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SUSTAINABLE AGRICULTURAL PRODUCTIVITY GROWTH
AND
BRIDGING THE GAP FOR SMALL-FAMILY FARMS
Interagency Report to the Mexican G20 Presidency
With contributions by Bioversity, CGIAR Consortium, FAO, IFAD, IFPRI, IICA,

OECD, UNCTAD, Coordination team of UN High Level Task Force on the Food
Security Crisis, WFP, World Bank, and WTO.
12 June 2012
UN-HLTF on
Global Food Security
In 2011, G20 leaders committed to sustainably increase agricultural (production
and) productivity (paragraph 43 of the Cannes Declaration). They "agree(d) to further
invest in agriculture, in particular in the poorest countries, and bearing in mind the
importance of smallholders, through responsible public and private investment," they
"decide(d) to invest in research and development of agricultural productivity. Early in
2012 Mexico, as G20 President, invited international organisations to examine
practical actions that could be undertaken to sustainably improve agricultural
productivity growth, in particular on small family farms.
The preparation of this report, co-ordinated by the FAO and the OECD, responds to
this request. It is a collaborative undertaking by Bioversity, CGIAR Consortium, FAO,
IFAD, IFPRI, IICA, OECD, UNCTAD, Coordination team of UN High Level Task Force on
the Food Security Crisis, WFP, World Bank, and WTO. We, the international
organisations, are pleased to provide you with this joint report and look forward to
continuing collaboration within the G20 framework to further elaborate and, as
appropriate, implement the recommendations that it contains.
12 June 2012
SUSTAINABLE AGRICULTURAL PRODUCTIVITY GROWTH AND BRIDGING THE GAP FOR SMALL FAMILY FARMS
TABLE OF CONTENTS 5
Table of Contents
Terms and abbreviations ......................................................................................... 6

Introduction ........................................................................................................ 7
The sustainable productivity challenge ....................................................................... 8
Productivity and sustainability ............................................................................ 8
Agricultural Innovation Systems .......................................................................... 11
Investments in agriculture ................................................................................ 14
Policies and institutions ................................................................................... 16
Taking stock of actions underway ............................................................................. 19
Improving the policy environment for a more productive and sustainable agriculture .............. 21
Supporting a long-term commitment to increased investment in agriculture development .. 21
Improving trade policies ................................................................................... 23
Strengthening development co-operation .............................................................. 24
Facilitating private sector investment in agriculture ................................................ 25
Improving agricultural innovation systems and adoption of innovations for
sustainable productivity growth ............................................................................... 27
Improving Agricultural Innovation Systems (AIS) to generate innovative solutions ............. 27
Closing the gap for smallholders and their families .................................................. 38
References ......................................................................................................... 47
Annex A. Additional information on AIS .................................................................... 53
Annex B. Measuring investments and capacities in agricultural research:
The ASTI initiative .................................................................................. 62
Annex C. Networks to share genomic information ....................................................... 63
Annex D. The contribution of agricultural biodiversity to stable and sustainable
agricultural production, system resilience and ecosystem services ....................... 66
Annex E. Towards improving water and food security: The policy challenge ....................... 63
Annex F. Impact of an increase in competition in the fertiliser industry ............................ 82
Annex G. Recommendation to improve access to weather information .............................. 88
Reccommendations
Recommendation 1 ............................................................................................. 23
Recommendation 2 ............................................................................................. 24
Recommendation 3 ............................................................................................. 26
Recommendation 4 ............................................................................................. 33
Recommendation 5 ............................................................................................. 34
Recommendation 6 ............................................................................................. 37
Recommendation 7 ............................................................................................. 41
Recommendation 8 ............................................................................................. 43
Recommendation 9 ............................................................................................. 44
Recommendation 10 ........................................................................................... 46
6 TERMS AND ABBREVIATIONS
Terms and abbreviations
AIS Agricultural Innovation System
DUS Distinctness, Uniformity and Stability
FDI Foreign Direct Investment
ICT Information and Communication Technology
IPR Intellectual Property Rights
ODA Official Development Assistance
Public expenditures on agriculture Transfers to agriculture from taxpayers through the

government budget
Public investment in agriculture Budgetary expenditures that lead to capital formation in the
agricultural sector. Capital formation includes physical and
human capital.
PPP Public-Private Partnership
R&D Research and Development
Support to agriculture Gross transfers to agriculture from consumers and taxpayers

arising from government policies that support agriculture.
In addition to budgetary expenditures, support includes other
estimated transfers that do not require actual monetary
disbursement (e.g. credit concessions, but also market price
support).
TFP Total Factor Productivity; a measure of the efficiency with

which all production factors are transformed into outputs
VCU Value for Cultivation and Use
Yield A measure of output per area of land (e.g. tonnes of wheat)

per animal (e.g. litres of milk per cow).
INTRODUCTION 7
Introduction
Global agriculture will face multiple challenges over the coming decades. It must
produce more food to feed an increasingly affluent and growing world population that will
demand a more diverse diet, contribute to overall development and poverty alleviation in
many developing countries, confront increased competition for alternative uses of finite
land and water resources, adapt to climate change, and contribute to preserving
biodiversity and restoring fragile ecosystems. Climate change will bring higher average
temperatures, changes in rainfall patterns, and more frequent extreme events, multiplying
the threats to sustainable food security. Addressing these challenges requires co-ordinated
responses from the public and private sectors and civil society that will need to be adapted
to the specific circumstances of different types of farmers in countries at all levels of
development.
Improving agricultural productivity, while conserving and enhancing natural resources, is

an essential requirement for farmers to increase global food supplies on a sustainable basis.
The role of smallholder farmers and their families in increasing agricultural productivity
growth sustainably will be crucial.1 Half a billion small family farms produce most of the
food consumed in developing countries and farm over 80% of the land in Asia and Africa, but
their productivity is generally lagging. The success of developing countries in increasing
agricultural productivity will have global implications in strengthening the resilience of food
markets, enhancing food security, improving wellbeing and promoting sustainability.
This report is submitted to the G20 Mexican Presidency by Bioversity, CGIAR Consortium,
FAO, IFAD, IFPRI, IICA, OECD, UNCTAD, Coordination team of UN High Level Task Force on
the Food Security Crisis, WFP, World Bank and WTO. It responds to Mexico's request for
information and advice on practical actions that could be undertaken to sustainably improve
agricultural productivity growth, in particular on small family farms.
The approach taken reflects the view of the collaborating international organisations
that a successful strategy for sustainable agricultural productivity growth requires
significant improvements in the investment climate in many countries, in agricultural
innovation systems and farming practices, in the management of natural resources, and in
specific policies and efforts to close the productivity gap of small family farms. This report
first examines current trends in productivity and its main drivers innovation, investment
and policy. It then takes stock of actions underway, in particular those included in the 2011
G20 Ministerial Action Plan. The two following sections focus on four broad areas that
require attention: providing an enabling environment conducive to investment and
innovation in agriculture; investing in agricultural innovation, broadly defined; improving
national and international research collaboration; and, closing the gap between actual and
potential productivity levels of agriculture in developing countries.
1. There is no unique and unambiguous definition of a smallholder as explained in FAO (2012d).
8 THE SUSTAINABLE PRODUCTIVITY CHALLENGE
The recommendations provided are broadly of two types: specific actions that can
contribute in some way to improving productivity growth or sustainable resource use
(whether building on existing initiatives or suggesting new activities) and more general
proposals that may not be actionable as presented but that serve to highlight areas for
priority attention. This report also invites G20 countries to engage in a medium- to long-
term, analysis-based peer review of policies fostering sustainable productivity growth,
which would identify specific constraints and opportunities, beginning with their own food
and agriculture sectors. In addition to possible benefits to participating countries, a peer
review process could contribute to the identification of best policies and best policy
packages to achieve the widely held aim of sustainably improving productivity of the global
food and agriculture system. While such an initiative is proposed to and for G20 countries, it
could have much wider application to interested countries.
The sustainable productivity challenge
This section focuses on available evidence and outlines the main developments in
agricultural productivity and sustainability, the evolution of Agricultural Innovation
Systems (AIS), and the trends in policies, public expenditures and private investments
in agriculture which affect agricultural productivity and sustainability.
Productivity and sustainability

The growing global demand for food, feed and biofuel is well established. It is
estimated that the world population will be 9.1 billion persons by 2050, up from the
current population of 7 billion. More importantly, income growth will increase the
quantity and change the composition of agricultural commodity demand. The use of
agricultural commodities in the production of biofuels will also continue to grow.
Significant increases in production of all major crops, livestock and fisheries will thus
be required. Estimates indicate that by 2050, agricultural production would need to
grow globally by 70% over the same period, and more specifically by almost 100% in
developing countries, to feed the growing population alone, excluding additional
demand for crops as feedstock by the biofuel sector (FAO, 2009a).
Trends in agricultural productivity

Throughout history, productivity in agriculture has shown high growth rates.
Together with the expansion of the resource base, this has enabled food production to
outpace population growth. For example, the Green Revolution resulted in an increase
in food production from 800 million tonnes to more than 2.2 billion tonnes between
1961 and 2000 (FAO, 2011a).
Estimates of past and current productivity trends vary widely, and future
productivity in the long run is difficult to project. The debate on whether global
agricultural productivity has slowed down or not has been taken up again as the need
for significant increases in food production is more widely recognised. Some recent
estimates suggest that total factor productivity (TFP), the most comprehensive
measure of productivity reflecting the efficiency to turn all inputs into outputs, grew at
an average rate of around 2% per year since 2000 across major world regions (Fuglie,
2012). The picture is more complex when looking at individual countries or sub-regions.
Some large countries like Brazil, China, Indonesia, Russia and Ukraine have achieved
much higher TFP growth rates than the corresponding regional average. Sub-Saharan
Africa is lagging, but some countries like Cameroon, Congo, Kenya, Mali, Benin and
Sierra Leone have achieved above average TFP growth rates in the 2000s, mostly
attributable to policy changes (Yu and Nin-Pratt, 2011).
THE SUSTAINABLE PRODUCTIVITY CHALLENGE 9
Other studies, in particular those using partial factor productivity indicators such as
land and labour productivity, give a more pessimistic global picture, in particular when
China's performance is taken out of the calculation of the world average (Alston et al.,
2010). In Latin America, China and many developed countries, labour productivity
increased faster than land productivity, as labour was shed out of the sector. This
contrasts with Asia, where land productivity dominated, and Africa, where land
expansion was a main driver. While productivity in some livestock sectors, in particular
non-ruminants, is increasing fast, there are concerns about trends in crop productivity
growth.2
The most popular indicator of land productivity is crop yield. The average global
rates of growth in yield of most of the major cereals are declining. Since the 1980s,
growth in wheat and rice yields fell from 2.5-3% to around 1%. Maize yields showed
growth of slightly less than 2% over the last decade (Figure 1).
Figure 1. Compound annual growth rates in world crop yields (%)
Wheat Rice Maize Barley
4
3.5
3
2.5
2
1.5
1
0.5
0
1961-1970 1970-1980 1980-1990 1990-2000 2000-2010
Source: FAOSTAT.
Lower productivity and slow growth in some developing countries and in small
family farms raise specific concerns. The gap between farmers' yields and technical
potential yields3 reflects the largely suboptimal use of inputs and insufficient adoption
of most productive technology, often linked to lack of market integration. Yield gaps
2. Lower partial factor productivity does not necessarily lead to lower TFP. For example, lower
land productivity (e.g. crop yields) can result from a more extensive use of land, with TFP
change depending on the relationship between the decrease in fertiliser and pesticide use, and
the change of output per hectare.
3. Technical potential yields are maximum yields with latest varieties, removing all constraints
including moisture, at generally prevailing solar radiation, temperature and daylight, estimated
from highly controlled on-station experiments or crop models calibrated with latest varieties,
well-monitored crop trials (Evans and Fischer, 1999). Van Dijk et al. (2012) distinguish several
measures of potential yields from closest to furthest to farmer yield: economic maximum
farmer yield, technical maximum farmer yield, experimental maximum research station yield
and modelled potential yield. They also find a large variability of yield gaps across sub-regions
of Africa.
were estimated to range from 11% in East Asia to 76% in Sub-Saharan Africa in 2005
(FAO, 2011b). Globally, there are approximately 500 million small family farms, with
over 280 million smallholders in India and China alone (IFPRI, 2007). Measures to reduce
the productivity gap between actual levels and the technical potential could offer high
returns in terms of food security, nutrition and rural income gains (World Bank, 2008).
Studies show that high returns can also be achieved by reducing gender gaps in
productivity on small family farms. According to FAO, closing gender productivity gaps
associated with unequal access to resources and inputs could raise total agricultural
output in developing countries by 2.5-4%, leading to a reduction of 12-17% in the
number of undernourished globally (FAO, 2011a).
Trends in sustainability of agriculture

Efforts to increase food production will take place within an environment
characterised by a scarcity of natural resources. In many regions, there is little room
for expansion of arable land, with virtually no additional land available in South Asia,
the Near East and North Africa. Where land is available, in sub-Saharan Africa and Latin
America, more than 70% suffers from soil and terrain constraints (FAO, 2011a).4
Unsustainable land use practices, such as overuse, poor land management and nutrient
mining, result in global net losses of land productivity of an average 0.2% per year
(Nelleman et al., 2009). Land degradation makes the top soil vulnerable to water and
wind erosion and reduces the productivity of inputs such as fertiliser and irrigation,
which in turn leads to production and income losses.
At the global level, agriculture is the largest water user worldwide, representing
about 70% of total withdrawal. In some countries, over 90% is withdrawn for
agricultural purposes. Cities and industries are competing intensely with agriculture for
the use of water and an increasing number of countries, or regions within countries, are
reaching alarming levels of water stress and pollution. Global freshwater resources will
be further strained in the future in many regions, with over 40% of the worlds
population projected to be living in river basins experiencing severe water stress by
2050 (OECD, 2012a).
Agriculture is also a major source of water pollution, from nutrients, pesticides,
soils and other contaminants, leading to significant social, economic and environmental
costs. It also damages the wider environment through the emission of greenhouse
gasses. In some intensive farming systems, up to 50% of available inorganic and organic
nutrient inputs are not always utilised by crops or pastures, leading to significant
pollution from nutrient run-off (OECD, 2012b). The opposite is the case in large parts of
the developing world, where crop farming leads to a net extraction of nutrients from
the soil. In large parts of sub-Saharan Africa, soil productivity has been on a declining
trend.
Biodiversity underpins agriculture and food security through the provision of genetic
material needed for crop and livestock breeding. The past century has seen a great loss
of biodiversity through habitat destruction, mainly due to deforestation (UN, 2001).
Maintenance of biodiversity is crucial for sustainability and resilience of farming
systems as it builds the capacity to absorb shocks and continue to function within a
changing set of circumstances. The challenge is to maximise agricultures positive
contributions to biodiversity while minimising its negative impacts.
Global agriculture will need to adapt to climate change. There is growing evidence
that climate change has had negative effects on agriculture and widespread agreement
that agriculture, particularly in developing countries, will be for the most part
4. In Central Asia, there is potential for agricultural land expansion. Unfortunately our
understanding about land use today is hindered by lack of good quality data (Fritz et al., 2011).
negatively affected by climate change (IPCC, 2007; Lobell et al., 2011; Nelson et al.,
2009, 2010; Wassmann et al., 2010; Mller et al., 2011). In the near term, climate
variability and extreme weather shocks are projected to increase, affecting all regions
with negative impacts on yield growth and food security, particularly in sub-Saharan
Africa and South Asia in the period up to 2030 (Burney et al., 2010; SREX, 2012).
Agriculture (including deforestation) accounts for about one-third of greenhouse gas
emissions; for this reason, it contributes significantly to climate change mitigation
(IPCC, 2007). While crops can be adapted to changing environments, the need to
reduce emissions will increasingly challenge conventional, resource-intensive
agricultural systems (Royal Society, 2009). Productivity growth needs to increase to
keep up with demand growth, but also to increase resilience of the sector to supply
shocks, whether due to climate change or due to resource limits more generally.
Agricultural Innovation Systems

The productivity of farms can be improved through economies of scale and the
adoption of more technically-efficient production systems. However, long-run
productivity growth for the sector as a whole requires continuous technological
progress, as well as social innovations and new business models. For agriculture to
respond to future challenges, innovation will not only need to improve the efficiency
with which inputs are turned into outputs, but also conserve scarce natural resources
and reduce waste (OECD, 2011a).
Estimates of the rates of return to agricultural R&D suggest a very high social value
of agricultural R&D. Annual internal rates of return of investments on agricultural R&D
estimated in the literature range between 20% and 80% (Alston, 2010). In developing
countries, the dollar-for-dollar impact of R&D investments on the value of agricultural
production is generally within the range of 6% to 12% across countries (Fan et al., 2008,
Fan and Zhang, 2008, FAO, 2012a). Those countries which have heavily invested in R&D
while simultaneously investing in extension have had the strongest productivity growth
(Fuglie, 2012).
Driven by policy incentives, recent productivity improvements in developed
countries have occurred with lower levels of variable input use, and thus more
sustainably. Innovation systems have responded to the demand articulated by users,
policy makers and international development partners and developed innovations that
allow for more sustainable use of resources, such as no-till farming, insect-resistant
crops, more efficient irrigation, water management systems, sensors for nutrient status
in crops, remote sensing and Geographic Information Systems (GIS) to improve and
monitor land use and SMS messaging for enhancing advisory services to farmers.
Trends in R&D funding

In all low- and middle-income country regions as a whole, public expenditure on
agricultural R&D increased from the 1980s, but there are important variations across
countries within regions (Figure 2). Several countries have well-managed and funded
systems producing world-class research; others, some of which are highly dependent on
agriculture, have experienced significant reductions in their R&D expenditure and
capacity levels since the early 1990s. Overall, the average share of agriculture in total
R&D expenditures is decreasing in both high-income and low- and middle-income
countries.
Public R&D expenditure on agriculture accounts for above 1% of agricultural GDP in
most OECD countries, and 4% in the United States. However, public expenditure on
agricultural R&D in OECD countries grows slowly (e.g. by 0.2% per year in the United
States and 0.5% in Japan in the 2000s) or even decreases. In some high-income
countries, the slowing or negative growth rates of public R&D expenditure on
agriculture in the last decade are raising concerns about the ability of the sector to
maintain and increase productivity growth rates because agricultural research has to
spread its efforts across an increasing number of topics (OECD, 2011b).
Public R&D expenditures on agriculture in low-and middle-income countries are
generally lower as a percentage of agricultural GDP than in OECD countries, and there
is wide diversity across countries. In East Asia and the Pacific, China accounted for
about two-thirds of total public agricultural R&D spending in the low- and middle-
income countries in 2002. Following a period of stagnation in the 1990s, Chinas
agricultural research spending doubled during 2001-08 (Chen, Flaherty, and Zhang,
2012). In Sub-Saharan Africa, after a decade of stagnation in the 1990s, investment in
agricultural research rose more than 20% between 2001 and 2008. However, most of
this growth occurred in only a handful of countries (Beintema and Stads, 2011).
Figure 2. Trends in food and agricultural public research expenditures
Sub-Saharan Africa East Asia & Pacific, minus China

China South Asia, minus India
Latin America & Caribbean India
4 500
Million 2005 PPP USD
4 000
3 500
3 000
2 500
2 000
1 500
1 000
500
0
1981 1984 1987 1990 1993 1996 1999 2002 2005 2008
Source: ASTI database.
While public expenditure is the main source of funding for agricultural R&D, private
sector investment has increased but is generally focused on high value and market-
oriented production systems. Greater protection of intellectual property, rapid
progress in molecular biology, and the integration of global output and input markets
have generated strong incentives for the private sector to invest in R&D. At the same
time, the record of private research in natural resource management and in
maintaining biodiversity is limited, with the exception of a few public-private
partnership initiatives.
Investments by the private sector in the developing world remain small and
agricultural research continues to be mostly funded by governments (Beintema and
Stads, 2008). The evidence suggests that, on average, government allocations have
accounted for 81% of funding since 2000, and only 7% of funding was derived through
donor contributions. These latter contributions have been in the form of both loans and
grants, and mostly attributed to countries in Sub-Saharan Africa and a few low-income
countries in Asia and Latin America (Etcheverra and Beintema, 2009).
International R&D, in particular by CGIAR, has in many instances successfully led to
the development of technologies well-suited to smallholder production systems. In the
1990s, more centres were added to the CGIAR and although total funding continued to
grow, average spending levels per centre declined. Since 2000, overall funding to the
15 centres of the CGIAR has increased, but a larger portion of this funding is support for
specific projects and programmes of research involving different centres and non-CGIAR
research organisations (Beintema and Elliott, 2009).
Changes in Agricultural Innovation Systems

The predominant model for innovation has been mostly supply-driven: scientists in
the public sector create new technologies which are then disseminated by extension
officers to the farmers who are asked to adopt them. Many countries have reviewed
their agricultural innovation systems (AIS) in recent years in response to concerns about
lack of adoption of innovation and the need to increase performance to respond to
emerging and pressing challenges. Indeed, sustainable production intensification
requires a major shift from the supply-driven innovation model to knowledge-specific
and often location-specific farming systems which conserve and enhance natural
resources. Non-technological innovation such as marketing or organisational innovations
also receive more attention today.
Unlike the experience of the Green Revolution which relied on improved and
genetically uniform high-yield varieties complemented by high levels of inputs,
increasing agricultural productivity in todays context will require gains among a large
number of smallholders in very different agro-ecological regions. Traditional
technologies and practices have proved their relevance to increasing productivity and
ensuring environmental sustainability. Recognising the need to move away from supply-
driven to demand-driven innovation, some countries have taken steps towards a more
inclusive, interactive and participatory approach (UN, 2001).
Innovation is increasingly taking place in a network-based setting which fosters
interaction and learning. AIS display a large diversity, reflecting different country
contexts and different degrees of transition from the traditional top-down approach.
While R&D remains an important component of agricultural innovation systems there is
a growing recognition of the role of other actors: farmers, extension services, upstream
and downstream industries, consumers, civil society, and information brokers. Working
with farmers to validate and adapt technologies in an integrated way lies at the heart
of AIS. The participation of more diverse actors along with institutional reforms have
improved the responsiveness to AIS to specific needs, with resulting innovations better
suited to resource-poor farmers (World Bank, 2012). However, most developing
countries, particularly in Sub-Saharan Africa, face challenges in implementing an AIS
approach due to weak resources and institutions (World Bank, 2005).
Upstream and downstream industries have increased their role in the diffusion of
innovation to farmers and the private sector is increasingly involved in R&D activities
with high potential market returns, such as biotechnology. Partnerships between public
research and the private sector are being developed, including with local industries.
Governments have encouraged public research institutions to engage in public-private
partnerships with producer organisations and the agri-food industry.
Another notable trend in AIS is less government involvement in the delivery of
extension services. This has permitted the emergence of other intermediaries, such as
innovation brokers, who can articulate farmers demand for research and help them
access technology and knowledge, or who are associated with creating linkages in value
chains (OECD, 2012c). However, public services still dominate extension in developing
countries and they face widespread problems of limited funding, insufficient
technology and knowledge, poorly trained staff, weak links with research, and limited
farmer participation (World Bank, 2005).
Public institutional changes have generally aimed to increase co-ordination at the
national level both within agricultural systems, and between agriculture and other
sectors. Some countries have merged or strengthened the links between agricultural
R&D and higher education institutions. Others have reformed their agricultural
universities. Mechanisms and networks to set priorities for agricultural research have
been strengthened and made more inclusive.5
Investments in agriculture
Investments in agriculture encompass both public and private spending on natural
capital (such as land, water and biodiversity), physical capital (such as animals,
machinery, irrigation systems, storage, processing and marketing facilities, roads, ports
and other hard infrastructure on- or off-farm), human capital (such as health,
education, training, and advisory services), and knowledge capital (such as research,
technology development, and organisational and other innovations). These various
types of investments play complementary roles in the production process and
contribute to increase productivity. Investment needs will vary depending on the stage
of economic and agricultural development.
Investment can be financed by both public and private sources, including domestic
savings of households and private companies, government savings, external borrowing,
and foreign investment. Public investments often focus on the provision of public
goods, while private investments tend to focus on areas generating private returns.
Private investors have been particularly involved in technology generation as IPRs have
been strengthened. But these lines are becoming increasingly blurred and public-
private partnerships are emerging where mutual benefits are anticipated
In terms of physical capital, increased mechanisation by investment in tractors and
power-threshers spurred crop yield growth in many industrialised countries a few
decades ago and continues to do so in developing countries. While this type of
investment can be characterised as private investments in agriculture, investments for
agriculture play an important enabling role. They have public good (or quasi-public
good) characteristics and are consequently predominantly financed from public
sources. Investment in infrastructure in rural areas, in particular transportation (ports
and rural roads), soil and water conservation, irrigation systems, electrification and
information and communication technologies, is an effective way to stimulate
productivity growth (Shenggen Fan, 2008; Mogues and Benin, 2012). It allows
smallholders to connect to markets and thereby provide higher incentives to increase
productivity. Irrigation systems allow for increased land productivity, particularly in
countries that depend on rain-fed agriculture and face water shortages. Often,
infrastructure and road development are ranked among the top two sources of overall
agricultural growth, second to R&D investments. Especially in Africa, irrigation and
feeder roads are shown to have large output-increasing and poverty-reducing effects.
The importance of transport infrastructure is demonstrated in Africa where, for certain
landlocked countries, transport costs can be as high as 77% of the value of their
exports. The establishment of development corridors linked to major ports can be an
effective way to stimulate local economies (Foresight, 2011). Improving market
facilities such as warehouses, storage facilities and market-information systems are
important in creating an enabling environment and facilitating the integration of
farmers into markets as well as providing incentives to increase investment and hence
productivity.
5. For example the Forum for Agricultural Research in Africa (FARA) is an umbrella organisation
bringing together and forming coalitions of major stakeholders in agricultural research and
development in Africa.
Trends in private on-farm investment

