Download Setting meaningful investment targets in agricultural R D: Challenges, opportunities, and fiscal realities

Setting meaningful investment targets
in agricultural R&D: Challenges, opportunities, and fiscal realities
Nienke Beintema & Howard Elliott
Presentation at the FAO Expert Meeting “How to Feed the World to 2050”, Rome, 24‐26 June 2009
Outline of presentation
■ Trends in agricultural R&D investments
■ Perspectives of underinvestment ■ Capacity constraints (fiscal and institutional)
■ Future investment options
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Public and private sector investment
in agricultural R&D
circa 2000: 39.6 billion in 2005
international (PPP) dollars
Developing
countries,
private (2%)
Developing
countries,
public (26%)
high-income
countries,
public (34%)
high-income
countries,
private (39%)
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developing = low- and middle
income countries
Public agricultural R&D investment
trends globally, 1981, 1991, and 2000
billion 2005 international (PPP) dollars
25
20
57%
15
10
60%
62%
32%
5
30%
29%
0
9%
10%
11%
1981
1991
2000
Low income (46)
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Middle income (62)
High income (32)
Public agricultural R&D investment trends
in developing countries, 1981‐2006 billion 2005 international (PPP) dollars
4
3
2
1
0
1981
1986
1991
Sub-Saharan Africa
Latin America & Caribbean
China
1996
2001
2006
Asia-Pacific (minus China)
West Asia & North Africa
developing = low- and middle
income countries
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Sub‐Saharan Africa compared to
Brazil, China, and India, 1981‐2006 billion 2005 international (PPP) dollars
3.0
2.5
2.0
1.5
1.0
0.5
0.0
1981
1986
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1991
1996
2001
Sub-Saharan Africa
India
Brazil
China
2006
Global annual growth rates in public agricultural R&D investment, 1976‐2000
Annual growth rate (percentage)
10
8
6
4
2
na
0
-2
Sub-Saharan Asia & Pacific Latin America West Asia &
Africa
& Caribbean North Africa
1976-81
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1981-91
Developing
countries
1991-2000
High-income
countries
Intensity of public agricultural R&D
investments, 1981‐2000
2.5
Agricultural R&D spending
as a share of AgGDP (%)
2.0
1.5
1.0
0.5
0.0
Sub-Saharan Asia & Pacific Latin America West Asia &
Africa
& Caribbean North Africa
1981
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1991
2000
Developing
countries
High-income
countries
Spatial concentration of public
agricultural R&D spending, 2000
Agr. R&D
Spending
Agr.
Population Land
Agr.
GDP
(percentage )
Top 5
48
52
23
47
Top 10
62
56
33
52
6
11
14
6
Bottom 80
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Government remain crucial in developing countries’ agricultural R&D
100
19%
Percentage
80
35%
38%
60
40
77%
61%
Funding agricultural research
62%
20
0
Latin America (2006)
Government
Asia (2002/3)
Higher education
Sub-Saharan Africa (2000/1)
Nonprofit
Executing agricultural research
Government agencies (371)
Total funding = $3,782 million (2005 PPP dollars)
Producer
organizations &
Marketing
boards
1%
Own income
7%
Other
1%
Donors
7%
Sample of circa 55 countries,
excluding China
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Government
84%
Concept of underinvestment:
Three dimensions
■ Rate of return to public investment in agricultural R&D is higher than social rate of return on capital or other opportunities for public investment ‐ more investments will result in more social gains than social costs ■ Failure to maintain on‐farm productivity growth at its historical trends – lost potential is sign of underinvestment
■ Insufficient financial capacity to meet various pre‐set targets that in themselves demand increasing investments in agricultural R&D
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Common descriptive targets: Some examples
■ MDG1: Halving hunger and poverty – Annual growth in GDP of 6%
■ ASARECA: GDP growth of 6% produces 3% growth per capita
■ Maputo Declaration of commitment to agriculture: Annual growth in public agricultural expenditure of 10%
■ IAC report/NEPAD: doubling investments for agricultural research / research intensity
■ Fiscal effort: Each low income country could raise government share in total economy to 20%, but may not always advisable (e.g. post‐conflict)
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Capacity constraints
■ How fast the system can adapt to challenges or exploit opportunities
■ Priority
■ Fiscal capacity
■ Absorptive capacity
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Agricultural Research Intensity Ratio (ARI)
AgRE
