Farm sector reforms
Sunday, 31 October 2010
The agriculture sector has always been in the national limelight because of its important role in the economy. This sector was the largest contributor to the economy long ago. But over time it has been pushed back to the third position with the services and industries sectors securing the first and second places respectively in terms of their share in the country's gross domestic product (GDP). The share of the farm sector has now declined to 18 per cent from more than 45 per cent in the mid-sixties. However, with the deregulation of the economy in line with the fast pace of globalization, particularly during the last couple of decades, such a development is considered a natural outcome.
Then again, the Bangladesh farm sector has also been liberalized, at least, partially. The results have been rather mixed. The Human Development Report for 2009, prepared by the Pakistan-based Mahabubul Haq Centre and launched in Dhaka by the Centre for Policy Dialogue (CPD) at a function late last week, opposed the process of farm sector liberalisation saying that free-farm policy would affect the cost of agricultural inputs and food prices. The report has suggested Bangladesh to undertake institutional reforms, including land reforms, and to make the farm loan process easier. It also pointed out that the share of the manufacturing sector in output and employment did not rise in tandem with the fall in the share of agriculture sector. More importantly, the report has observed that farm sector liberalization has worsened the overall food security status in South Asia.
Whether the partial liberalization has contributed to food insecurity or not remains a debatable issue. But there is no denying that the prices of farm inputs, including fertilizers and pesticides, have increased in recent years. The prices of the same would have been much higher had not the government provided some amount of subsidy. The fact remains that the country's food production has more than doubled over the past two decades and food imports are now made primarily to maintain a reserve stock for the sake of price stability in the domestic market and for distribution of food grains among the vulnerable section of the population under different public safety-net programmes. No deregulation means greater provision of subsidy on farm inputs. But the government can hardly afford to make the subsidy component bigger because of resource constraints. Besides, it cannot overlook the element of possible abuse of higher subsidy elements.
The problem here relates largely to the low income level of the hardcore poor who remain vulnerable to food insecurity. Their lower-than-subsistence level income is not enough to match the prevailing prices of food. So, solution to that problem can be found in a reasonable hike in the income of the poor. Unfortunately, despite a respectable level of annual growth of the economy for the last two decades, generation of new employment opportunities and rise in the income level of the people at the bottom have been much below the expectations. Thus, the distribution of the incremental national income, in terms of per capita, has been somewhat skewed, to be precise.
The policymakers, instead of seeking a solution in the so-called socialistic strategies, do need to put in place programmes and projects at the grassroots that would help augment the income of the poor, side by side with efforts to reform the institutions involved, directly or indirectly, in the farm sector. It is also imperative for the government to spend a greater amount of money on agriculture research and development. Past achievements suggest that the country's agricultural scientists are capable of delivering results. What they need is necessary state support and patronization.
Then again, the Bangladesh farm sector has also been liberalized, at least, partially. The results have been rather mixed. The Human Development Report for 2009, prepared by the Pakistan-based Mahabubul Haq Centre and launched in Dhaka by the Centre for Policy Dialogue (CPD) at a function late last week, opposed the process of farm sector liberalisation saying that free-farm policy would affect the cost of agricultural inputs and food prices. The report has suggested Bangladesh to undertake institutional reforms, including land reforms, and to make the farm loan process easier. It also pointed out that the share of the manufacturing sector in output and employment did not rise in tandem with the fall in the share of agriculture sector. More importantly, the report has observed that farm sector liberalization has worsened the overall food security status in South Asia.
Whether the partial liberalization has contributed to food insecurity or not remains a debatable issue. But there is no denying that the prices of farm inputs, including fertilizers and pesticides, have increased in recent years. The prices of the same would have been much higher had not the government provided some amount of subsidy. The fact remains that the country's food production has more than doubled over the past two decades and food imports are now made primarily to maintain a reserve stock for the sake of price stability in the domestic market and for distribution of food grains among the vulnerable section of the population under different public safety-net programmes. No deregulation means greater provision of subsidy on farm inputs. But the government can hardly afford to make the subsidy component bigger because of resource constraints. Besides, it cannot overlook the element of possible abuse of higher subsidy elements.
The problem here relates largely to the low income level of the hardcore poor who remain vulnerable to food insecurity. Their lower-than-subsistence level income is not enough to match the prevailing prices of food. So, solution to that problem can be found in a reasonable hike in the income of the poor. Unfortunately, despite a respectable level of annual growth of the economy for the last two decades, generation of new employment opportunities and rise in the income level of the people at the bottom have been much below the expectations. Thus, the distribution of the incremental national income, in terms of per capita, has been somewhat skewed, to be precise.
The policymakers, instead of seeking a solution in the so-called socialistic strategies, do need to put in place programmes and projects at the grassroots that would help augment the income of the poor, side by side with efforts to reform the institutions involved, directly or indirectly, in the farm sector. It is also imperative for the government to spend a greater amount of money on agriculture research and development. Past achievements suggest that the country's agricultural scientists are capable of delivering results. What they need is necessary state support and patronization.