Levels & trends in agricultural spending & investment · Agricultural expenditure per worker, average 1990-2007 (USD PPP log) Growth in ACS per worker, 1990-2007 (%) Figure : Agricultural

Agricultural Development Economics Division

Rome, December 2011

Preliminary estimates of

Levels & trends in agricultural spending & investment

background work for The State of Food & Agriculture 2012

Sarah K. Lowder

Economist Agricultural Development Economics Division,

ESA


Rome, December 2011

Key messages of the report regarding levels and trends in Agricultural Capital stock (FAOSTAT) Government expenditures on Agricultural R & D (IFPRI ASTI) Government expenditures on Agriculture (IFPRI SPEED) Official development assistance to Agriculture(OECD CRS) Foreign direct investment in Agriculture(UNCTAD) Relative size of various types of investment Your advice

Contents of presentation


Rome, December 2011

Capital Stock (FAO) inventories-based estimates

On-farm agricultural capital stock has increased over time...

Figure 1: Agricultural capital stock, constant 2005 dollars 1975 - 2007

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1975 1979 1983 1987 1991 1995 1999 2003 2007

Trill

ion

US

D

Low and middle-income countries

High income countries

Source: Authors’ calculations using FAO, 2011.


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But growth has slowed since the 1980s both globally and in the low- and middle-income countries. In high income countries the rate of change has become negative (probably due to underreporting and other data issues).

Figure 2: Rates of growth in agricultural capital stock, 1980s - 2007




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Capital Stock (FAO) inventories-based estimates Figure 3: Rates of growth in agricultural capital stock, 1980s - 2007

The trend has varied among the low and middle income country regional groupings



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ACS per ag worker has decreased in the low- and middle-income regions since 1980 This is due to decreases in Sub-Saharan Africa and parts of South Asia, regions which already suffer from low capital-labour ratios.

Region Average ACS per person

employed in agriculture, 1980-2007 (USD 2005 constant)

Compounded annual rate of growth (based on USD 2005 constant),

1980-2007

Agricultural capital stock

Population active in agriculture

ACS per person active in agriculture

World 4,200 0.6 1.1 -0.5 High-income countries 63,800 0.1 -2.8 2.9 Low & middle-income countries 2,700 0.9 1.2 -0.3 East Asia and the Pacific 1,100 1.7 1.1 0.6 Of which: China 700 1.5 1.1 0.4 EAP excluding China 2,700 1.9 1.4 0.5 Europe and Central Asia* 18,300 -1.9 -2.2 0.3 Latin America & Caribbean 15,100 0.8 0.0 0.7 Middle East and North Africa 9,400 1.9 0.9 0.9 South Asia 1,700 1.5 1.5 0.1 Of which: India 900 1.2 1.4 -0.3 South Asia excluding India 4,500 1.8 1.6 0.2 Sub-Saharan Africa 2,400 1.5 2.2 -0.6

Table 1: Level and growth of agricultural capital stock 1980-2007 *ECA annual rate of growth for 1992-2007



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Capital Stock (FAO) inventories-based estimates Figure 4: Levels of Agricultural Capital Stock per agricultural

worker, 1980 - 2007

ACS per worker was lowest in EAP, followed by South Asia and Sub-Saharan Africa; it has not increased in those regions. It is by far the largest in ECA and LAC, with MENA also showing large per capita levels of ACS; it is in these regions that it has increased.

Source: Author’s calculations using FAO, 2011.


Rome, December 2011

Low and middle income regions spend less than high income countries in absolute terms. The difference is even more pronounced when we consider per capita terms or as a share of agricultural GDP.

Government Expenditures on Agricultural R & D

Table 2. Intensity ratios of public agricultural R&D spending, 1981, 1991 & 2000 1981 1991 2000 As share of agricultural GDP Low and middle income countries 0.54 0.54 0.55 High income (32) 1.53 2.11 2.37 Total (140) 0.91 0.98 0.97 Per ag worker Subtotal (108) 6 7 8 High income (32) 359 598 828 Total (140) 16 18 18 Note: Table excludes 31 Eastern European and former Soviet Union states, because of data unavailability.

