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EBRD launches key initiative to boost food security via private sector investment

By Anthony Williams

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The EBRD has launched an initiative to help address the global challenge of food security via greater involvement of the private sector in efforts to match the rising demand for food with adequate supplies from the agricultural sector.

The new programme builds on existing work to bring together the private and public sectors in forging a joint response to food shortages and draws lessons from previous pilot schemes. It involves even greater coordination among key stakeholders and also reaches out to the EBRD’s planned new areas of operations in the Middle East and North Africa.

The Private Sector for Food Security Initiative places stronger emphasis on the supply- and trade-side of the food equation than has been the case so far in the global response to food security, an issue that is becoming even more pressing given projections for world population growth over coming years.

It brings together the Bank’s existing and potential new regions by aiming to match the huge potential for exports in the former area with the massive import needs of the latter.

The programme will aim specifically to:

  • address bottlenecks along the whole food value chain by providing an effective menu of commercially viable responses
  • match more effectively the supply and demand from food exporters and food importers
  • provide greater opportunities for private-public sector dialogue to address the needs of the private sector
  • enhance coordination among the relevant international financial institutions and multilateral development banks to address both food as well as water security issues.

The involvement of the private sector is crucial in stimulating the supply side of food security as food production is first and foremost a private sector activity. With its predominant focus on private enterprise, the EBRD is particularly well placed to promote the priorities of the private sector in its interaction with relevant authorities in key supply countries.

Such private sector involvement is key to unlocking the agricultural potential in countries such as Russia, Ukraine and Kazakhstan– three producer nations that could supply half the world’s grain needs if they realised their production potential, thus making great inroads into reducing global food imbalances.

The EBRD will also bring to bear its expertise in investing along the whole food value chain, especially as improved agricultural trade logistics and better financial and risk management instruments within the sector are crucial to smoothing the flow of products and to reducing food price volatility.

While applying its financing to existing countries of operations, which include many key agricultural suppliers, the EBRD’s new initiative will also be important in the southern and eastern Mediterranean (SEMED) region, including such countries as Egypt, the world’s largest importer of wheat.

Better logistics along the food chain will also help smooth out price swings in this area, to which the EBRD is now planning to extend its investments. Such volatility is potentially damaging, especially to smaller producers and poorer consumers, who are unable to insure themselves against wild price fluctuations.

In this context it will also be critical to step up activities aimed at more efficient utilisation of both water and energy, with the aim of producing “more food per drop” of water and fertiliser.

In its traditional region of activity, the EBRD is the largest investor in the agribusiness sector, where it has a portfolio of financing of €2.9 billion and in which it provided funding of €850 million in 2010. Investments are expected to exceed €900 million in 2011.

Improved policy dialogue between the private and public sectors will increase the potential for investments in the farm sector generally.

The EBRD has already been active on the food security front by organising regional and country- focused pilot events aimed at improving the dialogue between commercial investors and the authorities that are responsible for providing the legislation and regulation that can improve the environment for private sector financing in the sector.

This initiative will now scale up such pilot policy dialogue and coordinating activities and roll them out systematically in both food-exporting and food-importing countries.

The Bank has also been keenly involved in the private sector angle of G-20 discussions on food security and has worked on analytical papers, assessing how best to address the issue of global food shortages and rising prices via the private sector.

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