TRADE AND FOOD SECURITY IN THE CAUCASUS AND CENTRAL ASIA REGION: PROSPECTS AND POLICY CHALLENGES

Kateryna G. Schroeder, William H. Meyers and David Sedik

IAAE Inter-Conference Symposium

Almaty, Kazakhstan

4 April 2016

• Current State of Food Insecurity in CCA

• Global and Regional Trends

• Macroeconomic and Geopolitical Factors

• Focus on Trade

• Policy Implications

Outline

Food security framework

Food security exists when all people, at all

times, have physical, social and economic

access to sufficient safe and nutritious food

that meets their dietary needs and food

preferences for an active and healthy life

(Committee on World Food Security,

2009).

Selected food availability indicators

Prevalence of

Undernourishment, %

2013-15

Armenia 6.3

Azerbaijan <5

Georgia 8.0

Kazakhstan <5

Kyrgyzstan 6.0

Tajikistan 34.0

Turkmenistan <5

Uzbekistan <5

CCA 7.3

Least developed countries 26.9

Developing countries 13.1

Developed countries <5

World 11.0

Source: FAO (2015)

Average Dietary

Energy Supply

Adequacy, %

Average Value of Food

Production,

constant 2004-2006 I$ per

caput

2013-15 2011-13

118 348

126 266

115 161

136 460

122 291

96 149

128 444

122 358

122 337

105 149

119 272

136 491

122 311

Food Access Uneven progress across

the region

Income distribution

Seasonal nature of

poverty

Long harsh winters

Rural vs. urban poverty

Vulnerable groups

(youth, women,

migrants, elderly,

people with

disabilities)

05

1015202530354045

Remittances inflows as % of GDP, 2014

05

101520253035404550

Share of income spent on food, % of total

income, 2014

Source: USDA (2014); World Bank (2015)

Utilization

• Inadequacy of vitamin A, vitamin D, folic acid,

iodine, and calcium for all ages

• For adults, micronutrient deficiencies are primarily

caused by inadequate zinc, iron, selenium, copper,

vitamin B12, and vitamin C

• Anaemia in children

• Uzbekistan, Kyrgyzstan, Tajikistan, Azerbaijan, and

Armenia (>30%)

• and pregnant women

• ranging from 26.5% in Armenia to 38.4% in Uzbekistan

High share of cereal consumption in the CA countries

0

500

1000

1500

2000

2500

3000

1995 2000 2005 2011

Central Asia

Vegetables

Vegetable Oils

Sugar & Sweeteners

Milk - Excluding Butter

Meat

Fruits - Excluding Wine

Fish, Seafood

Eggs

Cereals - Excluding Beer

Source: FAOSTAT, 2015

Dynamics of the food consumption patterns, kcal/capita/day

Utilization

0

5

10

15

20

25

30

35

40

45

Armenia Azerbaijan Georgia Kazakhstan Kyrgyzstan Tajikistan Uzbekistan

Wasting Severer wasting Stunting Underweight

Prevalence of underweight, stunting, wasting and severe wasting in children under

5 in 2014, % of children (<5)

Source: FAO, 2014

Dynamics of the food consumption – the other side of the story

Source: FAOSTAT, 2015

Dynamics of the food consumption patterns, %

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1995 2000 2005 2011

Central Asia

Vegetables

Vegetable Oils

Sugar & Sweeteners

Milk - Excluding Butter

Meat

Fruits - Excluding Wine

Fish, Seafood

Eggs

Cereals - Excluding Beer

Obesity trends

0

10

20

30

40

50

60

Azerbaijan Kazakhstan Armenia Georgia Uzbekistan Kyrgyzstan Turkmenistan Tajikistan

Total Child obesity Male

Overweight and obesity rates in adults and children, %, 2014

Source: WHO, 2014

Dependency on food

imports and oil exports

Unsustainable

production practices

Climate change

processes

Political instability &

absence of violence

Food Stability

0

20

40

60

80

100

120

140

SEE CIS CCA

1900-2000 2001-2016

0

20

40

60

80

100

120

Water dependency ratio, %, 2015 (FAO, 2015)