Sources: Beintema and Stads (2010), China from Chen, Zang and Flaherty (2011); Sub-Saharan Africa from Beintema and Stads 2011. AgGDP from World Bank (various years)


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2,500

3,000

3,500

4,000

4,500

1981 1986 1991 1996 2001 2006

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ion

2005

PPP

dol

lars

Sub-Saharan Africa East Asia & Pacific, minus China

China South Asia, minus India

Latin America & Caribbean India

Government Expenditures on Agricultural R & D Figure 5: Levels of government spending on agricultural R & D, 1980 - 2007 In all low and middle

income country regions government spending on Ag R & D increased (increase was slight in S Asia, excluding India)

Sources: Beintema and Stads (2010), China from Chen, Zang and Flaherty (2011); Sub-Saharan Africa from Beintema and Stads 2011. AgGDP from World Bank (various years)


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Government Expenditures on Agriculture

Source: Authors’ calculations using IFPRI, 2010. Statistics of Public Expenditure for Economic Development (SPEED)

For 67 countries, agricultural spending has increased in total levels and per worker, but the share has declined.

Figure 6: Levels of government spending on agriculture, 1980 - 2007


Rome, December 2011

Agricultural spending per person active in agriculture has increased in all low and middle income regions except SSA.

Government Expenditures on Agriculture (cont’d)

Table 3: Levels and per capita measure of agricultural expenditure (low and middle income countries) Region Total agriculture expenditure Expenditure on agriculture per worker (USD

2005 PPP) (2005 USD PPP, billion) 1980 1990 2000 2007 1980 1990 2000 2007

East Asia and Pacific (8) 24 31 53 102 54 55 88 170 Europe and Central Asia (9)* 7 12 15 - 287* 553 767 Latin America & the Caribbean (11) 10 6 11 11 336 225 394 390 Middle East and North Africa (7) 8 8 11 13 489 427 570 612 South Asia (7) 7 16 17 29 31 59 58 87 Sub-saharan Africa (12) 3 3 3 4 81 54 37 49 54 country total 51 70 107 173 68 75 103 160



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Source: Authors’ calculations using FAO, 2011 and IFPRI, 2010. Statistics of Public Expenditure for Economic Development (SPEED)

Figure 7: Growth in ACS per worker and agricultural expenditure per agricultural worker, 1990-2007


ARG

AZE

BGD

BLR

BOL

BRA

BTN

BWA

CHN

CRI

DOM

EGY

ETH

FJI

GHA

GTM

IDN

INDIRN

JOR

KAZ

KEN

KGZ

LKA

LSO

LTU

MAR

MDA

MDV

MEXMMR

MUS

MWI

NGA

NPL PAK

PANPHLPNG

ROU

RUS

SLV

SWZ

SYR

THATUN

TUR

UGA

URY

VCTVUT

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2 4 6 8Agricultural expenditure per worker, average 1990-2007 (USD PPP log)

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Figure : Agricultural expenditure and growth in ACS per worker, 1990-2007

Countries with higher levels of agricultural expenditures per worker have seen more significant increases in ACS per worker.


Rome, December 2011

Government Expenditures on Agriculture


The agricultural share of public expenditure has decreased; this decrease often coincides with the decline of the sector in the economy.

