Impact Of The Global Economic Crisis On The Agricultural Sector
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IMPACT OF THE GLOBAL ECONOMIC CRISIS ON THE AGRICULTURAL SECTOR By : Rufus Leandre Chief Extension Officer INTRODUCTION/OVERVIEW The World Economic Crisis (WEC) which is affecting the whole world in some form or other now would inevitably also have a profound effect on our fragile economy. Though otherwise suggested or touted we are largely considered an agrarian economy that produces both crops and livestock and bananas mainly for the international market. Nationally this crisis is bound to affect our livelihood on the not to distant future. Especially the agricultural sector will most definitely feel the effects of the global economic recession and these effects are already manifest. The current global financial economic crisis is still unfolding. OECS countries have not yet begun feeling the impact and other developing countries in the Asia/Pacific Region started to feel the impact deeply from 3rd quarter. However it is still to early to comprehend the full social/Economic impact of the crisis on the agricultural sector. Every effort and stand should be taken by our Regional governments to avert the impact of the global economic crisis on the agricultural sector. Apart from the numerous critics in support of the Tourism Sector as the back bone of our small island economics. Given the present crisis agriculture is the only sector which can provide some sustainability to this economic dilemma that has been forced on our small Island Economies. Our government should make every effort and endeavour to further revitalize the agricultural sector and give real meaning to the agricultural sector as the true back bone of the St. Lucian Economy because it touches the lives of rich, poor, old, young, visitors, humans and non humans. In fact, it impacts on the lives of all living things since it is the sector which feeds the St. Lucian population and the visitors to our shores (tourist etc), provides its factories and agro industry with raw materials and generates a very significant portion of its foreign exchange earnings. 1
In our review of the agriculture sector we envisage two major effects that this global economic down turn will have on our island nation and the agricultural sector in particular.
It has provided very serious and significant opportunities for the sector and for our country if we take immediate advantage of the present environment.
It is causing great concern especially for our export oriented farmers.
Global Economic changes are effecting the context under which farmers throughout the developing world participate in the agricultural sector. Economic globalization has brought about such change as liberalization of trade and investment formulation of Regional Economic agreements and implementation of structural adjustment projects (SAPS) and the removal of subsidizes and price support. While some farmers may benefit from economic globalization by shifting to production of export commodities, accessing niche markets or funding alternative sources of income related to emerging consumer economics, many others are threatened by low crops prices removal of subsidizes, competition with cheaper imports, changes in credit availability inability to gain access to internet. And a lack of access to imputs such as high yielding seeds, fertilizer and irrigation. Likewise changes to climate are also affecting agricultural production through increased rainfall, droughts and heavy winds. The world today is in a crisis. The world agriculture is facing serious long term issues and challenges that need to be urgently addressed. These include land and water constraints, low investment in rural infrastructure and agri research, expensive agricultural imputs relative to farm gate prices and little adoption to climate change. There is a real risk that as a consequence of the current world economic problems people will have to reduce their food intake and the number of hungry could rise further. (Calpesaid). According to the Food Agricultural Organisation (FAO), the impacts of the F.C. will be left under contains at the MACRO level, with potentially negative effects on their agriculture sector and on their food security.