Expanding the capital base of agriculture is intrinsic to the process of increasing
productivity, and generating higher and more stable returns to those whose livelihoods
depend on this sector. In developing countries, smallholders provide the bulk of
domestic private investment, notably on-farm. Better investment of their own labour
and part of their income to improve land, acquire new equipment, expand livestock
herds and farms, and invest in storage and the post-production chain will increase their
efficiency to produce food and minimise losses.
Mechanisation and the use of animal traction to replace human labour have
dramatic potential to increase productivity. Land improvements, such as land levelling,
terracing and bunding for runoff and erosion control, can contribute significantly to the
management of natural resources. In sum, other forms of investment, such as public
investment or foreign direct investment, will have limited or no impact if they are not
accompanied by increased on-farm investments.
Globally, on-farm investments, reflected by the volume of agricultural capital
stock, have increased over time, with the increase concentrated in low- and middle-
income countries. On-farm investments in high-income countries have remained
relatively stable. However, the rate of growth of agricultural capital stock has been
uneven over time, probably reflecting the impact of both market and policy incentives
to farmers. Average annual growth in the global agricultural capital stock of about 1%
during the 1980s was followed by significantly lower rates during the 1990s (Figure 3).
On-farm investment growth has recovered since 2000. This was partly due to the
increasing trend in agricultural commodity prices, although these remain at a level
significantly lower level than that which characterised the period 1980-1990.
Figure 3. Agricultural capital stock growth 1980-2007

Annual growth rate (%)
1980-1985 1985-1990 1990-1995 1995-2000 2000-2005 2005-2007

1.6
1.2
0.8
0.4
0.0
-0.4
Low and middle income High income World
Source: FAOSTAT.
Trends in foreign direct investment

Foreign direct investment (FDI) is often referred to as a major and growing source
of finance for agricultural development. Higher agricultural prices and better
incentives to invest in agriculture are likely to stimulate further international

investment flows to this sector.
Flows of FDI to agriculture (agriculture, hunting, forestry and fisheries) as well as
the food, beverages and tobacco sectors have increased significantly over the past
decade. In many cases, this new momentum has translated into large-scale acquisitions
of farmland in lower- and middle-income countries. Less attention has been paid to a
wide range of collaborative arrangements between large-scale investors and local
smallholders, such as various types of contract farming schemes, joint ventures,
management contracts, and new supply chain relationships.
Data issues hamper the analysis of FDI, as the increasing flows are partly explained
by wider country coverage of the statistics. Reporting in current USD also tends to
overestimate the real increase. Nevertheless, in spite of the increase in recent years,
current flows of FDI to agriculture remain limited in size. In 2008, out of total recorded
flows of FDI of USD 1.2 trillion, flows to the food, beverages and tobacco sectors
amounted to only USD 87 billion, less than 1% of the total. Flows to primary agriculture
amounted to USD 5 billion, a far less significant sum (FAO, 2012a).
Policies and institutions

The incentives to innovate and adopt better technologies, as well as to invest in
agriculture, depend on the overall policy environment, including macro-economic and
sectoral policies and regulations. The policy set in developing countries has historically
led to a clear bias against the agricultural sector. Diminished incentives for farmers to
invest and expand production are significantly related to protection of non-agricultural
sectors (Krueger, Schiff and Valds, 1988). More recent estimations reveal that over the
past four to five decades the nominal rate of protection afforded to non-agriculture
steadily declined for developing countries as a whole, from 45% in the 1960s to less
than 10% in the 1990s (Anderson, 2009). This trend has contributed more to a decline of
net taxation of agriculture than specific agricultural support policies. Reforms in Asia,
and especially in India and China, have significantly contributed to this outcome, while
non-agricultural policies in many African countries still continue to lead to an anti-
agriculture bias.
Policy-induced failures and the lack of enabling institutions constrain the
productivity of small family farms. Of particular concern are poor policies and
institutions that grant smallholders limited control over land and water resources on
which their productive activities and livelihoods depend. An estimated 1 to 2 billion
people globally live on and use commonly held land over which they have no legal title
(IFAD, 2011a). Poorly defined property rights limit their access to credit and insurance
markets, and prevent them from investing in improved environmental sustainability and
natural resource management.
The impact of specific agricultural support policies on farm productivity depends on
how and why it is delivered. Commodity-based support has the largest impact on
production, but protecting farmers from competition does not encourage them to
increase productivity. Market interventions often treat the symptoms of market failure
and under-development rather than the cause. For example, food price stabilisation
can provide a more stable investment climate but can also impose very high costs on
consumers, thwart the development of private risk management, and can export
instability onto world markets. It also thwarts the development of the private sector
which is crucial for the long-term development of the food sector (OECD, 2012e).
Like price support, input subsidies also distort production. However, they can
redress, at least temporarily, market failures such as the under-development of
infrastructure, missing markets for credit and inputs, and a lack of knowledge of the
benefits of using improved seeds, animal breeds and fertiliser. To this extent, they can
help farmers acquire improved technology, and thus foster productivity, but over time
they can also impede the development of private markets and do not tackle the
problem of market failure directly.
More generally, if support is targeted to a specific input, it can encourage an input
mix that will not necessarily be economically or environmentally sustainable. For
example, irrigation subsidies can affect sustainable water use and may not encourage
the adoption of water saving irrigation systems if appropriate regulations are not in
place. Providing producers the tools they need for risk management is important for
the adoption of innovation, but too much government support in risk management
schemes may prevent the emergence of market solutions. As seen earlier, public
expenditures on agricultural R&D have positive and large impacts on agricultural
productivity, but public expenditures on extension and advisory services are also
important and complementary as they promote the adoption of new production systems
that enable productivity growth on a sustainable basis.
Trends in agricultural policies

Agriculture is a sector where government intervention is pervasive, but the
objectives, instruments and resulting support vary by commodity, country and over
time. High-income countries are providing relatively high support to their agricultural
sector on average, although it has been declining since the 1990s. Low-income
countries globally taxed their agricultural sector until the mid-1990s and support
remains low on average. Exportable products receive less support in high-income
countries than import-competing products, and are still taxed in developing countries.
When decomposing the real rate of assistance to agriculture by income level, it is clear
that countries are moving from taxing to subsidising their farmers as income levels
grow (Anderson, 2009).
Support to agricultural producers in OECD countries has declined since the mid-
1980s. In recent years, it has accounted for about 20% of gross farm receipts compared
to 37% in the mid-1980s, with large differences across countries and commodities in
terms of level and composition (OECD, 2011c). Policy reform has not only reduced
support levels, but also the impact of support on commodity markets. The share of the
most distorting support in OECD countries has decreased from 86% of total support to
producers in the mid-1980s to 45% at the end of the 2000s.
The extent to which policy reform has affected productivity is not clear. Payments
that are largely delinked from current production affect farm productivity. They favour
extensification and help maintain less efficient farmers in business, but they also
promote the adoption of environmentally-friendly production practices as farmers may
use the extra income to invest in innovation.
In emerging economies and developing countries, support is concentrated on
subsidies to variable inputs, such as fertilisers, and to farm, transport and marketing
infrastructure. In emerging economies, support as a percentage of gross farm receipts
is generally lower than the OECD average, but has increased since the mid-1990s and in
2010 it approached the OECD average of 18% in China (17%) and is above this average in
Russia (21%). Nevertheless, these averages need to be interpreted with care, as some
commodities in emerging economies are taxed while others are supported.
In developing countries, the share of agriculture in public expenditures declined in
the 1980s and 1990s (Fan and Breisinger, 2011). Systematic international evidence on
public expenditure in agriculture is not available, and it is generally not possible to
ascertain to what extent the reported expenditure consists of subsidies, benefits and
expenses on goods and services by governments, or can be considered as investment
contributing to the formation of capital.
For developing countries as a whole, agricultural expenditure grew at 6% annually

in the 2000s, outgrowing their population growth and agricultural GDP growth (IFPRI,
2011). However, only six African countries have achieved the target of 10% of total
government expenditures allocated to the support of agriculture, as formulated in the
2003 Maputo declaration (Benin et al., 2011). Little is known about the composition of
those expenditures, the efficiency with which it is delivered, and the effects they have
on productivity.
Plant-animal disease and food safety regulations that affect agriculture
Plant and animals diseases are a cost to producers, reduce productivity, and pose
health risks to consumers. Food-borne diseases have an enormous impact on health and
livelihoods, and are of great concern to consumers, producers and policy makers. As
much as 70% of deaths among children under five are linked to biologically
contaminated food and water in developing countries (Unnevehr and Hirschorn, 2000).
Policy interventions are necessary to tackle such problems and governments have a
number of options available to intervene. Some of these policies cam also have
implications for international trade.
Policy heterogeneity in the area of Sanitary and Phytosanitary (SPS) measures
reflects differences across countries in terms of their approaches to regulation, as well
as different abilities to effectively implement measures that reduce plant and animal
disease risks. While harmonisation across countries could facilitate trade and should be
encouraged, policy heterogeneity will have to be recognised (OECD, 2009, 2010a).
Stringent private standards and import rules may be amongst the reasons why
developing countries are not fully utilising market access preferences in high-income
markets. Complying with food-related regulations and voluntary standards can have a
high overall economic impact in low-income countries with a high share of agriculture
in GDP and in exports. However, the costs associated with complying are significant. At
the same time, food safety-related regulations and voluntary standards on export
markets can provide a trigger to upgrade production methods in the home market of
exporting countries.6
Import conditions for food products defined by public regulation and private
standards continue to differ between countries despite all the efforts by international
and regional organisations to foster international co-ordination. Participation from
developing countries in standard setting bodies is currently limited.
6. The OECD Schemes for the Varietal Certification of Seed Moving in International Trade provide
for the application of harmonized procedures and techniques that reduce technical barriers and
facilitate international trade in high quality seed. The OECD Seed Schemes are open to OECD
countries as well as all Member countries of the United Nations; currently, 58 countries actively
participate in the Schemes. Over 200 species and more than 43 000 varieties are listed in the
2012 OECD List of Varieties. All varieties listed have met the OECD criteria including Value for
Cultivation and Use (VCU) and Distinctness, Uniformity and Stability (DUS)
(www.oecd.org/tad/seed).
TAKING STOCK OF ACTIONS UNDERWAY 19
Taking stock of actions underway
The recommendations in this report call upon the G20 governments to take action
on increasing agricultural productivity in a sustainable manner in their own countries,
but also to support non G20 developing countries in their efforts to address the
challenges global agriculture faces.
Mindful of the need to avoid proliferation of new mechanisms and to build on the
2011 Action Plan on Food Price Volatility and Agriculture, the proposals made build on
existing institutions, organisations and expertise. Box 1 summarises the status of
ongoing initiatives that were launched by the G20 in 2011, and Box 2 provides more
detail on the G20 Conference on Agricultural Research for Development, held in
Montpellier, France in September of that year.
Box 1. 2011 G20 Action Plan on Food Price Volatility and agriculture
In June 2011 the meeting of G20 Agriculture ministers agreed to an Action Plan on Food Price
Volatility and Agriculture, which was subsequently welcomed by Leaders during G20 summit in Cannes
in November 2011. While several element of the action plan build on ongoing initiatives, some specific
new activities were launched:
The Agricultural Market Information System (AMIS) initiative has three objectives: 1) to
improve the information base and disseminate information in a transparent manner; 2) to develop the
capacity to produce detailed commodity market data; and 3) to facilitate policy dialogue and co-
ordination in the event of a serious development in commodity markets. The Agricultural Market
Information System (AMIS) initiative is comprised of three components: 1) the AMIS Secretariat; 2) the
Information Group (composed of experts in capitals); and 3) the Rapid Response Forum. The
Secretariat is based at the FAO, with active involvement from other international organisations. The first
meetings of both the Information Group and the Rapid Response Forum have taken place and
considerable progress is reported in developing new systems to improve the quality and timeliness of
market data for key food crops: wheat, maize, rice and soybeans. AMIS involves G20 countries and, at
this stage, Egypt, Viet Nam, Thailand, the Philippines, Nigeria, Ukraine and Kazakhstan. The AMIS
website was launched in December 2011 (www.amis-outlook.org).
The Global Agricultural Geo-monitoring Initiative (GEOGLAM) aims to strengthen the
international communitys capacity to produce and disseminate relevant, timely and accurate forecasts
of agricultural production at national, regional and global scales, by enhancing national agricultural
reporting systems; establishing an international network of agricultural monitoring and research
organisations and practitioners; and creating a monitoring system of systems based on both satellite
and in situ observations. It will, amongst other things, provide inputs into AMIS.
As a specific action to improve productivity through research and development the International
Research Initiative for Wheat Improvement (Wheat Initiative) was launched in Paris on 15
September 2011. This initiative is mainly science driven and aims at better coordination of international
research on wheat genetics, genomics and agronomy related to wheat, both bread and durum wheat.
The Tropical Agriculture Platform (TAP) focuses on enhancing capacity-building and knowledge
sharing to improve agricultural production and productivity. It is aiming at fostering the generation,
sharing and utilization of agricultural technologies and practices for smallholders in developing
countries, mainly using existing mechanisms.
The Platform for Agricultural Risk Management (PARM) is an initiative to promote the
integration of agricultural risk management into the agricultural policies of developing countries, by
facilitating co-ordination among practitioners in this field. The Platform was initiated by the French
development Agency (AFD) and is currently endorsed by IFAD (which is expected to host it), FAO,
WFP, World Bank, some regional development banks, and some bilateral cooperation agencies.
G20 leaders agreed to remove food export restrictions or extraordinary taxes for food purchased
for non-commercial humanitarian purposes by the World Food Program and agreed not to impose them
in the future. Discussions on this issue continue in the WTO.
Source: agriculture.gouv.fr/IMG/pdf/2011-06-23_-_Action_Plan_-_VFinale.pdf.
20 TAKING STOCK OF ACTIONS UNDERWAY
Box 2. 2011 G20 Conference on Agricultural Research for Development

The G20 Conference on Agricultural Research for Development, held in Montpellier, France,
on 12-13 September 2011, brought together the G20 Agricultural Research Systems and key
international bodies, such as the Consultative Group for International Agricultural Research
(CGIAR), the Food and Agriculture Organisation (FAO), the Global Forum for Agricultural
Research (GFAR) and the World Bank, to promote scientific partnerships for Food Security.
The presidency summary recognised that:
The Global Conference on Agricultural Research for Development (GCARD), which
first met in Montpellier in March 2010 at the initiative of GFAR and CGIAR, has a key role
to play to develop greater international coherence of agricultural science policies and
promote their implementation.
The CGIAR reform resulted in a unique capacity in Agricultural Research for
Development.
Existing mechanisms, in particular GCARD, CGIAR and GFAR are essential to help
identify and describe future challenges and opportunities, and shape priorities for
Agricultural Research for Development.
The principle of a Global Agricultural Foresight Hub, proposed by GFAR, was widely
welcomed. It provides an opportunity for G20 countries to support the development of a
neutral platform, linking international, regional and national levels and should be further
elaborated.
The International Research Initiative for Wheat Improvement (IRIWI), the Global
Agriculture Geo-Monitoring Initiatives, CGIAR Research Programs such as the Global
Rice Science Partnership (GRiSP) and the Coalition for African Rice Development
(CARD), as well as triangular cooperation like PROSAVANNAH program, provide good
examples of partnerships around the G20 Agricultural Research Systems that include
stakeholders in developing countries and address their food security and sustainable
development needs.
Innovative public-private research partnerships at relevant scale are essential to stimulate
access to the best knowledge, to achieve efficiency and effectiveness, and to deliver
widespread and lasting impact of Agricultural Research for Development.
The Agriculture Pull Mechanism Initiative provides an opportunity for market based
mechanism.
The Tropical Agriculture Platform, outlined by FAO, can contribute, in cooperation with
interested G20 Agricultural Research Systems, among other initiatives, to identification of
appropriate capacity development practices, the consolidation of best training practices
and the promotion of modalities to support continuous learning and improve ownership by
national stakeholders in developing countries.
Agricultural Research for Development has to be mainstreamed into food security and
development strategies and plans, at national, regional and international levels.
It also encouraged the interested G20 Countries to support, through national focal points, the
preparation of a successful and inclusive GCARD in Uruguay in 2012, which aim to enhance the
development impact of Agricultural Research Systems.
Source: www.agropolis.org/news/G20_Conference_AgricultureResearch_Development.php
IMPROVING THE POLICY ENVIRONMENT FOR A MORE PRODUCTIVE AND SUSTAINABLE AGRICUTURE 21
In addition, this report recalls and reiterates the importance of continued support
to a number of ongoing activities and generally accepted principles that contribute to
improving agricultural productivity and sustainability. In that regard, G20 governments
should:
Recognise that increasing agricultural productivity growth in a sustainable manner
requires long term commitment and significant changes in the mechanisms and
institutions that support agricultural development.
Commit to improve the consistency and stability of funding of national, regional
and international Agricultural Innovation Systems.
Ensure that policies and strategies in pursuit of short term food security minimise
market distortions and do not compromise medium and long term sustainability.
Support programmes that recognise the importance of the interface of the
agriculture, nutrition, and health sectors by being better adapted and redesigned
to maximise health and nutrition benefits and to reduce health risks.
Commit to ensuring that the needs of women farmers are addressed in the
infrastructure and energy agendas of the G20, and to explicitly consider the
implications of G20-supported initiatives in these two areas for workload and
wellbeing of rural women.
Recognising the potential for the creation of innovations that generate significant
public global benefits, G20 governments:
Continue to support the CGIAR systems ability to carry out R&D on smallholder
productivity, including with continued specific attention to the needs of women
farmers, in appropriate partnership with the national and regional research
systems.
Continue to support and strengthen special funding mechanisms, and in particular
the Agriculture Pull Mechanism initiative to address the technology needs of
smallholders.
Improving the policy environment for a more productive and sustainable agriculture
Supporting a long-term commitment to increased investment in agriculture development

A successful strategy for sustainable agricultural productivity growth requires
significant improvements in macroeconomic, structural, and agricultural policies and
institutions to provide the necessary incentives to farmers and the private sector to
increase investments and build the necessary capital. G20 countries account for three-
quarters of the global gross value of agricultural production. At the same time, most
small family farms are situated in G20 countries, with over 280 million smallholders in
India and China alone.
The required investments to achieve sustainable agricultural productivity growth
encompass knowledge, human and physical capital, and both on-farm investments in
agriculture and off-farm investments for agriculture. A challenge for policy makers in
developing countries is to move beyond a plethora of interventions and policies towards
a coherent policy framework which both facilitates and stimulates all actors, including
smallholders and other private investors, to invest in and foster the accumulation of
productive human and natural capital.
At the national and regional levels, this calls for comprehensive policy and
investment strategies to increase agricultural productivity, improve the nutritional
content of foods, mitigate food safety risks, promote sustainable use of resources,
22 - IMPROVING THE POLICY ENVIRONMENT FOR A MORE PRODUCTIVE AND SUSTAINABLE AGRICULTURE
unleash innovation and new technologies, and enhance farm profitability. Climate
change mitigation, water conservation, soil protection and biodiversity enhancement
are also part of such strategies. Progress towards a more strategic approach to
investment in agriculture, with clear long-term objectives and the harmonization of
policy and public and private investment, would bring sustained benefits.
G20 governments should support comprehensive national and regional agricultural
development and investment strategies which are country-owned and -led, evidence-
based, and inclusive of civil society and farmer organisations to prioritise, invest and
foster the accumulation of productive, intellectual, human and natural capital, and
facilitate private investment, both domestic and international, including that by
smallholders. Such strategies should include monitoring and evaluation mechanisms to
assess the transparency and effectiveness of investment programmes and strategies in
terms of productivity, environmental sustainability, food and nutritional security and
well-being.
G20 governments recognise that a productive and sustainable global food and
agriculture system requires long-term commitment, in their own countries and
elsewhere, as well as fundamental improvements in the mechanisms and the
approaches to enable further development, particularly on small family farms.
Creating relevant data and information upon which to base policy decisions is often
a significant limitation to effective policy-making. There is a growing need for
information to guide policy concerning the environment, climate change, food security,
biodiversity, investment in agriculture, water and land use, and agricultural research
and innovation, as well as for information about processes of structural transformation
in rural areas and in agriculture, including their social and gender dimensions.
Improving the capacity of countries to collect economic, policy and environmental
information to measure agricultural performance and the results of agricultural
investment is central to formulate effective policies. The Global Strategy to Improve
Agricultural and Rural Statistics provides a framework for national and international
statistical systems, which enable them to produce and to apply the basic data and
information needed to guide decision making in the twenty-first century (FAO-UN-World
Bank, 2011). The Monitoring African Food and Agricultural Policies project (MAFAP), for
example, is a pilot initiative to support decision-makers at national, regional and pan-
African levels by developing a systematic method to monitor and analyse food and
agricultural policies in African countries. Climate smart agriculture approaches seek to
build evidence-based policy frameworks that integrate climate change adaptation and
mitigation concerns into agricultural development strategies for food security and
poverty reduction (FAO, 2010a). If successful, such initiatives should be expanded. 7
Well functioning input and output markets are needed to ensure access to needed
production inputs and to enable suppliers to reach consumers. Information on physical
markets allows producers to make decisions about timely supply to markets, in
response to seasonal and other demand trends. The G20 initiative of the Agricultural
Market Information System (AMIS), for example, aims to enhance food market outlook
information and build capacity in developing countries by strengthening collaboration
and dialogue among countries. The OECD-FAO Agricultural Outlook assesses agricultural
market prospects, presenting projections and related market analysis over a ten-year
horizon. The FAO global perspectives publications provide assessments of the long-term
7. Another large scale data initiative is GEOSHARE. This recent research consortium gathers
national and sub-national statistics from various researchers and public agencies worldwide to
put together a consistent time series of spatially disaggregated global data on agriculture,
natural resources, and environment. It develops an open source data portal to the global
research and policy making community. It is an outgrowth of the UK Foresight project Global
Food and Farming Futures (www.geoshareproject.org/).
outlook for the world's food supplies, nutrition and agriculture, and highlight risks and
uncertainties that may influence market outcomes, as well as the priority areas where
investment and research should be directed (FAO, 2009b). These global initiatives are
essential, but relevant sub-national level information is sometimes lacking.
Recommendation 1
Recognising the imperative to increase agricultural productivity sustainably, in particular on small
farms in developing countries, and the long-term nature of the engagement required to meet future
global demand for food and other agricultural products, G20 governments should:
1. Commit to invest in sustainable approaches to productivity growth in their domestic agriculture
sectors, with particular attention to smallholder farmers, both women and men, according to their
role in the overall domestic agricultural and food security systems, fostering structural
transformation and sustainable agricultural growth.
2. Support the Global Strategy to Improve Agricultural and Rural Statistics and commit to
collaboration with concerned international organisations (particularly OECD, FAO, IFAD, IFPRI
and the World Bank) in measuring levels of public and private investment in agricultural
productivity.
3. Introduce, as an on-going feature of G20 work, a process of analysis and peer review to identify
best policy options to increase agricultural productivity growth sustainably, and more generally to
promote coherence between food security, agricultural productivity and sustainability objectives
Improving trade policies

