A Grave Neglect

For decades, agriculture has suffered neglect from multilateral financial institutions. This neglect of agriculture has, over time, caused the slow development of this vital sector. Coupled with a skewed trade in agriculture where mostly agriculture-dependent countries are net losers, we are now seeing the serious consequence of a lack of focus on agriculture in light of the growing food crisis.

Now, belatedly, multilateral financial institutions have realized that agriculture is the single most vital instrument for development and poverty reduction: every dollar worth of improvement in a country's gross domestic product that is agriculture-driven is four times more effective in reducing poverty than GDP growth originating in other sectors.

The World Bank has recently renewed its emphasis on agriculture and rural development, with commitments in 2007 reaching $3.1 billion and marking an increase for the fourth straight year. But it is important to note that this follows a great decline in lending throughout the entire 1980s and 1990s.

This lack of foresight has also plagued the ADB, whose mandate, ironically, is to fight poverty in Asia. Although ADB's loans to the Philippines have been increasing, these are unduly biased towards urbanization and fiscal consolidation. In 2006, ADB approved US$650 million in loans – its highest lending since 1998 -- geared towards the energy and fiscal sectors.

Disappointingly, lending and technical assistance to agriculture has slipped since its peak in the 1980s, sliding from US$666.5 million in the '80s to US$371.7 million in the '90s, and US$405.1 million from 2000 to 2007. Accounting for inflation, loans from 2000 to 2007 actually decreased by a quarter from the 1990s lending level.

It has also failed to provide continuing support to the International Rice Research Institute (IRRI), the largest agriculture research and training institute in Asia, giving only technical assistance grants with many strings attached. Typically, IRRI receives a paltry $1 million per year from ADB.

Now, triggered by the food crisis, ADB has pledged to lend $1 billion to the agricultural and natural sector, and double its lending to the sector to over $2 billion in 2009.

Why this sudden realization to support agriculture? The reason is simple. About 70 percent of the MDGs' target group live in rural areas, particularly in Asia and Africa. In the Philippines, for instance, one in four of all poor Filipinos lives in the rural areas.

For most of the world's poor, agriculture is a critical component in successfully eradicating extreme poverty and hunger. It will be an illusion to think that the poor will simply be absorbed by growth taking place outside agriculture. It is in the rural areas where the fight against poverty will either be won or lost.