Agriculture Reference
In-Depth Information
time when public procurement was declining. The size has important implica-
tions for BULOG, especially since its transformation into a state trading enter-
prise (STE) in 1998 to operate on commercial principles. Furthermore, given
its past record of inefficiencies, estimated to be US$2 billion in 1993-98, down-
sizing and restructuring is perhaps unavoidable for BULOG to be a sustainable
STE in the near future.
By contrast, the size of the government agency responsible for price sta-
bilization has declined by 30 percent in Bangladesh. On the average, the Di-
rectorate of Food employed 11,598 employees in the 1980s, which gradually
has declined after reforms to 8,170 during 2001-02. With the downsizing, the
efficiency of the food department has improved, too. For example, the system
loss (storage and transit losses) has declined from being as high as 3 percent
of distribution in the 1980s to about 1.5 percent in the 1990s (Ahmed et al.
2003), and the public distribution system, in combination with private imports,
contributed effectively in managing the response to the 1998 flood (Del Ninno
et al. 2001).
The Bottom-Line Questions
The bottom-line questions are: Why are some policies, particularly monopoly
control and movement restrictions, so popular? What persuades governments
to continue to provide regulatory supports to food logistics agencies? Policy-
makers and bureaucrats, by nature, are risk averse. Some would argue that the
policies have worked—although not necessarily very well. Such policies will
change only when a conclusive case is made that alternatives work better. How-
ever, both monopoly controls over international trade and restrictions on food-
grain movements encourage corruption. When parastatals are given monopoly
status, corrupt food officials and politicians are given an opportunity to receive
large commissions for arranging government-to-government contracts. In the
absence of highly sophisticated audit systems, the corruption can go unde-
tected, even when purchase prices are set well above what is warranted by the
actual quality of grain imported. In addition to the transfer of resources from
taxpayers to corrupt officials, such incentives create massive waste associated
with excess and rotting grain in public warehouses (Roumasset 2003).
In the case of movement restrictions, incentives for rent seeking are even
higher, especially in countries where public procurement is large and foodgrain
production varies greatly across regions. In addition to subsidizing food offi-
cials, the policy creates lucrative rents for law-enforcement officials who guard
the checkpoints, for politicians from surplus regions who collect higher taxes,
and even for the politicians and food officials from deficit regions who can gain
by buying subsidized grain and selling it at higher prices. Benefits to special in-
terests are some of the reasons why, despite overwhelming evidence of its in-
efficiency, the policy keeps re-appearing.
