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The Least DevelopedCountries Report 2015
Transforming Rural Economies
Dr. Aynul HasanDirector, Macroeconomic Policy and
Development Division
Bangkok, 3 December 2015
Outline• Key messages• LDCs and Rural Transformation:
from MDGs to SDGs• Agricultural productivity• Development of non-farm activities• The Gender Dimension• Transforming Rural Economies: A Policy
Agenda
Key Messages
• LDCs are the battleground on which the SDGs will be won or lost -and rural areas in LDCs are where the battle will be hardest
• The SDGs both highlight the need, and offer the opportunity, for a new and different approach to rural development
• This means poverty-oriented structural transformation (POST), through agricultural upgrading and diversification, exploiting agriculture/non-farm synergies
• Linking demand and supply, differentiating among rural areas, and sequencing investment/interventions, are critical
• Increasing agricultural productivity requires increasing input use and quality, strengthening agricultural R&D and extension, and infrastructure investment
• Financing for productive investment needs to be affordable as well as available, well targeted, and linked to business skills
• "To will the end is to will the means"• Fulfilment of ODA commitments is essential, and the target for ODA
to LDCs should be increased to 0.35 per cent of donor GNI
Launch of The Least Developed Countries Report, 2015
Key Messages
LDCs and Rural Transformation:from MDGs to SDGs
• Absolute goals require us to think differently– We can halve poverty by harvesting “low-hanging fruits"– We can only eradicate poverty by eradicating it
everywhere: “no one is left behind”– We need to focus where it’s most difficult– LDCs are the battleground on which the SDGs will be won
or lost…– …and rural areas in LDCs are where the battle will be
hardest
Launch of The Least Developed Countries Report, 2015
Context: the 2030 Agenda/SDGs
0
20
40
60
80
100
0 20 40 60 80 100
Poverty Headcou
nt Ratio, 2011 (%
)
Poverty Headcount Ratio, 1990 (%)
Poverty Headcount Ratio, 1990 and 2011 (%)
ODCs (Other)
ODCs (SSA)
African LDCs +HaitiAsian LDCs
Island LDCs
Poverty is much higher in LDCs….
0
20
40
60
80
100
0 20 40 60 80 100
Poverty Headcou
nt Ratio, 2011 (%
)
Poverty Headcount Ratio, 1990 (%)
Poverty Headcount Ratio, 1990 and 2011 (%)
ODCs (Other)
ODCs (SSA)
African LDCs +HaitiAsian LDCs
Island LDCs
POVERTY HALVED BY 2015
POVERTY INCREASED SINCE 1990
…and falling most slowly (if at all)
‐80 ‐70 ‐60 ‐50 ‐40 ‐30 ‐20 ‐10 0 10 20 30 40 50 60 70 80 90
Yemen, Rep. (2005)Nepal (2010)
Lao PDR (2012)Bhutan (2012)
Bangladesh (2010)Afghanistan (2011)Timor‐Leste (2007)
Sao Tome and Principe (2009)Comoros (2004)Zambia (2010)Uganda (2009)
Togo (2011)Tanzania (2012)
Sudan (2009)South Sudan (2009)Sierra Leone (2011)
Senegal (2011)Niger (2008)
Mozambique (2009)Mauritania (2008)
Mali (2010)Malawi (2010)
Madagascar (2010)Liberia (2007)Lesotho (2010)
Guinea‐Bissau (2002)Guinea (2012)Ethiopia (2011)
Equatorial Guinea (2006)Congo, Dem. Rep. (2005)
Chad (2011)Central African Republic (2008)
Burundi (2006)Burkina Faso (2009)
Benin (2011)Angola (2008)
Poverty Headcount Ratio
urban
Poverty rates are twice as high in rural areas as in towns and cities…
rural
The SDGs: a step-change in ambition
• Poverty eradicationmeans doubling the lowest householdincomes globally in just15 years…
• …after they have stagnated for the last 20‐30 years
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1980 1990 2000 2010 2020 2030
$ pe
r person pe
r day (2
005 PP
P)Estimated Global Consumption
Floor, 1981‐2011, and 2030 Target
$1.25‐a‐daybasis
$1.00‐a‐daybasis
MDGs SDGsPre‐MDGs
• This highlights the need for a new model of development
• But efforts to fill the gaps will also change the economic environment for development:– Increased infrastructure increases productivity– Increased infrastructure investment increases demand– Accelerated poverty reduction also generates demand
growth• This provides the opportunity for a new model of
development
Launch of The Least Developed Countries Report, 2015
Implications of the SDGs
• Income transfers can only be part of the solution– financially unsustainable and logistically infeasible
• Main engine must be primary incomes, from economicactivity
• Requires structural transformation– Increasing labour productivity within sectors– Shifting resources from lower- to higher-productivity
sectors/activities– Keys are labour productivity and technology
• Focus on employment for all at incomes above the poverty line, matched by productivity– Poverty-oriented structural transformation (POST)
Launch of The Least Developed Countries Report, 2015
Structural transformation
• Increasing labour productivity– in agriculture– in non-farm activities
• Shifting resources– from lower to higher-value crops in agriculture– from agriculture to non-farm production - rural economic
diversification• Again, the keys are productivity and technology• Harnessing the synergies between agriculture and the
non-farm economy
Launch of The Least Developed Countries Report, 2015
Structural transformation of the rural economy
Agricultural productivity
0
10
20
30
40
50
60
70
80
90
100
Industry Services Agriculture
