in individual countries and ways and means should be sought not only to arrest the decline in investment in land and water, but also to rationally increase the investment in order to achieve desired sustained productivity growth. All stakeholders - governments, private sector, financing institutions, NGOs, farmers, civil societies and international organizations - must take necessary steps to meet the challenges.

This paper (i) gives a brief account of the present situation and prospects of food security, production and poverty, (ii) examines the status of investments in land and water, (iii) analyzes the trend, future needs and mechanisms of investments in land and water, and finally (iv) provides a policy framework for investment in land and water towards sustained food security and prosperity.

THE FOOD AND AGRICULTURE SITUATION IN THE ASIA AND PACIFIC REGION

Over the past 50 years, the Asia - Pacific Region has undergone an unprecedented transformation in food and agricultural production, food security and rural development. The Green Revolution process, a science - led synergism among enhanced genetic potential (improved seeds), irrigation and fertilizers triggered in the mid - 1960s, was the engine of this transformation. During the past 30 years, between 1969 and 1999, Asian cereal production more than doubled to reach nearly one billion tonnes. Despite the addition of 1.3 billion people to the region’s population, average per capita food availability increased from about 2 000 kcal/person/day in 1965/1966 to over 2 600 kcal/person/day in 1999/2000. Increased agricultural productivity, rapid industrial growth in many countries and expansion of the non - formal rural economy had almost tripled the per capita GDP. During the last 30 years, the poverty level had fallen from about 60 percent to less than 30 percent.

Yet, over 500 million Asians are chronically undernourished, accounting for about two - thirds of the world’s hungry people (Figure 1). Child malnutrition exacts its highest debilitating toll in Asia and the Pacific region, especially South Asia. Likewise, nearly 800 million persons, two - thirds of the world’s poor, have their homes here. It is disquieting that in the recent years the number of hungry and poor people has not been decreasing but remains stubbornly high. Production growths are low and stagnating; moreover, increased agricultural production in the region has often been associated with environmental degradation such as erosion of topsoil, salinization, depletion of soil fertility, lowering of he water table and a fast decline in water availability, waterlogging, pollution of water bodies, eutrophication, build - up of greenhouse gases, ecosystem acidification and loss of biodiversity. Given that the per capita availability of land Asia and the Pacific region is one - sixth of that in the rest of the world, and that nearly three - fifths of the future increase in world population will occur here, future increases in food and agricultural production must be realized from ever - shrinking and generally deteriorating land, water and other production resources. This is indeed an uphill task.

Figure 1: Number of undernourished by region

Source: FAO, CFS: 2001/2

There is a strong link between poverty and food insecurity. As seen in Table 1, from 1987 to 1998, as the incidence of poverty fell in Asia, the Middle East and North Africa, levels of undernourishment declined as well. South Asia, which in 1998 had 522 million people with incomes less than US$1/day, registered 44 percent of the world’s poor as well as the largest number of undernourished people, some 294 million, or over 39 percent of the world’s hungry. Therefore, the twin objectives of the World Food Summit (WFS) and the UN Millennium Summit of reducing undernourishment and poverty by half by the year 2015 are highly interconnected and interdependent.

DEMAND AND SUPPLY OUTLOOK TO 2015/2030

Food demand in developing countries is essentially a function of population growth and income increase. As world population registered 4.44 billion people in 1995/1997, developing countries accounted for 77 percent of the total (Table 2). In 2030, this proportion will rise to 83 percent, with an estimated world population of 6.7 billion. South and Southeast Asia together will continue to account for over 50 percent of the world’s population - 53 and 52 percent towards 2015 and 2030, respectively - although rates of growth will decelerate considerably, especially in East Asia. Given the high base level population and not - so - low growth rates, the share of South Asia in the world’s population will increase from the current level of 22 percent to 24 percent in 2030, annually adding 19 million persons towards 2015 and 16 million towards 2030. The corresponding increments for East Asia are 16 and 9 million respectively. In the next 30 years, nearly one billion additional people will be added to the populations of South, Southeast and East Asia, and half of this addition will take place in India and China.

TABLE 1

A comparison of poverty and undernourishment data

Source: FAO, CFS, 2001/2002

Projected per capita income growth (GDP) in Asian subregions between 1995/1997 and 2015 and between 2015 and 2030 range from 3.6 to 5.7 percent and are generally higher than the corresponding growth for developing countries as a whole (Table 3). This growth will greatly help in reducing the poverty level in the region and maintain a fairly high demand for food and agricultural products, leading to reduced undernourishment.

TABLE 2

Population data and projections

Source: Agriculture: Towards 2015/2030, FAO

Table 4 gives balances of cereals production and demand over 1995/1997 - 2015/2030 as analyzed by FAO (2000). By the year 2030, the world cereal production would need to be increased to 2.8 billion tonnes, an addition of nearly one billion tonnes. In South, Southeast and East Asia, cereal production is expected to increase by 380 million tonnes, from 720 million tonnes in 1995/1997 to 1 100 million tonnes in 2030. Comparing the subregions, South Asia is expected to register an increase of 73 percent, whereas East Asia (including South East Asia) is expected to register an increase of 44 percent. Cereals demand is expected to outstrip production both in South and East Asia, the self - sufficiency rate in South Asia falling from 97 to 94 percent and in East Asia from 94 to 90 percent over 1995/1997 - 2030.

TABLE 3

GDP growth rate, percent per annum

Source: Agriculture; Towards 2015/2030, FAO

TABLE 4

Cereal balances, demand and production (million tonnes)

Source: Agriculture: Towards 2015/2030, FAO
*SSR = Self Sufficiency Rate = Production/Demand (all uses)

A livestock revolution is underway in the developing countries, particularly in Asia, with profound implications for crop - livestock balance, nutrition, income and the environment. Asia registered the highest growth rate in the world in livestock production in past decades and is projected to maintain this trend towards the year 2030 (Table 5). South Asia, in particular, will register much higher growth rates - 3.2 percent against 1.7 percent for the world as a whole. East Asia will also maintain high growth rates, particularly from 1997 to 2015. East Asia (40.4 percent) and South Asia (10.4 percent) together will account for more than half (about 51 percent) of increased global meat production. Further, there will be an expansion of the industrial production of livestock. These trends will put added pressure on water for consumption and environmental health.

