Input Subsidy Programs in Developing Countries: Lessons from an Asia/Africa Comparison
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Input Subsidy Programs in Developing Countries: Lessons from an Asia/Africa Comparison

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IFPRI Policy Seminar "Input Subsidy Programs in Developing Countries

IFPRI Policy Seminar "Input Subsidy Programs in Developing Countries
What Works, What Doesn’t, and Why?" presentation by Shahidur Rashid, IFPRI, on 18 April 2013.

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    Input Subsidy Programs in Developing Countries: Lessons from an Asia/Africa Comparison Input Subsidy Programs in Developing Countries: Lessons from an Asia/Africa Comparison Presentation Transcript

    • Input Subsidy Programs in Developing Countries: Lessons from an Asia/Africa comparison Shahidur Rashid (presenting) Paul A. Dorosh, IFPRI M.K. Mujeri, BIDS IFPRI POLICY SEMINAR INPUT SUBSIDY PROGRAM IN DEVELOPING COUNTRIES 18 APRIL 2013 INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE WASHINGTON DC 20006
    • 1.1 Differences in natural endowment: Irrigation potential (1) Figure: Irrigated land as% of total ag. Land-- S. AsiaA. Irrigation potential and SSA  56.0 0.30 Irrigation potential in Asia is high 54.0 0.25 compared to Africa  In 2009, 56% of 52.0 0.20 agricultural lands were irrigated. 50.0 0.15  This compares with 48.0 0.10 only 0.28% in SSA  Cropping intensity is 46.0 0.05 also lower in SSA-- generally one main 44.0 0.00 crops South Asia SSA INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 2
    • 1.1 Differences in natural endowment: Irrigation potential (2)Irrigation potentialmakes the difference  Fertilizer use in irrigation land is much higher than in non- irrigated land  Use of fertilizer in non-irrigated land is only 1/3rd of irrigated land—this is similar to many SSA countries including Ethiopia and KenyaINTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 3
    • 1.1 Differences in natural endowment: Fertilizer production capacity (1)B. Natural gas 7.0  Due to large markets 6.0 Share of consumption to production and availability of gas, fertilizer production 5.0 grew fast in all five countries 4.0  When the Green Revolution began in the 3.0 1960’s, all countries 2.0 (except Pakistan) were large net importers 1.0  Domestic production was 1/3rd to 1/5th of the 0.0 total use  By mid 1980s, more or less self-sufficient Bangladesh East Asia India Indonesia PakistanINTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 4
    • 1.1 Differences in natural endowment: Fertilizer production capacity (2) Fertilizer Consumption (in Million tons) Regions 1970s 1980s 1990s 2000sDependence on fertilizerimports declined despite World 89. 2 128.9 131.8 154.8an increase in fertilizer Africause in Asia: 2.3 3.5 3.6 4.3  More than six-fold E. Asia 12.6 27.0 42.0 56.6 increase in S. Asia S. Asia  Almost 7-fold 4.01 10.3 17.9 26.2 increase in India, Bangladesh 0.23 0.60 1.1 1.6 Indonesia, Pakistan India 3.12 8.01 14.21 20.9 and Bangladesh. Indonesia 0.50 1.9 2.50 3.60 Pakistan 0.58 1.5 2.33 3.60INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 5
    • 2.1 Differences in policies: Ag spending did not go into subsidies only (1) In Asia, public resources were not only used for subsidies:  In fact, in the early years of the Green Revolution, investments in infrastructure was higher than total subsidies (inputs + food subsidies)  In fact, fertilizer subsidies averages only $200 millionINTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 6
    • 2.1 Differences in policies: Ag spending did not go into subsidies only (2)Decades Top Public Spending Returns RankPoverty Reduction (per Mill Rs)1960s Roads/ Rural infrastructure 1272 11970s Roads/ Rural infrastructure 1346 11980s Roads/ Rural infrastructure 295 11990s Roads/ Rural infrastructure 335 2Returns W.R.T. Ag growth (per Rs Spent)1960s Roads/ Rural infrastructure 8.79 11970s Educational Investment 7.88 11980s Agricultural R&D 6.95 11990s Agricultural R&D 6.93 1INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 7
    • 3.1 Looking forward: Ag investment does help input promotion (1)• Comparison of retail prices Ethiopia as % of its with its’ neighbors indicate neighbors that Ethiopia is very Countries DAP Urea (without competitive. adjustments)• Retail price of DAP and DAP Urea Urea in Ethiopia is about Ethiopia 885 710 -- -- 15% lower than Kenya; 23% and 29% lower than Kenya 1,038 845 85.3 84.02 Tanzania Malawi 1,060 -- 66.98 --• Retail price of Urea in Rwanda 1,009 790 87.7 89.87 Ethiopia is only 67% of Malawi Tanzania 1146 998 77.3 71.14 INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 8
    • 3.2 Looking forward: Technology gives reasons for hope (2) Technology gives hopes because: I. Potential for exploring natural gas, a key ingredients in fertilizer production, is far better today than any time in history. II. Potential to better understand soil health is much better today than ever before.INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 9