In their 2011 report to the G20, Price Volatility in Food and Agricultural Markets:
Policy Responses, international organisations called upon G20 governments to
demonstrate leadership in multilateral negotiations to strengthen international
disciplines on all forms of import and export restrictions and subsidies as well as on
domestic support schemes that distort production incentives or encourage investment
in unsustainable agricultural production patterns and resource use.
They recognised that a trade environment where market access is substantially
improved can foster productivity growth and contribute to building global food
security. More specifically, substantially reducing trade and production distorting
domestic support, improving market access opportunities, eliminating export subsidies,
and strengthening the disciplines on export restrictions will improve the enabling
environment for investment and productivity growth.
Expected profitability is an important driver behind innovation and the adoption of
more productive techniques and practices. By impeding the transmission of price
signals to producers and consumers, price-distorting policies misdirect efforts to
increase productivity and maintain production in areas that do not yield the highest
returns, both for the environment and in economic terms. It is increasingly important
that food be able to move in a free and predictable manner from surplus to deficit
areas, given the already strong pressures on the natural resource base in some regions
and the expected impacts of climate change.
This should not prevent developing countries, in particular the most vulnerable
ones, to maintain some flexibility in their policies to deal with exceptional
circumstances that would threaten their agricultural sector. Developing countries may
also take appropriate complementary measures that address specific constraints to
improving supply capacity, including improving the ability of smallholders to turn
potential opportunities into real economic gains for their families. The WTO-OECD Aid
for Trade initiative, for example, aims to help develop trade-related skills and trade
infrastructure in developing countries.
Reducing production losses due to pests, diseases and mishandling will both
enhance productivity and contribute to reducing pressure on fragile resources. There is
a need to ensure the implementation of viable, functioning, adequately funded and
transparent sanitary and phytosanitary (SPS) systems, in particular to improve plant and
animal health surveillance, control, inspection and approval procedures to reduce the
risk of entry, establishment or spread of pests, diseases, and organisms that can affect
human, animal or plant life or health.
The World Trade Organisation (WTO) SPS Agreement and SPS Committee should play
a critical role in this regard. Capacity building in developing countries, in particular to
implement international SPS standards, guidelines and recommendations, is another
vital component of the strategy to be adopted. In this regard, the Standards and Trade
Development Facility (STDF), a partnership including FAO, the World Organisation for
Animal Health (OIE), the World Bank, the World Health Organisation (WHO), and the
WTO, should be supported to strengthen collaboration, increase awareness, mobilise
resources, and identify and disseminate good practice in SPS capacity building.
Recommendation 2
G20 governments should:
1. Demonstrate leadership in multilateral negotiations to strengthen international disciplines on
all forms of import and export restrictions, as well as on domestic support schemes that distort
production incentives. Specifically,
- substantially improve market access, while maintaining appropriate safeguards for
developing countries, especially the most vulnerable ones;
- substantially reduce trade distorting domestic support and eliminate export subsidies;
- improve transparency in trade policies and domestic support measures, including timely
notification of measures;
- support the WTO-OECD Aid for Trade initiative and other similar initiatives that aim to help
developing countries, particularly least developed ones, develop trade-related skills and
trade infrastructure; and,
- commit to strengthen initiatives at all levels in favour of trade facilitation, that aim to reduce
border restrictions to trade, and demonstrate leadership in multilateral negotiations in this
field.
2 Promote greater adherence to the science-based sanitary and phytosanitary measures
developed by the FAO/WHO Codex Alimentarius Commission, the FAO International Plant
Protection Convention, and the World Organisation for Animal Health, in full conformity with
the WTO Agreement on the Application of Sanitary and Phytosanitary Measures.
3. Support sanitary and phytosanitary capacity building, including through the Standards and
Trade Development Facility (STDF) to strengthen collaboration with developing countries and
assist in building their capacity and the capacity of their farming communities to implement
international sanitary and phytosanitary (SPS) standards, guidelines and recommendations.
Strengthening development cooperation

Official development assistance (ODA) to agriculture has received new international
attention following the food price spikes of 2007/08. In 2010, net ODA flows from
members of the OECD Development Assistance Committee (DAC) reached
USD 128.7 billion, representing an increase of 6.5% over 2009. This is the highest real
ODA level ever, surpassing even the volume provided in 2005 which was boosted by
exceptional debt relief. However, the share of ODA going to agriculture fell to 6%.
As the economic crisis deepens, aid budgets may be affected. The evidence
suggests that economic crises have important consequences on aid, not only decreasing
aid budgets but also changing the evolution as donors tend to slow down, and
sometimes reverse, the pre-crisis paths of aid budget expansion (Rapsomanikis, 2009).
Preliminary findings based on DAC members returns to the forward spending survey
suggest slower aid growth ahead. Global country programme aid is planned to grow at a
real rate of 2% per year from 2011 to 2013, compared to 8% per year on average over
the period 2008-10 (OECD, 2012e).
Donors should reaffirm their commitments to ODA, and where appropriate prioritise
agriculture development to help the worlds poorest improve their economic prospects.
These efforts should align with national agricultural development plans and priorities.
The Paris Declaration on Aid Effectiveness in 2005 and the 4 th High Level Forum for
Effective Development Cooperation in Busan in 2011 were significant steps to enhancing
donor co-ordination and responsiveness to country strategies and priorities.
The Global Agriculture and Food Security Program (GAFSP), launched in April 2010,
provides an additional important avenue for public investment. As of February 2012,
the GAFSP has pledged and committed USD 1.1 billion from a number of donors. To
date, investment programmes are assisted by the World Bank, the African Development
Bank, the Inter-American Development Bank, the International Fund for Agricultural
Development (IFAD), and the FAO. Currently, GAFSP has approximately USD 180 million
to allocate to the highest ranked proposals. However, there is no guarantee that all
deserving proposals will be funded given the limited availability of funds.
Facilitating private sector investment in agriculture

Farmers are the main source of private investment in primary agriculture. However,
foreign investment can also have a significant role in agricultural capital stock
accumulation in some countries. Many developing countries are making significant
efforts to attract and facilitate foreign investment into their agriculture sectors.
Foreign direct investment (FDI) is seen as a potentially important contributor to filling
the investment gap and providing developmental benefits through technology transfer,
employment creation, and infrastructure development. However, the acquisition of
rights to land, water and other natural resources by foreign investors has been
controversial.
Mechanisms that promote responsible investment in agriculture, including building
international consensus on Principles for Responsible Agricultural Investment (PRAI) are
important in shaping FDI in agriculture to achieve higher productivity and ensure
benefits are shared by all stakeholders, which in turn contribute to global food security
and poverty reduction. FAO, IFAD, UNCTAD and the World Bank are assessing the
developmental aspects of agricultural foreign investments in developing countries and
pilot-testing the RAI principles with investors and host country governments. The 2011
Action Plan reaffirmed the G20 Leaders commitment at the 2010 Seoul Summit to
uphold the Principles of Responsible Agricultural Investment (PRAI) to ensure sustained
investment in agriculture. The Committee on World Food Security will soon begin a
comprehensive consultation on these Principles. The OECD Policy Framework for
Investment in Agriculture (PFIA) has helped Burkina Faso, Indonesia and Tanzania
evaluate, design and implement in a coherent manner different measures aimed at
enhancing agricultural investment. At the 37 th session of the Committee for World Food
Security (CFS), the proposal to integrate smallholder sensitivity into the criteria for
responsible investments in agriculture was also put forth.8
8. www.fao.org/economic/est/investments/en/
The OECD Guidelines for Multinational Enterprises develop standards for responsible
business conduct that are applicable to the agricultural supply chains. New initiatives
are emerging to harness large private investors, both international and domestic, to
contribute to boosting agricultural growth in developing countries. Innovative
mechanisms bring together public and private sector stakeholders to define middle-
range investment plans with a growth corridor or a value chain focus, such as the
recent Grow Africa Partnership initiative, the New Vision for Agriculture of the World
Economic Forum, and the Southern Agricultural Growth Corridor of Tanzania (SAGCOT).
Public-private partnerships (PPP) are at the core of these initiatives and include,
but are not limited to, joint ventures between foreign investors and local producers or
their associations. In addition, supermarkets in developing countries are leading
processors and exporters to transform the marketing channels into which smallholders
sell. Business models include contract farming or out-grower schemes under which
smallholders can be offered inputs, credit, technical advice, and a guaranteed market
at a fixed price, albeit at the cost of some freedom of choice over crops. Mixed models
are also possible with investments in a large-scale core enterprise at the centre, with
out-growers under contract to supplement core production (Hallam, 2012).
Care must be taken, however, in the selection and formulation of business models
that are capable of meeting the needs of both host countries and investors. There is
scant evidence on the impact of PPPs involving foreign investors and agro-
industry/supermarket organised value chains on the participation of smallholders in
market integration. While some positive experiences emerged recently, the literature
suggests that agricultural value chains routinely shed participants or collapse
completely, while the degree to which participating smallholders benefit remains
uncertain, especially in cases where new business arrangements leave smallholders
exposed to risks (Barrett et al., 2010).
International guidance must go beyond setting principles that agricultural
investments should comply with in order to avoid negative impacts. It must also move
towards practical advice that would help ensure benefits are shared equitably between
investors and host countries and, in particular for their local populations. Generating
solid evidence on inclusive business models and scaling up effective partnerships
between agribusiness, governments and smallholders can harness private capital and
capacity towards the achievement of broad-based national priorities in terms of food
security, productivity growth and sustainable agriculture.
Recommendation 3
Recognising the importance of defining framework conditions that would attract increased investment,
whilst ensuring appropriate sharing of benefits between the host country citizens and investors,
1. Support country-level implementation of the Voluntary Guidelines on Governance of Tenure of
Land, Fisheries and Forests in the Context of National Food Security, recognizing the
importance of fair and efficient institutions for natural resource tenure and management.
2. Support the Committee on World Food Security process on the Principles for responsible
Agricultural Investments (PRAI) and on-going work to field test and operationalise the PRAI,
and advocate their implementation by investors, governments, international organisations and
civil society.
3. Support a series of international consultations with the relevant international organisations, the
B20 and farmers organisations to assess the potential of various public-private partnership
models to increase foreign direct investment in developing country agriculture and, promote
and scale-up appropriate partnership models in developing countries agriculture, noting in
particular the plans of the B20 New Vision for Agriculture, the Grow Africa Partnership, and
the FAO Committee on World Food Security.
IMPROVING AGRICULTURAL INNOVATION SYSTEMS AND ADOPTION OF INNOVATIONS FOR SUSTAINABLE PRODUCTIVITY GROWTH 27
Improving agricultural innovation systems and adoption of innovations for sustainable

productivity growth
Improving Agricultural Innovation Systems (AIS) to generate innovative solutions

Agricultural Innovation Systems (AIS) worldwide are in transition in an effort to
better reflect users demand and generate innovative solutions more effectively.
International, regional and national R&D and extension services continue to be at the
heart of effective AIS to improve productivity and sustainability, but innovation is
increasingly taking place in interactive and dynamic processes involving a diversity of
public and private actors, including farmers. This reinforces the need for
comprehensive agricultural development and investment strategies, policy co-
ordination and collective action.9
Reform of AIS does not necessarily mean more direct government involvement and
more public funding, but may mean a different organisational set-up of the innovation
system and a better policy, business and regulatory environment which will attract
financial and human resources, and provide incentives for knowledge exchanges,
partnerships and innovative business developments to take place (Bernet et al., 2006;
Hall et al., 2007; World Bank, 2006a and 2012).
Improving co-ordination and institutional design

In most countries, innovation policy and governance structures are still very much
in flux, and the large majority of developing countries still lack an innovation policy.
Overarching co-ordination is only possible with strong and high-level political support
(OECD, 2010b). Adequate information and analytical capacity is required to assess
performance and identify future needs. However, there is a lack of mutually agreed
methods and indicators to track the efficiency and effectiveness of expenditures in
innovation systems, and in AIS in particular.
Various methods are being developed, such as benchmarking combined with multi-
stakeholder policy dialogues and diagnostic foresighting tools. Collaborative efforts that
involve governments, international organisations and other actors are needed to
develop a common framework and methods for assessment, and to help build country
level mechanisms for improved policy co-ordination, assessment, prioritisation, and
monitoring and evaluation of AIS investments.
Agricultural innovation needs effective co-ordination to allow the often fragmented
stakeholders with different assets, knowledge, and experience to participate in the
innovation process. There is a need to strengthen linkages with agricultural
development and investment strategies in developing countries so that innovation and
technology needs are clearly identified and thus effectively prioritised. Successful co-
ordination requires leadership on behalf of the government, capacity-building to
strengthen organisational capabilities and an environment that enables self-
organisation and emergence of broker organisations (World Bank, 2012). Wider policy
coherence, across innovation, competition, trade, education and rural policies, is also
needed.
9. Collective action is understood here to be an action by multiple actors (individuals and

organisations) to identify opportunities for innovation, assess the challenges involved, and
access and use the social, human, and capital resources required to innovate, learn, and share
information, as well as to implement the activities.
28 IMPROVING AGRICULTURAL INNOVATION SYSTEMS AND ADOPTION OF INNOVATIONS FOR SUSTAINABLE PRODUCTIVITY GROWTH
Improving the cross-country supply of innovations

In the traditional agricultural innovation system, technologies were developed and
extended by the public sector. Today, growth of sustainable agricultural productivity
will require the active participation of farmers and other stakeholders in innovation
systems. The private sector also plays an increasingly important role, but will typically
orient its innovations towards high value and market-oriented production systems.
Public goods, such as improved natural resource management and maintenance of
biodiversity, will typically fall outside the scope of purely private innovations.
Governments in developed and developing countries, together with international
organisations, need to assure predictable and consistent financial support to basic
research and innovation in areas that are not taken up by the private sector. They also
need to collaborate and pursue positive synergies, and avoid duplication of efforts to
improve the overall efficiency in the use of financial resources.
Enhancing the cross-border technology transfer potential of the international R&D
architecture is pivotal to increasing productivity growth and addressing issues that are
transnational, such as transboundary diseases, climate change, water scarcity, and
price volatility in global markets, or that require investment beyond one country. The
Global Research Alliance on Greenhouse Gases, for example, is a low/no cost approach
to cross-country collaboration on research that help to address climate change
challenges.10 Opportunities provided by advances in biotechnology require concentrated
investments in infrastructure, advanced computing, and human capacity that call for
regional or central hubs (e.g. the BecA-Hub11) that offer economies of scale. It is not
efficient for every country to have its own basic agricultural research system, and
resources in those cases could be better focussed on adapting solutions developed
elsewhere.
Many agricultural technology breakthroughs, especially the improved wheat and
rice germplasm that shaped the Green Revolution, emerged from research that was
encouraged by the international community and governments with the CGIAR making
significant contributions through basic research that had substantial international
spillover effects that also benefitted smallholders.
Over the years, CGIARs activities have broadened considerably towards an
expanded development mandate, as well as to addressing country-specific activities in
response to donor support. As such, its role as a provider of productivity-enhancing
public research and a source of international R&D spillovers has weakened (Pardey and
Pingali, 2010; Pardey, Alston and James, 2008). This reality, among others, impelled
the CGIAR to examine and revise in 2008 its approach to agricultural R&D. As a result,
funding to the system has been increased, research agendas are now more results-
oriented (new CGIAR Research Programmes) and increasingly complemented by broader
partnerships for uptake of research results.
The CGIAR system continues to hold immense promise to respond effectively and
efficiently to the challenge of improving small family farm productivity, with specific
attention to the needs of women farmers. It is uniquely well placed to undertake
scientific research and development, in partnership with national and regional research
systems, encompassing a wide range of diverse needs and circumstances.
Improving the linkages between international R&D providers and developing
countries and making them effective in sharing knowledge, identifying and prioritizing
needs and transferring technology is challenging. Good co-ordination with
10. www.globalresearchalliance.org.
11. Biosciences Eastern and Central Africa: BecA website, hub.africabiosciences.org/.
international, regional and sub-regional research networks is important for countries to

develop their own national research system.12 Increases in the effectiveness of R&D
international spillovers can also be achieved by mechanisms such as the G20 Tropical
Agricultural Platform initiative and regional research collaboration. 13
Such initiatives provide important regional and sub-regional focus, facilitate the
transfer of innovations, technologies and practices and strengthen linkages with
agricultural development and investment strategies in developing countries. The
growing capacity of large national agricultural systems in Brazil, China, India, and South
Africa, for example, holds huge potential for increased South-South co-operation, while
a strategy for small countries with limited resources, in particular, could be to rely
more on technology adaptation/adoption and regional and international partnerships.
The G20 can spearhead global coordination and collaboration on agricultural R&D
and innovation, as in the Conference on Agricultural Research for Development, held in
Montpellier on 12-13 September 2011, which brought together the G20 Agricultural
Research Systems and key international bodies. More regular meetings of agriculture
scientists will be crucial to establish global research and development priorities and
actions for sustainable agricultural productivity growth. Such meetings may take place
within the activities of existing mechanisms and platforms, such as the G20 Tropical
Agricultural Platform, the Global Conference on Agricultural Research for Development
(GCARD), CGIAR Research Programmes (CRP) planning mechanisms, and the Global
Research Alliance (GRA) on Agricultural Greenhouse Gases.14
Better connecting research to demand

To improve the contribution of the R&D system to long-term challenges and
shorter-term market demands, governments and research agencies could embrace a
dual strategy that involves upgrading the R&D infrastructure (innovation hardware)
and investing in the institutional infrastructure (innovation software).
Governments need to improve the institutional infrastructure for innovations by
implementing policies that enable national and international partnerships, leverage
skills and resources, diversify funding, and result in improved products and practices
that meet the needs of the entire agri-food system. In all cases, new competencies
related to communication, ICT, intellectual property rights, participatory planning,
facilitation of partnerships-teamwork would help (Horton in World Bank, 2012).
A key strategy to improve the demand articulation for innovations is to link to
bridging organisations within the context of agricultural development and investment
strategies. Extension services, farm or trade associations, NGOs or extension-research-
farmer councils can facilitate small family farm inclusion effectively. However,
research partnerships could develop further if they moved from participatory research
12. For example the Forum for Agricultural Research in Africa (FARA), the Inter-American Institute
for Cooperation on Agriculture (IICA), Association for Strengthening Agricultural Research in
Eastern and Central Africa (ASARECA), Conference of African and French leaders of agricultural
research institutes (CORAF), the Asia-Pacific Association of Agricultural Research Institutions
(APAARI), and the Forum for the Americas on Agricultural Research and Technology
Development (FORAGRO).
13. Such as the regional agricultural research in Africa, the West Africa Agriculture Productivity
Program and the East African Agricultural Productivity Programme.
14. The OECD Co-operative Research Programme (CRP) on Biological Resources in Agriculture,
which aims to strengthen the scientific knowledge that informs policy decisions on sustainable
use of natural resources in agriculture, food, forests and fisheries, could also provide such a
platform. See for example the proceedings of the Conference on Challenges for Agricultural
Research it organised in Prague on 6-8 April 2009 (www.oecd.org/agriculture/crp)
and use of competitive research grants toward wider alliances and R&D consortia, such
as the Papa Andina network in Latin America that brings farmers, researchers, and
processing industry together to address technology and market challenges. In more
market-oriented contexts, the strategic focus for institutional partnerships in the
research system is expected to shift towards more resource leveraging and research
linkages to producer organisations, agricultural input or processing industries, and
supermarkets. This takes place usually within the framework of public-private
partnerships (PPPs) and in the form of consortia (Annex A). The key challenge is to
maintain a balance between strategic research that focuses on small family farm
productivity and market-oriented research. Specific funding strategies are required to
ensure that research continues to contribute to the reduction of rural poverty.
Improving private sector engagement at national level

Private sector investment in agriculture R&D has been rising for the increasingly
high value and marketed oriented production systems in emerging economies. The key
to opening the potential of private R&D for smallholders will lie in creating a viable
market for R&D outputs and innovation-related services.
Governments can employ instruments to direct private investments to areas of
significant public interest and areas where the private sector alone would generally
under-invest in areas which are usually of importance for smallholders. Public policies,
well-designed financial incentives and significant efforts in capacity-building are
needed for effective public private partnerships with respect to advanced science and
technology, complex regulatory systems, Intellectual Property Rights (IPR) protection,
sophisticated markets and market infrastructure, and international trade
considerations. Governments of developing countries will have to establish new
institutions and policies that facilitate private investment in technology, technology
transfer, services and innovation based on international good practice, either directly
through foreign direct investment or indirectly through alliances and partnerships
(Annex A presents successful experiences with consortia and PPPs).
With the growing diversity of partners and institutional arrangements, the demand
for more innovative funding mechanisms is growing. The appropriate financing
instrument (e.g. a grant or subsidy, a guarantee, or a loan) depends on the type of
public good to be produced and the role of the public sector. Reforming innovation
institutions and mechanisms may require a re-definition of the relationship between
public and private researchers and their clients.
New applications for other funding mechanisms, such as tax incentives, venture
capital, and advance market mechanisms, are beginning to emerge. Over two-thirds of
OECD members and many developing countries have tax incentives for R&D. Available
evidence on the effectiveness of R&D tax credits is mixed, but they can be an effective
mechanism to overcome market failures resulting in underinvestment in private R&D
(Hall and van Reenen, 2000).
The use of venture capital has been limited in developing countries, but small- and
medium-sized agricultural enterprises require risk capital to capture opportunities
presented by agricultural innovation. Although traditional venture capital may not
always be appropriate for many developing countries, innovative financing models can
be explored.15 16 The African Agriculture Fund, Actis Africa Agribusiness Fund, African
15. An angel investor provides backing to very early-stage businesses or business concepts. For
example, a business may have little more than a business concept and perhaps a plan for
growing the business.
Agricultural Capital, African Agribusiness Investment Fund are examples of new venture
funds targeting African agriculture.
Agricultural pull-mechanisms reward successful innovations ex post, as compared to
push mechanisms which fund potential innovations ex ante. Models for pull mechanisms
include: 1) standard prizes that reward achievements in a technology development
contest; 2) proportional prize structures that reward innovations in proportion to their
impact; and 3) advance market commitments (Annex A).
The Agricultural Pull Mechanism Initiative (AGPM), to be launched in 2012 by the
G20, convenes experts across a variety of fields and collaborates with a diverse set of
stakeholders, including governments, private companies, non-governmental
organisations, and civil society organisations. It has developed a short list of potential
pilot concepts and has formulated the architecture for the underlying pull mechanisms
to overcome some of the constraints for the creation of an innovation that will
generate wider social benefits.
Such pull programmes are financially attractive because no resources are spent
until the desired product is developed and approved by regulators. They can be
structured so that total expenditure depends on adoption rates creating strong
incentives for researchers to select appropriate projects and focus on developing
products that farmers will want to use. Pull-mechanisms ought to focus on a specific
market failure and development solution, embedded in agricultural innovation systems
in terms of regulatory environment.
Strengthening public and private extension and advisory services