TABLE 5

Annual growth rate (%) of total livestock production

Source: Agriculture: Towards 2015/2030, FAO

Figure 2: Incidence of undernourished (million persons)

Source: FAO, SOFI, 2000

Varied demand and supply projections of cereals, livestock and other food products indicate a significant increase in per capita food consumption, particularly in developing countries, to 2 860 and 3 020 kcal in 2015 and 2030 respectively. In South Asia the corresponding figures are 2 790 and 3 040 kcal and in East Asia the projections are still higher, 3 020 and 3 170 kcal. These increases will lead to a further significant drop in the share of persons undernourished to 10 percent in 2015 and 6 percent in 2030 for the developing countries, to 10 percent and 4 percent for South Asia and to 7 percent and 4 percent for East Asia (Table 6). However, due to continued demographic growth (in absolute numbers), the decrease in the number of undernourished persons will only be to 576 million in 2015 and 401 million in 2030 from 790 in 1995/97 for Asia to 309 in 2015 and 168 million in 2030 from 524 in 1995/97. As of late 2001, the World Food Summit (WFS) goal of halving the number of undernourished persons no later that 2015, would only be reached towards 2030 (Figure 2).

TABLE 6

Incidence of undernourishment in developing countries

Source: Agriculture: Towards 2015/2030, FAO

SOURCES OF CROP PRODUCTION GROWTH

From 1967 to 1997, the developing countries registered a satisfactory crop production growth rate of 3.1 percent (Table 7). East Asia, with a growth rate of 3.6 percent, played the leading role in increasing the global average. South Asia, with a growth rate of 2.8 percent, also performed well. During the succeeding 34 - year period, the growth rate is expected to slow to 1.2 percent in East Asia but maintain a moderate level of 1.9 percent in South Asia. Yield gains during the Green Revolution era were generally attributed to almost equal contributions of genetically improved seeds, irrigation and fertilizer with highly significant interactions.

TABLE 7

Annual crop production growth rate (percent per annum)

Source: AgricultureTowards 2015/2030, FAO

There are three sources of growth in crop production: (i) arable land expansion, (ii) increased cropping intensity and (iii) yield growth. Yield growth accounts for 83 percent of production growth in Asia, whereas expansion of the net area under cultivation contributes only 5 percent. The remaining 12 percent will be through increased cropping intensity (Table 8). In other words, 95 percent of the crop production growth in Asia will accrue through crop intensification and only 5 percent through net area expansion, while in other regions net area expansion will contribute from 20 to 30 percent.

Increased production of wheat and rice in developing countries will need to come from gains in yield (about four - fifths), whereas maize will rely equally on expanded area planted, even more than in the past. In Asia, wheat and rice will have negligible or zero net area growth (or even negative growth in some major producing countries). Thus yield growth will be the exclusive source of increased production.

TABLE 8

Sources of growth in crop production (percent)

Source: Agriculture Towards 2015/2030, FAO

AGRICULTURAL LAND

The developing countries will expand their total arable land area by 120 million ha between 1995/1997 and 2030 (Table 9). This includes an increase of only 15 million ha in Asia (9 million ha in South Asia and 6 million ha in East Asia, with annual growth rates of 0.13 and 0.07 percent respectively). India and China together account for about 28 percent of the developing countries’ arable land. India’s share of arable land in South Asia was overwhelming, some 82 percent. In South Asia, nearly 90 percent of arable land is already under use, whereas in East Asia, more than 40 percent of the available potential is unused. In South Asia excluding India, about 15 million ha of land unsuited for agriculture has been brought under plough, raising sustainability concerns. By 2030, while in the developing countries about 1.7 billion ha additional potentially arable land will be available, in Asia only 132 million ha will be potentially available for area expansion (4 million ha in South Asia and 128 million ha in East Asia), again emphasizing the importance of yield growth in Asia.

In Asia, future expansion in cropped area will accrue essentially as expansion of gross cropped areas through increased cropping intensity. The overall cropping intensity for developing countries will rise by 8 percent from 1995/97 to 2030, from 91 to 98 percent (Table 10). Of necessity, and also as one - third of the cultivable land is irrigated, in South and East Asia (particularly China) cropping intensity was the highest, 126 percent in South Asia and 158 percent in East Asia under irrigated conditions. In rainfed also it was over 100 percent. Towards 2030, there will be further intensification of 11 percent both in South and East Asia. In certain agro - ecological settings, covering vast irrigated areas in South and Southeast Asia, cropping intensity is 200 percent or more. It may be emphasized that increased cropping intensities are associated with increased risk of land and environmental degradation when it is not accompanied by appropriate technologies and policies. Investment decisions and management must therefore also internalize environmental costs and other externalities.

IRRIGATION AND WATER USE

As seen from Table 11, the irrigated area in the developing countries will increase by 54 million ha (or 23 percent) between 1995/97 and 2030. This means that 22 percent of potentially irrigable land will be brought under irrigation, and 60 percent of all land with irrigation potential (402 million ha) will be in use by 2030. About 75 percent of the developing countries’ irrigated area in 1995/97 was in Asia. This share is projected to be retained through 2030. In other words, nearly 75 percent of projected increase in irrigated area in the developing countries would materialize in Asia. Further, China and India together will continue to possess about 54 percent of the developing countries’ total irrigated area, with India accounting for 28 to 29 percent. South Asian irrigation figures are heavily impacted by India as it accounts for 71 and 74 percent of the subregion’s total irrigated area in 1995/1997 and 2030, respectively. Of the projected increase of 17 million ha under irrigation in South Asia, 15 million ha will be in India.