Sectoral Labour Productivity (Value Added per Worker), 2011‐13 (Developed Countries = 100)
developed countries
other developing countries
LDCs
LDCs' productivity gap in agriculture iswider than in industry or services
0
1
2
3
4
0
20
40
60
80
per cen
t
LDC Agricultural Productivity Trends (Final Output per Worker) as % of Developed and Other Developing Countries, 1980/84‐2010/12
Relative to other developingcountries (left‐hand scale)
Relative to developed countries(right‐hand scale)
…and it has been widening for decades
• Quantity of conventional inputs, irrigation– Low in African and island LDCs; higher in Asian LDCs
• Technology - R&D; agricultural extension services– Greater agroecological diversity makes this more problematic
in Africa than in Asia
• Human Capital - education, health, nutrition– Evidence suggests minimum 4 years' education needed
• Public investment and policies - knowledge-building, infrastructure
• Agroecological conditions - climate change
Launch of The Least Developed Countries Report, 2015
Determinants of agricultural productivity
0
0.5
1
1.5
2
2.5
3
3.5
1981 1990 2000 2008
Public Expenditure on Agricultural R&D (% of agricultural GDP)
World
Low‐income
Middle‐income
High‐income
Agricultural R&D spending has fallen, whilst growing elsewhere
Development of non-farm activities
• An important determinant of diversification and agricultural upgrading
• RNFE development is more difficult further from towns• But increasing rural-urban access is two-edged
– Wider markets and increased access to inputs; but– Loss of natural protection– Disadvantages cf established urban suppliers
• Identifying the right policies is critical• So is recognising the very different opportunities and
priorities in peri-urban, intermediate, remote and isolatedrural areas
Launch of The Least Developed Countries Report, 2015
Urban Proximity
• Remote and isolated areas have the greatest need for diversification, but the least opportunities
• Similarly among households: poorer households– are forced into diversification by low agricultural incomes– but have limited capital and access to finance, and less
education– face great human costs in case of financial losses– "enterpreneurship by necessity" in activities with low entry
barriers, low productivity and limited returns• Shift to dynamic "entrepreneurship by choice" is critical to
poverty-oriented structural transformation
Launch of The Least Developed Countries Report, 2015
Contradiction between need and opportunity
The Gender Dimension
• Women are around half the rural and agricultural workforce
• But they face major additional constraints– Double burden of care and productive work– Disproportionate share of (unpaid) family labour– Limited control over commercial proceeds from
agriculture and non-farm activities– Limited access to finance, markets
• Relieving thes constraints can make an important contribution to transformation
Launch of The Least Developed Countries Report, 2015
Gender Constraints
0
20
40
60
80
100
Burkina Faso
Gam
bia
Guine
a
Mali
Sene
gal
Ethiop
ia
Haiti
Lesotho
Madagascar
Malaw
i
Mozam
biqu
e
Ugand
a
Zambia
Banglade
sh
Myanm
ar
Nep
al
Comoros
Agricultural Landholders by Gender (%)
female
male
Women's access to land is limited by customary law and practice….
West Africa Other Africa & Haiti Asia Island
0
20
40
60
80
100
Ethiopia Madgascar Tanzania Nepal Yemen
Gender Wage Gaps in Selected LDCs (%)
…and there are large gender gaps in wages
Transforming Rural Economies: A Policy Agenda
• Agricultural upgrading– Extend cultivated area where possible/sustainable– Diversify towards higher-value crops– Increase yield/productivity through technology and input
use– Market differentiation to raise prices
• Rural economic diversification by choice– Shift from survivalist "entrepreneurship by necessity" to
dynamic "entrepreneurship by choice"; – Enterprise expansion, not microenterprise proliferation– Rural electrification as a key driver
Launch of The Least Developed Countries Report, 2015
Policy Directions
• Maximise synergies between agriculture and RNFE – increase staple production + local food stocks, to ensure
reliable access– agro-processing - value-addition and tradability– low-season employment, to off-set seasonality of
agricultiure• Foster demand linkages
– Non-staple and processed foods– Basic consumer goods and services– Agricultural input supply
• Sequence investment– Interventions to foster supply response to increasing demand
Launch of The Least Developed Countries Report, 2015
Policy Directions
ODA/Development Cooperation
• The considerable investment needs to meet the SDGs in LDCs willneed to come mainly from ODA
• SDG17 is for "developed countries to implement fully their ODA commitments– The 0.7% and 0.15-0.2% commitments are explicitly included– This also implicitly includes aid effectiveness commitments, including
on country ownership, untying, etc• Since LDCs' account for 40-50% of SDG shortfalls, 0.35% would be
more consistent with the 0.7% overall target• Support to productive sectors is important, as well as social sectors, to
make gains economically sustainable• ODA shorfalls would leave a stark choice:
– Miss the goals, or– Borrow unsustainably debt crisis, as in the 1970s/80s
Launch of The Least Developed Countries Report, 2015
Policy Directions
Thank you