Extension and advisory services are critical for facilitating smallholder access to
technology and knowledge. They increasingly play a brokering role to support multi-
stakeholder innovation processes. In many cases, extension is the only AIS institution
that actively facilitates adoption among smallholders (Christoplos, 2010; Klerkx et al.,
2009). Countries that have invested in extension simultaneously with investment in R&D
have had the strongest TFP growth (Fuglie, 2012).
Yet, many governments over the years have reduced their investment in extension
and advisory services, leaving these with insufficient staff and operational resources
(World Bank, 2005; Christoplos, 2010). The private sector, along with ICT-and other
group-based approaches, has increasingly taken up this space with specific objectives
for the development of their value chains. However, many extension tasks still have a
public goods nature that requires public investment, such as co-ordination and
technical backstopping of diverse service providers, the regulation and quality control
of service providers and often the overall extension system, service provision to small-
holders and disadvantaged areas, and monitoring and evaluation of services (World
Bank, 2012).
To enhance national extension systems, one recommended strategy is to establish
and strengthen a demand-driven, pluralistic and decentralised advisory service that
mixes both public and private services. Common characteristics of such services include
the development of extension programmes based on client demand, both from men and
women, the organisation of rural producers to build social capital and develop
16. Venture capital is a form of private equity that is provided for both early-stage and more
mature companies with substantial market potential. Returns on venture capital investment
stem from a trade sale (sale to, or merger with, another company) or an initial public offering
in which the company becomes authorized to sell its stock to the general public on a stock
exchange. Venture capital funds will not only provide money but will mentor their investee
firms.
economies of scale, and the provision of the technical background and certification for
service providers.
Extension services also need to be geared to the development of integrated
extension and advisory services that combine market-oriented services with other
services, such as group organisation, access to technology and knowledge, and links to
finance (Swanson and Rajalahti, 2010; World Bank, 2012), along with empowerment of
producers, women and men alike. Investment in new capacities (market-oriented
services, group-based approaches, use of ICT), and new tools and actors is often
needed in countries with a weak system and a large small-holder base. Among new
tools, ICTs are increasingly used to circulate market, price, and weather information
and to offer specific kinds of extension advice. ICTs targeting small-holders, however,
require both public and private investment (World Bank, 2011). Successful
implementation requires more knowledge of good practices in extension, which can be
provided by coordinated efforts of different actors, such as the Global Forum for Rural
Advisory Services (GFRAS).
Making agricultural education and training more attractive and relevant

Sustainable productivity growth in agriculture represents a knowledge intensive
undertaking, the success of which hinges on the development of the capabilities of the
actors primarily involved. Fostering the education and development of the ability of
farmers to innovate, to solve new problems as they emerge in a volatile environment,
and to engage with other stakeholders from researchers and policy makers to retail
buyers is at the heart of agriculture development.
In many countries, agricultural education and training has been neglected. Low
levels of general education in the farming population of developing countries can also
be an obstacle to adaptation.
A broader approach to, and a new emphasis on, agricultural education and training
is required for two reasons. First, there is a need to provide farmers and rural small
and medium enterprises (SME) with the skills, understanding and innovative capacity
that they require to practice sustainable agricultural intensification and market-
oriented activities. Strengthening individual capabilities and human capital are
important for all aspects of farm and business management. Sustainable agricultural
intensification must be recognised and presented as modern and profitable, so that the
aspirations of rural youth young men and women can converge around this.
Second, there is a need to train a new generation of agricultural specialists, scientists
and service providers who can work with smallholders in new ways to develop the skills
needed to make sustainable agricultural intensification work (IFAD, 2011a).
Agricultural universities, faculties of agriculture, vocational and technical colleges,
and farmer training centres all play a role in creating human capital needed to
modernise the sector. The emphasis on the innovation system as a dynamic, highly
interactive market place for ideas poses challenges to the education system, in
particular to match the supply of education and training with labour market demands
(World Bank, 2007). Building a productive and financially sustainable educational
system needs sustained political support for investments in Agricultural Education and
Training (AET) to develop a system of core institutions.
Aside from technical knowledge (e.g. production, processing, agribusiness,
biotechnology), graduates require professional skills such as leadership,
communication, facilitation, and organisational capabilities that are crucial for
performing in an AIS. Important reforms include reforming curricula and teaching
methods to better match modern labour market needs and building capacity, and
stakeholder partnerships for technical education and training. Such reforms have wide
implications for inter-ministerial co-operation (e.g. Ministries of Agriculture, Education

and Labour), financing, and stakeholder involvement (World Bank, 2012) (Annex A).
Recommendation 4
Mindful of the benefits of multilateral cooperation in Agricultural Innovation Systems (encompassing
education, science and extension), G20 governments should:
1. Continue to support existing and on-going initiatives that contribute to improving agricultural
productivity sustainably, including the Tropical Agriculture Platform, the Wheat Initiative, the
Global Forum for Agricultural Research, the Global Research Alliance on Agricultural
Greenhouse Gases and the Global Alliance on Food Security Research.
2. Facilitate exchange of experience and policy dialogue on AIS at high level, initially in at least
two ways:
- supporting on an on-going basis, an annual meeting of "chief scientists" in G20 countries;
and
- inviting existing mechanisms and platforms, such as the G20 Tropical Agricultural Platform,
the Global Conference on Agricultural Research for Development (GCARD), CGIAR
Research Programmes (CRP) planning mechanisms, and the Global Research Alliance
(GRA) on Agricultural Greenhouse Gases, to consider ways in which to further facilitate
international collaboration and information exchange on sustainable agricultural innovation
and growth, including identifying ways to better integrate research on
transnational/transboundary issues into agricultural production research, and ways to
effectively leverage existing research funding.
3. Strengthen efforts at the national, regional and global levels to identify, assess, prioritise,
monitor and evaluate investments in Agricultural Innovation Systems and identify the necessary
1
resources to support the Agricultural Science and Technology Indicators (ASTI) initiative to
a) collect and maintain a comprehensive database on expenditures on agricultural innovation;
b) develop tools and methods to assess the performance and impact of innovation systems.
1. See Annex B.
Improving the system of intellectual property rights (IPR), where there is need
Protection of intellectual property rights (IPRs) is an important factor influencing
the performance of agricultural innovation systems. Through adequate IPR protection,
rights-holders can exclude competitors from use of an innovation for a limited period of
time or, in the case of open innovation approaches, promote access and sharing. The
WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS, which
entered into force in 1995) established near-global minimum standards of protection
for the main types of intellectual property.17
Of particular importance for agricultural productivity, TRIPS provides that patents
shall be available with a few exceptions in all fields of technology for inventions that
are new, non-obvious and useful. One exception concerns plant varieties, which may be
excluded and protected via a sui generis system such as the one provided under the
convention of the International Union for the Protection of New Varieties of Plants
(UPOV), or by any combination of those two options. In addition, in some cases,
national law and regional or international accords afford IPR protection beyond the
TRIPS minimum standards (e.g. availability of protection for new plant cultivars via
patents and plant variety protection laws).
17. The TRIPS Agreement covers patents, including plant variety protection, copyright and related
rights, trademarks, undisclosed information (including trade secrets), geographical indications,
industrial designs and topographies of integrated circuits.
The strengthening of IPR protection in recent decades has also been associated with
an increase in private sector investment in agriculture-related research and
development and a surge in innovation leading to improved plant varieties, agricultural
chemicals, and production technologies (e.g. OECD, 2011b; Wright and Shih, 2010;
Kolady et al., 2010). In part due to the incentives provided via IPR, many of these
innovations have moved rapidly into commercial use. In some cases, the strengthened
IPR regime has led to new collaboration via pooling of intellectual property, as was the
case with development of a nutritionally enhanced strain of rice known as golden rice
(OECD, 2011d). A World Bank report (2006b) draws lessons on the design of regimes to
support plant breeding in developing countries, based on an empirical analysis of
existing regimes.
At the same time, concerns have emerged with respect to some aspects of the
present approaches to IPR protection in agriculture, particularly with respect to
patents and breeders rights. Fragmented ownership of intellectual property with
respect to research inputs (technologies and materials such as genes), may hamper the
innovation process or result in industry concentration to consolidate ownership of
intellectual property (Blakeney, 2011). The threat of litigation may hamper scientific
freedom to operate or may lead to liability for farmers using protected innovations
such as biotech crops (Wright and Shih, 2010; McGloughlin, 2012).
There are a variety of options available that may improve the system of IPR
protection to provide further incentives for private investment in innovation, without
compromising the sharing of knowledge and further innovation. Some of these issues
can be addressed by use of best practices in regulation and innovation policy
frameworks such as with respect to collaborative approaches, public-private
partnerships, or licensing of genetic inventions (e.g. OECD, 2011d and 2006). The
administration of the patent system is also important in terms of delivery of quality
patents that provide an appropriate degree of protection (Dons, 2012). 18
IPR protection remains uneven across some developing countries, both in terms of
compliance with TRIPS (e.g. Perera, 2011) and in terms of the ability to capitalise on
economic opportunities associated with the IPR system.19 Improved compliance and
awareness building may lead to improved performance of incentives for innovation and
diffusion of innovation in developing countries. There may be further potential for the
international community in providing technical assistance for improvement of IPR
systems in developing countries as well as for complementary measures such as Aid For
Trade that may improve the business environment for private sector engagement
including with respect to agriculture (OECD-WTO, 2011).
A major problem in agriculture in many developing countries, particularly relevant
in the case of small-scale farms, is a growing conflict and imbalance between the
traditional farmer seed systems and the commercial seed sector. Seed laws in many
developing countries have been reviewed and changed during the last decade, in
particular to support the emergence of the private sector. In many countries, the law
applies to all seeds and planting materials, including traditional varieties, but
implementation rules are available for only a few major crops. Despite the growing
awareness of the value of the farmers sector, very few countries have explicit
exemptions for farmers traditional seed systems, which make marketing of farmers
18. This means that the patents awarded should be clearly defined with a scope in line with the
nature of the invention and not overly broad.
19. The African Agricultural Technology Foundation (AATF) facilitates and promotes PPPs for the
access and delivery of appropriate proprietary agricultural technologies for use by resource-
poor smallholder farmers in Sub-Saharan Africa. www.aatf-africa.org/
(www.iphandbook.org/handbook/ch17/p18/).
seeds technically illegal. The concept of farmers rights, adopted in the International
Treaty on Plant Genetic Resources for Food and Agriculture (PGRFA) (FAO, 2009c),
prescribes involvement of farmers in the development of policy and gives farmers the
right to save, use, exchange and sell farm-saved seed. This may require some countries
to revise their seed laws or regulations taking into account national needs and
priorities, while also respecting international obligations concerning IPR protection,
including with respect to the TRIPS Agreement.
Improving management of sanitary and phytosanitary systems

Regulatory systems exert an overarching influence on the ability of agricultural
trade to develop. For example, where Sanitary and Phytosanitary (SPS) provisions and
certification systems are inadequate, agricultural trade may be constrained which in
turn may diminish incentives for productivity increases and demand for innovation.
Regulatory issues of particular importance for agricultural innovation include IPR,
health and food safety regulations, and bio-safety regulations. Poor choices in
regulatory policy settings or inappropriate application of tools may delay scientific
advancements, prevent technology transfer and impose crippling transaction costs on
organisations.
In developing an appropriate SPS regulatory environment, including implementation
provisions, experience has shown that science-based approaches are most effective and
least market distorting. A variety of innovative approaches can help reduce the
regulatory cost burden for governments. These include use of public-private
partnerships based on best practices in the way the SPS regulatory framework is
managed, including the interface between private voluntary standards and compulsory
compliance regulation. In general, the achievement of regulatory objectives mainly
relies on adequate national practices supported by on-going harmonization towards
best international practices, with the contribution, if necessary, of well-targeted
capacity building in developing countries, including through mechanisms like the
Standards and Trade Development Facility (STDF).
Ensuring biodiversity and sustainability

A key element to ensure sustainability in production is the proper use of
agricultural biodiversity both in its conventional use in breeding, as well as and in its
direct use by farmers and communities for livelihoods and other multiple benefits.
Agricultural biodiversity has been and continues to be a foundational source of traits
for crop and livestock improvement through breeding and biotechnology. Important
collections of plant genetic resources exist in gene banks around world including those
of the CGIAR Centres and national and regional institutions.
A major bottleneck for the effective use of the diversity existing in these
collections for crop improvement and productivity growth is the lack of easy access to
information on the characteristics of materials to potential users. In this regard, the
development of a global information system that provides users with direct access to
information on the wealth of material conserved ex situ may well be the single most
important contribution that could be made to improving the efficiency of crop
improvement.
The first version of a global accession-level information gateway on genetic
resources (GENESYS) was released in May 2011 and supported by the International
Treaty on PGRFA, the Global Crop Diversity Trust and the CGIAR. GENESYS already
provides access to information about more than 2.3 million accessions from CGIAR gene
banks, the EURISCO web catalogue of European gene bank accessions, and the
Germplasm Resources Information Network (GRIN) of the United States Department of
Agriculture. The expansion and promotion of this tool and a commitment from the G20
Countries to provide their data to this information gateway would represent a

tremendous boost to crop improvement and global agricultural productivity growth.
Investments in capacity strengthening and establishing frameworks and platforms
for data sharing to enable scientists worldwide to access and fully exploit new genomic
information and associated germplasm can result in a significant reduction in the time
it takes to breed better producing animals and plants. There are many existing
collaborations designed to share genomic information, such as US/NSFs iPlant, EUs
Elixir and others, which can be leveraged to develop a network which will facilitate
searches for desired traits and linking these to the correct germplasm. A listing of some
existing networks which can be leveraged is provided in Annex C.
Recommendation 5
1. Commit to support developing countries to establish and enforce appropriate IPR systems
consistent with international obligations, in particular the Agreement on Trade-Related Aspects
of Intellectual Property Rights and the International Treaty on Plant Genetic Resources for Food
and Agriculture, including application of the provisions of the latter treaty with respect to farmers
rights, with a view to promoting productivity and private investment in line with each countrys
strategy for food security.
2. Support the development and promotion of a global information system on plant and animal
genetic resources conserved in situ as well as in genebanks as a tool to boost plant breeding
and to sustainably increase agricultural productivity both worldwide and at small-scale farmer
levels. They also commit to make the information relating to genetic resources conserved in
their national genebanks available through a common portal, such as Genesys, which is
hosted by the CGIAR and to support the linking of this portal with information systems
containing genomic data.
Annex D provides an overview of the contribution of agricultural biodiversity to

stable and sustainable agricultural production, system resilience and ecosystem
services, which are currently undervalued, and could be better exploited to ensure the
resilience and sustainability of agricultural systems.
Addressing the water challenge in agriculture

To meet the projected global growth in demand for agricultural commodities over
the next fifty years will have significant implications for surface water and groundwater
resources, as well as the quality of rivers, lakes, aquifers and marine waters. Expanding
agricultural production will heighten competition for water resources with other users
and increase the risks of water pollution damaging human health and the environment.
Most of the increased competition for water, and pressure on water quality, will
occur in those developing countries where population growth, economic and
agricultural growth will be most rapid. As a consequence the need to improve the
future performance of agricultural water management will be critical to help reduce
pressure on water resources and the quality of water.
Annex E outlines the water challenge in agriculture and discusses how to improve
water use in agriculture and water quality. The Annex concludes that the policy
responses countries might consider as part of an economy-wide water policy reform
programme, are to:
1. Create incentives to signal to farmers and other water users the value of water
and the cost of water pollution caused by agriculture. This can also include, for
example, instituting water brokerage pilots in watersheds and river basins to
increase efficient water use, recovering operation and maintenance costs for
water supplied to irrigators; and reforming water pricing policy.
2. Invest in water infrastructure to address water resource and quality concerns,
including fostering more efficient farming practices and farming systems, such as
aggressive crop breeding for (biotic) water stress tolerance, which can yield
significantly larger water conservation benefits than direct interventions in
irrigation systems. Also, in regions of greatest water stress expand water storage
capacity.
3. Enable innovation to promote improved water management in agriculture. To
enable, disseminate and speed-up innovation over the long-term requires changing
the behaviour of governments, farmers, water managers, the agro-food chain and
other stakeholders by:
engaging these stakeholders to address water management issues, especially at
the water catchment or sub-catchment level;
enabling change by educating, training and raising awareness of farmers
through farm advisory services and building the capacity of other stakeholders
in a water catchment in the realisation of policy goals; and,
establishing information and knowledge systems to provide technical and socio-
economic information about the likely impact (science), costs (financial) and
farmer reactions (social) to a given policy change to address water
management in agriculture.
4. Strengthen institutions and governance to support efforts enhancing food and
water security. This involves the establishment of secure water use rights for
smallholder farmers, which should be the highest priority for water policy and
institutional reform, given its inherent potential to increase the efficiency of
water use and equity for the allocation of water resources for different users.
5. Build resilience, to address long-term concerns with food and water security,
including developing and implementing agricultural adaptation and mitigation
options, most of which are related to water.
Recommendation 6
Recognising the importance to improve the efficiency of water use in agriculture and to safeguard
the quality of water, as an integral part of sustainable productivity growth, G20 governments should:
1. Support countries in considering a range of policy responses to address the increasing
importance of improved agricultural water management to sustainable productivity growth in
both rainfed and irrigated agriculture. This includes policies that create incentives for farmers
and other water users to better incorporate the value of water and the cost of pollution into their
decisions and it includes strategic investments in water storage and supply infrastructure with
the involvement of water user associations, including farmers, in privatepublic partnerships.
2. Promote innovations in water research, information and knowledge systems, and outreach to
farmers and other stakeholders at the water catchment level.
3. Seek to improve the institutional effectiveness of water governance in agriculture, and build
resilience to address the increasing risks to water security associated with climate change.
4. Continue dialogue based on the recommendations concerning food security and water made by
Ministers in their Declaration at the World Water Forum, Marseille, France, 13 March 2012.
Closing the gap for the smallholders and their families

Considerable potential exists to improve small family farm productivity with
existing technology and practices. To be profitable, however, sustainable
intensification requires dynamic and efficient input and output markets. It also requires
that smallholders, both women and men, have access to such markets and to the
information needed to be able to participate effectively in them.
Policies to directly stimulate the adoption of specific technologies

There is no single technical package to underpin the quest for agricultural
productivity growth and environmental sustainability gains. An extensive spectrum of
options is available to instigate the transformation of agriculture, together with
continuing innovations.
Input subsidies
The use of fertiliser in Africa averages only eight kilograms per hectare, that is,
only 10% of the world's average. Addressing Africas fertiliser crisis is therefore urgent.
Over the last ten years, African countries have implemented large-scale, multi-year
input subsidies.20 These programmes have multiple objectives: to increase production
and enhance food security by loosening the constraints posed by price volatility, cash
constraints and lack of knowledge and strengthening the demand for inputs by
smallholders. They aim to consolidate input marketing systems, which suffer from lack
of economies of scale (Annex F). They are considered market-smart as they target
smallholders exclusively through vouchers and grants, and attempt to promote private
sector solutions for the provision and distribution of inputs (Dorward, 2009; Dorward
et al., 2008).
Available evidence, albeit very limited, suggests that subsidies in many countries
have contributed to agricultural productivity gains, although their success cannot be
totally separated from exogenous factors such as favourable weather and depends
strongly on implementation performance (Druilhe et al., 2012). The associated costs
are also very high, crowding out alternative forms of public investment. If market-
smart subsidies are used to boost small family farm productivity sustainably, their
cost-efficiency must be improved.
It is important that such programmes be temporary and only target farmers who are
not aware of the benefits of fertiliser and improved seeds, or who have no means to
finance input purchases or access to credit. Interventions that do not affect the cost of
specific inputs, but rather enhance farmers liquidity, such as loan guarantees and
credit for input purchases, or facilitate access to inputs under value chain
arrangements, can provide efficient alternatives (Rapsomanikis, 2009). In the longer
term, one-time starter packs which combine input provision and extension can
effectively foster the adoption and diffusion of technology.
International organisations should support countries to strengthen monitoring and
evaluation systems of market-smart input subsidy programmes, improve small family
farm targeting and graduation mechanisms, and implement specific training to enhance
farmers knowledge of precision approaches to ensure sustainable input applications.
20. Amongst recent interventions, one can distinguish between targeted and rationed subsidies
implemented in East and Southern Africa (Kenya, Malawi, Rwanda, Tanzania, Zambia), and
universal schemes (untargeted, pan-national for specific crops) adopted in West African
countries (Burkina, Senegal, Mali, Nigeria, Ghana).
More attention could usefully be focused on improving the functioning of input

markets generally, and fertiliser markets in particular. Given the fertiliser raw material
resources available in Africa, the African Union Member States in the Abuja Declaration
on Fertilizer for the African Green Revolution in 2006 undertook to promote
national/regional fertiliser production and intra-regional fertiliser trade to capture a
bigger market and take advantage of economies of scale through measures such as tax
incentives and infrastructure development. There is a need to identify the tools to
facilitate the increase in competition in the fertiliser industry, including through the
promotion of new investments in fertiliser plants in prioritised geographical locations,
specifically in Sub-Saharan Africa which is by far the smallest producer and consumer in
the world.
Policies to reduce costs or provide incentives to smallholders to adopt improved
inputs should be coherent with national objectives on agricultural sustainability. In
some countries, overuse of Green Revolution technologies led to the depletion of water
tables (UN, 2001). Complementary measures to enhance farmers ability to use inputs
in efficient and sustainable ways, such as building the knowledge about precision
approaches in the use of mineral fertiliser and water, are also necessary to ensure that
natural resources are not over- or misused. Also critical is to identify and remove
policy-based incentives that encourage the wasteful use of water and fertilizers. In
rain-fed areas, climate change threatens millions of small family farms and policies
should ensure the proper economic valuation of natural resources to encourage their
sustainable use (FAO, 2012b; IAASRD, 2008; IFAD, 2011c).
Sustainable production intensification and climate smart agriculture

