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Grain marketing parastatals in Asia: Why do they have to change now?

In: From parastatals to private trade: Lessons from Asian agriculture

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  • Rashid, Shahidur
  • Gulati, Ashok
  • Cummings, Jr., Ralph

Abstract

Using case studies from six Asian countries, this paper (a) assesses the relevance of underlying rationales for public intervention in foodgrain markets, (b) documents the existing policies and regulations that support operation of grain parastatals, (c) provides estimates of benefits and costs of parastatals, and (d) compares experiences of countries that liberalized (or reduced intervention) with the ones that continue to have significant presence of parastatals. Our results suggest that conditions in the region have improved significantly over the past thirty years; and none of the four commonly agreed rationales—that is, poorly integrated domestic markets, thin and volatile world market, promoting modern technology and the scarcity of foreign exchange reserves—for public intervention in foodgrain markets are now persuasive. Domestic foodgrain markets are integrated, international markets for both wheat and rice are significantly more robust than they were thirty years ago, High-Yielding Varieties (HYV) now cover practically all of the high potential area sown to wheat and rice; and foreign currency reserves have increased dramatically in all countries in recent years. However, although rationales have lost their significance, many countries continue to practice old policies and provide regulatory supports to parastatals, including monopoly control over international trade, preferential access to transportation, restrictions on movement of foodgrains, and cheap or interest-free credit. Relative to the private sector, the costs of the grain parastatals have been high and are increasing, as special interests and rent- seeking are increasingly dictating their operation. This is being manifested in various forms, such as excessive public stocks in India, vacillating import policies in Indonesia and Pakistan, questionable government foodgrain import decisions in the Philippines, and politically-determined ceiling and floor prices in India. On the other hand, the exp
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Suggested Citation

  • Rashid, Shahidur & Gulati, Ashok & Cummings, Jr., Ralph, 2008. "Grain marketing parastatals in Asia: Why do they have to change now?," IFPRI book chapters, in: Cummings, Jr., Ralph; Gulati, Ashok; Rashid, Shahidur (ed.), From parastatals to private trade: Lessons from Asian agriculture, chapter 2, pages 10-47, International Food Policy Research Institute (IFPRI).
  • Handle: RePEc:fpr:ifpric:9780801888151-02
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    Cited by:

    1. Cummings, Ralph Jr. & Rashid, Shahidur & Gulati, Ashok, 2006. "Grain price stabilization experiences in Asia: What have we learned?," Food Policy, Elsevier, vol. 31(4), pages 302-312, August.
    2. Roumasset, James A., 2006. "The Economics of Agricultural Development: What Have We Learned?," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25598, International Association of Agricultural Economists.
    3. Briones, Roehlano M., 2013. "The Structure of Agricultural Trade Industry in Developing Countries," Discussion Papers DP 2013-15, Philippine Institute for Development Studies.
    4. World Bank, 2005. "Managing Food Price Risks and Instability in an Environment of Market Liberalization," World Bank Publications - Reports 8264, The World Bank Group.
    5. Christophe Gouel, 2014. "Food Price Volatility and Domestic Stabilization Policies in Developing Countries," NBER Chapters, in: The Economics of Food Price Volatility, pages 261-306, National Bureau of Economic Research, Inc.
    6. Ton, Giel, 2008. "Challenges for smallholder market access: a review of literature on institutional arrangements in collective marketing," MPRA Paper 33329, University Library of Munich, Germany.
    7. Rashid, Shahidur & Cummings Jr., Ralph & Gulati, Ashok, 2007. "Grain Marketing Parastatals in Asia: Results from Six Case Studies," World Development, Elsevier, vol. 35(11), pages 1872-1888, November.
    8. Jayne, Thomas S. & Mason, Nicole M. & Myers, Robert J. & Ferris, John N. & Mather, David & Sitko, Nicholas & Beaver, Margaret & Lenski, Natalie & Chapoto, Antony & Boughton, Duncan, 2010. "Patterns and Trends in Food Staples Markets in Eastern and Southern Africa: Toward the Identification of Priority Investments and Strategies for Developing Markets and Promoting Smallholder Productivi," Food Security International Development Working Papers 62148, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    9. James Roumasset, 2006. "The Economics of Agricultural Development: What Have We Learned? Processes," Working Papers 200604, University of Hawaii at Manoa, Department of Economics.
    10. Minten, Bart & Reardon, Thomas, 2011. "The quiet revolution in India's food supply chains:," IFPRI discussion papers 1115, International Food Policy Research Institute (IFPRI).
    11. Ian Gillson & Amir Fouad, 2015. "Trade Policy and Food Security : Improving Access to Food in Developing Countries in the Wake of High World Prices," World Bank Publications - Books, The World Bank Group, number 20537.

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    parastatals; trade; grain; markets; Asia;
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