Input Subsidy Programs in Asia What lesson can we learn for Africa

Similar documents
Technology Promotion, Safety Nets, and Agricultural Productivity:

WHAT KINDS OF AGRICULTURAL STRATEGIES LEAD TO BROAD-BASED GROWTH?

Toward World Food Security

Agricultural Input Subsidy Programs in Africa:

India: Short-term Responses to Higher Food Prices Simrit Kaur June 30, 2009

Rising Food Prices in East Asia: Challenges and Policy Options

China, India, Bangladesh, Pakistan, Indonesia, Nigeria, Rwanda, Malawi, and Tanzania

Unappreciated Facts about Staple Food Markets: The Potential for Win-Win Outcomes for Governments, Farmers, Consumers and the Private Sector

SUBSIDIES &THE PERSISTENCE OF TECHNOLOGY ADOPTION

Improving Efficiency of the Fertilizer Supply Chain: A Comparative Analysis*

Agriculture Investment in South Asia: trends, opportunities and challenges. Krishna Prasad Pant, PhD

THE IMPACT OF PRIVATIZATION AND DEREGULATION ON NEW TECHNOLOGY DIFFUSION AND AGRICULTURAL GROWTH PERFORMANCE IN BANGLADESH - A MACRO VIEW

Identifying Investment Priorities for Malawian Agriculture

Vital Statistics (Part III)

Development Dimensions of Food Security

REGIONAL ANALYSIS OF SMALL RESERVOIRS Potential for expansion in Sub-Saharan Africa

SUSTAINABLE AGRICULTURE DEVELOPMENT IN INDIA: A CASE STUDY OF UTTAR PRADESH ABSTRACT

Partnership to Cut Hunger and Poverty in Africa Research-Based Advocacy for African Agricultural Development

INDIAN RICE LANDSCAPE: Trade, Production & Government Intervention in Marketing Shweta Saini and Ashok Gulati

Strategy Options for the Maize and Fertilizer Sectors of Eastern and Southern Africa

TARGETING IN CONDITIONING CROWDING IN/OUT: David Mather and Isaac Minde

Fertilizer Subsidies in Sub- Saharan Africa: Smart Policy or Political Trap?

Megatrends Transforming Africa s Agri-food Systems

Distortions to Agricultural Incentives Project lead by Kym Anderson. Signe Nelgen University of Adelaide

Fertilizer Sector Subsidy in India. Vijay Laxmi Pandey Suresh Babu

Agricultural Development. Dana Boggess Program Officer, Agricultural Development December 18, 2012

Feed the Future Innovation Lab for Food Security Policy

Agricultural Input Subsidy Programs in Africa: An assessment of recent evidence T.S. Jayne, Nicole Mason, William J. Burke

DEVELOPED COUNTRIES SUPPORT TO THE AGRICULTURAL SECTOR IN LEAST DEVELOPED COUNTRIES OF EAST AFRICA: THE CASE OF AGRICULTURAL PRODUCTIVITY

Agricultural Risks Management in Africa A Synthesis

Background: MSU Input Studies

AGRICULTURE IN BANGLADESH A NOTE ON FOOD SECURITY BY ENHANCING PRODUCTIVITY

Underappreciated Facts about African Agriculture:

Policy Reforms & Analysis of Wheat Procurement System in Punjab, Pakistan.

RISING FOOD PRICE AND ITS CONSEQUENCES

Smallholder or family farming in transforming economies of Asia & Latin America: Challenges and opportunities

The future of small farms

Food Security in Africa: State, Trends and Main Issues

Hub Characterization Report Nepal Hub

Social Inclusion Programmes: Experiences and Lessons from the Malawi Farm Input Subsidies Programme

From Protection to Production: Breaking the Cycle of Rural Poverty

Views of farmers and grass root level government officers on the present fertilizer subsidy programme in Sri Lanka

Managing Access to farm Inputs

SINGLE SUPER PHOSPHATE

Agricultural Research, Innovation, Productivity, and Poverty

CLUB of BOLOGNA. November 15-16, 2014 Bologna EIMA International 2014

Rising Food Prices: Causes, Effects, and Actions Needed

Impact of WTO Accession on China's Agriculture, Rural Development and on Farmers

Food Security, Farming, and Climate Change to 2050 Scenarios, Results, Policy Options

Supply-demand modeling and

POLICIES AND INSTITUTIONS FOR PROMOTING NERICA RICE COMPETITIVENESS IN SUB-SAHARAN AFRICA

Political Economy of Fertilizer Policy in Ghana

Possibility of Rice Green Revolution in Sub-Saharan Africa

Indian Chem 2018 Indian Agrochemical Market Scenario and opportunities. Mr. Harsh Dhanuka Vice President, Dhanuka Agritech Ltd.

