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Agricultural Economics. Lecture 6: Agricultural Policy Tools in Turkey. 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 ” - PowerPoint PPT Presentation

Text of Agricultural Economics

  • Agricultural EconomicsLecture 6: Agricultural Policy Tools in Turkey

  • 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 moderation.From the goal of expanding the use of agricultures production capacity to help meet energy needs.

  • Goals of Policy AnalysisReducing uncertainty and providing information for decision makers in the public arena.Systematic evaluation of the technical and economic feasibility and political viability of alternative policies.

  • approach 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 COSTS! BENEFITS!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 programEvaluating 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

  • 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 projectAlso, policies dealing with food safety and quality.Rural development policies: Structural policies

  • Policy process:Interest groups:Government and leading party. Granted market power to SMEs and the cooperative unions. MARA; Ziraat Bank; ASCsNumber of state owned enterprieses s. e.g. Trkeker, TMO nearly full market powerAgricultural sales cooperatives (ASCs).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 state owned enterprieses 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 restructuring 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

  • Market based policies Market Regulation; ASCs Agricultural Insurance Support Schemes Rural Development ActivitiesStructural Measures (e.g. Land Consolidation) Research and Extension Programs Foreign Trade Mechanisms Producer Organizations

    Some Policy Tools and Instruments

  • Objectives; a) self-sufficiencyb) import substitutionc) rural developmentd) nutritional levele) raw material supply for industry

    Traditional Policy

  • Instruments a) market stabilizationintervention (1932 2001)b) input supplyc) credit supply

  • 1-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

    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 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

  • a) 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

    Common Elements in CAP Reforms and Policy Change in Turkish Agriculture