Monday, April 20, 2009

Outsourcing Agriculture

The greatest crisis, in my view, of 2008 was not the financial crisis. It was the food crisis that hit the world in the early part of the year. Global food prices rose by 75% as compared to 2000. Food riots broke out in many countries. About 73 million people, in 78 countries, who depend on food aid from the United Nations have had their rations cut. The crisis got diffused, because other events overtook it and food prices fell back. But unlike the financial crisis, there is no solution in sight and its going to come back with a vengeance next year, or the year after, with certainty.

The problem is deep. A combination of high oil prices, climate change (both in terms of global warming and in terms of diversion of land for growing corn for fuel) and shrinking land for agriculture affects the supply of food. On the other hand global demand is expected to double by 2030 as population increases and economic development increases the demand for nutrition. End result is that food prices will rise meteorically for the next 10-20 years. That means food riots, starvation, malnutrition and a global crisis.

The problem will be deepest in three parts of the world - China, India and Africa. China is the worst placed - it has the largest population, but the lowest cultivable land. But China will manage the problem the best. Africa is best placed - huge cultivable land, but will manage it the worst. India is in between.

My take on the solution, is for Africa to "outsource" food production to China and India. The solution is not these countries buying up land in Africa, as Saudi Arabia and South Korea are doing. That will never work - in times of crisis, a Mugabe equivalent will simply appropriate the land back. Africa must retain the ownership of the land, but outsource grain cultivation to Indians and Chinese. India and China must focus on making Africa hugely food surplus. That will have twin advantages - it will greatly reduce starvation in Africa itself. And it will increase global food production enough to keep prices low.

China and India have the greatest stake here. They are the greatest consumers of food. Their natural reaction would be to boost agriculture domestically. That they should, and would, do. But they would benefit greater if they became an "outsourced service provider" in food production to Africa.

Buzz off Europe and North America. China and India must simply take over the FAO and deal direct with Africa.

Any takers for BPO in agriculture ?

Kya Bolte Ho ? nǐ shì shénme shuō ?