What the One Belt, One Road Initiative Could Do for Rural Livelihoods

Deputy Director-General, Programmes
FAO – Food and Agriculture Organization

The scale of China’s One Belt, One Road (OBOR) initiative, with a projected investment of US$ 900 billion and the inclusion of up to 65 countries, has certainly grabbed the world’s attention.

Much of it has focused on the formidable size of the infrastructure investments and the array of possible geopolitical or geo-economic implications.  It is important not to lose sight, however, of what are likely to be much more local or sub-national economic impacts, particularly in areas that are currently lagging and falling behind.

Regardless of the eventual global scope of the OBOR initiative, several of its features illustrate the potential payoff from taking a more “territorial” approach to sustainable rural transformation as a key driver of poverty and hunger eradication. This approach combines infrastructure and other investments with policy interventions that aim to support the income and employment connections between smaller urban centres and their surrounding rural areas.

In terms of food security – and that is a primary mandate for the Food and Agriculture Organization of the United Nations as well as a significant challenge in precisely the area OBOR spans - this inclusive view of the food system and the potential of its non-farm segments as a source of off-farm employment creation is key. And this concept also appears to underpin OBOR plans, building on recent Chinese experience in expanding both agricultural production and related agro-industries, through a mixture of infrastructure investments and policy moves.

Since the 1990s more than 1.6 billion people have moved above the poverty line, including 750 million who continue to live in rural areas. While we tend to think of economic transformation historically as a shift out of rural areas into cities - the classic experience of urban-centered industrialization - progress in rural areas has been central to poverty reduction. In South Asia for example, since the 1990s a larger share of people exited poverty while remaining in rural areas than those that moved to cities.
The old model of rural-urban migration, moving out of agriculture and into a rapidly expanding industrial sector no longer is a fair characterization of what is happening in many places.

Industrialization is simply not taking place in many countries in the OBOR range - which have large variations in terms of natural and human resources - and in such cases the rural poor often have moved from low productivity farms to become urban poor in equally low productivity informal sector activities. The large-scale flow of men and women out of agriculture will continue, however, and along with population growth it creates an enormous need for jobs, particularly for young people. Major infrastructure projects can be a boon, but ultimately require a vision of sustainability to provide a lasting anchor of decent employment.

Reaching the Sustainable Development Goals by 2030 depends critically on progress in rural areas, where most of the world’s poor and hungry live. Progress has been good in areas that are well connected but very uneven in others and not good at all in areas that are not well integrated into the rest of the economy.  While most attention on OBOR infrastructure plans has emphasized the international movement of goods and services, it may well be that the national and subnational value chains the plans could catalyze will become even more important, especially those that link rural areas and smaller cities and towns. 

In the developing world, 1.5 billion people live in cities and towns of 500 000 or fewer people, about half of the total urban population. In all developing regions except Latin America and the Caribbean, more people live in or around small cities and towns than in larger cities. Although often ignored by policy-makers, these urban areas contain the key economic, social and political connections for huge parts of the world’s population.

Globally, there is rapidly increasing urban demand for food, and demand that is shifting away from staples and towards higher-value products like fruits and vegetables, dairy and poultry products, often with a higher degree of processing. Urban markets already consume 70 percent of the food supply, even in countries with large rural populations. Similarly, food and beverage processing already accounts for between 30 and 50 percent of all manufacturing value addition in sub-Saharan Africa for example.  Demand on its own will not, however, be sufficient to raise the incomes of small rural producers who are at an increasing disadvantage facing additional barriers in more integrated supply chains that larger producers can more easily overcome. 

It is at this interface – again, more likely to be national or sub-national in scope – where OBOR’s real impact may lie rather than in international balances of trade. OBOR in principle increases accessibility through its transportation infrastructure framework, coupled with other investments, and thereby offers a platform from which to overcome some chronic problems that have limited the ability of rural areas to leverage their comparative advantages. 

It is important to think of rural transformation as encompassing both rural and urban areas in this “agro-territorial development” approach. Policy analyses have often been too segmented, looking at urbanization, or industry, or agricultural productivity in isolation from the larger system. Rural transformation requires a mix of infrastructure development and policy interventions that encompass both rural and urban aspects.  Public investment needs to be encouraged as leverage for stimulating private investment through things like agro-corridors, agro-industrial parks, agribusiness incubators or special economic zones. Policy interventions include things like secure land tenure rights, enforceable contracts and less red tape to start businesses.

While not unique in recognizing this potential, the OBOR initiative is expected to provide considerable investment and infrastructure to help realize the employment and income gains that can come from food systems, in things such as agricultural storage, processing and trade. Road and electricity grids are essential for cold chains, for example, and are often required for higher value processing and distribution. All of this should stimulate the catalytic role that the small cities and towns can provide for a rural transformation that propels overall economic growth, expands employment opportunities for people leaving agricultural production and ultimately will generate much of the return on these critical investments.