Agriculture Reference
In-Depth Information
dairy, fish, spices, and even some estate crops. Unlike cereals, both demand-
and supply-side constraints are far less limiting for these commodities, because
the consumers spend proportionately larger amounts on such commodities as
their incomes increase and the potentials for increasing their productivity are
much higher than for the staple food commodities.
When Do the Parastatals Have to Change?
Theoretically, the agricultural parastatals, and the regulatory environment
within which they operate, should change with modifications in the conditions
that justify their existence. But the reality is different. Over time, while the un-
derlying rationales lose their significance, the stakeholders (rent seekers) grow
in size and accumulate lobbying power to prevent changes or even to reverse
policy reforms. After making a devastating case against parastatals and price
stabilization policies, Roumasset (2003), drawing from Williams and Wright
(1991), observed that the mystery remains as to why so many economists ad-
vocate stabilization and so many governments practice it. The answer, they con-
cluded, lies in the realm of political economy, and dismantling parastatals is
neither an obvious nor an easy task—an issue that has surfaced in all country
case studies in this volume.
However, as far as economic arguments and empirics are concerned, the
message about the timing for change is clear: the parastatals, and the regula-
tions to facilitate their operations, have outlived their usefulness in Asian coun-
tries. If Bangladesh and Vietnam had heeded the rationales for public interven-
tion, they would have found any number of reasons not to liberalize at the times
they did. The commonly accepted rationales justifying public intervention—
level of infrastructure and access to information, technology adoption, and in-
ternational liquidity constraints—are still worse in Bangladesh than in any other
country reviewed in this topic. In 2002, at the aggregate level, Bangladesh farm-
ers allocated about 62 percent of their rice area to HYV rice, much lower than
the six-country average of more than 78 percent, and only one in 250 people
owned a land phone line, about seven times fewer than the six-country average.
Similarly, when Vietnam started liberalizing in the late 1980s, HYV rice ac-
counted for only about 40 percent of total sown area and, perhaps more impor-
tantly, both production and marketing were under state control, and private trade
was literally nonexistent. Yet these two countries liberalized, although to dif-
ferent degrees, and have successfully demonstrated that the same set of food
policy objectives can be achieved through reduced intervention.
How to Make the Changes
With regard to the method of liberalization, the main question is whether the
change should be gradual (which is inevitable) or “cold turkey” (which could
