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Estimating Size & Operations of Public Sector and     its Impact on Wheat Market in Pakistan                              ...
OutlineIntroduction & BackgroundRecent Literature & GapsMethodology & DataQualitative AssessmentQuantitative ResultsTasks ...
Area & Production of Wheat (2010)Name of Countries                                                              Production...
Country-wise Yield (2010)   S.No.     Name of Countries                                                          Yield (Hg...
Percentage Change                                       0                   -30                         -20               ...
Import of Wheat           4500                                                  100000           4000                     ...
Some Recent Literature                              Wheat-sector Distortions   Literature               Issues Highlighted...
Some Gaps in the Literature                                                             What have been                   H...
MethodologySituation                        Qualitative        QuantitativeAnalysis                           Focus Group ...
18th Amendment and Reversal                                           Ministry of Food                                    ...
1. How much is government intervention worth?   [Disbursements to TCP and Fertilizer Sector]                  Subsidy to T...
2. How much is government intervention worth?  [Disbursements to Utility Stores Corporation]             Ramzan Package   ...
3. How much is government intervention worth? [Disbursements to Pakistan Agricultural Storage and Services Corporation]   ...
4. How much is government intervention worth?          [Disbursements for Tube-wells and Tractors]                        ...
5. How much is government intervention worth?               [Subsidy on Sale of Wheat]                                    ...
6. How much is government intervention worth?           [Crop Loans and Remission Grants]                                 ...
7. How much is government intervention worth?           [GST Subsidy and Loans Written-off]                               ...
8. How much is government intervention worth?                [Provincial Subsidies - I]                                   ...
9. How much is government intervention worth?                [Provincial Subsidies - II]                                  ...
10. Total Government Intervention in Wheat Market                                                                         ...
How Government Intervention Promotes Rent-Seeking?
How Government Intervention Promotes Rent-Seeking?• Case-I: Farmer needs to sell to PASSCO   – Farmer goes to revenue offi...
How we Modeled Intervention?            [Simulation: Economy-wide Impact of Subsidies]• Issue-I: Targeted Vs. Untargeted S...
How we Modeled Intervention?                       [Data and Simulation Design]• Social Accounting Matrix 2007-08   – Pre-...
How we Modeled Intervention?            [Dynamic Computable General Equilibrium Model]• Model Specifications   – Intertemp...
How we Modeled Intervention?              [Dynamic Computable General Equilibrium Model]• Elasticities and related paramet...
Macro-level Results – Percentage Change         Variables            First Period   Mid-Term    End-PeriodReal GDP        ...
Sectoral Results – I (Percentage Change)                                   Agri                       Other     Processin ...
Sectoral Results-II (Percentage Change)                                     Agri                         Other     Process...
Major Gainers and Losers                [In Output terms]• Gainers                      • Losers  –   Wheat               ...
Major Gainers and Losers                 [In Price terms]• Gainers                     • Losers   – Wheat                 ...
Major Gainers and Losers               [In Export terms]• Gainers                    • Losers  – Agriculture processing   ...
Way Forward• Province-specific inquiry• Political economy of subsidies Vs. other forms of  transfers• Introduce a referenc...
Thank Youwww.sdpi.org, www.sdpi.tv                            36
Estimating the Size and Operations of the Public Sector and its Impact on Wheat Markets in Pakistan: A Post-18th Constitut...
Estimating the Size and Operations of the Public Sector and its Impact on Wheat Markets in Pakistan: A Post-18th Constitut...
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Estimating the Size and Operations of the Public Sector and its Impact on Wheat Markets in Pakistan: A Post-18th Constitutional Amendment Inquiry by Dr. Vaqar Ahmed, Sustainable Development Policy Institute, Islamabad

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Presented on February 9th, 2013 at the Second Research Competitive Grants Conference in Islamabad, Pakistan.

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  • NRA: nominal rates of assistance.
  • Somehow capacity building ends up becoming a black box.
  • Somehow capacity building ends up becoming a black box.
  • Somehow capacity building ends up becoming a black box.
  • Somehow capacity building ends up becoming a black box.
  • Somehow capacity building ends up becoming a black box.
  • Somehow capacity building ends up becoming a black box.
