Agricultural Economics

Lecture 6: Turkish Agricultural Policies

Goals of Policy

From the social goal of saving family farm to the “economic goal of providing tools by which farm business can reduce risk”

From the goal of adjusting production to market to the “goal of expanding demand, remaining competitive, and achieving open markets internationally”

From 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 moderation

From the goal of expanding the use of agriculture’s production capacity to help meet energy needs

The Role of the Economists: Four distinct approaches used by the economists in policy analysis Scientific 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 one’s 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 Questions What is?: Based on scientific and empirical

observations. What can be?: Political elements.. What will be?: Forecast What should be?: Value judgements

Goals of Policy Analysis

Reducing uncertainty and providing

information for decision makers in the

public arena

As systematic evaluation of the technical

and economic feasibility and political

viability of alternative policies, strategies

for implementation, and consequences for

policy adoption.

approach to problems that is logical, structured, valid, and replicable

generation of feasible courses of action a 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.

Policy Analysis Process

Evaluating Alternative Policies or

Programs

Ex-Ante (rational model)

Ex-Post (program evaluation)

Policy Analysis Process

Ex-ante evaluation:

projecting future states

with and without policy or

program

Evaluating Alternative Policies or Programs

Ex-post evaluation:

Did policy or program achieve its

objective?

Was policy or program efficient,

equitable, and politically acceptable?

Evaluating Alternative Policies or Programs

Policy Analysis Framework

Policy Analysis. . . .

will involve a

RESEARCH PLAN

RESEARCH PLAN Background research:

legislative history

political environment

previous policy efforts

relevant information

RESEARCH PLAN

Research design:

specification of research objectives

outline of informational needs

specifications of methods to be used

RESEARCH PLAN Research implementation:

data collection

data tabulation

results presentation

Conclusions 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 project

Policies 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; ASCs

Number of SEEs. E.g. Türkşeker, Tekel, TMO nearly full market power

Agricultural sales cooperatives (ASCs). 16 unions. Chambers of Agriculture; semi public institutions

Functioning of Agricultural Policies Closed and domestically oriented sector Policy was strongly supportive to agriculture via

price supports and input subsidies Gradual increase of real budget outlatys Strong protectionist policy – however declining

trend in output and GVA of agriculture. Price support Input 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/ASCU Law 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.

ARIP

IMF and World Bank promoted major change in macroeconomic and agricultural policies as part of recovery package. Reduction of Price support Restructring SEEs and ASCUs Decrease input subsidies Introduction of direct income support Restructuring agricultural production Observibg effects of policy changes in a

household survey

Reduction of Price Support

Phasing 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.

Restructuring

SEEs. 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 Subsidies

Abolution 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 Support Small delay due to land registration problems Slow payments due to delays in registration

system.

Restructuring Agricutural Production Relocating 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 11

AGRICULTURE and RURAL DEVELOPMENT

AGENDA 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 Council

b) Money-Credit Coordination Council

3) Undersecretariat of Foreign Trade

4) Undersecretariat of Treasury

5) Committee on Restructuring and Support in Agriculture

Market based policies

• Market Regulation; SEE’s, ASC’s

• Agricultural Insurance

• Support Schemes

• Rural Development Activities Structural Measures (e.g. Land Consolidation)

• Research and Extension Programs

• Foreign Trade Mechanisms

• Producer Organizations

Some Policy Tools and Instruments

Objectives;

a) self-sufficiency

b) import substitution

c) rural development

d) nutritional level

e) raw material supply for industry

Traditional Policy

Instruments a) market stabilizationintervention (1932 –

2001) b) input supply c) credit supply

1-Abolition of administered prices 2-Abolition of input and credit subsidies 3-Restructuring of agricultural SEE’s and

agricultural sales cooperatives 4-Introduction of DIS Scheme 5-Restructuring of agricultural production

Basic Objective: Market Orientation

Agricultural Reform Program - 2000

2006-2010 Agricultural Strategy Paper: Objectives and Priorities (in line with the EU

Accession and WTO-AA):

1. Sustainable development, product quality

2. Food security and safety

3. Competitiveness of agricultural holdings

4. Agricultural markets and marketing

5. Rural development

6. Producers’ organizations

Support Schemes in the Strategy 1) Direct Income Support 2) Deficiency payments 3) Livestock supports 4) Rural development supports 5) Alternative crop support 6) Crop insurance premium supports 7) Environmentally based agricultural land protection support (ÇATAK) 8) Other supports

a) Basic reasons;External: WTO Reform ProcessInternal : Efficiency, Taxpayer and Consumer

Concerns b) Overall Sectoral Change;Market Orientation,Higher Competitiveness c) New Objectives; food safety, environment, rural

development d) Procedural; Registration and Control Mechanisms

Common Elements in CAP Reforms and Policy Change in Turkish Agriculture

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 the presentation for State Aids, are dispersed between the budgets

of three different institutions: • Ministry of Agriculture and Rural Affairs (MARA) • Ministry of Environment and Forestry (MEF) • Undersecretariat of Treasury (Treasury) Main agricultural supports are placed under MARA and Treasury