Some tried and tested technologies and practices have proved their relevance to
increasing productivity and promoting environmental sustainability, according to local
conditions and needs. The best option for sustainable production intensification
depends on specific agro-ecological and market conditions, but generally they involve
increasing ecosystem services in agricultural production systems (to increase the
resilience and efficiency of agricultural production systems as well as improve
agricultures contribution to environmental goods) and increasing the efficiency of
input use (to reduce agricultures contribution to environmental bads). Sustainable
Land management practices, such as reduced tillage, maintenance of a protective
organic soil cover, crop rotation to enhance nutrient levels and manage pests, and
integrated nutrient and water management techniques, are associated with both
environmental and productivity benefits (FAO, 2011b, 2001c). Sustainable production
intensification requires the use of well adapted and high performing varieties to meet
productivity, nutrition and agro-climatic challenges. Increased efficiency of organic and
inorganic fertiliser, water use and pest and disease control are needed to increase
returns to agriculture while reducing negative environmental externalities when
achieving needed productivity gains.
Climate smart agriculture (CSA) is an approach to managing multiple objectives in
agricultural growth and development strategies under the specific constraints of
climate change. The approach involves identification of policies, strategies,
technologies and financing to support sustainable increases in agricultural productivity
and incomes, incorporating necessary adaptation by building resilience and adaptive
capacity in agricultural systems, while reducing and removing and greenhouse gases to
contribute to climate change mitigation. CSA is based on a principle of site specificity,
recognising that the priorities and practices will vary from place to place. CSA
incorporates sustainable intensification approaches, emphasising the importance of
efficiency to increase returns and reduce emissions per unit output, and building
ecosystem services to foster resilience as well as sequestration. Aligning international
climate policy and financing approaches under the UNFCCC process with the priorities
of developing countries to achieve CSA is a fundamental component of the approach,

just as building innovative financing mechanisms to link climate adaptation and
mitigation financing with agricultural development and food security funds is a major
component of CSA. Leveraging private investments through the establishment of
appropriate public-sector incentives and funds is part of this innovative approach, as is
the establishment of financing to support the long-term transitions often required to
achieve CSA objectives.
Achieving sustainable production growth and climate smart agriculture will require
shifts in policies to support transition to sustainable and climate smart production
systems. One key barrier is secure rights over key production resources such as land and
water. The Voluntary Guidelines on the Governance of Tenure of Land, Fisheries and
Forests in the context of National Food Security provide guidance on how to improve
access to support sustainable development. Another key issue is the time it takes to
achieve net economic benefits after the switch to new practices, and the need to
support livelihoods over this transitional phase. Major investments in human capital are
required to achieve the needed improvements in management. Linking environmental
sources of finance, such as for climate change adaptation and mitigation, to
agricultural development finance is a potential means to overcome this barrier that is
being promoted under climate smart agriculture approaches (FAO, 2010b). Translating
these approaches at the national level into large scale co-ordinated programmes of
action will require significant institutional support. Consideration must be given to the
different incentives for adoption that may be faced by men and women when their
access to services and control over vital assets are unequal. In practical terms,
mechanisms should be developed to assess the productivity, resilience and
environmental impacts of production systems. Key issues include risk management, and
collective action in managing natural resources.
Successful adoption of sustainable productivity intensification practices will depend
on the capacity of farmers to make optimal choices, which in turn depends on the
availability of information, technical support to smallholders through extension services
and appropriate incentives. At the local level, farmer organisations are vital in
facilitating the uptake of sustainable production intensification practices, scaling up
pilot studies, empowering disadvantaged social groups, and using farmers experiences,
local and traditional knowledge.
Country experiences are diverse (IFAD, 2011c). In some cases, these approaches
have spread easily due to the existence of favourable agro-ecological and market
conditions, without need for direct policy support. In other countries, their scaling up
has required a favourable policy environment. In yet other instances, political
commitment to both productivity growth and a sustainable intensification agenda has
been critical. In Zambia, adoption of conservation agriculture was successful, being an
explicit part of the current national agricultural policy (IFAD, 2011c). In China, the
promotion of ecological agriculture has also been clearly promoted through a
package of policy measures under the 11th Five Year Plan, while Indonesia has a
national programme for the promotion of integrated pest management. In 2012 FAO
initiated a project to support the development of climate smart agriculture policies,
strategies and investments with three partner countries: Malawi, Zambia and Viet Nam.
Recommendation 7
Recognising the need to address the short-term imperatives of ensuring food security while
increasing the resilience and sustainability of food systems for the longer term and taking into
account the need to minimise potential market distorting effects, G20 governments should:
1. Commit to reviewing policies that may generate perverse incentives for sustainability and
encourage unsustainable use of natural resources, undertake the integration of natural resource
management into agricultural policy making to redress them, and work towards ensuring that
environmental sustainability gains are achieved.
2. Support developing countries in designing and implementing policies based on a
comprehensive analysis of the relationships between food security, food production and natural
resource use.
3. Support developing countries to strengthen monitoring and evaluation systems of market-
smart smallholder targeted input subsidy programmes, improve small family farm targeting
methods and graduation mechanisms, and implement specific training to enhance farmers
knowledge of precision approaches to ensure sustainable input applications on a gender equal
basis.
4. Support interested international and regional organisations to conduct analysis and studies and
recommend options to strengthen competition in the fertiliser industry, and improve access to
fertilisers at competitive prices, specifically in Sub-Saharan Africa (Annex F).
Risk management
Risk considerations are important factors that influence farmers decisions to adopt
new practices or technologies. Smallholders are rarely well equipped to manage risks in
an environment that is increasingly characterised by fragile ecosystems, persisting poor
integration into output, input, and finance markets, and often with a high prevalence
of diseases, such as HIV or malaria, or conflict.
Risk aversion hinders the adoption of technologies and practices, in spite of their
long term benefits for the individual farmer and for overall sustainable productivity
growth. Small family farms may choose lower return crop and livestock production
options over more technology- and input-intensive options. Or they may opt for
productivity enhancing over sustainability enhancing practices. The threat of shocks,
either general, such as droughts, or farm-specific, such as a crop failure, increases
their financial risks and makes smallholders reluctant to access credit markets due to
the consequences of an inability to repay.
Reducing the risk for farmers to adopt more sustainable and productive practices is
complex. Appropriate public investments in infrastructure, storage, services, and
better governance of natural resources and of agricultural markets, including contracts
and institutional arrangements in value chains, are both critical to limiting the risk
environment for smallholders, as well as for other private sector actors.
On-farm risk management strategies include diversification of production and
maintenance of on-farm genetic diversity. These strategies allow agricultural systems
to maintain production in the face of changes to climate and markets, and develop the
capacity to absorb shocks and continue to function within a changing set of
circumstances.
As recognised in the G20 Agricultural Ministers Action Plan of June 2011, financial
instruments are important to mitigate and manage agricultural risks. Farmers with
adequate access to credit and saving services, and with insurance coverage are better
able to invest in productive assets (Cai et al., 2009). However, traditional agricultural
insurance and credit services are unsustainable throughout the developing world,
mainly as a result of the high transaction costs of reaching farmers who operate on a
small scale.
The development of market-based approaches to financial inclusion for
smallholders has been central to recent efforts. Credit is essential to build up the
necessary capital. In particular, longer term loans are needed for investment in
productive and natural capital, such as storage and soil fertility. Initiatives for the
development of innovative micro-insurance schemes and of weather index insurance
products have gained attention, particularly in the case of weather index insurance
as a tool to manage systemic risks.
Pilot initiatives undertaken with support from a number of donors, alongside private
and public sector partners, indicate that weather index insurance products indexed to
weather station data, area and yield, or satellite rainfall estimations, have the
potential to overcome high transaction costs associated with traditional multi-peril
crop insurance (IFAD and WFP, 2010).
Although index insurance is in the early stages of development, numerous pilot
studies have been completed and several practitioners and donors have begun to shift
their attention to the challenge of scaling up successful approaches. The work of the
WFP-IFAD Weather Risk Management Facility is an example of a systematic approach to
taking stock of success factors for weather index insurance programmes, defining the
complementary roles of public and private sector actors, and identifying the
preconditions for scaling up successful models.
Challenges to the diffusion of index insurance include its limited affordability and
appeal for poor farmers, and the constraints faced by the private sector to develop
index insurance products outside the context of partnerships with the public sector. In
order to design quality index insurance contracts, it is important to improve the quality
of data to which such risk management instruments are indexed. In this regard,
reaching many farmers with instruments to manage weather risks requires more and
better weather stations emitting higher-quality weather data. Current technological
developments on the use of ICTs and satellite imagery are gradually making the
collection of meteorological information easier, which may significantly help
developing countries.
For scaling up purposes, there remains a need to broaden efforts to improve data
collection systems and to strengthen national meteorological services and their
weather observing networks. More importantly, there is a need for historical
meteorological data to be made available and easily accessible to insurers and re-
insurers to facilitate the design of weather risk management instruments and improve
the estimation of risk premia.
Relevant initiatives were supported by the G20 as part of the 2011 Action Plan on
Food Price Volatility and Agriculture. In particular, efforts to provide smallholders with
innovative and effective market-based risk management options should be scaled up.
Public-private partnerships, specifically with international organisations and the
cellular telecommunications corporations, promote the establishment of networks of
stations in developing countries for the making of meteorological observations.
Initiatives such as the Weather Info for All (WIFA) in which the World Bank and the
World Meteorological Organization work together with mobile telephony operators aim
at hosting weather equipment at mobile network sites to strengthen weather networks
and systems.
Recommendation 8
1. Support the efforts of relevant International Organizations and existing risk management
initiatives, such as the Platform for Agricultural Risk Management, the Global Index Insurance
Facility, the Weather Risk Management Facility, the R4 Rural Resilience Initiative and the
Weather Info for All, to provide smallholders with innovative and effective market-based risk
management options, including weather index insurance.
2. Strengthen their own efforts towards exchanging weather information, including the recovery of
historical meteorological information to facilitate the development of weather index insurance and
re-insurance markets (Annex G).
Promoting market integration and increasing competitiveness

The adoption of technologies and practices to increase productivity sustainably
must be profitable. Neither the widespread adoption of productivity enhancing
technologies, nor the provision of services required to facilitate their adoption are
likely to occur unless greater attention is given to removing the constraints facing small
family farms (FAO, 2012c). This requires the development of markets and agricultural
value chains so that farmers can participate competitively, obtain fair prices for their
products, and invest on-farm.
Smallholders, in particular women, face significant constraints to access markets.
Their choice is dependent on both their ability to participate in output and input
markets and on the functioning of those markets. Policies to facilitate market
integration should take into account the modern nature of value chains, and
differences in the capacity of men and women smallholders to meet market demand for
nutritional quality and food safety standards. Efforts are needed to support the ability
of poor producers to participate in new market opportunities, and to ensure that
nutritious and safe foods are available, accessible, and affordable to poor consumers.
Farmers are not a homogeneous group. They differ in terms of the extent to which
they participate in markets and the importance that different markets (for agricultural
products, inputs, labour, services) have for them. Even within the same household,
women and men farmers may participate in different kinds of markets and their
production decisions may reflect a different balance between income generation and
household food security and nutritional concerns.
Governments have multiple roles to play in supporting the development of
agricultural markets and value chains in which smallholders can find profitable, yet
low-risk, market opportunities. Governments need to invest, develop enabling policies
and regulations to promote the expansion and transformation of agricultural markets
and specific value chains, and support the capacity of poor rural people, in particular
women, to engage in these more profitably (IFAD, 2011c).
Land access and tenure security influence the extent to which farmers are prepared
or able to invest in improvements in production and sustainable land management,
adopt new technologies and promising innovations, or access finance for on-farm
investment and working capital. Since the full benefits of certain sustainable practices
accrue over several years, secure tenure that provides the incentive for farmers to
invest is vital.
Land tenure systems that allow renting in and out easily can contribute to bridging
the productivity gap. The evidence indicates that secure tenure can double investment
and significantly increase land values, while well developed rental markets can result
in increased productivity by around 60% (Deininger and Jin, 2007; Feder, 2002).
The restructuring of downstream segments of the food value chain presents new
risks of marginalisation for smallholders, and new opportunities for some to raise their
income and productivity. This is particularly true in domestic markets in developing
countries which are becoming more segmented and differentiated, offering different
entry points for smallholders with diverse potential in terms of quality of production
and market engagement.
Progress has also been made in recent years in innovative financing to agriculture
through public-private or donor-facilitated mechanisms, such as equity financing,
refinancing, guarantee funds to allow development of new financial products, and
fiscal incentives to financial institutions providing inclusive services in rural areas.
Value-chain financing is an innovative terrain with promising opportunities for
smallholders and offers the potential to link access to finance to productivity growth.
Including agriculture in a broader financial agenda is increasingly recognised.21
New market opportunities are often linked to establishing collaborative
arrangements between smallholders and larger private sector enterprises retailers,
processors, but also providers of inputs and technical assistance. A variety of business
arrangements including contract farming, out-grower schemes, and others can
provide incentives for smallholders to engage in more productive activities. However,
ensuring that this occurs often requires the public sector to play both enabling and
active supportive roles, in particular in ensuring that the business arrangements that
link smallholders to the modern value chains provide incentives to more sustainable
practices.
With a supporting enabling environment, smallholders will be better placed to
adopt productivity enhancing technology. However, the greater challenge is to improve
the functioning of both upstream and downstream agricultural markets so that they can
serve smallholders on an equal footing with larger actors, with manageable risks, and
on terms that make it worthwhile and feasible for them to shift to more productive and
sustainable practices. The ability of smallholders to organise is often the key enabling
factor for them to engage profitably and at reduced risk in new markets as
organisations can facilitate economies of scale in access to inputs and services,
information, capital, marketing and negotiations with other actors.
About a third of food produced for human consumption is wasted or lost globally,
and over 40% of the losses in developing countries occur at the post-harvest and
processing levels (FAO, 2011d). Efforts to develop new technologies to reduce post-
harvest losses have been comparatively much lower than those to boost production.
Improved post-harvest systems, however, require more than improved technologies and
need to cover a large segment of value chains, including preservation, conservation,
safety and quality control or enhancement, processing, packaging, storage,
distribution, and marketing. There is a need for a comprehensive approach that links
R&D to technology dissemination, advisory services, infrastructural development,
capacity building, and institutional innovation in all segments of agricultural value
chains where losses may occur (IFAD, 2011b). 22
21. This issue is thoroughly dealt with in a report to the G20 by the Global Partnership for Financial
Inclusion and the International Finance Corporation, namely CPFI and IFC (2011).
22. Among the several existing initiatives to address post-harvest losses at the international level we
may cite the FAO-hosted Information Network on Post-Harvest Operations, which promotes
sharing of data and best practices in post-harvest activities, supporting post-harvest management
and related capacity building at the country level, and the Post-Harvest Action, Global Post-
Harvest Forum, which contributes towards a post-harvest R&D agenda developed on a multi-
stakeholder basis (IFAD, 2011b).
Investments in human capital

Human capital development, including health, nutrition, education, and skills
development, is essential to increase farmers productivity in agriculture, as well as
their ability to seize decent non-farm employment opportunities.
In many developing countries, access and quality of education in rural areas need to
be urgently improved. Rural-urban gaps remain wide in education enrolment and
attainment rates, basic education is frequently biased against agriculture and, in
general, fails to teach young people about agriculture in the context of sustainable
development or to appreciate how it is linked to the communities development
aspirations. Gender disparities in access to education, particularly above the primary
level, also remain a major problem in many countries.
In order to effectively invest in human capital, governments must integrate long-
term solutions with immediate food security measures that empower farmers to invest.
Well designed social protection safety nets programmes and interventions can play a
critical role, in enabling the transition to sustainable intensification, especially if they
are well integrated with policies aimed at promoting transformational changes and at
enhancing agricultural productivity. Labour-based, productive safety nets such as
public works or food-for-assets programmes can empower poor farmers to increase
their productive potential, enhance local infrastructure such as irrigation systems, and
contribute to ecosystem restoration and local resilience.
Cash transfer programmes have become an important tool for social protection and
poverty reduction strategies in low- and middle-income countries around the world.
Their focus is on food security, health, nutritional and educational status, particularly
of children, but comparatively little attention is paid to boosting the productive
activities of beneficiary households.
There is good reason to believe, however, that cash transfer programmes can
influence the productive capacity of beneficiary households, in particular by helping
households with limited access to financial services for investment and risk mitigation.
The provision of regular and predictable cash transfers to poor households in the
context of missing or malfunctioning markets has generated economic and productive
impacts at the household and local levels. For example, the Mexican PROGRESA
programme has led to increased land use, livestock ownership, crop production and
agricultural expenditures, and a greater likelihood of operating a microenterprise (Todd
et al., 2009; Gertler et al., 2012). The Malawi social protection programme has led to
increased on-farm investment and production (Covarrubias et al., 2012; Boone et al.,
2012).
Recommendation 9
G20 governments promote human capital development and agricultural productivity growth for
smallholders, women and men alike, and with particular attention to youth. They should:
1. Support the continued provision of targeted, well-designed and gender-sensitive social safety-
net programmes that meet the immediate food and nutrition needs of smallholders and their
households, and that also help reduce risks and costs associated with the adoption of more
productive and sustainable practices and technologies.
Unless policies to promote innovation and investment have an explicit gender focus,
women will continue to be disadvantaged with respect to accessing technologies,
markets and services. As a result of their multiple responsibilities, women face major
labour constraints. Investing in labour-saving and productivity enhancing technologies
and infrastructure to free womens time for more productive activities is pivotal.
Increasing womens access to land, livestock, education, financial services,

extension, technology and rural employment would boost their productivity and
generate gains in terms of agricultural production, food security, economic growth and
social welfare. Closing the gender gap in agriculture would generate significant gains. If
women had the same access to productive resources as men, they could increase yields
on their farms by 2030%. This could raise total agricultural output in developing
countries by 2.54% (FAO, 2010b).
The Womens Empowerment in Agriculture Index (WEAI) measures the
empowerment, agency, and inclusion of women in the agriculture sector in an effort to
identify ways to overcome those obstacles and constraints. The Index is a significant
innovation in its field and aims to increase understanding of the connections between
womens empowerment, food security, and agricultural growth (IFPRI, 2012).
Many labour saving technologies exist and can be made available to large numbers
of poor rural women. Infrastructure investments can greatly contribute when designed
specifically with gender roles and the needs of rural women in mind. Priority areas for
technology and infrastructure investment include access to water and water
management (both for farming and for household consumption), access to energy
(cooking fuel and on and off-grid electricity in particular), and access to tools and
implements well suited to womens physical requirements and cultural preferences
(Carr and Hartl, 2010; World Bank, FAO and IFAD, 2008).
Recommendation 10
1. Recommend the explicit integration of agricultural education and of the sustainable
agriculture intensification agenda into the international organisations initiative to
support national skills development strategies, as developed under the G20
Development Working Group in 2011, and widen the range of involved organisations to
explore possibilities to enhance South-South and triangular co-operation in the
gender-sensitive reform of agricultural education systems.
2. Recognise the equal importance of the roles of women and men farmers in promoting
sustainable agricultural productivity growth, the critical need to bridge gender
productivity gaps in agriculture, and the need for measures to improve gender
equality, in particular concerning access to land, water, education, services,
technology and decent rural employment. In particular, they should promote tools
such as the Womens Empowerment in Agriculture Index to assess the impact of
policies and investment on women
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ANNEX A. ADDITIONAL INFORMATION ON AIS 53
Annex A.
Additional Information on AIS
Box A.1. Features of Papa Andinas partnership programmes

This programme is an example of a regional institutional mechanism for research-innovation in small-
holder-agrarian contexts.
Papa Andina is a regional partnership that involves the International Potato Center (CIP) and national
agricultural research organisations in Bolivia, Ecuador, and Peru. Since its inception in 1998, Papa Andina
has shifted its focus from implementing a regional research agenda to developing a regional learning
agenda and strengthening national capacities for innovation.
Organisational interface. Papa Andinas participatory market chain approach (PMCA) features
facilitated, face-to-face meetings that involve diverse market chain actors, researchers, and other
agricultural service providers in exploring options for market chain innovation. The facilitating R&D
organisation then conducts or arranges for R&D on specific innovations. A project team based at CIP has
continued to serve as a broker and facilitate interactions between researchers, market actors, and decision
makers at various policy levels (in theory this task should eventually pass to the market actors). Full-time
facilitators and innovation brokers reduce some of the transaction costs and co-ordination issues related to
partnerships and networks. Financial sustainability beyond donor funding remains controversial and
problematic for Papa Andina, both in CIP and in national research organisations.
Outcomes. PMCA and stakeholder platforms have achieved higher prices for native products,
increased farmers revenues, developed more stable markets for producers of native potatoes (partly
through successful branding and marketing), and increased farmers self-esteem. In Bolivia, new potato
products sold to supermarkets enable farmers to receive 3040% higher prices than they received in
traditional markets. The innovation network in Ecuador (Plataforma) enabled farmers to raise yields by 33%,
1
improve inputoutput ratios by 20%, and increase gross margins per hectare four-fold.
New products and markets. Other key outcomes include the creation of a new brand of high-quality
fresh potatoes for the wholesale market, a new native potato chip product and brand, and the first brand of
high-quality native potatoes to be marketed in Peruvian supermarkets. Technological innovations improved
2
pest and disease management and the selection of harvested produce. A national platform, CAPAC-Peru,
was established to promote the marketing of quality potato products and innovation, in which local actors
are gradually taking more responsibility as their capacity and trust increases. CAPAC helped organise
small-scale farmers to supply potatoes meeting the more demanding market requirements. When a
multinational entered the market, Papa Andina began to work on corporate social responsibility to balance
corporate interests with the interests of community suppliers and the environment. Other indirect results
include the popularisation of native potatoes in Perus urban cuisine and the establishment of Perus annual
National Potato Day, which caused the United Nations to declare 2008 the International Year of the Potato.
Key lessons
Approaches such as PMCA require substantial time and resources for capacity development if they are
to strengthen linkages between researchers, economic actors, and policy makers.
Traditional evaluation approaches based on objectives and logical frameworks do not work for
innovation processes and innovation brokers performance. The processes and tasks involved are too
complex and results often take some time to be apparent.
A pro-poor focus is vital to market chain approaches and innovation networks, which run the risk of
benefiting those who are better able to take advantage of new market opportunities and innovations. In
Peru, native potato varieties have evolved from poor peoples food to a source of national pride, and
the main beneficiaries have been the smallholders from the high Andes who preserved and grew them
over thousands of years.
___________________________________________________
1. Impact statistics from Cavatassi et al. (2009).
2. CAPC = Cadenas Productivas Agrcolas de Calidad en el Per (Quality Agricultural Productivity Chains in Peru).
Source: Devaux et al. (2009, 2010); Horton et al. (2010).
54 ANNEX A. ADDITIONAL INFORMATION ON AIS
Box A.2. Design of the Australian national agricultural innovation system

Two events have significantly shaped the present Australian national agricultural innovation
system.
The first was the introduction of the rural research and development corporation (RDC) model
in 1989 under the Primary Industries and Energy Research and Development Act 1989
(PIERD Act), to invest in and facilitate R&D in the agriculture, fisheries and forestry industries (the
original model also included an energy RDC). The Australian rural sector comprises a diverse
range of industries, mostly owned and operated by a myriad of small family businesses. The
market failure in the provision of socially optimal levels of RD&E is likely to be more severe in the
rural sector than in many other sectors of the economy, as individual small businesses have a very
low capacity to conduct significant RD&E. It is also difficult for rural businesses to capture benefits
from the application of property rights to the technology and knowledge generated from investment
in R&D in the sector.
Under the RDC model, the government collects statutory levies on rural industry production,
and the levies are paid to research and development corporations which conduct RD&E to benefit
the industry collectively. The levy rate is set by a vote of producers in each industry. The Australian
Government contributes funding to match the producer levy contributions up to a limit of 0.5% of
the gross value of production by the industry. The contributions provided by government act as an
incentive for private investment, but also recognise the spillover benefits to the wider community in
the form of research which contributes to environmental stewardship and more sustainable use of
natural resources. Industry is closely involved in RDC priority setting for scientific, technological or
economic R&D which extends from basic and strategic research to applied research and
development. The RDCs are accountable both to producers and to the Australian Government.
The second major influence on the present Australian system was a decision in 2005 by the
primary industries ministers of Australias national, state and territory governments to endorse the
concept of National R with Regional D&E. The concept recognises that basic and strategic
research (R) can be provided from a distance, with regional adaptive development (D) and local
extension (E) required to improving the uptake of innovation by industry. The governments, RDCs
and public research providers (including universities) subsequently agreed to develop the National
Primary Industries Research, Development and Extension (RD&E) Framework in an effort to
encourage greater collaboration, reduce duplication, and improve the investment of RD&E
resources nationally. Under the framework, 14 primary industry sector strategies for national co-
operation in RD&E are in various stages of development or implementation, and eight cross-
sectoral strategies promote cooperation in relation to animal biosecurity, animal welfare, biofuels
and bioenergy, climate change and variability, food and nutrition, plant biosecurity, soils and water
use in agriculture.
Source: ABARE.
Box A.3. Chile technology consortia

