Policy dialogue for the
livestock sector

Nancy Morgan

Introduction

Livestock contribute to the livelihoods of an estimated 70 percent of the world’s rural poor. For many of these rural poor, livestock provide a small but steady stream of food and income, help raise whole farm productivity and are often the only way of increasing assets and diversifying risks. In addition, livestock have an important role in improving the nutritional status of low-income households, confer status, are of cultural importance and create employment opportunities within and beyond the immediate household. The burgeoning demand for animal protein in low- and middle-income countries (the so-called ‘Livestock Revolution’) provides an opportunity for the poor to improve their livelihoods. However, the nature of livestock farming is determined by policy and institutional frameworks that are rarely pro-poor and that sometimes encourage forms of production that threaten long-term environmental stability and public health.

In 2001, the Food and Agriculture Organization of the United Nations launched the Pro-Poor Livestock Policy Initiative (PPLPI) which will strive, within a time frame of six years, to facilitate and support the formulation and implementation of policies and institutional changes that have a positive impact on the livelihoods of a large number of the world’s poor. In view of the critical role played by livestock in supporting and sustaining their livelihoods, the Initiative has a distinct focus on livestock.

A central Pro-poor Livestock Policy Facility (PPLPF), funded by the UK Department for International Development, has been established at the headquarters of the Food and Agriculture Organization of the United Nations (FAO) with the responsibility of guiding and coordinating the initiative’s regional activities and with the ambition to become a point of reference for livestock related pro-poor policy development. In order to account for the fact that the continuum of policy-making extends from the international to regional to national and sub-national levels and the ensuing need for closer linkages between the various levels of policy making, the Initiative intends to complement the central Policy Facility with a number of regional Pro-Poor Livestock Policy Hubs^[5] (South Asia, S.E. Asia, West Africa, Andean Region, and East Africa) to ensure that local concerns feed into the higher level processes and that international policy makers are aware of the impacts of their decisions at local level.

The objective of the project is a strengthened capacity in FAO member nations and international organizations to formulate livestock sector and related policies and implementation plans that reduce poverty, whilst managing environmental and public health risks. The principal outputs the project aims to achieve are: portfolio of livestock-related interventions for reducing poverty through policy and institutional change; increased awareness and consideration of the potential contribution of livestock and the livestock sector to poverty reduction; effective systems for livestock policy information, analysis, decision-support as well as for monitoring and evaluation; and mechanisms for effective stakeholder representation in the negotiation of policies and institutional changes that better support poor peoples livestock-dependent livelihoods.

The facility will encourage and facilitate conceptual shifts in policy objectives that create and strengthen the capacity of the poor to act for themselves, engage the poor as partners sharing rights and responsibilities, create incentives for the poor to mobilize resources, help catalyse the formation of people’s organization, and protect the assets of the poor to reduce their vulnerability. This will be achieved through the formulation and promotion of policy and institutional reforms that reduce existing financial, technical, and social and cultural barriers that increase competitiveness and that reduce risks and vulnerability.

In order to develop the capacity to inform national and international decision-making in support of poor people’s livestock-related livelihoods, analytical approaches and methodologies need to be identified to: identify and quantify the critical links along the policy and commodity chains; analyse the first-and second round effects of reform (policy and institutional change) on small livestock holders; and identify those policies - and implementation pathways - which are ‘pro-poor’ and conducive to facilitating market access to small livestock holders.

To-date, activities underway in the project include a review of household expenditure surveys in Nepal, the United Republic of Tanzania, and Viet Nam; a poverty analysis and the development of household typologies, an assessment of the impact of trade liberalization on small-holder livestock producers in Nepal (through a CGE analysis), and some preliminary work on micro-modelling.

Obstacles for the rural poor to benefit from the ‘livestock revolution’

Although the rural poor have a major stake in the livestock sector, the large majority of them have, thus far, not been able to take advantage of the opportunities presented by the demand-led growth for animal protein. This has been due to a combination of global, regional and national level policies, regulations, norms and values. Such institutions are defined as the societal ‘rules of the game’. They provide a framework for access to and control of capital assets, influence the political effectiveness of economic interests, and control the political agenda (North 1990). The manner in which these factors shape collective outcomes through the organizational enforcement of these rules at a national and international level therefore supports or prohibits the development of the poor. In the livestock sector such ‘rules’ currently translate into barriers, lack of competitiveness and risks, all of which prevent the poor from taking advantage of the available development potential.

Barriers may exist in different forms:

Financial and asset barriers prevent small farmers from intensifying their production because the investment required often exceeds their capital wealth. The absence of innovative forms of targeted small to medium-scale credit is restricting the involvement of poor people in the commercialization of livestock production and product processing.

Technical barriers constrain small producers from efficiently supplying a safe and relatively uniform product to the market. The lack of appropriate infrastructure for the preservation of perishable products affects the negotiation power of small production units, particularly if these are distant from the consumption centres. In addition, technical barriers exist in the form of sanitary requirements (including animal welfare) as a prerequisite to trade. A perceived or real low animal health status may exclude countries or groups within countries from international, regional and local markets. Small producers are also currently excluded from the market because of a lack of technologies, goods and services that allow for the implementation of innovative product standards and safety norms.

