Alvaro Lario, President of the International Fund for Agricultural Development, together with his colleague Ron Hartman, spoke with Robin Davies when they visited Australia in March 2024 to encourage the Australian Government to rejoin the Fund.
Alvaro Lario, President of the International Fund for Agricultural Development, together with his colleague Ron Hartman, spoke with Robin Davies when they visited Australia in March 2024 to encourage the Australian Government to rejoin the Fund.
Lario explains IFAD’s distinctive role in supporting small-scale farming to reduce rural poverty and boost economic growth in the Asia-Pacific region.
Hartman, IFAD’s Head of Global Engagement, Partnerships and Resource Mobilization, describes IFAD’s work in Papua New Guinea and Indonesia, showing how IFAD funding can leverage domestic and private investment.
This is the second episode in our 2024 season, which is a new beginning for the podcast after a hiatus of two years. We're bringing you a mix of interviews, event recordings, and in-depth documentary features relating to the topics we research at the centre – Australia's overseas aid, development in Papua New Guinea and the Pacific, and regional and global development issues.
Please note: We provide transcripts for information purposes only. Anyone accessing our transcripts undertake responsibility for assessing the relevance and accuracy of the content. Before using the material contained in a transcript, the permission of the relevant presenter should be obtained.
The views presented in this podcast are the views of the host and guests. They do not necessarily represent the views or the official position of the Development Policy Centre.
Alvaro Lario 00:05
For us the most important thing is to invest in rural people, where poverty is. Locally driven development, community driven development. So that niche, that focus on small scale farmers, is why even many of the development banks come to us. Our way of designing, our way of targeting. That's why we are appreciated and our reputation is coming from.
Acknowledgement 00:38
We wish to acknowledge the Indigenous people of Australia, the wider Asia Pacific region, and other parts of the world and express our respect for the traditional knowledge and practices which stemmed from a deep connection to the lands and waters they have inhabited for millennia.
Robin Davies 00:49
Welcome to Devpolicy Talks, the podcast of the Development Policy Centre. We are part of the Crawford School of Public Policy at the Australian National University on Ngunnawal and Ngambri country in Canberra. This podcast, which we've relaunched after a more than two year hiatus, in this new season, we bring you a mix of interviews, event recordings, and in-depth documentary features related to the topics we research at the Centre, namely Australia's overseas aid, development in Papua New Guinea and the Pacific, and regional and global development issues.
This episode is an interview I recorded with Alvaro Lario, the president of the International Fund for Agricultural Development, or IFAD, with some contributions also from his colleague, Ron Hartman. Alvaro was appointed to his role in July 2022, and was previously IFAD's Chief Financial Officer and an Associate Vice President of Financial Operations for four years. Earlier, he was the Treasury Markets Lead and Principal Portfolio Officer at the International Finance Corporation, the private sector arm of the World Bank Group. On being appointed to his current role he pledged to leverage IFAD's AA+ credit rating to access global savings from impact investors and pension funds to tackle poverty in poor rural communities. Alvaro came to Australia earlier this year to brief parliamentarians and government officials to promote IFAD's work, particularly in Southeast Asia.
There's one important piece of context to be aware of. Australia was a member of IFAD until 2004, when the Howard Government withdrew completely from the organisation. A complicated process involving consideration by the Treaty's committee of parliament. The Labor Government was planning to rejoin in 2012. But the then opposition was not supportive and shelved the plan on winning government. And I should disclose that in working for the former Australian Agency for International Development, I represented Australia on the board of IFAD from 1999 to 2001.
Alvaro Lario 02:07
My name is Alvaro Lario. I'm the President of International Fund for Agricultural Development. We are a UN specialised agency, as well as a development financial institution. We're the only institution focusing on just rural development and our focus is food security, agriculture, climate adaptation with a focus on small scale farming. Our target is very much that last end mile and being an investment fund, our clear goal is to transform rural economies to provide a reduction of inequality, social cohesion, and making sure that people do not have to forcibly migrate, and they have jobs and income generation activity where they are right now.
Robin Davies 02:34
What led to the establishment of the organisation initially?
