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Agri Overview

Changing role of government in agriculture                         Home
By MUHAMMAD ISMAIL QURESHI

The global order is changing fast and consequently challenges facing agriculture and becoming increasingly demanding. The future of the sector and its contribution to the economy will depend on how agriculture is positioned to meet the challenges of market, internal and external.

In Pakistan, agriculture, which account 22 percent of GDP and provides more than 50 percent of jobs, has a special role to play in growth, poverty reproduction, and environmental protection. In recent years, agricultural output growth has varied. Although livestock sub-sector has experienced a robust rate of growth, the overall long-term trend shows a decline in growth rate, especially in crop agriculture. For example, average growth rate of agriculture during 2000-06 is almost one percentage point lower than the growth rate in 1990s.

With limited chance of increasing land and water resources, future growth has to come largely from diversification in line with market demand and productivity increase, which will require major changes in systems, policies, and institutions for agriculture. And the most important change required is redefinition of the role of Government in agriculture, which would be crucial in making agriculture competitive in the global market.

The appropriate role of Government is to become the enabler of smoothly functioning markets through institutional and regulatory reforms that facilitate private sector activities and market efficiency. Where market failure is not an issue and where intervention in the past led to marked inefficiency, the strategy to be adopted now is to reduce the government's role through policy reforms and strengthening market liberalisation.

This means that recognising the role of the private sector is the first step toward rationalising public sectors' role in agriculture. This also means that government must reshape its investments and public expenditure on agriculture.

Public spending is primarily focusing on the provision of public goods and the correction of market failures and not on activities that are better suited to the private sector, even if such activities may be profitable.

In areas such as poverty alleviation, small farmer development and environmental protection, where the government has a legitimate role to play, market-friendly policy reforms are being adopted to ensure economic efficiency and growth and to achieve the Government's millennium development goals.

Agricultural output prices are now market determined, allowing market signals to be transmitted to farmers without distortion. The government has largely liberalised internal wheat market and has ended the subsidy on wheat imports.

The Government has minimised its level of intervention in agricultural input markets, as it has moved toward privatising urea production and distribution. The Government is developing an institutional and legal framework that would allow efficient lending by commercial banks to agriculture, unhindered by highly restrictive collateral requirements and seasonal credit regulations.

Let me now turn to the other side of rationalising public sector's role in agriculture - how to make it move constructive and effective in making agriculture more competitive leading to a much higher rate of growth. This objective is reflected in Medium-term Development Framework (MTDF) 2005-10, which enjoins Ministry of Food, Agriculture and Livestock to perform roles such as: enhancing productivity of crops and livestock; promoting efficient use of water, promoting production and export of high value crops and livestock, ensuring availability of credit to small and medium farmers, improving market structure and efficiency of agriculture input distribution and strengthening agriculture and livestock institutions. Let me now outline the key roles of the public sector in pursuance of these goals of MTDF.

The Government has an important role in agriculture research and extension. As most sub-sectors of Pakistani agriculture have entered a post-green revolution stage of development, Pakistan requires new strategies to enhance input efficiency and to maintain and improve the quality of the resource base.

Greater importance is now, therefore, attached to making research demand-driven. Productivity and sustainability are being enhanced by improvement in crop and resource-management research. With that objective in view, the Government has undertaken institutional changes and reforms by making research institutions more autonomous. The incentive structure is being drastically reformed to permit the research system retain its best human resources.

Private and public sector research financing will, where possible, be provided on a competitive basis, so that funding to institution would be tied to performance. The reform programme will ensure coordination among both national and provincial research institutions improved so that unnecessary duplication is avoided.

The reform programme is also putting in place a system of monitoring of research under a system of greater decentralisation. Likewise, agriculture extension services - an important responsibility of the public sector - is being reorganised by making extension services major decentralised under devolution. Under the reformed system, farmers will have to play a larger role in controlling and evaluating these services.

The Government has a role in development of infrastructure, especially rural infrastructure for agricultural growth. In this area, the Government has undertaken a major programme of lining of watercourses to improve water delivery, in addition to programmes for better water management (through user's association). Another significant public sector programme is farm-to-village road construction, which would improve the distribution of inputs and the marketability of outputs, especially high-value agricultural products. The programmes are going to be financed partly by saving from the rationalisation of public expenditures.

The Government's role in agriculture is going to be influenced by its mandate to reduce rural poverty. In a labour-abundant economy such as Pakistan, subsidies on capital (heavy machinery such as combine harvesters) are inappropriate because they distort factor markets and lead to labour displacement. It is, therefore, important that the government pursues a policy of removing subsidies to mechanisation that displace labour without increasing output significantly. The Government has a role to undertake directed development spending toward the small farmers and rural poor.