Chile is considered a pioneer in using consortia to align public research with national
innovation policies, and the government issued its first tender for a Technology Business
Consortium in 2004. Chiles consortia are expected to strengthen links between research
communities and local and global business communities, thereby improving scientific skills and
techniques, competitiveness and opening new business opportunities.
A consortium is defined as a technology company in which one or more companies agree to
carry out joint projects with universities, institutes, and/or technology centres to develop new
technologies that can improve and add value to production processes and products. The
theoretical justification for this type of instrument is to discover solutions for market failures limiting
innovation by an enterprise and encourage partnership strategies to incorporate knowledge
externalities, co-ordinate the use of complementarities, and share the risk of investment in
technology innovation.
Public agencies fund and manage the consortium programme. The maximum contribution of
the public sector to a single consortium is USD 6 million, and each consortium can operate for up
to five years. The maximum yearly public contribution to a consortiums total budget is 25% for
research activities, with an additional contribution of 10% for human capital development and 15%
for research infrastructure. This funding is matched by co-financing of 50% from non-public
consortium members.
Most of the consortia studied have focused on improving the competitiveness of productive
sectors rather than on improving capacity to pursue innovative activities. Their main contributions
are improved access to technological and other kinds of knowledge (such as marketing,
international market regulations and requirements, and staff with specific kinds of expertise) and
joint technology development by researchers with companies.
Given their short duration and the applied research they generally conduct, applications for IP
protection are still very low. For the same reason, the companies in the consortia have not yet
achieved major technological breakthroughs. Consortia are a good option when industry is
strongly committed to the process and the partners possess the technological capabilities to
develop the kinds of products they seek. When these conditions are not met, a strictly corporate
model such as the one used in Chile may not work. Special programmes may be needed, for
example, if consortia are intended to include small-scale producers.
Source: lvarez et al. (2010); World Bank (2012).
Box A.4. Indias evolving agricultural innovation system

The National Agricultural Innovation Project (NAIP), launched in 2006, addresses R&D and
innovation challenges by changing the way in which scientists, farmers, and agricultural
entrepreneurs interact in the national AIS. NAIP incorporates lessons from the three earlier
projects (representing almost 25 years of experience), including the need to develop public-private
partnerships, integrate technology development and transfer mechanisms, and finance research
through competitive research grants.
The project sought to strengthen the role of the Indian Council for Agricultural Research
(ICAR) in catalysing and managing change in the National Agricultural Research System and to
promote the development of three kinds of multistakeholder, multidisciplinary consortia of public
and private organisations, universities, NGOs, and others: (1) market-oriented, collaborative
research alliances with a focus on selected agricultural value chains; (2) livelihood research
alliances with a focus on strategies to sustain secure rural livelihoods in about 110 disadvantaged
districts; and (3) basic and strategic research alliances with a focus on well-defined areas of
frontier science with potential applications for problems in Indian agriculture. The trade-off
between market-driven innovation and innovation for lagging areas has been addressed by
creating dedicated funding streams to support different types of innovation clusters.
Promising consortia and research alliances were funded by NAIP through a competitive
process. In each case, consortium members were jointly responsible for the governance, design,
and implementation of their research programmes; maintaining satisfactory fiduciary and
safeguard arrangements; applying the resulting innovations; and disseminating new knowledge
through conferences, innovation marketplaces, networks, and communications strategies. A
Helpdesk was established to support the new and more challenging partnerships that the
consortia represented. It provided guidance for preparing concept notes and full research
proposals, assisted in matching consortium partners, and helped to overcome initial problems in
managing the consortia.
The outcomes of NAIP are numerous and diverse: the approach received an overwhelming
amount of interest and resulted in funding 188 consortia; NAIP was able introduce greater
pluralism into agricultural research, with almost 40% of consortium institutes coming from outside
the ICARstate agricultural university system, PPPs were promoted on a large scale for the first
time; the consortium approach has promoted pluralism, synergy, teamwork, partnership, value
addition, learning, and better, more relevant research, and the anticipated greater impact is
associated with the approach. Lastly, the institutions have been strengthened as a result of formal
training and, even more important, through development of new partnerships, as illustrated by the
continuous interaction between public, private, and NGO sectors and the willingness of ICAR
institutes to work outside their system. ICAR has started to mainstream the consortium approach
and competitive selection process throughout its institutes.
Source: World Bank (2006, 2012).
Box A.5. Promoting PPPs for agricultural technology transfer in China

The China Agriculture Technology Transfer Project responded to strategic concerns about
Chinas agriculture by piloting innovative models to transfer and use agricultural technology. It
aimed at enabling poor farmers to adopt new, value-adding technologies and generate additional
income by producing for high-value markets. Public investments in agriculture were leveraged with
complementary private investments from agribusiness. Aside from developing new models to
transfer technology, the project fostered better publicprivate partnerships in agriculture.
The project PPP approach addresses public good nature investments, placing emphasis on
environmental technology, social services, and small-holder productivity along with innovativeness
of the technology, economic and financial viability, and additionality of the investment (the grant will
not drive out other funding), particularly strong company, and compliance with strategic policy
directions. The PPP models promote commercially attractive technologies and new institutional
arrangements:
Competitive matching grants provide partial funding to develop and test successful tripartite
investment models in which researcher-investor-farmer partnerships focus on increasing farm
income.
Grants support researcher-company interactions to develop profitable public good technologies
for sale.
Funding helps farmer organisations develop strong grant proposals.
The project also finances technology transfer to farmers lacking capital, information, or the
decision-making power to adopt technologies on their own. Through block grants, the project
supports public programmes to help the private sector commercialise innovative technologies.
Public funds are also used to develop public good technologiestechnologies that do not appeal to
the private sector on purely commercial grounds.
Results: More than 200 sub-projects have been selected for implementation. Poor farmers are
adopting new, value-adding technologies and generating additional income by producing for high-
value markets. Public investments in agriculture are leveraged with complementary private
investments from agribusiness. The project was also able to change the mentality of actors, have an
impact on PPP policy and program; institutionalised project selection and management procedures;
built capacity, and identified innovative models.
Source: Adapted from World Bank (2005, 2010).
Box A.6. Examples of technology transfer offices and incubators

Technology transfer offices (TTO) are special units affiliated with a research organisation or
university with a mandate to identify and protect as well as facilitate the use and commercialisation of
research results. These offices can expand the recognition of the research organisations work
(thereby strengthening public perceptions of its value), move technologies to end-users (seed
companies, farmers) on an exclusive or nonexclusive basis, and generate revenues to fund
continuous research. Technology transfer offices can provide special expertise on IP protection
and/or legal agreements and contribute to formal transfers of technology from public organisations or
universities or from the private sector to commercial or international partners.
Inova, a technology transfer office established by the State University of Campinas Unicamp in
Brazil in 2003, helped create productive linkages between the universitys own R&D and industry. By
2007, Inova had become the most frequent patentor and licensor in Brazil. The greatest contributor to
the patent and licensing portfolio is the Chemistry Institute (48%); the corresponding figure for
agribusiness and food is 16%. Factors in Inovas success include: it is driven by market demand; the
technology transfer team comes from private institutions and has business skills (not researchers);
and the government provides many incentives to companies, such as tax benefits and
sponsorship/subsidy of the salary of a scientist hired by a company.
Incubators nurture young firms, helping them to survive and grow during the start-up period when
they are most vulnerable. Incubators provide hands-on management assistance, access to financing,
and business and technical support services; they frequently also provide shared office space and
access to equipment. Although they work with a broad spectrum of business development models,
the vast majority of business incubators fall into two general categories: technology (focusing on
commercialising new technology and transferring technology) or mixed use (serving a wide range of
clients).
The Agri-Business Incubator@ICRISAT at Hyderabad, India offers technology consulting,
business development, and training services, as well as office space, laboratories, and agricultural
land for startups to test new technologies and services. ICRISAT has established several
partnerships and has been able to commercialise several technologies for both small and commercial
farmers. Developing countries require also broader, less intensive, and more diverse incubator
services to develop entrepreneurial, innovative cultures and business environments. In Mozambique,
the Technoserve Incubator leverages entire agribusiness sectors, and provides diverse services to
different target groups.
Sources: World Bank (2012); Di Giorgio (2007) and Campbell (2007).
Box A.7. US Model for Technology Transfer:

Agricultural Technology Innovation Partnership program (ATIP)
The US Department of Agriculture (USDA) established the ATIP to further enhance likelihood that
USDA intramural research outcomes would be adopted by US private sector businesses for
commercialisation. Although replete with scientific expertise, the intramural research components of
USDA do not have the resources nor the authority to provide business partners of USDA (licensees)
with marketing, manufacturing, and fiscal resources (complementary assets) needed by them for their
businesses to be successful. As a result, ATIP was established to strategically form geographic
partnerships with wellestablished economic development entities that excel in providing the
complementary assets that USDA cannot.
Ten organisations across the United States each have a Partnership Intermediary Agreement
with USDA to formalise their membership in ATIP. This network represents a novel approach to
enhance and accelerate commercialisation of USDA research outcomes. The ten members of ATIP
established a Foundation to provide both a unifying entity for the members external to USDA, as well
as flexibility to engage other organisations that have a vested interest in seeing USDA research
outcomes adopted by the private sector to create goods and services for public benefit.
ATIP and USDA have held a number of regional events, called Rural Agriculture and Business
Innovation Forums. The goal of these forums is to provide to rural farmers and agribusinesses
innovations and technologybased solutions to their regional agricultural problems. The forum
approach entailed several steps: 1) Regional listening sessions comprised of businessman, farmers,
economic development, regulatory and extension personnel are held to identify broad lists of regional
issues; 2) Second session is then held for an indepth discussion of the list of region issues in order
to identify priority areas for which they may be an existing technology based solution; 3) The Forum is
convened as a roundtable discussion to address the three topic areas with farmers, agribusiness
professionals, USDA researchers, university and, extension service personnel, rural development
personnel, and funding and regulatory agency personnel.
Source: US Department of Agriculture.
Box A.8. Models for pull mechanisms

Standard prizes reward achievements in a technology development contest. It can be designed
as a winner-takes-all prize or so as to reward runners-up as well.
Proportional prize structures reward innovations in proportion to their impact. Such mechanisms
could offer a fixed per-unit reward that depends on the total benefits achieved, so that the total award
is flexible. For instance, a fixed payment per hectare planted in a new seed variety, where the total
reward paid out would depend on adoption provides incentives to fund research aimed at improving
the variety and adapting it to local conditions.
Advance market commitments (AMCs) offer a public-sector subsidy payment for goods and
services that the AMCs intended beneficiaries want to buy. This increases the market size and makes
returns more certain for producers. In exchange, the industry commits to providing the product at a
sustainable long-term price for an agreed period after public support ends.
Box A.9. Positive education reform examples

Reforming Indias State Agricultural Universities was a major effort to modernise university
administration and management; update the curriculum; make related changes in pedagogy, learning
materials, and infrastructure; set new standards for higher agricultural education; and improves human
resource management in state line departments.
In 1997, the Netherlands initiated a major investment in the knowledge infrastructure for
agriculture that led Wageningen University to change its focus, structure, programmes, and staffing
and co-operate with a wider research, social science, and stakeholder network.
The private, autonomous EARTH University in Costa Rica was established to educate young
people to deal with the regions numerous problems in rural areas. It blends academic work with
practical experience and collaboration in agrarian communities and agribusiness; building capacity
and stakeholder partnerships for technical education and training.
In five Egyptian universities, a curriculum change enabled course content to respond to the needs
of potential employers and has proven to be a good entry point for wider institutional change.
Vocational agricultural education programmes in 25 secondary schools in Egypt were transformed to
introduce students to practical training and to skills such as problem solving, critical thinking, and
decision making.
Source: World Bank (2012).
References to Annex A
lvarez, R., J.M. Benavente, C. Contreras, and J.L. Contreras (2010), Consorcios Tecnolgicos
en Amrica Latina: Una primera exploracin de los casos de Argentina, Chile, Colombia y
Uruguay, Technical Note No. IDB TN-127, Washington, DC: BID (Banco Interamericano de
Desarrollo). idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=35242324, accessed March
2011.
Campbell, A.F. (2007), How to Set Up a Technology Transfer Office: Experiences from Europe.
In Intellectual Property Management in Health and Agricultural Innovation: A Handbook of
Best Practices, Vol. 1, edited by A Krattiger, R.T. Mahoney, L. Nelsen, J.A. Thomson,
A.B. Bennett, K. Satyanarayana, G.D. Graff, C. Fernandez, and S.P. Kowalski. Oxford, UK, and
Davis, California: Centre for the Management of Intellectual Property in Health Research and
Development (MIHR) and Public Intellectual Property Resource for Agriculture (PIPRA),
pp. 55966. www.ipHandbook.org, accessed April 2011.
Cavatassi, R., M. Gonzlez-Flores, P. Winters, J. Andrade-Piedra, P. Espinosa and G. Thiele
(2009), "Linking smallholders to the new agricultural economy: An evaluation of the
Plataformas Program in Ecuador", ESA Working Paper 09-06, Rome, FAO.
Devaux, A., D. Horton, C. Velasco, G. Thiele, G. Lopez, T. Bernet, I. Reinoso, and M. Ordinola,
(2009), Collective Action for Market Chain Innovation in the Andes, Food Policy, Vol. 34,
pp. 318.
Devaux, A., J. Andrade-Piedra, D. Horton, M. Ordinola, G. Thiele, A. Thomann, and C. Velasco
(2010), Brokering Innovation for Sustainable Development: The Papa Andina Case, ILAC
Working Paper No. 12, Rome: Institutional Learning and Change Initiative (ILAC).
Di Giorgio, R.C. (2007), From University to Industry: Technology Transfer at Unicamp in Brazil.
In Intellectual Property Management in Health and Agricultural Innovation: A Handbook of
Best Practices, vol. 1, edited by A Krattiger, R.T. Mahoney, L. Nelsen, J.A. Thomson, A.B.
Bennett, K. Satyanarayana, G.D. Graff, C. Fernandez, and S.P. Kowalski. Oxford, UK, and
Davis, California: Centre for the Management of Intellectual Property in Health Research and
Development (MIHR) and Public Intellectual Property Resource for Agriculture (PIPRA),
pp. 174754. www.ipHandbook.org, accessed April 2011.
Horton, D., B. Akello, L. Aliguma, T. Bernet, A. Devaux, B. Lemaga, D. Magala, S. Mayanja,
I. Sekitto, G. Thiele, and C. Velasco (2010), Developing Capacity for Agricultural Market
Chain Innovation: Experience with the PMCA in Uganda, Journal of International
Development, Vol. 2, p. 367.
World Bank (2005), China Agriculture Technology Transfer Project, Project Appraisal
Document, Washington, DC: World Bank.
World Bank (2006), India: National Agricultural Innovation Project, Project Appraisal
Document, Report No. 34908-IN, Agriculture and Rural Development Sector Unit, South Asia
Region, Washington, DC.
World Bank (2010), Designing and Implementing Agricultural Innovation Funds: Lessons from
Competitive Research and Matching Grant Projects, Report No. 54857-GLB. Washington, DC.
World Bank (2012), Agricultural Innovation Systems: An Investment Sourcebook. Washington, DC:
World Bank.
62 ANNEX B. MEASURING INVESTMENTS AND CAPACITIES IN AGRICULTURAL RESEARCH: THE ASTI INITIATIVE
Annex B.
Measuring Investments and Capacities in Agricultural Research:

The ASTI Initiative
The Agricultural Science and Technology Indicators (ASTI) initiative is one of the
few sources of information on agricultural R&D statistics for low- and middle-income
countries. Facilitated by the International Food Policy Research Institute (IFPRI), ASTI
has been compiling, analysing, and publicizing primary data on institutional
developments, investments, and capacity trends in agricultural R&D in low- and
middle-income countries since 2001, building on prior projects undertaken by IFPRI and
the former International Service for National Agricultural Research (ISNAR).
ASTI has published sets of country briefs and country notes, datasets, regional
synthesis reports, and other analytical reports that have been widely and frequently
cited in national and international agricultural research policy documents. ASTI outputs
provide both data trends the progress of human and financial capacity in agricultural
research over time and data comparisons the performance of a country or a region
relative to another. The initiative has produced a large amount of original and ongoing
survey work focusing on developing countries, but it also maintains access to relevant
data for developed countries for comparative purposes. ASTI is also a comprehensive
source of qualitative information on the history of national agricultural R&D systems,
institutional changes, and constraints that agencies and researchers face in undertaking
agricultural R&D. Data collection, analysis, and dissemination are conducted through a
network of national, regional, and international agricultural R&D agencies. ASTI data
and associated reports are made freely available at the ASTI website
(www.asti.cgiar.org).
ASTI has been funded on a project basis, and as a result, data collection activities
have been rather ad hoc and focused mainly on updating out-of-date datasets. Since
2008, ASTI has received two subsequent grants from the Bill and Melinda Gates
Foundation for its data collection and analytical activities in Sub-Saharan Africa and
South Asia. This has allowed ASTI to initiate a transformation of its program to a more
sustainable and institutionalised monitoring system with frequent updates, and to
enhance the use of ASTI datasets and outputs for analytical purposes. ASTI is currently
seeking funding to replicate this institutionalized and decentralised data collection and
analysis system in SubSaharan Africa to other parts of the world. ASTI is also
developing plans to expand its indicators to include performance measurements.
ANNEX C. NETWORKS TO SHARE GENOMIC INFORMATION 63
Annex C.
Networks to Share Genomic Information
This annex provides a listing of some existing networks which can be leveraged to
share genomic information:
Ensembl Plants (European Molecular Biology Laboratory-European Bioinformatics Institute,
Cambridge, United Kingdom): 14 plant species. plants.ensembl.org/index.html.
Collaborating with ARS.
InterPro (European Molecular Biology Laboratory-European Bioinformatics Institute,

Cambridge, United Kingdom): InterPro is an integrated database of predictive protein
"signatures" used for the classification and automatic annotation of proteins and genomes.
UniProt Knowledgebase (UniProtKB): UniProt is the central hub for the collection of
functional information on proteins. UniProt is a collaboration between the European
Bioinformatics Institute (EBI), the SIB Swiss Institute of Bioinformatics and the Protein
Information Resource (PIR).
Gene Ontology Consortium (with support from NIH-NHGRI) is an international consortium.
GMOD (Generic Model Organism Database) is an international consortium.
Oryzabase (National Institutes of Genetics, Japan): Integrated rice science database.
The Generation Challenge Programme (GCP) of CGIAR and its partners: Partners and
products in GCP are:
The Integrated Breeding Platform (IBP) is a web-based, one-stop shop for information
site providing tools for a configurable Breeding Management System (based on concept of
the International Crop Information System, ICIS); a Field Trial Management System
including an Integrated Breeding Fieldbook; and tools for a Decision Support System
including a Molecular Breeding Design Tool, a Cross Prediction Tool and a tool for marker-
assisted recurrent selection (MARS).
MoU with iPlant for the IBP: The Generation Challenge Programme (GCP) and iPlant
Collaborative signed a joint Memorandum of Understanding (MoU) on 17 January 2011, in
San Diego, California, United States. Under the terms of this MoU, iPlant will collaborate
with GCP in developing GCPs Integrated Breeding Platform (IBP), including hosting a
team of GCP software engineers.
www.iplantcollaborative.org/learn/news/2011/01/18/iplant-collaborates-cgiar-
integrated-breeding-platform-ibp-powerful-new
The Crop Trait ontology and Trait dictionaries (www.cropontology.org/): A

collaborative effort of the Crop Lead Centres for developing the controlled vocabularies
64 ANNEX C. NETWORKS TO SHARE GENOMIC INFORMATION
necessary for integrating phenotypic and genetic, genomic data through annotations.
Collaboration with the Plant Ontology Consortium, SOybase (USDA), SolGenomic Network
(SGN), Gramene and Trait ontology, RCN-Phenotype ontology, GARNet (UK) and initiation
of collaboration with NCBI.
CGIAR Centres: AfricaRice, Bioversity, CIMMYT (Centro Internacional de Mejoramiento de

Maz y Trigo), CIAT, CIP, IITA, International Rice Research Institute (IRRI), ICARDA,
International Crops Research Institute for the Semi-Arid Tropids (ICRISAT).
List of GCP partners in developing countries, newly developed countries, developed

countries, public and privates institution can be found at:
www.generationcp.org/gcp_partners and the list of principal investigators:
www.generationcp.org/gcp_principal_investigators.
Agropolis, Agronomic Research Platform in Montpellier, France is a Collaborator of GCP

since the beginning and is collaborating on the Challenge initiatives for Rice and
Sorghum.
The John Innes Centre (Norwich, United Kingdom) is one of eight institutes that receive
strategic funding from the BBSRC for plant science and microbiology, and is collaborator
of GCP since the beginning.
The Scottish Crop Research Institute (SCRI, Scotland, United Kingdom) is one of the
Scottish Governments main research providers in environmental, crop and food science
and will have a major role in the Scottish knowledge economy. It changed its name for
The James Hutton Institute and is collaborator of GCP since the beginning.
Monsanto, Dupont/Pioneer Hi-Bred, Syngenta, Limagrain, Noble Foundation, major

universities in Canada, South Korea, Japan, United Kingdom, etc., are all GCP
collaborators.
iPlant (National Science Foundation, USD 50 million award, currently in year 3 of five-
year award to University of Arizona and the Texas Advanced Computing Center) is a
research community based (including ARS scientists), educators, and students working to
enrich all plant sciences through the development of cyberinfrastructure-the physical
computing resources, collaborative environment, virtual machine resources, and
interoperable analysis software and data services that are essential components of
modern biology. It is a GCP collaborator.
Sol Genomics Network (Boyce Thompson Institute, Ithaca, NY and ARS scientists)
contains genomic, genetic, phenotypic and taxonomic information for Solanaceae
(tomato, potato, eggplant, pepper and petunia) Rubiaceae (coffee), and more. It
collaborates with GCP for the ontology.
Plant Ontology Consortium and the Reference Plant Trait Ontology, Oregon State
University, provide an international controlled vocabulary for annotating Genomic and
Phenotypic, Breeders data enabling integration for supporting data mining and
discovery, comparison, etc. They collaborate with GCP.
Knowledgebase (DOE, Office of Biological and Environment Research, first year of new
program) is a community-driven cyberinfrastructure for sharing and integrating data and
analytical tools to accelerate predictive biology.
ANNEX C. NETWORKS TO SHARE GENOMIC INFORMATION 65
Phytozome (DOE): 25 plant species many in collaboration with ARS scientists.
i5K (5 000 arthropod genomes): ARS and university scientists will sequence, assemble and
annotate the genomes of 5 000 insects and other arthropods in the next five years. The
i5K project is hosted at the Arthropod Genomics Consortium site
(arthropodgenomes.org/wiki/i5K).
1000 Fungal Genomes Project: DOE-Joint Genome Institute (JGI) Community Sequencing
Project initiated by ARS and university scientists to inform all areas of fungal biology.
Maize NAM (ARS, China MOST, other).
African Orphan Crops (AOC) consortium www.worldwildlife.org/what/globalmarkets/

agriculture/orphancrops.html
66 ANNEX D. THE CONTRIBUTION OF AGRICULTURAL BIODIVERSITY
Annex D.
The Contribution of Agricultural Biodiversity to

Stable and Sustainable Agricultural Production,
System Resilience and Ecosystem Services
The loss of biodiversity in agriculture
FAO (2011) states that, in many places around the world, achievements in
agricultural production in the last decades are the results of management practices
that have led to the loss of biodiversity and have degraded the land and water systems
upon which the production depends. Gliessman (2007) states that the loss of genetic
diversity in agriculture has occurred mainly because of conventional agricultures
emphasis on short-term productivity gains.
There is broad consensus that global rates of agricultural biodiversity loss are
increasing (Jarvis et al., 2007). The first report of the State of the Worlds Plant
Genetic resources for Food and Agriculture (FAO, 1998a) already described as
substantial the loss in diversity of plant genetic resources for food and agriculture,
including the disappearance of species, plant varieties, and gene complexes.
The world food base is depending on a decreasing number of species and varieties.
In fact, despite the existence of some 50 000 edible plants in the world, rice, maize
and wheat provide 60% of the world's food energy intake and only a few hundred plants
contribute significantly to food supplies (FAO, 2010). Six varieties of corn account for
more than 70% of the worlds corn crop, and 99% of the turkeys raised in the United
States belong to a single breed (FAO, 1998a).
Instances of crop genetic erosion in major and minor crops were reported by several
countries to the Second Report on the State of the World Plant Genetic Resources (FAO,
2010). The following two examples are only a glimpse at what seems now to be more a
rule than an exception in all regions of the world: peasant farmers on the island of
Chiloe, Chile, cultivated 800 to 1 000 varieties of potato when only about 270 varieties
are now found; in Mali, 60% of local varieties of sorghum have disappeared in one
region over the last 20 years (FAO, 2010). The loss of traditional culture, including the
loss of traditional farming culture and changes in traditional food habits were also
mentioned (FAO, 2010).
Domesticated animals are also threatened by genetic erosion: FAO (1998b)
estimates that as many as two domesticated animal breeds are being lost each week
worldwide while 20% of animal breeds (mammalian and avian species together) are at
risk and 9% are extinct (FAO, 2007).
ANNEX D. THE CONTRIBUTION OF AGRICULTURAL BIODIVERSITY 67
The contribution of agrobiodiversity to stable and sustainable agricultural production,

system resilience and ecosystem services
The Millennium Ecosystem Assessment (2005) summarises the contribution of

biodiversity in terms of its role in provisioning, regulating, supporting and providing
cultural ecosystem services (Table D.1).
Table D.1. Biodiversity benefits to agriculture through ecosystem services