Volatility and resilience in African food markets

Improving food security

Challenges and Issues in the African Cotton Sector

Outlook On Agricultural Policy, Growth And Food Security

World Economic and Social Survey (WESS) 2011: The Great Green Technological Transformation

Comparative Advantage and Competitiveness of Wheat Crop in Pakistan. Sofia Anwar, Zakir Hussain, M. Siddique Javed *

The Challenge of Energy and Poverty Reduction. Dominique Lallement & Douglas Barnes Energy and Water-ESMAP April 20, 2005

Partnership to Cut Hunger and Poverty in Africa Research-Based Advocacy for African Agricultural Development

Title: RKVY Project Seed Replacement Ratio by National Seeds Corporation Ltd

Agriculture. List of Tables

Is Poverty a binding constraint on Agricultural Growth in Rural Malawi?

Synthesis of Discussions

Assessing Poverty in Kenya

COTTON REPORT. Kai Hughes. Cotton Production & Trade Trends. Executive Director International Cotton Advisory Committee

WTO Disciplines on Agricultural Support Update: Philippine WTO Domestic Support Notification

By: Mr. Muhammad Mahmood, Secretary to Government of the Punjab, Agriculture Department

INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE. Page 1

World Agricultural Outlook, Risks, and Challenges for the Coming 10 years

Current Issues and Empirical Evidence from Malawi, Zambia, and Kenya. Isaac Minde, T.S. Jayne, Joshua Ariga, Jones Govereh, and Eric Crawford

Tight to the ground: Can sub-saharan Africa be self-sufficient in food production?

Global Agricultural Supply and Demand: Factors contributing to recent increases in food commodity prices

This PDF is a selection from a published volume from the National Bureau of Economic Research. Volume Title: The Economics of Food Price Volatility

UNMISTAKABLE SIGNS OF AGRI-FOOD SYSTEMS TRANSFORMATION INAFRICA

Agriculture for Development. Focus on Sub-Saharan Africa

Science and Technology Policies for Agricultural Productivity and Growth in Developing Countries

Rethinking Agricultural Input Subsidies in Poor Rural Economies

How Trade Liberalization Can Benefit the Environment (or The Fallacy of Food Miles )

CONCLUSION, MAJOR FINDINGS AND POLICY SUGGESTIONS

BHOOCHETANA Technology Adoption & Enhancement of Productivity in Dry Land Agriculture in Karnataka

Agriculture in A changing world. Dr. Agnes M. Kalibata Minister of State in charge of Agriculture (Rwanda)

Impact of Crop Intensification Program on Sustainable Maize Production in Rwanda

Impact of Stress-Tolerant Rice on Farmer Welfare in India

Success Rates. Successful Projects in the Agriculture and Natural Resources Sector Operations Evaluation Department

Price Shocks, Volatility and Household Welfare: A Cross-Country Inquiry

China s Role in the Future Food Security Situation of Asia: A Threat or An Ally

MICROECONOMIC ISSUES IN KENYAN AGRICULTURE. Mary W. K. Mathenge

Impacts of WTO Policy Reforms on U.S. Rice

PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: AB4706. Project Name

Government of India Ministry of Agriculture Department of Agriculture and Cooperation Directorate of Economics and Statistics

Megatrends Driving Agricultural Transformation in Africa

Megatrends Driving Agricultural Transformation in Africa

The Global Food Price Crisis: Analysis and Response

SECTOR ASSESSMENT (SUMMARY): AGRICULTURE, NATURAL RESOURCES, AND RURAL DEVELOPMENT 1

Agricultural and Rural Transformation

Low-quality, low-trust and lowadoption: Saharan Africa. Jakob Svensson IIES, Stockholm University

The role and future of informal & traditional dairy markets in Developing Countries

Transcription:

Input Subsidy Programs in Asia What lesson can we learn for Africa Shahidur Rashid (presenting) Paul A. Dorosh, IFPRI M.K. Mujeri, BIDS INPUT SUBSIDY PROGRAM IN SUB-SAHARAN AFRICA 16 APRIL 2013 WASHINGTON DC 20006

Presentation Outline 1. Contextual differences between Asian and African agriculture 2. Differences in policies and strategies 3. Effects of subsidies 4. Recent trends 5. Summary

1.1 Differences in natural endowment (1) A. Irrigation potentials Irrigation potentials in Asia has been much higher In 2009, 56% of agricultural lands were irrigated. This compares with only 0.28% in SSA Cropping intensity is also lower in SSA-- generally one main crops 56.0 54.0 52.0 50.0 48.0 46.0 44.0 Figure: Irrigated land as% of total ag. Land-- S. Asia and SSA 0.30 0.25 0.20 0.15 0.10 0.05 0.00 South Asia SSA Page 3