  • Somehow capacity building ends up becoming a black box.
  • Somehow capacity building ends up becoming a black box.
  • Somehow capacity building ends up becoming a black box.
  • Somehow capacity building ends up becoming a black box.
  • What youth are discussing over twitter and facebook is very different from what we are talking here.
  • What youth are discussing over twitter and facebook is very different from what we are talking here.
  • Due to dutch disease effect exports are declining…as subsidies being financed through foreign debt
  • Transcript of "Estimating the Size and Operations of the Public Sector and its Impact on Wheat Markets in Pakistan: A Post-18th Constitutional Amendment Inquiry by Dr. Vaqar Ahmed, Sustainable Development Policy Institute, Islamabad "

    1. 1. Estimating Size & Operations of Public Sector and its Impact on Wheat Market in Pakistan 1
    2. 2. OutlineIntroduction & BackgroundRecent Literature & GapsMethodology & DataQualitative AssessmentQuantitative ResultsTasks Ahead
    3. 3. Area & Production of Wheat (2010)Name of Countries Production Area Harvested %age Share in (tonnes) (Ha) ProductionChina 115180303 24256086 17.7India 80710000 28520000 12.4America 60102600 19278200 9.23Russian 41507600 21639800 6.38France 38207000 5426000 5.87Germany 24106700 3297700 3.7Pakistan 23310800 9131600 3.58Canada 23166800 8268700 3.56Australia 22138000 13507000 3.4Turkey 19660000 8053670 3.02Ukraine 16851300 6284100 2.59Iran 15028800 7035020 2.31Argentina 14914500 4373440 2.29UK 14878000 1937000 2.29Kazakhstan 9638400 13138000 1.48Total of top 15 Countries 519400803 174146316 79.8Total of other 108 countries 131480199 42828367 20.2 World total 650881002 216974683 100Source: Agriculture Marketing Information Service, Directorate of Agriculture, Punjab
    4. 4. Country-wise Yield (2010) S.No. Name of Countries Yield (Hg/Ha) 1 Netherlands 89092 2 Belgium 88272 3 Ireland 85990 4 New Zealand 81241 5 UK 76810 6 Germany 73102 7 France 70415 8 Denmark 66264 9 Namibia 65789 10 Saudi Arabia 65000 62 Pakistan 25528Source: Agriculture Marketing Information Service, Directorate of Agriculture, Punjab
    5. 5. Percentage Change 0 -30 -20 -10 10 20 40 50 30Source: FAO STAT 1948 1951 1954 1957 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 Volatility in Annual Yield 1993 1996 1999 2002 2005 2008 2011
    6. 6. Import of Wheat 4500 100000 4000 90000 3500 80000 3000 70000 PKR Million000 Tons 60000 2500 50000 2000 40000 1500 30000 1000 20000 500 10000 0 0 1974 1971 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 Wheat Imports (000) tons Wheat Imports (PKR Million) Source: State Bank of Pakistan
    7. 7. Some Recent Literature Wheat-sector Distortions Literature Issues Highlighted Policy RecommendationDorosh (2012): Setting procurement prices too high Need for strengthening monitoringPakistan Wheat relative to domestic prices results in and coordination across governmentProcurement massive fiscal costs with no benefit agenciesReforms to consumers and small farmers that do not sell wheat to government agenciesDorosh and The dispersion in NRAs among farmSalam (2007) products need to be reducedBastin et al. 45%-50% of wheat that has been The wheat economy must be(2008) harvested is wasted, liberalized and rationalized. If it is spoilt, smuggled, or never even necessary to provide food for the enters the cash economy poverty stricken the government should do so directly with food vouchersAli et al. (2011) Government Need to upgrade the entire supply policy has insignificant effect on chain wheat production though the sign of its coefficient is positive
    8. 8. Some Gaps in the Literature What have been Has the devolution What explains the the economy-wideWhat has changed helped any multiplicity of effects of targeted post-18th aspects of Wheat- subsidies post- and untargeted Amendment? sector’s supply 2007/08? subsidies in Wheat chain? sector?