(Adapted from Millennium Ecosystem Assessment, 2005)
Provisioning Regulating Supporting Cultural

Food and nutrients Pest regulation Soil formation Sacred groves as food
Fuel Erosion control Soil protection and water sources
Animal feed Climate regulation Nutrient cycling Agricultural lifestyle
varieties
Medicines Natural hazard Water cycling
regulation (droughts, Genetic material
Fibres and cloth reservoirs
floods and fire)
Materials for industry Pollinator sanctuaries
Pollination
Genetic material for
improved varieties and
yields
Pest resistance
Frison et al. (2011) summarise evidences that agricultural biodiversity contributes

to sustainable production and that it has potential to make an even greater
contribution. In his report to the UN Secretary General, De Schutter (2010) noted that
agroecological approaches to food security involve the maintenance or introduction of
agricultural biodiversity (diversity of crops, livestock, agroforestry species, fish,
pollinators, insects, soil biota and other components that occur in and around
production systems) to achieve the desired results in system sustainability and
productivity.
Agricultural biodiversity, through dietary diversity, can contribute to nutritional
health gains and in moderating problems related to micronutrient deficiencies (Johns
and Eyzaguirre, 2006). Dietary diversity is a vital part of diet quality. There is evidence
of the beneficial effects of dietary diversity (as opposed to specific dietary
components) on disease, morbidity and mortality (see references in Frison et al., 2006
and 2011). Thus, a wide range of local plants and minor crops and varieties are key
contributors to accessing essential micronutrients and health promoting factors for
nutrition security. Research has demonstrated a strong association between dietary
diversity and diet quality and nutritional status of children (Arimond and Ruel, 2004;
Kennedy et al., 2007; Rah et al., 2010; Sawadogo et al., 2006).
Agricultural biodiversity can contribute to system sustainability and resilience: the
deployment of biodiversity in agriculture contributes to a more diverse production base
which can lead to more sustainable and resilient systems. One of the many descriptions
of the concept of resilience includes: (i) the capacity to absorb shocks and still
maintain function; (ii) the degree to which a system is capable of self-organisation; and
(iii) the degree to which a system can build and increase its capacity for learning and
adaptation (Folke et al. 2002; Carpenter and Brock, 2008). Resilience is a vital
ecosystem property, allowing agricultural systems to maintain production in the face of
changes to climates, markets and other factors. It builds the capacity to absorb shocks
and continue to function within a changing set of circumstances. Examples of the
contributions of different components of agricultural biodiversity are given below.
The contribution of increased diversity of crops and increased crop production,

particularly through genetic diversity, to improve resistance to biotic and abiotic
stress, and to improve ecosystem regulating and supporting services are reported in
Ostergard et al. (2009), Hajjar et al. (2008) and Gurr et al. (2003).
The role of diversity of soil biota and the maintenance of all components of soil
food web and of diversity within different levels for supporting agricultural systems is
described by Beed et al. (2011), Gliessman (2007) and Mder et al. (2002).
The value of diversity in livestock production through improved provision of
nutrients, overall productivity, system resilience, and income is explored in Morton
(2007), and the importance of diversity in aquaculture to improve ecosystem function,
nutrition and income in many different farming systems is described in Halwart (1998)
and Pullin and White (2011).
The introduction of trees into agricultural environments to improve ecosystem
function and to provide marketable products and realize the full potential of
agroforestry systems is explored in Garrity et al. (2010).
The value of pollination services and the relation between pollinator diversity
versus density is reported in Gallai et al. (2009) and Dag et al. (2006).
Agricultural biodiversity has various dimensions or scales (gene level, species or
population level, interspecific or ecosystem level, and landscape level) and can be
divided into structural, compositional and functional components (PAR/FAO, 2011).
Those various scales and components support ecosystem services upon which
agriculture is based. The hierarchy concept explained by Noss (1990) suggests that
biodiversity be monitored at multiple levels of organisation, and at multiple spatial and
temporal scales. No single level of organisation (e.g. gene, population, community) is
fundamental, and different levels of resolution are appropriate for different questions.
He states that big questions require answers from several scales.
In fact, Jarvis (2007) states that our understanding of the relationship between
biodiversity and ecosystem functions is incomplete but the following points can be
stated with a high degree of certainty:
Genetic diversity within population is important for continued adaptation to
changing conditions and farmers need through evolution and, ultimately, for the
continued provision of ecosystem goods and services;
Species composition may be more important than absolute number of species;
Diversity within and between habitats and at the landscape level is also important
in multiple ways.
In conclusion, the multiple roles of agricultural biodiversity are currently
undervalued and should be better exploited to ensure the resilience and sustainability
of agricultural systems, to maximise its role in providing multiple ecosystem services
and in contributing to the supply of the diverse diets needed for healthy lives.
ANNEX D. THE CONTRIBUTION OF AGRICULTURAL BIODIVERSITY 69
References to Annex D
Arimond M., and M.T. Ruel (2004), "Dietary diversity is associated with child nutritional status:
evidence from 11 demographic and health surveys", Journal of Nutrition, Vol. 134, No. 10,
pp. 25792585.
Beed, F., A. Benedetti, G. Cardinali, S. Chakraborty, T. Dubois, K. Garrett, and M. Halewood
(2011), "Climate change and micro-organism genetic resources for food and agriculture: State
of knowledge, risks and opportunities", Background Study Paper No. 57, Thirteen regular
Session of the Commission on Genetic Resources for Food and Agriculture, 18-22 July 2011,
Rome, Italy. Online: http://www.fao.org/docrep/meeting/022/mb392e.pdf (last accessed: 9
August 2011).
Carpenter, S. R., and W.A. Brock (2008), "Adaptive capacity and traps", Ecology and Society,
Vol. 13, No. 2, pp. 40. Online URL: http://www.ecologyandsociety.org/vol13/iss2/art40/
Dag, A., I. Zipori, and Y. Pleser (2006), "Using bumblebees to improve almond pollination by the
honeybee", Journal of Apiculture Research, Vol. 45, pp. 215-216.
De Schutter O. (2010), Report submitted by the Special Rapporteur on the right to food, Olivier
De Schutter. United Nations General Assembly. Human Rights Council, Sixteenth session,
Agenda Item 3: Promotion and protection of all human rights, civil, political, economic, social
and cultural rights, including the right to development. (A/HRC/16/49).
FAO (1998a), The State of the Worlds Plant Genetic Resources for Food and Agriculture, FAO,
Rome.
FAO (1998b), Special: Biodiversity for Food and Agriculture: Farm Animal genetic Resources,
FAO: Rome.
FAO (2007), The State of the Worlds Animal Genetic Resources for Food and Agriculture, CGRFA,
pp. 37-38. Available at: ftp://ftp.fao.org/docrep/fao/010/a1250e/a1250e02.pdf.
FAO (2010), The Second Report on the State of the Worlds Plant Genetic Resources for Food and
Agriculture, FAO, Rome.
FAO (2011), The State of the World's Land and Water Resources for Food and Agriculture
(SOLAW) - Managing systems at risk. Food and Agriculture Organisation of the United Nations,
Rome and Earthscan, London.
Folke, C., S. Carpenter, T. Elmqvist, L. Gunderson, C.S. Holling, and B. Walker (2002),
"Resilience and Sustainable Development: Building Adaptive Capacity in a World of
Transformations", AMBIO: A Journal of the Human Environment, Vol. 31, No. 5, pp. 437-440.
Frison, E., I.F. Smith, T. Johns, J. Cherfas, J., and P.B. Eyzaguirre (2006), "Agricultural
biodiversity, nutrition, and health: making a difference to hunger and nutrition in the
developing world", Food and Nutrition Bulletin, Vol. 27, No. 2, pp. 167-179.
Frison, E.A., J. Cherfas, and T. Hodgkin (2011), "Agricultural biodiversity is essential for a
sustainable improvement in food and nutrition security", Sustainability 2011, Vol. 3, No. 1,
pp. 238-253.
Gallai, N., J.-M. Salles, J. Settele, and B.E. Vaissire (2009), "Economic valuation of the
vulnerability of world agriculture confronted with pollinator decline", Ecol. Econ., Vol. 68,
pp. 810-821.
Garrity, D.P., F.K. Akinnifesi, O.C. Ajayi, S.G. Weldesemayat, J.G. Mowo, A. Kalinganire,
M. Larwanou, and J. Bayala (2010), "Evergreen Agriculture: a robust approach to sustainable
food security in Africa", Food Security, Vol. 2, No. 3, pp. 197-214.
Gliessman S.R. (2007), Agroecology: the ecology of sustainable food systems, 2nd edition, CRC
Press. Taylor & Francis group. Boca Raton, London, New York.
Gurr, G.M., S.D. Wratten, and M.A. Altieri (2003), "Genetic engineering and ecological
engineering: a clash of paradigms or scope for synergy?" In: Gurr, G.M. S.D. Wratten, and M.A.
Altieri (eds.), Ecological Engineering for Pest Management: Advances in Habitat Manipulation
for Arthropods, CSIRO Publishing, Australia.
Hajjar, R., D.I. Jarvis, and B. Gemmill-Herren (2008), "The utility of crop genetic diversity in
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ANNEX E.TOWARDS IMPROVING WATER AND FOOD SECURITY: THE POLICY CHALLENGE 71
Annex E.
Towards Improving Water and Food Security:

The Policy Challenge
Background
In paragraph 49 of the Cannes Declaration, G20 leaders welcomed the production

of a report by the international organisations on how water scarcity and related issues
could be addressed in the appropriate fora. Taking into account the importance that
the G20 leaders attach to the water and food security link, this Draft Text provides an
Annex to the G20 report Improving global sustainable agricultural productivity growth
and bridging the gap for small family farms.
The scope of linkages between water and agriculture

To meet the projected global growth in demand for agricultural commodities over
the next fifty years food, feed, fibre and feedstock for bioenergy will have
significant implications for water systems. 1 Expanding agricultural production will
heighten competition for water resources with other users and increase the risks of
water pollution damaging human health and the environment. Most of the increased
competition will occur in those developing countries, where both population, economic
and agricultural growth will be most rapid. As a consequence the need to improve the
future performance of agricultural management will be critical to help reduce pressure
on water systems.
Delivering the required improvements in agricultural water management will be a
challenge because of the complex linkages between agriculture (rain-fed and irrigated)
and water systems:
Water resources: Agriculture accounts for the major share of water withdrawals for
consumptive use for most countries, about 70% globally.
Water pollution: In industrialised countries, agriculture is often a major source of
non-point water pollution as a result of intensification of production (e.g. intensive
use of farm chemicals and increased livestock manure waste) and because other
point sources of water pollution, such as from industry and sewage treatment, have
been contained. In most developing countries, agricultures contribution to water
pollution is less important, mainly because of the greater significance of pollution
from urban and industrial sources, and has yet to be addressed (Jawahar and
Ringler, 2009). However, in many developing countries the future expansion of
agriculture is projected to lead to growing pressure on water systems, as illustrated
by the growth in excess nitrogen (Figure E.2).
1. The term water system covers the consumptive uses of water (e.g. agriculture, energy,
industry, domestic) from mainly surface water and groundwater sources and non-consumptive
water uses, largely supporting ecosystems and meeting social needs (e.g. bathing, aesthetic and
spiritual values), but also for hydropower and navigation.
72 ANNEX E.TOWARDS IMPROVING WATER AND FOOD SECURITY: THE POLICY CHALLENGE
Water and energy links: These include the direct links through the use of energy to
pump water through irrigation canals and extract surface water and groundwater;
and indirect links such as through the production of agricultural feedstocks to
supply bioenergy with consequences for water resources and quality, and also the
competition for water stored in a reservoir used for both irrigation and to generate
hydropower.
Droughts and floods: The impacts of droughts and floods have significant human life
and food security costs. Agriculture can both exacerbate floods and droughts, such
as through land clearing for agricultural use, and also contribute to ameliorating the
harmful consequences of floods on the rest of the economy by providing water
retention services and slowing flood water flows that may harm urban populations
and infrastructure.
Ecosystems: With agriculture a major user of land and water, the sector can have
important consequences (positive and negative) on ecosystems, such as wetlands
and coastal zones.
Climate change: Agricultural and some water systems contribute to climate change
but are also vulnerable to the adverse impacts from climate change and climate
variability, with significant regional variation within and across countries. Much of
the adverse burden is placed on developing countries, especially in some sub-
tropical and lower mid-latitude regions (Nelson et al., 2010; OECD, 2010a).
Global outlook for water to 2050 and implications for agriculture
The OECD (2012a) Environmental Outlook to 2050 indicates that the global
prospects for water are more alarming than projected by the previous OECD (2008)
Environmental Outlook to 2030. Urgent action is needed to avoid significant costs for
society, including increased food insecurity. The OECD (2012a) Environmental Outlook
to 2050 provides a business as usual baseline which can help improve understanding of
the challenges and the trade-offs that need to be made.
Freshwater resources availability to 2050 will be further strained

Freshwater availability will be further strained in many regions, with over 40% of
the worlds population projected to be living in river basins experiencing severe water
stress. Overall water demand is projected to increase by 55% between 2000 and 2050,
due to growing demand from manufacturing, energy generation, domestic use and to
ensure environmental water needs. In the face of these competing demands, there may
be little scope for increasing water for irrigation (Figure E.1).
The combined effects of these pressures could mean water shortages that would
hinder the growth of many economic activities. Environmental flows will be contested,
putting ecosystems at risks. Groundwater depletion and pollution from many sectors
(e.g. agriculture, industry) may become the greatest threat to agriculture and urban
water supplies in several regions in the coming decades.
Under business-as-usual water productivity and medium GDP growth, over 50% of
the global population, 45% of global GDP, and almost 50% of global grain production will
be at risk due to water stress by 2050 (Ringler et al. 2011). For China and India and
many other rapidly growing developing countries, water stress will increasingly affect
growth negatively with globally 3.9 billion people living in water stressed basins by
2050 up from 1.6 billion in 2000 (OECD, 2012a). Low-income countries will be
particularly subject to water stress, with 39% of low-income countries experiencing
much more severe shifts towards water stress than wealthier/more industrialised
countries. Moreover, risk to economic growth and food security as a result of water
scarcity is not only a reality in developing countries. Many key industrialised areas and
countries will have to increasingly cope with water scarcity and its effects on growth
(OECD, 2012a).
Water pollution is projected to worsen in most regions

The quality of surface and groundwater water outside the OECD area is expected to
deteriorate in the coming decades, for example, from excess nutrient flows from
agriculture (both inorganic fertilisers and livestock manure) and poor wastewater
treatment (Figure E.2). In addition, as agricultural production expands, this will exert
further pressure on water systems, from pesticides, soil sediments and other
agricultural pollutants (e.g. veterinary products). The consequences will be increased
eutrophication, biodiversity loss and human health concerns. For example, the number
of lakes at risk of harmful algal blooms will increase by 20% in the first half of this
century, while groundwater pollution is a growing problem.
Addressing the water and food security challenge
The outlook for water systems indicates that policy makers need to address the
twin challenges of increasing agricultural production while reducing stress on both the
quantity and quality of water systems. It will be important that farmers receive the
right policy and market signals to improve water use productivity, advance agricultural
management practices to lower water pollution, and enhance the benefits that some
farming practices can bring to water systems.
Agricultural water management and incentive policy reform will be key to enhance
the efficiency of existing water use. This must be supported by infrastructure
investment to build, modernise and upgrade existing irrigation and water delivery
systems in most developing countries and some OECD countries (OECD, 2010a;
Rosegrant et al., 2009).
In terms of water quality, monitoring and enforcing water quality standards will be
important, with recent innovations in monitoring technologies that could help an
otherwise highly costly and complex task. In addition, encouraging farm practices that
are beneficial in reducing agricultural pollution need to be encouraged that are
targeted and tailored to specific local conditions, such as creating riparian buffers,
removing land from production near watercourses, and using conservation tillage to
conserve soil moisture and reduce soil sediment flows into water courses are important
policies.
The overall economic, social, and environmental costs resulting from the impact of
agriculture on water systems, both over extraction of water resources and pollution,
exceed billions of dollars annually, according to recent estimates for OECD countries
(OECD, 2012b). No global estimate of these costs exists, but based on the OECD
experience they are likely to be extremely high. At the same time, the rapid increases
in food production and decline in real prices of food could not have been achieved
without irrigated agriculture. Irrigations importance has increased further as a result
of climate variability and climate change (Rosegrant et al., 2009).
Policies used to address water resource stress and water pollution linked to
agriculture, are costing OECD governments billions of dollars annually, such as
maintaining irrigation infrastructure and providing support to farmers to adopt
practices to combat pollution (OECD, 2012b and 2010a). Extrapolating to non-OECD
countries the cost of such policies could be substantial. This cost, however, must be
counter-balanced with the rapid growth in food production and poverty reduction
achieved as a result of public investment in irrigation. But policies such as energy
subsidies to reduce water pumping costs for irrigators, has led to unsustainable use of
groundwater resources in some cases.
Figure E.1. Global water demand: Baseline scenario, 2000 and 2050
Irrigation Domestic Livestock Manuf acturing Electricity

Km3
6 000
5 000
4 000
3 000
2 000
1 000
0
2000 2050 2000 2050 2000 2050 2000 2050
OECD BRIICS RoW World
Note: This figure does not consider rain-fed agriculture. BRIICS includes: Brazil, Russia, India, Indonesia,
China and South Africa. ROW Rest of the World.
Source: OECD (2012a) Environmental Outlook to 2050, Paris, France, output from IMAGE suite of
models.
Figure E.2. Nitrogen surpluses per hectare from agriculture:

Baseline, 2000 and 2050
160 2000 2050

kg of N / ha / year
140
120
100
80
60
40
20
0
Rest of Af rica
Europe
Rest of SE Asia
Indonesia
Rest Latin America

Russia
China
Middle East
India
Southern Af rica *
Oceania
Brazil
Japan and Korea
N America
Ukraine and Central

Asia
OECD BRIICS RoW
Note: * In the IMAGE model the Southern Africa region includes ten other countries in this geographical
area including the Republic of South Africa, when dealing with land use, biodiversity, water and health.
For energy-related modelling the region has been split into the Republic of South Africa and "Rest of
Southern Africa".
Source: OECD (2012a), Environmental Outlook to 2050, Paris, France, output from IMAGE suite of
models.
Policy responses in addressing the water challenge in agriculture
The policy responses countries might consider to address the water challenge in
agriculture (both rain-fed and irrigated farming), as part of an economy-wide water
policy reform programme, can be summarised under five broad areas of action:
Create incentives, to signal to farmers (and other water users) the value of water
and the cost of pollution.
Invest in water infrastructure, to foster more efficient farming practices and
systems.
Enable innovation, to promote improved water management in agriculture.
Strengthen institutions and governance, to support efforts enhancing food and
water security.
Build resilience, to address long-term concerns with food and water security.
Create incentives to signal to farmers, and other water users, the value of water
and the cost of pollution
Water resources
Water has a value which is seldom transmitted through markets. Many countries
provide support to the development of irrigation infrastructure; water service fees are
generally below cost; and some governments even supply free or subsidized energy for
pumping ground and surface water. Such policies can undermine the sustainable use of
water resources, especially in regions where water is scarce.
An important consideration in policy makers tool kit to stimulate higher water
efficiency gains in all sectors, is introducing market (or market-style) incentives into
water-use decision-making. Market-based incentives can range from water charges to
formal or informal trading of water (use rights), the latter which can be observed in
some water stressed developing countries that rely on irrigation for food production. A
key prerequisite to introducing these water policy reforms, especially for developing
countries, is improving water services and the reliability of water supplies to farmers.
This can provide a pathway to introducing water charges, as can increasing the
accountability of water service providers to their clients (the farmers), hence,
providing a signal to farmers of the scarcity value of water.
Some OECD and some developing countries (e.g. China) are now beginning to
embrace water policy reforms that move toward raising water charges for farmers and
related policy reforms, to reflect the costs of supply and the scarcity value of water.
But increasing water cost recovery rates through water charges also requires a
comprehensive approach that fully recognises the equity issues that arise from
distributing the benefits of water policy reforms and the importance of ensuring
reliable and high quality access to water for all parts of the population. Developing
virtual water trade is also another option to address water scarcity that has been
advocated by some observers (Box E.1). Projections show an increase in cereal trade
from water-abundant to water-deficit areas from 23% in 1995 to 38% by 2025 (Rosegrant
et al., 2010).
The experience in OECD countries, and some developing countries, reveals that
where water charges to farmers have been raised as part of broader water policy
reforms to develop water markets (e.g. Australia, Chile), the improvement in lowering
the quantity of water applied per hectare irrigated has been substantial (OECD, 2010a;
Rosegrant and Gazmuri Schleyer, 1995). Evidence also indicates that raising water
charges to farmers, at least to cover the operation and maintenance costs of supplying
water to irrigators in some OECD countries, has not led to an overall reduction in
agricultural output or incomes (OECD, 2010a).
Water quality
Policies that raise producer prices or subsidise the use of inorganic fertilisers and
pesticides encourage farmers to over-use the subsidised fertiliser, leading to
unbalanced applications and increasing water pollution. OECD research has shown that
where countries have lowered overall agricultural support and shifted to forms of
support decoupled from production and input use, this has helped to lower water
pollution pressure from agriculture activities than would otherwise have been the case
in the absence of these reforms (OECD, 2012b).
Box E.1. Virtual water trade and water footprints:

