Methodology for preparing national cotton strategies in Africa Alexander Sarris Director, Commodities and Trade Division Food and Agriculture Organization of the United Nations Presentation to the EU-Africa Cotton Forum, Paris 5-6 July, 2004

Overview. Elements of national cotton strategies in Africa Prospects of international markets for African cotton Cotton in the national development strategies Organization of national cotton sectors Technological innovation and adaptation Vertical diversification, quality assurance and recognition Process for strategy formulation

Prospects of international markets for African cotton Medium term world market prospects and opportunities and competition from other producing countries Domestic and trade policies of major producing and trading countries. Competition from synthetic fibers Comparative advantages of African cotton under current and medium term world market developments.

Cotton in the national development strategies and PRSPs Is there a need for a new or modified national cotton sector strategy? Period for application of national cotton strategy Cotton’s role in the macro and rural economies The contribution of cotton to foreign exchange earnings and domestic public resources. Taxation and subsidy issues Role of cotton in the growth process of the African economies. Leading sector? Backward and forward linkages. Cotton employment, incomes and relation to poverty alleviation. Prospects of domestic markets for African cotton, in light of industrialization and growth strategies. Cotton and environmental issues

Organization of national cotton sectors 1. Organization of production Farmers organization and capacity to participate in cotton sector institutions and policy formulation Role of cotton in farmer incomes and household income growth strategies. Farmers’ response to market signals. Adaptation of technological innovations. Requirements of farmers for more efficient production. Needs and institutions for forward cotton pricing. Capacity of farmers to insure against cotton and other agriculture related risks, and their needs for safety nets. Organization (public,private) of the provision of essential producer services (inputs, credit, seeds, research, extension)

Organization of national cotton sectors (2) 2. Organization of marketing and ginning Economies of scale in different parts of marketing chain and the need to regulate entry under a liberalized environment. Rules and incentives for foreign direct investment. Need and institutional arrangements to best combine input provision with credit and output marketing What institutions can best provide productive inputs and essential producer services (research, extension)? Pricing systems, and risk bearing along the cotton chain. Payment systems for farmers. Efficient systems for hedging cotton system risks, and risk sharing along cotton value chain. Stabilization funds and market based commodity risk management. Is there a need for a regional cotton exchange? Legal systems and institutions for enforcement of laws and agreements.

Technological innovation and adaptation Need for promotion of knowledge intensive, lower input, sustainable production structures. Needs and systems for farmer training in integrated production and pest management (IPPM) to improve livelihoods and reduce environmentally dangerous input use. Policies toward GM cotton Policies for cotton quality assurance and recognition through universal cotton classification system Best institutional arrangements for research and extension

Vertical diversification and value addition Opportunities and requirements for the promotion of national and regional value added industries (seed cotton production, yarn production, fabric manufacturing, finished good processing). Policies for domestic and international investments along the cotton value chain

Process to formulate sustainable cotton sector strategies (1) Stakeholder consensus building and participation in the definition of the problems, constraints, and areas for improvement. Understanding the opportunities and needs of different stakeholders at different points of the commodity chain If strategy already in place what, if any, external and internal conditions have changed in recent period, that necessitate rethinking of strategy? Objective professional analysis of identified problems and policy options.

Process to formulate sustainable cotton sector strategies (2) Capacity building at national level to undertake policy analysis and evaluation of options. Capacity building at producer association level to organize and participate in policy dialog. Partnerships between national and international institutions and technical experts from academia, trade and industry. Stakeholder participation in review of policy options. Period needed for strategy formulation or reformulation.

FAO is available and willing to help in cotton strategy formulation Independent and impartial analysis and points of view. Rural and agricultural development and hunger reduction major strategic thrusts of FAO Competence in several related technical areas Long experience and presence in all African countries. Long experience in technical cooperation with member countries in all areas of FAO’s expertise Large capacity to implement technical and policy related analysis and projects Extensive network of contacts and collaboration with technical experts in many member countries Good collaborative relations with other major multilateral agencies and NGOs