AgE
BUD
GDP
ARI ≡
×
×
×
AgE
BUD
GDP
AgGDP
↓
↓
Fiscal
Capacity
Structure of
the Economy
Priority to
Research in
Agriculture
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↓
Priority to
Agriculture
↓
Determinants of ARI by country income group
Priority to Research (AgRE/AgE)
Priority to Agriculture (AgE/Bud)
Hi
Hi
LO
Lo
Fiscal Capacity (Bud/GDP
Structure: Share of Agriculture (AgGDP/GDP)
Hi
Hi
Lo
Lo
Y Axis: level of country income per capita; X Axis: Ratios as defined
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Priority to research
■ In high income countries
■ Changing composition of AgRE away from productivity enhancement at farm level
■ Implications
■ Cumulative loss of productivity
■ Reduced spillovers in future for developing countries
■ Role of public sector research in structure, coordination and behavior of research and development
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Priority to research (cont’d)
■ IFPRI studies suggest research is most productive of investments in agriculture.
■ Political economy of budget allocations need study (e.g. WDR 2008: ■ In India agriculture share in budget 11% but research losing to fertilizer, credit, electricity subsidies
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Priority to agriculture
■ Historical weakness of agriculture: low political voice, policy makers lack of knowledge of potential for pro‐poor growth, prior negative experiences with agricultural projects.
■ Structural adjustment protected certain areas (e.g. education) but not agriculture
■ PRSP/HIPC stressed social goals and this influenced project selection
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Fiscal effort or fiscal will?
■ Taxable bases: what is reasonable effort?
■ Fiscal centralization and decentralization
■ Fiscal culture: circular problem of low revenue, low service, low compliance, corruption
■ Fiscal strategy: future tax revenue as criterion in public investment? (Easterly)
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Allocation of resources
■ Efficiency of public management
■ Medium Term Expenditure Frameworks helped focus priorities in general; did less well in controlling actual expenditure
■ Efficient financing
■ For example, competitive funds, payment for services, farmer check‐offs, sales
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Structure of economy
■ Transforming countries offer chance to effect change for benefit of agriculture:
■ Growth of new sectors and tax bases
■ Markets and infrastructure offer opportunities for flow of inputs and new technology
■ Need conscious effort to build support to R&D into transforming structures
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Institutional and Human
Capacity Development
■ Balanced growth of domestic knowledge systems ■ NARS: demographic profiles and attrition ■ Agricultural universities: research mandate requires expansion MSc and PhD training ■ Both hard and soft skills required for collaboration
■ Creating regional postgraduate programs and research platforms
■ Identification of the gap does not say how fast it can be filled: need for balanced growth
■ Reforms in sub‐regional and international collaboration: CGIAR, SROs in Africa, Regional Productivity programs
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Summary
■ There is underinvestment relative to ■ Opportunity for net social gain
■ Need to meet stated goals
■ To maintain productivity and future spillovers
■ There is fiscal potential that requires public management reform and exploitation of new funding mechanisms
■ More countries are entering stage of transformation where structural change favors a better effort for agriculture: plan for it
■ Reinvest in both research and higher education: balanced growth
■ A multidisciplinary effort to develop methodologies to quantify the options for addressing emerging challenges.
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Implementation
■ Process to frame the agenda
■ Information
■ Methods for integration across disciplines
■ Instruments for implementation
■ Legal frameworks
■ Institutions and markets for payment of ecosystem services
■ Intergovernmental, transboundary mechanisms
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Setting meaningful targets
■ Policies based on consensus on 2050 scenario
■ Every tool is needed
■ Productivity increases our choice among goals
■ Measures of national capacity ■ A “sufficient” NARS
■ National commitment commensurate with capacity
■ Sustainable data and information ■ Public expenditure framework linking priorities to disbursement
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Thank you