Agriculture Reference
In-Depth Information
The reformers have demonstrated that there is much to gain—in terms of sav-
ing public resources and enhancing market development—by reducing public
intervention in grain markets.
It is time to learn from the reformers and recognize that public funds have
alternative uses. The returns to some alternative investments are high—perhaps
much higher than the returns to public policies of price stabilization as currently
practiced (Roumasset 2003). Recent studies on India and China suggest that
those rural public investments most effective in increasing agricultural produc-
tivity are agricultural research and development, roads, and education; rural pub-
lic investments most effective in decreasing poverty are roads, agricultural re-
search, education, rural development, soil and water conservation, health, and
irrigation in India and education, agricultural research and development, roads,
electricity, telephones, irrigation, and poverty loans in China (Fan, Hazell, and
Thorat 2000; Fan, Zhang, and Zhang 2002). That is, agricultural research, roads,
and education, rank among the top three public investments in terms of their re-
turns—no matter whether evaluated against increasing agricultural productivity
or decreasing poverty.
There are other areas where public funds can be justifiably used. Two is-
sues are of particular importance. First, even if markets can be relied on for ef-
ficient allocation of resources, given the level of poverty, the need for social
safety nets will remain, although such safety nets do not have to be implemented
as part of the framework of procurement-stocking distribution. Second, given
the high levels of agricultural subsidies in industrialized countries and relatively
higher price variability in the world market than in the domestic market, com-
plete government withdrawal will not be a politically feasible reform option. A
compromise might be to enforce a reasonable price band that allows arbitrage
opportunities and encourages private-sector participation in the grain market.
However, this strategy will require a shift from the existing paradigm to a new
set of policies and institutions. How such a shift can be made is beyond the
scope of this chapter but is addressed elsewhere.
24
Summary and Implications
Drawing from the country case studies, this chapter synthesizes diverse expe-
riences of grain-market intervention policies in selected Asian countries. The
main focus has been on (1) providing a critical overview of the evolution of food
and price policies and the parastatals agencies entrusted to implement those
policies, (2) assessing the underlying rationales justifying government inter-
ventions in grain markets, (3) documenting policy responses to changing con-
ditions, and (4) comparing experiences of countries that liberalized (or reduced
24. Because each country has different characteristics and policy environments, this issue is
taken up in the country papers as well as in the concluding chapter of this topic.
