MakingItIndustry for Development

2nd quarter 2011

fromfarmAgribusiness:

tofork

n Alternatives to coca

n Nestlé: creatingshared value

n Energy efficiency n Vandana Shiva n Ethiopia

A quarterly magazine. Stimulating, critical andconstructive. A forum for discussion and exchangeabout the intersection of industry and development.

Number 1, December 2009lRwanda means business: interview with President Paul KagamelHow I became an environmentalist: A small-town story with global implications by Phaedra Ellis-Lamkins, Green For All lWe must let nature inspireus – Gunter Pauli presents an alternative business model that is environmentally-friendly and sustainable lOld computers – new business. Microsoft on sustainable solutions for tackling e-waster lGreen industry inAsia: Conference participants interviewed lHot Topic: Is it possible to have prosperity without growth? Is ‘greengrowth’ really possible? lPolicy Brief: Greening industrial policy; Disclosing carbon emissions

Number 2, April 2010lAfter Copenhagen – Bianca Jagger calls for immediate steps to avoid climate catastrophe lThe InternationalEnergy Agency’s Nobuo Tanaka looks at energy transitions for industry lEnergy for all – Kandeh Yumkella and LeenaSrivastava on what needs to be done to improve energy access lWomen entrepreneurs transforming Bangladesh lEverywhere under the sun – Suntech CEO, Zhengrong Shi, on the power of solar lHot Topic: The pros and consof biofuels lPolicy Brief: Financing renewable energy; Feed-in tariffs

Number 3, July 2010lChina’s stunning economic rise: interview with minister of commerce, Chen Deming l Jayati Ghosh onpoliticizing economic policy lTowards a more productive debate – Ha-Joon Chang calls for an acceptance thatindustrial policy can work lThe World Bank’s Robert Zoellick on modernizing multilateralism lGreening theMexican economy – Juan Rafael Elvira Quesada lHot Topic: Does microfinance work? lPolicy Brief: The privatesector and development; The power of patient capital

Number 4, November 2010lStrengthening productive capacity – Cheick Sidi Diarra argues that the LDCs should – and can – produce more,and better quality, goods lMilford Bateman on community bank alternatives to microfinance lKiribati, smallcountry, big sacrifice: interview with President Anote Tong lThe challenge on our doorstep – The World BusinessCouncil for Sustainable Development lPatricia Francis on climate change and trade lHot topic: The relevanceof entrepreneurship for economic development lPolicy Brief: Renewables investment in India; Promotingindustry’s innovation capacities

Number 5, February 2011lA window of opportunity for world trade? – Peter Sutherland assesses the prospects for the conclusion of amultilateral trade agreement lA path to mutual prosperity –Xiao Ye on trade between sub-Saharan Africa andChina lClimate compatible development – Simon Maxwell on how to avoid the downsides of climate change lTimor-Leste, from aid dependence to resource revenue – interview with President José Ramos-Horta lColin McCarthy questions the approach to regional integration in Africa lHot Topic: Representatives of theshipping and aviation industries on stemming rising CO2 levels lPolicy Brief: Private standards; A new approachto export-led growth, EU industrial policy

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This issue of Making It: Industry for Development looks at someaspects of the broad concept of agribusiness, often defined as thewhole range of business activities that are performed from farm tofork, but also including the processing of raw materials for theproduction of many non-food items, such as textiles, paper andbiofuel. Agribusiness covers the supply of agricultural inputs, theproduction and processing of agricultural products, and theirdistribution to the consumer. It is big business, like agribusinessgiants, Cargill, Archer Daniels Midland (ADM), and Bunge, but it isalso small business, like the Indian worker drying rice with the aidof his moped in the picture below.

As Kanayo Nwanze points out, agribusiness is the key toresolving two of the great challenges of our time: reducing thepoverty of the world’s small farmers and feeding the world’sgrowing population. Agribusiness is the crucial space between theworld’s 500 million small farms, and the world’s seven billionhungry people. Patrick Kormawa expounds on exactly this in thecontext of sub-Saharan Africa, outlining a new strategic frameworkfor agribusiness development that can stimulate growth and reducepoverty across the continent.

But can agribusiness, as it has developed in recent decades,continue in a world increasingly concerned about carbonemissions, water scarcity and the threat to biodiversity? Elsewherein this issue, Egypt’s Helmy Abouleish and India’s Vandana Shivastress the merits of organic agricultural inputs; Paul Bulcke, CEO ofthe world's largest food and drink company, explains how Nestlé istaking action all along the length of its supply chain; GuillermoGarcia reveals how value-added agro-products can be a viablealternative to coca in Colombia; and Johanna Sorrell wonders ifsurging palm oil production can be sustainable.

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Editor: Charles Arthureditor@makingitmagazine.netEditorial committee: Ralf Bredel,Tillmann Günther, Sarwar Hobohm,Kazuki Kitaoka, Wilfried Lütkenhorst(chair), Cormac O’Reilly and Jo Roetzer-SweetlandWebsite and outreach: Lauren Brassawoutreach@makingitmagazine.netCover illustration: Dave GranlundDesign: Smith+Bell, UK –www.smithplusbell.comThanks for assistance to Donna ColemanPrinted byGutenberg PressLtd, Malta –www.gutenberg.com.mton FSC certified paper To view this publication online and toparticipate in discussions aboutindustry for development, please visitwww.makingitmagazine.netTo subscribe and receive future issuesof Making It, please send an emailwith your name and address tosubscriptions@makingitmagazine.netMaking It: Industry for Developmentis published by the United NationsIndustrial Development Organization(UNIDO),Vienna International Centre, P.O. Box 300, 1400 Vienna, AustriaTelephone: (+43-1) 26026-0, Fax: (+43-1) 26926-69E-mail: unido@unido.orgCopyright © 2011 The UnitedNations Industrial DevelopmentOrganization No part of this publication can beused or reproduced without priorpermission from the editorISSN 2076-8508

Contents

GLOBAL FORUM6 Letters8 An Arab Spring for women? Lina Abou-Habib asks if revolutions in the MENAregion can be a vehicle for the economicempowerment of women or whetherpatriarchy will prevail 10 Hot Topic: Does energy efficiency lead toincreased energy consumption? Jesse Jenkins and Harry Saunders outline the importance of the rebound effect, while Marianne Moscoso-Osterkorn argues that measures to improve energy efficiency are always justified

16 Business matters – news and trends

FEATURES18 Agribusiness: Africa’s way out of poverty– Patrick Kormawa argues that a shift to anagribusiness development growthtrajectory is crucial for poverty reduction

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The designations employed and thepresentation of the material in this magazinedo not imply the expression of any opinionwhatsoever on the part of the Secretariat of theUnited Nations Industrial DevelopmentOrganization (UNIDO) concerning the legalstatus of any country, territory, city or area or ofits authorities, or concerning the delimitationof its frontiers or boundaries, or its economicsystem or degree of development. Designationssuch as “developed”, “industrialized” and“developing” are intended for statisticalconvenience and do not necessarily express ajudgment about the stage reached by aparticular country or area in the developmentprocess. Mention of firm names or commercialproducts does not constitute an endorsementby UNIDO.The opinions, statistical data and estimatescontained in signed articles are theresponsibility of the author(s), including thosewho are UNIDO members of staff, and shouldnot be considered as reflecting the views orbearing the endorsement of UNIDO.This document has been produced withoutformal United Nations editing.

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Number 6, 2nd quarter 2011

22 Switching from coca – Guillermo Garcíaexplains how agribusiness can help Colombia’speasant farmers pursue legal and more secureopportunities

KEYNOTE FEATURE24 Feeding a crowded world –Kanayo Nwanze argues that smallholderfarmers must have opportunities to beentrepreneurs, rather than bystanders, in thenew and potentially profitable marketplacesthat are evolving

30 ‘Creating Shared Value’ for society andshareholders – Nestlé CEO Paul Bulckerecognizes that the company’s success dependson creating value for everyone it touches32 Farming for the future – Helmy Abouleish,managing director of Egypt’s SEKEM Group,sees biodynamic agriculture as the only way toachieve long-term competitiveness

34 Country feature: Ethiopia –Defining its own path Peter Gill senses real grounds foroptimism, and Prime MinisterMeles Zenawi provides detailsabout his vision for sustainabledevelopment38 Can palm oil be sustainable? –Johanna Sorrell looks at options forthe palm oil industry40 Staying Alive – interview with eco-activist, Vandana Shiva

POLICY BRIEF42 Food crises: Architects needed43 Packaging: key to more food andeconomic development44 Biofuels: ethics and policy

46 Endpiece –Andy Sumner on the‘new bottom billion’

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LETTERS

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Whoseprosperity?In issue 5, Lucy Muchoki saysthat agribusiness in Africa isthreatened by “competitionfrom foreign markets whichare usually highly protectedand subsidized”. She also saysAfrican agribusiness has to“compete in low price,commodity markets withproducers from othercountries that haveincreasingly got a significantlow cost advantage over ourproducers”.

This situation is the directresult of the internationaltrade framework that PeterSutherland is so desperate topreserve. For Sutherland,“prosperity arises from ourmutual economicdependence”. Whoseprosperity?l Janice Jones, Banjul, TheGambia

Timor-Leste The interview with PresidentRamos-Horta is really good. Itwas unusual and refreshing toread such plain speaking froma political leader. I wish himand Timor-Leste all the best,and hope that the country cancontinue to act as a goodexample of how to use oil andgas revenues for the benefit ofall the people. l Jane Godwin, received byemail

No sweatI liked the short piece,Garment assembly? No sweat!(Making It, issue 5) about theAlta Gracia factory in theDominican Republic whereworkers are allowed tounionize and get paid a livingwage. I was particularly struckby the last bit of the articlewhich reports that otherbusinesses in the village aredoing well because the AltaGracia factory workers areearning enough money to havesome left over after paying forbasic necessities. They spend –other businesses profit.

That the payment of decentwages would have a beneficialknock-on effect on the wider

economy would seem obvious,but the idea has apparentlynever registered with the‘experts’ at the World Bank andIMF who continue to presscountries like Haiti to keepwages as low as possible inorder to attract foreignexploitation... sorry, I meanforeign investment. l Jean-Baptiste Jean, Montreal,Canada

The right balanceI continue to enjoy reading thearticles in Making It magazine,as well as those which seem toappear exclusively on thewebsite. I appreciate the balanceof research and reportspresented in these articles, and

the high-level authors you’veselected, which makes theinformation accessible tosomebody like me. I think whatyou are doing by publishingsuch a range of views on onetopic, really lets the readerdecide. I look forward to thisnext issue on agribusiness, andespecially to read about how theindustry affects people andtheir livelihoods. l Emile Potolsky, received byemail

Cheaper, faster,safer I am shocked to read about theBritish ‘greens’ who, despite thedisaster in Japan, still say thatnuclear power is the onlyalternative to fossil fuels(Making It magazine website).They should heed the words ofAmory Lovins, the veteranenvironmentalist and energyanalyst, who wrote, “Nuclearplants are so slow and costly tobuild that they reduce andretard climate protection.Here's how. Each dollar spenton a new reactor buys about 2-10 times less carbon savings,20-40 times slower, thanspending that dollar on thecheaper, faster, safer solutionsthat make nuclear powerunnecessary and uneconomic:efficient use of electricity,making heat and powertogether in factories orbuildings (cogeneration), andrenewable energy.” lŞemseddin Sami, websitecomment

The Global Forum section of Making It is a space for interaction anddiscussion, and we welcome reactions and responses from readers aboutany of the issues raised in the magazine. Letters for publication inMaking It should be marked ‘For publication’, and sent either by email to:editor@makingitmagazine.net or by post to: The Editor, Making It, Room D2138, UNIDO, PO Box 300, 1400 Wien, Austria. (Letters/emailsmay be edited for reasons of space).

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Timor-Leste’sPresident Ramos-Horta: “refreshingto read such plainspeaking from apolitical leader”.

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An ill windI recently came across issue 2of your magazine (“Wind ofchange”) and found it to be anexcellent addition to thediscussion about how, as youput it, “to facilitate productiveactivities by powering tools,machinery and manufacturingprocesses in ways that willcause less – ideally no –damage to our environment”.

The terrible earthquake andtsunami that shook Japan inMarch was an awesometestimony to the overwhelmingforce of nature. The causes ofearthquakes have nothing to dowith human intervention – butwe know that global warmingincreases the frequency ofextreme weather and thereforethe likelihood that we willsuffer more catastrophes likewe have had recently in Haiti,Chile, New Zealand, and nowJapan.

It seems to me that thenuclear meltdowns that thetsunami caused at Fukushimapower station in Japan showthat we have to rethink ourever-increasing reliance onnuclear power in order toreduce CO2 emissions. Theseare potential “winds ofchange” that make me shiver.So, it was welcome news tohear the Japanese President,Naoto Kan, announce hiscountry is to abandon plans toexpand the nuclear powerindustry. He said, “...it isnecessary to move in thedirection of promotingnatural energy and renewable

energy such as wind, solar andbiomass”.l Steven Sedgley, Nottingham,UK

Making doI am excited to announce therelease of my free book, MakingDo: Innovation in Kenya’s InformalEconomy, which attempts todeepen our understanding ofthe systems of innovationsurrounding small-scaleengineer-entrepreneurs inAfrica. Through thisunderstanding, we can bettercollaborate for industrializationin the global South and improve

our own work here in the North– a message I believe resonateswell with the Making It andUNIDO communities.

This is the first book writtenon indigenous innovation inAfrica in more than 15 years,and I hope to reach as wide anaudience as possible in orderto provoke discussion andmotivate action among thedesign, business, anddevelopment communities.Therefore, Making Do has beenmade available online for free:http://analoguedigital.com/makingdo l Steve Daniels, New York,USA

OnlineI have long enjoyed readingMaking It, getting informedabout the latest industrialdevelopment issues. I recentlynoticed that the magazine isalso available in digital formover its website. In view of theefforts to reduce paper usagefor a better environment, Iwould like to contribute byswitching to reading themagazine online rather than inprint. Therefore, I would liketo ask for my printed versionsubscription to be cancelled.lDr. Antonis Gitsas, Vienna,Austria

WaterWater is a very salient issue,and I am surprised not to haveseen it mentioned in any issuesof Making It. Where does thisfinite resource fit intosustainable industrialdevelopment? According to theWorld Health Organization,the problem is getting worse ascities and populations grow,and as the need for waterincreases in agriculture andindustry.

To continue to use thisresource and many othersunbridled, in the name ofeconomic growth, is to bite thehand that feeds us. I believethat Making It could define anapt debate surrounding boththe issue of resource usage andabuse, as well as aboutalternatives to a system whichpropels these actions. l Peter Lund, received by email

For further discussion of theissues raised in Making It, pleasevisit the magazine website atwww.makingitmagazine.net andthe social networking Facebooksite. Readers are encouraged tosurf on over to these sites to joinin the online discussion anddebate about industry fordevelopment.

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Over the past few months, watchingpopular revolutions unfold in the MiddleEast and North Africa (MENA) region hasbeen both an exhilarating and a surrealexperience. Indeed, as days and weekspassed, many of my guesses andpredictions proved to be wrong. In the caseof Tunisia, I was positively convinced thatthe uprising would not lead to any radicalchange and that, short of other viablealternatives, Ben Ali and his cronies wouldmaintain power. Wrong… Ditto for Egypt.Who would have thought that the all-powerful oligarch and his family wouldleave power? Indeed, the turn of events wasboth exhilarating and surreal.