1.1 Differences in natural endowment (2) Irrigation potentials makes the difference Fertilizer use in Irrigation land is much higher than in nonirrigated land Use of fertilizer is non-irrigated land is only 1/3 rd of irrigated land this is similar to many SSA countries including Ethiopia and Kenya Page 4

1.1 Differences in natural endowment (3) B. Natural gas Due to large markets and availability of gas, fertilizer production grew fast I all five courtiers When Green Revolution began, all countries (except Pakistan) were large net importers Domestic production was 1/3 rd to 1/5 th of the total use By mid 1980s, more or less self-sufficient Share of consumption to production 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Bangladesh India Pakistan East Asia Indonesia Page 5

1.2 Differences in the degree of interventions Unlike many African countries before SAPs, government s shares in ag market was small Governments shares in rice markets was within 5-7% range, except in India and Pakistan Pakistan and India s shares increased after GR was complete. Except for Pakistan, government s market shares are even smaller 30 25 20 15 10 5 0 35 30 25 20 15 10 5 0 Govt's market share (rice) 1970s 1980s 1990s 2000s Bangladesh India Indonesia Philippines Govt's market share (wheat) 1970s 1980s 1990s 2000s Bangladesh India Philippines Pakistan Page 6

1.3 Differences in market size Market thinness was less of an issue for the Asian GR countries 60.0 Share of cereals consumption (%) 50.0 40.0 30.0 20.0 10.0 0.0 Southern Asia Eastern Asia Eastern Africa Page 7

2.1 Differences in policies (1) In Asia, policy focus was not only fertilizer and seed In fact, in the early years of green revolution in India, investments in infrastructure was higher than total ag subsidies Similar trends are for Bangladesh. Page 8

2.2 Differences in policies (2) In Bangladesh, spending in ARD continued even when AID declined This spending accelerated after the reintroduction of subsidies in 2007-08 Similar analysis are underway for Pakistan and Indonesia 30.00 25.00 20.00 15.00 10.00 5.00 0.00 Agriculture, RD, Water ( ADP vs. AID) 1991-2009 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 ADP-Agric+RurDev+Institutions AID-Agric+RurDev+Institutions Page 9

2.2 Differences in policies (3) Public spending by sectors in Bangladesh Economic sector 1987-89 1990-92 1993-95 1996-98 1999-01 2002-04 2005-08 Agriculture Rural Dev. Water 11.7 11.1 10.8 11.5 11.5 11.4 14.2 Power development 7.4 5.7 6.8 5.3 5.2 6.1 3.7 Gas, Oil and Natural Resources 2.3 2.8 1.6 2.0 1.4 1.7 0.3 Transportation 4.2 5.9 9.1 8.7 8.6 7.8 4.4 Communication 1.8 2.2 3.4 2.1 3.1 4.2 3.3 Industries 3.9 0.9 0.9 0.6 1.1 1.0 0.7 Education and Religion 11.2 12.6 15.8 15.7 15.4 14.4 15.4 Social Welfare, W.A. and Y.D. 5.9 4.9 4.2 1.6 1.0 1.5 2.4 Physical Planning & Housing 1.6 1.9 2.1 3.2 3.7 3.4 3.0 Health & Family Welfare 5.9 6.5 7.0 6.7 6.3 6.1 6.7 OTHERS 44.2 45.5 38.4 42.7 42.5 42.4 46.0 Total Public expenditure 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Page 10

2.2 Differences in policies (4) 18000.0 16000.0 14000.0 Budgetary supports by sector, Bangladesh 12000.0 10000.0 8000.0 6000.0 4000.0 2000.0 0.0 1971-74 1975-79 1980-84 1985-1989 1990-1994 1995-1999 2000-04 2005-08 Agriculture Water Resources Power Gas, Oil and Natural Resources Rural Development & Institutions Page 11

2.3 Differences in policies (5) In India, fertilizer subsidy was never about only cereals. The table below shows the average shares of subsidies by crops (2001-2011) Crops Total Fertilizer used ( 000 tons) Total subsidy (Rs. Lakh) % share in total subsidy Per ha fertilizer use (Kg) Paddy 5061.7 367.5 32.2 119.4 Wheat 3189.7 231.6 20.3 130.8 Sugarcane 989.6 71.8 6.3 240.6 Cotton 921 66.9 5.9 110.8 Groundnut 465.9 33.8 3 74.6 Jowar 443.8 32.2 2.8 60 Bajra 304.3 22.1 1.9 29 Maize 258.4 18.8 1.6 55.8 Others 4073.4 295.7 25.9 66.1 All crops 15707.8 1140.4 100 92.6 Page 12