Alvaro Lario 02:36
IFAD was established in 1977, after a number of discussions around the food crisis of the 70s. Oil producers were being asked to really provide some of those benefits to address the global challenge of food security. And it was very much focus already then on small scale farming. So we know we have been having since then, unfortunately, every 10 years, a food crisis. There have been calls for more establishments of funds. But the reality is that this fund was established to really address the connection of many of these local farmers to markets and to the access to finance, to water. So very similar to the situation we are in nowadays in many of countries unfortunately. And the beauty of this is that even if you look at our articles of agreement, with very different language, because then we didn't talk about resilience of systems, but the type of goals are almost equivalent to the ones we have nowadays.
Robin Davies 03:12
And was it established through the UN General Assembly?
Alvaro Lario 03:15
It's a United Nations specialist agency, there's another 13 more with a certain mandate for the UN General Assembly. The reality is that the first finances were mainly the Gulf countries then the OECD countries decided to match the same financing. And nowadays, it's mostly OECD countries which are funding the institution.
Robin Davies 03:30
That's an interesting point for me because back when I was originally involved, the fact that the organisation mobilised so much money from the Arab states was really a selling point that it was leveraging funding from those organisations. What does your organisation look like in terms of its staffing complement? Obviously, a lot of people are there to do investment appraisal and investment management. How much internal technical capacity do you have across the various sectors agriculture that gives you I guess, a comparative advantage versus other banks working in the sector?
Alvaro Lario 03:53
Our primary competitive advantage is the network of local farmers' organisations, the connections on the ground, the ability to work with local governments. I wouldn't say that necessarily, that our key focus is technical assistance or technical committees that you will have in an FAO [Food and Agriculture Organisation]. So in this sense that our ability of bringing different partners together, financing, designing complex projects is where we excel and why they want us to be there in terms of impact. If you only want to have certain technical assistance, a request for a certain water issue, in that place normally you will hire an FAO [officer].
Robin Davies 04:18
How would you describe the distinctive role of IFAD relative to other development banks working in the agricultural sector?
Alvaro Lario 04:23
Our only focus is agriculture and only focus and target is mostly small-scale farmers. So if you think about the World Bank or an African Development Bank, their focus is much more on the larger infrastructure like building dams. Building a main road in our case is a tertiary road that actually connects many of the villages to the market. It's the smaller dam that is actually flowing into the small-scale farmers. And that's where the real need is. That's where the poverty is, in the rural areas. So it's important to talk about the bigger infrastructure development, which obviously is the focus of many of the local governments. But for us the most important, and it's on our logo, that’s in our DNA, to invest in rural people, where poverty is. Locally driven development, community driven development. So that niche, that focus on small scale farmers, is why even many of the development banks come to us. Our way of designing, our way of targeting. That's why we are appreciated, and our reputation is coming from.
Robin Davies 05:00
Are small holder farmers organised regionally and globally? Who are the organisations that you interact with?
Alvaro Lario 05:03
Recently we had in our Governing Council Meeting, which is called the Farmers Forum, we are meeting regularly with some of the key farmers organisations from all over the world. They come and discuss some of the issues. We bring them many times to global events like the COP or others where they have a voice, and this is part of why I think IFAD is also relevant. Because for us, it's about listening to the needs of the local governments but also bringing the voices of different organisations, different nations, or indigenous people. That's a very key part of what how we think of ourselves and how we design our programs.
Robin Davies 05:04
Now, in addition to being effectively a development bank, you are located in Rome, alongside two other UN agencies, the World Food Programme and the UN Food and Agriculture Organization. How do you work with them?
Alvaro Lario 05:35
FAO are always very much focused on the normative and regulatory aspects, some of the technical expertise. Whereas the World Food Programme is very much focused on the humanitarian assistance in the conflict affected states and very difficult humanitarian situations. So actually, what we're trying right now is to link better and we will be launching an initiative in a week on six pilot programs in conflict affected states whereby we're trying to make sure that there's a humanitarian and development nexus. As another example of some of their work is on resilience and school meals. They provide to a lot of schools throughout the world. In certain countries are trying to connect the small-scale farmers to provide a lot of the products to the school. So that's why then the families we have also the money to send their children to many of these schools. And so we connect in the school meals program. In the case of FAO, because of their broad technical expertise, we also bring them to certain aspects in the design for projects and we bring specific expertise, and we partner with them through their FAO Investment Centre in a number of different countries.