2
The channels through which agri markets will be affected are on both the demand and supply side. Globalization has generated intense scholarly debates, heated polemics, public demonstrations and street protest. Widely held consensus think globalization offers opportunities as well as poses risks (costs) Globalization – the widening and deepening of International flows of trade, finance and information on a single integrated global market. (UNDP) 1997 and the liberalization of policies that supports markets. In past due to the forces of globalization many developed countries have reaped the benefits of faster economic growth, cheaper imports, new technologies and increased foreign competition. Agriculture has contributed much to the, until recently, widely feted St Lucians model of economic growth and social progress. Although different sub sectors have been affected to different degrees St Lucia agriculture has not been deeply hurt by the crisis. At the same time the country looks to its agriculture to lead it out of this crisis. There is no doubt that St Lucians farmers are capable of the hard work needed to pull the economy into recovery. The increase in production are shown over the past thirty years testify to their abilities. Over this period the production of vegetables food and root crops, hot pepper and tree crops has risen six fold. Similarly the country is experiencing which production has risen sharply in less than a quarter of a century. OPPORTUNITIES The agricultural sector provides probably the best opportunity for our country to ride out the Economic downturn and come out stronger economically than ever before. Two main opportunities identified 1. Farmers/producers/farmers groups and our nation on the whole should take advantage of the crisis and produce in large quantities food and root crops, vegetable and increase our livestock development programe. This will ensure food security and sovereignty for our country, and open up massive opportunity to
3
export food to address the expected food shortages in some countries of the world. 2. We should use this opportunity to transform our economy and give agriculture its true place as the leading pillar of our society and provide it with its due weight in resource allocation and use the food and other non food crops to create industries for value addition in the country to produce what we need to consume and to make our economy much stronger in terms of exporting value added products regionally and extra regionally. The recent 30 year Agricultural Exhibition Bears testimony to the potential of the agricultural sector. Presently the programes the ministry have identified for the future in terms of value added and promotion of local food and implementation of high technological programe for its farmers. We have recognized the new and emerging consumer group which has become very busy and an increased working class made of a large number of female headed. The St. Lucian farmers has to move to another level of product development and packaging for direct sales to the supermarkets, e.g. Dasheen, Yam, seasonings etc in an already prepared form in our supermarkets, so as to save time in the normal peeling and other preparation of these products by our housewives and house husbands. •
Investment in our human resource and increase their capacity in the formation of groups and associates and empower farmers to become a lobbest group to negotiate on behalf of farmers.
•
Farmers to strengthen their organizations skills for their business, and also further development of their skills.
•
Greater efficiency in the utilization of raw materials to produce more value added goods. Opportunity for using simple approaches eg pealing of dasheen and other produce etc. no serious investment but this process still requires skill.
•
Training and skill development of farmers.
•
Strengthen business and financial management acumen
•
Farmers will become more innovative in terms of technology and inputs
•
Opportunity to form partnership between public and private sector ventures. 4
•
For development of sharper and even the development of a national farmers organization that can further lobby government for incentives, inputs and equipment etc.
CHALLENGES Apart from some of the opportunities highlighted the world economic crisis will also bring challenges to the sector. •
Higher cost of prices imports
•
Dwindling Market prices of agricultural produce – if market for produce not organized, over supply and future decline in market process.
•
Producer uncertainly
•
Because of the opportunities – exodus farmers to the agricultural sector by informal producers. Ministry of Agriculture may not have the resources to monitor the increase in production by those non produces in a timely manner for timely market forecasting.
•
Regular farmers may not be able to meet loan payments and other commitments over production and over supply possibilities. Eg. access to cheaper poor value foods, high cost of production – not reflected in price paid to farmers
•
********* high cost of inputs
•
When societies are in danger of collapse during severe economic turmoil for e.g. Asia in 1997, evidence significant rises in suicide and crime rates, abuse and violence against women ethnic Heyzer etal 1999, Knowles et al 1999. (Women bear the brunt of these social fall outs).
• SOME ACTIONS TO STIMULATE AND RIVITALIZE THE SECTOR IN THIS CRISIS 5
These include: •
Increasing the budget for agriculture from % to % in budget year 2008-2009-2010-2011.
•
Directing the Economic Partnership Agreement (EPA) funds to the agricultural sector
•
Directing more Special Framework of Assistance(SFA) funds and other grant funding to develop appropriate, meaningful projects programes to support food production.
•
Insist at the European Union (EU) level for a suspension of the Tarrification and also WTO agreement and present barrier to trade from the ACP countries.
•
Insist at EU/WTO level provision of subsidies/incentives for our farmers and farm products so as to create the enabling environment for producing cheaper local food. Create a fund for support to provide consumers or farmers and incentives to assist food prices that would help in providing cheaper foods to the population.
•
Provision of further support and lower interest rates for lending to producers through agricultural development bank or other financial institutions less stringent measures for farmers to take loans for enterprise development.
•
Establishment and initiation of a special allocation to support farmers through some form of investments bank window.
•
Create and investment pool for the purchase of farm equipment and other agro industrial equipment eg. tractors, cold storage equipment, water storage facilities for on farm production.