However, what was even more startlingwas what a feminist friend from Egyptdescribed to me as “radical and profoundsocial changes”. She, along with manyothers, maintained that “women areomnipresent”, and “there are absolutely no

incidents of sexual harassment in TahrirSquare”. The international media capturedand hailed the visible participation ofwomen from all walks of life in theEgyptian revolution. For a moment inhistory it seems, society transcendedgender-based violence, prejudice, anddiscrimination against women. For amoment in history, many women in Egyptexperienced equality, collegial leadership,and all-out public and politicalparticipation. During that moment, theirvoices and action mattered.

Some women’s organizations sought tocapture that moment. In the not so longago past, women who had taken part inliberation movements against colonialforces were quickly forgotten, and sentback to their places, at home… Anotherfeminist colleague told me that they wereconstantly and consistently “takingpictures, collecting testimonials, and

documenting in great detail what womendid to make this revolution a reality…lestwe forget”. But forget, we did.

Political activity that followed thedethronement of the dictator appeared tobe almost entirely male-led. OnInternational Women’s Day, March 8,hundreds of women gathered in TahrirSquare to ask for a greater role in buildingtheir new country. They were attacked byangry men who shouted at them to go backhome. Notwithstanding who theperpetrators were, and why theycommitted such hateful acts, it was a sadreminder that gender equality andwomen’s rights remain at risk.Notwithstanding the various analyses ofhow and why this happened, many of ushave chosen to interpret it as a violentreminder that women should not and maynot occupy the public sphere.

If women’s mere presence in the publicsphere is not accepted or tolerated bysome, and not protected and upheld bymany others who have fought forrevolution, change and transformation,then what lies ahead for women in thepost-revolution era?

Women’s participation in the MENAregion has always been abysmally low,especially at the level of political life, aswell as in terms of their presence in theformal economic sector. Patriarchal social

An Arab Springfor women?

Lina Abou-Habib asks if revolutions in theMiddle East and North Africa can be a vehiclefor the economic empowerment of womenor whether patriarchy will prevail.

LINA ABOU-HABIB is the founder anddirector of the Collective for Researchand Training on Development-Action(CRTDA), based in Beirut and workingin the Arab region, and is a member ofthe editorial board of the journal,Gender and Development.

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institutions, and the values, practices, andeven the legal framework they reproduce,have been quite effective and powerful inensuring that women remain in a positionof dependence and subordination.Religious family courts, despite the variousreforms and pseudo-reforms they havegone through over the past decade or two,still fall short of acknowledging andcodifying the concept of equality. Thehousehold has invariably been kept as asacrosanct, untouchable institution which,in most cases, and in most places, meansany form of discrimination against womenand violation of women’s human rightsmay take place with almost total impunity.Market institutions in the MENA regionare far from being egalitarian or equallyaccessible to women and men. Unequalpay, discrimination at the workplace, glassceilings, sexual harassment, penalizationof women’s reproductive and care roles,and the age-old undermining of women’sleadership, have all contributed to theexclusion of women from the economy.

In Egypt, for instance, women are mostlyto be seen in the agricultural sector, which islargely unregulated and is where women’swork is often confused, unconsciously, aswell as consciously, with their non-negotiable and hardly recognizedhousehold work. In the more prosperousand better paid service, industry, andbusiness sectors, women’s participation isless than 13%, and these women are leastlikely to be found in the higher echelons ofmanagement. Women’s participation in theunregulated and often exploitative informalsector reaches up to 46% in Egypt, thusincreasing the invisibility of women.Though often enjoying a better reputationfor gender equality, Tunisia does not faremuch better: women make up 55% of thelabour force in agriculture, but less than22% in the service sector!

If exclusion and discrimination againstwomen in the MENA region, as in many

others, is a well-established andinstitutionalized phenomenon which ispracticed in the household, as well as inlarger social institutions, including stateinstitutions, then what change for womenare revolutions bringing?

Perhaps the most important questionthat comes to mind is whether the newwinds of change that continue to sweepthe MENA region carry a sincere agenda, adesire, and commitment to genderequality. In other words, are therevolutions questioning and challengingthe so-called sanctity of the private sphere?Do they recognize women as full citizens,no matter where they are located, whetherat the home, in the workforce, or in thepublic sphere? Will inequality continue tobe protected by impunity, or will it bechallenged, and if so, how? Will inclusivecitizenship be internalized, owned, andpracticed? Will diversity be respected andupheld? Will sexual rights and women’s

bodily agency become a reality?In short, how, and on which basis, will the

new emerging states rebuild socialinstitutions that are not patriarchal? Howwill these social institutions in the MENAregion be held accountable for ensuringgender equality, especially since the mereconcept of state accountability to womenand men citizens is in itself a novelty?

At this point in time, five months after thestart of the ‘Jasmine Revolution’ in Tunisia,and its knock-on effect throughout theregion, it is impossible to gaze through acrystal ball and predict whether this willbring more or less opportunities, jobs,freedom, and emancipation for women andgirls. However, one can safely say thatwithout asking these uncomfortablequestions, and without a sincere willingnessto challenge and change patriarchalinstitutions and holding them accountable,gender equality will remain a far- fetchedgoal for women in the MENA region. n

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JESSE JENKINS is Director of Energyand Climate Policy at the BreakthroughInstitute, and lead author, along withTed Nordhaus and MichaelShellenberger, of Energy Emergence:Rebound and Backfire as EmergentPhenomena. HARRY SAUNDERS isManaging Director of DecisionsProcesses Incorporated, a corporatemanagement and decisionsconsultancy, and a Senior Fellow at theBreakthrough Institute.

Energy efficiency is widely viewed asan inexpensive way to reduce energyconsumption and drive reductions inglobal emissions of greenhouse gases.

Efficiency policies feature prominentlyin the toolkits of many nationalgovernments, internationaldevelopment agencies, and NGOs, andboth the International Energy Agency(IEA) and the Intergovernmental Panelon Climate Change (IPCC) estimatethat energy efficiency measures will dothe heaviest lifting as the world seeksthe emissions reductions needed tostabilize the global climate. This focuson efficiency is particularly prominentin the world’s emerging economies,where getting more out of less energyis seen as a key path to bothsustainable growth and reducedclimate risk.

Does energy efficiencylead to increasedenergy consumption?In February 2011, the BreakthroughInstitute published acomprehensive review of theliterature and evidence for reboundeffects which concluded that a largeamount of the energy savings frombelow-cost energy efficiency areeroded by demand rebound effects.In some cases, the rebound exceedsthe savings, resulting in increasedenergy consumption fromefficiency, known as backfire.

JESSE JENKINS and HARRYSAUNDERS outline the importanceof the rebound effect. In response,MARIANNE MOSCOSO-OSTERKORN, Director General ofthe Renewable Energy andEnergy Efficiency Partnership(REEEP), argues that energyefficiency yields considerableeconomic and energy securitybenefits, and that measures toimprove it are always justified.

HOT TOPIC

Rethinkingrebound andefficiency

More efficient

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Yet recent research, including newreports authored by each of us, highlights apowerful but largely overlooked economicphenomenon that requires a globalrethink of energy efficiency and its role inclimate mitigation and sustainabledevelopment strategies: the reboundeffect.

Truly cost-effective energy efficiencymeasures lower the effective price of theservices derived from fuel consumption –heating, cooling, transportation, industrialprocesses, etc. – leading consumers andindustry alike to demand more of theseservices. There are other indirect andeconomy-wide effects as well, asconsumers re-spend money saved through

efficiency on other energy-consuminggoods and services, industrial sectorsadjust to changes in the relative prices offinal and intermediate goods, and greaterenergy productivity causes the economy asa whole to grow. Collectively, theseeconomic mechanisms drive a rebound indemand for energy services that can erodemuch – and in some cases all – of theexpected reductions in total energy use,along with much-hoped-for reductions ingreenhouse gas emissions.

Furthermore, rebound effects are oftenmost pronounced in the productivesectors of the economy, including industryand agriculture, as well as throughout theworld’s emerging economies.

Anything but linear and directThese rebound effects run counter to acore assumption of conventional energyand climate forecasting and analysis: theidea that efficiency improvements lead to alinear, direct, and one-for-one reduction inoverall energy use.

Estimates of the energy use andemissions reductions possible throughefficiency are typically derived from‘bottom-up’ engineering models andcalculations of the cost effective efficiencyopportunities available in each economicsector. Analysts then sum up the availableefficiency measures in each sector todetermine the gains possible for theeconomy as a whole, and subtract these ‰

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Energy efficiency ratinglabels are now found inmany new buildings andon household appliancesand electronics.

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labourers on the shop floor. Yet here again,higher labour productivity lowers productcosts, increases demand for those products,and opens up new markets that were notpreviously profitable. It frees up money to re-invest in other areas of production, and itcreates new jobs in other areas of business.All of these dynamics cause a rebound inlabour demand.

At the macroeconomic level, it is widelyunderstood that improving labourproductivity drives economic growth, createsnew profitable ways to utilize labour, andgenerally increases overall employment,rather than decreases it. And despite thesimplified assumptions common to energyforecasting and analysis, the reality is thatenergy isn’t different from labour, ormaterials, or capital.

Rebound likely to be largest where leaststudiedDozens of academic studies have examinedthe empirical evidence, conductedmodelling inquiries, and otherwise testedthe scale of rebound effects. Reboundeffects differ in scale, depending on the typeof energy efficiency improvement and thesector of the economy in question. As itturns out, rebounds are generally smallestin exactly the situations that have receivedthe most research to date: forimprovements in the efficiency of end-useconsumer energy services in wealthy,developed economies. This includesefficiency improvements in personaltransportation, home heating and cooling,and appliances. Here, relatively wealthyconsumers already fully enjoy most energyservices, or come close to it. A consumermay gain little utility, for example, fromheating his or her home above acomfortable room temperature, even if theefficiency of home heating improves.

The direct increase in demand for theseend-use energy services due to the decreasein their apparent price is therefore

relatively modest, and commonly erodes10-30% of the initial energy savings or less.

Additional indirect and macroeconomiceffects may mean total energy demandrebound can erode roughly one quarter toone third of the expected energy savingsarising from end-use efficiency measures indeveloped economies.

However, the consumption of end-useservices in the world’s wealthy nations is farfrom indicative of broader trends across theglobal economy. In fact, the largest reboundeffects are typically found elsewhere: in theproductive sectors of the economy thatconsume the bulk of energy in any nation,and in the world’s emerging economies,home to the vast majority of future energydemand growth.

Emerging economiesIn contrast to conditions in wealthy nations,demand for energy services is far from

efficiency gains from business-as-usualforecasts of energy use accordingly. Thisbasic method is at the heart of widely citedclimate and efficiency strategies authoredby McKinsey and Company, the IEA, andthe IPCC.

Crucially, these studies assume nofeedbacks between improvements in energyefficiency and either economic activity ordemand for energy services. Thus, a givenpercent gain in efficiency is assumed to leadsimply and directly to an equivalent andequal percent reduction in total energy use.In reality, however, the economy is anythingbut direct, linear, and simple, especiallywhen responding to changes in the relativeprice of goods and services.

When a good or service, or input, toproduction gets cheaper, consumers andfirms use more of it, find new cost-effectiveuses for it, and on top of this re-invest anysavings in other productive activities.Meanwhile, any net improvement in energyproductivity contributes to economicgrowth.

No paradoxOften labeled “Jevons’ Paradox,” after theBritish economist who first noted themechanism in an 1865 treatise, reboundeffects actually operate through well-understood economic principles ofdemand elasticity, substitution, and thecontribution of productivity to economicgrowth.

Economists would never assume, forexample, that a ten percent improvement inlabour productivity – also known as a"labour efficiency" improvement – wouldreduce overall demand for labour in theeconomy by 10%.

At the scope of the individual factory orassembly line, improving labour productivitymay mean the plant can get by with fewer

HOT TOPIC‰

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saturated throughout the developingworld. After all, roughly one-third of theglobal population still lacks sufficientaccess to even basic modern energyservices.

In the world’s emerging economies, thecost and availability of energy services isoften a key constraint on their enjoyment.Demand is thus far more elastic(responsive to changes in price), andrebound effects much larger than in thedeveloped economies. That in turn meansrebound effects are much larger.

Very few studies have carefully examinedrebound dynamics in developingeconomies, but those that have find directrebound effects alone to be on the order of40-80% for end-use consumer energyservices, such as lighting and cooking fuel– more than twice as large as theequivalent rebounds found in wealthiernations.

As a wide body of development literaturerecognizes, expanding access to modernenergy services is also a principal driver ofdevelopment outcomes. Whether suchservices are provided by burning morefuels, burning them more efficiently, orboth (the most likely scenario), theoutcome is the same: greater economicactivity and expanding welfare, which inturn demands more energy.

Energy analysts must therefore be verycareful in generalizing experiences orintuitions about rebound effects in rich,developed nations to the larger bulk of theglobal population living in developingeconomies. The shadow of Jevons’ Paradoxstill looms large over much of thedeveloping world.

Productive sectorsFar more study of rebound effects forefficiency improvements in producing

sectors (e.g. industry, commerce, andagriculture) is also warranted, given thefact that roughly two-thirds of globalenergy is consumed in the productionand transportation of goods and services,and the refining, processing, and deliveryof energy to end-uses.

However, the literature to date indicatesthat direct rebound effects are muchlarger in the productive sectors than inend-uses – on the order of 20-70% forthese sectors, at least within a UnitedStates context – with additional rebounddue to indirect and macroeconomiceffects.

Rebound effects in productive sectorsdepend principally on the ability of firmsto rearrange their factors of production(labour, capital and equipment, andvarious materials) to better take advantageof now-cheaper energy services (a processknown in economics as input or factorsubstitution). If, over the long-term, it isrelatively easy for firms to substituteincreasingly efficient energy services forother production factors, direct reboundeffects can be substantial. This isespecially true for decisions related to theconstruction of new productive capacity –and so we should again expect morepronounced rebound in the fast-growingproductive sectors of emergingeconomies.

Additional mechanisms add to the scaleof rebound, as consumers demand moreof now-cheaper products and economicproductivity overall improves.

Where does this leave us? Conventional climate mitigationstrategies count on energy efficiency to doa great deal of work. For example, the IEAin a global climate stabilization scenariopublished by the agency in December2009, estimates that efficiency measurescould account for roughly half of theemissions reductions needed. Yet, from a ‰

Energy efficiency can reduce the costs ofoperating container terminals. Siemens DriveTechnologies have improved control functions forthe operation of rubber-tired gantry cranes, witha resultant 70% reduction in fuel consumption.

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argument, a more interesting questionwould be to ask: how much more seriouswould today’s climate change situation beif energy efficiency had not beenimplemented in the past? According to theInternational Energy Agency, substantialenergy savings have already taken placesteadily over the last 20 years, and it arguesthat without these energy efficiencymeasures, today the world’s energydemand would be 50% higher than itactually is. This effect must be taken intoaccount when discussing and evaluatingthe climate impact of current energyefficiency measures.

California decouplesExamples like California prove thatjurisdictions that strongly promote energyefficiency can achieve an energy trend thatcontrasts sharply with their immediateneighbours. Today, we can observe that theamount of energy consumed by theaverage Californian is just 60% of the USper capita average – dramatic proof thatenergy efficiency has effectively decoupledgrowth in energy consumption fromeconomic growth in the most populousAmerican state. And this trend is no flashin the pan – it has continued for more thanfour decades now. The California exampleshows that regardless of all the reboundarguments, energy really was saved. Costlynew power plants have not had to be built,and the whole economy has benefited.