Social and cultural barriers restrict access to assets, goods and services, including the market, due to ethnic grouping, class, gender, language, education or lack of property rights. A lack of appropriate mechanisms and information campaigns has thus far prevented the equitable participation and empowerment of the most vulnerable groups in the development process.

Lack of competitiveness resulting from a combination of higher production and transaction costs often disadvantage the small producers who do not benefit from the economies of scale associated with larger-scale units.

Production costs are usually higher in small-scale production enterprises, outweighing any cost advantages from the discounted value of family labour. Furthermore, there is a lack of objective data to inform policies and institutions about the impact of hidden and overt subsidies that facilitate the supply of cheap animal products to the cities, on small-scale producers, public health and the environment. In addition, the public sector has thus far not acted to develop or disseminate new technologies for small-scale use. The absence of policies and institutions that enable small production units to benefit from the cost advantages of large-scale production skews the playing field further.

Transaction costs can be prohibitively high for small-scale producers because of the small quantities of marketable product produced and the absence of adequate physical and market infrastructures in remoter areas. Transaction costs are also increased where producers lack negotiating power or access to market information and remain dependent on middlemen. Moreover, the lack of facilitation in the formation of producers associations or other partnership arrangements makes it more difficult for smallholder producers to reduce transaction costs through economies of scale.

Risk reduction and mitigating its effect on poor livestock-dependent people are prerequisites for a sustainable reduction in poverty. Small-scale production is associated with a mixture of both market and production risks.

Market risks include price fluctuations for both inputs and products and are often associated with a weak negotiating position. Many small-scale producers evolved from subsistence farming with sound risk coping mechanisms but lack the assets or strategies to sustain full exposure to market risks. The absence of safety nets in the face of economic shocks, invariably present in such markets, will restrict the full participation of the poor.

Production risks relate to resource degradation and asset control, to climatic variations such as drought and floods, and to infectious diseases. Although both small-scale and intensive livestock production systems are at risk from the predations of epidemic diseases and droughts, the poor are particularly vulnerable to these types of shocks due to their limited assets and the lack of insurance schemes. Public and private services in disaster-prone poor countries almost invariably lack the capacity to plan for such risks, or to respond in a timely manner.

Actors in the livestock policy-making process

The range of actors that contribute to the presence and endorsement of these ‘rules’ that currently translate into barriers, lack of competitiveness and risks for the poor, and their current role and influence on political and institutional change are briefly outlined below:

Poor people whose livelihoods are directly or indirectly dependent on livestock production: They have only a minimal influence on political and institutional change in most national and international arenas.

Commercial sector: National and trans-national pharmaceutical and agribusiness companies can influence political and institutional reform through their investment decisions.

Public Sector: National, provincial and local governments are responsible for the formulation, implementation and enforcement of legal, political and institutional reform; and have some influence on policies and institutions in third countries through bi-lateral (aid) programs.

International organizations: (e.g. UN, World Trade Organization (WTO), Office International des Epizooties (OIE), Consultative Group on International Agricultural Research (CGIAR), World Bank) - They have an advisory role to member nations; are responsible for the formulation of international standards and codes; decide on conditional grants and lending programs; have an advisory role to other international organization; and finally aim at awareness creation and influencing public opinion.

Civil Society: (e.g. Non Governmental Organizations (NGOs), academia; churches; producer and consumer groups) - Civil society organizations (CSOs) are strongly focused on awareness creation; represent public opinion; and have an advisory role to national governments and international organizations.

Apart from the varying degrees of influence these actors have on political and institutional change, they also have different and, at times, opposing perspectives and interests. The perspectives in time and space can range from ‘here and now’ for individual farmers to ‘global and future’ for environmental groups. The differing interests and main concerns of the ‘North’ and ‘South’ are also evident. The ‘North’, for example, is concerned with food safety and quality, animal health and welfare, bio-diversity and breed conservation, safeguarding the environment and protecting international markets. The ‘South’ will currently be more concerned about food quantity and affordability, and the increases in livestock production and productivity brought about by technological changes in animal health, genetics and nutrition, and gaining access to international markets.

Many livestock related issues have far-reaching externalities, giving rise to multi-level conflicts. For example, the lack of action against a highly contagious disease in one country can be of serious concern to a neighbouring country or an entire region. There may however, be little incentive for the affected country to prevent the potential spill-over to its neighbours, nor, in many cases, will they have the capacity to prevent it. Although international organizations and agreements exist to guard against such externalities, enforcement is generally weak or lacking and incentive mechanisms to promote adherence, rather than to punish violation, are absent.

Weaknesses of international livestock policy-making

In the absence of unbiased information, assessment and advice to inform the discussion on livestock/public goods interface issues and with the lack of stakeholder fora where such international public policy issues can be negotiated, individual perspectives and priorities become the overriding factor guiding decision making.

Consequently, international livestock policy making currently suffers from three major weaknesses:

• Participation gap: Although all actors are affected by policy decisions, national and particularly international policy making is still restricted to a number of ‘privileged’ groups.

