Agricultural EconomicsLecture 6: Turkish Agricultural Policies
Goals of PolicyFrom the social goal of saving family farm to the economic goal of providing tools by which farm business can reduce riskFrom the goal of adjusting production to market to the goal of expanding demand, remaining competitive, and achieving open markets internationallyFrom the goal of soil conservation to the goal of sustainable production in the utilizaton of land, air and water.From the goal of maintaining adequate food reserves into the goal of food security, food safety, and homeland security. From the goal of domestic demand expansion into eating wisely and in moderationFrom the goal of expanding the use of agricultures production capacity to help meet energy needs
The Role of the Economists: Four distinct approaches used by the economists in policy analysisScientific approach: Most frequently used in science journals. Defining the problem, reviewing the literature, hypothesis, testing and drawing conclusions.Value judgements as well.Analytical approach: Consequences are devided into two columns: pro and cons, advantages and disadvantages, costs and benefits. Depends on ones perspective.
Evangelistic approach: Used to make the case for particular solution and to crusade for its adoption. Activists. Most compelling arguments. Opponents as well. Activists and advocates on both ends of the farm policy spectrum.Educational aproach: Alternatives/consequences method. Objectivity. Problem clearly defined, alternative solutions and probable consequences are analyzed.Emphasizes the consequences of the alternatives.
Crucial Policy Process QuestionsWhat is?: Based on scientific and empirical observations. What can be?: Political elements..What will be?: ForecastWhat should be?: Value judgements
Goals of Policy AnalysisReducing uncertainty and providing information for decision makers in the public arenaAs systematic evaluation of the technical and economic feasibility and political viability of alternative policies, strategies for implementation, and consequences for policy adoption.
Policy Analysis Processapproach to problems that is logical, structured, valid, and replicablegeneration of feasible courses of actiona search for information and evidence of benefits and other consequences of courses of action in order to help policy makers choose the most advantageous policy action.
Evaluating Alternative Policies or Programs
Policy Analysis ProcessEx-Ante(rational model)Ex-Post(program evaluation)
Evaluating Alternative Policies or ProgramsEx-ante evaluation:projecting future states with and without policy or program
Evaluating Alternative Policies or ProgramsEx-post evaluation:Did policy or program achieve its objective?Was policy or program efficient, equitable, and politically acceptable?
Policy Analysis Framework
Policy Analysis. . . . will involve a RESEARCH PLAN
RESEARCH PLANBackground research:legislative historypolitical environmentprevious policy effortsrelevant information
RESEARCH PLANResearch design:specification of research objectivesoutline of informational needsspecifications of methods to be used
RESEARCH PLANResearch implementation:data collectiondata tabulationresults presentationConclusions and recommendations
Turkish Agricultural Policies
Turkish agricultural policy dates back to 1930s. Protectionist policy.In certain periods, in 1980-1984 and again in 2001, there has been strong reduction in support and protection.Since 2001, mainly under pressure from IMF and WB, some important changes have been introduced. ARIP projectPolicies dealing with food safety and quality.Rural development policies as well..
Policy process:Interest groups:Government and leading party. Granted market power to SMEs and the cooperative unions. MARA; Ziraat Bank; ASCsNumber of SEEs. E.g. Trkeker, Tekel, TMO nearly full market powerAgricultural sales cooperatives (ASCs). 16 unions.Chambers of Agriculture; semi public institutions
Functioning of Agricultural PoliciesClosed and domestically oriented sectorPolicy was strongly supportive to agriculture via price supports and input subsidiesGradual increase of real budget outlatysStrong protectionist policy however declining trend in output and GVA of agriculture.Price supportInput subsidies were two important parts of Turkish ag. Policy.
The development of rural areas and agriculture has been impeded by heavy government intervention in the sector often counterproductive.Trade controls, government procurement, strong government involvement in marketing, input subsidies and heavy investment in irrigation structure on a fully subsidised basis have created a net inflow of resources from the government to agriculture..State budget, and implicit transfers from consumers.
ASC/ASCULaw to implement ASCUs for government programs rather than member owned cooperatives.Dominance of government control prevented the ASCUs from developing as organisations providing services for their members.Inefficient system for the ASCs.
