Chapter 4 Agreement Establishing the International Fund for Agricultural
Development (Rome, 13 June 1976)
The Australian Government is proposing that Australia accede to the Agreement
Establishing the International Fund for Agricultural Development (the
Agreement), which establishes the International Fund for Agricultural
Development (the Fund).
Australia has been a previous member of the Fund, joining when the Fund
was established. Australia withdrew in
The Fund was established in 1977, implementing a recommendation of the
1974 World Food Conference. The World Food Conference recommendation was made
at a time when serious food shortages were being experienced in sub-Saharan
The Fund’s objective is to make available financial resources, in the
form of loans or grants, for agricultural development in developing Member
the Fund’s stated objective is:
…provide financing primarily for projects and programs
specifically designed to introduce, expand or improve food production systems
and to strengthen related policies and institutions within the framework of
national priorities and strategies, taking into consideration: the need to
increase food production in the poorest food deficit countries; the potential
for increasing food production in other developing countries; and the
importance of improving the nutritional level of the poorest populations in
developing countries and the conditions of their lives.
The National Interest Analysis (NIA) indicates that the Fund currently
has a strong focus on smallholder farmers, who are disproportionately
represented amongst the world’s poor. The NIA claims that the Fund supports 36
million people to secure food supplies by increasing productivity, enabling
access to markets, and gaining microfinance.
The Fund is administered by a Governing Council made up of
representatives from each member state. To run the Fund, the Governing Council
elects an Executive Board.
The Fund’s activities are financed by the member states of the Fund.
New members of the fund make an initial financial contribution to the Fund
which is to be used to achieve the objective of the Fund.
Member states are then invited to make additional contributions to the
Fund when it is necessary or desirable.
The approval of expenditure on projects and programmes is made by the
Executive Board in accordance with the policies, criteria and regulations laid
down by the Governing Council of the Fund.
Contributions by member states are made without restrictions as to use.
The contributions can only be refunded upon the termination of the Fund’s
Australia and the Fund
Australia’s decision to withdraw from the Fund in 2004 was examined by a
previous incarnation of this Committee. The Committee’s views on the
withdrawal are detailed in Report 60, tabled on 16 June 2004.
Report 60 identifies a number of reasons for Australia’s
withdrawal from the Fund.
The first was the Fund’s lack of focus on the South-east Asia and
Pacific region, despite the majority of the world’s poor living in these
regions. At the time, only seven per cent of the Fund’s projects and
programmes were in the South-east Asia and Pacific region.
The second reason identified was that the type of assistance provided by
the Fund was also provided by other organisations such as the World Bank and
the Asian Development Bank, each of which had an established presence in the
region, and were also in receipt of Australian aid funding.
A third reason identified in Report 60 was the structural
inefficiency inherent in the Fund’s then requirement that it implement its
activities through other international institutions, such as the World Bank and
the United Nations (UN) Office for Project Services.
Australia’s proposed withdrawal from the Fund was seen as a serious
critique of the operations of the Fund. Should Australia withdraw, it would be
the only OECD country not to be a member for the Fund.
By the time of the Committee’s inquiry, the Fund had initiated efforts to
address Australia’s concerns. Nevertheless, Report
60 recommended Australia withdraw from the Fund.
Witnesses from the Australian Agency for International Development
(AusAID) reported that Australia was:
…the only country to withdraw from IFAD. Russia was never a
member and has never been a member. It is the only other G20 member who is now
not a member, along with Australia. But there are a number of other countries
who have the status of being either a non-financial member—for example, New
Zealand—or a non-member. But they are a relatively small grouping of countries.
According to AusAID, Australia’s withdrawal from the Fund had a
significant impact, prompting significant reforms:
That action, we believe, has contributed to the current
reform agenda that IFAD has embarked upon, and which is showing some great
progress. So we are confident that the withdrawal of a major OECD nation did
have quite a dramatic impact. The IFAD management now is quite different to
the management in 2004, so we are working with a different group of people, and
they have been very responsive to our engagement with them, including that the
IFAD president visited Australia in 2009 and met with a range of Australian
In 2011, AusAID conducted a review of the fund and found that:
…since 2004, the Fund’s reform process has resulted in
improvements to strategic planning, project quality and impact, knowledge
management and innovation. The Fund is now considered by donors and developing
countries to be an increasingly effective, results focussed, value for money
Figure 5.1 below indicates the distribution of the Fund’s resources
across the globe. The distribution of the Fund’s resources to South-east Asia
and the Pacific has clearly improved as the region is now a significant
recipient of resources.
Figure 5.1: Distribution of Fund resources, 2011
West and Central Africa
East and Southern Africa
Asia and the Pacific
Latin America and the Caribbean
Near East, North Africa and Europe
Report 2011, International Fund for Agricultural Development, pp 15-39.
In relation to the uniqueness of the service delivered by the Fund, the
Fund’s latest Strategic Framework identifies the Fund’s niche in focussing on rural
development through small scale agriculture. In relation to the
Fund’s engagement with the South-east Asia and Pacific region, the Fund has
opened twelve offices in the region, compared to the absence of a presence when
Australia withdrew from the Fund.
Finally, since Australia’s withdrawal from the Fund, the Agreement has
been amended to remove the requirement that the Fund implement its activities
through other international institutions.
Reasons for Australia to take the proposed treaty action
Based on the improvements implemented by the Fund since Australia’s
withdrawal, AusAID argues that rejoining the Fund will:
…allow Australia to expand its existing support for food
security and rural development and help the world’s most vulnerable fight
hunger. This aligns with the Australian Government’s aid policy, which places
priority on food security as a vehicle for sustainable economic growth and
Making financial contributions to the Fund is an effective
way in which the Australian Government can seek to reduce poverty in the world,
consistent with its aid program mandate. The Fund has a strong focus on
smallholder farmers, who are disproportionately represented among the world's
most vulnerable. IFAD initiatives support more than 36 million poor people
around the world to secure food supplies by increasing productivity, access to
markets and gaining microfinance.
