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Following the interesting article of Mr. Meassik in latin America and Caribbean, I would like to share our analysis of the contribution of the agriculture sector towads poverty reduction in Nepal. The following analysis may be very specific, because Nepal combines: status of least developed country, landlock position between two giant protectionist countries (India and China), Hindu Kingdom status with attached castes system, armed conflict since 2002, very small farm size and high land fragmentation. Several national macro-strategies and macro-economic analysis have suggested that agricultural may be the driving force for growth and for poverty reduction in Nepal. The Agriculture Perspective Plan (1995-2015) defined agriculture as the engine of growth with strong multiplier effects on employment and on other sectors of the economy. In 1995, the APP sets the objective of increasing average AGDP from 3% to 5%, and agricultural growth per capita to 3%. Since 1976, the analysis of the AGDP compared the demographic growth show that increased production has almost not added value in term of agriculture growth per capita. Said differently, agricultural growth since 1985 has not increased the labor productivity, and then not reduced the economic poverty in Nepal. On the other hand, agricultural growth during this period has maintained a good level of national food production. Since 1976, rural and agriculture development in Nepal has favored the maintenance of a food-security farming pattern and indigenous social values without developing people's social and economic assets, and without adding much economic value at the national level. The expected multiplier effect on employment has not been observed as planned, and has not contributed to significantly reduce poverty and inequitable access to benefits between castes/ethnic groups and well-being grouping. Why agriculture development has not reduced poverty in Nepal since the last 15 years The long food security national agenda through food crop production only has provoked the food insufficiency since 1986 and has not prepared the rural communities to add value to their production, to develop their livelihoods, and to diversify their production systems; The agrarian structures on Nepal, characterized by very small farm size (0.78 ha/hh in average, with 50% of the rural households having less than 0.4 ha), high land fragmentation, very high labor to cultivable land ratio, low farm labor productivity, and low level of intensification have not much development advantages compared to off-farm sources of income, and investment in agriculture is now very risky in front of India and China. A maximum of 25% of the rural population, having more than one ha of cultivable land, are potentially in the position to invest in commercial agriculture. However, significant AGDP over the demographic growth can not be expected with only 25% of rural households and such limited cultivable land by households, even with land intensification, crop diversification and increase of yield. The multiplier effect of agriculture on farm employment did not take place as expected, and had no impact on poverty for the three following reasons: 1) only 15-20% of the rural households are realistically in the position to hire extra laborers in the process of agriculture development; 2) the farm-related minimum wages has not increased since the last 15 years, kept under the poverty line, with progressive decreasing purchasing power of the laborers over the period; 3) the rural households with laborers (40 to 50% of the rural households) give more and more priority to off-farm wages, urban demand, labor migration to India, Malaysia and Gulf Countries (economic benefit 2 to 5 times higher than farm wages) to escape the chronic poverty. The castes systems and discriminatory behavior are still practiced in the rural areas, and low castes and other very poor groups, most of them landless and marginal farmeras, do not see farm employment as a solution to improve their living conditions. They do not have any hope to cut the historical "land-owner-laborer" dependence associated with very low wages, and give preference to new economic opportunities without or with less historical castes dependence. Agriculture was traditionally a subsistence economy, became progressively a way of life (social, religious, territorial roots), and now turn progressively to an activity for the poor, a coping activity if there is no employment in India and Oversea, or a secondary activity financed and systained by off-farm activities. Consequently, while the government keep focussing on agriculture production and interpretate national statistics to justify its position, qualitative studies and researches show that rural societies have started to more outside of agriculture for the last 150 years. Today, more than 50% of the rural incomes do not come from agriculture production and more than 60% incomes are from off-farm activities. About 25% of the national GDP come from remittances (India and oversa), and an important contribution comes from Gurka pensions, government employment (teachers, police, army, etc.), tourism sector, micro-enterprises and construction activities. In term of outcomes, rural livelihood analysis show that higher proportion of rural savings are invested in education and in financing the departure for oversea migration, both with the intention to