Since last year there has been a surge of interest and debate in public forums about the need to increase public sector investment in agriculture, and policy reform for agricultural development. Prime Minister Dr Baburam Bhattarai’s commitment to double the budget for agriculture sector, and promises from other high level officials, including vice-chairman of National Planning Commission and the chief secretary of the government, to give due priority to agriculture sector have received wide media coverage. In the meantime, the government is preparing Agriculture Development Strategy (ADS), a 20-year strategy paper for the development of agriculture sector. The document, which is in its final stage of preparation, will probably be disclosed in a few months after a round of consultations and validations.
The Nepali economy is fundamentally agrarian: agriculture contributes to approximately one third of the Gross Domestic Product (GDP), while also being the largest source of informal employment. Reducing poverty, improving food security, and achieving sustainable development cannot be imagined in an agrarian economy like Nepal without inclusive development of the agriculture sector. In our context, it is hard to envision the development of this sector without adequate investment and conducive policies.
One of the major constraints of the agriculture sector in Nepal is under-investment from both public and private sectors. The Ministry of Agriculture Development receives approximately three percent of the national budget, which is not sufficient to promote adequate agricultural growth and ensure food security to an ever-growing population. Out of this inadequate allocation, a significant amount is spent subsiding agricultural inputs, mainly fertilizers. It has been alleged that big farmers benefit more from input subsidies rather than small and marginal ones. To get the best possible returns from subsidy policies, they should be subjected to a genuine cost benefit analysis and review. If allocated budget could have been invested in capacity building, rural infrastructure development and research in agriculture sector instead, it would have given far better results.
As subsidies have usually been politically sensitive agenda, it might be difficult to completely do away with them, but they should be subjected to improved modalities and management so that small and marginal farmers also benefit.
Nepal, a developing country in a state of transition, is not in a position to sufficiently invest in agriculture. However, the government can draw investment from other sources including public and private sectors by creating favorable investment climate. In Nepal, agriculture is predominantly small-scale, labor intensive and subsistence-based. As a result, small farmers are the largest investors in agriculture. Therefore, farmers should be at the center of the process of formulation of any strategy related to agricultural development. Government policies should promote agribusiness models that favor small scale producers.
A significant proportion of small scale farmers do not own the land they cultivate. These farmers cannot invest in technology and farm infrastructure to enhance production and productivity unless they have tenure security. Marginal farmers cannot risk investment if their rights of land tenure are uncertain. This is, among other things, a fundamental issue that needs to be addressed in our policies in order to increase private sector investment in agriculture and thus increase agricultural production and productivity.
Although private sector investment in agriculture comes mostly from scattered and unorganized small farmers, large scale corporate investment has been initiated in some sub-sectors, mainly those of high value commodities like poultry and dairy. Favorable investment climate can attract corporate investors in other sub-sectors in the future. Large scale private investment in agriculture can create employment, transfer technologies, and create forward and backward linkages. Although corporate investment could be the driving force for commercialization and modernization of agriculture if adequately backed by appropriate policies, there is the risk that these investments may bypass small scale producers and pose additional risks to the livelihood of local communities. This can be prevented by policies which ensure transparency and accountability of large investments. Governance of these large scale investments should be cautiously addressed in agricultural policies.
Forthcoming agricultural development strategies should attract large investors, but in the meantime, the interests of small farmers should be protected with due respect to the rights of small scale marginal producers. The policies should promote transparency and accountability of large investments, and also ensure meaningful inclusion of local communities, preventing the transfer of productive capitals like land. Connection and relationship between large scale investors and small scale marginal producers should be a win-win model. This connection can be strengthened through mechanisms to ensure benefit sharing from large scale investment to local communities. The strategy should promote direct involvement of local farmers in agricultural value chain. For example, contract farming regulated by appropriate and clear policy could be an option to attract large scale investment without transferring ownership of land, which would serve the interests of both parties.
Moreover, youths are not sufficiently motivated to invest their time and money in the agriculture sector, resulting either in agricultural land becoming barren, or feminization of agriculture due to emigration of young males in search of employment. Attracting large corporate investors to agriculture may not necessarily attract youths to the agriculture sector. Therefore, Agriculture Development Strategy should address this issue and create policies that will attract youths to agriculture.
Increasing investment in agriculture is a must for reducing poverty, achieving sustainable development, and enhancing food security. Increased investment in agriculture will be beneficial to the country in the real sense only if the investments can help alleviate poverty and enhance food security of vulnerable communities. As government investment is not sufficient, appropriate policy and legal and institutional framework should be in place to create a favorable climate for investment. In our context, agriculture development policy should be in favor of small scale marginal producers and suitable to specific agro-climatic realities, but in the meantime, they should not hinder large scale investments capable of bringing equitable and balanced growth to the agriculture sector.
The author is senior Veterinary Officer at Nepal Agriculture and Food Security Project