Robin Davies 06:20
I wanted to focus next on the Asia Pacific region. Of course, the structure of the economies of many of the larger countries in our region is changing rapidly. How you see IFAD's role changing in Asia Pacific, particularly in some of those larger countries, such as Indonesia or the Philippines or Vietnam? It sounds like there has been a lot of decentralisation since I last engaged with IFAD. What does that look like in the Asia Pacific? What sort of infrastructure do you hopefully replicate in the region now?
Alvaro Lario 06:35
So Asia is the biggest portfolio for IFAD. In the case of Indonesia, for example, the investments that IFAD brings, or the financing might be the hundreds of millions, but then the co-financing from the government comes in the billions. So actually, the important part of IFAD once more is the design, the targeting, the niche of how to provide solutions to certain small-scale farmers and how we can then have that the knowledge base of making sure that we are addressing the challenges because of what we do throughout the world. That's why in this case the Indonesian government trusts us very much and wants to partner. Bangladesh is another example. Also in Asia, but in all Southeast Asia, our presence is very big.
Where it gets more challenging is in the small island states like the Pacific. I'm just coming out of meeting with High Commissioners of many of these Pacific Islands. IFAD is present and we have been increasing our presence significantly. The challenges remain and I was this past week in the Solomon Islands. I met with the Prime Minister, and we were discussing rural development and actually, IFAD is not present in Honiara. We are in Malaita, where there's a lot of projects that were concluded and they focused more than anything else on value development, creation of rural jobs, income generation activities, that means providing opportunities and hope to the youth that really makes them want to stay. To get a decent livelihood and be able to lead a life that is meaningful. An anecdote from one of the police officers, he was mentioning that actually the project has already been completed three years ago, but he has seen that the youth had a different hope, that there was less crime, that it was less social unrest. So it's for us it's about transforming the rural economy. Does that mean? It means that we try to address issues like inequality issues, like social unrest, social cohesion, and this is what providing jobs and opportunities, economic opportunities is about.
IFAD is a very decentralized organization in the last five years, we've gone from 17% of the staff in the field to 45% of staff in the field. Right now our regional office is going to be open. Our Asia hub is going to open in Bangkok in Thailand this September. We have a regional Pacific hub in Fiji. And as I said, we believe that it's very important not only to have a stronger core of technical people but also to be present and for us, and it was discussing with high commissioners, that is part of our DNA is to make sure that we're responding to the needs of the countries that we have the ability to listen, but to be present where they are. So right now we have 50 country offices throughout the world. They're not big country offices, we don't believe that we need to have a lot of staff. Why? Because IFAD actually, designs, supervises, supports implementation, but is locally owned by the governments, by the farmers' organisations. They are the ones who implement, IFAD does not implement the project. So we are present throughout the world, but still is locally and community driven development.
Robin Davies 08:45
You talked about your dialogue with some of the Pacific Island countries, commissioners here in Canberra. As you look ahead several years, maybe up to 10 years, what sort of role would you see IFAD playing in the Pacific?
Alvaro Lario 08:52
For us, it's very important to listen, to respond to the needs, and this is what we have heard today, but we hear it everywhere. There's a lot of development that is driven either by bilateral trade, that is driven by the interest of the countries and the most important part is, not that's relevant to IFAD but it's relevant to the Pacific, that it does not respond to the KPIs of our organisation, but it responds to the KPIs of the of the country. In this case for us it would be important to assemble financing from a different number of ways - whether it's the Climate Fund, whether it's bilateral institutions that we manage to bring coherence to a lot of the current fragmentation of aid. And it's an important part of how we think of ourselves in the rest of the world as well as the Pacific. Apart from that there's a lot of challenges to address, but many of them relate also to providing youth with opportunities and making sure that women have also leadership roles in many of the decisions. So there's a little bit that belongs to the Pacific, but I think it's also belonging to the rest of the world.