prepare the children to earn outside of the territory. The high and sustained rural - urban migration of 7% per year, even before the armed conflict, is also a clear sign that the rural cake is now to small for all. Can agriculture reduce poverty in the future The agrarian and social structure of Nepal did not evolve quick enough to cope with the increasing demographic density over resources (contrary to India, Bangladesh, Pakistan, Thailand, Vietnam). Participation for change is too late on several fronts (implementation of land reform, intensification techniques, mechanization, commercial alliance, production and trade groups, labels, niche markets, quality control, processing, minimum farm wage policy and monitoring etc.) and would require a preliminary long rehabilitation steps. Given the deeply rooted caste structure and the weak solidarity mechanisms in rural Nepal, the already highly fragmentation of land and very low farm size, the protectionist measures of India and China including susidy), and the continuous armed conflict (partly fueled by the inequality linked to the caste system) since 2002, more negative impacts may be generated than benefits in restructuring agriculture towards significant growth and commercialization, may be very costly for not efficient impact on poverty. Trends in rural livelihood show that most of the rural households are not interested by this sector as entry point for poverty reduction, and their participation in agriculture development program is in general very weak. However, agriculture remain a historical reference that should be maintained to avoid possible social, religious and cultural deviations. Nepal agriculture may be sustained like the mountain agriculture of the central Cordilera in the Philippines, mostly by remittances from the plain, towns and overseas. In the medium and long term - recognising that the main internationaly recognized assets of Nepal is the Himalayan range, the trecking and the national parks, this is certainly an indirect way to maintain a certain food security at the national and regional level, release demographic pressure on natural resources, maintain the rural people in their indigenous territory, maintain the rural way of life that is required to manage the natural resources of the Himalyan range, to control the poaching of plants and animals, and to develop the eco and ethno-tourism in the future (when conflict will be over). Then, the indirect way to sustain agriculture or even develop it in some areas is to facilitate the oversea migration in the short and medium-term (training, registration, protection) with the short and medium aim of maintening the rural life of the remaining families and consolidate the financial and human assets, and the longer aim to reinvest in rural areas (house, micro-enterprise, etc.), to strengthen the rural-urban synergies in line with high urbanization (vocational training, peri-urban agriculture, etc.). Few data on Nepal agriculture Nepal, with 157 persons/km2, is considered a high population density developing country and a very high population density per unit of agriculture land. The density per cultivable land is rather similar between the three ecological zones: 8.6 persons/cultivable ha in the Terai, 11.7 in the hills, and 9.98 in the Mountains. Comparative analysis with the region shows that the Bangladesh and Nepal have the lowest land to labor ratio (0.22 and 0.29 respectively), compared to India (0.61), Sri Lanka (0.51) and Pakistan (0.81). With this weak land to labor ratio, Nepal is also a very atypical country in its industrial development. The rural societies have not diversified and intensified the production horizontally and vertically, and have not added value to the production through mechanization, post harvest technologies, processing agribusiness and commercialization. This stagnant agriculture is in line with a long national agenda of food security through food crops production that have provoked the national food insufficiency since 1986. In Nepal, with about 10 persons per cultivable area or 0.29 ha per labor force, AGDP still represents 40% of the GDP (1999) compared to Bangladesh (21% of the GDP for 0.22 ha per labor), India (28% of the GDP for 0.61 ha per labor), Pakistan (26% of the GDP for 0.81 ha per labor) and Sri Lanka (22% of the GDP for 0.51 ha per labor). Small holding size of high land fragmentation in Nepal is one of the main reported causes of poverty in rural area. Implementing the land reform (drafted in 1962 but never really implemented) alone without addressing the inheritance system is not sufficient for improving agriculture efficiency in the medium term (fragmentation will take place again in each generation). Given the current high-density population in agricultural land and the high fragmentation, it is doubtful that the implementation of land reform today addressing the causes of land problems would provide more positive benefits than negative impacts. By regional standard, Nepal has a very low labor productivity per hectare (US$ 188.2 in 1999, at 1995 US$ constant price - compared to US$ 301.2 in Bangladesh, US$ 402.3 in India, US$ 629.1 in Pakistan and US$ 752.5 in Sri Lanka). The daily farm-related wages ranges from 0.4 to 0.9$ in 2004, compared to 1.2 $ - 7 $ for non farm activities or labor migrants. Laurent Chazee Agriculture and Rural Development Specialist DFID staff assigned to ADB Nepal
Please visit dfid-agriculture-consultation.nri.org.