The California experience also showsthat energy efficiency programmes haveeducational effects that result in sustained

MARIANNE MOSCOSO-OSTERKORN isthe Director General of the RenewableEnergy and Energy Efficiency Partnership(REEEP), a global partnership that works toreduce the barriers limiting the uptake ofrenewable energy and energy efficiencytechnologies, with a primary focus onemerging markets and developingcountries.

The Breakthrough Institute report, EnergyEmergence: Rebound and Backfire as EmergentPhenomena, highlights the challenges andcomplexities of measuring the overalleffectiveness of energy efficiencymeasures. The results are complex, andare affected by the interaction of manydifferent factors, including economicgrowth, energy use, technology, behaviour,and rebound effects. Unfortunately, theassumptions used are not fully verifiable,and the different models show widevariations in their results, all of whichdevalues the conclusions offered.

The overall effects of energy efficiencycan indeed be disputed by employing themany theoretical and modelling methodsavailable to measure the direct andindirect rebound effects. But this wholeargument misses the point that energyefficiency has many benefits, other thanclimate change mitigation, which need tobe considered. Energy efficiency leads toincreased productivity and economicoutput, reduced demand, reduced energybills and last, but by no means least, anenhanced security of energy supply.

If one does keep purely to the climate

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The many benefits ofenergy efficiencyclimate or global resource

conservation perspective, rebound effectsmean that for every two steps forwardtaken through greater efficiency,rebounds take us one (or more) stepsbackwards. This is particularly truethroughout the developing world, and inthe productive sectors of the globaleconomy.

A clear understanding of reboundeffects therefore demands a fundamentalre-assessment of energy efficiency’s rolein global climate mitigation efforts.

A continued failure to accurately andrigorously account for rebound effectsrisks an over-reliance on the ability ofefficiency to deliver lasting reductions inenergy use and greenhouse gas emissions.Without a greater emphasis on the otherkey climate mitigation lever at ourdisposal – the de-carbonization of globalenergy supplies through the deploymentand improvement of low-carbon energysources – the global community will falldangerously short of climate mitigationgoals.

At the same time, however, we can re-affirm the role of energy efficiency effortsin expanding human welfare and fuellingglobal economic development. Unlockingthe full potential of efficiency may verywell mean the difference between a richer,more efficient world, and a poorer, lessefficient world. The former is clearly thedesirable case – even if the world usesmore or less the same amount of energy ineither scenario.

The pursuit of any and all cost-effectiveefficiency opportunities should thuscontinue as a key component of anefficient course for global development,even as we reconsider the degree to whichthese measures can contribute to climatemitigation efforts. n

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behavioural changes over time – aphenomenon that can also be observed inseveral European and Asian countries.This might be dismissed by some as aphenomenon that emerges primarily insaturated markets where people’s energyneeds are already satisfied, but no studiesexist which can provide reliable data toback up this argument.

Part of a packageWhat real experience does show is thatenergy efficiency measures appear to bemost effective if they are implemented as apackage of activities that include newtechnology, incentive systems, andeducation, as well as capacity-building andpublic promotion. These kinds ofintegrated programmes have yieldedsignificant energy reduction. The holisticenergy efficiency programme in Japanafter the first energy crisis in the 1970s isanother prime example. Much likeCalifornia, modern-day Japan has achievedan almost complete decoupling of energyconsumption and GDP growth.

Significant effects of comprehensiveefficiency programmes, targeting bothend-consumer and industry, are alsoreported in mid-income and developingcountries such as Thailand and thePhilippines. Thailand initiated a voluntaryenergy efficiency programme forappliances in 1994, which has sincebecome a well-functioning mandatorysystem covering more than 50 appliances,lighting, and equipment. According to theAsia-Pacific Economic Cooperation’s peerreview on energy efficiency, as ofSeptember 2009, the Thai standards andlabelling programme has contributed10,175 gigawatt hours of energy savings,1,725MW of peak demand capacity savings,and 6.6 million tons of CO2 reduction. Inthe Philippines, mandatory standards andlabels for air-conditioners saved 6MW ofcapacity during the programme’s first year.

Yet another example is the NationalCompact Fluorescent ExchangeProgramme in Ghana, which waslaunched in 2007, reducing peak loaddemand for the over-stretched nationalelectricity systems and lowering theelectricity bill of mostly low-incomeconsumers. With the exchange of sixmillion light bulbs in Ghana’s households,peak load savings of 124MW per annum,and CO2 savings of 112,320 tons, wereachieved. This resulted in overall energycost savings of US$33m.

Energy savingsThese examples from lower-incomecountries underline that end-consumerenergy efficiency clearly impacts netsavings for overall national electricitysystems in developing countries –especially through reducing peak loaddemand. It seems that these savings arenot “sucked away” through increasedconsumption, especially at this point oftime. Indeed, even if some of these savingswould be consumed during a differenttime of day, the positive benefits for a

national energy system and CO2reduction would not be diminished. Theachieved savings would help to reducecostly provisions of mostly fossil fuel-based peak load systems.

Technology alone is not the solution,and yes, the possible rebound effects ofenergy efficiency measures should indeedbe considered by policymakers inrealistically estimating the impact ofenergy efficiency measures on CO2reduction. But this environmental effect –the extent of which is very much open todebate – is a one-dimensional counter-argument. Real-life experience clearlyshows that energy efficiency yieldsconsiderable economic and energysecurity benefits, and therefore measuresto improve it are always justified. Ofcourse other measures, such asdecarbonization of the global energysupply, should also be implemented totackle climate change, but energyefficiency programmes increase theenergy consciousness of people, and arethus an important first step to save theplanet. n

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nThe global economy hasslowed in recent months, but theEconomist Intelligence Unitbroadly expects the recoveryfrom the Great Recession of2008-09 to keep going. An array offactors – including highcommodity prices, unrest in theMiddle East and North Africa,global supply-chain disruptionsdue to the disaster in Japan, andtighter monetary policy in manycountries – are causing concern.But the underlying foundationsfor a sustainable recovery stilllook like they are in place.

Global GDP is estimated to

recent market correction, high oilprices are still a source ofconcern. If prices remain veryhigh or rise further, that will actas a brake on economic growth.Inflationary pressures generallyare causing anxiety. The debtcrisis in the euro area is also farfrom resolved. Developmentsthere could destabilize financialmarkets, undermining thebroader recovery. Industrialproduction in Japan hascollapsed as a result of the March11th tsunami, and this is havingan adverse impact on globalsupply chains. Meanwhile,among emerging markets,China’s efforts to cool itseconomy are creating particularuncertainty. Will its policieswork, and if so is that a good

A small but fast-growingcompany based in Bihar, thepoorest state in India, hasperfected and commercialized asystem to turn rice husks intoelectricity, providing remotevillages with a clean, reliablepower supply.

The company, Husk PowerSystems, has created a processthat takes a common wasteproduct, rice husks, heats it untilit breaks down into gas, and thenuses the gas to power an engineto generate electricity. The firstgasification plant was set up in2007, and now Husk Power has65 plants supplying electricity toaround 180,000 people whopreviously depended onkerosene as a light source.

Each plant can power 400-500households for 7-8 hours per dayat a cost of just 80 rupees –roughly US$1.75- per householdper month.

In rural Bihar, pretty mucheverything that can be used willbe used, but rice husks are a big

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grow by 4.3% in 2011. This isquite a bit slower than last year,when the rebuilding ofinventories and the extraordinarystimulus measures unleashed bypolicymakers in many countrieshelped to generate growth ofalmost 5%. The cyclical boostfrom those measures is nowessentially over, so the onus is onthe global economy to growwithout support.

On balance, prospects are quitegood. Emerging markets are stillgenerally doing well, even thoughmany are struggling to tameinflation. Most important,

developed countries are betterpositioned to sustain modestgrowth. For example, as signals ofeconomic health in the US, thefact that more jobs are beingcreated and that consumers arestill spending (despite high oilprices) probably outweighsdisappointing first-quarter GDP.Recent growth in the euro zonehas also been surprisingly robust,driven in part by the success ofthe German economy, theregion’s powerhouse.

None of this to downplay therisks to global growth thatremain. Notwithstanding the

exception. When rice is milled,the outside kernel, or husk, isdiscarded, and because the huskcontains a lot of silica, it doesn’tburn well and can’t be used forcooking. It has been estimated

that the state of Bihar produces1.8 billion kilograms of rice huskper year. Most of it ends uprotting in landfills and emittingmethane, a greenhouse gas.

Husk Power Systems is aiming

to expand its reach, and plans tohave over 2,000 plants inoperation by the end of 2014.According to India’s Ministry ofNew and Renewable Energy, thecountry has 100,000 villages that

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thing? A slowdown in Chinawould significantly affect manyother countries. The upheavals ofthe “Arab spring” also continue tomake themselves felt, presentingeconomic and geopolitical riskson several fronts. (EconomistIntelligence Unit)

nRising wealth, changing diets,and increased food consumptionacross the developing world –along with a growing globalpopulation – are fuelling a steadyrise in demand for agriculturalcommodities such as sugar,soybeans, and meat.Consequently, the prospects forgrowers, ranchers, processors,and other agribusinesses areblossoming – and perhapsnowhere more so than in Brazil

and to a certain extent inArgentina.

The opportunities areconsiderable. Historicallyfragmented businesses such aslivestock and sugar, for instance,are beginning to consolidate,offering companies the benefitsof increased scale. New sources offinancing are allowing players toovercome historicallyunderdeveloped capital markets.Increased demand for affordableand clean energy is creating non-traditional opportunities, such asthe production and export ofbiofuels.

In Argentina and Brazilfavourable weather and soil createan ideal environment for cropsand livestock. Brazil’s endowmentof arable land, for example, is a

whopping 4,100,000 squarekilometres – roughly the size ofthe European Union before theaddition of Bulgaria and Romania– only 17% of it now in use.Indeed, Brazil could more thandouble its current utilization levelwithout harming the country’sAmazon rainforest. China, India,and the United States all have lessfarmland and much higherutilization rates. Argentina, for itspart, has 1,700,000 squarekilometres of available farmland,and its pampas boasts 760,000square kilometres of the world’smost fertile farmland andpastures.

Such natural blessings, coupledwith low labour costs, help explainhow Brazil has become the world’slargest producer of frozen orange

juice, sugarcane, poultry, beef,and coffee, and the second-largestproducer of soybeans. Argentinaleads the world in soy oils andflours, and is a significant playerin soybeans and beef. In 2005Brazil and Argentina were theworld’s 6th- and 13th-largestagricultural producers,respectively, by export value.

The impact of agribusiness onthe economies of Brazil andArgentina is profound. In 2006,agribusiness represented 36% ofBrazil’s exports and 52% ofArgentina’s (worth US$49 billionand US $24 billion, respectively).Moreover, in both countriesagribusiness and relatedactivities generate roughly one-third of GDP. (McKinseyQuarterly)

Indonesia is the best place forentrepreneurs to start a business,a BBC survey has suggested. TheUSA, Canada, India and Australiaare seen as among the next bestcountries at supporting newbusinesses.

The results come from a surveyof more than 24,000 people across24 countries. They were askedwhether innovation was highlyvalued in their country; whether itwas hard for people like them tostart a business; whether peoplewho do were highly valued; andwhether people with good ideascould usually put them intopractice. Taking all the answerstogether as a single index,Indonesia came out as the mostfavourable place for entrepreneurs.

All the developed economiessurveyed were above the averagescore, with the exception of Italy,which was far below. But there werealso plenty of developingeconomies that came out as pro-entrepreneur – India, China, andNigeria were also perceived by theirown people as relatively favourable

places for new businesses. In terms of regions, the four

countries of East Asia and thePacific surveyed all received highscores. All the three countries insub-Saharan Africa also scoredabove average. In Latin America,Mexico and Peru scored relativelyhighly, but Brazil and Colombiawere well below average.

The poll does not provide

evidence on why people took theviews they did, and in somerespects the results are consistentwith widely-held perceptions ofthe country concerned.

For example, the USA has aparticularly pro-private sectorculture and a smaller state sectorthan many western Europeancountries. It is seen as a goodplace for entrepreneurs. Russia,which received a low score in thispoll, is seen internationally as aplace where the state is too proneto intervene in economic life.

But there are some surprises.Labour laws in France arerelatively tough, yet in this poll thecountry was seen as a good placefor a new business. Nigeria'sproblem with corruption did notstop it doing better than mostcountries in this survey.

The poll was undertaken for theBBC World Service by theinternational survey firmGlobescan together with theProgramme on InternationalPolicy Attitudes at the Universityof Maryland.

Indonesia is top for entrepreneurs

are not connected to thenational grid. Twenty thousandof those villages are so remote,the ministry says, that theycannot be reached byextending the grid.

1 Indonesia2 USA3 Canada4 India5 Australia6 Nigeria7 China8 Kenya9 Mexico10 The PhilippinesBBC World Service poll resultspublished on 25 May, 2011

Top 10 ‘mostentrepreneur-friendlynations’

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It is estimated that Africa’s population reached1.4 billion in 2010, with resultant consequencesfor food security, growing urbanization, andyouth employment. African countries urgentlyneed to refocus their agricultural and eco-nomic growth strategies. The continent’s agri-culture is substantially under-capitalized, withextremely low levels of mechanization andvalue addition. Africa’s average of 13 tractorsfor each one hundred square kilometres ofarable land compares unfavourably both withthe global average (200/100km2 of arable land)and with the average for other developing re-gions, such as South Asia (129/100km2 ofarable land). The same applies to irrigation:sub-Saharan Africa (SSA) has only 4% of arableand permanent cropland under irrigation,compared with 39% in South Asia and 11% inLatin America and the Caribbean.

African agribusiness’s present share of totalGDP is very low. Data from the World Bankshows that the value of agribusiness produc-tion in Thailand matches that of the entire SSAregion, while that of Brazil is nearly four timesthe African total. Crucially too, in all but twoAfrican countries (South Africa and Zim-babwe), agriculture’s share of GDP exceeds thatof agribusiness by 10 percentage points, high-

Although high value and non-traditionalagro-industrial production for export providesdynamic and growing market opportunitiesfor some African countries, the most impor-tant demand driver in SSA is, and will remain,the domestic and regional market. Looking atthe demographics and changing consumptionhabits for food and non-food agriculturalproducts, domestic markets and intra-Africantrade will remain important, representingmore than three-quarters of total market valueat a continental level, with domestic marketsalone constituting 80% of total market value inregions such as East Africa.

Agribusiness is labour-intensive, creatingjobs in value-adding, agro-processing activities,particularly for those who will inevitably leavethe land as economic development proceeds.In order to reap the benefits of job creation, itis important that policymakers and develop-ment partners target interventions along theentire agribusiness value chain, and not justagriculture on a stand-alone basis. Agriculturalstrategies cannot be framed – as in the past – interms of a production-led strategy. It isdemand, in part linked to value chain develop-ment, which must perform the pivotal role, andprovide the driving force for investments.