•
Insists at the EU level or other funding agencies an agricultural stimulus package diversification efforts, to support our food security and sovereignty and price support mechanism and programs in the agricultural sector. Increased impetus or our support for local producers (buy local campaign) World Bank ha pledged them support during the economy recent food crisid.
GOVERNMENT SUPPORT STRUCTURES 6
In order farmers to increase on their scale of production:The following measures are to be followed by government to ensure success of this venture. Accelerate and encourage/subsidize agricultural development bank/credit union etc to extend very v low intent credit facilities for venture capital programmes. Need to provide further support to our farmers to provide them with very improved technologies improved seeds and other low cost inputs especially fertilizer and other high price inputs. Facilitation of timely delivery of inputs. Creation of investment opportunities for developing and purchasing of a appropriate water storage structures and facilities to harvest and develop potential sources of water for irrigation. (to much water is being lost during heavy periods of rain). Create the enabling environment to provide irrigation facilities and structures for all farmers as required by 2012 . Provide for orderly and sound marketing of all farmers produce:establishment of central market/facility to be owned and operated by farmers groups by private sector. Form partnerships and alliances with all hotel and other entities on the island. Call for a review of tax incentives provided to those entities including clauses which will inform level of tax holiday and tied to the purchase of local products as a major part of the agreement for receiving Tax concession. Also methods and agreement for payment to these farmers on a more timely basis. Create the environment for the hotel in ensuring reliability of produce on a regular basis, the hotel should consider a joint venture investment to ensure success for both parties. (agri-Tourism linkages improved and increased). Government to seek assistance and guidance in support of imposing tariff on imported competing goods. This will have to be negotiated (CSME, WTO, etc). If St. Lucia is to properly implement this programe
7
It will not have suffered the brunt economical and financial of the crisis being presently experienced by development countries. Become a more food secure and food sovereign state. Emerge with an opportunity to become a more export oriented economy. Consumers will consume more locally grown products and decrease in our Foreign exchange expenditure on imported goods and result in a decrease in our food import bill Government needs to put measures in place and ensure that the Labour Code is swiftly put into law. This measure will encourage and promote a more efficient labour force, and ensure that our farmers will get a fair day work for a fair day pay. Presently labour in the sector is about 3 hours per day this would mean that by wage the farmer is entitled to pay for the amounts of hours worked. Productivity in the sector will increase three fold. Need for Government to begin to look at Regional Farm labour programe/project. Continue to invest in technological development especially creating the synergies in the agricultural and energy sectors – development of solar and other forms of renewable energy on farms – including agro base renewable energy. In order to bail out the producers, buyers, processors and all stakeholders in the value chain from the impact of the Economic Crisis there is need to access: Long-term credit facilities, it is expected that this facility will be housed in the newly established development bank which will offer long term loans at affordable rates to enable all stakeholders to sustain and develop the sector during the recession. A revolving fund facility is suggested. Opportunity to speak to crop insurance programmes. Increase Public spending and Investments in Agriculture Agriculture is the main livelihood of the working people/rural people farmers in St. Lucia and still provides employment for over 60% of the neglect in agriculture is addressed, the persistent poverty and widening equalities in the region and St. Lucian will continue with grave repercussion on food safety. In 2008 the sector received considerably 8
effective amidst and rising food prices, faced with the global Renewal crisis and less shifted to other issues. Whilst some stimulus packages introduce direct spending increases for agriculture and rural development, the overwhelming is on other sectors. More needs to be done to revitalize and revive agriculture emphasis. Subsidize loans to farmers and rural infrastructure investment – China/Vietnam through stimulus packages which resulted in the improvement and sustainability of the sector Pension development fund for farmers is also an option. More support required for government as it relates to vale added agro processing. Criteria should be set for providing incentives and concessions.
OTHER COMMENTS AND SUGGESTIONS •
Turn crisis into opportunities
•
Aid expected to decline and may exacerbate the problem.