ARIPIMF and World Bank promoted major change in macroeconomic and agricultural policies as part of recovery package.Reduction of Price supportRestructring SEEs and ASCUsDecrease input subsidiesIntroduction of direct income supportRestructuring agricultural productionObservibg effects of policy changes in a household survey
Reduction of Price SupportPhasing out of price support. Linking up to world market prices and reducing import tariffs.Procurement payments have been reduced. Some reduction in export tariffs. Not all export subsidies were abolished.Price supports are short term. Easier than institutional changes.
RestructuringSEEs. Complete resstructuring of SEEs by either privatisation or discontinuation.State owned organisations still exist and many restructuring steps still remain to be taken.Water, seed, and pesticide subsidy still exist.
Decrease Input SubsidiesAbolution of fertilizer subsidy, reduce seed pesticide and water subsidy. Reduce credit subsidies.Fertilizer subsidies reduced..Water, seed, and pesticide subsidy still exist.
Introduction of Direct Income SupportSmall delay due to land registration problemsSlow payments due to delays in registration system.
Restructuring Agricutural ProductionRelocating hazelnut and tobacco production.However, not successful.Destroying capital goods for financial compensation is difficult with high inflation rates and free rider behavior.
Notes from:SCREENING CHAPTER 11AGRICULTURE and RURAL DEVELOPMENTAGENDA ITEM 1: TURKISH AGRICULTURAL POLICY (January 23-26, 2006).
Some Major Policy Documents: Five-Year Development Plans; Annual Programs Government Programs 2000; Agricultural Reform Implementation Program(ARIP);market orientation Agricultural Strategy Paper (2006 2010); EU Accession and WTO Reform Process further market orientation
Policy Making Bodies:1) Ministry of Agriculture and Rural Affairs (MARA)2) State Planning Organization (SPO)a) High Planning Councilb) Money-Credit Coordination Council3) Undersecretariat of Foreign Trade4) Undersecretariat of Treasury5) Committee on Restructuring and Support in Agriculture
Some Policy Tools and InstrumentsMarket based policies Market Regulation; SEEs, ASCs Agricultural Insurance Support Schemes Rural Development ActivitiesStructural Measures (e.g. Land Consolidation) Research and Extension Programs Foreign Trade Mechanisms Producer Organizations
Traditional PolicyObjectives; a) self-sufficiencyb) import substitutionc) rural developmentd) nutritional levele) raw material supply for industry
Instruments a) market stabilizationintervention (1932 2001)b) input supplyc) credit supply
Agricultural Reform Program - 20001-Abolition of administered prices2-Abolition of input and credit subsidies3-Restructuring of agricultural SEEs and agriculturalsales cooperatives4-Introduction of DIS Scheme5-Restructuring of agricultural productionBasic Objective: Market Orientation
2006-2010 Agricultural Strategy Paper:Objectives and Priorities (in line with the EU Accession and WTO-AA):1. Sustainable development, product quality2. Food security and safety3. Competitiveness of agricultural holdings4. Agricultural markets and marketing5. Rural development6. Producers organizations
Support Schemes in the Strategy1) Direct Income Support2) Deficiency payments3) Livestock supports4) Rural development supports5) Alternative crop support6) Crop insurance premium supports7) Environmentally based agricultural land protectionsupport (ATAK)8) Other supports
Common Elements in CAP Reforms and Policy Change in Turkish Agriculturea) Basic reasons;External: WTO Reform ProcessInternal : Efficiency, Taxpayer and Consumer Concernsb) Overall Sectoral Change;Market Orientation,Higher Competitivenessc) New Objectives; food safety, environment, rural developmentd) Procedural; Registration and Control Mechanisms
AGRICULTURAL PAYMENTS UNDER THE BUDGET Agricultural payments covered under National Fiscal Budget are; Payments for General Services Operating Expenses Investments (related with annual investment program) and Agricultural Support Payments Agricultural payments, which are explained in detail in thepresentation for State Aids, are dispersed between the budgets of threedifferent institutions: Ministry of Agriculture and Rural Affairs (MARA) Ministry of Environment and Forestry (MEF) Undersecretariat of Treasury (Treasury) Main agricultural supports are placed