• Incentive gap: Internationally, countries often have little motivation to co-operate in the improvement of global public goods, unless they can benefit from spill-over effects. Nationally, individual actors seldom have incentives to contribute to the negotiating platform for the reduction or avoidance of public ‘bads’.

• Knowledge, information and communication gap: The extent and causes of public ‘bads’ and the anticipated effects of intervention are contested among different actors. In addition, stakeholders are often ill-informed about the view-points and needs of other affected parties.

To correct the current under-provision of public goods, public policy making has to adjust to the changing realities and address the gaps through mechanisms that formally combine stakeholder engagement and negotiation with research and analysis. Assisting policy makers in efficiently tackling poverty requires substantial changes in the approaches and attitudes of organizations that influence international or global norms and behaviour. The result of this process should be transparent and informed policies explicitly addressing the public goods affected by livestock.

Policy options for the livestock sector

Informed and transparent pro-poor livestock policy formulation and the accompanying institutional change require a profound understanding of its political economy. This requires information and tools to analyse the impact of norms and institutions on the various strata of livestock-dependent poor people, and mechanisms to catalyse the required change.

To effectively address the constraints that currently prevent the poor from taking advantage of the available livestock sector development potential, identification and targeting of the priority policy changes and institutional reforms required under different sector dynamics will be essential. To accomplish this, the PPLPF is applying the following analytical framework of development scenarios based on market demand and production potential:

Coping with growth: This development scenario applies where economic growth is driving a burgeoning demand for animal products with a correspondingly dynamic production response. Here the primary public goods involve issues of equity, environmental pollution, animal and public health, including the risk of emerging diseases. Policies and institutions are required that enable small producers to benefit from the cost advantages of large-scale production in order to create a more level playing field.

Creating the conditions for growth: The growing demand for animal products, where it exists, offers substantial opportunities for the small-scale livestock producer to participate and benefit. However, in these areas a number of technical, infrastructural and institutional constraints impede an appropriate production response to the increased demand. To create an enabling environment in which poor producers can take advantage of the available development opportunities, these productivity, trade and other barriers will have to be overcome. Barring this, there is a real danger that the livestock-dependent poor will be marginalized further.

Enhancing rural livelihoods: In many developing countries, economic growth is weak and is not driving an expansion in the demand for animal products. Here the situation is characterized by large numbers of highly vulnerable rural poor for whom livestock represent one of the few opportunities to support and enhance their livelihoods. Many of the barriers and constraints apply equally to this group and some of these represent norms and societal ‘rules of the game’ that derive from international policies. Enhancing livestock-related livelihoods through improved access to and control of capital assets (natural, social, human, physical and financial) will not only reduce vulnerability and risk, but also position resource-poor livestock producers to benefit from any upturn in the economy and demand for animal products, should it occur.

Tables 8a and 8b summarize some of the main pro-poor policy options and institutional changes that may help to overcome the delineated barriers, lack of competitiveness and risks, and thereby constitute relevant development pathways in the three identified scenarios.

Table 8a: Typology of pro-poor policy options and institutional changes for the first of the three identified development scenarios

Table 8b: Typology of pro-poor policy options and institutional changes for the second and third identified development scenarios

The role of the pro-poor livestock policy initiative

Providing appropriate guidance in the creation of mechanisms that ensure the required political and institutional reform in the existing political environment is essential to any initiative that aims at sustainable improvements to the livelihoods of the poor. The PPLPI aims to position itself as the facilitator/provider of such pro-poor livestock-related policy guidance as the governments of lesser-developed nations develop and implement their national poverty alleviation strategies. This will play a central role in encouraging and facilitating the conceptual shifts in policy objectives in these lesser developed nations that: 1) create and strengthen the capacity of the poor to act for themselves, 2) engage the poor as partners sharing rights and responsibilities, 3) create incentives for the poor to mobilize resources, 4) help catalyse the formation of people’s organization, and 5) protect the assets of the poor to reduce their vulnerability, particularly as they relate to the livestock - public goods interface.

Improved access to and control of different types of capital assets (natural, social, human, physical and financial) enable the poor to meet basic needs better and to create different livelihood options. It is the facilitation of these social capacity building processes that allows people to improve their use of local resources, create new resources or services, promote equity, influence government actions and establish new institutional frameworks (Cernea 1988; UNDP 2000; World Bank 2000). Public policy networks, in which governments, national and international organizations, CSOs and the corporate sector can collaborate on selective issues to achieve balanced agreements that enhance the choices and rights of the poor through interventions that increase equity and efficiency, are emerging as a practical means to address governance issues.

References

Cernea, M.M. 1988. Nongovernmental organizations and local development. World Bank discussion papers No. 40 Washington, D.C., World Bank.

North, D. C. 1990. Institutions, institutional change, and economic performance. Cambridge; New York, Cambridge University Press.

UNDP. 2000. Human Development Report 2000. New York: Oxford University Press. (also available at www.hdr.undp.org).

World Bank. 2000. World Development Report 2000/2001: Attacking Poverty. New York: Oxford University Press. (also available at www.worldbank.org).