•
Pursuing supportive monetary and agricultural fiscal policies
Focus three fold when dealing with crisis a. Maintain macro economic fundamentals b. Minimize the social consequence of the crisis. c. Undertake strategic long term investment in physical, human capital and fiscal packages, which should be pro poor. Monetary policies are geared to keeping the financial sector liquid so that enterprises can survive large fiscal stimulus packages introduced in e.g. Asia/pacific – carrying specific measures to minimize unemployment, protect small enterprise encourage consumption spending, direct income support to low income households, embark on rural development and increase in health care spending. CONCLUSION
9
We strongly believe that agriculture is the only sector that will see the economy through the world economic recession and we should all pull our weights towards accelerating, through environmental climate change incentives etc. The green revolution in St. Lucia we are coping and that present minister of agriculture exemplifies and is a great support of our vision as he shown the fortitude to deliver and his promises and support to the agricultural sector this far. I am therefore urging all St. Lucians to come together to support our by local, eat local campaigns and other programs of the MALFF and to decrease our level of non communicable disease by eating local fresh and nutritious foods and other products. Let us take advantage of this situation to contribute to our country by working hard to produce more, increase our productivity and the quality your goods be patrotic and ensure we honor our commitments to our local products for our current survival and future property.
10
In our review of the agriculture sector we envisage two major effects that this global economic down turn will have on our island nation and the agricultural sector in particular.
It has provided very serious and significant opportunities for the sector and for our country if we take immediate advantage of the present environment.
It is causing great concern especially for our export oriented farmers.
Global Economic changes are effecting the context under which farmers throughout the developing world participate in the agricultural sector. Economic globalization has brought about such change as liberalization of trade and investment formulation of Regional Economic agreements and implementation of structural adjustment projects (SAPS) and the removal of subsidizes and price support. While some farmers may benefit from economic globalization by shifting to production of export commodities, accessing niche markets or funding alternative sources of income related to emerging consumer economics, many others are threatened by low crops prices removal of subsidizes, competition with cheaper imports, changes in credit availability inability to gain access to internet. And a lack of access to imputs such as high yielding seeds, fertilizer and irrigation. Likewise changes to climate are also affecting agricultural production through increased rainfall, droughts and heavy winds. The world today is in a crisis. The world agriculture is facing serious long term issues and challenges that need to be urgently addressed. These include land and water constraints, low investment in rural infrastructure and agri research, expensive agricultural imputs relative to farm gate prices and little adoption to climate change. There is a real risk that as a consequence of the current world economic problems people will have to reduce their food intake and the number of hungry could rise further. (Calpesaid). According to the Food Agricultural Organisation (FAO), the impacts of the F.C. will be left under contains at the MACRO level, with potentially negative effects on their agriculture sector and on their food security.
2
The channels through which agri markets will be affected are on both the demand and supply side. Globalization has generated intense scholarly debates, heated polemics, public demonstrations and street protest. Widely held consensus think globalization offers opportunities as well as poses risks (costs) Globalization – the widening and deepening of International flows of trade, finance and information on a single integrated global market. (UNDP) 1997 and the liberalization of policies that supports markets. In past due to the forces of globalization many developed countries have reaped the benefits of faster economic growth, cheaper imports, new technologies and increased foreign competition. Agriculture has contributed much to the, until recently, widely feted St Lucians model of economic growth and social progress. Although different sub sectors have been affected to different degrees St Lucia agriculture has not been deeply hurt by the crisis. At the same time the country looks to its agriculture to lead it out of this crisis. There is no doubt that St Lucians farmers are capable of the hard work needed to pull the economy into recovery. The increase in production are shown over the past thirty years testify to their abilities. Over this period the production of vegetables food and root crops, hot pepper and tree crops has risen six fold. Similarly the country is experiencing which production has risen sharply in less than a quarter of a century. OPPORTUNITIES The agricultural sector provides probably the best opportunity for our country to ride out the Economic downturn and come out stronger economically than ever before. Two main opportunities identified 1. Farmers/producers/farmers groups and our nation on the whole should take advantage of the crisis and produce in large quantities food and root crops, vegetable and increase our livestock development programe. This will ensure food security and sovereignty for our country, and open up massive opportunity to
3
export food to address the expected food shortages in some countries of the world. 2. We should use this opportunity to transform our economy and give agriculture its true place as the leading pillar of our society and provide it with its due weight in resource allocation and use the food and other non food crops to create industries for value addition in the country to produce what we need to consume and to make our economy much stronger in terms of exporting value added products regionally and extra regionally. The recent 30 year Agricultural Exhibition Bears testimony to the potential of the agricultural sector. Presently the programes the ministry have identified for the future in terms of value added and promotion of local food and implementation of high technological programe for its farmers. We have recognized the new and emerging consumer group which has become very busy and an increased working class made of a large number of female headed. The St. Lucian farmers has to move to another level of product development and packaging for direct sales to the supermarkets, e.g. Dasheen, Yam, seasonings etc in an already prepared form in our supermarkets, so as to save time in the normal peeling and other preparation of these products by our housewives and house husbands. •
Investment in our human resource and increase their capacity in the formation of groups and associates and empower farmers to become a lobbest group to negotiate on behalf of farmers.
