Reforming agricultural policy: Kenya's impasse and Malawian dilemmas in international perspective
Colin Poulton, Research Fellow, Centre for Development, Environment and Policy, SOAS, University of London (Wye)
Steve Wiggins, Research Fellow, Protected Livelihoods and Agricultural Growth (PLAG) Programme, ODI
Andrew Shepherd, Research Fellow and Director of Programmes, Rural Policy and Governance Group (RPGG), ODI
Andrew Dorward, Research Fellow, Centre for Development, Environment and Policy, SOAS, University of London (Wye)
Andrew Dorward, in the chair, introduced the speakers and emphasized that this meeting was the first in a series being co-hosted by ODI and the Future Agricultures Consortium.
'Comparing agricultural reforms: Bangladesh, Chile, China, New Zealand'
Steve Wiggins, Research Fellow, ODI
1. Steve Wiggins presented four agricultural reform case studies. The nature and duration of the reforms varied and they all occurred as part of wider policy reforms.
2. The case of Bangladesh demonstrates how phased implementation, which allowed for quick learning, and world fertilizer price changes, influenced the success of the reforms. They took place in the mid-1970s, when world fertilizer prices were falling. Initial liberalization was limited to the input market which resulted in increased production and greater use of inputs. In turn, this increased winter rice production, resulting in a decrease in the price of wholesale rice. Additional reforms occurred in the early 1990s.
3. The case of Chile demonstrates that gradual reform can result in increased investment. This reform process involved the privatisation of state bodies, two years of hesitant reform, an authoritarian regime and counter reform. There was a huge increase in fertiliser use in the early 1980s, which indicated that there was considerable investment back into the sector. However, policies were dominated by technocrats and elites and the bank crash of 1982 was a major shock to the system.
4. The case of China also demonstrates success through the gradual reform of markets for produce, land and labour. In this case, the process acted to increase production and decreased rural poverty. Cereal yields did not experience the same growth as the rest of the agricultural sector though.
5. The case of New Zealand shows how rapid reform initially acted to harm farmers, while support provided afterwards assisted them. New Zealand's agricultural reforms were accompanied by large and radical economic reforms. The objective of the reforms was to eliminate inefficiencies, especially in ports and transportation. The reforms were characterised by import substitution and outsourcing. In 1987, New Zealand implemented mechanisms in the form of subsidies to address market volatility and subsequently experienced very rapid growth of 2.7% from 1991 to 2004 (OECD).
6. Wiggins concluded that:
- Chile and New Zealand are examples of 'big bang' reforms, so it therefore took longer for farmers in those countries to recover from change and to adapt.
- The Bangladesh and China cases suggest that the nature of the reforms that are implemented may also be an important factor.
- Motives for implementing reforms differed between countries: Bangladesh and China wanted to increase production, while Chile and New Zealand were seeking more diverse changes.
'Reforming agricultural policy: Kenya's impasse and Malawian dilemmas in international perspective'
Colin Poulton, Future Agricultures Consortium and Centre for Development, Environment and Policy, SOAS
7. Colin Poulton stated that he and his colleagues' research in Kenya and Malawi is motivated by the hypothesis that if agriculture in Africa is going to increase and poverty decrease, significant change is required. Change is often slow and runs counter to recommendations from policy advisors. Poulton therefore questioned to what extent policy advice should be tailored to political realities.
8. Poulton argued that international experience shows that:
- Thorough agricultural reforms are often undertaken as part of economy-wide reform programmes.
- National crises may act to trigger reforms.
- Reforms are often associated with new governments who have clear mandates.
- Exchange rates and global prices are important factors in the success (or not) of reforms, and the ease of transition from pre-reform to post-reform systems.
- Gradual reforms may be better than 'big bang' reforms, especially when markets, institutions and state capacity are weak.
- Aid often has reform imbedded.
9. In Kenya, slow reforms had disappointing results:
- Progress in implementing the Strategy for Revitalising Agriculture (SRA) has been slow since 2004.
- There have been difficulties co-ordinating activities across five different government ministries.
- The processes of reform did not withstand fluctuation.
10. Despite this however, the fertilizer industry is considered to have been successfully privatised. This success is related to the actions of a few individuals who had vested interests in the privatisation process, for whom there was a 'quick win' which occurred during a window of opportunity.
11. The Kenyan reforms have also lacked civil society input. There was inertia in policy discussions and reform has only taken place within the agricultural ministry. Cotton is considered to be the one exception to this. A strong individual from the Kenyan Cotton Growers Association was influential in ensuring strong civil society participation in policy discussions.
12. Poulton then discussed the role of government and donors in Malawian agricultural reforms. These reforms will go ahead with or without donor support because there is high degree of local ownership. The government has also expressed its commitment to the reforms, with subsidies being a key issue in the 2004 elections. The three donor positions with regard to the reforms are:
- Opposition (IMF, USAID): these donors feel that the reforms would impede private input market development.
- Support (UN agencies, Scandinavians and many NGOs).
- Caution (DFID, WB, EU): these donors feel that there is a high risk of state failure.
13. Poulton concluded that:
- National crises often trigger reform processes.
- Reform is most likely to focus on agriculture when the crisis occurs within the agriculture sector.
- Reforms are also often associated with new governments.
- There is often elite scepticism of liberalisation.
- Where civil society is weak, it should be strengthened and included in reform discussions.
- There is often a dilemma on the part of donors relating to whether to provide general budget support for reforms.
Andrew Shepherd, Director of Programmes, Rural Policy and Governance Group (RPGG), ODI
14. Andrew Shepherd questioned what donors should do with regard to reform processes. Important points that arose from the presentations included:
- Agricultural reform is contingent on the need for wider reforms. Therefore, agricultural reform needs non-agriculture people and institutions to be involved as well.
- The importance of sequencing, staging and ongoing learning are illustrated in most case studies.
- A pragmatic approach is better than an ideological approach.
- 'Big bang' change does not always ensure optimal outcomes.
- The results from Wiggins' analysis raise the question of whether agricultural reforms generally deliver more for non-cereal or non-basic foods.
- An important debate rests in whether or not donors should support reform directly or support the formation of alliances for reform. Shepherd posited that donors should be engaged at the margin, and should not be central in reform discussions.
- Sub-sector work, rather than sector-wide reform, is more likely to produce better results in the short to medium term.
- The size and nature of crises may be an important factor in the level of agricultural reform success.
- Reform processes are closely linked to policies outside the agriculture sector. Therefore, do we need to look at the business environment, financial sector, etc too?
15. Discussions ensued around: the role of NGOs in reform processes; the potential embedding of reform into the MDGs; impacts of reforms on smallholder farmers; and indicators of success.
How easy is it to make fundamental changes to agricultural policy? In the past Bangladesh, China, Chile, and New Zealand, for example, have made such changes. Their experiences and the contemporary cases of Kenya and Malawi will be reviewed.