Table 4: Agricultural shares of and AOI of government expenditures (low and middle income countries) Regions Share in Government

expenditure Agricultural orientation index of public expenditure

1980 1990 2000 2007 1980 1990 2000 2007

East Asia and Pacific (8) 11% 9% 7% 7% 0.4 0.4 0.5 0.6

Europe and Central Asia (9)* 0% 1% 3% 2% - 0.2 0.4 0.3 Latin America & the Caribbean (11) 7% 4% 4% 2% 1.5 0.7 0.8 0.4 Middle East and North Africa (7) 5% 5% 4% 3% 0.3 0.4 0.4 0.3

South Asia (7) 7% 7% 5% 5% 0.2 0.3 0.2 0.3

Sub-saharan Africa (12) 6% 6% 4% 4% 0.3 0.3 0.2 0.2

54 country average 7% 5% 5% 4% 0.5 0.4 0.4 0.5



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Official Development Assistance to Agriculture

Source: Authors’ calculations using OECD, 2010. CRS.

Levels of ODA commitments to agriculture were largest during the 1980s. They decreased in the 1990s, increased sharply in recent years (through 2009), but remain lower than in 1980s. ODA per ag worker, the ag share of ODA and AOI for ODA all show similar trends at the global level.

Figure 8: Levels of ODA to agriculture, by region, 1980 - 2007


Rome, December 2011

Foreign Direct Investment (UNCTAD) Foreign direct

investments in agriculture have increased rapidly in the most recent years, but remain of marginal importance as a contributor to total agricultural investments. Furthermore, our analysis suggests that the increase may be less than previously reported.

Figure 9: FDI inflows to the food, beverage and tobacco sector as well as to Agriculture, forestry, fishing and hunting, 1980 to 2008 (billion USD current prices)

Source: Authors’ calculations using UNCTAD, 2011.


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Most investment in agriculture is financed from private, domestic resources. ODA and probably FDI are the smallest sources of investment, with government investment being much larger and private investment being by far the largest.

Relative size of investments Figure 10: Relative size of private, governmental, ODA and foreign direct investments in agriculture in 54 low and middle income countries (billions constant 2005 dollars), 2005 - 2007

Source: Authors’ calculations using FAO, 2011; IFPRI, 2010;OECD, 2010 and UNCTAD, 2010.

0

40

80

120

160

Private Gov't ODA FDI ?*

2005

2006

2007

Note: * For this country grouping we can not estimate FDI, but judging from available data for other countries it would likely be very small.


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EAP (9) ECA (9) HI (12) LAC (11) MENA (7)

S. Asia (7)

SSA (11)

2005 2006 2007

Bill

ions

of d

olla

rs

This result does, however, vary somewhat among country groupings. See in particular EAP, HI and SSA.

Relative size of investments Figure 11: Relative size of private, governmental and foreign donor investments in agriculture (billions constant 2005 dollars), by country grouping, 2005 - 2007

Source: Authors’ calculations using FAO, 2011; IFPRI, 2010 and OECD, 2010.


Rome, December 2011

Your advice… Do the following messages make sense? Are they helpful for FAO work?

In low and middle income countries as a whole domestic private investment is larger than government investment in agriculture, ODA invested is very small in comparison and FDI is likely to be the smallest source of investment

There is inter-regional variation: Government investment is far smaller than private investment in the 11 SSA countries; ODA is nearly at the level of government investment However this is not the case for EAP where government investment is almost as large as private investment In the HI countries (12) we see that government investment is larger than private investment


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Thank you!


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Supplementary slides


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Table 1: Comparison among key international datasets on foreign, domestic, private and public spending on agriculture Domestic Foreign

Public Private Government Expenditures Official Development

Assistance (ODA) Foreign Direct Investment

IFPRI SPEED OECD CRS UNCTAD Financial Times FDI Markets Average annual amount low & middle income 160 billion (2005 - 2007) 7 billion (2007 - 2009) 3 billion (2006 - 2008) 7 billion (2008 - 2010) high income countries na na 1.5 billion (2006 - 2008) 10 billion (2008 - 2010) Global trend levels Increased from 1980 to 2007. At peak in 1980s; decreased

during 90s & increased in recent years. Remains lower than in the 80s.

Increased from 1990 to 2007; largely as result of increase in number of countries reporting.

