Agriculture Reference
In-Depth Information
Benefits and Costs
Admittedly it is difficult to separate the contribution of price stabilization poli-
cies from the overall government commitment to economic development as ex-
pressed in all policies and investments. Similarly it is difficult to distinguish the
merits of policies and investments from those of the institutions implementing
these policies. These problems notwithstanding, we attempt to draw inferences
about benefits based on price stability and performance of the agricultural sec-
tor; compare the operational costs of parastatals in countries that liberalized (or
reduced intervention) with countries that continue to have significant parastatal
presence; and, finally, draw implications for reforms.
Benefits of Price Policies
Attribution problems notwithstanding, the case studies suggest that price poli-
cies have benefited Asian agriculture in three important ways: (1) they have en-
sured price stability, (2) they have boosted agricultural production, and (3) they
have helped mitigate disasters.
PRICE STABILIZATION
. If the commonly used measure of price stability—
the coefficient of variation—in domestic markets is compared with that in the
international markets, all countries reviewed in this volume appear have done
well in terms of food prices.
19
Some studies have attempted to link the price sta-
bility with other economic and political indicators. Highlighting the effects of
price stability, some authors have concluded that the countries most success-
ful at price stabilization have also been among the fastest growing economies in
the world (Timmer 1992, 2000) and that where food prices have not been stabi-
lized and food security remains questionable, political stability and economic
growth have been threatened (Pinckney 1993). Because these studies are based
on cross-country empirics, a plausible interpretation of the conclusions is that
price stability can have positive effects, irrespective of the level at which prices
are stabilized.
In our sample of countries, an aggregate analysis would probably yield the
same conclusion; that is, all countries have been able to stabilize prices and
achieve significant agricultural growth over the past few decades. There is no
denying that the stability of prices—no matter at what level they are stabi-
lized—can mitigate risks and give farmers some degree of certainty in allocat-
ing their land in favor of the crops for which prices are guaranteed.
However, analyzing the levels of stability can offer further insights as to
whether the stability has been achieved efficiently. If the international parity is
taken as the benchmark, our case studies indicate that the countries have stabi-
19. Note that Vietnam has not pursued price stabilization in the conventional sense. The food
logistics agency VINAFOOD neither procures from farmers nor distributes to consumers; its role
is restricted mainly to rice export within the limit of government-set quotas. In the Philippines, ex-
periences with price stabilization have been mixed.
