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Home arrow Marketing arrow Food Security and Sustainability: Investment and Financing along Agro-Food Chains

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Issues Addressed and Case Studies

Globalisation that has led to a rapid decline in the cost of transporting bulky and perishable agricultural products over long distances driven primarily by changes in transportation, information and communication technologies, as well as the reductions in government distortions to agricultural production, consumption and trade have boosted crossborder agricultural trade, increased growth and reduced extreme poverty globally and, in the process, have altered global agricultural production and trade patterns (Anderson 2010). Hence, agricultural trade may open new opportunities for developing countries to pursue their comparative advantage in addressing food security issues (FAO 2015a). Obviously, trade is neither a threat nor a universal remedy when it comes to food security, but it poses challenges and risks that need to be considered in choosing measures of public policy. Trade is only one policy dimension within the broader context of private sector mobilisation along the agrofood value chain. If trade is chosen as a strategy to address food security, it should aim to make agriculture a part of the solution by focusing on small producers and their links to the international networks of markets and knowledge within a broad-based agricultural development strategy.

Focusing simply on agri-food trade and comparative advantage is not enough. Trade is important, but agriculture’s economic and social role in addressing food insecurity is wider. Youth unemployment is becoming a social and political concern in developing countries and agricultural policies should focus on building skills, efficiency and sector linkages along the agro-food value chain. Increasing yields in agriculture in general becomes of paramount importance for increasing agricultural production for exports but also for improving food availability at the household level and this would require strong institutional effort. Water use efficiency would also need changes in production technology, putting an additional burden on building skills. Finally, grains will probably remain the main staple in developing countries for some time and increasing efficiency in their supply chain, either home-grown or imported, is quite important. Further, food subsidies, despite well-known disadvantages, cannot be phased out without putting in place an efficient social safety net and an efficient fiscal management system. Thus, agricultural trade is important in addressing food insecurity, but making this policy option feasible requires mobilisation of the small-holding sector and strengthening of its links to international markets and networks through an efficient agrofood value chain.

Furthermore, it is important to understand the multifaceted nature of food security as related to the grid of complicated GVCs and, thus, to the complex global production networks (Dicken 2011) which are led by Multinational Enterprises (MNEs) creating a close link between food security, agricultural trade and FDI (WIR 2013; Dunning 1993). According to WIR (2013), “GVCs involve cross-border trade of inputs and outputs taking place within the networks of affiliates, contractual partners and arm’s-length suppliers of MNEs” (WIR 2013, p. x). As Gerefi et al. (2005) and Gereffi and Christian (2009) point out, GVCs in the agro-food sector evolve around two dimensions: the first is the global dimension represented by MNEs participating in agro-business, manufacturing, franchising and retailing, while the second dimension is the local dimension and is represented by local farmers, producers, local franchises and retailers. The interaction of “global and local food value chains” determines two major challenges for the global community. The first challenge relates to the restoration of competition and empowerment of the stakeholders in the local food value chain, whilst the second challenge refers to the safeguarding of quality standards in the GVCs by the lead firms (Rama and Wilkinson 2008). Responsible investment in the entity of the agro-food chain is then a core prerequisite not only for food and beverage MNEs but for all stakeholders involved in a spirit of partnership for both global and local communities in order to secure viable and responsive GVCs to regional and local needs and diversities (World Bank / UNCTAD 2014).

In addition, investment needs and financing instruments along the agro-food value chain for food security and sustainability is an important concern. Agriculture is at the core of the food security problem, but part of the solution as well. Small stakeholders, in particular, occupy an increasingly important segment of the GVC and MNEs will increasingly rely on small stakeholders to secure their supplies of agricultural commodities and satisfy consumer sustainability preferences.

Finally, it is important to look at these issues also in the context of case studies. The case studies include two countries from the South Mediterranean region, Tunisia and Egypt, one low-income country in transition to market, Mongolia, and a paper focusing on the entire Middle East and North Africa region (Breisinger et al. 2011). All these countries face an increasing challenge of food insecurity. They experience limited and fragile natural resources, in particular land and water, and acute vulnerability to climate change. They also suffer from underinvestment in agriculture and insufficient private sector participation. Importing a large part of their food makes these countries extremely vulnerable to price volatility in international food commodity markets. Further, several of them are increasingly dependent on imports for key staples such as grains that supply the major part of the calorie content of domestic food consumption.

 
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