Increase from 2003 - 2011.

shares Decreased from 1980 to 2007.

Same as above. Increased from 1990 - 2008. Increased from 2003 - Q1 & Q2

2011. per economically active in agriculture

Increased from 1980 to 2007.

agricultural orientation index Neither increased not decreased

Decreased since 1980s

Definition of sector Agriculture, forestry & fisheries Agriculture, forestry & fisheries Agriculture, Forestry, Fisheries & Hunting

Primary agriculture as well as food processing and business services.

Time span 1980 - 2007 1973 - 2009 1990 - 2008 2003 - 2010 Country coverage low & middle income 54 153 50 in most recent years 35 - 55 destination countries high income countries na na 36 in most recent years 25 - 35 destination countries Monetary units Constant 2005 dollars, PPP Constant 2005 dollars Current US Dollars Current US Dollars


Rome, December 2011

Definition of agricultural capital stock (ACS)

Land Development Livestock (Fixed assets & inventory)

Machinery & equipment

Structures for livestock

Arable land Cattle and buffalo Tractors Animals Permanent crop land Sheep Harvesters Poultry Irrigated land Goats Milking machines Plantation crops Pigs Hand tools Horse Camels Mules Poultry

ACS data include crops & animal husbandry. They exclude forestry & fisheries. Four types of capital are included:


Rome, December 2011

Functional classification of government expenditures on agriculture

• Administration of agricultural affairs

• Conservation, reclamation or expansion of arable land

• Agrarian reform and land settlement

• Supervision and regulation of the agricultural industry

• Construction or operation of flood control, irrigation and drainage systems

• Efforts to stabilize or improve farm prices and incomes

• Extension services or veterinary, pest control, crop inspection and crop grading services

• Production and dissemination of general information, technical documentation and statistics on agricultural affairs and services

• Compensation, grants, loans or subsidies to farmers in connection with agricultural activities, including allowing land to remain uncultivated

Source: (IMF, 2002; IFPRI, 2010)


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Economic classification of public expenditures

Expenses Categories of non-financial assets (“capital”)

1. Compensation of employees

2. Subsidies

3. Social benefits

4. Use of goods and services

5. Interest

6. Grants

7. Consumption of fixed capital

8. Other

Fixed assets a) Buildings and structures b) Machinery and equipment c) Other fixed assets Inventories a) Strategic stocks b) Other inventories Non-produced assets a) Land b) Subsoil assets c) Other naturally occurring assets d) Intangible nonproduced assets Valuables


Rome, December 2011

Capital share of government expenditures on agriculture Country

(Source study) Capital share of agricultural expenditures

Year

Ghana 53% 2007 Kenya 28% 2008 - 2009 Mozambique 84% 2007 Nigeria 36% 2005 Tanzania 9% 2010 - 2011 Uganda 22% 2008 - 2009 Zambia 24% 2000 Laos 84% 2004 - 2005 Philippines 26% 2005 Vietnam 75% early 2000s Honduras 66% 2006 Simple average 46%

Sources: Public expenditure reviews mainly authored by or for the World Bank.


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ODA to agriculture by project category Agricultural crops & livestock Forestry Fisheries

policy & administrative management policy & administrative management policy & administrative management agricultural development forestry development fisheries development land resources fuelwood/charcoal water resources inputs food crop production industrial crops/export crops livestock agrarian reform agricultural alternative development extension education/training education/training education/training research research research agricultural services services services plant & post-harvest protection & pest control financial services cooperatives livestock/veterinary services

Source: OECD, 2010


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Flow : Official Development Assistance Sector: 310: III.1. Agriculture, Forestry, Fishing

