Lennart Båge

President of IFAD

International Conference on Financing for Development

Monterrey, México
18 March 2002

Mr Chairman, 
Your excellencies, 
Ladies and Gentlemen,

     I am honoured to have the opportunity to address the Ministerial session of the International Conference on Financing for Development.
The vision underlying the FfD was provided by world leaders at the Millennium Summit when they affirmed their commitment to reduce poverty by half by 2015 and achieve the other Millennium Summit development goals.
     Today, over 1.2 billion human beings still are in extreme poverty, trying to survive on less than one dollar per day. Some three-quarters of them, about 900 million, live in rural areas and the majority of the poor will still be rural by 2025. Development cooperation, if poverty reduction is its primary goal, must focus on where the poor are - the rural areas.
     The substance of development assistance is as critical as its direction. Certainly, investment in health and education are vital, particularly in view of the AIDS pandemic and other mass communicable diseases. But since the bulk of the poor and vulnerable are in rural areas, the bulk of social sector expenditure should also be in rural areas, especially for primary health and education systems.
     Yet, social sector investment by itself is unlikely to be sustainable without rising output and incomes. Tanzania for example in the 1970's and early 80's achieved impressive growth in social investment and social indicators. Yet these proved hard to sustain in the light of the failure to raise production and incomes at a comparable pace. Thus a balance is needed between investment in the social sector and investment to support the productive activities of the poor.
     Most of the 900 million rural poor depend on agriculture and related trades and services for their survival. Creating the conditions in which smallholder farmers, especially women farmers who in many countries produce the bulk of food crops, and other poor rural groups can increase their productivity and incomes is the most effective way to reduce poverty. This requires policies that encourage rural and agricultural growth.
     Unfortunately, trends in ODA in recent years have been exactly the opposite. In fact between 1988 and 1999, the share of ODA allocated to the rural sector declined sharply and the volume of ODA for agriculture fell by nearly 50%. By OECD estimates, ODA to agriculture now represents only about 8% of the total. Eight percent of ODA to support the livelihood of threequarters of the poor. Does that make sense?
     Historically, apart from a few mineral rich countries, economic growth and development have been initiated by growth of agricultural productivity and output. This was as true of England in the eighteenth century as the Asian tigers
in the twentieth. Today, in many low-income countries, smallholder agriculture and related rural employment account for a large proportion of total employment, and a substantial part of exports. In these countries, unless agricultural productivity and growth are enhanced, it is difficult to see how sustained economic growth can be fostered.

Mr Chairman,
     Reducing poverty by half in twenty-five years is a goal well within reach. In fact, a number of countries in East Asia and even provinces in India, which are larger than many countries, have achieved reductions of fifty percent or more in poverty levels between 1975 and 2000. So the task is certainly do-able. The challenge is to adopt appropriate policies and mobilise the resources for the task.
     Reports prepared for this Conference and for the Development Committee suggest that to achieve the Millennium Summit goals, ODA needs to be raised by USD 50 to USD54 billion per year, approximately doubling the current level. Since three-quarters of the poor are in rural areas, it would be reasonable to expect that a comparable proportion of these resources is also channeled to the rural sector, with better balance between social sector investments and investment in productive activities and infrastructure.
     Doubling ODA is certainly an ambitious target, but what is especially important is that Monterrey should show the way ahead towards raising development assistance to higher levels.

Mr Chairman,
     IFAD is an agency, which throughout its quarter century of operations, has maintained an exclusive focus on poverty, particularly rural poverty. This year's Governing Council of IFAD, the annual meeting of its Governors, adopted as its overall theme, Financing Development - The Rural Dimension.
     At the Governing Council at which President Obasanjo of Nigeria was the keynote speaker, Governors representing the Fund's 162 member states, reflected on these ideas in their statements and at a policy dialogue held during the Council session. Let me quote a few elements from the closing statement of the Chairman in which he summed up the discussions on behalf of the Council.
     "Governors noted that the present rate of poverty reduction must be accelerated substantially in order to achieve the target. Further noting that the large majority of the poor live in rural areas where agriculture and related activities are the main source of livelihood, Governors also emphasized the importance of increasing the rate of rural and agricultural development. This is critical in order to step-up overall national growth rates and create the conditions in which the rural poor can work their way out of poverty.
      In this regard, His Excellency President Obasanjo, stressed that, "Rural poverty reduction must remain at the centre of the global development agenda ".
      Or as expressed by the New Partnership for Africa's Development (NEPAD), "Improvement in agricultural performance is a prerequisite of economic development. Bilateral donors and multilateral institutions have paid too little attention to the agricultural sector and rural development, where more than 70% of the poor people in Africa reside. The entire donor community must reverse such negative trends."

Mr Chairman,
     The Millennium Summit in 2000 raised the hopes for a new partnership, with developing countries undertaking far-reaching reforms, and developed countries providing greater development assistance and supportive trade and other policies. Achieving this will require strong and sustained political will and leadership from both sides. The hundreds of millions of poor whose voices have remained unheard so long, deserve no less.

Thank you

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