What I see for the next decade is going to be climate change and climate shocks even more relevant for the region. I was recently with the Minister of Finance of Tonga, and he was mentioning that in the last year because of the rise of increased by 11 centimetres and they had to go several times and measure it as they couldn't believe it. So this is a little bit of what's a big threat very clearly for the Pacific. Some of my conversations on the Solomon Islands with the government were that they were not just thinking about whether the next cyclone was going to happen or not, but when it was going to happen. And this is just the reality of the world, but very specifically, a big threat for the region.
Robin Davies 09:58
Some of the points you made there are about agricultural resilience protecting the agriculture sector that that is already there. Looking at agricultural development, what do you think are some of the opportunities for the region in terms of expanding exports of certain products or increasing intra-regional trade?
Alvaro Lario 10:09
One of the things that we're hearing more and more in the region relates to commercialisation and market access. I think that's a very important part is not only here, but also between Europe and Africa. There's a lot of issues related to trade that are there. There's other issues, for example, that, in the case of Australia are less relevant because of the low subsidisation of agriculture compared to other regions. But the reality in the world too, is that there's 700 billion of subsidies in agriculture. When we are asked one of the ways of solving the current climate threat and dealing with security and climate, the reality is that a lot of these subsidies could incentivise certain behaviors that could be good for the planet as well for agriculture, and probably this is less relevant for Australia than for the Pacific. But the key issue for us in the Pacific relates to jobs, to opportunities and to social cohesion and inequality
Robin Davies 10:45
My next two questions about IFAD's country operations were directed to Ron Hartman, who was IFAD's Head of Global Engagement, Partnerships and Resource Mobilization. He was travelling with Alvaro and was previously running operations in our region, so he has really in-depth knowledge of IFAD's work in the field. Obviously, coming to PNG which is by population and land area is more than 90% of the Pacific region, what are some of the IFAD's main priorities there? Your focus is on smallholder agriculture. PNG is the one country in the Pacific that has a lot of oil palm development going on, in addition to traditional small-scale agriculture, so how does IFAD situate itself in the agricultural sector in that country?
Ron Hartman 11:15
My name is Ron Hartman. Predominately my career with IFAD has been operations, managing a number of country programs, particularly in Asia and the Pacific, regional programs as well. IFAD's history in PNG is a long one. We invested quite a lot in in different types of small-scale agriculture in the 1980s and early 1990s. And then there was a period of not so much disengagement, but certainly there was a deacceleration of the partnership that we had. In the early 2000s, for various reasons, there was a pickup of the partnership and what we did in terms of that reengagement in PNG, is looking at what's often a very crowded development environment and see where there are opportunities for IFAD to add value. And what we tend to focus on was how are we able to build the capacity of remote and often isolated communities and see how they can be integrated into value and supply chains. A couple of the investments that we decided to focus on both geographic but also commodity focused. We had and completed a couple of years ago, quite a sizable investment that focused on coffee and cocoa. Coffee in the highlands, which is often a small-scale crop, has a lot of the benefits for the female headed households and women farmers. And cocoa in Islands which has very similar characteristics. What was interesting for us, is the decline of value that some farmers were able to benefit from both coffee and cocoa and the number of reasons for that. It's an erosion of the comparative advantage that the country had in trade, lack of regular supply quality or those kinds of aspects.
IFAD was working with a few partners, New Zealanders, the Australians, and particularly ACIAR on building on some of the research that they were doing in terms of productivity, etc. But also on other financiers in agriculture in particular the World Bank. So we designed in partnership with the World Bank project, which was called the Productive Partnerships in Agriculture project. And what that was is to try to make sure we were leveraging both public and private investments and leveraging that in terms of delivery support services to small scale farmers. What we particularly focused on was targeting how to make sure that those that are a little riskier, had the right kind of support to be able to incentivise that they would stay in coffee or cocoa, improve productivity based on having more assured market access, and then making sure that those terms of trade and market access was more sustainable and fairer and hopefully, incentivise staying in the sector. We also focused a lot on how various decisions on infrastructure investment will support the development of those supply chains. So making sure that communities that may be more remote had access to be able to benefit from markets etc. In addition, we did quite a bit of work on the opportunities of changing household dynamics. So we learned some lessons in PNG around if we're able to increase the incomes of women farmers, what kind of positive impacts that would be around household dynamics.