TABLE 9

Total arable land: data and projections

Source: Agriculture Towards 2015/2030, FAO

TABLE 10

Cropping intensity (percent)

Source: Agriculture Towards 2015/2030, FAO

The expansion of irrigation during the Green Revolution era in the developing countries registered a growth of 94 million ha (1.9 percent per annum), but as the demand rate decelerates during the next 34 years the growth rate is projected to drop to 0.6 percent, due to both the increasing cost of bringing additional area under irrigation and retreating water resources. However, because of increased cropping intensity in areas under irrigation, irrigated areas in the next 34 years will increase by 86 million ha. Most of this gain will occur in Asia, where total irrigated area will reach about 40 percent, against 14 percent in the developing countries excluding China and India (Table 12). In South Asia (excluding India), where there is very high pressure for crop intensification, irrigation intensity is already extremely high (62 to 64 percent), particularly due to Pakistan where irrigation intensity can reach 80 percent. Therefore, the performance of irrigated agriculture in India, China and Pakistan will greatly impact the developing world’s irrigated agriculture production.

TABLE 11

Irrigated (arable land): data and projections

Source: Agriculture Towards 2015/2030, FAO

TABLE 12

Irrigated land as percent of total arable land

Source: Adapted from Agriculture Towards 2015/2030, FAO

Agriculture accounts for about 70 percent of the freshwater use in the world. Increasing withdrawal of freshwater for agriculture is one of the main causes of water scarcity which several countries are facing today and many more will face in the future, and more acutely. Therefore, irrigation water must be used most efficiently. As seen in Table 13, irrigation efficiency in the developing countries averaged about 43 percent in 1995/97, varying from 26 percent in Latin America (having abundant water resources) to 50 percent in the Near East/North Africa region and 49 percent in South Asia (water - scarce regions). Improved irrigation technologies, modernization and rehabilitation of irrigation and appropriate water resources policies, means that each region should improve its irrigation efficiency, with maximum improvement taking place in the Near East and North African region (15 percent), followed by South Asia (9 percent). In East Asia, less China, efficiency is rather low and must be improved considerably. This may be partially attributable to the predominance of rice cultivation in Southeast Asia where paddy fields are flooded to facilitate land preparation and weed management.

TABLE 13

Irrigation efficiency (percent) in developing countries

Source: Agriculture Towards 2015/2030, FAO

The role of irrigation in enhancing yield and total production (including increased cropping intensity) is also evident. In 1995/97 the developing countries averaged 1.71 tonnes/ha yield for rainfed cereals, projected to grow to 2.23 tonnes/ha in 2030, as compared to 3.82 and 5.16 tonnes/ha for irrigated conditions (Table 14).

TABLE 14

Cereal yields in developing countries, rainfed and irrigated

Source: Agriculture Towards 2015/2030, FAO

WHY THE EMPHASIS ON INVESTMENT IN LAND AND WATER

Land and water are not only the basis of agriculture but of life itself. Protecting, developing and maintaining the health and viability of these basic resources is fundamental to the survival and progress of humanity. Investment in land and water must be viewed as investment in sustained food security, income, prosperity, environment and health. ‘Crop per drop’ as advocated the International Water Management Institute, emphasizes the importance of conservation and judicious use of scarce resources.

The World Bank (2001) estimates that by 2025 as many as 48 countries and some 1 400 million people - mostly in least developed countries - will experience water stress or scarcity. Besides lowered water availability (quantity), deteriorating water quality and environmental conditions, irrigation - related land degradation and insufficient river flow will aggravate water shortage problems, which could depress agricultural production and limit industrial and household use (IFAD, 2001).

Worldwide, according to Global Land Assessment of Degradation (GLAD) mapping of nearly 105 billion ha of cropland, 38 percent is degraded (Table 15). Africa has the most extensive cropland degradation (65 percent), followed by Latin America (51 percent) and Asia (38 percent). Water erosion and wind erosion, in that order, were the main causes of degradation. In monetary terms, global losses due to land degradation in drylands ranges from US$13 billion to US$28 billion per year.

TABLE 15

Agricultural land degradation in different regions (million ha)

Source: Oldeman, 1992

The average cumulative loss of cropland productivity at the world level during the post - Second World War period as a result of human - induced soil degradation was 12.7 percent, and at the Asia level it was 12.8 percent (Oldeman, 1998). Land and water resources have degraded almost to the point of no return in certain agro - ecological pockets in some countries, primarily due to wrong technologies, poor management and greed. These trends must be understood as warnings that livelihood systems are the basis of society and civilization itself is threatened.

In Asia and the Pacific region there is limited scope of horizontal expansion of cultivated land and irrigated area; per capita availability of agricultural land and water has been decreasing due to population growth and the diversification of agricultural land to non - agricultural uses. Moreover, large proportions of the resources have degraded and numbers of large irrigation structures have aged and degenerated. For instance, in South Asia 73 percent of agricultural land suffers from forms of degradation (Table 16). All forms of land degradation in South Asia are estimated to cost US$9.8 to 11 billion per year (FAO/UNDP/UNEP 1994), or 7 percent of agricultural GDP. Therefore, increasing emphasis will need to be placed on rehabilitation and improving degraded resources.

The total land area of Asia and the Pacific region is 3 001 million ha or 22.9 percent of world land area. Possible agricultural production in 86 percent of the region is limited by adverse soil, climatic and topographic factors, including cold (2 percent), dryness and aridity (19.4 percent), steep slopes (26.7 percent) and chemical problems (13.5 percent). Thus, only 14 percent of the region’s total land area is free from constraints on agricultural production.

Soil degradation - in particular loss of potential soil productivity due to erosion and soil nutrient decline - is the biggest threat to meet the future agricultural needs in the region. Adequate investment needs must be mobilized for enabling community owned watershed development programmes and for optimal fertilization programmes to offset the continuing negative balance of nutrient status of the soil. The loss of soil productivity in both the commercial and subsistence sectors has national costs and effects, such as the need for more food imports, lessened exports, the possible necessity of relief supplies and the need for added agricultural investment. Less tangible but necessarily added to this are the social welfare costs associated with assisting those who fall below the poverty line.

