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Rural Poverty, Smallholders and Markets in Cambodia Raghav Gaiha, University of Delhi Based on a collaborative study with Md. Azam -sponsored by APR, IFAD and carried out in consultation with SNEC Objectives • Agriculture’s potential for GDP growth acceleration ▫ Two routes: (i) higher productivity, and (ii) participation in high value chains ▫ Policy influences (e.g. public and private investment, FDI, trade expansion) on both intensification and diversification of agriculture ▫ Relationships between agricultural growth, GDP growth and poverty reduction • Risks, Poverty and Vulnerability • Switches between production for self-consumption and market sales and between food crops and cash crops among smallholders • Policy challenges Data • Analysis based on FAOSTAT, WDI, CSES 2007. • Today’s presentation based on analyses carried out with CSES, 2007 Risks, Poverty and Vulnerability (CSES 2007) • Khmer households much less likely to be poor • Education reduces poverty • Small farmers more poverty prone than large farmers • Security of land title reduces poverty • Diversified sources of income, cushion against shocks, reduce poverty • Irrigation reduces poverty • Access to electricity reduces poverty • All weather roads substantially reduce poverty • Natural catastrophes (floods, droughts) enhance risk of poverty Switches between Self-Consumption and Market Sales, by Commodity & Size of Farm • Vast majority of smallholders dependent on subsistence farming • Integration into markets, higher living standards and reduced vulnerability • Analysis based on CSES 2007 • Switching regression procedure (Maddala, 1983) –sales of agricultural output as well as choice between selfconsumption and selling regime determined jointly • Total sales (all crops), food crops, and cash crops • Aggregate sample, small and large landholders analysed separately Switches between Self-Consumption and Market Sales, by Commodity & Size of Farm (contd) • Supply responses likely to differ between small and large farmers ▫ Reasons include lack of assets, technologies and incentives ▫ Behavioural traits such as risk aversion Results (1) • Price of paddy, rice yield (proxy for technology), farm size and ownership of agricultural equipment have positive and significant effects on market sales ▫ Significant differences between small and large landholders. ▫ Reasons include lack of endowments (e.g. land, skills), and behavioural traits (risk aversion) • Rice yield and not price of paddy (technology) has highest marginal effect among smallholders • Ownership of agricultural implements more important too. Results (2) • Supply responses lower in villages prone to floods, droughts ▫ Catastrophic risks greater for large farmers • Transaction costs main barrier to marketing of food crops (distance to markets, bus stop, ownership of transport equipment) among smallholders ▫ Developing rural infrastructure-roads, information networkshigher payoffs to smallholders • Secure landownership facilitates market integration of subsistence farmers • More diversified income sources free smallholders from the obligation to sell and produce for self-consumption Policy challenges (1) • Remarks confined to policy interventions designed to help smallholders integrate into markets and enhance living standards and reduce vulnerability • Enlargement of farm size • Evidence on beneficial effects of land concessions to poor mixed • Whether grant of small plots with access to technology and credit better option? • Security of land title • Catastrophic risks and resilience against them • Access to extension and technology Policy challenges (2) • Rural infrastructure, transaction costs and commercialisation of smallholders • Strengthening of rural and market information networks • Diversification of income sources of smallholders • In short, challenge is accelerated agricultural growth and mainstreaming of smallholders in this process