href="#litres_trial_promo">5.1 Investment by the public and the private sector for on-farm agricultural capital stock
5.2 Sources of investment for capital formation in selected countries
5.3 Investment by the corporate private sector
5.4 Foreign Direct Investment (FDI)
5.5 Official Development Assistance (ODA)
Drivers of investment in agriculture for increased production and productivity
6.1 Public–private complementarity in investment
6.2 Policies and the enabling environment for investment
6.3 Policies, trends and incentives to invest
6.4 Drivers of household investment in agriculture
6.5 Drivers of investment in agro-industries
Promoting investment for increased agricultural production and productivity
7.1 Promoting farm-household savings for on-farm investment
7.2 Promoting public sector investment in agriculture
7.3 Create enabling environment for corporate private sector investment in agro-industries
7.4 Promoting Foreign Direct Investment through inclusive business models
ANNEX 1 Sources of investment finance, selected country groups, 2002–2006
ANNEX 2 The NEPAD-OECD Draft Policy Framework for Investment in Agriculture
ANNEX 3 Non-financial assets in the UN System of National Accounts
ANNEX 4 A list of case studies
Foreword
Investing in agriculture is one of the most effective ways of reducing hunger and poverty, promoting agricultural productivity and enhancing environmental sustainability. However, for any investment to have a positive impact on agricultural production and productivity, it must contribute to capital formation at the farm level. In this respect, investments made by the farmers themselves are indispensable. Their investments constitute the foundation and the engine for sustainable development and the reduction of poverty and hunger.
For farmers, the main sources of investment finance are their own savings and their fixed capital, which are used as collateral for credit. Capital formation is certainly higher for farming households with positive savings and clear, legally recognized ownership of their land. In areas where the levels of poverty and hunger are high and agriculture is dominated by small-scale farmers, such as in South Asia, sub-Saharan Africa and parts of Latin America, the average farmer earns less than half of what is needed to cross the poverty line. For small and marginal farmers with below average land holdings, the situation is even worse, both in terms of their ability to save and to secure their rights to the land.
Apart from the capacity to invest through the generation of savings and fixed assets, the factors driving investment for farm-level capital formation are the growth of the food value chain from producers to consumers, which includes agro-industries and the provision of public goods in the form of basic infrastructure, such as roads, electricity, education and technology. There is no doubt that more public resources are needed for agriculture. However, there is a need for new investment strategies that are centred on agricultural producers and focuses public resources at all levels on the provision of public goods in ways that complement investments made by farmers and support inclusive and efficient agricultural and food systems at local and national level.
To address these issues, in October 2009 FAO initiated the project: Study on Appropriate Policy Measures to Increase Investments in Agriculture and to Stimulate Food Production (GCP/GLO/267/JPN) with contribution from the Ministry of Agriculture, Forestry and Fisheries (MAFF) of Japan. This document presents findings from its project activities.
The report seeks to build a better understanding of the relationship between savings and investment at the farm level, domestic and foreign corporate private investment in agriculture and agro-industries and the public sector investment in developing countries. It proposes policies and a programme of action for creating conditions under which domestic savings, farm-level investments and investment in agro-industries are united in a self-perpetuating, virtuous cycle that can be described as ‘save, invest and grow’.
LAURENT THOMAS
Assistant Director-General
Technical Cooperation Department
Acknowledgements
This report was prepared by Saifullah Syed, Senior Economist, FAO Investment Centre (TCI), in collaboration with Masahiro Miyazako, Project Coordinator, TCI. We would like to express our gratitude to the Japanese Ministry of Agriculture, Forestry and Fisheries for funding this work.
The report is based largely on country case studies and a literature survey. It has drawn extensively from the FAO publication: State of Food and Agriculture 2012 – Investing in Agriculture for a Better Future. The case studies were conducted in Bangladesh, Bolivia, Brazil, Burkina Faso, Cambodia, China, Ethiopia, Egypt, India, Indonesia, Lao People’s Democratic Republic, Mali, Malawi, Nepal, Republic of Korea, South Africa, Paraguay, Thailand, United Republic of Tanzania, Viet Nam and Zambia. We would like to thank the researchers and consultants who prepared the case studies and the background analytical reports.1
The report benefited from the Technical Workshop on Policies for Promoting Investment in Agriculture, held in Rome, 12–13 December 2011 and led by Peter Hazell, Imperial College, London, as a key resource person. It has also benefited from the Symposium on Poverty Reduction and Promotion of Agricultural Investment, held on 10 March 2010 in Tokyo, Japan, with the participation of Supachai Panitchpakdi, Secretary-General of the United Nations Conference on Trade and Development (UNCTAD) as well as the Workshop on Private Corporate Sector Investment in Agriculture in Southeast Asia, organized by Brighten Institute, Bogor, Indonesia in collaboration with FAO and held on 10–11 November 2012 in Bandung, Indonesia.