Frequency of natural disasters in ECA countries,

number (EM-DAT, 2015)*

Global and Regional Trends (FAO, 2013) External:

1) Macroeconomic and geopolitical factors

Internal:

1) Increasing food demand

2) Evolving natural resources’ constraints

3) Energy scarcity and security

4) Dynamic food prices and price volatility

5) Changing agrarian systems and globalization of food production

6) Evolving patterns in food trade and policies

7) Impact of climate change

8) Role of science and technology in agricultural productivity

9) Evolving development environment

10) Increasing vulnerability to disasters and crises

Global and Regional Trends (FAO, 2013) External:

1) Macroeconomic and geopolitical factors

Internal:

1) Increasing food demand

2) Evolving natural resources’ constraints

3) Energy scarcity and security

4) Dynamic food prices and price volatility

5) Changing agrarian systems and globalization of food production

6) Evolving patterns in food trade and policies

7) Impact of climate change

8) Role of science and technology in agricultural productivity

9) Evolving development environment

10) Increasing vulnerability to disasters and crises

• Slowing economic growth in emerging and developing

countries, especially China

• Slowing TFP and slowing investment growth in EMEs

• An increase in interest rates by the U.S. Federal Reserve

• Weak commodity prices, including agricultural

commodities, metals, and particularly oil

• Conflict between Ukraine and Russia, and more trade

disruptions between Russia and EU

• Currency devaluation

Macroeconomic and geopolitical factors

Slowing economic growth

Average GDP

growth, annual %

Projected GDP

growth, annual %

Unemployment

rate, % of total

labor force

2010-14* 2020

Projections

2014

Armenia 4.1 3.5 17.1

Azerbaijan 3.2 3.3 5.2

Georgia 5.6 5.0 13.4

Kazakhstan 6.0 4.2 4.1

Kyrgyzstan 3.7 5.3 8.1

Russian Federation 2.8 1.5 5.1

Tajikistan 7.1 5 10.1

Turkmenistan 11.0 6.9 10.5

Uzbekistan 8.2 6.5 10.6

Source: IMF, 2015

• Slowing economic growth in emerging and developing

countries, especially China

• Slowing TFP and slowing investment growth in EMEs

• An increase in interest rates by the U.S. Federal Reserve

• Weak commodity prices, including agricultural

commodities, metals, and particularly oil

• Conflict between Ukraine and Russia, and more trade

disruptions between Russia and EU

• Currency devaluation

Macroeconomic and geopolitical factors

World Bank food, agriculture, and energy

price indices, 01/00 to 1/16, 2005=100

Source: World Bank monthly commodity prices (Pink Sheet), accessed Feb 29, 2016

FAPRI projections: the decline in farm

commodity prices

Source: FAPRI-MU, 2016

Commodity Peak year Peak level Recent

year

Recent

level

Change 2016/17

projections

Corn price

($/bu.) 2012/13 6.89 2015/16 3.60 -48% 3.75

Wheat price

($/bu.)

2012/13

7.77

2015/16

5.00

-36% 4.97

Soybean

price ($/bu.)

