By Roberta Fortugno
Rural development is essential for achieving overall economic growth and reducing poverty; however, this process requires addressing key challenges, specifically focusing on improving agricultural productivity and ensuring the spillover of this growth to non-farm activities. In many developing economies, these steps are not happening at a pace compatible with sustained growth and job creation in rural areas. This article explores the hindrances to rural development, examining the slow growth in agricultural productivity and the underinvestment in the agricultural sector.
The first critical step in rural development is enhancing agricultural productivity: unfortunately, many developing countries face significant challenges in this regard. Globally, developing economies, particularly in Latin America and sub-Saharan Africa, have experienced lower agricultural productivity growth compared to high-income economies. This stagnation has resulted in a considerable portion of the global agricultural workforce in developing countries not witnessing sufficient productivity growth, hindering progress towards Sustainable Development Goal 2.3.
A major factor contributing to languid agricultural productivity growth is chronic underinvestment in the agricultural sector. Low and middle-income countries, including those in Africa, have reported meager levels of agricultural capital stock per worker. Despite this, investment in agriculture remains disproportionately low, with these countries dedicating only a small share of gross fixed capital formation to agriculture. This lack of investment is exacerbated by unfavorable returns, volatile agricultural prices, and insufficient access to financing, particularly for smallholder farmers.
The tepid agricultural investment is influenced by various factors, including volatile agricultural prices, inadequate access to productivity-enhancing technologies, insecure land access, and the impact of climate change. Additionally, the declining trend in agricultural prices over the past decade has discouraged long-term investments in improving agricultural productivity and food safety standards. The COVID-19 pandemic has further disrupted international trade, raising concerns about its negative impact on agricultural productivity due to restrictions on transportation and supply chain disruptions. Participation in global value chains (GVC) has shown mixed results, with no noticeable correlation between agricultural productivity growth and GVC participation.
Another critical aspect hindering rural development is the persistent underfunding of agricultural research and the inadequate accumulation of knowledge about agricultural practices and technologies. Low and middle-income countries typically allocate less than 1% of agricultural GDP to research, significantly lower than high-income countries. Poor-quality extension services further hinder knowledge dissemination, with extension workers lacking accountability and knowledge of emerging technologies.
Unlocking rural development requires a comprehensive approach to address the challenges impeding agricultural productivity growth and overall economic transformation in rural areas. This involves increased investment in the agricultural sector, improved knowledge accumulation and dissemination, and careful consideration of the impacts of global trade disruptions. OCCAM supports the need for a decisive change in national development planning, recognizing the relevance of rural-urban linkages and equitable distribution of gains; this is crucial for accelerating rural transformation and achieving Agenda 2030.