Agribusiness: AFRICA’S WAY OUT OF POVERTY

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Patrick Kormawa argues that a shift toan agribusiness development growthtrajectory is crucial for poverty reduction

lighting the region’s failure to add value tofarm production. This relative inability to pro-duce and process agro-industrial commodi-ties limits the scope for industrialization, andmeans that these countries are failing to bene- fit from opportunities to add value and createjobs. While high-income countries add aboutUS$180 of value by processing one tonne ofagricultural products, African countries gen-erate only US$40. Moreover, while 98% of agri-cultural production in high-income countriesundergoes industrial processing, in Africancountries less than 30% is processed. Ruralareas in African countries have limited agro-processing activity and capacity. As such, SSAcountries in particular experience large post-harvest losses, especially for perishable com-modities such as fruit and vegetables, withpost-harvest losses averaging 35-50% of totalattainable production. For grains, such lossesvary from 15-25%.

PATRICK KORMAWA is one of UNIDO’s senior expertsin agribusiness development, and is currently directorof the regional office in Abuja, Nigeria. He is the co-editor of Agribusiness for Africa’s Prosperity, publishedby UNIDO in May 2011. ‰

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An agribusiness-led development strat-egy, with stronger productivity growththroughout the entire agribusiness value chainsystem, offers the best opportunity for rapidand broad-based economic growth andpoverty reduction in SSA. Indeed, the expan-sion of employment through downstreamagro-industrial processing value chains maybe one of the few local paths out of poverty forsmall farmers.

For this to have broad-based impact, theremust be a structural transformation involvinga shift in the economy from subsistence-ori-ented household production and household-based agro-industry towards a modernintegrated economy, based on specializationand exchange, often relying on economies ofscale. The off-farm elements of the agribusi-ness and food retailing system expand relativeto farm-level production, both in terms ofvalue added and employment. Such a shift iscritical for poverty reduction, as between oneand two-thirds of smallholder farmers appearto lack the resources to “farm their way out ofpoverty”, and will therefore eventually need tomove to more remunerative employment inemerging sectors outside farming, such asagribusiness, industry and services.

A new agribusiness policy space A new UNIDO study, Agribusiness for Africa'sProsperity, warns of the dangers of “recyclingfailed ideas”. One of these is the belief thatAfrica must have a Green Revolution along thelines of those in Asia and Latin America. Thisis akin to stating that Africa will enjoy an in-dustrial revolution as occurred in East Asia. Itis important to note that the world has movedon since those events took place. It should alsobe recognized that because technology andmarkets have changed, there can be no guar-antee that earlier agricultural developmentgrowth models can be successfully replicatedin Africa today, or in the future. Thus, a newagricultural development policy approach isneeded, the essence of which is to shift frompast failures of production-led growth to anagribusiness development growth trajectory,taking into consideration the economic andsocial development needs of Africa. TheUNIDO study proposes that a new strategicframework for agribusiness development bebuilt around seven pillars, as follows.

21st century. The era of low food prices is over.African countries must embrace new farmingapproaches, like the “sustainable intensifica-tion” proposed in Foresight. The Future of Foodand Farming (2011). This will require enlistingall modern technologies and agro-industrialinputs, mechanization, and genetically modi-fied crops and livestock, in order to increaseproductivity.

Upgrading value chains: Upgrading thecompetitiveness of farms and firms, irrespec-tive of size, will be crucial. African countriesneed to invest in competitive value chains,taking into consideration local, regional andinternational market demands and require-ments. Value chain participant councils could

Enhancing agricultural supply for valueaddition: If agriculture is to provide a devel-opment path out of poverty, it is crucial thatAfrican countries fully integrate into globalagribusiness. It is important to learn from thepolicy experience of emerging economies,where agribusiness development resultedfrom deliberate but targeted public policiesand strategies, and from institutional supportand development. Factors contributing tomarket failures must be well understood andspeedily addressed by key stakeholders suchas national and local policymakers, as well asdevelopment partners. African countries mustalso de-emphasize low input agriculture as apanacea for ending hunger in Africa in the

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play a crucial role in coordinating the func-tions and activities of producers and other keystakeholders. This would require the promo-tion and development of efficient agri-inputvalue chains, mechanization, processing, andof related ago-industries.

Exploiting local, regional, and internationaldemand: Many African countries have yet togain greater access to dynamic global agribusi-ness markets due to lack of competitivenessand inability to adjust supply to changingmarket opportunities. In this regard, Aid forTrade can play a crucial role in building capac-ity to trade, overcoming supply-side rigiditiesto market opportunities and strengtheningstandards and compliance systems. It is also

learning and innovation, promoting nationaland regional innovation systems, strengthen-ing human resource development, and gener-ally improving STI infrastructure. It isessential to enhance the link between know - ledge created by universities, exploited by lab-oratories, and commercialized by privateenterprise.

Promoting effective and innovative financ-ing: Traditional financing mechanisms com-prising domestic resource mobilization,sovereign wealth funds, funding from diaspo-ras and development finance institutions, leas-ing, and collateralization, must be exploredwith renewed vigour. Some of the more inno-vative financing tools, such as risk mitigationfor bank lending through insurance schemes,finance through large lead firms in valuechains, equity, venture and hybrid capital, haveproven to be workable and should be explored.Here it is important that the enabling condi-tions for local resource mobilization and uti-lization are created to permit the “crowding in”of private investment in agribusiness.

Creating a favourable business environ-ment: The creation of an overall enabling envi-ronment for developing and promoting privateagri-enterprises requires a favourable businessenvironment – macroeconomic stability;favourable exchange rates; efficient financialsystems and institutions; political and social sta-bility; good governance; transparent land tenurearrangements; a climate for business; etc..

Improving infrastructure and energyaccess: It is essential that agribusiness expan-sion be promoted in areas where the requiredinfrastructure and energy services are availableand which are linked to transport and high-way corridors. In this regard, public-privatepartnerships will be particularly necessary. Afocus on clean, renewable, efficient, low-carbon, and sustainable, energy services, as wellas a reduction in greenhouse gas emissions,will be important parts of the strategy. Thepromotion of information and communica-tion technologies is also a precondition forparticipation in value chains. Finally, the CleanDevelopment Mechanism, which promotesprojects that reduce greenhouse gas emissionsin developing countries, could be a futuredriver of technology diffusion processes inAfrica and assist with the creation of green jobsand investment opportunities. n

crucial to promote agribusiness cooperation byreducing intra-African tariff and non-tariff bar-riers, negotiating the reduction in such barri-ers with the South and the North. A freshapproach will be required in order to fosteragro-industrial cooperation within the Southin the field of value chain participation, tech-nology transfer and foreign direct investment,as well as to align “Africa’s commodity process-ing priority” with the resource needs of majortrading partners such as China.

Strengthening technological efforts and ca-pabilities for agribusiness: There is an urgentneed to strengthen Science, Technology andInnovation (STI) policies, with an emphasis onimproving the coordination mechanism for

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Around 100,000 peasant farmers in Colombia cultivate thecoca plant. Colombia’s coca leaves are the raw material forhalf of all the cocaine consumed globally each year. Thedrug has an annual global market value of US$88bn. Thesefigures would suggest that cultivating the coca plant is alucrative activity, one that a Colombian peasant farmerwould be reluctant to give up. Nothing could be furtherfrom the truth.

Information obtained from field studies indicates thatthe average annual net income of a peasant farmer familythat sells coca leaf is just US$2,100. If that family buys thechemical inputs and hires the additional labour necessaryto transform the coca leaf into coca paste, the basis of co-caine, then annual incomes can double. Even so, it is clearthat far from providing peasant farmers with a healthyprofit, the production of the illicit crop does little morethan allow for a subsistence existence. It is the middlemenand traffickers who make the big money.

Coca leaf cultivation is also a precarious livelihood inColombia because illegal, armed groups (guerrillas andparamilitaries) fight to control the illicit cocaine trade.These groups have a monopoly over the purchase and saleof coca paste, and extort “taxes” from the traffickers, labo-ratories and runways from where cocaine is transported.They also guarantee territorial control of the coca pro-duction and promote illicit crops in their areas of influ-ence. In addition, farmers are continuously confrontedwith the threat of the eradication of their illicit crops bythe government.

Given suitable alternatives, the necessary infrastructureand access to marketing opportunities, most familieswould gladly switch to other sources of income, and thisforms the backdrop to the alternative development pro-grammes carried out by the United Nations Office onDrugs and Crime (UNODC) in Colombia and other coun-tries that produce illicit crops.

In Colombia, the government, UNODC, other interna-tional partners, and the local private sector, support

Guillermo Garcíaexplains howagribusiness can helpColombia’s peasantfarmers ditch cocacultivation and pursuelegal and more secureopportunities.

GUILLERMO GARCÍA is the ProjectsCoordinator of Alternative Developmentfor the United Nations Office on Drugsand Crime in Colombia.

SWITCHINGFROM COCA

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farmers' associations that give up the cultivation of the cocaplant, and instead engage in producing alternative prod-ucts, including beans, cacao, heart of palm, coffee, honey,coconuts, dairy products, and gourmet sauces.

Providing farmers with legal and profitable alterna-tives and improving the living conditions in rural areas,villages and urban centres in regions affected by illicitcultivation has proved to be a most effective socio-eco-nomic intervention.

Alternative development is not just replacing one cropwith another, but consists of building alternative liveli-hoods with the participation of farmers in conditions oflegality and security. In some cases, the income from al-ternative products is not high enough to compete withthat from coca cultivation, but alternative development re-duces the levels of violence and enhances access to mar-kets, thus improving farmers’ economic security.

Crucial aspects of Colombia’s successful alternative de-velopment interventions are initiatives to boost investmentin agricultural activities and products which create incomefor the farmers, and to provide assistance with the develop-ment of agro-industry and marketing in order to generateadded value by transforming crops into new and competi-tive products.

In one programme, financed by the Inter-American De-velopment Bank, UNODC assists commercially viable farmenterprises in placing their products in established na-tional and export markets. Support is provided in areassuch as modern business management and practices, prod-uct quality, packaging, marketing, and distribution. Assis-tance is also provided to gain access to specialty or nichemarkets worldwide, such as environmentally friendly andfair-trade markets.

UNODC has managed to sign marketing agreementswith the nationwide supermarket chains, Carrefour andCasino, to sell six products from five alternative develop-ment organizations. These are hearts of palm, black pepper,bee honey, coffee, chocolate bars and beans. n

‘Hommage à Warhol’by Lauren Brassaw

In one UNODC alternative development project, in the department of Putumayo inthe Amazon region, 256 families grow 365 hectares of peach palm trees from whichhearts of palm are harvested. The heart of palm is the most tender and delicate partof the palm tree; with a fine flavour and a soft texture. It is a natural organic food, withno artificial additives, and helps digestion thanks to its high natural fibre content.

France and Spain are the biggest consumers of hearts of palm in the world, butthere is an increasing demand for this product internationally. ‘Hearts of palm fromPutumayo’ is the leading brand in the Colombian market, and the product isexported to France, Japan and Canada.

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Feeding acrowdedworldFood tastes and agricultural markets are changing. In recent years, there has been arapid growth in the reach of supermarkets, locally and globally, and the developmentof consolidated value chains for agricultural products. Kanayo Nwanze argues thatsmallholder farmers must have opportunities to be entrepreneurs, rather thanbystanders, in the new and potentially profitable marketplaces that are evolving. >>>

KANAYO F. NWANZE began his term as the International Fund forAgricultural Development’s fifth president on 1 April 2009. IFAD workswith poor rural people to enable them to grow and sell more food,increase their incomes and determine the direction of their own lives.Since 1978, IFAD has invested over US$12.5bn in grants and low-interestloans to developing countries, empowering more than 370 million peopleto break out of poverty. IFAD is an international financial institution and aspecialized United Nations agency, based in Rome. A Nigerian national,Nwanze has a strong record as an advocate and leader of change. He hasover 30 years of experience, across three continents, in poverty reductionthrough agriculture, rural development, and research.

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Today, more than 900 million people are struggling withchronic hunger and are mired in poverty. When looking tothe future, the matter becomes even more pressing. By 2050,more than nine billion people will inhabit this planet. Tonourish a hungry and crowded world, food production willneed to increase by 70%.

Feeding the world’s hungry and poorest people is thechallenge of our time, but with enough creativity and hardwork, it is a challenge that we can meet. The solution lieswith the people who farm the world’s 500 million smallfarms. These farms are the backbone of agricultural devel-opment and the key to feeding the future. Tapping thepotential of these smallholders, many of whom live inpoverty, will require a fundamental shift in the way weapproach agricultural development, both globally andlocally.

Earlier this year, the International Fund for AgriculturalDevelopment (IFAD) released the Rural Poverty Report 2011, acomprehensive assessment of the challenges and solutionsto eradicating poverty in the developing world. The reportreflects the current environment for smallholders – ripe withpossibilities but entwined with emerging threats. The sto-ries of those smallholders who have successfully availedthemselves of technologies and new opportunities stand instark contrast with the desperate conditions faced by mil-lions of others.

There is a risk that the emergence of modern value chainsand supermarkets in the developing world will widen thisgulf. It is true that the introduction of new technologies andsophisticated market systems, alongside growing urbaniza-tion, holds the promise of meeting growing demand foragricultural products while lifting millions from the depthsof poverty. But if these market forces are handled incorrectly,they could leave smallholders without sufficient resourcesto resist becoming marginalized.

To foster a thriving agricultural sector that is inclusive ofsmallholders and supportive of a modern, diversified econ-omy demands nothing short of an agro-industrial revolution.This revolution, at its core, must facilitate the development ofstrong links between markets and smallholders; in doing so,it will bring us closer to meeting the first Millennium Devel-opment Goal of halving global poverty and hunger by 2015.This ‘people-oriented’ strategy benefits producers and cus-tomers alike. By encouraging a marketplace that is both mod-ern and inclusive, and by helping poor smallholder farmersenter those markets, we can improve the lives of millions liv-ing in poverty today – and feed the world’s population oftomorrow.

Assessing the current landscapeFor far too many smallholder farmers, every day is a struggleto keep their heads above water; subsisting rather than prof-iting from their crops. Despite providing as much as 80% ofthe food locally consumed in Asia and sub-Saharan Africa,many of these farmers live inches away from crisis, fightingnot to get ahead, but merely to survive. Without modern toolsand techniques, yields are frequently too low to generate sur-pluses. Land and water are increasingly scarce and preciouscommodities. And commerce is further hindered by poor ornon-existent infrastructure, and few buyers for small farm-ers’ produce – particularly in the more remote areas.

At IFAD, we are trying to find solutions to these chal-lenges by asking ourselves two key questions: first, can afarmer who lives on the edge of destitution be expected totake on additional risk by investing in higher-yield crops?Second, is there a way for the smallholder to enter the mar-ketplace without facing marginalization?

By 2050,foodproductionwill needto increaseby 70%

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The answer to both questions can be yes, and we haveseen the success stories to prove it. One of them is AhmadAbdelmunem Al-Far, who lives in Cairo and has become asuccessful entrepreneur. After joining an IFAD-supportedproject where he was granted a portion of newly reclaimeddesert, access to a credit fund, systems for sewage and refusedisposal, and drip irrigation, Ahmad has built a thrivingbusiness. He now produces crops such as fava beans, onions,oranges, green peppers, and potatoes, and has joined 36,000other participating farmers in the marketplace. These proj-ects are successful because they recognize smallholders forwhat they are: potential entrepreneurs. By shifting ourmindset to view smallholder farms as businesses seeking aprofit, rather than a handout, we see remarkable progress.

IFAD supports projects like these in rural communitiesacross the world, and in each region we see success storieslike Ahmad’s. With help from our partners, we are able tofund projects to develop local infrastructure, including last-mile roads, irrigation and water control systems; we are help-ing to reduce post-harvest losses, and we are assisting farm-ers in improving the quality of their produce.

