Agricultural investment is one of the most important and effective strategies for economic growth and poverty reduction in rural areas of the world where the majority of the poor live.
According to Food and Agriculture Organisation (FAO) of the United States, gross domestic product (GDP) growth in agriculture has been shown to be at least twice as effective in reducing poverty as growth originating in other sectors (World Bank, World Development Report 2008).
The regions of the world where hunger and poverty are most widespread today have seen stagnant or declining rates of agricultural investment in agriculture over the past three decades. Eradicating hunger in these regions and increasing food production requires substantial increases in the level of investment in agriculture including dramatic improvements in the level and quality of governments own investment in the sector.
The FAO estimates that an additional investment of USD 83 billion will be needed annually to close the gap between what low and middle income countries have invested each year over the last decade and what is needed by 2050.
In other words, yearly investment in agriculture needs to rise by more than 50 per cent. The FAOs activities to encourage investment in agriculture and rural development include: technical and economic advice to governments on policies and legislation that influence public and private investment; capacity development of governments to design and execute multi-sector and multi-partner investment strategies aligned with their own priorities assistance for countries to design, implement and evaluate investments, not only for agriculture and rural development, but also to meet the food and nutrition needs of their citizens; technical support to partner international financing institutions to leverage additional investment; support to the development and implementation of the countries agricultural, food security and nutrition investment strategies and plans under the Comprehensive Africa Agriculture Development Programme (CAADP) of the New Partnership for Africas Development (NEPAD); analysis of trends and impacts of foreign agricultural investment in developing countries; and Support to international consultations to develop principles for responsible agricultural investment.
The Inter-Agency Working Group (IAWG) composed of FAO, UNCTAD, IFAD and the World Bank have jointly developed the Principles for Responsible Agricultural Investment that Respect Rights, Livelihoods and Resources (PRAI).
These draw attention to rights and livelihoods of rural populations and the need of socially and environmentally sustainable agricultural investments. The level of investment in agriculture is positively correlated with food security and poverty reduction. Regrettably, agricultural investment in developing countries decreased sharply over the last decades. Substantial increases are needed to eradicate hunger and poverty, create decent jobs and livelihood opportunities and ensure environmental sustainability. As the largest on-farm investors, farmers must be central to agricultural investment strategies. Their investments must be stimulated and complemented by governmental and donor investments in public goods.
Investments by companies along the entire value chain also play an important role. However, the benefits of agricultural investments will not arise automatically and some forms carry risks for local communities and the environment. The FAO promotes responsible investment in agriculture through empirical research and by supporting various consultation processes.
Investing in agriculture is essential for reducing hunger and promoting sustainable agricultural production. Those parts of the world where agricultural capital per worker and public investments in agriculture have stagnated are the epicenters of poverty and hunger today.