Food Security

Strengthening the Supply Response:

The Role of EBRD and MDBs

Prepared for the Meeting of the G20 Ministers of Agriculture, Third Deputies Meeting, 11 - 12 of May 2011, Paris

Heike Harmgart European Bank for Reconstruction and Development

Outline

1. Strengthening the supply response: the investment challenge

2. Key objectives and instruments to increase investment: examples from the EBRD region

3. The role of the MDBs

4. Opportunities for coordinated MDB action and the G20 process

The food supply challenge

To feed the world, global agricultural production needs to increase by 70 percent over the next 40 years

The FAO estimates that 90 percent of the necessary production increases will have to come from increases in yields and cropping intensity and only 10 per cent from the expansion of arable land.

The role of MDBs

Identified areas of specific collaboration:

• Strengthening global food supply

• Reducing food price volatility

• Strengthening safety nets

• Addressing the food-water nexus

The global investment challenge and the role of the private sector

Global Investment Gap to achieve the targeted food supply increase is estimated at US$200 billion annually

Developing countries will need to increase investments by 50% relative to current trends

Investments will mainly need to come from the private sector

The investment challenge An EBRD country example: Ukraine Ukraine has huge agricultural potential …

8% of global grain exports, with a potential to double yields and increase grain output from 40mt to 80mt

… requires massive investments … Investment costs of c. $1000-$2000 per ha

Require a total of 40-80 billion US$

Adapting existing technologies

Using sustainable technologies

• … which need transparent and predictable policies to boost investor confidence

• MDB support is important to achieve this

Ukraine (con’t)

MDBs have been promoting this through intensive policy dialogue between the Ukrainian government, IFIs and private companies

Organization of a conference in January 2011 in Kiev with key stakeholders : the Ministry of Agrarian Policy, grain associations, 30 local and foreign private companies and IFIs (EBRD, WB, IMF, IFC, FAO)

Start of a regular public/private Working Group in Kiev with the Ministry of Agriculture and key market participants, supported by the EBRD and FAO

Joint action/letter by the IMF, WB and EBRD to the Ukrainian PM to correct policies

Increased Investment since the food crises – the EBRD experience

The role of the MDBs in supporting the supply response

Each MDB (ADB, AfDB, EIB, EBRD, IADB, IFC and the World Bank) has formulated individual strategies and committed resources to respond to food and water security

EBRD and IFC focus their activities solely on the private sector

In October 2010 under the auspicies of the Heads of MDBs meeting, a special MDB Working Group on food and water security was formed to improve coordination and utilise synergies

Joint actions by MDBs

Strengthen coordination and collaboration to avoid overlap and maximize synergies

Promote policy reforms jointly that enable private sector investment

Provide investments along the whole food value-chain

Support public sector investments

Engage in coordinated policy dialogue with governments (see Ukraine)

Joint actions by MDBs

Jointly promote policy reforms that enable private sector investments and provide direct private sector financing

• Promote private investments through the whole food value chain

→ spill-overs from downstream financing

• Provide direct financing in food chain-related infrastructure that is critical for storage, transport and trade efficiency

• Promote access to commercial finance for agricultural producers through risk-mitigation (co-financing, private sector take-up of risk management tools)

• Support a platform for private public consultation

Coordinated support for public sector investments:

Tailored R&D for high-yielding, climate change resilient crops

Promote secure property rights and public infrastructure investments

Facilitate access to markets and promote SMEs and micro-enterprises

Promote institutional change for agricultural collateralization options and insurance for farmers, such as Warehouse Receipts and Crop Receipts, land mortgages and rural guarantee funds, indexed insurance.

Joint actions by MDBs

Better global policy coordination

Higher resource efficiency, incl. utilisation of GAFSP

Greater knowledge pool to share innovative approaches (e.g. CPRs IFC-EBRD initiative)

Joint financing of specific food and water security projects/initiatives, including regional projects

Expand global multilateral financing instruments (loans, grants, funds and technical assistance)

Joint Action Plan by MDBs underway

The missing link: top level policy coordination to support an adequate supply response and avoid price volatility from uncoordinated individual action

– Point in case: Ukraine‘s export quotas

How to do it? EBRD‘s ongoing analysis

– Top political level coordination

– Counteract/leverage local vested interest.

G20 guidance

Heike Harmgart

harmgarth@ebrd.com

Thank you!