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Grain marketing parastatals in Asia

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  • Rashid, Shahidur
  • Cummings, Ralph Jr.
  • Gulati, Ashok

Abstract

Using case studies from six Asian countries, this paper (a) assesses the relevance of underlying rationales for public intervention in foodgrain markets, (b) documents the existing policies and regulations that support operation of grain parastatals, (c) provides estimates of benefits and costs of parastatals, and (d) compares experiences of countries that liberalized (or reduced intervention) with the ones that continue to have significant presence of parastatals. Our results suggest that conditions in the region have improved significantly over the past thirty years; and none of the four commonly agreed rationales—that is, poorly integrated domestic markets, thin and volatile world market, promoting modern technology and the scarcity of foreign exchange reserves—for public intervention in foodgrain markets are now persuasive. Domestic foodgrain markets are integrated, international markets for both wheat and rice are significantly more robust than they were thirty years ago, High-Yielding Varieties (HYV) now cover practically all of the high potential area sown to wheat and rice; and foreign currency reserves have increased dramatically in all countries in recent years. However, although rationales have lost their significance, many countries continue to practice old policies and provide regulatory supports to parastatals, including monopoly control over international trade, preferential access to transportation, restrictions on movement of foodgrains, and cheap or interest-free credit. Relative to the private sector, the costs of the grain parastatals have been high and are increasing, as special interests and rent- seeking are increasingly dictating their operation. This is being manifested in various forms, such as excessive public stocks in India, vacillating import policies in Indonesia and Pakistan, questionable government foodgrain import decisions in the Philippines, and politically-determined ceiling and floor prices in India. On the other hand, the experiences of Bangladesh and Vietnam, both of which have implemented extensive reforms over the last fifteen years, suggest that reduced government intervention can promote competition in the domestic markets, reduce subsidies, and release funds for development and anti-poverty programs without jeopardizing price stability. The paper concludes that reforms are overdue and the delay in changing the old ways of doing price stabilization will be increasingly wasteful.

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Paper provided by International Food Policy Research Institute (IFPRI) in its series MTID discussion papers with number 80.

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Date of creation: 2005
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Handle: RePEc:fpr:mtiddp:80

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References

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  1. Bob Baulch, 1997. "Transfer Costs, Spatial Arbitrage, and Testing for Food Market Integration," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 477-487.
  2. P. J. Dawson & P. K. Dey, 2002. "Testing for the law of one price: rice market integration in Bangladesh," Journal of International Development, John Wiley & Sons, Ltd., vol. 14(4), pages 473-484.
  3. del Ninno, Carlo & Dorosh, Paul A. & Smith, Lisa C. & Roy, Dilip K., 2001. "The 1998 floods in Bangladesh: disaster impacts, household coping strategies, and responses," Research reports 122, International Food Policy Research Institute (IFPRI).
  4. Ismet, Mohammad & Barkley, Andrew P. & Llewelyn, Richard V., 1998. "Government intervention and market integration in Indonesian rice markets," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 19(3), December.
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  6. Ahmed, Akhter U. & Rashid, Shahidur & Sharma, Manohar & Zohir, Sajjad, 2004. "A study of food aid leakage in Bangladesh," FCND briefs 5, International Food Policy Research Institute (IFPRI).
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  9. Param Silvapulle & Sisira Jayasuriya, 1994. "Testing For Philippines Rice Market Integration: A Multiple Cointegration Approach," Journal of Agricultural Economics, Wiley Blackwell, vol. 45(3), pages 369-380.
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  11. Peter Timmer, 2004. "The Road to Pro-Poor Growth: The Indonesian Experience in Regional Perspective," Working Papers 38, Center for Global Development.
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Citations

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Cited by:
  1. Rashid, Shahidur & Cummings Jr., Ralph & Gulati, Ashok, 2007. "Grain Marketing Parastatals in Asia: Results from Six Case Studies," World Development, Elsevier, vol. 35(11), pages 1872-1888, November.
  2. Roehlano M. Briones, 2013. "The Structure of Agricultural Trade Industry in Developing Countries," Trade Working Papers 23420, East Asian Bureau of Economic Research.
  3. Jayne, Thomas S. & Mason, Nicole M. & Myers, Robert J. & Ferris, John N. & Mather, David & Beaver, Margaret & Lenski, Natalie & Chapoto, Antony & Boughton, Duncan, 2010. "Patterns and Trends in Food Staples Markets in Eastern and Southern Africa: Toward the Identification of Priority Investments and Strategies for Developing Markets and Promoting Smallholder Productivi," Food Security International Development Working Papers 62148, Michigan State University, Department of Agricultural, Food, and Resource Economics.
  4. Gouel, Christophe, 2013. "Food price volatility and domestic stabilization policies in developing countries," Policy Research Working Paper Series 6393, The World Bank.
  5. James Roumasset, 2006. "The Economics of Agricultural Development: What Have We Learned? Processes," Working Papers 200604, University of Hawaii at Manoa, Department of Economics.
  6. Roumasset, James A., 2006. "The Economics of Agricultural Development: What Have We Learned?," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25598, International Association of Agricultural Economists.
  7. Reardon, Thomas & Minten, Bart, 2011. "The quiet revolution in India's food supply chains:," IFPRI discussion papers 1115, International Food Policy Research Institute (IFPRI).
  8. Cummings, Ralph Jr. & Rashid, Shahidur & Gulati, Ashok, 2006. "Grain price stabilization experiences in Asia: What have we learned?," Food Policy, Elsevier, vol. 31(4), pages 302-312, August.
  9. World Bank, 2005. "Managing Food Price Risks and Instability in an Environment of Market Liberalization," World Bank Other Operational Studies 8264, The World Bank.
  10. Ton, Giel, 2008. "Challenges for smallholder market access: a review of literature on institutional arrangements in collective marketing," MPRA Paper 33329, University Library of Munich, Germany.

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