Over - extraction of ground water is widespread and is caused by industrial, domestic and agricultural withdrawals. In substantial areas of China and India, groundwater levels are falling by 1 to 3 metres per year. Over - extraction in coastal areas causes saltwater to intrude into freshwater aquifers. Investment in groundwater utilization must be based on waterbalance and the recharge data of the area and the spatial distribution of wells and pumps must also be regulated accordingly.

TABLE 16

Shares of agricultural land in South Asia affected by different forms of degradation

Source: FAO/UNDP/UNEP, 1994

Commonly encountered environmental degradations such as waterlogging, salinization, overextraction, the use of fossil aquifers, pollution of surface and ground water and their associated economic and social costs can be minimized through appropriate and timely management interventions. Land and water investment decisions also have serious implications for global warming and climate change. The potential for carbon sequestration in soil may be as high as 40 percent of total annual atmospheric increases in CO₂ concentration. Water management practices can greatly impact methane emission from paddy fields - an important point of consideration for Asia and the Pacific as about 90 percent of the world’s paddies fall in this region.

Relative impact of soil degradation will vary under different agricultural settings. In Asia, for example, it is projected that by 2020 economic effects of soil degradation will be most severe in densely populated marginal lands followed by irrigated lands (Table 17). National policy priorities for managing degraded lands will thus vary widely and must be determined by each country’s resource endowment, the structure of agricultural supply, distribution of poverty, and the principal agricultural sources of economic growth (Scherr, 1999).

Fresh water is distributed very unevenly across the globe, with the lowest availability in Asia and the highest in South America (Table 18). It is projected that by 2025, 46 to 52 countries with an aggregate population of 3 billion will be water stressed (Engelman and Le Roy, 1993). Fuelled by population and industrial growth, between 1950 and 1990 water use increased by 100 to 500 percent in different regions. Agriculture is the biggest user of water, accounting for more than 90 percent of water withdrawals in low - income developing countries (Table 19). The decreasing per capita availability of water is exacerbated by the increasing cost of developing new water, wasteful use of already developed water supplies, degradation of soil in irrigated areas, depletion of groundwater, water pollution, and distorted water policies and pricing.

INVESTMENT REQUIREMENTS

Investment requirements can be grouped into two interdependent categories: the monetary requirement and the human resources and attitudinal requirement. Land intensification needs may generally encompass investments for such needs as: i) soil fertility maintenance by adequate levels of balanced fertilization and management of structural, textural and organic health; ii) land shaping for adoption of minimum tillage and other land operation practices; iii) soil conservation and afforestation measures; iv) reclaiming acid, saline and alkali soils, ravine areas; stabilizing sand dunes, waterlogged and other degraded land; and v) enriching the biological health of soils.

TABLE 17

Relative impact of soil degradation in different agricultural pathways

Notes: Resolution of soil degradation problems (last column) requires a strong agricultural economy with farmer incentives and capacity for good land husbandry. Sensible agricultural/rural policies and infrastructure investments are needed. The last column refers to policies and public investments needed to control soil degradation. indicate high, medium, and low.

Source: Scherr, 1999

TABLE 18

Per capita water availability by region, 1950 - 2000 (km³ per year)

Source: Ayibotele, 1992

Likewise, investment in water resources, supply and use is required for: i) design and construction of large, medium, small and micro irrigation schemes; ii) rehabilitation, upgrading and modernizing existing irrigation schemes and systems; iii) developing new and tapping unutilized water resources; iv) developing river basin - based integrated development and water management; v) preventing water pollution and deterioration of water quality; and vi) integrated watershed development encompassing upgradation of arable land, non - arable land and underground water, particularly in rainfed areas in arid and semi - arid zones.

Long - term investment in land and water must be based on well - conceived national land use and water policies, taking into account intersectoral demands, growth prospects and other national priorities. FAO agro - ecological zoning methodology provides a broad framework for developing an appropriate national land use policy. Land and water development programmes for different zones should be reflect this methodology and make a strong case for including land and water resources as priority areas for ODA allocations within the framework of food security and poverty reduction strategies. Irrigation and water requirements must be systematically and scientifically assessed in the context of the availability of cultivable land, food and agricultural production goals and demand - supply balance. Governments must be aware and capable of using ‘global’ and ‘local’ models to assess and plan for needs and prospects.

TABLE 19

Sectoral water withdrawals by country income group

Source: World Bank, 1992

Investment in research, technology development and extension in land and water management is necessary to increase water use and development efficiencies. This is important because existing efficiencies are generally low, varying from country to country (hence the scope for learning from each others' experiences), and secondly, future increases in production must essentially accrue through increases in yield and productivity for every drop of water and every inch of cultivated land. As mentioned earlier, nearly three - fourths (74 percent) of the irrigated land of the developing world is in Asia, 14 percent in the Near East and North Africa, 9 percent in Latin America and 3 percent in Sub - Saharan Africa. Further, irrigated agriculture is projected to account for a 38 percent of increase in arable land and more than 70 percent of the increase in cereal production between 1997 and 2030. Against these projections, it is worrisome to experience stagnating yields, low yields and declining rates of yield growths, let alone the widespread degradation of the land and water resources.

Viewed against this background, the investment scenario for water resource development is disquieting. From 1950 to 1993, only 7 percent of World Bank lending was allocated to agriculture and rural development - discouragingly low in both in terms of percentages and absolute amounts. This does not augur well for the anticipated increase in irrigated land between 1997 and 2030, although it has been shown that in 192 water resource development projects, the internal rate of return on investment was an average 16 percent (Jones, 1995).

The social context of irrigated agriculture is highly relevant. The high population absorptive capacity of irrigation limits the migration of growing populations to areas of greater environmental risk. If additional water for irrigation or additional irrigated areas are not forthcoming, the increased burden on rainfed agriculture to meet demand will be enormous and detrimental to environment, with far more deforestation and land clearance.