So for instance, making sure that when incomes were increased, that the income increase was being able to be reinvested in developing livelihoods rather than being used for consumption type practices. That would be redeployed into children's education, increasing savings, it could be reinvested in agricultural activities, rather than being, not so much wasted, but spent on other activities. So we spent quite a bit of time thinking of how to make markets, for example, safer for women. How we're able to capacitate them to negotiate for returns of trade, negotiate fair prices, etc. So a year or two ago, we undertook some impact assessments of this particular project and there was really impressive results in terms of increased income, but particularly how incomes were used to improve livelihoods as I mentioned before.
At the moment, our main investment in PNG focuses on fresh produce so this is vegetables etc. Through the Fresh Produce Development Agency, which is an institution that has been invested in terms of institutional capacity by New Zealand for a long period of time. What we try to focus on again, is making sure the market conditions are right and have that pull factor to incentivise small scale farmers and provide opportunities and ensure that there is the right kind of public goods for them to benefit from increasing their investment in agricultural activities. So here we focus on building capacities, organizing farmers, making sure they got the right kind of technical inputs, technology and innovation to be able to increase productivity. In the Pacific and PNG, there are important nutritional challenges. So by investing in fresh produce hopefully we're able to also provide capacity building education in terms of nutrition. How they can both market, generate income but also increase the consumption of nutritious foods to change the dynamic and paradigm around nutrition for infants and children. So it's a predominant focus that we have.
Robin Davies 15:14
Let's jump across to some of the big countries in Asia, countries of the scale of Vietnam, Philippines, Indonesia. IFAD has been quite successful in leveraging government resources for investments in some of these countries, particularly Indonesia. I'm interested to hear more about, what's the big thing in Indonesia?
Ron Hartman 15:26
IFAD developed a really strong relationship with over a four-year period. Again, according to our mandate has tended to focus on those areas where others are not and use effects investment to catalyze attention and catalyse more public and private investment in areas that are less favorable. So an IFAD investment in Indonesia would have a few characteristics. Firstly, we're generally focused on eastern Indonesia, there is less investment, there's more fragility, etc. We have tended to have in Indonesia geographically focused projects, so I record investments in Papua, West Papua, Maluku, Maluku Utara. So what we've done, as I said, is used IFAD's limited resources to attract other types of finance. So a couple of examples that we have are in central Sulawesi. We had a partnership with the government of Indonesia that was trying to focus on stimulating a return of focus of small-scale farmers in cocoa, a commodity that I mentioned before. What we have done there with government, for example, is seeing how we can use public investment to deliver better public goods to attract more private sector investment. Cocoa is an interesting example of where globally there is a fragility and some risk in cocoa production. Huge demand, but production is not keeping up with the demand. And in fact, production globally is under threat because of the focus in different areas. So we worked with the Government of Indonesia as they were seeing the small-scale farmers move away from cocoa or trying to create the right incentives for them to invest.
One interesting aspect of this particular project was some work that we did to try to facilitate public and private investment, partnership investment in cocoa with the Mars company. Mars is one of the largest privately owned companies in the world, and it's the largest chocolate manufacturer also. Mars is interesting because it has really world class technology. And what we wanted to do is to make sure that a remote, small-scale farmer in Sulawesi was able to access some of that technology. So IFAD, being a multilateral institution, was able to facilitate a partnership between Mars and the government of Indonesia that wasn't happening without a multilateral party there. And that was an interesting example of how it took such a long period of time to bridge some of the gaps between public or private. We had a government that was a little bit worried about working with a multinational company to protect its farmers and a multinational company was a little bit worried about working with the government because of their perceptions of effectiveness and efficiency. So we've provided was seed money to catalyse that partnership. What come out of that partnership was some quite remarkable results quickly for small scale women farmers. We had huge increases in productivity just through basic management practices, improved seed varieties and other kinds of techniques. Plus they have to negotiate premium prices for farmers that are able to guarantee high quality and regularity of supply. So this was a sort of a US$50-60 million investment from IFAD that probably mobilised around the same from the Government of Indonesia and the private sector, so an example of how we assemble finance. Another example that we've had most recently is a very sizeable investment in irrigation. Irrigation is a is a big issue in Indonesia. And what we were finding is that where the primary and secondary level there was large amounts of investment, that sometimes didn't get down to the tertiary level. So small scale farmers, are again, not benefiting from improvements in irrigation. We made an investment of $US100 million and leveraged around a US$600 million investment from the Asian Development Bank. And that was matched by a couple of billion dollars in national investment from the Government of Indonesia. So again, one small example of how IFAD is able to use its resources to catalyse and scale up its investments by bringing in different partners.