The Agreement requires Members to make initial financial contributions
to the Fund, and enables further additional contributions, to be used to
achieve the objective of the Agreement. Financing by the Fund is governed by
the policies, criteria and regulations laid down by the Governing Council of
the Fund with decisions regarding the selection and approval of projects and programmes
made by the Executive Board in accordance with those policies, criteria and
AusAID identifies a number of benefits resulting from Australia
rejoining the Fund. In the NIA, AusAID argues that member states will benefit
from Australia’s research skills in areas such as poverty, nutrition and health
The Committee believes it is necessary to qualify this statement as, in
accordance with the requirements in the Agreement, Australia will be providing
funding, not expertise, to the Fund. Member states will only benefit to the
extent that Australian experts and organisations may now be used by the Fund in
implementing its programmes.
The original domestic legislation which implemented the Agreement was
the International Fund for Agricultural Development Act 1977 (Cth) (the
1977 Act). This was not repealed subsequent to Australia’s withdrawal from the
If Australia accedes to the Agreement, relatively minor changes to the
1977 Act will need to be made. Specifically, the amending legislation will need
to reflect the version of the Agreement to which Australia would be acceding,
including all amendments to the Agreement that have taken effect since its
entry into force generally on 30 November 1977.
The requisite privileges and immunities are contained in the International
Organisations (Privileges and Immunities) Act 1963 (Cth) and the Specialized
Agencies (Privileges and Immunities) Regulations 1986 (Cth). These
instruments were also not repealed subsequent to Australia’s denunciation and
withdrawal of the Agreement.
The resources of the Fund consist of initial contributions, additional
contributions, special contributions from non-member States and from other
sources and funds derived from operations or otherwise accruing to the Fund.
Australia would be required to make an initial contribution to the
resources of the Fund consisting of an amount agreed between it and the
Governing Council at the time of the approval of its membership.
Australia’s proposed initial financial contribution is $120 million.
In order to assure continuity in the Fund’s operations, the Governing
Council is required to periodically review – at intervals it considers
appropriate – the adequacy of the resources available to the Fund. If, as a
result of such a review, the Governing Council deems it necessary or desirable,
it may invite Members to make additional contributions to the Fund’s
resources. Decisions under this section are taken by a two-thirds majority of
the total number of votes of the Governing Council.
At any time the Governing Council may authorize a Member to increase its
contributions. Contributions are made
without restriction as to use and can only be refunded upon the termination of
the Fund and following the discharge of liabilities to creditors.
Witnesses for AusAID also implied during the public hearing on
13 August 2012 that Australia will be in a position to influence how its
contribution to the Fund will be spent:
Once we conclude the accession process, once we are admitted
formally as members and once we sit down with IFAD management and other donors
to start negotiating how the money will be spent—that is, in response to
Australia coming back and becoming a strong donor—we will insist on ongoing
improvements to the efficiency and effectiveness of the organisation. We are
likely to insist, for example, on quite a large management say on the executive
council. It is not simply a case of signing off a cheque: it really is a
negotiation in terms of successful replenishment, meaning a certain outcome to
donors not only in food security and reduction of poverty but also in how the
organisation functions, how it aligns with the priorities of the Australian aid
program and how it aligns with priorities of other organisations to make sure
that those organisations do not step on each other's toes.
By way of clarification, the Committee notes that any such influence
will be informal, as the Executive Board will exercise the authority to
determine where Australia’s contributions are spent.
It is worth noting that AusAID expects that Australia will become a
member of the Executive Board, and will thus be in a position to influence the
Fund’s spending priorities. Certainly, Australia’s
proposed initial financial contribution of $120 million
will make Australia one of the largest contributors to the Fund, and should
have a significant impact on Australia’s campaign to be elected to the
Finally, the Committee notes that, although this has not been mentioned
in the NIA, the circumstances of Australia’s denunciation and renewed
application for membership means that, if Australia is accepted back as a
member the Fund, Australia will have paid its initial financial contribution
twice: in 1977 and 2012.
The International Fund for Agricultural Development faces a significant,
possibly insurmountable, challenge if it is to achieve its stated objective.
The situation in relation to food affordability was summarised by an AusAID
witness as follows:
I think it is incorrect to say that we have not made any
inroads since 2008-09 when we experienced one of the worst food price crisis
that we can recall. We had over one billion people suffering from hunger, but
it is now around 850 million. So in the last four years we have seen a fall in
the number of hungry people and some progress made towards [Millennium
Development Goal 1], which sets a target of
reducing hunger by 50 per cent by 2015. It is true that food prices continue
to be volatile.
In fact, food prices have risen six per cent since February this year.
AusAID witnesses identified two factors contributing to the continued
volatility of food prices:
n the increasing size
of the middle class across the globe. The middle-class is consuming more and
different food to the poor, affecting the cost and availability of food in
lower income brackets; and
n the use to which
arable land is being put. Africa has significant quantities of arable land
that is not being used to grow food.
With crop failures in the United States and Russia during the northern
summer due to record high temperatures and drought, the price of food is
already on the rise again. The Fund has noted predictions that events of this
sort will increase due to the influence of climate change.
Organisations like the Fund are likely to be needed more than ever in
the years to come. The Committee supports Australia’s accession to the
||The Committee supports the Agreement Establishing the
International Fund for Agricultural Development (Rome, 13 June 1976) and
recommends that binding treaty action be taken.
Kelvin Thomson MP