IFPRI

INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

AGRICULTURE AND FOOD SECURITYPOLICY CONSTRAINTS

OUSMANE BADIANE

Director for Africa

ONE KEY MESSAGE

Good Policies are not a solution for everything

Bad Policies are a problem for everything else

Policy Reversal would jeopardize ongoing growth recovery process» Risk of return to failed policies of 60s and 70s

No institutional memoryNew generation of leadersStronger fiscal positionsMore open, democratic systemsPopulist pressures and tendencies

19611964

19671970

19731976

19791982

19851988

19911994

19972000

20030.2

0.6

1.0

1.4

1.8

SSA

TFP Eff Tech

Trends in Agricultural Productivity in SSA (1961=1)

Source: IMF (2008); WDI (2008); Benin, S. et al. ReSAKSS (2012)

POLICY REFORMS AND ECONOMIC PEROFMANCE IN AFRICA

Page 4

Martket liberalization, price margins and stability - Benin

05

1015

2025

3035

4045

Regional Market Pairs

Perc

en

tag

e

Before Reforms (1985-89) After Reforms (1990-95)

Change in absolute spatial marginsCfa/Kg

0

20

40

60

80

100

120

140

Local Markets

Pe

rce

nta

ge

Before Reforms (1984-89) After Reforms (1990-95)

Change in temporal marginsPercent

0

10

20

30

40

50

60

70

Regional Market Pairs

Pe

rce

nta

ge

Before Reforms (1985-89) After Reforms (1990-95)

Change in relative spatial marginsPercent

0

5

10

15

20

25

30

35

40

Local Markets

Ind

ex o

f In

stab

ility

Before Reforms (1984-89) After Reforms (1990-95)

Change in local price stabilityPercent

POLICY REFORMS AND PERFORMANCE OF LOCAL MARKETSCase of Maize Markets in Benin

Badiane and Resnick (2006)

POST 1980s RECOVERY: LONGEST PERIOD OF SUSTAINED GROWTH SINCE 1960S

SOURCE: IFPRI / Badiane 2011

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

-6

-4

-2

0

2

4

6

8

10

12

Agriculture value added, Africa Linear (Agriculture value added, Africa)

ANN

UAL

GRO

WTH

( PE

RCEN

T)

THE GROWTH IS ACCELERATINGAS WELL AS SPREADING GEOGRAPHICALLY

SOURCE: IFPRI / Badiane and Ulimwengu

AGRICULTURAL TRADE AND ECONOMIC GROWTH

AGR. EXPORT AND DOMESTIC GROWTH

EXPORT GROWTH

INDUST. GROWTH

1%Growth

0.04%To

1.83%

AGR. EXPORT AND DOMESTIC GROWTH

0

0.5

1

1.5

2

2.5

3

Niger Senegal Zambia BurkinaFaso

Incremental income from 1$ additional revenue from agricultural tradablesSource: C. Delgado et al (1998)

AGRICULTURAL TRADE AND RURAL GROWTH IN AFRICA

Potential agribusiness growth and expected income to farmersUS$ billion

3 8

50

10 10.5

150

High value exports

Commodities Urban food

2000

2030

2.9 1.6 30

Potential Increased farmer income in 2030

Expected sector growth to 2030

Increase in Demand and Incomes in Billion US$

LONG TERM TRENDS IN FOOD DEMAND AMONG AFRICAN COUNTRIES

IFPRI/Badiane

THE STABILIZATION POTENTAIL OF REGIONAL TRADE

DISTRUST OF PRIVATE SECTOR HAS NOT CHANGED MUCH

LACK OF CONFIDENCE IN MARKETS

FARMING NOT RECOGNIZED AS PRIVATE BUSINESS ACTIVITY

THEIR PRODUCTS AS SEEN AS COMMON RATHER THAN PRIVATE GOODS

LINGERING DOUBT RE EFFECTIVENESS AND COST OF ALTERNATIVE POLICIES

NO DISTINCTION BETWEEN POLICY GOAL AND INSTRUMENTS

RETURN TO SUBSIDIES AND PRICE CONTROLSCREATION OF NEW SPECIALIZED AGENCIES

LEARN FROM EXPERIENCE OF 1960 – 1980AVOID REPEATING SAME MISTAKES: SAME POLICIES -> SAME RESULTSMOVE TO EVIDENCE BASED POLICY UNDER CAAPD IS CRITICAL

RISK OF POLICY REVERSAL AND FUTURE GROWTH

WHAT IS THE PROBLEM?

