Focus on Agricultural Policies
These two columns highlight the actions needed immediately.
One is to tax the agricultural producers and use the state to provide subsidies and other benefits to the consumers of agricultural items. This is what Argentina is doing. It has imposed a heavy tax on agricultural exports which has the effect of lowering the domestic price. Since the political base of the government is in the urban areas, this policy makes political sense but is disastrous for the country’s agricultural sector and for exports since agriculture is the main source of trade for the country.
The other way is to pass on price increases to agricuural producers and let them enjoy the windfall. Experience shows that farmers are not big spenders. They will plough back the increases in their incomes into agriculture — into the various parts of the agricultural system. This will result in increasing the productivity of land and labour, making the country more competitive in the international market. This is the policy option favoured by the Brazilian government.
In fact, the Brazilians have gone two steps further. They have provided a very large increase in the amount of credit available to agricultural producers at subsidised prices — with the state picking up in the budget the difference in the market and subsidised price of credit. This system will increase further the productivity of agriculture. It is clear which way Pakistan should go. It should go the Brazilian way.
To make this approach Pakistan-specific, we need to adopt a number of policies and do so quickly so that the farming community can start to make its plans in time. The government should have international prices of traded agricultural commodities reflected in its procurement price. It should encourage the banking system to lend much more to the farming community, subsidising some parts of the capital that will get used for modernising agricultural practices.
It should enter into a partnership with the private sector to invest heavily in agricultural research. It should carefully study the water-pricing policy and charge farmers the real price of this precious commodity. And it should provide income support to the poor so that they can deal with price increases. Pakistan, in other words, needs a well thought-out farm policy.
Can agriculture lead the way? By Shahid Javed Burki
[to read the rest click on this LINK]
One is to tax the agricultural producers and use the state to provide subsidies and other benefits to the consumers of agricultural items. This is what Argentina is doing. It has imposed a heavy tax on agricultural exports which has the effect of lowering the domestic price. Since the political base of the government is in the urban areas, this policy makes political sense but is disastrous for the country’s agricultural sector and for exports since agriculture is the main source of trade for the country.
The other way is to pass on price increases to agricuural producers and let them enjoy the windfall. Experience shows that farmers are not big spenders. They will plough back the increases in their incomes into agriculture — into the various parts of the agricultural system. This will result in increasing the productivity of land and labour, making the country more competitive in the international market. This is the policy option favoured by the Brazilian government.
In fact, the Brazilians have gone two steps further. They have provided a very large increase in the amount of credit available to agricultural producers at subsidised prices — with the state picking up in the budget the difference in the market and subsidised price of credit. This system will increase further the productivity of agriculture. It is clear which way Pakistan should go. It should go the Brazilian way.
To make this approach Pakistan-specific, we need to adopt a number of policies and do so quickly so that the farming community can start to make its plans in time. The government should have international prices of traded agricultural commodities reflected in its procurement price. It should encourage the banking system to lend much more to the farming community, subsidising some parts of the capital that will get used for modernising agricultural practices.
It should enter into a partnership with the private sector to invest heavily in agricultural research. It should carefully study the water-pricing policy and charge farmers the real price of this precious commodity. And it should provide income support to the poor so that they can deal with price increases. Pakistan, in other words, needs a well thought-out farm policy.
Can agriculture lead the way? By Shahid Javed Burki
[to read the rest click on this LINK]
posted by temporal at 9/10/2008
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