Embracing the futureThese improvements are critical, given the growth in the sizeand scope of supermarkets and the modern consolidatedvalue chains that they have catalyzed in recent years. Thesesupermarkets seek to provide high quality produce to theircustomers, and they impose ever more rigorous standardson their suppliers. They usually prefer to source from a fewlarge suppliers, making it difficult for smallholder farmersto get a foothold in these new markets.

The transition from traditional to modern farming isoften extremely difficult. To be successful, smallholders usu-ally need support to run their farms as commercially-ori-ented businesses geared towards exploiting market oppor-tunities. The Rural Poverty Report 2011 finds that smallholdersusually require new skills and knowledge to increase theirproductivity and respond to market requirements in termsof quality and phytosanitary standards. They also need accessto real-time market information to tell them what the mar-ket is looking for. While smallholders are vulnerable whenoperating alone, when they join forces to create rural pro-ducers’ organizations they can be highly effective. By form-ing these organizations, smallholders can bulk their demandfor inputs and their marketed supply, and they gain greaterleverage when negotiating with buyers, helping to ensurethat they are given a fair deal for their produce. Navigatingthe modern marketplace becomes less daunting when there

is greater security. Formal contracts can strengthen the trustsmallholders place in the market. And as urban customersincrease their demand for processed products, new employ-ment opportunities are created for rural workers and small-holders alike.

There must also be a focus on access to credit, whichremains a key element in the ability of the smallholderfarmer to participate in, and capitalize on, new market forces.Many banks are now working in rural communities to helpfarmers manage the risks of marketplace entry, and agro-processors are also providing production credit to their sup-pliers. There have been dramatic results from increasedlending, and, from now on, smallholders need expandedaccess to longer-term funding to enhance their confidencewhen entering the marketplace.

PartnershipsFull-scale agricultural development in rural communities willhinge on the assistance of numerous actors: policymakers andpublic services, civil society organizations, non-governmen-tal organizations and donors all play a crucial role in helpingsmallholders to engage more effectively in modern valuechains. We know that governments have the capacity to expandsmallholders’ options when selling their products to local andglobal markets, and they can also increase public spending inagriculture. Private-sector investments can improve small-holders’ access to markets and assist in implementing policiesthat include, rather than exclude their products. Donors areable to encourage farmers to organize, as well as work towardsobtaining fair deals in value chains. Finally, governments,donors, and the private sector, may all help make smallholderfarming viable for women and young people.

Today, many smallholders have unprecedented opportu-nities for economic and agricultural success. With training,organization and infrastructure, millions of poor people canescape the clutches of poverty. Rural women, men, andyoung people, may finally see the reality of profitable farm-ing, and with that, the chance for better homes, education,and health for their families. As smallholders continue toenter modern markets, experience tells us that a flourishingrural economy will not be far behind.

Thriving rural communitiesAgricultural growth is the driver of economic growth. Thishas been true across the centuries, and throughout the world,from 18th century England to 19th century Japan, and to 20thcentury China. With new agricultural development comesa vibrant rural life – both on and off the farm. ‰

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Sixty per cent of the world’s rural population fallsbetween the ages of 15 and 24, and many of these young peo-ple will eventually be faced with a choice: stay in their ruralregions to work, or seek employment in cities.

To feed a hungry world, we need these young women andmen to remain in rural communities and become con-tributing members to the rural economy. We need them tobecome modern smallholders, earning profits in the mar-ketplace, but they also must have options for employment inrural non-farm work. Each dollar invested in agriculturegenerates between 30 to 80 cents in second-round income inthe economy. This shows that profitable farming is criticalnot just for its own sake, but for its impact on the larger eco-nomic environment. Creating local demand for goods andservices leads to non-farm employment and small-scalemanufacturing, which in turn spurs agricultural growth.

Towards a prosperous futureWe need only look to rural farmers in Ghana, the UnitedRepublic of Tanzania, and Viet Nam, to understand just howsmallholders can lead agricultural and economic growth inthe developing world. Indeed, GDP growth generated byagriculture is at least twice as effective in reducing poverty asgrowth in other sectors. Through sustained investment inthe value chain, we can build on these successes and ensurethat agriculture becomes an even more effective method forreducing poverty in rural communities.

The coming decades will bring real and fundamentalchanges to the way smallholders live and operate their farms.The risks are apparent, but the possibilities are abundant.The climate change challenge is real and we must ensurethat our efforts are environmentally sustainable. But withsmart incentives, creative thinking, and strategic support,many smallholders will not only be able to survive, but pros-per. Agricultural growth through modern markets holds thepotential for a life of greater financial security, stronger edu-cation, and better health care. In short, the marketplace maybecome the means to a better life.

Development will need to come from within the countriesthemselves, if we are to see the large-scale change that is neededto meet the Millennium Development Goals and to feed futuregenerations. When developing nations make rural agriculturalgrowth a priority, we can help sustain and support their efforts.There is no single magic policy that will work for all regions,but with a smart, locally-focused approach, millions can risefrom the depths of poverty and achieve prosperity. IFADremains committed to achieving this future. Smallholders willlead the way, and we will continue to lend a hand. n

‰

“To feed a hungry world, we needthese young women and men tobecome modern smallholders,earning profits in the marketplace,but they also must have options foremployment in rural non-farm work”

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Near Arusha, UnitedRepublic of Tanzania.Workers between thegreenhouses at acompany that produces,grows and developsseeds for export toEuropean vegetablegrowers and farmers.

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There has always existed a deep interdepen -dence and interconnectivity between eco-nomic activity and societal advancement. Inrecent times, however, there has been a worry-ing tendency for business to be seen as an un-welcome necessity rather than anindispensable partner. I believe the time hascome to get the right perspective back on therelationship bet ween business and society.

Fortunately, in recent years, a new definitionof the role of business in society has emerged,

with a clear focus on long-term thinking andaligning the interests of shareholders and so-cieties for mutual impact, or, to put it anotherway, Creating Shared Value (CSV). This is not anew approach or a new reality. It is what eco-nomic reality always should have been. CSV issimply a new way of framing the fundamentalrole of economic activity in society – to createmutual value.

First articulated by prominent thinkers likeHarvard’s Michael Porter, the concept of CSV

had significant resonance for Nestlé as itclosely echoes the way we have been goingabout “doing business” for decades. Its adop-tion has further clarified our existing approachand, together with our strong compliance andsustainable business practices, it will ensurethat we continue to succeed over time, alongwith the societies we serve.

One thing that being in business for morethan a century has taught us is the impact offocus. So, given the nature of our activities,

Nestlé CEO Paul Bulcke recognizes that the company’s success depends oncreating value for everyone it touches – from the farmers who supply its products,to its employees, to its consumers, and to the communities where it operates.

‘Creating Shared Value’ forsociety and shareholders

Maggi products ona supermarket shelf.Photo: Nestlé

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and our ambition to be the world’s leadingnutrition, health and wellness company, wehave identified nutrition, water, and rural de-velopment as areas of focus for our CSV ef-forts. We identified these because they areintrinsically linked to our supply chain, andare where we can deliver the greatest impact.

Nutritional valueIn the developed, as in the developing, world,this focus has delivered benefits for society,while enhancing our own competitiveness. In-vestments in improving the nutritional valueof our products, in the long-term viability andliving standards of rural communities, and inreducing our environmental impact, for ex-ample, are all improving the desirability ofour products, while at the same time protect-ing the environment and having profoundlong-term benefits for society.

One of the best examples of this is our‘popularly positioned products strategy’.These highly accessible food products, soldmainly in lower-income regions, have enabledus to reach out to billions of consumersworldwide. By working with local govern-ments to understand the needs of people inspecific areas, and fortifying these productswith essential micronutrients, we aim to helpimprove public health, as well as the popular-ity of our products.

To illustrate how broad-ranging thisimpact is, in 2010, we sold 90 billion serv-ings of our fortified Maggi products, andused our scientific know-how to fortify ourmilk products with vitamin A, iron or zinc,depending on the needs of local popula-tions, in 80 countries.

These products bring direct employmentopportunities to impoverished regions, bothin terms of our local production facilities, andour unique distribution methods that have sofar created more than 6,000 micro-entrepre-neurs, most of them women, in some of thepoorest areas of Brazil, Thailand, and thePhilippines.

Water usageOur work with regard to water is also havinga global impact. We have reduced our ownwater consumption and waste-water genera-tion by two-thirds over the past decade, real-izing substantial cost savings in the process.And we assist our suppliers in improving theirwater usage. With agriculture being one of thelargest users of fresh water, helping farmersto adopt better water management will have alasting and far-reaching influence. We investin their communities and have provided clean

drinking water wells for schools in more than100 Indian and West African villages. The sumof our work is healthier, more productivecommunities that are able to supply the qual-ity raw materials we need.

The global availability of water is not justcritical to our own operations; it is criticalto life. We take this seriously and use our po-sition to prompt action beyond our ownbusiness, for example, by educating childrenaround the world in good water stewardship,and by championing integrated solutions tothe world’s water crisis through active par-ticipation in groups, such as the World Eco-nomic Forum Water Resources Group, andthe UN Global Compact’s CEO Water Man-date.

Rural developmentOur third area of focus is rural development.With 70% of global poverty concentrated inrural areas, investment in these areas is cru-cial, particularly in building agricultural ca-pacity. With 443 factories located all over theworld, mostly in rural areas and more thanhalf in developing countries, and as a majorpurchaser of agricultural produce globally, werepresent an important source of this invest-ment.

As early as the 1920s, we built factories inrural areas of Brazil and South Africa, and sawhow these can be sources of development. Bybringing new possibilities and facilitating in-frastructure, such as roads and water treat-ment systems, we can cause lastingimprovements to rural communities and givepeople fresh hope and ambition, with pro-found benefits for the future.

Agriculture has the potential to be a keydriver of rural development. By engaging withfarming communities and providing techni-cal and financial assistance, we have helped

them to secure a better future for themselves.Today, we deal directly with nearly 600,000farmers worldwide, affecting the lives of mil-lions more.

Investing in productivityAs the world’s largest processor of milk, wesource nearly 12 million tonnes of milk, fromaround 30 milk districts worldwide, where weinvest in helping farmers become more pro-ductive by providing free advice, vaccines, andaccess to financial support. Besides our milkdistricts, our most significant commitmentsto increasing farmer productivity and prof-itability have been ‘The Cocoa Plan’ and ‘TheNescafé Plan’. Together, they will see us investUS$700m in key rural development initiativesbetween now and 2020, including investmentsin research and development, tackling issuessuch as child labour and HIV, social projects,and in ensuring that Nestlé products have azero deforestation footprint.

We know we do not have all the answersconcerning the best ways to create sharedvalue, so we invite new ideas from externalstakeholders. The Nestlé CSV Advisory Board,a body comprising global experts in nutrition,water and rural development, has alreadygiven us invaluable perspectives into what wecan do better. Based on its recommendations,this year we will be looking to further stimu-late broad-based investment in rural develop-ment, and continue to raise serious concernsabout issues, such as the deforestation effectsof biofuels.

Creating Shared Value can also be used bythe global community to prompt action onpressing issues, such as the need to doublefood production by 2050. We believe such con-cerns are best tackled through collaborativeaction, with governments, business, and civilsociety, working together, using the strengthsof each partner for the advancement of all par-ties. Only then will it be possible to harnessagriculture’s ability to drive food security, en-vironmental sustainability, and worldwideeconomic growth.

To conclude, there are two basic principlesthat we have seen as the drivers of CSV: l the understanding that no company can besuccessful over time if its sole focus is onshareholders – it must also have a positiveimpact on society, and, l the idea that free and open societies canonly be successful in the long-term if there isa thriving economy with prosperous compa-nies, which also recognize their mutual inter-dependence with the communities where theyoperate. n

“We have identifiednutrition, water, and ruraldevelopment as areas offocus for our CSV efforts...they are intrinsically linkedto our supply chain, and arewhere we can deliver thegreatest impact. ”

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The world is facing multiple crises – eco-nomic, social and environmental. Developingcountries are particularly affected as theystruggle with weak and unequal economies,and find themselves located in regions thatare the most susceptible to climate change.Both socially and environmentally, the agri-cultural sector plays a major role in theeconomies of developing countries: socially,because it is the sector that provides the ma-jority of jobs, and because it tries to ensurefood security – a crucial issue in the contextof rising food prices and recent food riots; andenvironmentally, because it uses up to three-quarters of the world’s fresh water resources,and because established farming systems cancause soil erosion, pollution, and desertifica-tion. It is absolutely essential and urgent thatthe world turns away from standard agricul-tural practices and adopts more sustainablefarming systems. But can such farming sys-tems produce enough to feed the world at anaffordable price?

The SEKEM agricultural modelSEKEM – a holistic, sustainable developmentinitiative based on biodynamic agriculture –aims to do so. Biodynamic agriculture is a spe-cific form of organic agriculture which, as de-fined by the Demeter ecological association,views the farm as “a self-contained, self-sus-taining ecosystem responsible for creating andmaintaining its individual health and vitalitywithout any external or unnatural additions.[…] Soil, plants, animals and humans togethercreate this image of a holistic living organism.”

SEKEM applies biodynamic agriculturalmethods, including the extensive use of com-post, to turn desert lands into living andhealthy soil. The use of resilient crops andnatural predators negate the need for exter-nal inputs, such as chemical fertilizers andpesticides. Biodynamic agriculture meansclosed nutrient cycles, in which SEKEM rearslivestock to produce its own compost, growscereals to feed the livestock, and uses crop ro-tation to enhance soil fertility. The surplus issold in supermarkets and organic shops, bothnationally and internationally.

The cost factorOne crucial question posed when thinking ofchanging from the standard agricultural prac-tice is: Will we face higher costs? The SEKEMmodel of organic, resource-efficient, and soil-protecting, sustainable agriculture requires10-30% more manual labour on average thanconventional agricultural production. Em-ploying more workers usually leads to overallhigher expenses. Also, organic products on su-permarket shelves always cost more than theconventional alternative.

The logical conclusion must be that or-ganic production is more expensive thanbusiness-as-usual production. But is thatindeed the case?

The answer is no. Such a narrow economicview fails to take into account fiscal and socio-economic externalities which are not inter-nalized in the market prize of organicproducts. To take Egypt as an example, thereare energy and water subsidies which pro-

mote resource-intensive practices. Resource-efficient practices, such as biodynamic agri-culture, do not benefit as much (if at all) fromthese subsidies, and are put at a disadvantage,with resultant market distortions.

The indirect cost-saving effects of moresustainable farming systems are also missingfrom this calculation. Healthy soils with ahigh content of solid organic matter increasethe water holding capacity, decrease waterconsumption, and inhibit erosion. Comparedto business-as-usual agricultural production,biodynamic agriculture’s increased energy ef-ficiency, lower greenhouse gas emissions, andincreased soil carbon sequestration, make it asuperb tool to mitigate climate change. Re-silient crops, crop rotation, and diversificationmethods such as agro-forestry, mean that therisk of crop failure is minimized. Intercrop-ping and the absence of chemical inputs in-crease biodiversity. Moreover, lowerexpenditure on external inputs makes finan-cial resources available to cover the costs ofhigher employment, thus promoting rurallivelihoods. Biodynamic agricultural methodsare also healthier as they don’t expose farmers,animals, soil, air, or surface water to hazardouschemicals.

