Growing the Wealth of the Poor - World Resources Institute

W O R L D R E S O U R C E S 2 0 0 8Beyond the Community Level:Addressing Challenges at the Macro LevelEarlier chapters adopt a village-level perspective to nature-basedincome, concentrating on the capacities that communities mustdevelop and the actions they must take in order to create viableenterprises that reduce poverty. But for such a communitycenteredmodel to succeed, a supporting environment offunctional national governance, accessible markets, andimproved physical and financial infrastructure is required.Scaling up depends critically on actions that governments take toremove obstacles and provide support in matters beyond thelocal sphere. In the following sections we probe some of themacro-level changes needed to provide the necessary enablingenvironment to allow community-based enterprises to realizetheir full potential and scale up their impact. The changesneeded to create that environment range from reducing theinfluence of elites and implementing fair tax and regulatoryschemes to improving rural representation in national governments,making ministers more responsive to rural needs, andimproving rural infrastructure.It is an impressive and even daunting list, although it is byno means exhaustive. Behind these recommendations is theunderstanding, however, that many of the reforms called forhave been lacking for decades and that change requires newincentives to alter policy and motivate conduct that is pro-poor.This is not easy. Resistance to the kind of changes that wouldcreate such an enabling environment is every bit as persistent asrural poverty itself. This emphasizes the importance of consistentand prolonged commitment by national governments to thegoal of pro-poor development and the policy reforms that thisrequires. With genuine commitment from national leaders toalleviate rural poverty, real change is possible.Rectifying and Expanding Rural MarketsRural markets often possess a number of distortions that disadvantagerural smallholders and communities that seek to marketnature-based products. Competition is often minimal, andvillagers who produce nature-based commodities like charcoal orcoffee usually do not capture much of the eventual retail value oftheir products. Governments have a vital role to play in makingmarkets fairer and thereby able to yield greater income. Theright policies can boost employment, helping to ensure viablelivelihoods for the poorest.The willingness of governments to confront the dysfunctionsof rural markets must proceed from a genuine belief inthe potential for rural small-scale enterprises to contribute tonational economic growth. For decades, government policies inevery natural resource sector—from agriculture to forestry tofisheries to mining—have favored large-scale producers at theexpense of rural small-scale producers. This is in spite of thefact that small-scale rural enterprises are responsible for significantproduction and most of the employment in these sectors.In India, small forest enterprises account for 87–98 percent ofall forest-related businesses and generate more than 80 percentof all revenues. Indeed, small and medium-size forest enterprisesfrequently account for 80–90 percent of all forestbusinesses in developing countries (Mayers and Macqueen2007:1–2; Molnar et al. 2007:1–10). Likewise, smallholders areresponsible for 90 percent of all agricultural production inAfrica (WRI et al. 2005:35). In the burgeoning palm oilbusiness, smallholders account for up to 90 percent of totalproduction in West African countries and as much as one thirdof production in Indonesia and Malaysia, the world’s twobiggest producers (Vermeulen and Goad 2006:4).The rationale for states to favor large-scale over smallscaleoperations has been predicated on the belief that thebigger outfits are more efficient and productive. Yet muchresearch points to the fact that small enterprises, when theyhave the same level of technical help and financing as largeones, can be both efficient and profitable. For example, smallholderpalm oil farmers with access to the latest technologyhave shown they can be as efficient as large-scale plantationsand can achieve high net profits (Vermeulen and Goad 2006:6,26, 28). Similarly, some small forest enterprises in CentralAmerica produce high-quality hard woods that are competitiveand profitable in a global timber market dominated by largerproducers (Molnar et al. 2007:43–46). Extending this productivepotential beyond a few successful rural enterprises requiresstate action to challenge elite capture of resources and reformthe regulatory and incentive structures that often determinewhether a small business can get off the ground or insteadwithers quickly. It also requires targeted assistance withtechnology adoption, product improvement, business planning,and market development.SMALL FORESTRY ENTERPRISES (SFES) PREDOMINATEBrazil China Guyana India S. Africa Uganda168Number of SFEs (% of all forestry enterprises) >98% 87% 93% 87-98% 33-95% –SFE Employees (% of all forestry employees) 49-70% 50% 75% 97% 25% 60%SFE Revenues (% of all forestry revenues) 75% 43% 50% 82% 3% 60%Source: Mayers and Macqueen 2007:1–2