Research and development efforts in land and water sectors, backed up by adequate investment, should cover: i) mapping and utility classification of land and water resources; ii) improving the efficiency of land and water use in agriculture; iii) policy, institutional, economic and social aspects of land and water management; iv) management of watersheds for multiple functions; v) management of aquatic ecosystems, in particular those having boundaries with terrestrial ecosystem; vi) wastewater recycling, and the conjunctive use of water, improvement of water quality and reduction of water pollution; vii) restoration of fertility and structure of degraded lands and prevention of further degradation, bioremediation; and viii) integrated soil - water - plant - nutrient management and fertility improvement.

Water accounting methods developed by the International Water Management Institute (IWMI) can help planners improve water productivity by analyzing where it is going, who is using it, how productive it is per cubic metre and whether it is available for reuse. Likewise, soil fertility and health indicators are increasingly available and should be used for assessing resources and investment priorities.

TREND OF INVESTMENT

Investments in agriculture, including land and water and research and technology developments have been declining. This is paradoxical to the projected demands for food and agricultural products and supply constraints. It is a matter of great concern that most developing countries in recent years assign only 6 - 8 percent of their spending to the agriculture sector, although 60 percent of their populations depend on agriculture - and poverty continues to be essentially a rural phenomenon.

More than 90 percent of investment in agriculture in most developing Asian countries comes from domestic resources, although in some low - income food deficit countries the proportion of dependence on foreign assistance may be as high as 25 - 30 percent. In irrigation, about 90 percent of the estimated investment of US$60 - 80 billion annually in developing countries is based on domestic sources (DFID, 2000, World Bank, 2001). Current levels of investment in water are only 50 percent of the minimum needed. World Bank lending to irrigation was 7 percent of its total lending in 1950 - 1993, more than any other sector (Jones, 1995), but had dropped to 4 percent during 1990 - 1997 (DFID, 2000). Shrunken and shrinking investment in the water sector is bound to be a major bottleneck in meeting the projected food and agricultural production in developing countries.

The official flow of funds to agriculture has declined to 63 percent of that at the beginning of the decade. At 0.24 percent of annual GDP, current levels of foreign aid fall short of the 0.7 percent target set by developed countries. Actual aid falls short of that target by US$100 billion a year. In the late 1990s, aid and lending to agriculture was one - third the level of the late - 1980s which itself was down from the late - 1970s level. The share of agricultural lending in the loan portfolio of the World Bank fell below 10 percent in 2000 compared to an average of 14 percent for the decade ending 2000. Thirty years ago the figure was 40 percent (FAO, 2001).

It is well known that countries with high levels of undernourishment also have severe budgetary constraints. Countries with one - quarter of their population as undernourished spend at least 30 times less per agricultural worker as compared with countries having less than 5 percent of population as undernourished (FAO, 2001). Hence the case for a larger flow of concessional development assistance to Low Income Food Deficit Countries (LIFDCs) to effectively face the challenge of food insecurity and undernutrition cannot be overemphasized.

Besides serious gaps in the financial flow to agriculture, particularly to land and water, there are serious gaps in management and priorities. Moreover, there are serious conflicts between quick gains and long - term sustainability. Several successful experiences of land and water management with tremendous impacts on production, productivity, food security, poverty alleviation, income, trade, and sustainability exist in Asia and elsewhere which must be critically documented and shared with other countries. Cases of failure should be critically analyzed and the causes should be studied by all to avoid further failures.

Local wisdom and indigenous knowledge and technologies have many times been effective in land and water management, but in the rush for quick fixes and due to a lack of vision and perspective, such sources of indigenous understanding are dying. Managers of investment in land and water must recognize traditional knowledge and experience, and blend them with modern technologies referred to as ecotechnology. The need for investing in the people themselves, in shaping their attitudes and participation, can hardly be overemphasized. The people are true guardians, service providers as well as beneficiaries, and hence development must be rooted in a spirit of participation - “of the people, by the people and for the people”.

Uncertainty of land tenure is a significant deterrent to long - term and sustainable investment on land. Ambiguities relating to rights of land, water and trees tend to contribute to environmental degradation and curb investment desires. Other institutional aspects include the absence of clear community mechanisms for upkeep of public assets and infrastructure, lack of financial services and the marginalization of women. The absence of micro - credit institutions discourage investment in soil and water conservation measures, particularly if payback periods are relatively long.

FINANCING MECHANISMS

The decrease in the proportion of public investment and donor loans and grants invested in the agricultural sector has come about because of a greater priority given by governments to investments to develop other sectors (such as infrastructure, energy, transport, education and health). Within the agricultural sector in Asia, however, there is a shift by governments to invest proportionately more in natural resources management (soil, plant and water resources), forestry, fisheries and integrated rural development. Priority is also being given to rehabilitation of existing irrigation schemes rather than the development of new large schemes and donors are very reluctant to invest in dams.

Governments and international donors have generally avoided investments in reforming the rural financial system and developing credit facilities to small farmers with little or no collateral. Private investment in land had been mostly limited to large estate and orchard crops. Government services to farmers are being reshaped by decentralization of government services, with some reduction in quality of services. Governments are also involved in privatizing many services. These trends, along with the WTO settings, are creating changed circumstances in which small farmers have to produce agricultural products and generate family incomes. The impact of these changes on farmers and rural communities and future priorities for investment in the rural and agricultural sector should be analyzed. Besides identifying the priority areas for investment, it would be essential to analyze the various financing mechanisms and their linkages. These linkages must be managed in consistence with the appropriate rights and laws related to the resources and their transparent governance.

A flexible, responsive and multi - directional financing mechanism is needed. Country - owned poverty reduction strategies (CPRS) can be articulated to provide the basis for donor concessional assistance (particularly World Bank and IMF lending) and the use of resources freed by debt relief enhanced under the highly indebted poor countries (HIPC) initiative. The World Bank’s Comprehensive Development Framework (CDF) or its equivalent, the UN Development Assistance Framework (UNDAF) at the country level, may form a basis for coordination of programmes and action plans based on each country's Poverty Reduction Strategy Paper (PRSP). Of the 23 LIFDCs with the highest prevalence of undernourishment, 17 are in the HIPC group of eligible countries. Overall, 41 countries with US$170 billion in external debt are eligible for consideration under the HIPC initiative. The enhanced initiative seeks to establish stronger link between debt relief and sustainable poverty reduction programmes in recipient countries.