In this connection, participatory community-based organisations offer great promise. The Government is, therefore, supporting these initiatives and also proposing to initiate programs to promote livestock, which especially helps the poor. Recently, the Government has adopted a pro-poor livestock policy and has initiated major investment in this sub-sector.

The Government has a role in protecting the environment. The Government is particularly placing more emphasis on natural resource management problems in agriculture. Environment and natural resources management problems are often associated with market failure and require public regulation. Increased pesticide use has created growing resistance among pests and destroyed natural predators.

The Government, is therefore, putting a major emphasis on integrated pest management (IPM) techniques that is effective against pest problems as well is more environmentally friendly.

The Government has a role in correcting distortions in land market. Confiscatory land reform did not do well in the past. But some important measures can and should be implemented immediately. Foremost is providing security of tenure to may farmers, especially tenants-at-will, thereby improving responsiveness to incentives and creating better incentives for long-term investments. Property rights can also be reinforced by improving and streamlining land registration by establishing a system of permanent title deeds and computerisation of land records.

Along with improved land records, their proper maintenance and easier access to them, procedures for settling land disputes could be streamlined as well. Finally, the government needs to consider eliminating artificial incentives to large holders, such as low machinery prices and unequal access to credit.

Lack of property rights and institutions to manage common property resources can result in on-site damage and create negative externalities. Government is aware of that and taking responsibilities for preparing appropriate framework to safeguard common property.

Finally, the government has a key role and responsibility in quality control and implementing internationally accepted norms and regulations. This role of the public sector has become all the more important in the light of WTO agreements and regulations. Future of Pakistan agriculture depends on how well we can compete successfully in the global market and for that quality control to comply with international norms and standards is crucially important.

Given this new reality, the Government's role in agriculture is shifting toward facilitating trade and marketing and meeting WTO challenges. A key challenge of new global world to meet is the requirements as per the agreement on sanitary and phyto-sanitary (SPS) standards, which requires that all food-hygiene measures and food safety measures, such as content of veterinary residues, pesticides residues and other chemical residues/additives are observed. The agreement sets rules to ensure that the national measures, to protect the human, animal and plant life and health, are consistent with the obligations.

THE GOVERNMENT HAS TAKEN SOME MEASURES TO IMPROVE THE IMPLEMENTATION OF SPS STANDARDS IN PAKISTAN:
A joint national quality policy and Plan has been prepared by the Ministry of S&T. Instructions have been issued to Health Testing Laboratories to get accreditation with Pakistan National Accreditation Council (PNAC); Government has earmarked Rs 300 million to MINFAL for this purpose.

To prepare National Quality Testing Laboratory profile/Directory, the list of labs and a questionnaire have been developed by MINFAL to identify laboratories having the requisite equipment and manpower for accreditation. Ministry of S&T and PNAC have started a comprehensive training programme and courses for lab experts dealing with testing and certification of food products.

With rationalising the role of the public sector, supporting public sector institutions needs to be changed as well. This latter task is always most challenging because of resistance of government officials to change their practice and orientation. At present, efforts are being made to set up private-public sector agencies with leadership role given to the private sector. Government has undertaken this process in setting up business oriented organisations, such as Livestock Development Board, Dairy Board and Agri-business Development Fund. In keeping with enabling role orientation, the Government is also reforming other agencies such as PARC to include more active participation of stakeholders in its management. In keeping with more emphasis on trade, a WTO cell is being set up in MINFAL.

To conclude, the appropriate role for government is to encourage the development of a smoothly functioning markets, through institutional and regulatory reforms that facilitate private sector activities and market efficiency. Where market failure is not an issue, and government inefficiency is clearly evident, the strategy will require that government's role must be reduced.

Similarly, where public sector has a legitimate role (eg public goods and market failures) its role has to be strengthened. Accordingly investment and public expenditure on agriculture will have to be reshaped. Government spending will focus on provision of public goods and addressing market failures, and not on activities better suited to the private sector.

The Government will continue to have an active role in areas such as: development and dissemination of new technology' infrastructure development; poverty alleviation; small farmer development; protection of environment; and quality control and implementing international rules and regulations. With rationalisation of public sector's role in agriculture, supporting public sector institutions are being reformed and reoriented. An adoption and effective discharge of the appropriate role of the Government will usher in a new era for Pakistan agriculture by increasing its overall productivity and competitiveness in the global market.

(The writer is Secretary, Ministry of Food, Agriculture and Livestock (MINFAL).)
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Courtesy: Business Recorder

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