One final example that I can provide is a small pilot that we started a number of years ago in Papua. Papua and West Papua are very challenging environments due to remoteness and lack of infrastructure and facilities. There's been a sort of a tendency over generations of failed development attempts to do things there particularly in the agricultural space. We experimented and piloted a very small project that really focused on trying to build the capacity of local institutions and local communities to better plan and better invest in agriculture. We implemented a project for about five years and was able to develop better community facilitation working with these local nonprofit organisations, and actually developed a model that was working in environments whereas often a lot of failure. With the creation of a ministry of villages under the Jokowi Government of a few years ago, we were able to then try and see how we were able to replicate and scale up that investment. And so a small project of a few US$100,000 from IFAD has now become almost a regional program that's focused on village development in eastern Indonesia, with a strong agriculture and nutrition focus that is now worth billions of dollars in investment, that tends to be the model that we work with.
Robin Davies 19:24
For my final question I went back to Alvaro Lario. I'd like to come back to the question of Australia's membership or the non-membership of IFAD. Australia withdrew from the organisation now quite a long time ago now, a couple of decades ago. There have been regular discussions between the organisation and successive Australian governments about the potential to rejoin. In that context, I'm interested in what you would describe as the advantages to our development partners in the region, and to Australia itself, of potential renewed Australian membership of the organisation?
Alvaro Lario 19:48
So let me start by saying that IFAD is composed of 180 members. Australia is the only G20 country that is not a member. Of the discussions I was having right now with the High Commissioners, they are not presenting the strategy of small state islands when we're discussing investments. New Zealand is an an example [of one that does]. We and ACIAR - that's the Australian Centre for International Agricultural Research - we have had some partnerships, but we cannot contract them. We cannot contract Australian consultants. Before they withdrew, we were working with a lot of Australian consultants in the drylands in the Sahel because of the type of expertise. So it's a little bit of an anomaly. I will say generally, there has been a strong support from civil society generally, also from some of the Australian institutions, even among the political aisle. I've been meeting with certain parts of the government and the opposition. There seems to be also support, because it's recognised as an anomaly not being present to be able to discuss multilateral settings and how to also make sure that it's not the fragmentation of many of the approaches.
I think there's a lot of benefits, from economic benefits to Australian technical expertise. This is where we would like to have Australia back to leverage on a lot of the knowledge, the research that has been extremely strong on Australian agriculture and right now, it's very difficult to engage as Australia is not a member. So we do hope that there will be some initiation of reviews of assessments. As I said that we will increase our presence in the Pacific, and it will be important for Australia to be part of the conversation. I do believe that, at this moment in time with global food security is a key issue, it is strange not to have a breadbasket or Australian superpower in agriculture be part of this conversation, specifically on small scale farmers in the Pacific but also elsewhere as well. So we do hope that there will be a review. We are currently assessed as ranked number one in terms of effectiveness by the Centre for Global Development for the effectiveness of our aid among all multilaterals, so all the conditions are present. We would really love to see Australia back.
Robin Davies 21:15
That's our show for today. You might want to tune in at 9am Australian Eastern Standard Time on 15 May as the Development Policy Centre's aid team presents its analysis of the 2024-25 Australian budget and trends in Australian and global aid. You can find the registration link at devpolicy.org and on our social media channels. A podcast interview with the analysis will be released soon after the event.
Outro 21:33
Policy talks is the podcast at the Australian National University's Development Policy Centre. Show notes are posted to Simplecast. Our producers are Robin Davies, Amita Monterola, and Jackie Hanafie. You can read and subscribe to our daily blogs on aid, international development, and the Pacific at devpolicy.org. And you can follow us on Facebook, LinkedIn, Instagram, and Twitter. You can send us feedback and ideas for episodes to devpolicy@anu.edu.au. Join us again in another fortnight for the next episode of Devpolicy Talks.