A flexible lending framework is suggested as a mechanism for implementing CPRS. In this mechanism, World Bank may take the lead in providing broad - based poverty reduction support credit (PRSC) linked to key objectives, reform areas and priority action areas such as land and water development. Governments will receive the credit on IDA terms geared to performance. The funding is integrated with the government budgetary cycle and augments the capacity to allocate resources on a cross - sectoral basis. In this process and facilitation, FAO has a role in assisting governments in articulating agriculture sector strategy and in the formulation of programmes within CPRS framework. This also provides scope for interested bilateral donors to enter into partnership with FAO to support such programmes.

Private sector participation in investment and management must be encouraged. Market distortions, imperfect access to information and uncertainty about cost - benefit relationships pose discouragement to private sector participation. However, this area requires capacity building in entrepreneurial skills and facilities for financial services and working capital support. Decentralized financing mechanisms are needed to facilitate such provisions as extension, micro - credit and information sharing.

INVESTMENT POLICIES AND STRATEGIES IN LAND AND WATER DEVELOPMENT

Agriculture will continue to be the engine of broad - based economic growth and development in most Asian countries. The unprecedented success in increasing production, productivity, income growth, food security and poverty alleviation through the Green Revolution process underpins the synergistic interplay of soil fertility, irrigation, improved seeds, management practices, labour, capital, technology and political will. In recent years, however, it is seen that the pace of growth of yield and productivity has decelerated, and is even stagnating under major production, regimes such as the rice - wheat system, let alone rainfed areas. Keeping in mind the projected demands of food and agriculture, the state of land and water and the overall environmental health, it will be essential to effect several paradigm shifts to transform the Green Revolution into Evergreen Revolution to achieve sustained agricultural growth.

Given that there is negligible scope for horizontal expansion of agricultural land in Asia and the Pacific region, the only option left is the intensification and diversification of the production system for sustainably enhancing yield and productivity. Considering the assets and liabilities of the Green Revolution process, the approach towards Evergreen Revolution must be structured on a system - based, interdisciplinary and participatory approach. It must promote efficiency and inclusiveness and seek congruence of productivity, sustainability, profitability and equity. Based on this premise, the following policy framework is suggested for investment (financial and management) in land and water.

Integrated approach to land and water management and investment strategy

Although they are two distinct and most fundamental natural resources - not only for agriculture but for the very life and existence of humankind - land and water are intimately interrelated resources. The extent, quality and productivity of the two resources are highly interdependent. Therefore, while there must be land - specific and water - specific conservation, development and utilization policies, strategies and programmes, there is a need to have clear policy and approach for synergistic development and effective integration of land and water to enhance overall productivity, sustainability, profitability and reduction of environmental costs.

Agricultural area expansion in the land - hungry Asia - Pacific region is largely dependent on gross cropped area expansion (increased cropping intensity), which is closely linked with irrigation intensity. It is often noticed that expanding irrigation without drainage facilities and efficient on - farm water management has resulted in vast land degradation in the form of waterlogging and salinity, thus negating the gain. This highly costly and negative trend can and must be discouraged; it can be reversed only by integrating the development of the two resources. Clearly, an interdisciplinary approach is essential. It must involve land and soil specialists, water and irrigation experts, agronomists, engineers, designers, economists, sociologists and even anthropologists. Above all, the people themselves, working as partners in a participatory mode, is required. An integrated approach of policies and investment is essential to promote land and water protection, rehabilitation, development and quality improvement leading to sustainable agricultural supply, economic growth, rural welfare and long - term national wealth.

A system - based integrated approach is needed also within each subsector. Supply and demand management strategies and policies constitute a continuum. Supply management strategies encompass location, development and exploitation of new sources of agricultural land and water. Demand management strategies encompass incentives and mechanisms which promote conservation, improvement and efficient use of the resources. The importance of the constituent parts of the two strategies varies depending on the resource availability and level of overall and agricultural development. In the Asia - Pacific region, per capita scarcity of land and water resources on one hand - and pressure for intensification and diversification of resources and their economies and environmental costs on the other - call for greater attention to demand management strategies. The demand for greater production (essentially through increased yield and gross cropped area expansion and for delivered water) will further increase. This will lead to still greater competition for water and land allocation among agricultural, industrial and urban uses, thus aggravating externality problems. These trends will require greater attention to demand management.

On the supply side, development of new water resources and lending for this purpose have slowed considerably since the late 1970s. Declines during the decade ending 1990 in Bangladesh, India, Indonesia and Thailand ranged from 15 to 40 percent (Rosegrant and Svendsen, 1993), resulting in a decline in irrigated area growth rates. However, the decline in large - scale irrigation projects was partially compensated by increase in private small - scale irrigation. The large, small, surface and groundwater irrigation systems should be integrated and the choice of system size in a given river basin must be based on conditions unique to that basin and hydrological and aquifer profile. The Green Revolution in Asia was closely linked with the 'groundwater revolution' in the region. Fortunately, the region has still significant untapped groundwater potential. These resources and potentials must be scientifically researched and estimated. Our governments must develop policies and programmes for the conjunctive use of surface water and groundwater.

The extent and quality of land resources should also be mapped and matched with new technologies and production systems. A disaggregated approach of investment in and management of different agro - ecological regimes - irrigated lands, high quality rainfed lands, densely populated marginal lands, extensive agriculture in marginal lands, and urban and peri - urban agricultural lands - will be required. Biotechnology can greatly help in designing new varieties and breeds to match even degraded lands and render them productive. Development of drought resistant crops and varieties will not only reduce the pressure on irrigation expansion but will also improve productivity and profitability of vast semi - arid, arid and other noncongenial rainfed areas, and thus promote equity (Singh, 2001).