To quantify the cost-saving effects of sus-tainable farming systems and their potentialto mitigate and adapt to climate change issomewhat difficult. However, it is not onlycommon sense, but also the opinion of thescientific community and of economic ana-lysts, that there will be a tremendously posi-tive economic impact. Furthermore, there is

For Helmy Abouleish, managing director of Egypt’s SEKEMGroup, biodynamic agriculture is not only the way to addressmajor challenges such as climate change and food security,but is also the only way to achieve long-term competitiveness.

FARMING FOR ‘In 2050, mankind will have to produce

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another important factor to be taken into ac-count, and that is the savings to be made onthe cost of national healthcare systems whenchemical pesticides and fertilizers are re-placed by natural predators and compost. Thehealth of farmers significantly improves, andthe population can enjoy a wide variety offoodstuffs that do not contain any chemicalresidues.

Considering all the cost aspects, fromlabour to machinery and from subsidies toenvironmental and health costs, sustainableagriculture is today already cheaper. As energyprices rise, as water becomes scarcer, and asclimate change becomes more severe, onlysustainable farming systems will be viable andaffordable.

Feeding the worldIn 2050, mankind will have to produceenough food for nine billion people. Theavailability of, the access to, and the afford-ability of, sufficient nutrients are the definingcriteria of food security that have to be takeninto consideration when choosing the farm-ing system of tomorrow.l Availability: Contradicting the long-estab-lished belief that external inputs such aschemical fertilizers are necessary in order tosubstantially increase food production, an in-creasing number of scientists, policy panels,and experts, such as Olivier de Schutter, theUnited Nations’ Special Rapporteur on theRight to Food, are now claiming that re-source-conserving, low external input tech-niques have a proven potential to significantly

improve yields. In traditional farming systemsin developing countries, and in regions wheresoils are degraded, yields can be increased upto 200%. l Access and affordability: The rural areas wherethe greatest yield increases could be achievedthrough eco-intensification methods, such asagro-forestry, are often the same regionswhere poverty and hunger are widespread. In-creased yields would therefore directly tackleaccess to food, and nourish the farming pop-ulation. As sustainable farming systems aremore labour intensive, a substantial amountof jobs would be created which, in turn, wouldenable many more people to buy foodstuffsfor their families.

The futureToday’s prevailing agricultural paradigmsneed to be transformed. In the developedworld, industrial agriculture achieved highproductivity levels, primarily through the ex-tensive use of chemical fertilizers, pesticidesand herbicides, of water, and of transportationfuels. Traditional agriculture, mostly in devel-oping countries, often results in deforestationand the excessive extraction of soil nutrients.Sustainable modes of agricultural productionrepresent the only solution that can providesufficient quantities of affordable and nutri-tious food for our growing global population.

In these times of change, as we have re-cently experienced in Egypt, the window isopen for renewed and intensified efforts topromote sustainable solutions to the greatchallenges that we face. n

The core businesses of the SEKEMGroup are land reclamation,organic farming, food, phyto-pharmaceutical, and textileproduction. SEKEM was foundedby Dr. Ibrahim Abouleish in 1977,and today is the leading organicfarming and food processingcompany in Egypt, employingaround 1,500 people. The herbs,fruits, and vegetables cultivatedon the company’s farms areprocessed to create high-qualityfood and medicines, which aresold on the national andinternational market. The SEKEMcompanies include the largestpacker of organic tea and theleading producer of herbs in theMiddle East. SEKEM is well-known for its corporate socialresponsibility efforts in thecommunities where it hasoperations, and is internationallyrecognized for its sustainabledevelopment role.

THE FUTUREenough food for nine billion people.’

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Ethiopia: Defining

What happens in Ethiopia has always matteredin the world. For a start, this is where humanhistory actually began. Ethiopia then becameone of the great powers of the ancient world,and was Christian before most of Europe. Itsaw conflict between Christianity and Islam,but today these two communities live largelyamicably together. Alone in Africa it resistedEuropean colonialism, and retains its spirit ofindependence. Then, in the modern world, itbecame a byword for poverty andwretchedness.

The great famine of 1984-5, where hundredsof thousands died, disfigured Ethiopia’sreputation and launched the modern era ofaid. A quarter of a century later, the countryremains critically dependent on outside help,and is still stuck with those old images, but thegovernment that has been in power for thepast 20 years has kept its sights steadily on theeconomic transformation needed to consigndeath by hunger to history.

A generation ago, it was the town of Korem,in northern Ethiopia, which had the largestfamine camp, and thus drew in the televisionteams. There is now a primary school and abrand new hospital on the site of the old camp.When I visited, local administrators werepreparing for a special symposium on thefamine, promoted with posters saying, ‘NoMore Deaths from Hunger’ and ‘Never Again,End Hunger.’

Throughout the north, Ethiopia’s heartlandand political power base, the developmenteffort is impressive. After decades ofenvironmental degradation, the hills are atlast getting greener again. Water conservationand irrigation projects proliferate, in a landstill dependent on the rains. Behind it all is agovernment which honours its pastrevolutionary links with the peasantry, andsees development as a social campaign, asmuch as economic management.

With conscious deliberation, Ethiopia hasavoided a popular helter-skelter rush to thecities by concentrating investment in thecountryside. Land continues to be state-owned, and cannot be bought and sold. Even amarginal existence on a small rural plot maybe preferable to destitution in a city slum. Thepace of urbanization is picking up, but it is thepull of job prospects in the town, often for ayounger, better-educated generation, and notthe push of penury on the land which isdriving it. The aim is to bring about socialevolution, not a crisis of dislocation.

Away from the social sector and reliefprojects of Western aid, there is a moreimportant development effort under way. It isfinanced by soft international loans, andexecuted by the Ethiopians themselves – andby the Chinese who are fast becoming themost important external players in Africa’slong looked-for renaissance. This is an

infrastructure revolution, comprising not justroads, but telecommunications as well. Inremote corners of Ethiopia, I have witnessedteams of Chinese engineers from thesesectors advancing in lock-step across thehighlands.

The man who presides over this is one ofthe most outstanding Africans of hisgeneration. The résumé of Prime MinisterMeles Zenawi tells a larger political storyabout the end of the 20th century and thebeginning of this one. He was a Marxistmedical student who broke off his studies tojoin, eventually to lead, a guerrilla struggle.When he assumed power in 1991, he faced aruined country that had to make its way in acapitalist world. He has consistentlyimpressed both world leaders and Nobelprize-winning economists with his analysisof Ethiopia’s needs and the dexterity of hispolicy implementation.

Meles Zenawi is no liberal democrat, butdoes nevertheless aim to plant lastingpopular institutions in Ethiopia. For these totake root, he believes a measure of prosperityis essential. So, there must first be a period ofstate-directed economic growth and state-directed political institutions. Such a politicalphilosophy sits uneasily with the West, butthose who believe that a square meal is also ahuman right should pay careful attention tohis plans for Ethiopia. n

Peter Gill was one of the first journalists to report on the Ethiopian famine in the mid-1980s.Twenty five years later, he sees the country implementing pro-poor economic policies, andsenses real grounds for optimism.

Ethiopia

COUNTRYFEATURE

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its own path

Peter Gill, a journalist anddocumentary film-makerspecialising in developmentissues, is the author ofFamine and Foreigners:Ethiopia since Live Aid,recently published byOxford University Press.

A school in southernEthiopia. An outline of thecountry’s borders has beendrawn on the wall.

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In the following extracts from recent interviews and speeches, Prime Minister Meles Zenawiprovides some details about his vision for sustainable development in Ethiopia.

In late 2010, the government of Ethiopia un-veiled an ambitious five-year Growth andTransformation Plan (GTP) which aims todouble agricultural production and to sustainthe double-digit GDP growth registered onaverage over the past five years. At the launchof the plan, Meles Zenawi told reporters, “Inthe future, we will feed ourselves…I think it'squite achievable over the next five years.” InMarch 2011, he gave the following update onthe implementation of the GTP:

“There are two key bottlenecks to the im-plementation of the GTP. The first one beingfinance, and the second one being imple-mentation capacity. In terms of finance, wehave been doing quite a lot to see what we cando to identify the gaps and find sources to fillthe gaps. In terms of the five-year budget, weare pretty well covered. This assumes that theloans and grants that we get from abroad willbe maintained at the current level…

In terms of implementation capacity, we

have started well with building up the capac-ity, both in terms of the ministries and publicenterprises, and support for the privatesector. Particularly in the public enterprisesector, we have done quite well in establish-ing the Basic Metals and Engineering Corpo-ration, and beefing up its capacity. It has nowreached a stage where it can accept contractsto build factories locally, such as sugar facto-ries, and manufacture adequate amounts ofspare parts for manufacturing, the automo-

Building a developmental stateU

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Addressing the African Union’s conference ofministers of economy and finance in lateMarch, Prime Minister Meles Zenawi advisedAfrican countries to strengthen the role of thestate and to invest heavily in infrastructure.“The debate on a new development paradigm,centred on the concept of a ‘developmentalstate’, is welcome and long overdue. The neo-liberal paradigm of growth has failed to bringprosperity to Africa. Their three decades’ longcampaign against state activities has not re-sulted in sustained growth and economictransformation. It has failed to do so because,among other things, its restless campaign toenfeeble the African state and its role in theeconomy has not succeeded in overcomingthe environment of unproductive and perva-sive rent-seeking. If anything, such rent-seek-ing activities have become worse and moreentrenched in the era of neo-liberal domi-nance. This suggests that the neo-liberal par-adigm has got it wrong both in terms ofunderstanding the source of the underlyingproblem and the solution it prescribes.”

“One of the biggest threats to the contin-ued growth of our economies is a massive gapin infrastructure development in our coun-tries. While the private sector has to play a sig-nificant role in overcoming the gap, the statehas to play the leading and vital role in thissector. Three decades of waiting for the pri-vate sector to address our infrastructure gaphas only served to widen that gap. We cannotafford to wait any longer. We should embarkon a massive programme of both public andprivate investment in infrastructure, if we areto have any chance of sustaining the limitedgrowth we have achieved in the recent past.The recent G20 decision to mobilize some ofthe excess savings in the world for infrastruc-ture investment in Africa becomes a decisionof vital significance to us. We need to engagethe G20 actively to ensure that adequate re-sources are mobilized for investment in in-frastructure in Africa, and that the lion’s shareof those resources is directed towards publicinvestment in infrastructure. We have to beginto act differently now.”n

tive sector, and so forth. So, quite a lot ofimport substitution work is being done already by the Corporation.

We are looking at radically improving thecompetitive nature of the construction sector.We hope to assist in the establishment of hun-dreds of local construction companies. Wehave prepared the finances to support them,and have procured the earth-moving machin-ery for these companies. We are going to haveto build quite a few industrial towns. For ex-ample, in the southern Oromia region, wehope to develop about 150,000 hectares ofsugar estates, with about six sizeable sugar fac-tories, and that will mean about six smalltowns. We will be building four or five addi-tional sugar estates, and about seven fertilizerfactories in the western Oromia region, andthat will mean a sizeable town needs to bebuilt there.”

At the Hydropower for Sustainable Development2011 conference that took place in theEthiopian capital, Addis Ababa, at the end ofMarch, Meles Zenawi outlined his govern-ment’s plans to power the country’s sustain-able development.“Our government has decided to exploitEthiopia’s abundant resources to generateelectricity from renewable sources, not onlyto relieve the acute shortage of electric powerthat we currently face in our country, but alsoto export power to neighbouring countrieswhich are less endowed in renewable sourcesof energy. Indeed, Ethiopia has developedplans to achieve zero net emissions of carbonby 2025, an ambitious and noble target set byonly a handful of countries in the world,partly because it is aware of its potential.

Our plan for 2025 is based on three pil-lars. The first pillar is to generate virtually allof our electricity from clean and renewablesources, centred on hydropower, but one thatalso includes wind, geo-thermal, and biogasfrom sugar plantations as important supple-mentary sources of power. The second pillarof our plan is to maximize the use of elec-tricity and bio-fuels for transport and other

energy needs. The third and final pillar is tocarry out a massive re-forestation pro-gramme of degraded land to, among otherthings, serve as a huge carbon sink. In thisregard, we plan to re-forest over 15 millionhectares of degraded land in the comingyears. In other words, our ambitious plans tobuild up to 8000MW of additional capacityfrom hydropower in the next five years willnot only contribute to filling the infrastruc-ture gap in our region that everybody agreesneeds to be removed expeditiously, but willdo so in a manner that will help reduce ourcarbon emission to zero and help neigh-bouring countries to reduce their emissionssignificantly.”

“In the future, we willfeed ourselves…I thinkit's quite achievable overthe next five years.”

Ethiopia

COUNTRYFEATURE

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About 50 million tons of palm oil are producedevery year – and that number is certain to onlyrise. Demand has been driven by yield, whichin the case of palm oil, is close to six timesmore per hectare than canola oil. Given theseexceptional yields, farmers have been plantingoil palms at a rapid clip, raising concerns overits environmental and cultural impacts. As aresult, various advocacy groups have blamedthe increase in palm oil production for creat-ing detrimental agricultural practices, de-stroying vulnerable rain forests and peat lands,and having negative consequences for nativecultures. Today, around 8% of palm oil is pro-duced to “sustainable” standards that attemptto mitigate the damage of mass palm oil pro-duction through less invasive productionmethods. However, sustainable palm oil pro-duction may prove more costly and less effi-cient than business-as-usual production.

The ubiquity of palm oil In the past thirty years, palm oil has seen ex-ponential growth in production. It is expectedthat annual palm oil consumption will in-crease from its current levels of 38 million tonsto 63 million tons by 2015, and continue to 77million tons by 2020. Indonesia is the world’slargest producer of palm oil, but a growingnumber of countries are becoming viablecompetitors on the global palm oil market, in-cluding Malaysia, Colombia, Brazil, Nigeria,Liberia, Thailand, and Uganda.

This growth is driven not only by palm oil’scost-effectiveness, but also its multiple appli-cations in the development and production ofa variety of fats and foods, such as baked goods,condensed and powdered milk, French fries,concentrated foods, and supplements inanimal food. Palm oil also reaches into non-edibles such as soaps, detergents, candles, cos-metics, glue, printing inks, lubricants formachinery, and biofuels.

Because it is used in such a variety of prod-ucts, industries that are heavily dependent onpalm oil would be hard pressed to find a suit-able, similarly high yield and cost-effective al-ternative.

All purpose or all problem oil? With the rapid growth of the palm oil industryhas come the degradation of large tracts of frag-ile lands. In order to produce oil palms at scale,many plantations have employed destructiveslash-and-burn techniques turning forests intoneat rows of oil palms, replacing the dynamicecosystems of the rainforest with a monocul-ture crop. Damage to ecosystems includes: l the destruction of tropical rain forests tomake way for new oil palm production; l the discharge of palm oil mill effluent whichkills aquatic wildlife; l the displacement of indigenous people andsubsistence farmers. l the loss of habitat and subsequent loss ofwildlife, with an especially detrimental impacton global orangutan populations; l the burning and draining of large tracts ofpeat lands, which are important absorbers ofCO2;

Certain corporations, both producers andpurchasers, have been targeted by advocacy or-ganizations for their involvement, either director indirect, in these practices. Social marketingcampaigns have proven very effective in initi-ating modification of corporate purchase andsourcing behaviours, a prime example beingGreenpeace’s viral Kit Kat video asking Nestléto stop buying palm oil from destroyed rain-forest lands. As a result of the campaign, Nestléimmediately stopped buying palm oil fromSinar Mas (Indonesia’s largest palm oil andpulp company, and a planter that Greenpeaceclaims openly destroys rainforest to expandpalm plantations). Nestlé also linked up withThe Forest Trust (a charity that looks to halt il-legal logging by tracing consumer products totheir source), which will help Nestlé formguidelines for more sustainable palm oil pur-chase. Nestlé is currently purchasing 18% of itspalm oil from “green” sources, is expected tohit 50% by the end of 2011, and plans to sourceall of its palm oil needs from environmentallyfriendly sources by 2015.