•
Farmers to strengthen their organizations skills for their business, and also further development of their skills.
•
Greater efficiency in the utilization of raw materials to produce more value added goods. Opportunity for using simple approaches eg pealing of dasheen and other produce etc. no serious investment but this process still requires skill.
•
Training and skill development of farmers.
•
Strengthen business and financial management acumen
•
Farmers will become more innovative in terms of technology and inputs
•
Opportunity to form partnership between public and private sector ventures. 4
•
For development of sharper and even the development of a national farmers organization that can further lobby government for incentives, inputs and equipment etc.
CHALLENGES Apart from some of the opportunities highlighted the world economic crisis will also bring challenges to the sector. •
Higher cost of prices imports
•
Dwindling Market prices of agricultural produce – if market for produce not organized, over supply and future decline in market process.
•
Producer uncertainly
•
Because of the opportunities – exodus farmers to the agricultural sector by informal producers. Ministry of Agriculture may not have the resources to monitor the increase in production by those non produces in a timely manner for timely market forecasting.
•
Regular farmers may not be able to meet loan payments and other commitments over production and over supply possibilities. Eg. access to cheaper poor value foods, high cost of production – not reflected in price paid to farmers
•
********* high cost of inputs
•
When societies are in danger of collapse during severe economic turmoil for e.g. Asia in 1997, evidence significant rises in suicide and crime rates, abuse and violence against women ethnic Heyzer etal 1999, Knowles et al 1999. (Women bear the brunt of these social fall outs).
• SOME ACTIONS TO STIMULATE AND RIVITALIZE THE SECTOR IN THIS CRISIS 5
These include: •
Increasing the budget for agriculture from % to % in budget year 2008-2009-2010-2011.
•
Directing the Economic Partnership Agreement (EPA) funds to the agricultural sector
•
Directing more Special Framework of Assistance(SFA) funds and other grant funding to develop appropriate, meaningful projects programes to support food production.
•
Insist at the European Union (EU) level for a suspension of the Tarrification and also WTO agreement and present barrier to trade from the ACP countries.
•
Insist at EU/WTO level provision of subsidies/incentives for our farmers and farm products so as to create the enabling environment for producing cheaper local food. Create a fund for support to provide consumers or farmers and incentives to assist food prices that would help in providing cheaper foods to the population.
•
Provision of further support and lower interest rates for lending to producers through agricultural development bank or other financial institutions less stringent measures for farmers to take loans for enterprise development.
•
Establishment and initiation of a special allocation to support farmers through some form of investments bank window.
•
Create and investment pool for the purchase of farm equipment and other agro industrial equipment eg. tractors, cold storage equipment, water storage facilities for on farm production.
•
Insists at the EU level or other funding agencies an agricultural stimulus package diversification efforts, to support our food security and sovereignty and price support mechanism and programs in the agricultural sector. Increased impetus or our support for local producers (buy local campaign) World Bank ha pledged them support during the economy recent food crisid.