Sound concepts to guide policy makers?
Virtual water: The term virtual water began appearing in the water resources literature in the
mid-1990s to describe the water used to produce crops traded in international markets. During the time
since its inception, the concept has been very helpful in gaining the attention of public officials and
policy makers responsible for encouraging wise use of limited water resources.
However, the fundamental shortcoming of the virtual water concept as a valid policy prescriptive
tool is the lack of an underlying conceptual framework. Some researchers have incorrectly described
virtual water as analogous to, or consistent with the economic theory of comparative advantage. The
virtual water concept is applied most often when discussing or comparing water-short and water-
abundant countries. By focusing on the water resource endowment alone, virtual water represents an
application of absolute advantage, rather than comparative advantage. For this reason, policy
prescriptions that arise from virtual water discussions will not maximise the net benefits of engaging in
international trade. Comparative advantage is the pertinent economic concept, and virtual water
considers only absolute advantage.
A number of authors have begun describing the important role of non-water factors such as
population densities, historical production trends, national food security goals, poverty reduction
targets, and the availability of complementary inputs when determining whether to transfer water from
one region to another, or to achieve desired outcomes alternatively by transporting or trading
agricultural commodities.
Water footprints: The notion of water footprints describes the volume of water required to support
production and consumption in selected regions or countries. It is used to assess whether a region or
country is consuming resources in a sustainable or unsustainable fashion from a global perspective.
However, estimated water footprints are somewhat one-dimensional, as they depict the use of only one
resource. In addition, water footprints do not describe the implications of water use. Instead they
consider only the amounts of water used in production and consumption activities.
Hence, ecological water footprint analysis is not sufficient for determining optimal policy
alternatives, as it does not account for the opportunity (scarcity) costs of water resources and the ways
in which water is combined with other inputs in production and consumption. Water footprints enable
one to compare estimated water use per person or in aggregate across countries, but they are
inadequate for evaluating the incremental costs, benefits, or environmental impacts of water use.
Farmers, traders, and public officials must consider many economic and social issues when
determining optimal strategies. Virtual water and water footprint concepts will be helpful in policy
discussions in many settings, in combination with other environmental, economic, and social indicators.
But they will not be sufficient for determining the optimal outcomes of those discussions and
establishing economically efficient and environmentally effective policy alternatives.
Source: Adapted from Wichelns (2010).
Taking a more holistic view of agricultural pollution policy design can help to avoid
adverse environmental effects and encourage co-benefits. For example, the
development of riparian buffers, which can limit pollutant farm runoff, can also
provide other benefits in terms of wildlife habitats and carbon sequestration by
establishing green cover (OECD, 2012b).
As well as reforming agricultural support policies, there is increasing interest in
using innovative policy tools and market approaches to lower agricultural water
pollution. These tools and approaches, albeit not widely used to date, mainly include:
water quality trading (Shortle, 2012); voluntary arrangements, supported by private
payments, such as between private water supply utilities working with farmers to
ensure improved water quality so as to reduce water treatment costs; information
based instruments, like organic standards; and capacity building, such as setting
environmental standards by agro-food companies, backed by farm advisory services, to
encourage best management practices to protect water quality and meet other
environmental goals (OECD, 2012b).
Invest in water infrastructure to foster more efficient farming practices and systems
Investors in water infrastructure encounter a high level of diversity in hydrological
conditions and farming systems operating in a greatly varying set of political, cultural
legal and institutional contexts across the world. Management of water systems in
agriculture includes a spectrum of options ranging from purely rain-fed (the majority of
systems) to entirely irrigated systems.
Creating incentives to improve agricultural water productivity through removing
perverse incentives will not necessarily be sufficient to meet water demands in
agriculture, especially in developing countries. Hence, water supply capacity for
irrigated agriculture needs to be expanded in some countries, particularly in Sub-
Saharan Africa where only 4% of cultivated area is currently irrigated (Svendsen et al.
2009). Moreover, water storage capacity needs to be selectively expanded; water
recycling and reuse developed; and the poor state of irrigation infrastructure, which is
impeding improvements in water productivity in agriculture in many countries, needs to
be enhanced.
The additional investment required to expand and upgrade agricultural water
supply systems will present a considerable challenge for public and private finance
(OECD, 2011a; 2011b); especially in developing countries. Investment is also required to
reduce the impact of drought and flood disasters impacting agriculture.
Transparent and predictable investment policies, relying on good institutional
government capacity and regulatory measures at both the national and sub-national
levels, are crucial to foster private investment in water infrastructure for agriculture.
The key factors that might be able to encourage private investment in irrigated
agriculture, include (OECD, 2010a):
defining titles to water rights that promote market transfers of water;
developing regulatory measures that require the upkeep and maintenance of
infrastructure, as well as minimum flows for environmental needs;
increasing the cost recovery rates of water supplied to farmers so there is a flow
of financial resources to support water delivery infrastructure maintenance and
renewal;
shifting from an investment strategy for water infrastructure in agriculture of
build and neglect to one centred on build and maintain, looking toward
facilitating private public partnerships to raise finance for infrastructure
development. Water user associations, including farmers, can play a key in

fostering private public partnerships.
Property rights and institutions, which are capable of coping with the rapidly
increasing demand for land and water resources, are critical for investment in
agricultural water management and for the successful adoption of efficient, equitable
and sustainable resource use (Binswanger-Mkhize et al., 2011).
In establishing new capital investment projects, especially augmenting water
storage capacity, will require examination of the economic, environmental and social
costs and benefits of such projects. Consideration of improvements in incomes for small
family farms and the urban poor should be a key element in the cost/benefit analysis of
projects.
Enable innovation to promote improved water management in agriculture

Enabling innovation will be crucial in meeting the challenge of raising water
productivity and improving water management in agriculture. Taking a long term vision
and strategy to enable innovation in agriculture and water policy reforms over the next
20-30 years is also important. There are often trade-offs between investing in short-
term projects with an immediate effect and undertaking actions that can have a larger
and longer-term impact, for example, investing in research, farmer education, and
establishing data monitoring systems to improve decision making (OECD, 2010b).
To enable, disseminate and speed-up innovation over the long-term requires
changing the behaviour of governments, farmers, water managers, the agro-food chain
and other stakeholders by (OECD, 2010a; 2010b and 2012b):
Engaging these stakeholders to address water management issues, especially at
the water catchment or sub-catchment level;
Enabling change by educating, training and raising awareness of farmers through
farm advisory services and building the capacity of other stakeholders in a water
catchment in the realisation of policy goals;
Establishing information and knowledge systems to provide technical and socio-
economic information about the likely impact (science), costs (financial) and
farmer reactions (social) to a given policy change to address water management in
agriculture.
Strengthen institutions and governance to underpin efforts to raise water

productivity
There are frequently many organisations involved in managing, allocating and
regulating water resources at different levels of government. Rationalisation of these
institutional structures could improve transparency and accountability (OECD, 2011c;
2012c).
Associated with this institutional complexity is an intricate set of legal rules
concerning water property rights in some countries, but where institutional structures
are less developed water property are often ill-defined and non-statutory rights often
do exist. As pressure builds-up to reallocate water between different users and to meet
environmental demands there is a need for water property rights to become more
flexible, where these rights exist, and for supporting institutions to be more robust to
ensure an economically efficient and environmentally effective allocation of water.
There are a number of drivers that are likely to improve the institutional
effectiveness of water governance in agriculture, including the (OECD, 2010b):
extent of commitment from key groups in a water catchment;
level of stakeholders understanding and representation in water policy decision

making, notably at the water catchment level;
importance of timing by governance structures, especially reducing the time from
inception to effect of a water project;
definition of a clear message by institutions as to the goals of water projects; and
the
development of social capital in building co-operation among stakeholders.
Build resilience to address long-term concerns with food and water security
Most countries are reporting the growing incidence, severity and costs of flood and
drought events on agriculture, heightening concerns for food and water security. In
response countries are beginning to develop mitigation and adaptation strategies,
including for example, developing new crop varieties or change farm practices where
climate change alters temperatures and precipitation; and adapting management
practices that can contribute to slowing water transport across farmland and reducing
flood damage in urban areas (Morris et al., 2010).
These approaches are more likely to be effective if they are embedded in longer
term strategies closely linked with overall agricultural policy reform, risk management
policy and market approaches.
Climate change will also require greater attention in agriculture to water saving
practices, both in terms of on-farm distribution systems and also the larger
infrastructure systems delivering water to farms. In Sub-Saharan Africa, a key response
to climate change will be irrigation development that needs to be aligned with
changing levels, seasonality and variability of runoff and water availability (see, for
example, Zhu and Ringler, 2012). Better understanding of the importance of extending
risk management approaches in agriculture to existing climate variability, can also help
build a more solid foundation for addressing climate change in the future (OECD,
2010a).
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Markets in Tradable Water Rights: Lessons from Chile, Mexico and California, Cuadernos de
Economa, Vol. 32, No. 97, pp. 291-315.
Svendsen, M., M. Ewing and S. Msangi (2009), Measuring irrigation performance in Sub-Saharan
Africa, IFPRI Discussion Paper 894. www.ifpri.org/publication/measuring-irrigation-
performance-africa.
Shortle, J. (2012), Water Quality Trading in Agriculture, OECD Consultant Report available at:
www.oecd.org/agriculture/water
Wichelns, D (2010), An Economic analysis of the virtual water concept in relation to the agri-
food sector, OECD Consultant Report available at: www.oecd.org/agriculture/water
Zhu, T. and C. Ringler (2012), Climate Change Impacts on Water Availability and Use in the
Limpopo River Basin, Water, Vol. 4, No. 1, pp. 63-84. Available at:
dx.doi.org/10.3390/w4010063
Key Links: www.oecd.org/agriculture/water www.oecd.org/tad/env/indicators
82 ANNEX F. IMPACT OF AN INCREASE IN COMPETITION IN THE FERTILISER INDUSTRY
Annex F.
Impact of an Increase in Competition in the Fertiliser Industry
It is well established that low adoption of improved land management practices is

one of the main factors behind lagging agricultural productivity in many developing
countries. Although an increase in fertiliser use is not the only solution to this problem,
countries that have increased their agricultural productivity have also considerably
increased their use of fertiliser. Several regional and local policies have been promoted
in the past years to stimulate sustainable fertiliser use with mixed results, but not
much has been said about the high and increasing dependence of developing regions on
imported fertiliser, which is a highly concentrated industry at the global level. As
shown in Table F.1, a small number of countries control most of the production
capacity for the main nitrogen, phosphate, and potash fertilisers. The top five
countries control more than half of the worlds production capacity for all major
fertiliser products. Similarly, except for China, the industry shows a high level of
concentration among firms within each main producing country. In most cases, the top
four firms control more than half of each countrys production capacity.
Table F.1. Concentration of World Fertiliser Production Capacity, 2008/09
Fertiliser Top-5 countries Top-5 Capacity Top-5 Share
(% of World in parenthesis) (000 MT) (% of World)
Ammonia China (22.8), India (8.9), Russia (8.5), 84 183 50.6

United States (6.5), and Indonesia (3.9)
Urea China (33.1), India (13.1), Indonesia (5.4) 95 802 59.9
Russia (4.2), and United States (4.1)
DAP/MAP China (23.3), United States (21.2), India 22 896 65.9
(11.4),
Russia (6), and Morocco (4)
Phosphoric acid United States (20.9), China (19.3), Morocco 28 274 61.3
(9.6),
Russia (6.2), and India (5.3)
Potash Canada (37.6), Russia (13.2), Belarus (9.9), 39 687 76.7
Germany (8.2), and China (7.7)
NPK China (29.3), India (8.2), Russia (6), 47 186 50.4
France (4), and Turkey (3).
Note: Based on capacity of operative plants in 2008/09. MT: Metric tonnes.
Source: IFDC Worldwide Fertilizer Capacity Listing by Plant. Elaborated by Hernandez and Torero (2011).
ANNEX F. IMPACT OF AN INCREASE IN COMPETITION IN THE FERTILISER INDUSTRY 83
The high levels of concentration in the fertiliser industry mainly result both from
high requirements of raw materials, which are not available worldwide, and from
potential economies of scale in production, which result in cost efficiencies. However,
high concentration in an industry may also result in market power exertion and tacit
collusion among firms, which may allow a few companies to take full advantage, for
example, of international price spikes in energy and grain markets to the detriment of
farmers wealth. On this matter, Figure F.1 shows that during the food crisis of 2008,
where oil and agricultural prices drastically increased, ammonia and urea prices
exhibited even higher price spikes. By mid-2008, when the crisis was felt most,
ammonia and urea prices were 2-3 times larger than in mid-2007; oil and corn prices, in
turn, were 1.5-1.9 times larger. The market power effects could be outweighing the
cost-efficiency effects in this highly concentrated industry.
Figure F.1. Real monthly ammonia, urea, corn and crude oil prices, 2002-2011
Ammonia Urea Corn Oil
480 2.5
420
2.0
360
300
USD per gallon

USD per MT
1.5
240
1.0
180
120
0.5
60
0 0.0
Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11
Note: Prices deflated by CPI, 1982-84=100. The prices correspond to Ammonia US Gulf barge, Urea US Gulf
prill import, No. 2 yellow corn FOB US Gulf, and Oklahoma crude oil FOB spot price.
Source: Green Markets, Energy Information Administration, and FAOSTAT.
Hernandez and Torero (2011) have formally analyzed the relationship between
fertiliser (urea) prices and market concentration using annual data from a panel of
38 countries. One of the variables used to measure concentration is the top-4
concentration ratio (CR4), which is the sum of the market shares of the four largest
firms operating in the market. The shares are measured both in terms of production
capacity and number of plants. The analysis accounts for the relative importance of
fertiliser imports on use in each country. The estimation results indicate a positive
correlation between prices and market concentration. In particular, a 10% decrease in
the top-4 concentration ratio using production capacity to measure market share leads,
on average, to an 8.2% decrease in fertiliser prices, while a 10% decrease in the top-4
concentration ratio using number of plants, leads to an 11.6% decrease in prices. In the
case of the HHI, a 10% decrease in the index leads to a 5.6% decrease in prices using
production capacity and to a 9.2% decrease using number of plants, although the
former change is not statistically significant at conventional levels (Table F.2).
Table F.2. Impact of increased competition on prices

through a 10% decrease in the concentration
Top-4 Concentration measure Decrease in concentration Decrease in prices
Based on production capacity 10% 8.2%
Based on number of plants 10% 11.6%
Source: Hernandez and Torero (2011).
From the previous analysis, an 8.2% decrease in prices could be considered as a

conservative scenario while an 11.6% decrease could be regarded as an optimistic
scenario. Gruhn, Goletti and Roy (1995), in turn, report an average elasticity of
fertiliser demand with respect to prices of around -1.62 based on a study conducted by
David and Otsuka (1994) in some Asian countries. Similarly, Bumb, Johnson and Fuentes
(2011) assume that the elasticity of crop production with respect to fertiliser use is
0.25. With these elasticities, an estimated impact of the change in prices on both
fertiliser intake and crop production can be derived, as shown in Table F.3. A 10%
increase in competition in the fertiliser industry will increase fertiliser intake by 13-19%
and crop production by 3-5% (Figure E.2). Considering that the share of crop sales to
rural income is roughly between 30-40% in developing regions like Africa and South
Asia, rural income will increase by 1-2%.
Table F.3. Impact of increased competition

on fertiliser intake and crop production
Conservative Optimistic
Decrease in fertiliser prices 8.2% 11.6%
Elasticity of fertiliser demand to prices -1.62 -1.62
Increase in fertiliser use 13.3% 18.8%
Elasticity of crop production to fertiliser use 0.25 0.25
Increase in crop production 3.3% 4.7%
Source: Gruhn, Goletti and Roy (1995) and Bumb et al. (2011).
Figure F.2. Impact on fertiliser intake, crop production and rural income
of a 10% decrease in concentration
Conservative scenario Optimistic scenario
20%
18.8%
18%
16%
14% 13.3%
12%
10%
8%
6%
4.7%
4% 3.3%
1.9%
2%
1.0%
0%
Increase in fertiliser use Increase in crop production Increase in rural income
Source: Hernandez and Torero (2011), Gruhn et al. (1995) and Bumb et al. (2011).
Cost-benefit analysis
To put this in context, as shown in Hernandez and Torero (2011), a cost-benefit
analysis of such a policy can be assessed using some countries in South Asia and Africa
as examples (India and Bangladesh in South Asia and Senegal, Ghana, Kenya and
Tanzania in Africa). In particular, to decrease the top-4 concentration ratio in South
Asia and Africa by 10% it will be necessary to build a fertiliser (nitrogen) plant in each
region with a corresponding annual production capacity of 1.2 million metric tonnes
(MT) and 0.7 million MT. These numbers are equivalent to 10% of the annual production
capacity reported by the top-4 firms in each region according to IFDC Worldwide
Fertilizer Capacity Listing by Plant. The new plant will absorb the share-reduction of
the top-4 firms in each market and will not be large enough to be among the top four
producers in each region. The following cost and income assumptions are made.
Cost assumptions
The cost of building the 1.2 million MT plant in South Asia would roughly equal around
USD 1.2 billion and the cost of building the 0.7 million MT plant in Africa would
roughly equal USD 700 million, using as a reference the estimated cost of the nitrogen
plant which is currently under construction in the Delta and Lagos States in Nigeria
(USD 2.5 billion for two 1.3 million MT plants).
The investment cost of the plants, which can be built in any of the countries in each
region, are prorated based on the relative amount of fertiliser (nitrogen) consumed by
each country according to IFA open-access database and FAOSTAT Online database.
For example, India accounts for 93% of the total fertiliser used between India and
Bangladesh, so India will cover 93% of the building costs of the plant in South Asia.
The cost per MT of nitrogen production is USD 130 for a plant size over 1 000 MT of
capacity per day (over 330 000 MT per year) according to the Production Cost Survey
by the Fertilizer Institute.
Income assumptions
Only 20% of the rural population in each country will experience an effective increase
in their income of 1%. This conservative scenario accounts for the fact that some
farmers may already be using the optimal amount of fertiliser while the increase in
fertiliser use for several others may still not reach a certain level which results in a
higher income.
The estimated per capita rural income in each country is based on their most recent
household survey available (2009/10 National Sample Survey in India; 2005 Household
Income and Expenditure Survey in Bangladesh; 2001 Household Survey-ESAM II in
Senegal; 2005/06 Living Standards Survey in Ghana; 2005/06 Integrated Household
Budget Survey in Kenya; and 2007 Household Budget Survey in Tanzania).
The total net present value of such a policy over a time horizon of 2012-2050
(39 years) will be equal to USD 11.2 billion in the two countries in South Asia and to
USD 345 million in the four countries in Africa using an annual discount rate of 3%, and
to USD 8.1 billion and USD 80 million, respectively, using an annual discount rate of 5%
(Figure F.3). By country, only Kenya will experience a negative net present value.
Figure F.3. Net present value of simulated policy in South Asia and Africa
South Asia
India Bangladesh
5% discount rate 6670 1401
3% discount rate 9318 1907
0 2000 4000 6000 8000 10000 12000

USD million
Africa
Ghana Tanzania Senegal Kenya
5% discount rate 116 56 22
3% discount rate 190 142 46
-200 -100 0 100 200 300 400 500

USD million
Note: Time horizon assumed is 2012-2050.

Source: Hernandez and Torero (2011).
References to Annex F
Bumb, B.L., M.E. Johnson, and P.A. Fuentes (2011), Policy Options for Improving Regional
Fertilizer Markets in West Africa, IFPRI Discussion Paper No. 1084.
Gruhn, P., F. Goletti, and R.N. Roy (1995), Proceedings of the IFPRI/FAO Workshop on Plant
Nutrient Management, Food Security and Sustainable Agriculture: The Future through 2020,
Viterbo, Italy.
Hernandez , M. and M. Torero (2011), Fertilizer Market Situation: Market Structure,
Consumption and Trade Patterns, and Pricing Behavior, IFPRI Discussion Paper No. 1058.
Hernandez, M. and M. Torero (2011), "Promoting competition in the fertiliser industry: A global
approach", IFPRI Policy Brief.
88 ANNEX G. RECOMMENDATION TO IMPROVE ACCESS TO WEATHER INFORMATION
Annex G.
Recommendation to Improve Access to Weather Information
Core objective
The key objective of this recommendation is to facilitate through public-private

partnerships, in co-operation with cellular telecommunications corporations and
multilateral banks, the establishment of a network of meteorological observation
stations. The impact will be twofold.
1. There will be a significant increase in the number of weather stations given the
significant presence of cellular phone towers.
2. The availability of information via cellular phone towers will increase the
availability of information via SMS in real or near to real time to agencies in
charge of collecting such information and to farmers.
The problem this initiative proposes to resolve
Access to more and better quality weather information will allow farmers to
optimise their decisions (especially small farmers who currently do not have access to
this information). Insurance and re-insurance companies will also have better and more
frequent weather information available to them to develop their insurance schemes.
Proposed pilot
This initiative can be implemented in developing countries by promoting initiatives

similar to Weather Info for All in which public-private partnerships which include
leading providers of cellular telecommunications host weather equipment at mobile
network sites to strengthen weather networks and systems.
Specific Pilot implementation: The key initial action will be the implementation of
a pilot project for Mesoamerica. It will include the following phases.
Phase 1: Testing different technological alternatives

Phase 1 will test different technological alternatives in three countries to identify
which is the most cost-effective standard Automatic Weather Station. It will then
evaluate which is the most cost-effective platform to transmit the weather information
obtained to the National Meteorological Services and from there directly to potential
users in the agricultural sector. Transmission of information will in all cases use cellular
technology.
Phase 2: Feasibility study

Based on the results of Phase 1, a feasibility study will be implemented to assess
the cost-benefit ratio of the intervention. This feasibility study will assess the results of
a pilot phase in three countries.
ANNEX G. RECOMMENDATION TO IMPROVE ACCESS TO WEATHER INFORMATION 89
Phase 3: Implementation of pilot in three countries of Mesoamerica

The development of the weather stations and the information to farmers will be
implemented in three selected countries. An impact evaluation will be implemented to
assess the cost-effectiveness of the intervention.
Phase 4: Implementation of the intervention in other Mesoamerica countries

Based on the results of Phase 3, efforts will be made with different cellular
companies to introduce the pilot project to additional countries in Mesoamerica, and
possibly to countries in other regions.
Key partners
The objective will be to have the support of the following actors.

1. America Movil, company of Carlos Slim, for the pilot and potential intervention in
Mesoamerica.
2. The Inter American Development Bank has confirmed its support to work in
partnership with America Movil. The IADB, through its General Manager for
Mesamerica, has agreed to support this initiative in collaboration with America
Movil.
3. Other cellular companies in the region.
4. International Food Policy Research Institute will support the design of the pilot
project and the cost-effectiveness analysis of the intervention.
5. World Meteorological Organization (WMO) Official United Nations authoritative

voice on weather, climate and water.
6. Other interested international organisations.

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SUSTAINABLE AGRICULTURAL PRODUCTIVITY GROWTH

BRIDGING THE GAP FOR SMALL-FAMILY FARMS

Interagency Report to the Mexican G20 Presidency

With contributions by Bioversity, CGIAR Consortium, FAO, IFAD, IFPRI, IICA,

Terms and abbreviations ......................................................................................... 6

Terms and abbreviations

AIS Agricultural Innovation System

DUS Distinctness, Uniformity and Stability

FDI Foreign Direct Investment

ICT Information and Communication Technology

IPR Intellectual Property Rights

ODA Official Development Assistance

Public expenditures on agriculture Transfers to agriculture from taxpayers through the

PPP Public-Private Partnership

R&D Research and Development

Support to agriculture Gross transfers to agriculture from consumers and taxpayers

TFP Total Factor Productivity; a measure of the efficiency with

VCU Value for Cultivation and Use

Yield A measure of output per area of land (e.g. tonnes of wheat)

Improving agricultural productivity, while conserving and enhancing natural resources, is

1. There is no unique and unambiguous definition of a smallholder as explained in FAO (2012d).

The sustainable productivity challenge

Productivity and sustainability

Trends in agricultural productivity

Figure 1. Compound annual growth rates in world crop yields (%)

Wheat Rice Maize Barley

Trends in sustainability of agriculture

Agricultural Innovation Systems

Trends in R&D funding

Figure 2. Trends in food and agricultural public research expenditures

Sub-Saharan Africa East Asia & Pacific, minus China

Source: ASTI database.

Changes in Agricultural Innovation Systems

Trends in private on-farm investment

Figure 3. Agricultural capital stock growth 1980-2007

1980-1985 1985-1990 1990-1995 1995-2000 2000-2005 2005-2007

Trends in foreign direct investment

incentives to invest in agriculture are likely to stimulate further international

Policies and institutions

Trends in agricultural policies

For developing countries as a whole, agricultural expenditure grew at 6% annually

Taking stock of actions underway

Box 2. 2011 G20 Conference on Agricultural Research for Development

Supporting a long-term commitment to increased investment in agriculture development

Improving trade policies

Strengthening development cooperation

Facilitating private sector investment in agriculture

Improving agricultural innovation systems and adoption of innovations for sustainable

Improving Agricultural Innovation Systems (AIS) to generate innovative solutions

Improving co-ordination and institutional design

9. Collective action is understood here to be an action by multiple actors (individuals and

Improving the cross-country supply of innovations

international, regional and sub-regional research networks is important for countries to

Better connecting research to demand

Improving private sector engagement at national level

Strengthening public and private extension and advisory services

Making agricultural education and training more attractive and relevant

implications for inter-ministerial co-operation (e.g. Ministries of Agriculture, Education

Improving management of sanitary and phytosanitary systems