Ganesh Thapa

Rural Poverty Reduction Strategy for South Asia

Roughly 40 percent of the world’s poor live in South Asia, where poverty is basically a rural problem. Therefore, a significant gain in rural poverty reduction in this sub-region will be crucial to reach the international poverty reduction target. Based on the analysis and experience of the International Fund for Agricultural Development (IFAD), this paper argues that to be successful, poverty reduction policies in South Asia must focus on the less-favoured rural areas and on most disadvantaged sections of the rural poor (mainly women, the landless and indigenous peoples). In order to overcome disadvantages arising from remoteness, lack of social services, insecure and unproductive jobs, and discrimination as women or ethnic minorities, the rural poor need legally secure access to productive assets (mainly land, forests and water); sustainable or regenerating agricultural technology; access to markets; opportunities to participate in decentralized resource management; and access to financial services.

Foodgrain Stocks, Prices and Speculation

Much of recent work has raised the issue that the surge in prices of foodgrains in the last two years cannot be explained satisfactorily in terms of the fundamentals of supply and demand. It has also been suggested that the part that cannot be explained in this way is due largely to speculation. Speculation influences food prices in two distinct ways: one is the huge influx of capital from commodity index funds, hedge funds and pension funds in commodity futures markets or options. Some evidence suggests that expiry prices in commodity futures markets are considerably higher than cash or spot prices, implying that futures markets are not facilitating price discovery. The second form is purchase or hoarding of commodities on the presumption that their prices will continue to rise. The present analysis, based on a rational distributed lag model of global stocks of wheat, maize and rice and their prices over the period 1986-2008, confirms a positive long-run effect of rising prices on stocks. In the case of rice, this effect is considerably stronger. If this finding has any validity, although the need for correcting demand-supply imbalances remains a top priority, careful attention must also be given to limiting speculation. Various suggestions include the imperative of a ‘virtual grain reserve’ to be established to help calm markets through the futures market. But, above all, there is a strong case for a better functioning trading system-in particular, for trade liberalization in agriculture and to build trust in global food markets and stock management.

Have natural disasters become deadlier

The present study seeks to build on earlier work by identifying the factors associated with the frequency of natural disasters and the resulting mortality. Drawing together the main findings, some observations are made from a policy perspective to focus on key elements of a disaster reduction strategy. Countries that were prone to natural disasters in the previous decade (1970-79) continued to be so in the next two decades. Geophysical factors (e.g. whether landlocked, distance to coast) had an important role in explaining inter-country variation in the occurrence of natural disasters. However, income did not have any effect. Deaths varied with the number of disasters; they also varied with (lagged) deaths in the previous decade, pointing to (presumably) persistent government failures in preventing deaths where the deaths were high; poor countries suffered more deaths, controlling for these and other effects; larger countries suffered more deaths. The pay-off from learning from past experience is high, as reflected in the elasticity of deaths to disasters. Even moderate learning can save a large number of deaths (e.g. through early warning systems, better coordination between governments and communities likely to be affected). Growth acceleration would also help avert deaths through more resources for disaster prevention and mitigation capabilities. A combination of the two-learning from past experience and more resources for disaster prevention and mitigation-would of course result in a massive reduction in deaths from disasters. Attention is drawn to segmented and shallow disaster insurance markets; the Samaritans dilemma in providing emergency assistance to poor countries that neglect investment in protective measures; need for mainstreaming of disaster prevention and mitigation among multilateral development agencies and governments, as also growth acceleration ; why short-term relief must be combined with rebuilding of livelihoods and reconstruction, and the potential for public-private partnerships; and, above all, the need for building ownership of local communities and preservation of social networks. A challenge for development assistance is to combine growth acceleration with speedy relief and durable reduction in vulnerability to natural disasters.

Financialisation of Food Commodity Markets, Price Surge and Volatility: New Evidence

Recent literature points towards the role of speculators in exaggerating the rally in food prices, over and above that explained by the fundamentals of demand and supply. Some studies argue that futures market speculation can only be blamed for the increasing food prices if it is accompanied by hoarding. With this background, the issues that the present chapter deals with are: (i) assessing the impact of indices such as SP and (ii) tracing the volatility patterns in commodity prices, and linking volatility in commodity markets to these variables.Our results show a negative relationship between the commodity market returns and the Dollex, and a positive relationship between commodity market returns and crude oil price returns. The impact of equity markets, inflation and emerging market performance on commodity markets is weak. We also find some evidence of reverse causality or mutual endogeneity, for instance, causality from GSCI, S&P500 and WTI to MSCI, CPI to WTI, and MSCI, S&P500 to Dollex. We also study the causal relationships between the volatility of returns on macroeconomic variables and commodity markets, using the cross-correlation function, and Granger causality tests. Our results confirm unidirectional relationship from (volatilities of) GSCI to S&P500, from GSCI to MSCI, and from Dollex to GSCI. But there is also evidence of atwo-way causality between Inflation and GSCI (volatilities). Thus, the case for financialisation of commodity/food markets driving commodity/food returns and their volatility rests on weak foundations, leaving the door open for the pivotal role of supply-demand fundamentals.

Supply Response to Food Price Changes in Asian Countries

Primary commodity prices have been increasing, especially since the early 2000s and at an accelerated pace during 2007–08, with implications for food security in the developing world. Against this backdrop, much recent research has focussed on understanding the causes and consequences of food price increases. The objective of the present analysis is to examine how food commodity and input prices have affected the supply of the former in 10 Asian economies. This analysis assumes greater significance in the context of the recent surge in oil and food prices, and its persistence. If, for example, oil prices continue to rise — as feared on present evidence — the food price surge may also persist.

Chapter 23 – Have Natural Disasters Become Deadlier?

The study sought to build on earlier work by identifying factors associated with the frequency of natural disasters and the resulting mortality. Countries prone to natural disasters in the decade 1970–1979 continued to be so in the next two decades. Geophysical factors (e.g., whether landlocked, size of country) had an important role in explaining inter-country variations in the occurrence of natural disasters. Deaths varied with the number of disasters; they also varied with (lagged) deaths in the previous decade; poor countries suffered more deaths; and, controlling for these and other effects, larger countries suffered more deaths. The payoff from learning from experience is high; even moderate learning can save a large number of lives. Growth acceleration helps avert deaths through more resources for disaster prevention and mitigation capabilities. A challenge for development assistance is to combine growth acceleration with speedy relief and a durable reduction in vulnerability to natural disasters.