GOVERNMENT SUPPORT STRUCTURES 6
In order farmers to increase on their scale of production:The following measures are to be followed by government to ensure success of this venture. Accelerate and encourage/subsidize agricultural development bank/credit union etc to extend very v low intent credit facilities for venture capital programmes. Need to provide further support to our farmers to provide them with very improved technologies improved seeds and other low cost inputs especially fertilizer and other high price inputs. Facilitation of timely delivery of inputs. Creation of investment opportunities for developing and purchasing of a appropriate water storage structures and facilities to harvest and develop potential sources of water for irrigation. (to much water is being lost during heavy periods of rain). Create the enabling environment to provide irrigation facilities and structures for all farmers as required by 2012 . Provide for orderly and sound marketing of all farmers produce:establishment of central market/facility to be owned and operated by farmers groups by private sector. Form partnerships and alliances with all hotel and other entities on the island. Call for a review of tax incentives provided to those entities including clauses which will inform level of tax holiday and tied to the purchase of local products as a major part of the agreement for receiving Tax concession. Also methods and agreement for payment to these farmers on a more timely basis. Create the environment for the hotel in ensuring reliability of produce on a regular basis, the hotel should consider a joint venture investment to ensure success for both parties. (agri-Tourism linkages improved and increased). Government to seek assistance and guidance in support of imposing tariff on imported competing goods. This will have to be negotiated (CSME, WTO, etc). If St. Lucia is to properly implement this programe
7
It will not have suffered the brunt economical and financial of the crisis being presently experienced by development countries. Become a more food secure and food sovereign state. Emerge with an opportunity to become a more export oriented economy. Consumers will consume more locally grown products and decrease in our Foreign exchange expenditure on imported goods and result in a decrease in our food import bill Government needs to put measures in place and ensure that the Labour Code is swiftly put into law. This measure will encourage and promote a more efficient labour force, and ensure that our farmers will get a fair day work for a fair day pay. Presently labour in the sector is about 3 hours per day this would mean that by wage the farmer is entitled to pay for the amounts of hours worked. Productivity in the sector will increase three fold. Need for Government to begin to look at Regional Farm labour programe/project. Continue to invest in technological development especially creating the synergies in the agricultural and energy sectors – development of solar and other forms of renewable energy on farms – including agro base renewable energy. In order to bail out the producers, buyers, processors and all stakeholders in the value chain from the impact of the Economic Crisis there is need to access: Long-term credit facilities, it is expected that this facility will be housed in the newly established development bank which will offer long term loans at affordable rates to enable all stakeholders to sustain and develop the sector during the recession. A revolving fund facility is suggested. Opportunity to speak to crop insurance programmes. Increase Public spending and Investments in Agriculture Agriculture is the main livelihood of the working people/rural people farmers in St. Lucia and still provides employment for over 60% of the neglect in agriculture is addressed, the persistent poverty and widening equalities in the region and St. Lucian will continue with grave repercussion on food safety. In 2008 the sector received considerably 8
effective amidst and rising food prices, faced with the global Renewal crisis and less shifted to other issues. Whilst some stimulus packages introduce direct spending increases for agriculture and rural development, the overwhelming is on other sectors. More needs to be done to revitalize and revive agriculture emphasis. Subsidize loans to farmers and rural infrastructure investment – China/Vietnam through stimulus packages which resulted in the improvement and sustainability of the sector Pension development fund for farmers is also an option. More support required for government as it relates to vale added agro processing. Criteria should be set for providing incentives and concessions.
OTHER COMMENTS AND SUGGESTIONS •
Turn crisis into opportunities
•
Aid expected to decline and may exacerbate the problem.
•
Pursuing supportive monetary and agricultural fiscal policies
Focus three fold when dealing with crisis a. Maintain macro economic fundamentals b. Minimize the social consequence of the crisis. c. Undertake strategic long term investment in physical, human capital and fiscal packages, which should be pro poor. Monetary policies are geared to keeping the financial sector liquid so that enterprises can survive large fiscal stimulus packages introduced in e.g. Asia/pacific – carrying specific measures to minimize unemployment, protect small enterprise encourage consumption spending, direct income support to low income households, embark on rural development and increase in health care spending. CONCLUSION
9
We strongly believe that agriculture is the only sector that will see the economy through the world economic recession and we should all pull our weights towards accelerating, through environmental climate change incentives etc. The green revolution in St. Lucia we are coping and that present minister of agriculture exemplifies and is a great support of our vision as he shown the fortitude to deliver and his promises and support to the agricultural sector this far. I am therefore urging all St. Lucians to come together to support our by local, eat local campaigns and other programs of the MALFF and to decrease our level of non communicable disease by eating local fresh and nutritious foods and other products. Let us take advantage of this situation to contribute to our country by working hard to produce more, increase our productivity and the quality your goods be patrotic and ensure we honor our commitments to our local products for our current survival and future property.
10
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