    9. 9. MethodologySituation Qualitative QuantitativeAnalysis Focus Group Social Accounting Existing Literature Discussions Matrix 2007-08 Dynamic Pre/post 18th Key Informant Computable Amendment Data Interviews General Equilibrium Model Political Economy Stakeholder’s Analysis Analysis
    10. 10. 18th Amendment and Reversal Ministry of Food Security ECCSource: Salam (2012)
    11. 11. 1. How much is government intervention worth? [Disbursements to TCP and Fertilizer Sector] Subsidy to Trading Corporation of Pakistan Import of Subsidy to Fertilizer Wheat Operations Urea Producers Years PKR Million PKR Million PKR Million 2008-09 20000 31662 32000 2009-10 25500 3937 2334 2010-11 12000 4200 985 2011-12 217 44982 162 2012-13 -- 26000 3400Source: Federal Budgets, Ministry of Finance Year Books
    12. 12. 2. How much is government intervention worth? [Disbursements to Utility Stores Corporation] Ramzan Package Sales of Atta Other Food Items Years PKR Million PKR Million PKR Million2008-09 1300 500 9002009-10 1500 1200 2002010-11 700 3000 5002011-12 2000 -- --2012-13 2000 -- --Source: Federal Budgets, Ministry of Finance Year Books
    13. 13. 3. How much is government intervention worth? [Disbursements to Pakistan Agricultural Storage and Services Corporation] Cost Differential for Sale Wheat Operations Wheat Reserved Stock of Wheat Years PKR Million PKR Million PKR Million2008-09 286 -- --2009-10 599 -- 5982010-11 600 4000 --2011-12 4171 4000 --2012-13 1148 4000 --Source: Federal Budgets, Ministry of Finance Year Books
    14. 14. 4. How much is government intervention worth? [Disbursements for Tube-wells and Tractors] Benazir Green Sindh, Punjab and Balochistan Tractor Tractors Year Khyber PKR Millions Scheme Scheme Pakhtunkhwa PKR Millions PKR Millions PKR Millions2008-09 2044 4994 -- 20002009-10 2157 5732 -- --2010-11 -- -- 2000 --2011-12 -- -- -- --2012-13 870 4000 2000 --Source: Federal Budgets, Ministry of Finance Year Books
    15. 15. 5. How much is government intervention worth? [Subsidy on Sale of Wheat] FATA Gilgit Agency Years PKR Millions PKR Millions2008-09 195 6002009-10 216 6602010-11 233 6552011-12 255 7442012-13 270 775Source: Federal Budgets, Ministry of Finance Year Books
    16. 16. 6. How much is government intervention worth? [Crop Loans and Remission Grants] PKR Millions Crops Loan ZTBL Years Insurance Flood Affected Areas AJK Earthquake affectees loans2008-09 -- -- -- --2009-10 -- -- -- --2010-11 292 -- 53 4002011-12 500 3802 -- --2012-13 500 -- -- --Source: Federal Budgets, Ministry of Finance Year Books
    17. 17. 7. How much is government intervention worth? [GST Subsidy and Loans Written-off] PKR Millions GST subsidy for Write-off Loans, Years protected consumers Flood Affected Millers & Traders2008-09 4302 --2009-10 5704 --2010-11 -- --2011-12 -- --2012-13 -- 256Source: Federal Budgets, Ministry of Finance Year Books
    18. 18. 8. How much is government intervention worth? [Provincial Subsidies - I] PKR Millions Punjab Baluchistan Years Wheat Agriculture Atta Tubewells 2010 -- 2,500 -- -- 2011 -- 3,073 -- -- 2012 2,500 -- -- -- 2013 3,000 -- 300 3,000Source: Provincial Budgets and White Papers
    19. 19. 9. How much is government intervention worth? [Provincial Subsidies - II] PKR Millions Khyber Pakhtunkhwa Sindh Years Food from Agricultural Wheat Wheat Transportation Punjab Subsidies 2010 -- -- -- -- 2011 2500 2500 3,391 1,680 2012 2,000 -- -- 2,505 2013 2,500 -- -- 3,015Source: Provincial Budgets and White Papers
    20. 20. 10. Total Government Intervention in Wheat Market Post-18th 80000 Amendment 70000 60000 PKR Million 50000 40000 30000 20000 10000 0 2009 2010 2011 2012 2013 Note: Excludes support to urea or fertilizer sector in general In FY 2012 total government intervention in wheat market was USD 754 million
    21. 21. How Government Intervention Promotes Rent-Seeking?
