FEATURES OF THE RURAL ECONOMY OF DEVELOPING COUNTRIES
A distinctive feature of the rural economy of developing countries is the economic and social heterogeneity. Large farms side by side here with small local farmers. However, small farms are not homogenous. Those who are engaged in commodity production, supply surplus products to the markets and have their share of the benefits of increased market demand for new high-value agricultural products. But many other subsistence farming, mainly due to lack of assets and adverse external conditions. Consume the bulk of manufactured food products, they are entering the market as buyers and sellers of food workers. Belonging to one group or another is determined not only by the presence of assets, but also gender, ethnicity and social status, since all it involves an unequal ability to use the same assets and resources in response to opportunities.
Heterogeneity is observed in rural labor markets, where there are many low-skilled and poorly paid jobs in agriculture and very few jobs that involve highly skilled workers and opening the way to overcome poverty.
Observed heterogeneity and the consequences of migration, when some poor villagers out of poverty, while others fall into the urban slums and remain poor.
Such pervasive in agriculture and the rural population heterogeneity should be considered during the development of public policy in agriculture. As a rule, from any economic reform some benefit while others lose. Trade liberalization, leading to an increase in food prices – is a blow to the “net buyer” (represented by the largest group of rural poor in countries such as Bolivia and Bangladesh) and good for the “net sales” (represented by the largest group of rural poor Cambodia and Vietnam). Economic policies should be differentiated and take into account the status and position of households, particularly the rules prevailing in the area of gender. The problem of differentiated policies – do not create advantages for some groups at the expense of other, more rationally reflect the interests of all households in the first place, the very poor, given their situation and needs. Search the right balance of measures in respect of the more and less favorable sectors, regions and households – is one of the toughest political challenges that had to deal poorest countries experiencing a serious lack of resources.
Growth in agriculture has enormous potential for poverty reduction in developing countries. According to estimates based on a comparison of data for several countries, GDP growth is due to the growth of agriculture, at least twice as effective in reducing poverty than GDP growth, obtained at the expense of other industries. It is estimated that China’s aggregate economic growth, due to the development of agriculture, 3.5 times more effective impact on poverty reduction than growth in nonagricultural sectors, and in Latin America it is more efficient in 2,7 times. The rapid growth of agriculture – in India, brought to life by the introduction of technological innovations (the introduction of high-yielding crops), and innovation in China in the institutional sphere (household responsibility system and market liberalization) has led to a massive reduction of poverty in rural areas. A rapid reduction in poverty observed in recent years in Ghana, has taken place largely in rural households, some being the result of growth in agricultural production.
Features of Agriculture in the mineral-rich African countries. Agriculture accounts for one third of African countries rich in minerals. From 1985 to 1999, agriculture in the middle provides twice the proportion of the total growth of the economy than manufacturing. However, poverty remains a wide scale, despite the higher per capita GDP than in countries rich in minerals. Different experience, lived through the period until 1997, Indonesia and Nigeria, said the following. Since Indonesia has supported agriculture indirectly, through regular devaluations of the exchange rate, which gave incentives to producers of agricultural exports, and directly, by investing some of the unexpectedly high oil revenues in rural infrastructure, irrigation, agricultural credit and subsidies for fertilizers. In contrast, Nigeria limited loans to agriculture directly through the management of sales and indirectly through a fixed exchange rate, which led to significant taxation of agricultural exports and the subsidizing of cheap imports.
In Indonesia, the poverty line at $ 1 a day fell from 47% in 1981 to 14% in 1996 and in Nigeria it increased from 58 to 70% over the same period. These quite opposite results is largely due to the different approach to solving problems in agriculture.
Features of Agriculture in Africa south of Sahara is determined by the presence of three main conditions:
First, the provision of basic factors of production. Most African countries and countries with predominantly agricultural economies are relatively rich in minerals but poor in skilled labor, which suggests the comparative advantage of production of unprocessed raw materials. In some countries, a combination of natural resources and the availability of human capital indicates the relative profitability of production of processed agro-commodities, despite the fact that other factors may still hinder the development of processing sector in agricultural production.
Second, differences in productivity and cost. The latter are determined by the presence of conditions for entrepreneurial activity, infrastructure (roads, electricity, telecommunications) and the functioning of the necessary institutions (legal, financial, regulatory) affecting the performance of individual firms and industries. The conditions for entrepreneurial activity are more important in the sectors of industrial production and high-value services, as here, these factors are used more intensively. Investment Climate Surveys of the World Bank supports the conclusion that the indirect costs associated with poor working conditions for business in Africa are on average higher than that of its competitors in developing countries.
Third, the real economy of scale. The very existence of economies of scale puts latecomers at a disadvantage when they compete with countries that already a developed industrial base. Predominantly agrarian country in many respects already missed the moment to expand labor-intensive manufacturing, which gave impetus to the development in Asia in the 1980′s. Until now, a debate about the likelihood that Africa will be able to establish itself as a significant exporter of manufactured goods. But based on current and emerging future of comparative advantage, polytypic set of agro-commodity exports, both processed and unprocessed, together with services (including tourism) remains the main way to earn foreign currency in the medium term.