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CHAPTER2 Agricultural Trade and Rural Development in the Middle East and North Africa Dean A. DeRosa Situated at important crossroads between Africa, Asia, and Europe, the countries of the MENA region form one of the largest groups of developing countries in the world economy.1 In addition, with the initiation in recent years of a peace process between Israel and its Arab neighbors, the region has increasingly moved to the foreground of the world economy as private businessmen and government officials have begun to look more earnestly to the region's potential for enjoying higher sustained growth and greater economic development.2 Although MENA includes a number of oil-rich countries such as Kuwait, Qatar, Saudi Arabia, and UAE, it comprises mainly middle-income developing countries whose per capita income levels and economic performance, including with regard to indicators of social welfare, fall appreciably below the mean levels of countries in other regions at similar rungs of the development ladder globally (table 2.1 and appendix table 2.1). Moreover, the circumstances and lackluster economic performance of the populous low- to lower-middleincome countries in MENA-Iraq, Syria, and Yemen in the Middle East, and Egypt, Morocco, and Sudan in North Africa-are the subject of considerable international concern, one measure being the large shipments of international food aid to some MENA countries.3 Notwithstanding the prominence of petroleum in the region, agriculture remains important to most economies in MENA. Agricultural and rural populations still account for 40 to 60 percent of inhabitants in the MENA countries and for a substantial share of aggregate employment, belying the often much lower recorded share of agriculture in gross domestic output.4 Thus, the livelihood and social welfare of the largest segments of the populations of the 46 CatchingUp withthe Competition MENA countries are still deeply rooted in agriculture and the rural economy. As a consequence, like in most less developed countries worldwide, agriculture and rural development have potentially significant-and mutually reinforcing-roles to play in achieving higher sustained growth and economic development in MENA. For the last decade or more, however, many MENA countries have failed to achieve positive growth on a per capita basis (table 2.1). This observation applies particularly to such populous countries as Iran and Syria in the Middle East and Algeria in North Africa.5 Although agricultural growth has widely kept pace with general economic growth in MENA, agriculture in less developed countries must grow by 2 to 3 percentage points above the rate of population growth in order to contribute significantly to not only national economic growth but also rural development and welfare. By this rule of thumb, the lackluster performance of the MENA economies is discernibly mirrored in the less than robust performance of the agricultural sector. Agriculture and Economy-wide Policies in Economic Development6 That agriculture can contribute significantly to the transition of many if not most less developed countries to higher levels of growth and economic development is a pertinent and insightful theme developed by, among others, Johnston and Mellor (1961), Mellor (1966, 1995), and Johnston and Kilby (1975).7 More specifically, this theme contends that sustained industrial development and economic growth in low to middle income countries requires policies for economic development that yield incentives for efficient expansion of not only industry but also agriculture and the rural sector, despite the expected long-term decline in the relative importance of agriculture in growing economies. Increases in agricultural output stimulate the demand for industrial inputs such as fertilizer and farm equipment ("backward linkage") as well as expand the supply of agricultural goods used as inputs to nonagricultural production ("forward linkage"). Agricultural crop and livestock production is generally characterized by a "weak" backward linkage and "medium-strong" forward linkage (Hirschman 1958, 110). Agricultural growth, however, also raises the real income of farm households and hence their demand not only for food and other agricultural products but also, and likely more so, for industrial goods and services. For instance, Mellor and Lele {I 973) and, more recently, Ranis, Stewart, and Reyes (1989) show that such "consumption linkage" effects are critical to the influence of agricultural growth on the overall growth performance of the rural and national economy. In particular, a wider sharing of agricultural income growth among rural households leads to a greater incremental consumption demand for the labor-intensive products of rural industries. Rural industry growth in tum provides "additional impetus for further increases in [18.191.5.239] Project MUSE (2024-04...

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