On the demand side, land and water policies must be reformed to promote land and water savings through demand management and the application of appropriate technologies. Policy instruments for demand management may include: (i) enabling conditions through provisions of suitable land and water rights and laws to promote investment in and effective management of the resources, (ii) market - based incentives to promote conservation of land and water resources such as organic farming, appropriate pricing, reduced subsidies on urban water consumption and targeted taxes and subsidies, (iii) non - market instruments, including restrictions, licenses and pollution controls and (iv) direct interventions, including conservation programmes (Bhatia, 1995).

Secure rights to land and water and rights of access to these resources are essential for long - term investment by farmers in land and water conservation and improvement, as well as to enable them to effectively participate in participatory planning, investment and management. Property rights for women farmers should be given due attention as the number of women - headed households is increasing. Local customs, needs and specifics should be kept in mind while anchoring the rights regime, which must have efficient conflict - resolving investment - friendly mechanisms.

Policy support to generation, introduction, assessment and adoption of appropriate technologies will be instrumental in water savings, increasing water use efficiency, soil conservation and improvement of soil fertility and productivity. Micro - irrigation (drip, sprinkler and computerized control systems) saves 40 to 50 percent of water and is free from the problems associated with flood irrigation. In developing countries, water use efficiency is generally low (25 - 40 percent), whereas in developed countries it is 50 - 60 percent. Conservation tillage is proving highly effective in soil conservation and fertility/productivity improvement in Latin America. But this technology has yet to find its due place in the Asia - Pacific region where special national programmes should be promoted for conservation tillage. Technology packages to promote integrated soil - water - plant - nutrient systems should be developed and widely adopted on priority basis.

FLEXIBLE, PARTICIPATORY PATHS TO NEW TECHNOLOGICAL, MANAGEMENT AND DEVELOPMENT OPPORTUNITIES

Fast and far - reaching developments in science, technology (biotechnology, information and communication technology), management (e - commerce, regulatory mechanisms), globalization and liberalization, market opportunities and financing mechanisms, call for flexible and highly informed approaches to priority setting, resource mobilization and allocation and linkages. A dynamic approach to accommodate and capture new opportunities - such as those arising from the WTO, new technological products and new information and databases - will ensure necessary changes in land and water management and investment. Often, for example, existing irrigation systems and land use patterns (e.g. rice paddies) are too inflexible to allow crop diversification, thus denying options for other crops and new products to meet new nutritional and economic opportunities. Therefore, while the new irrigation, water and land development plans must have built - in flexibility for diversified production, the old structures will need to be modified accordingly, of course within location - specific economic viability, technological feasibility, social acceptability and environmental compatibility.

National capacities must be developed to assess existing land and water resources and potential and match them with the production, intensification and diversification needs and possibilities, duly internalizing the emerging and modern technologies. Required human resources, research and technological capacities, institutional and organizational support, and needed financial investments must be provided by individual governments to meet the objectives. Based on the assessment of land, water and irrigation requirements, a judicious balance is needed among new irrigation construction, rehabilitation of old and degrading irrigation systems, upgrading and modernization of irrigation, reclamation of degraded lands, opening of new lands, cropping intensity and choice of farming systems. In South, Southeast and East Asia, high population pressure and development demand, means that targeted policies and investments to deal with problems of degradation, restoration, upgradation and preventing further degradation of land and water resources and irrigation systems assume high priority.

Flexibility must also be maintained among choices of schemes. Large dams and large area coverage projects built by the public sector, and small schemes built and operated by public or private sectors (or jointly) have their own economic, social and environmental advantages and disadvantages. The World Bank found that large scale projects were more profitable, but project size explained only 10 percent of the variation in performance (Jones, 1995). Thus, the large versus small distinction is not very useful. Although international support, especially from World Bank, to large dam constructions has greatly reduced, countries must assess their needs and carefully weigh the advantages and disadvantages of alternative options or may wish to strike a dynamic combination of the two. Besides size, the control, management and operation, mechanisms can also be flexible. The inputs of public and private sectors and civil societies for different purposes will vary, but their rational blend may provide greater efficiency and effectiveness.

Government’s role in creating large schemes and providing public goods, and instituting and implementing needed agrarian reforms, rights and laws can greatly be complemented by the private sector and people themselves by managing the resources and providing veritable services. This will require significant organizational development and capacity building for farmers’ and water users’ organizations, and groups and for local governments. Mechanisms to transparently moderate conflicts between different groups of land and water users and speedily resolve problems are essential to ensure desired economic returns and other benefits. Experiences of successful water users associations (WUAs) in organization and management (O&M) of water resources should be analyzed and widely replicated and adapted. Financial autonomy, financial contributions by members of associations and the benefits received by them are all interrelated and should further be forged consistent with the participation, needs and aspirations of small farmers.

INVESTMENT IN LAND AND WATER CONSERVATION AND IMPROVEMENT

Investment in land and water development is essential for food security, poverty alleviation and balanced development. Investments in irrigation during 1965 to 1985 were instrumental (along with the investment in seeds of modern varieties and fertilizers) in ushering in the Green Revolution. During the past decade or so, however, investment in agriculture, land and water, has sharply declined, causing deceleration in agricultural growth. The reasons behind the reduced investments should be examined so that effective corrective measures may be taken to face the challenges of accelerated and sustained agricultural production and productivity - the Evergreen Revolution.

The pattern, nature and management of investment in land and water may need to be changed. Private sector investment must increasingly complement public sector investment. Development of the farmers, by the farmers and for the farmers is increasing and needs support by appropriate policies such as the creation of farmers' associations, community and participatory action, and water users' associations. To encourage various investors, economic, social, environmental and ecological impacts of successful investments in land and water should be critically analyzed and the results communicated to policy makers, farmers, people at large and other stakeholders at national and international levels. Not only the benefits but also the costs of not or under - investing in land and water should be analyzed and made widely known.