Amount: Commitments (current USD millions) 2006 2007 2008 2009

Purpose code ALL 4852.7 6845.7 7828.7 9538.8 31110: Agricultural policy and administrative management 894.5 1067.7 1413.7 2799.6 31120: Agricultural development 451.6 847.2 745.9 1638.3 31130: Agricultural land resources 109.0 102.0 141.1 142.9 31140: Agricultural water resources 781.8 1195.5 1104.8 1047.3 31150: Agricultural inputs 75.2 125.5 113.9 109.4 31161: Food crop production 154.8 205.3 888.9 640.7 31162: Industrial crops/export crops 121.8 261.7 221.2 117.3 31163: Livestock 192.0 166.7 98.0 139.1 31164: Agrarian reform 33.1 147.3 25.6 28.0 31165: Agricultural alternative development 187.4 385.6 389.4 302.2 31166: Agricultural extension 536.3 252.5 202.7 216.4 31181: Agricultural education/training 58.9 124.6 85.1 74.2 31182: Agricultural research 253.2 701.8 764.6 366.8 31191: Agricultural services 87.8 107.2 294.4 276.5 31192: Plant and post-harvest protection and pest control 12.7 37.2 32.4 23.2 31193: Agricultural financial services 85.0 74.5 25.8 251.6 31194: Agricultural co-operatives 32.3 57.1 62.7 72.0 31195: Livestock/veterinary services 74.2 50.1 54.7 137.7 31210: Forestry policy and administrative management 180.5 179.4 359.8 423.2 31220: Forestry development 286.1 429.8 312.2 186.7 31261: Fuelwood/charcoal 0.0 0.1 0.5 0.5 31281: Forestry education/training 5.8 4.3 19.6 3.7 31282: Forestry research 12.2 29.5 14.5 7.1 31291: Forestry services 7.5 1.1 1.5 7.0 31310: Fishing policy and administrative management 85.6 126.9 158.5 112.6 31320: Fishery development 94.1 80.3 183.8 255.6 31381: Fishery education/training 15.2 5.7 12.9 5.4 31382: Fishery research 4.1 19.1 12.3 10.3 31391: Fishery services 20.0 60.2 88.4 143.3

ODA to agriculture by project category


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FDI to agriculture and food and beverages (correspond to ISIC Revision 3)

Agriculture, forestry, fishing and hunting Agriculture, hunting and related service activities Growing of crops, market gardening and horticulture Farming of animals Mixed farming (growing crops combined with farming livestock) Agricultural and animal husbandry service activities, except veterinary activities Hunting, trapping and game propagation including related service activities Forestry, logging and related service activities Fishing, operation of fish hatcheries and fish farms; service activities Food and beverages, including tobacco Production, processing and preservation of meat, fish, fruit, vegetables, oils and fats Manufacture of dairy products grain mill products, starches and starch products, and prepared animal feeds other food products beverages tobacco products

Source: UNCTAD World Investment Report. 2009.


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ISIC Rev. 3


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Official Development Assistance to Agriculture (OECD)

Figure ODA Commitments to agriculture per person active in agriculture by region, 1981-2009

* ECA 1994-2009 Source: Authors’ calculations based on OECD, 2011. CRS database.

Shares and AOI show similar trends, except the increasing trend shown by 54 countries in recent years holds for SSA and MENA, but not the other regions

Figure : Agricultural Share of ODA by region, 1973-2009

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1973 1977 1981 1985 1989 1993 1997 2001 2005 2009

Asia

ECA

LAC

MENA

SSA

World

Rat

io

Figure : AOI by region, 1973-2009


Rome, December 2011

Official Development Assistance to Agriculture (OECD)

Replace with global infoPer capita trend is the same as that of levels, in all regions except E Asia

Figure ODA Commitments to agriculture per person active in agriculture by region, 1981-2009

* ECA 1994-2009 Source: Authors’ calculations based on OECD, 2011. CRS database.

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Levels & trends in agricultural spending & investment · Agricultural expenditure per worker, average 1990-2007 (USD PPP log) Growth in ACS per worker, 1990-2007 (%) Figure : Agricultural