Agriculture Reference
In-Depth Information
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Introduction
SHAHIDUR RASHID, ASHOK GULATI,
AND RALPH CUMMINGS JR.
Agricultural parastatals are quasi-governmental agencies charged with carry-
ing out public marketing activities. In Asia, these agencies have been linked
with food price policies that the countries in the region have practiced for
decades. Although operational approaches have varied, the central policy ob-
jective has been similar: to stabilize prices of basic agricultural commodities by
ensuring a floor price for farmers and a ceiling price for consumers. In imple-
menting these policies, the parastatals have been mandated to carry out a range
of marketing activities under a variety of legal and regulatory supports, includ-
ing monopoly control over export and import of food, movement restrictions
for private trade, subsidized storage facilities, and preferential access to credit
and transportation.
This topic addresses three important questions—why, when, and how—
concerning the need for developing countries to update their parastatal-centered
policies to address the current conditions in agricultural marketing. The first
question aims at explaining why parastatal-centered policies have persisted in
Asia and why they need to change. The second question explores the role and
effectiveness of parastatals in the various countries reviewed in this topic and
attempts to determine when policy changes should occur. The third question
looks at how this change should happen, that is, gradually—which is inevitable
—or abruptly.
The question “why” can be approached from two different angles—why
the parastatal-led market interventions are justified, on the one hand, and why
these need to change, on the other hand. Three arguments are commonly cited
in the literature on the wide range of market interventions: (1) agricultural mar-
kets in developing countries lack integration because of inadequate provision
of public goods, such as roads, telecommunications, and other marketing infra-
structure;
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(2) risk-mitigating institutions and markets, such as insurance and
credit, are either missing or incomplete; and (3) poor countries cannot not rely
1. Realistically, a strong public mistrust of private trade pervades many of these countries.
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