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I am a Marketing Economist who lectured for 9 years and has been a Consultant for 28 years. I follow in making this contribution the theme points set out by Duncan Green. Subsidies and barriers The subsidies and trade northern trade barriers are real and have far reaching implications that distort amongst other things the economics of production of various crops in developing countries, including some that are critical such as rice, maize, cotton, sugar and oilseeds. This does not mean that there are not other important issues and they are correctly identified in the theme paper. World market prices and access to markets affect nearly all developing countries in a negative way for most as far as poverty is concerned. Nearly all countries protect their agriculture, some more than others. Given this factor, it is surprising that many development experts and institutions continue to lecture developing countries on the need to open up markets and lower barriers, again some more than others. Particularly since it would appear that we are still quite far away from the northern barriers being eliminated. Given a world where everyone protects agriculture, the few who do not (Cambodia is an example I have come across recently) leave themselves at a disadvantage. There is some caution today about arguing the case for ending subsidies and opening markets but many as is the case for the ADB still appear to argue that corner strongly. It is interesting to look at Cambodia as the first LDC to be admitted to WTO with an open policy towards trade in agricultural products. They are also being offered open access to key regional markets. A lot will depend on FDI to produce to serve markets such as India, China and Singapore. But the history of the country has left it in a weak position to give the scale of assistance that farmers need to exploit that sort of situation and a lot will depend on whether Cambodia is given enough assistance to justify their open policy. The entire value chain needs to be strengthened with research, nurseries, irrigation, extension, post harvest and marketing. A number of countries are in fact arguing for dispensations for their commodities in attractive markets. Concessions are so lucrative for those allowed quotas that they begin to have a vested interest in continuation of protection. In the long term this is not likely to be good for poverty alleviation although in the short term advantages for the privileged few are attractive. Public Policy and Commodities The role of public policy is necessarily to manage the decline in commodities although supply management as advocated by Peter Robbins is very hard to achieve. I have looked at commodity stabilisation schemes that included supply management for desiccated coconuts by Philippines and Sri Lanka and commodity price stabilisation schemes in Western Samoa for cocoa and copra (which I helped end in 1986 because it gave farmers less in every year than they would have received in the global market), Philippines and Papua New Guinea and this approach is fraught with difficulties. The entire experience of the copra levy and coconut oil in the Philippines during the Marcos era was an unmitigated disaster. There are possibilities of adding value, marketing commodities better and market development and promotion measures that can in many cases make a big difference in delaying adverse trends, promoting beneficial ones and optimising value. Most aid programmes are weak in the provisions they make for marketing often substituting a concern for physical markets for marketing. Very big investment loans are regularly made by Development Banks and grants and loans by others with almost no consideration of markets and marketing and would never be tolerated in the private sector. Market development and promotion are underrated technologies in developing countries. It is fashionable to use phrases like 'market driven' but too many in the aid business do not have enough experience of the private sector to give meaning to the process in the plans they make and aid is in any case still usually directed to the public sectors many of whom in the past have tended to substitute regulatory regimes designed ostensibly to protect farmers for market forces. In the way of a general illustration, natural fibres have lost most of the ground they need to in the face of competition from synthetics but not enough is being done to minimise losses for jute, coir and sisal and maximise new market opportunities. Reduced volume consumption is bad enough but stagnant prices are a bigger threat today especially since after a long period of depreciating currencies against the dollar some developing country currencies have started to strengthen and this will inevitably squeeze commodity margins still further. Who will help Unfortunately, buyers seldom finance development for sellers so with globalisation the private sector in importing countries rarely undertakes investment to develop and promote markets for commodities. What makes matters worse is that the private sector in exporting countries is too fragmented for firms to individually undertake the necessary marketing investment. It does happen although it is rare with supermarket development in South East Asia with the retailers revolutionising fruit and vegetable handling and marketing for Thailand and Malaysia. Technical assistance can perform a very useful role in making up for this inability to develop and promote and protect markets. It did happen a lot in the late 70s and 80s but has sadly declined after that. It could make a major difference to Bangladesh to have something major done about jute markets but the International Jute Organisation was abandoned partly because the approach was too institutional and not action oriented and the World Bank rationalisation scheme died a political death. ITC (WTO/UNCTAD) plays a very useful cost effective role in such activity and should be far better funded. Markets Domestic markets in many countries as is the case of India and China are growing very rapidly and offer the main opportunity for poverty alleviation but export markets can play a catalytic role which should not be underestimated. Standards and entry costs may be rising but they are rising in domestic markets as well with the globalisation of consumer expectations. The FAO is doing some valuable work in Himachal Pradesh in India to promote apple varieties that are popular in the domestic market. In India there is little prospect for commercial agriculture due mainly to the land laws but also cultural practice. Contract farming too has a limited role although many pile a great deal of unjustified expectation on its possibilities. The search for assured markets is a distraction and very dangerous. At the other extreme, Simon Maxwell's homesteads relying on off farm income is a reality for most of the smallest farmers although there is precious little off farm income prospect. There are models for small scale high value cultivation with critical mass being achieved through aggregation that can be tried. The prospects for improvement lie mostly with those who fall in between the large farms and the homesteads, those with more than one ha and hopefully more than 2 ha. Combined in farmer groups they can be given assistance to increase incomes and become sustainable. Prospects Interestingly, agribusiness development prospects are substantial only where farmers can be assisted for a period of time to buy private sector services. A good idea being talked off is a farmer credit card with all the entitlements on fertilisers and other inputs already in the system as well as credit allocation to be used for extension which can even cover diversification and credit for crop cycles and social purposes. Credit is a major constraint because small farmers become trapped in a value chain with very low returns because they need credit for crops and social purposes. The banks prefer to lend to larger farmers and think smaller ones should be in saving schemes-the paradox again of lending to the richer ones and asking the poorest to save. In India there is a substantial amount of available credit in the system that is not being used because the mechanisms are weak. Andhra Pradesh recently used some of this for providing drip irrigation to farmers and the idea has proved viable. We need to work at mechanisms for getting assistance through to small farmers in the context of sustainable growth. At the end of the day, hundreds of millions of people will move to the cities in India and look for employment. The growing service and industrial sectors will absorb some of them and many of them over time but in the short term there could be untold misery and poverty. There is no way of preventing this. But emphasis on giving small farmers assistance will help delay and reduce the inevitable. Most of all if farmers were given greater purchasing power, the domestic market for agricultural services and goods would grow faster and more able to absorb those who will leave the rural areas. Unfortunately, there are precious few policy lessons on export led poverty alleviation that are major success stories. On a modest scale ITC did help develop the market for geotextiles for coir fibre and Sri Lanka was able to take advantage of this. Export promotion zones have only achieved variable results so far but this is partly due to the lack of backward linkages. It is very important to work on integrated solutions since one missing link can prevent advantage being taken. The UNDP Project in India to develop jute products has not been as successful as it could have been because it led to a lot of small enterprises with interesting innovations and some major technical advances but without the capacity to develop markets. There are examples, and Vietnam is one, of export led development to earn foreign exchange but often at very low prices and very little value added. This sort of development can be at the expense of others if assistance in marketing is not given and used. China too has gone through periodic forays in export markets that have disrupted prices for others but the domestic market in China comes into play to reduce export availability. This is an aspect of the debate where I look forward to learning of success stories others may have had. Best wishes, Vinay Chand, 230, Finchley Road, London NW3 6DJ, UK Tel: 44-20-7794 5977 Fax: 44-20-7431 5715 <address removed><mailto:<address removed>>
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