2.3 Differences in policies (6) Input subsidy programs in Asia did not involve price rationing: Prices are determined at the factory gate (or the port if imported) Anyone with a license can market any amount that s profitable to the dealers / traders Crowding out in domestic market is not a serious issue However, cross border trade becomes an issue is the price differences are high between the neighbors It was the case when BD eliminated subsidy It continues to be the case India and Nepal Page 13

3.1 Distribution of subsidy benefits (India) Marginal (<1 ha) Small (1-2 ha) Semi-medium (2:0-4:0) Medium (4-10 ha) Large (>10 ha) All households Fertilizer consumption per hectare of fertilizer area (kg) 1991-92 113.4 104.6 101.3 97 98.1 102.8 1996-97 162.1 131.8 123.9 118.6 113.6 131.1 2001-02 164.7 134.7 122.8 113.3 108.4 131.7 Shares of fertilizer use (%) Total 1991-92 20.6 21.1 24.2 23.9 10.2 100 1996-97 25.6 20.4 23 22.2 8.8 100 2001-02 29.9 22.1 22.1 18.9 7 100 Page 14

4.1 Overall effects on agricultural incentives NRA, agriculture (%) Countries 1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04 India 5.2 12.6-7.4 4.1 67.5 2-2.3 15.4 Pakistan 21.7 9.3-11.8-9.3-5.9-10.2-2.6 1.2 Indonesia -- -3.8 10.4 10.5-1.9-7.5-9.7 13.9 Bangladesh 3.1 3.9 17.4-2.4-8 4 Page 15

SOME EMERGING TRENDS Page 16

5.1. Update 1:Bangladesh 600 500 400 300 200 100 0 Subsidy in (Mil USD) Subsidy/tone 850 800 750 700 650 600 550 500 450 400 350 300 250 200 150 100 50 0 Input subsidies are back in Bangladesh Page 17

5.2 Update 2: Indonesia 5 000 4 500 Major shifts in fertilizer subsidy regime in Indonesia, 1990-2010 20 000 18 000 4 000 16 000 IDR/kg 3 500 3 000 2 500 2 000 1 500 1 000 Fertilizer is subsidized by Elimination of fertilizer subsidy Re-introduction of Fertilizer subsidies 14 000 12 000 10 000 8 000 6 000 4 000 IDR billion 500 2 000 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Expenditure on fertiliser subsidies (right scale) Ceiling price for urea (left scale) International price of urea (left scale) 0 Page 18

Optimal allocation of public spending Marginal returns to seedfertilizer subsidy MR isp MR cinv Marginal returns to complementary investment I 0 PEA opt PEA isp I 1 Total allocation of public spending on agriculture Page 19

Optimal allocation of public spending (2) Decades Top Public Spending Returns Rank Poverty Reduction (per Mill Rs) 1960s Roads/ Rural infrastructure 1272 1 1970s Roads/ Rural infrastructure 1346 1 1980s Roads/ Rural infrastructure 295 1 1990s Roads/ Rural infrastructure 335 2 Returns W.R.T. Ag growth (per Rs Spent) 1960s Roads/ Rural infrastructure 8.79 1 1970s Educational Investment 7.88 1 1980s Agricultural R&D 6.95 1 1990s Agricultural R&D 6.93 1 Page 20

Summary 1. What not to learn from Asia? Lesson #1: Do not increase subsidies following a shocks like global price hikes Costs of such actions can be very high Cite India and Bangladesh examples 2. The implications of endowment differences Lesson #2: Currently, only a small fraction of land in sub- Saharan Africa (0.28%) is irrigated. Potentials must be much larger; and investments in such efforts can have high pay off. 3. The differences in policies Lesson #3 Asia did not achieve productivity growth by focusing only on see and fertilizer. Complementary investments were significant in the early years of GR Page 21

Summary (2) 3. The policy differences Lesson #4: Government do not have to capture very large share of markets in managing price risks Lesson #5: Rationing subsidies can be challenging. While Asian system had its share of problems, but not rationing in the domestic markets, they avoided crowding out, rent seeking, leakage, and other moral hazards Ethiopia is piloting a project to provide input credit and voucher using ICTs. This can potentially address many of the moral hazards problems implicit in smart subsidies 4. The incidence of subsidy (who gets it?) Lesson #6 If the land distribution is not highly skewed, the benefits of subsidy are not very unequally distributed. Page 22