Monday, January 24, 2011

Inadequate investment in agriculture

Agriculture is a fundamental instrument for sustainable development and poverty reduction according to the World Development Report (WDR) 2008 and this is very much so in Papua New Guinea.
The WDR has placed PNG among agriculture-based countries.
PNG may well remain in this category for the next 50 years.
As such, agriculture should take a clear and central position in any development strategy and in necessary investment it deserves for the development of PNG.
Unfortunately, the national government and major donor agencies consider otherwise and have recognised other sectors as enablers of growth and development and have left agriculture out.
 If development is to take place and be self-sustaining, it has to start in rural areas in general and the agriculture sector in particular.
This is simply because 86% of its 6 million people are in rural areas and core problems of widespread poverty; growing inequality, rapid population growth and rising unemployment are direct effects of stagnant and declining economic activities.
Agriculture development is a key to rural development and improvement of livelihoods.
It not only delivers outcomes directly related to increased agricultural productivity but also contributes to necessary outcomes in other sectors such as health, education, infrastructure and law and order either directly or indirectly by empowering rural communities to look after their health and education through improved food security and increased incomes.
In fact agriculture needs to be viewed as a central sector in the country delivering long‐term outcomes and impacts to all other sectors while other sectors can contribute with short‐term outcomes to agricultural development.
Realistically, PNG should be investing around K400 million per year in agriculture if the nation is to avail the real potential of the agriculture sector for economic growth and development.
This is as per the international recommended rate, 10% of agricultural GDP, when agriculture in PNG contributes an estimated 37% (K4 billion) of total GDP.
According to the WDR, such rate of investment is essential if a nation is to move from the category of agricultural-based countries to transformed economies, a transition towards the developed world.
The current level of public investment in overall agricultural development is only about K190 million (including allocations of NADP funds to districts), which is less than 5% of the agricultural GDP.
Public investment in research and development is equally disappointing.
The current annual public investment in agricultural research is K30 million, which is only 0.75% of agricultural GDP while the ideal rate is 2.0% (K80 million).
Many developing countries have received very attractive rate of returns to agricultural research investment, figures being as high as 43%,
This explains the current gap and highlights the huge scope for increasing both public and private sector investments in agricultural research and innovations in PNG.
The European Union is focusing on education, health, and social sectors since last two years as per their strategic change.
The AusAID programme has also changed priorities, now focusing on health (HIV/AIDS), education, law and order and social sectors.
Whatever is left from AusAID funding through the Agriculture Research and Development Support Facility (K7 – 8 million per annum) will cease in 2012 onwards.
This indicates a declining investment in the agriculture sector.
The national government is also focusing on education, health, infrastructure/transport, and law and order as the enablers for development.
The recurrent budget increased by K851 million from K6.9 billion in 2010 to K7.8 billion in 2011 and all increases go to above sectors.
The development budget increased by K647 million to K4 billion (2011) from K3.4 billion (2010) and all increases go to the above sectors.
Again an indication of declining investment (both in absolute and relative terms) in the agriculture sector and this trend may continue.
The notion that transport and infrastructure will bring growth in agriculture sector is partly true; however, it will depend on how effective these are implemented.
The investment in transport/infrastructure should balance and complement direct investment in agriculture.
The assumption that the private sector (large holdings) will bring development to the masses is not true as their interest is creating wealth for themselves.
Obviously there will be spin-off benefits but these will not last long due to cost and inflation impacts.
It is, therefore, necessary for the national government and other donor agencies reconsider their priorities and include agriculture on equal footing with the other sectors currently given priorities.
Smallholders and subsistence sector, natural resource management and development/ environment, biodiversity, policy, technology, innovations and capacity development need public sector investment.
The 8% economic growth projected by the government is achievable with LNG and other resource projects
PNG has more favorable environment now than ever before for all stakeholders to make positive contribution to innovative agricultural development, in general, and to research, science and technology; in particular.
Therefore, this growth should be used for further wealth creation by masses through their participation.
This is important as economic growth not participated and shared by masses lead to double disasters, both in non-renewable and renewable resource sectors.
It would be just appropriate for the government not to turn its back on agriculture now. The consequences in the long run can be disastrous.

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