Is sustainability an option? Although the environmental and social im-pacts of palm oil production have been heav-ily criticized by a number of stakeholders,predictions of doom and gloom may yet beavoided with the implementation of sustain-ability practices that are currently underwaythrough concerted efforts of both the for-profitand non-profit sectors.

Creating access to information is a keycomponent of change for many organizationsattempting to influence a shift in corporatebehaviour. For example, in 2009, the WWFproduced the Oil Buyers Scorecard, essentiallyexposing many large-scale palm oil buyerswho have claimed eco-conscious purchasemethods, yet failed to meet their own stan-dards.

Many large corporations have begun shift-ing their production and purchasing of palmoil to address advocacy group and consumerconcerns. For example, as part of Avon’s HelloGreen Tomorrow initiative, the company an-nounced Palm Oil Promise – a company-wideglobal commitment to sustainable palm oil,which commits them to 100% sustainably cer-tified palm oil purchases. Other sustainabil-ity-driven options have surfaced over the pastfew years, and large-scale industry stakehold-ers are beginning to implement standards setout by these organizations. The leading group– The Roundtable on Sustainable Palm (RSPO)– has collaboratively worked towards creatinga set of global standards to guide the palm oilindustry toward sustainability. Currently, theRSPO has over 400 members, includingNGOs, investors, palm oil producers, andmajor corporations, including UnileverGlobal, Cognis, and IOI.

Although the RSPO is the largest organiza-tion helping to steward the palm oil industrycloser to sustainability, it is also an organiza-tion based in large part on voluntary standards.Unsurprisingly, numerous activist organiza-tions have accused the RSPO of ‘green tagging’,and have identified what they see as majorloopholes in the principles and criteria set outin the standards created by the RSPO. For ex-ample; l Friends of the Earth has accused the RSPOof being a “limited tool of technicality, which isnot able to adequately address the horrendous

Johanna Sorrell writes about theenvironment and sustainabilityfor the 2degreesnetwork.

Johanna Sorrell asks if large-scale sustainable productionof palm oil is a viable optionfor the palm oil industry.

Can palm oil be sustainable?

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impacts of oil palm cultivation on forests, landand communities”;lGreenpeace is both a supporter and critic ofthe RSPO, but has noted the continued defor-estation by companies which are members ofthe RSPO; l The Rainforest Action Network also sup-ports certain efforts of the RSPO, yet has ex-pressed intense dissatisfaction with some ofthe RSPO’s processes.

While creating and talking about standardsis one thing, implementing them is anotherstory altogether. To address this, GreenPalm, acertificate trading programme designed tohelp ensure the sustainable production ofpalm oil, has been initiated. GreenPalm servesas a form of ‘middle man’, helping purchasersof palm oil to buy certification credits to‘offset’ their purchases, mainly due to the factthat purchasing directly from a segregatedsupply of sustainably produced palm oil isoften extremely difficult. Each credit pur-chased represents a premium paid to sus-tainable producers for a ton of palm oil,helping to ensure and reinforce the sustain-ability of the supply chain.

Although these systems are far from per-fect, they are evolving tools to help stewardpalm oil toward more sustainable production,and will hopefully continue to evolve real andattainable sustainable standards from planta-tion to purchase.

Where do we go from here? Higher demand and greater consumption,coupled with a lack of available agriculturalland due to competition with other crops andwith stakeholder contention, will make palmoil production more challenging in the future.With no near-term end in sight for the grow-ing demand for palm oil, it remains to be seenwhether the palm oil industry will be able tomaintain current production levels shouldsustainability measures be applied across theboard, raising concerns for heavily invested in-dustry players. Consumer and industry edu-cation, as well as embracing opportunities forengagement on all levels, will play a major roleas production inevitably continues – sustain-ably or otherwise. l Reprinted with permission from 2degrees –The Global Community for Sustainable Business.Ph

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A worker sprays paraquat weed killer at an oil palmplantation on the outskirts of Kuala Lumpur. Paraquatis banned in the European Union, yet millions of fieldlabourers across Asia use the chemical to kill weedsand some face serious health risks as a result.

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Navdanya is a movement that I started in 1987, and here atthe Navdanya farm (Uttaranchal, north India), the first thingthat we do is to save seeds. We have saved more than 1,500varieties. It is also a place where farmers come to get seeds.In addition, it is an organic farm, and I am happy becausewhen we started it was a eucalyptus ‘desert’, and because we

have practiced organic farmingnow the soils are alive, the polli-nators have come back, and thebutterflies are busy. It hasbecome a biodiversity sanctuary.The third thing that we do isknowledge generation, both interms of training and research.

Our research shows that ecological, biodiverse systems canproduce two to five times more food per acre than the in-dustrial monocultures. The lie of industrial farming andthe lie of genetic engineering have been put to rest by thepractices of this farm. From the seed we learn renewal, gen-erosity, multiplicity and diversity.

“We have to save seeds”There is a global emergency because seeds have been ap-propriated and colonized. Corporations have declared thatseeds are their intellectual property, and the only way thatthey can get the intellectual property is by modifying andmutilating by genetic engineering. So we have a doublehazard – the hazard of genetic engineering and the hazardof seed patenting.

We have seen what this combination does in the area ofcotton. India is the land of cotton. We used to grow 1,500 va-rieties. This is the land where Gandhi spun freedomthrough cotton…. The seed is today’s spinning wheel, buttoday the seed is under threat, because all the cotton wecan spin now is genetically engineered Bt cotton, under thecontrol of one company, Monsanto. That’s why, if we don’tsave seeds, all the diversity will be gone forever, and with itthe memory that is in the seed – the ecological memory

and the cultural memory. And withit will go the livelihood of farmers.The takeover of Bt cotton haspushed farmers into such deepdebt that they are now committingsuicide. We have had 250,000 sui-cides in the last decade in India. We can’t see that happenwith the growers of corn, of tomatoes, of onions, of rice.We have only had experience with one crop – cotton – andwe have seen what it does. It devastates Nature. It devas-tates farmers. It devastates agriculture. We have to defendlife. That’s why we have to save seeds. We have to defendour freedom. That’s why we have to save seeds.

Working with NatureEcological farming, organic farming is working with Natureand that means that first of all you protect Nature. You arenot at war with Nature because industrial agriculture hascome out of war and it perpetuates a war against Natureand the Earth.

Secondly, it is farmer-friendly. An agriculture based onwar sells war-chemicals to farmers, and sells geneticallymodified, patented seeds to farmers. Those farmers get intodebt and either they leave the land and become refugees ormigrants, or they end theirlives. An agriculture that isecological works with in-ternal inputs that the farmprovides, that the Earthprovides. The soil fertilitycomes from the crops thatthe Earth provides, and thepest control comes from the diversity that the Earth gave.You don’t need to buy anything in the market. The Earth isgenerously saying, “Take everything from me”.

Thirdly, it is beneficial for the person eating becausewhen you produce food in Nature’s way, you producehealthy food, delicious food, diverse food, nutritious food….

“We have to defendour freedom.That’s why we haveto save seeds”

“You don’t need to buyanything in the market.The Earth is generouslysaying, ‘Take everythingfrom me’”

Interview

“Biodiverse systemscan produce two to fivetimes more food peracre than the industrialmonocultures”

VANDANA SHIVA

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Genetic engineering Let’s look at the science of genetically modified crops. Ge-netic engineering only relocates a single gene with a singleproperty. The only genes that have a single property aretoxic genes for producing toxins. Everything else that hasa positive property – yield, resilience to drought and tofloods – or that relates to issues of colour, flavour, and taste– they are multiple genes. You can’t relocate multiple genesthrough genetic engineering. It is a highly crude tool. It islike with a gun, all you can do is shoot. With a ‘gene gun’, allyou can do is shoot one gene with one trait. Life is too com-plex. You cannot shoot life’s complex, self-organizing ca-pacity. You can love it, maintain it, be aware of it, but youcannot shoot it. It is a primitive and crude technology.

The promise that geneticengineering would producemore food – which was a lietechnically from the begin-ning – has now been ex-posed. In India, they saidthat the cotton that had beengenetically engineeredwould provide 1,500kg per

acre. But the company, after lying to farmers, pushing themto suicide, had to admit that it is only 500kg per acre. Our va-rieties exceed this! We have just distributed traditionalcotton varieties to farmers in the ‘suicide belt’, and they havea higher performance. They don’t grow in a monoculture.

The only two applications that have been spread in theworld – because of the crudeness of the technology – are forherbicide-resilient crops and Bt toxin crops. One has a toxicgene for tolerating high doses of the company’s own herbi-cides, and the other has a toxic gene to produce a pesticideinside the plant. One was supposed to control weeds, theother to control pests. One has given us ‘super-weeds’ – so se-rious is the damage that millions of acres in the United Statesare now devastated, and Monsanto is bribing farmers to goand buy more lethal herbicides to spray on the super-resis-

tant ‘Roundup weeds’. As for the other, the Bttoxin, in India, the bollworm is resistant,and Monsanto is now selling Bollguard II.New pests have emerged everywhere, andfarmers are spending more on pesticides.

Genetically modified crops, which werebrought in as an alternative to chemicals,have increased the use of chemicals, whichis ‘wonderful’ for the industry because thebio-tech industry is the agro-chemical in-dustry. People need to recognize this to know that it is notan alternative. The alternative is ecological farming.

Feeding the citiesThe first thing to say about these projections about thegrowth in the world’s urban population is that they are verypatriarchal. They come out a hugely manipulative, control-ling, patriarchal mind. They come out of the World Banksaying, “Let’s push the farmers out of the countryside”,saying that there are “too many farmers”. There are nevertoo many farmers! A two acre farmer is not taking anythingaway from anybody. The person grabbing the land is theproblem. The ecological footprint is the footprint of in-dustry, of globalization.

We actually need more people on the land, and I am work-ing for a vision where we won’t have 70% of the world’s pop-ulation living in cities. But, whatever the numbers, every cityshould have its own ‘foodshed’. Food should become part oftown planning. Not only should cities, according to their size,have surrounding areas that provide food according to the cul-ture, according to the climate, according to seasonality, so thatevery city is supplied by localized food systems, but also, inside

every city, there must be urban gardens.l Interview by Bhavani Prakash, an en-vironmental activist based in Singaporeand founder of www.ecowalkthetalk.com– an environmental website with an Asiafocus.

“Every cityshould haveits own‘foodshed’”

“Geneticallymodified crops,brought in as analternative tochemicals, haveincreased the useof chemicals”

“In India, they saidgenetically engineeredcotton would provide1,500kg per acre… it isonly 500kg per acre. Ourvarieties exceed this!”

VANDANA SHIVA is a philosopher, scientist, environmental activist,and eco-feminist. She is the founder of Navdanya, an Indian-basednon-governmental organization which promotes biodiversityconservation, organic farming, the rights of farmers, and the processof seed saving. In 1993, she was awarded the Global 500 Roll ofHonour by the UN Environment Programme (UNEP) for outstandingenvironmental work. She is the author of many books, the mostrecent of which, Staying Alive: Women, Ecology and Development,was published in 2010.

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‘STAYING ALIVE’

POLICY BRIEF

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By OLIVIER DE SCHUTTER, United NationsSpecial Rapporteur on the Right to Food

World Bank President Robert Zoellickrecently listed measures that the G20should adopt to prepare us to confrontfood crises, now and in the future.Although welcome, these measures tackleonly the symptoms of the global foodsystem’s weaknesses, leaving the root causesof crises untouched. They may mitigate theconsequences of peak prices, but they areinadequate for avoiding the recurrence ofshocks. This can be accomplished if theG20 acts on eight priorities.

The G20 should support countries’ability to feed themselves. Since the early1990s, many poor countries’ food bills havesoared five- or six-fold, owing not only topopulation growth, but also to their focuson export-led agriculture. A lack ofinvestment in agriculture that feeds localcommunities makes these countriesvulnerable to international price shocks, aswell as to exchange-rate volatility.Mozambique, for example, imports 60% ofits wheat consumption, and Egypt imports50% of its food supplies. Rising pricesdirectly affect these countries’ ability tofeed themselves at an acceptable cost. Thistrend must be reversed by allowingdeveloping countries to support theirfarmers and, where domestic supply issufficient, protect them from dumping byforeign producers.

Food reserves should be established, notonly for humanitarian supplies in disaster-prone, infrastructure-poor areas, but alsoas a means to support stable revenues for

must be reversed. The major economiesshould ensure that such derivatives arerestricted as far as possible to qualified andknowledgeable investors who trade on thebasis of expectations regarding marketfundamentals, rather than mainly or onlyfor short-term speculative gain.

Many cash-strapped developingcountries fear that social safety nets, onceput in place, may become fiscallyunsustainable, owing to a sudden loss ofexport revenue, poor harvests, or sharpincreases in prices for food imports. Theinternational community can helpovercome this reticence by establishing aglobal reinsurance mechanism. Ifpremiums were paid in part by the countryseeking insurance and matched by donorcontributions, countries would have apowerful incentive to implement robustsocial-protection programmes.

Farmers’ organizations need support.One major reason why the majority of thehungry are among those who depend onsmall-scale farming is that they areinsufficiently organized. By formingcooperatives, they can move up the valuechain into the processing, packaging, andmarketing of their produce. They canimprove their bargaining position, bothfor input purchases and for the sale oftheir crops. And they can become animportant political constituency, so thatdecisions made about them are not madewithout them.

We must protect access to land. Each yearan area greater than France’s farmland isceded to foreign investors or governments.This land grab, which is occurring mostly

agricultural producers and ensureaffordable food for the poor. If managed inways that are transparent andparticipatory, and if countries combinetheir efforts regionally, food reserves canbe an effective way to boost sellers’ marketpower and counteract speculation bytraders, thereby limiting price volatility.

Financial speculation should be limited.While not a cause of price volatility,speculation on derivatives of essentialfood commodities significantly worsens it.Such speculation was enabled by massivederegulation of commodities-derivativemarkets that began in 2000 – and that now

Food crises: architects needed

“By forming cooperatives,small-scale farmers can moveup the value chain into theprocessing, packaging, andmarketing of their produce.They can improve theirbargaining position, both forinput purchases and for thesale of their crops.”

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POLICY BRIEF

By KENNETH MARSH, president of Kenneth S.Marsh & Associates, Ltd., consultants to thefood, pharmaceutical and packaging industries.

All member nations of the United Nationshave pledged to reduce world hunger by50% by the year 2015 as part of theMillennium Development Goals (MDG).Most efforts to reduce hunger centre onagricultural production – producing morefood. This is very important but does nottake into account the 20-60% of annual

worldwide food production that is lostbetween harvest and end-user in the foodchain. These post-harvest food losses areenormous, and present an opportunity andneed for improved packaging.

