Agricultural investment is widely recognised as one of the most important and effective strategies for economic growth and poverty reduction in rural areas where the majority of the world’s poor live. In this post, we explore the financial and technical investments governments must make to develop their agricultural industries.
The Food and Agricultural Organization (FAO) estimates that an additional investment of $83 billion is needed annually to close the gap between what low and middle-income countries have invested each year over the last decade and what is required by 2050. Investments must include and cover the following aspects in an economy:
- Capacity development of governments to design and execute multi-sector and multi-partner investment strategies aligned with their own priorities.
- Investment in research and development in the agricultural sector.
- Infrastructure development, establishing food parks and machinery for processing of food.
China, Japan, the United States, South Korea, Turkey, Germany, Russia, Italy, France, and Canada have the highest government investment in agriculture in absolute terms. They spent a combined $248 billion on agriculture, forestry, and fishing in 2014. Globally, public and private sectors of high-income countries spend a combined $50 billion annually on agricultural R&D.
Case Study: U.S. Forestry
The largest producer and consumer of forest products and timber
The U.S. government has played a considerable role in the success of the forest industry. The country is the largest producer and consumer of forest products and timber, producing 11.2 billion cubic feet of industrial roundwood like plywood, veneers, lumbers, and pulp products. The wood and paper manufacturing industry ships goods worth $240 billion. The industry accounts for 7% of total employment (8,90,000 people) in the manufacturing sector.
A single decentralised policy
Management of forests in the U.S. is divided between the state and federal governments under one decentralised policy. Individual states regulate the management of privately held forest area. Each state has a state forester and a state-level forestry organisation that provides financial and technical assistance to private forest owners. The federal government owns and is directly accountable for federal forest estates.
The U.S. Forest Service (USFS) – a valuable partner
The USFS is the largest forestry research organisation in the world. The agency manages 30% of all federally owned forestland. It employs 35,000 scientists, administrators and land managers, and has seven research institutes including a forest product lab.
As seen in the figure above, the USFS has a sizeable budget, has set up valuable investment partnerships, and contributes to the country’s total GDP.
Case Study: China’s Fishing Industry
China’s fishing industry faces challenges of depleting resources due to overfishing and pollution, a growing population’s excess demand for protein, and scarcity of land and water resources. Yet China is home to the world’s largest fishing industry. The country generates one-third of the world’s total fish production (61.7 Mn MT) and is the largest exporter of fish.
Growth in employment and technology
The sector has generated significant employment and witnessed a major increase in investment in fishing technology as seen in the table below.
China’s relentless efforts
In 2012, China invested 8 billion RMB in a Fishing Vessel Rebuilding programme with the aim to modernise the country’s fishing fleet. In 2014, 400 million RMB was invested to protect marine fishery resources. 75% of this investment was spent on releasing fish stocks in China’s inshore waters. 94 million RMB was spent on demonstration ocean farms.
Plans to reform fish subsidy programmes include fishing quota pilot programmes in inshore waters, which will be expanded throughout the country. In addition, the nearly completed land reclamation project in the South China Sea will further boost recreational fishing and ocean farming. All this has resulted in relatively high fish production per farmer per year of 6 MT and further growth is projected as seen in the figure below.
The U.S. forest industry and China’s fishing industry are cases in point for governments to invest in agricultural infrastructure and R&D. According to a World Bank report, GDP growth in agriculture has been shown to be at least twice as effective in reducing poverty as growth originating in other sectors. Therefore, investment in agriculture must have a key role to play in alleviating poverty.