2012/13

14.40

2015/16

8.80 -39% 8.73

Cotton price

(cents/lb.) 2011/12 88.30

2015/16

59.50 -33% 56.9

• Slowing economic growth in emerging and developing

countries, especially China

• Slowing TFP and slowing investment growth in EMEs

• An increase in interest rates by the U.S. Federal Reserve

• Weak commodity prices, including agricultural

commodities, metals, and particularly oil

• Conflict between Ukraine and Russia, and more trade

disruptions between Russia and EU

• Currency devaluation

Macroeconomic and geopolitical factors

Currency devaluation across the region

1

1.2

1.4

1.6

1.8

2

2.2

2.4

2.6

Jan

-14

Feb

-14

Mar

-14

Ap

r-1

4

May

-14

Jun

-14

Jul-

14

Au

g-1

4

Sep

-14

Oct

-14

No

v-1

4

Dec

-14

Jan

-15

Feb

-15

Mar

-15

Ap

r-1

5

May

-15

Jun

-15

Jul-

15

Au

g-1

5

Sep

-15

Oct

-15

No

v-1

5

Dec

-15

Jan

-16

Feb

-16

Mar

-16

Jan

uar

y 2

01

4 =

10

0

USD/RUB USD/KZT USD/AMD USD/AZN USD/GEL USD/KGS USD/UZS USD/TJS USD/TMT

Source: Oanda.com

Evolving patterns in ag trade and policies

• Geographic concentration of trade

• Commodity concentration of exports: • Azerbaijan: Oils and fats, sugar

and fruits

• Kazakhstan: Grain and flour

• Kyrgyzstan: Vegetables and fruits

• Tajikistan: Cotton

• Turkmenistan: Cotton

• Uzbekistan: Cotton

Source: FAO, 2015

Composition of agricultural net trade in

the CCA countries, 1000 US$

-3

-2.5

-2

-1.5

-1

-0.5

0

0.52000 2013

Mill

ion

s

Sugar and HoneyOilseedsMilk EquivalentMeat and Meat PreparationsFruit + Vegetables

Trade disruptions • Import tariffs

• Export duties

• Export/import bans

• Differing SPS standards and regulatory systems

• Other barriers to trade

• Poor quality of infrastructure

• High transaction costs

• Limited capacity for policy implementation

Source: FAO, 2015

Trade integration processes

World Trade

Organization (WTO)

Eurasian Economic

Union (EAEU)

Deep and

Comprehensive Free

Trade Agreement

(DCFTA) between the

European Union and

Georgia

Consolidation and expansion of the EAEU

• Created with an ambition to share a “single economic space” • Elimination of tariffs

• Harmonization of regulations

• There are, however, challenges • Inconsistency with international AND

national standards

• Limited capacity for implementation and enforcement

• Protectionist domestic agricultural policies and import substitution agendas

Source: Courtesy of Roman Mogilevsky, 2015

14.7

7.6

12.7

11.1

6.8

11.6

7.6

11.6

0

2

4

6

8

10

12

14

16

Armenia Kazakhstan Kyrgyzstan Russia

WTO bound rate Applied MFN rate

Policy implications

Current policy environment

• Improvement of agricultural production in the country with a corollary goal of achieving food self-sufficiency;

• Trade interventions;

• Protection of domestic consumers through income transfers and/or food price controls;

• Market interventions and managing of commodity stocks.

• Limited focus on utilization pillar

Re-direction of policy priorities

• Trade liberalization/adherence to WTO

principles

• Social protection policies/Safety net

programs

• School feeding programs

• Much stronger focus on the Utilization

pillar

• Fortification

• Labeling

• Education

ECA countries’ expenditures on social safety net

programs, % of GDP

Source: World Bank, 2015

Overview of the UCT programs in selected ECA

countries

Country Unconditional cash transfer programs, 2011

Program name # of beneficiaries % of total population

Armenia Family Poverty Benefit 96,309 3.25

Azerbaijan Targeted Social Assistance 548,663 5.98

Georgia Targeted Social Assistance 428,492 9.56

Kazakhstan Targeted Social Assistance 104,100 0.63

Kyrgyz Republic Monthly Benefit for Poor

Families with Children

361,500 6.56

Tajikistan Targeted Social Assistance 11,184 0.14

Uzbekistan Social Assistance to Poor

Families

600,000 2.05

Source: World Bank, 2015

Policy implications

Current policy environment

• Improvement of agricultural production in the country with a corollary goal of achieving food self-sufficiency;

• Trade interventions;

• Protection of domestic consumers through income transfers and/or food price controls;

• Market interventions and managing of commodity stocks.

• Limited focus on utilization pillar

Re-direction of policy priorities

• Trade liberalization/adherence to WTO

principles

• Social protection policies/Safety net

programs

• School feeding programs

• Much stronger focus on the Utilization

pillar

• Fortification

• Labeling

• Education

Thank you!