    22. 22. How Government Intervention Promotes Rent-Seeking?• Case-I: Farmer needs to sell to PASSCO – Farmer goes to revenue officer to obtain certificate of land authetication – The certificate is then submitted to PASSCO for obtaining the bardana bags – After filling farmer comes back to PASSCO for finally selling the output – PASSCO can reject if specifications not met• Case-II: Farmer avoids above mentioned hassle and sells to middle man – Middle man gains by buying at low and selling at a higher government-set price – The impact of subsidy ultimately doesn’t reach the grassroots farmer
    23. 23. How we Modeled Intervention? [Simulation: Economy-wide Impact of Subsidies]• Issue-I: Targeted Vs. Untargeted Subsidies• Issue-II: Subsidies Vs. Second Best (e.g. Vouchers)• Issue-III: Tax financing Vs. foreign borrowing to finance subsidy
    24. 24. How we Modeled Intervention? [Data and Simulation Design]• Social Accounting Matrix 2007-08 – Pre-18th Amendment economic structure• Simulation Design – Between 2009 and 2012 • 11 percent annual average increase in subsidy stock
    25. 25. How we Modeled Intervention? [Dynamic Computable General Equilibrium Model]• Model Specifications – Intertemporal model: Dissou and Didic (2011), Ahmed et al. (2012) – Households and firms which are both classified under constrained and non-constrained categories – Labour supply is inelastic and mobile across industries – Representative firm is assumed to exist in each industry – Composite output marketed domestically and abroad (exports)• Dynamic Features – For each period all markets are assumed to clear • Wages and prices clear factor and goods markets • Foreign Borrowing at global interest rate – Results: First Period (1st Year), Mid-Term (20 Years), End-Period (40 Years)
    26. 26. How we Modeled Intervention? [Dynamic Computable General Equilibrium Model]• Elasticities and related parameters – Substitution elasticity of CES households function (0.7%) – Substitution elasticity of first and second level CES production function (0.5 and 0.4% respectively) – Rate of depreciation (12%) – Output elasticity of public capital (0.3) – Share of public investment in total investment (28%), population growth rate (1.8%) – World real interest rate (6%) – Share of constrained households in • Consumption (57%) • Labour income (71%) • Income taxes (9.5%) • Government transfers (10%).
    27. 27. Macro-level Results – Percentage Change Variables First Period Mid-Term End-PeriodReal GDP 1.26 1.05 1.06Wage rate 2.46 2.40 2.40Price of capital good 1.15 1.10 1.10Household consumption 0.95 1.09 1.09 Myopic 2.69 2.20 2.20 Forward looking 0.28 0.61 0.62Total Investment 0.37 0.12 0.14 Public 0.79 -0.04 -0.09 Private 0.23 0.18 0.22 Myopic 1.53 1.09 1.09 Forward 0.09 0.07 0.12Total capital stock 0.06 0.12 0.12 Public 0.13 -0.04 -0.04 Private 0.03 0.17 0.17 Myopic 0.25 1.08 1.09 Forward 0.01 0.07 0.08Total exports -2.37 -2.49 -2.47Total imports 1.99 1.70 1.69Income of myopic households 2.69 2.20 2.20 Labour income 2.46 2.40 2.40 Capital income 2.72 1.05 1.04Government revenue 4.22 3.57 3.52