Critical land and water degradation problem areas should be identified by satellite imagery and isotopic signatures. Investment in reclamation and rehabilitation of such areas should receive priority attention. Investment opportunities include creating biochecks to control soil erosion, developing windbreaks (widely adopted in China), terracing, building up organic soil matter, installing small - scale irrigation systems and pumps, and creating water harvesting devices. Such investments and management activities should be done in close partnership of public and private sectors, farmers, researchers, extension workers, and non - governmental organizations. Institutional supports, such as credit, subsidies ('smart subsidies' granted by using carefully selected criteria), extension and community - based organizations will be needed to effectively organize and manage such investments. Subsidies as co - investment in increasing the productive potential of land and water should be encouraged.

More investment in land and water research, technology development, information systems

Research and technology development agendas for land and water must be broadened to address not only agro - physical and agro - biological issues but also socio-economic, environmental and ecological issues to ensure the congruence of enhanced productivity (efficiency), sustainability, profitability and equity. Only such an integrated holistic and system - based research and technology development approach will concurrently satisfy the various stakeholders, namely, the farmers, environmentalists (the “Green” lobby) and the public at large. Research and development (R&D) paradigm shifts must emphasise interdisciplinarity and multidisciplinarity rather than monodisciplinarity. The process is also the goal and not simply the product, system - based not just commodity - based, and people - and - environment - driven and not technology - driven. Such R&D systems are complex and demanding. Besides increasing R&D investments to meet such complex challenges, institutional supports and human resources must be adjusted to establish and manage linkages at national and international levels. To ensure informed investment and resource management, suitable indicators must be developed to identify economic, environmental, ecological and social costs and benefits. Policy research capacity, including socio-economic research capacity, must be strengthened in many R&D systems. Research and development staff must collaborate with policy - makers and planners.

In recent years, national and international agricultural research institutions (particularly CGIAR) have allocated larger proportions of their budgets to natural resources management (Alex and Steinacker, 1998). But this has often happened at the cost of equally important areas. Thus, there is a need to explicitly allocate additional funds to land and water resources commensurate with the priority. Work programmes should clearly identify multidisciplinary and multi - institutional activities and allocate resources specifically for the purpose. Concerned institutions must have capacity to value natural resources and analyze environmental impacts - costs and benefits to justify as well as to monitor the efficacy of the investments. Because of multidisciplinarity and multi - component technology packages and the emphasis on bottom - up and participatory approach, the extension and technology assessment and diffusion system will need to be overhauled and suitably trained human resources will be needed. The Asia and Pacific region leads the world in the development and widespread adoption of IPM technologies, including the Farmers’ Field School (FFS) initiative. Asia should use this experience by investment and management of land and water resources. The indicators and methodologies developed by the International Water Management Institute should be internalized in national Natural Resource Management Research (NRMR) programmes.

The impact of land and water R&D investments and management is closely linked with the nature and availability of information on the status and prospects of the resources. The need to increase the awareness of the status of land and water degradation, availability and improvement issues among policy makers, investors and the broader society can hardly be overemphasised. Recent revolutions in GIS, information and communication technologies must be harnessed for collecting and sharing information not only on the resources but also on available technologies, market conditions and socio-economic settings. Information networks must link the farmers, community groups such as landcare groups in Australia, local governments, extension and research organizations, climate and weather forecast centres, market and input output distribution centres and planners, and executors and policy makers.

Indigenous technologies and knowledge should form an integral part of databases. Public and private sectors should invest not only in necessary hardware and software but also in human resource training and development. Soil and water clinics in rural areas should be linked with rural agricultural information centres which must constitute an integral part of the national agricultural information system. International organizations such as FAO, UNEP, CGIAR centres, including IWMI, and the global and national Soil and Terrain Digital Database (SOTER) programme have established dynamic and comprehensive databases. The national and international databases should be linked for deriving maximum mutual benefits. FAO should strive to harmonize various indicators, methodologies for environmental and ecological accounting and data collection formats for standardizing the information collection and interpretation procedures.

EPILOGUE: NATIONAL VISION ON INVESTMENT IN LAND AND WATER

Each nation must have a vision statement on the investment in land and water. This should be based on the present and future needs of food and agricultural production and productivity and the national and global opportunities. Each nation must assess the extent of cultivated land and irrigation it should have to meet its goals. The extent, status and potential of the resources must be mapped systematically and scientifically and matched with the people’s aspirations, national capacity, and development objectives. Based on this, will emerge explicit targets and policies and sectoral and subsectoral priorities for investment in land and water resources.

Each country should have clearly defined rights to land, rights to water, and necessary laws. If not there, these must be developed and transparent agrarian reforms should be undertaken. The fundamental need for transparent governance of the natural and monetary resources and implementation of the rights and laws can hardly be over - emphasized in context of flow of funds, especially from external sources. Specific policies for promotion of public and private sectors’ investment, loans, credit and subsidy ('smart' subsidy) with special consideration of need and prospect of small farmers, and the provision of necessary institutional and infrastructural support need to be in place simultaneously. In their negotiations under the WTO Agreement developing countries must structure the 'green box' or if necessary introduce a 'food security box' in the Agreement, to protect the interests of small farmers.

Who would have predicted that the world would not be the same after 11 September 2001 - at least in the short to medium term. World Bank President James D. Wolfensohn estimated that “tens of thousands more children will die worldwide and some 10 million more people are likely to live below the poverty line” of US$1/day because of the attacks and that many more will be thrown into poverty if development strategies are disrupted. He said that “20 000 to 40 000 children under five years old may die from the economic consequences of the September 11 attack as poverty worsens” (Bangkok Post, 2 October 2001). Mr Wolfensohn further cautioned that developing countries GDP growth could be cut by 0.5 to 0.75 percent and developed countries by 0.75 to 1.25 percent in 2002 due to the impact of the terrorist attacks.

Will investment in agriculture be further depressed due to the September 11 tragedy? It must not. The silent violence of hunger and poverty is a killer of a much bigger proportion. As Chilean poet Gabriella Mistral has so eloquently reminded us all, the hungry child cannot wait. his bones and sinews are being formed now. You can’t tell him tomorrow; his name is today.

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