Food is lost to over-ripening, poorstorage at farm and distribution levels,during transport from farm to market,from crushing, bruising, oxidation, watertransfer, and attack by rodents, birds,insects, and microorganisms. Culturalfactors and legal requirements also play

Packaging: key to morefood and economicdevelopment

in sub-Saharan Africa, constitutes a majorthreat to the future food security of thepopulations concerned. Whatever gains inagricultural production result from theseinvestments will benefit foreign markets,not local communities. The G-20 couldcall for a moratorium on these large-scaleinvestments until an agreement onappropriate ground rules is reached.

The transition to sustainable agriculturemust be completed. Weather-relatedevents are a major cause of price volatilityon agricultural markets. In the future,climate change can be expected to causemore supply shocks. And agriculture isalso a major culprit in climate change,responsible for 33% of all greenhouse gasemissions if deforestation for cultivationand pastures is included in the tally. Weneed agricultural systems that are moreresilient to climate change, and that cancontribute to mitigating it. Agro-ecologypoints to solutions, but strong supportfrom governments is needed to scale upexisting best practices.

Finally, we need to defend the humanright to food. People are hungry notbecause too little food is being produced,but because their rights are violated withimpunity. Victims of hunger must beallowed to access remedies when theirauthorities fail to take effective measuresagainst food insecurity. Governmentsmust guarantee a living wage, adequatehealth care, and safe conditions for theworld’s 450 million agricultural workers byenforcing the conventions on labourrights in rural areas, subject toindependent monitoring.

Hunger is a political question, not just atechnical problem. We need markets, ofcourse, but we also need a vision for thefuture that goes beyond short-term fixes.The global food system will always needfirefighters. But what we need moreurgently are architects to design a morefire-resistant system. n ‰

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a major role in post-harvest foodlosses. Perfectly good food is thrown awayeveryday because of legal requirements inpublic food services.

Food losses occur in every country.Sophisticated multinational companiesmay claim to have no losses. In fact, theyhave significant losses that are not evenacknowledged in their accounting books.For example, a standard shrinkageallowance in shipping enables companiesto price goods to compensate foranticipated losses. Losses not exceedingone quarter to one half a percentshrinkage allowance per transfer areconsidered a zero loss. This may seeminconsequential, but it does add up. Forexample, with an allowance of one half apercent per transfer, eight transfers madefor one shipment allows for 4% losswithout any acknowledgement. For onemillion bushels of corn, this wouldamount to 40,000 bushels that“evaporate” from accounting records.With corn currently costing about US$5per bushel in the Unites States, thiswould amount to US$200,000 of lostrevenue. But no one would know howmuch grain was actually lost because, inofficial accounting records, the losswould be recorded as zero.

In general, packaging materials andmachinery are available in bothdeveloped and developing countries.However, developing countries tend toexperience higher levels of post-harvestfood losses, and they tend tounderestimate the potential of packagingto reduce these losses. A study conductedin Sri Lanka, for example, demonstratedthat collapsible plastic crates couldreduce crushing/bruising damage offresh produce by 20%, yet produce isoften transported in jute bags becausethey are much cheaper. Packaging isviewed as an expense, rather than anopportunity.

Packaging also offers opportunities forpromoting international trade. It is thepackaging “presentation” that sells aproduct for the first time. Very high-quality products that are well known intheir country of origin often fail onexport because packaging was chosen forits minimal cost to protect the product,and lacked adequate presentation valueto a new market that was unfamiliar withthe product. Such scenarios are evidentin both developed and developingcountries.

Food products recovered fromimproved packaging can be used toreduce hunger, and can also be used asinputs for value added products. Anofficial with the UN Food andAgricultural Organization (FAO)developed a programme of economicdevelopment through village-level foodprocessing. The concept was to producevalue-added packaged food productsfrom recovered food with limited shelflife. Ripe bananas, for example, last days,but packaged fried banana chips last formonths and therefore command higherprices. The village food processingprogramme has already led to economicdevelopment in four countries in SouthEast Asia - yielding more food, as well asenhanced economic security that helpspurchase more food. None of this wouldbe possible without packaging.

It is now time for packaging and post-harvest technologies to be recognized asjoint contributors to reducing hunger -equal to the more traditional efforts toboost agricultural production. nA version of this article originally appeared inthe World Packaging Organization’snewsletter, December 2010. It is reprinted withpermission of the author and of the WorldPackaging Organization.

By DR ALENA BUYX, Assisant Director of theNuffield Council on Bioethics which recentlypublished the report, Biofuels: ethical issues.

The development of biofuels has beendriven by three key global challenges:maintenance of energy security, economicdevelopment, and mitigation of climatechange. The apparent potential of biofuelsto address all three of these challenges hasmade them an attractive option topolicymakers, and a range of policymechanisms that encourage thedevelopment and uptake of biofuels are inplace. For example, the European Union’s2009 Renewable Energy Directiveeffectively established that biofuels shouldaccount for 10% of transport fuel by 2020 –a target that Europe seems to be on track tomeet.

However, current methods of biofuelsproduction have been widely criticized fortheir effects on the environment, on foodsecurity and prices, and on the humanrights of workers and communities. Forexample, the conversion of forests to palmoil plantations in Malaysia has raisedconcerns over detrimental impacts onbiodiversity in the region and land grabsby palm oil producers may be forcing outindigenous communities.

A key challenge, therefore, is to ensurethat policy decisions around biofuels are

‰ Biofuels:ethics andpolicy

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made in the full awareness of the ethicalimplications. Drawing on moral valuessuch as human rights, solidarity,sustainability, stewardship and justice, theNuffield Council on Bioethics has set outfive ethical principles that policymakersshould use to evaluate biofueltechnologies and guide policydevelopment.1) Biofuels development should not be atthe expense of people’s essential rights(including access to sufficient food andwater, health rights, work rights and landentitlements).2) Biofuels should be environmentallysustainable.3) Biofuels should contribute to a netreduction of total greenhouse gasemissions and not exacerbate globalclimate change.4) Biofuels should develop in accordancewith trade principles that are fair andrecognize the rights of people to justreward (including labour rights andintellectual property rights).5) Costs and benefits of biofuels should bedistributed in an equitable way.To implement these principles, theCouncil proposes that European andnational biofuels targets should bereplaced with a more sophisticated target-based strategy that considers the widerconsequences of biofuels production. Thestrategy should incorporate acomprehensive ethical standard for allbiofuels developed in and imported intothe European Union, enforced through acertification scheme. Ideally, theprinciples should also be embedded intowider international policies on, forexample, climate change mitigation,environmental sustainability, land use,and human rights.

There is a sixth ethical principle in theCouncil’s report: 6) If the first five principles are respectedand if biofuels can play a crucial role in

mitigating dangerous climate changethen, depending on certain keyconsiderations, there is a duty to developsuch biofuels.

The development of new biofuels is arapidly growing field of research, focusingon the use of biomass feedstocks that canbe produced without harm to theenvironment; that are in minimalcompetition with food production; thatneed minimal input of resources such asland and water; that can be processedefficiently to yield high-quality liquidbiofuels; and that are deliverable insufficient quantities.

Two of the main approaches indevelopment are biofuels made from thenon-edible parts of crops (known aslignocellulosic biofuels), and biofuelsmade from algae. However, commercialscale production is many years away formost new types of biofuels. This is due, inpart, to the large discrepancy between thepowerful targets and related penalties that

are in place for currently used biofuels,and the very few incentives for developingnew biofuels. Governments shouldtherefore do more to support thisresearch, for example by encouragingresearch funders to develop andimplement policies that directlyincentivize research and development ofnew and emerging biofuels technologiesthat will need less land and otherresources, avoid social and environmentalharms in production, and will deliversignificant greenhouse gas emissionssavings. nBiofuels: ethical issues can be read online at:www.nuffieldbioethics.org/biofuels

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ENDPIECE

The next issue will look at the challenges ofgovernance in the era of globalization.Setting the scene for this subject, the Instituteof Development Studies’ ANDY SUMNERoutlines some of the policy implicationsresulting from the revelation that most of theworld’s poor live in middle-income countries.

Popular understandings of global povertyare based on the false premise that poorpeople all live in poor countries. In fact,there’s a new bottom billion – 960 millionpoor people, or 72% of the world’s poor –and they live not in poor countries but inmiddle-income countries (MICs). Only aquarter of the world’s poor live in theremaining low-income countries (LICs),which are largely in sub-Saharan Africa.This is a dramatic change from just twodecades ago when 93% of poor peoplelived in low-income countries.

The poor haven’t moved, of course. The

countries in which many of the world’spoor live have got richer, in per capitaterms, and have been reclassified. Withgrowth, countries transitioning from low-to middle-income status under WorldBank classifications have led to this newbottom billion. China and India togetheraccount for about half of the world’s poor.However, the story isn’t just that India andChina have been upgraded to MIC status.If those two countries are removed, theproportion of the world’s poor in MICshas still tripled – this is a range of othercountries like Nigeria, Pakistan, Indonesia,but also some surprising ones such asSudan, Angola, and Cameroon.

How did we work this out? We took thepoverty and population data in the WorldBank’s World Development Indicatorsfrom 1988–1990 and 2007–2008 andestimated the number of millions of poorpeople for every country that had data.

These estimates of actual millions of poorpeople are hidden in poverty percentagesoften used for MDG assessments. As theWorld Bank noted in the last systematicestimation by Chen and Ravallion (2008),there were actually more poor Africans andIndians than there were in 1990, eventhough, as a percentage of the population,poverty has fallen. Why have we only just‘discovered’ this? Data are usually 2–4 yearsold, and many of these countries havegraduated in the last five years or so.

A new focus on relative poverty shouldshape the aid agenda Development policy needs to be about poorpeople, not just poor countries. We need toask what function aid has in an LIC or MIC.We need a clear, new commitment toreduce relative poverty and thus inequality,and in doing so develop a broader range ofcatalytic aid instruments. These would seekto build emancipation from aid, want, andinsecurity by a new focus on relativepoverty, and supporting the expansion ofthe tax-paying middle classes. This wouldhelp to build the domestic tax system, andimprove governance and accountability.

The ‘new bottom billion’

The world’s poorest (1.275 billion people who earn less than US$1.25 a day)Two-thirds of them live in five populous middle-income countries: India, China, Nigeria, Indonesia and Pakistan

India (456m) China (208m) Nigeria (88.6m) Indonesia (66m) Pakistan (35m)

ENDPIECE

Tailor aid to LICs and MICs so thatpoverty is targeted wherever it occurs Poverty may be increasingly turningfrom an international to a nationaldistribution problem, potentiallymaking governance and domestictaxation and redistribution policiesmore important than OfficialDevelopment Assistance (ODA). But thisdoes not mean we should stop giving aidto ‘poor countries’. Instead, donors needto differentiate more; the impact of thepost-financial crisis on public revenuesand spending means that LICs aroundthe world need aid resources more thanever before. Although some MICs cansupport their own poor people, otherscannot. Some are only just past thethreshold, and withdrawing aidsuddenly might mean they slip back toLICs. Even when domestic resourcesappear more substantial, political willmay be ambivalent. So, in MICs, thedonor strategy should include a broaderrange of aid instruments beyondresources – for example, focusing onissues such as trade, migration andclimate change.

A mechanism to share financialresponsibility between richer andpoorer countries The donor community will have tochoose how to respond to the ‘newbottom billion’. Increasingly, povertyreduction strategies and the global effortto reach the Millennium DevelopmentGoal (MDG) targets will be as muchabout tackling inequality in MICs as itwill be about an absolute lack ofresources in the poorest countries. Weneed an approach which looks to poorpeople, wherever they live, and focuseson new partnerships betweengovernments based on sharedresponsibility and accountability to thepoor (such as the Responsibility to

Protect, known as R2P in humanitariansituations) rather than a straightforwarddonor and recipient view of the world.This could work as a commitment toprovide a minimum level of income,healthcare, and education for citizens,with the financial responsibility sharedbetween rich and poor countries on asliding scale, depending on the wealth ofthe country where groups of poor peopleare living. However, the new MICs maywell not want traditional developmentassistance. This would mean that donorswould have to accept a move away fromtraditional aid to broad support forinstruments that only indirectly benefitthe poor in MICs.

ConclusionAccording to the World Bank, there willbe almost one billion poor people in2015, even if the MDGs are met. Most ofthose remaining poor people will be inMICs and will be the very poorest or the‘hardest to reach’ of all, as UNICEF hasnoted. As debates start about a post-MDG framework with a view to theSeptember 2013 UN high-level summit,new approaches will be needed. Any newglobal agreement needs to pay attentionto the changing nature of global poverty,as well as to ‘difficult’ issues such asclimate change and adaptation,demography, and urbanization. In therun-up to 2015, the ‘new bottom billion’raises a very different set of challengesfor policymakers from those they facedduring the run-up to 2000 and theadoption of the MillenniumDeclaration. n

MakingIt 47

Berners-Lee, Mike – How Bad Are Bananas? The carbonfootprint of everything

Cribb, Julian- The Coming Famine: The Global FoodCrisis and What We Can Do to Avoid It

George, Susan – Whose Crisis? Whose Future? Humes, Edward – Force of Nature: The Unlikely Story

of Wal-Mart’s Green Revolution Jackson, Tim – Prosperity without Growth: Economics

for a Finite Planet Lawrence, Geoffrey, Lyons, Kristen and Wallington,

Tabatha (eds) – Food Security, Nutrition andSustainability

Lovins, Hunter and Cohen, Boyd – Climate Capitalism Nadal, Alejandro – Rethinking Macroeconomics for

Sustainability Rosillo-Calle, Frank, and Johnson, Francis (eds) – Food

versus Fuel. An Informed Introduction to Biofuels Smith, Rick and Lourie, Bruce – Slow Death by Rubber

Duck: The Secret Danger of Everyday Things Szirmai, Adam, Naudé, Wim and Goedhuys, Micheline

(eds) – Entrepreneurship, Innovation, andEconomic Development

Yumkella, Kandeh, Kormawa, Patrick, Roepstorff,Torben and Hawkins, Anthony (eds) – Agribusinessfor Africa’s Prosperity

www.barefootcollege.org – The Barefoot College is anon-government organization providing basicservices and solutions to problems in ruralcommunities, with the objective of making themself-sufficient and sustainable.

www.berggruen.org – The Nicolas Berggruen Instituteis an independent think tank and consultancyengaged in the comparative study and design ofsystems of governance suited to the new andcomplex challenges of the 21st century.

www.globalpolicyjournal.com – Global Policy is aninnovative and interdisciplinary journal.

www.grist.org – Grist – environmental news andcommentary with a wry twist.

www.ifad.org – The International Fund for AgriculturalDevelopment (IFAD), a specialized agency of theUnited Nations, is dedicated to eradicating ruralpoverty in developing countries.

www.nestle.com/CSV – Creating Shared Value isNestlé’s way of doing business based onsustainability.

www.oaklandinstitute.org – The Oakland Institute is apolicy think tank whose mission is to increase publicparticipation and promote fair debate on criticalsocial, economic and environmental issues in bothnational and international forums.

www.thebreakthrough.org – The BreakthroughInstitute is a paradigm-shifting think tankcommitted to modernizing liberal thought for the21st century.

www.triplepundit.com – Triple Pundit is a new-mediacompany for the business community that cultivatesawareness and understanding of the triple bottomline.

www.viennaenergyforum.org – The Vienna EnergyForum – 21-23 June 2011 – will facilitate aninternational dialogue on providing universalenergy access and on the multiple benefits ofincreasing energy efficiency.

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