Global real GDP growth outlook

2014 2015 2016 2017

World

IHS (July) 2.8 2.6 3.3 3.4

China

IHS (July) 7.4 6.5 6.3 6.5

Economist poll (Oct.) 6.8 6.5

Euro area

IHS (July) 0.9 1.5 1.7 1.8

Economist poll (Oct.) 1.5 1.7

Sources: IHS Global Insight, July 2015 and The Economist magazine poll

of forecasters, October 2015

FOOD SECURITY INDICATORS WHAT DOES IT MEASURE? DIMENSION

Average Dietary Energy Supply Adequacy compares food supply with requirements

Average Value of Food Production evolution of total food production

Share of dietary energy supply derived from cereals, roots & tubers importance of staples in food supplies

Average protein supply availability of proteins in the country

Average supply of protein of animal origin availability of animal proteins in the country

Percent of paved roads over total roads

Road density

Rail-lines density

Domestic Food Price Level Index food price level relative to prices of other goodsECONOMIC

ACCESS

Access to improved water sources

Access to improved sanitation facilities

Cereal import dependency ratio

Percent of arable land equipped for irrigation

Value of food imports over total merchandise exports

Political stability and absence of violence/terrorism comparative score of political stability

Domestic food price volatility deviation of food prices from trend

Per Capita food production variability deviation of fod production from trend

Per Capita food supply variability deviation of food suply from trend

Prevalence of undernourishment dietary energy deprivation compared to minimum requirement

Share of food expenditure of the poor importace of food in consumptio of poorer housholds

Depth of the food deficit average dietary energy gap

Prevalence of food inadequacy dietary energy deprivation under high physical activity

Percentage of children under 5 years of age affected by wasting incidence of low weight for height in children

Percentage of children under 5 years of age who are stunted incidence of low height for age in children

Percentage of children under 5 years of age who are underweight incidence of low weight for age in children

Percent of adults who are underweight incidence of low weight for age in adults

Prevalence of anemia among pregnant women (%) incidence of anemia deficiency in pregnant women population

Prevalence of anemia among children under 5 (%) incidence of anemia in children

Prevalence of Vitamin A deficiency (forecoming) incidence of Vitamin A deficiency

Prevalence of Iodine deficiency (forecoming) incidence of Iodine deficiency

availability of hygienic conditions allowing to utilize food

exposure of countries to food supply shocks VULNERABILITY

STATIC and

DYNAMIC

DETERMINANTS

ACCESS

availability of pyshical infrastrcutures allowing to access food

UTILIZATION

OUTCOMES

UTILIZATION

AVAILABILITY

PHYSICAL ACCESS

SHOCKS

The suite of FAO indicators

Definitions • Average Dietary Energy Supply Adequacy: The indicator expresses the Dietary Energy Supply (DES) as a percentage of the

Average Dietary Energy Requirement (ADER) in each country.Each country's or region's average supply of calories for food consumption is normalized by the average dietary energy requirement estimated for its population, to provide an index of adequacy of the food supply in terms of calories. The indicator is calculated as an average over 3 years to reduce the impact of possible errors in estimated DES, due to the difficulties in properly accounting of stock variations in major food. It thus provides an indicator of structural food supply adequacy

• Prevalence of Undernourishment: The Prevalence of Undernourishment expresses the probability that a randomly selected individual from the population consumes an amount of calories that is insufficient to cover her/his energy requirement for an active and healthy life. The indicator is computed by comparing a probability distribution of habitual daily Dietary Energy Consumption with a threshold level called the Minimum Dietary Energy Requirement. Both are based on the notion of an average individual in the reference population.

• Average Value of Food Production: The total value of Annual Food Production, as estimated by FAO and published by FAOSTAT in International Dollars (I $) divided by the total population.

• It provides a cross country comparable measure of the relative economic size of the food production sector in the country.

• Stunted are children whose weight for age is more than two standard deviations below the median for the international reference population ages between 0-59 months (FAO, 2014c);

• Prevalence of wasting is a proportion of children under five whose weight for height is more than two standard deviations below the median for the international reference population ages between 0-59 months (FAO, 2014c);

• Prevalence of severe wasting is a proportion of children under five whose weight for height is more than three standard deviations below the median for the international reference population ages between 0-59 months(FAO, 2014c);

• Underweight are considered children whose weight for their age is more than two standard deviations below the median for the international reference population ages between 0-59 months(FAO, 2014c);