Experts favour introduction of 'smart subsidies' in farm sector

---

FE Report
Bangladesh should scale up public spending in agriculture to make a dent in hunger while generating rural jobs and promoting new technology, economists said Sunday.
Currently state investment in agriculture remains at 4.0 per cent of the country's gross domestic product, compared to 11 per cent in case of other 'transforming' countries that are shifting toward manufacturing.
"You need to increase public spending in agriculture to boost rice production and promote new technology," Alaiu de Janvyr, a teacher of University of California, told a World Bank-sponsored seminar in the city.
Janvyr, who co-authored the World Development Report 2008 focussing on agriculture, however, said farm subsidies should not be used as a permanent tool, but in a 'temporary' fashion.
"It's better to use public money in using improved seeds and promoting new technology rather than giving direct subsidies," Janvyr told the audience while presenting the report on Agriculture for Development.
Janvyr favoured what he called "smart subsidies" with focus on market development and cutting-edge technology.
The government has set aside subsidies worth Tk 60 billion in the current national budget, including Tk 42 billion for agriculture (fertiliser and others). The amount is being raised to Tk 120 billion because of the hike in the prices of fuel, fertiliser and food in the global market.
Stressing on making agriculture growth 'pro-poor,' the American academic said renewed attention is needed as the farm sector can help reduce rural-urban disparities and poverty in Bangladesh.
Speaking at the seminar, Abdus Sattar Mondol, a professor of Bangladesh Agriculture University, said there is a need for identifying areas of agricultural investment in the local context and called for lending facility to small farmers.
Mondol, a former Planning Commission member, said as the country's public spending as share of GDP is still low, the country should enhance the investment in the farm sector.
"If the government increases farm investment, it will help generate rural employment, increase better technology and foster research," he added.
Mondol said climate change requires urgent attention for both adaptation and mitigation as its adverse impact could wreak havoc on high-value farm production.
In the session on high-value agriculture, head of IFC-SEDF Deepak Adhikari said the growing demand for high-value agricultural commodities-including fruits, vegetables, spices, fish, and livestock products-provides enormous opportunities for producers and suppliers in Bangladesh.
Quoting a study report, he said the additional demand for high-value farm produce in Bangladesh will reach US$8.0 billion by 2020.
The IFC official said since high-value agricultural production is typically more labor-intensive than traditional cultivation, this increasing demand also provides an opportunity to raise rural incomes and generate rural employment.
Adhikari said the GDP growth linked to agriculture in the developing world can benefit the income of the poor two to four times more than that of other sectors.
"High-value agriculture, together with new markets and technological innovations, are new opportunities facing producers - even as agriculture itself continues to confront the persistent challenges of ensuring that growth in the sector benefits the poor and does not deplete natural resources," said a report on high-value agriculture in Bangladesh said.
Mona Sur, an economist at the World Bank, said while private sector investment necessarily leads the development of high-value agriculture and agribusiness, the role of the government remains essential in fostering an enabling business environment and investment climate.