PRINCIPLES OF EFFECTIVE INPUT POLICIES

IT IS THE ABSENCE OF A CRITICAL MASS OF:

OPERATORS NETWORKS INFRASTRUCTURE, AND SERVICES

IN ORDER TO ENSURE THAT INPUTS ARE AVAILABLE AT TIMES AND PLACES NEEDED AT REASONABLE COST

UNDERSTANDING THE COST OF SUPPLYING FERTILIZERS

Source: Bumb, Johnson and Fuentes, 2012 *Averaged across Ghana, Mali, Senegal, and Nigeria

THEY CAN BOOST PRODUCTDION IN SHORT RUN

THEY ARE NOT CERTAIN TO RAISE INPUTS USE AND YIELDS ONCE REMOVED (BROOKS 2012)

THEY DISTORT COSTS OF FACTORS, LEADING TO INEFFICIENT ALLOCATION OF INPUTS

THEY MAY BYPASS NASCENT LOCAL INPUT DEALERS (BANFUL 2009, BUMB ET AL., 2011; TAKESHIMA ET AL, FORTHCOMING)

THEY HAVE BEEN PRONE TO BAD TARGETING AND LEAKAGES (MASON AND RICKER-GILBERT, 2012)

EXCESSIVE LEAKAGE BENEFITS LARGER FARMERSFAILURE TO REACH THE POOREST AND MOST VULNERABLE HH

1

INPUT SUBSIDY POLICIES: THE EVIDENCE

3

2

4

5

THEY ARE VERY COSTLY FISCALLY:GHANA: FERTILIZER SUBSIDIES: 17 % OF MOFA BUDGETCOSTS TRIPLED FROM GHS 29 TO GHS 90 MILL. OVER LAST 3 YEARSCOULD REACH 3 5% OF BUDGET IN 2020. (BENIN ET AL., 2012)

MALAWI: FERTILIZER SUBSIDIES: 74% OF AG BUDGET IN 2008/09 AND 6.6% OF COUNTRY’S GDP (DORWARD AND CHIRA, 2011).

ZAMBIA: FERTILIZER AND SEED SUBSIDIES: 40% OF AG BUDGET BETWEEN 2004 AND 2011 (MASON AND RICKER-GILBERT, 2012)

THEY LEAD TO SERIOUS MACRO IMPLICATIONS IN THE LONG RUNSERIOUS FISCAL DEFICIT / FOREIGN EXCHANGE SHORTAGESCURRENCY OVERVALUATIONDECREASED COMPETITIVENESSSLOWER ECONOMIC GROWTH

INPUT SUBSIDY POLICIES: THE EVIDENCE

5

6

OVERCOMING POLICY CONSTRAINTS

You need data before you need them!What to do / How:

o Data clusters: production, trade, hh status, prices, costs, expenditures, etc

oWorking Groups/Task Forces: bureau of statistics; NARs; data units in finance; trade, sector ministries

o Common platform: harmonized standards and exchange protocols

1. IMPROVED DATA SYSTEMS

OVERCOMING POLICY CONSTRAINTS

A serious policy maker has to have constant access to high quality technical team

What to do/How: o Network: build AND maintain a network of

leading national centers of expertiseo Engagement: create mechanism with a

plan to engage and use local expertise agreement on long term strategic research vehicle for ad hoc, short term technical input

2. READY-TO-USE TOP EXPERTISE

OVERCOMING POLICY CONSTRAINTS

First priority post Dakar!What/how:

o Dream team: assemble qualified team, first from existing staff, later dedicated team

o Feed the beast: define demand for policy research and link to research networks

o Connect!: ensure access to evidence and its use in policy formulation

3. EFFECTIVE COORDINATION / BROKERING FUNCTION

OVERCOMING POLICY CONSTRAINTS

Make it your 2014 Resolution! What/how:

o Infrastructure: create up-to-date IT platformo Knowledge base: build, maintain, and expand

knowledge base: start with collecting existing key data, reports, and policy documents

o Right to know: eliminate barriers to accessing knowledge

o Never Forget: build memory of actions, processeses, outcomes – lessons learning to avoid past mistakes

4. OPERATIONAL KNOWLEDGEMENT MANAGEMENT

OVERCOMING POLICY CONSTRAINTS

Collective wisdom is best What/how:

o Dialogue platform: institute broad, informed debate about key strategic issues and choices

o Review culture: evaluate and track commitments, performance and progress

5. INCLUSIVE POLICY DIALOGUE