    28. 28. Sectoral Results – I (Percentage Change) Agri Other Processin Manufact Constructi Private Public Wheat Crops g Cotton Livestock uring Energy Textile on T&C Services ServicesGross OutputFirstperiod 23.37 2.10 2.12 -1.43 0.37 -0.18 0.04 -0.36 -0.04 0.60 -0.49 -0.37Short run 23.80 2.40 2.41 -2.74 0.78 -0.01 0.23 -0.57 0.01 0.81 -0.55 -0.32Long run 23.81 2.40 2.41 -2.73 0.79 -0.01 0.24 -0.57 0.00 0.81 -0.54 -0.36InvestmentFirst period 3.15 -7.27 -0.30 0.90 -1.12 2.42 -0.93 -0.54Short run 1.23 -2.63 -0.06 0.40 -0.48 1.05 -0.35 -0.14Long run 1.26 -2.63 -0.03 0.42 -0.46 1.08 -0.30 -0.07ExportFirst period -0.60 3.20 -2.08 -1.05 -2.93 -3.44 -2.92 -3.55 -3.88 -3.84Short run 0.26 4.34 -4.15 1.40 -2.24 -2.95 -3.26 -2.87 -3.82 -3.62Long run 0.27 4.35 -4.15 1.42 -2.23 -2.92 -3.25 -2.85 -3.80 -3.61ImportsFirstperiod -40.87 5.06 0.95 -0.26 1.80 2.92 3.85 3.60 3.39 3.18Short run -40.96 4.73 0.31 -0.16 0.17 2.49 3.70 3.60 3.19 3.08Long run -40.96 4.73 0.30 -0.15 0.16 2.48 3.69 3.59 3.19 3.05Domestic DemandFirstperiod 23.37 2.19 2.07 -1.17 0.37 -0.05 0.14 0.29 -0.04 0.90 -0.31 -0.37Short run 23.80 2.47 2.30 -2.18 0.78 0.10 0.32 0.11 0.01 1.07 -0.38 -0.32Long run 23.81 2.47 2.31 -2.17 0.79 0.10 0.33 0.11 0.00 1.08 -0.37 -0.36
    29. 29. Sectoral Results-II (Percentage Change) Agri Other Processin Manufact Constructi Private Public Wheat Crops g Cotton Livestock uring Energy Textile on T&C Services ServicesPrice of gross outputFirstperiod 0.33 -0.93 -2.44 -0.53 -0.27 0.25 0.29 0.82 1.14 0.14 0.64Short run -0.05 -1.34 -1.91 -1.53 -0.53 0.09 0.36 0.17 0.92 0.08 0.56Long run -0.05 -1.34 -1.91 -1.54 -0.54 0.08 0.36 0.16 0.91 0.07 0.54Price of domestic goodFirstperiod -30.77 1.86 -0.55 0.62 0.71 1.47 1.84 1.64 1.62 2.07 1.67 1.62Short run -30.94 1.47 -0.98 1.37 -0.30 1.19 1.67 1.73 0.97 1.83 1.61 1.54Long run -30.94 1.46 -0.99 1.37 -0.31 1.18 1.66 1.72 0.97 1.82 1.61 1.52Price of composite goodFirstperiod -25.07 1.82 -0.53 0.54 0.71 1.16 1.56 1.63 1.62 2.07 1.48 1.43Short run -25.21 1.43 -0.95 1.20 -0.30 0.94 1.42 1.72 0.97 1.83 1.43 1.36Long run -25.22 1.42 -0.96 1.20 -0.31 0.93 1.41 1.72 0.97 1.82 1.42 1.34Shadow price of capitalFirst period 1.85 -0.46 1.08 1.35 0.90 1.68 0.94 1.03Short run 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10Long run 1.10 1.10 1.10 1.10 1.10 1.10 1.11 1.11
    30. 30. Major Gainers and Losers [In Output terms]• Gainers • Losers – Wheat – Cotton – Agriculture processing – Textile – Livestock – Large Scale – Transport Manufacturing – Construction – Private Services
    31. 31. Major Gainers and Losers [In Price terms]• Gainers • Losers – Wheat – Cotton – Agriculture processing – Other Crops – Livestock – Textile – Large Scale Manufacturing – Energy – Construction – Transport – Private Services – Public Services
    32. 32. Major Gainers and Losers [In Export terms]• Gainers • Losers – Agriculture processing – Cotton – Livestock – Textile – Large Scale Manufacturing – Energy – Transport – Private services – Public services
    33. 33. Way Forward• Province-specific inquiry• Political economy of subsidies Vs. other forms of transfers• Introduce a reference simulation• Detailed welfare losses
    34. 34. Thank Youwww.sdpi.org, www.sdpi.tv 36
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