WB investigating possible scenarios of climate change impact on Azerbaijan - INTERVIEW

Frauke Jungbluth, Practice Manager for Agriculture and Food in the WB’s Europe and Central Asia Sustainable Development Group, gave an interview to Report News Agency. During the interview, Ms. Jungblut spoke about global climate change, its impact on the agriculture and food sector of Azerbaijan, and the implementation of projects and plans of WB.

Report presents interview:

Agriculture plays an important role in Azerbaijan’s economy. What contributions has the World Bank made and is making for the development of this sector?

Agriculture is a very important sector for Azerbaijan, and it contributes a lot to the economic development and diversification of the non-oil sector. It’s also important for job creation and its importance is highlighted in Azerbaijan’s National Priorities 2030. We, as the World Bank, have been working in the agricultural sector basically since the World Bank started to work in Azerbaijan.

So, from the early mid-nineties, the very first project that was linked to agriculture was a land reform project. Later there were a number of projects that supported the commercialization of the sector, advisory services, expanding lending, modernizing agricultural research institutes. The most recent project was the Agricultural Competitiveness and Improvement Project.

Without going into much of details, this project supported the inclusion of smallholders into value chains, the provision of knowledge and information services, and providing lending and agriculture financing that is adequate for the needs of the agriculture sector. That project also supported veterinary services, veterinary education, and promoting private veterinarians or building up the capacity of private veterinarians in rural areas. This was important to help improve the productivity and outputs of the agriculture sector. We have also had irrigation projects. They supported the modernization and rehabilitation of irrigation networks serving 150,000 hectares of land area and had a substantial impact on increasing the incomes.

Additionally, we also had a rural investment project that supported 2,000 rural communities for essential infrastructure services. So, moving forward, we see an important role for the agriculture sector in the stimulation of economic growth in Azerbaijan. And we stand ready to support the government in its goals for growth, modernization of the sector, and increasingly, also in greening the sector.

Many countries, including Azerbaijan, are trying to keep food prices under control. But global prices still remain high. What are the factors contributing to it? I think there were reports last year that food prices went up almost 60%. How can the countries curb it?

It's a very complex question, but in overall it comes from a global perspective. The crisis that we see started a couple of years ago. Food prices have been on the rise since about 2016 and they have been compounded by the recent crisis and COVID as well. It has led in a lot of countries to an increase in extreme poverty, malnutrition, and loss of some of the gains that have been achieved over the past decades.

We see a reversing trend in development.

There have been a lot of supply chain disruptions, economic fallout of the COVID-19 pandemic and all of this have contributed to food price increases. And the food price increases are particularly devastating for poorer households because about two-thirds of the income of poorer households goes into the food. So, if food prices are higher, this is hitting that group more than it is hitting others. And we also see that while prices have gone down more recently again, they are still much higher than they used to be. This is true for not only commodity prices but also for inputs like fertilizers. Fertilizer prices had a peak last year, went down again, but it's still about double the price than it used to be two years ago. We see that there's a continuity of this issue and there is a potential risk of this problem shifting from just high food prices to a crisis of food availability.

And in addition, for some staple items, food reserves that countries are possessing are at a very low level. And that is coupled with the expectation that in 2023 some countries, because of not good weather forecasts, will probably produce less than they used to produce.

In view of the above, our expectation is the crisis is not yet over. What are the underlying drivers of all of that?

Response measures can include aligning incentives, undertaking policies to increase productivity, adjusting the sector to produce as best as it can, and to be prepared for climate crisis or another crisis that may happen.

What we are seeing or saw last year is that as soon as a crisis starts, some countries apply ad hoc trade restrictions, and they tend to have an impact on the longer-term development of the sector.

You would not necessarily invest if you're not sure you can market your product because your border has been closed or the border of the country that you wanted export to has been closed to your product. So, all of this is affecting the increase of prices.

As I said, the fertilizers and other input prices also have increased which again leads to maybe a lower production because some farmers may consider it is not economically viable for them anymore to produce.

The other element of where we feel support is needed is in terms of accelerating innovations.

Innovation investments in agriculture research and advisory services have shown that they pay off but not a lot of it or not enough is done by a lot of the countries. So, public investments can actually make a difference.

Another element is enhancing information on innovations, what markets are demanding, and what changes are so that farmers can actually make an informed decision of what they are producing and investing.

The last point is also that the public sector cannot do that alone. The private sector has a critical role to play in that kind of support the activities.

One of the recent World Bank analyses on Azerbaijan mentioned that per farmland size in the country is less than 5 hectares and this impedes the development of the sector and, indirectly, its food security. What are your recommendations about this?

There's a recent World Bank report that is called Harvesting Prosperity that looked at a number of issues on technology and productivity, growth of the sector and what's needed.

Among other things, it also looked at land size, land productivity and labor productivity.

And the conclusion is that there is actually not an optimal land size and you can be efficient if you are a small or large farmer. Farmers can increase their productivity. Here open and transparent land markets play a role.

Because if a farm is successful, efficient in its size, but it decides that it makes economic sense for it to grow, then there is need to be a land market that allows that farm to access land and grow naturally.

Also, a lot depends on what a farm produces. There are certainly crops where economies of scale, a larger land area makes economic sense, but there are others where it is not necessarily applied.

Also, if you look at labor inputs in agriculture, it doesn't necessarily always mean that a larger land size provides more job opportunities.

In the case of Azerbaijan, it is important to better integrate all lands into inclusive value chains. Because sometimes the land size might not matter as much if everybody has a high-quality product.

Climate Change is already impacting Azerbaijan's agriculture - how to deal with this challenge?

Indeed, climate change is already impacting Azerbaijan. And water is one of the areas where Azerbaijan is seeing that. What we see from a global perspective is climate change and the amplification of natural and man-made events.

An important question is to look at the policies that are currently being implemented and to what extent they are serving that changing environment. This necessitates repurposing the agriculture policies. The world is changing, markets where you are exporting are changing as well. Therefore, we are recommending the countries where we work to incentivize greener, more climate-resilient development.

Both globally and in the region of Europe Central Asia region we focus on four pillars. They include supporting production and producers, facilitating increased trade in foods and inputs, supporting vulnerable households, and investing in sustainable food and nutrition security.

In the case of Azerbaijan specifically, climate change impacts have many facets, including temperature increases, water stress, soil degradation. Therefore, the sector has to prepare for this impact.

One of the broader terms that we are using for all of this is called climate-smart agriculture. Climate-smart agriculture is being better prepared for different calamities, such as drought or water stress.

This sometimes means you might need different varieties or to grow a different crop. Or you may need to look at how are we using our irrigation water? How can we save water while irrigating? And basically, how can farmers be better informed of using these climate-smart agriculture practices?

The World Bank is preparing a report which is called the Climate Change Development Report which also analyzes some of these broader sector elements. It is trying to model what would be likely scenarios of climate impact on Azerbaijan and what that means for various sectors of the country. So not just agriculture or water.

It is very important to look more comprehensively into that to understand what your investment policies will be going forward. We also have another report that is being finalized, which is about what climate-smart agriculture practices would be useful to consider in Azerbaijan.