Seniorl Anzu and Raghunath Ghodake
Agriculture can be a major source of growth and poverty reduction.
According to the World Development Report (WDR) 2008, this is particularly true for agriculture-based countries.
Being in this category, PNG stands to benefit from agriculture for poverty reduction and economic growth given its huge natural resource base and untapped potentials so far.
But to effect that, the report suggests that certain instruments must be effectively used, which include increasing access to assets, making smallholder farming more competitive and sustainable, diversifying income sources towards the labour market and the rural non-farm economy, and facilitating successful migration out of agriculture.
Increasing access to assets
The three core and immediate assets that PNG has, as defined by the WDR, are land, water and human capital.
These are household assets that determine our ability to effectively participate in agricultural markets, secure livelihoods in subsistence farming, compete as entrepreneurs in the rural non-farm economy, and find employment in skilled occupations.
However, major challenges that the country encounters are population pressure, environmental degradation, expropriation by dominant interests, and social biases in policies and in the allocation of public goods.
PNG has 463,000km² of land area. This is a vast land mass with only 27% land area occupied by people when they own more than 97% under customary ownership.
Much of these are potential agricultural land which are underutilised or untouched.
Access to water and irrigation is a major determinant to land productivity and the stability of crop yields and PNG has all year round abundance of water in which most cropping systems are rain-fed.
With climate change leading to rising uncertainties in rain-fed agriculture, investment in water storage (harvesting) will be increasingly crucial.
Equally but the most valuable asset is education for rural people to pursue opportunities in new agriculture, obtain skilled jobs and start businesses.
Yet education levels in rural areas tend to be dismally low and according to the WDR, this is worldwide.
Improving the basic rural education for quality human capital through appropriate training (including vocational) can provide technical skills that are useful for new agriculture.
Education and awareness can also combat the effects of HIV/AIDS , malaria and other illnesses that reduce agricultural productivity and devastate livelihoods.
Making smallholder farming more competitive and sustainable
The WDR states that improving the productivity, profitability, and sustainability of smallholder farming is the main pathway out of poverty in using agriculture for development.
These can be viewed in a broad array of policy instruments.
First is to improve price incentives and increase the quality and quantity of public investment.
In developing countries, some recent reforms and policy changes have improved price incentives for agricultural producers.
According to the WDR, between 1980-84 and 2000-04, net agricultural taxation declined on average from 28% to 10% in agriculture-based countries.
This happened around the time when the PNG Government announced some incentives for agriculture in the form of tax deductions for research, tax credits and cuts to corporate tax, lower income tax, duty free machinery, reductions on excise on diesel, the removal of foreign exchange controls and the removal of tax assessments on dividend payments for shareholders.
The concept was hailed as a “Green Revolution” for PNG.
In line with these were public investment initiatives like the coffee safety scheme and commodity road improvement programme – which have faded since then.
Second is to make product and input markets work better, especially for food staple markets, traditional bulk exports, high value markets and input markets.
Such options differ but a key issue for development lies with enhancing the participation of smallholders and ensuring the poverty-reducing impacts of agricultural growth – given there are structural changes in agricultural markets and the entry of powerful new actors, such as multinational and supermarkets.
The other issue is to improve access to financial services and reduce exposure to uninsured risks.
The WDR says financial constraints in agriculture remain pervasive, and they are costly and inequitably distributed, severely limiting smallholders’ ability to complete.
Much of this is to do with the lack of asset ownership to serve as security.
This is very true in PNG. But recently the microfinance scheme has opened increased access to loans for many smallholders.
PNG’s credit facilities have considered agriculture as a sector worth lending grants, although high turnover commodities such as coffee and oil palm get the biggest share.
In some developing countries, the range of financial products available to the rural poor has broadened to include savings, money transfers, insurance services, and leasing options.
Exposure to uninsured risks – the result of natural disasters, price volatility, policy changes – has high efficiency and welfare costs for rural households but the report suggests they can be managed by forgoing activities with higher expected incomes.
Promoting innovation through science and technology is another very crucial instrument.
The role of science and technology is critical for innovative and sustainable agricultural development.
Improved agricultural technologies and new innovations and knowledge generated through scientific research can foster development when they are used in innovative ways by the farming and rural communities.
However, developing countries invest only a ninth of what industrial countries put into agricultural research for development (AR4D) as a share of agricultural GDP.
The report, therefore, calls for investment in AR4D to be at the top of the policy agenda as many international and national investments have paid off handsomely.