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FAO regional/subregional policy

consultations on volatile prices

West Africa consultation on policy response to food price

volatility

David Phiri, Chief

FAO Policy Assistance Support Service – Rome Italy

Dakar, Senegal October 6, 2011

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Outline

• Justification for the consultations and objectives;

• Examples of regional/subregional seminar agenda;

• Information about past and future consultations;

• Lessons learnt, and way forward.

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Justification

• FAO’s mandate to respond and support informed decision making of country members;

• Price volatility and second price hike in 4 years;

• Experiences of reactions of member countries during the 2007/08 hike;

• The need for collective decisions and actions to manage food price volatility in the future.

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Objectives • Assisting governments of Member countries in

designing their immediate actions in response to the current food price crisis, in particular:

– Providing opportunities to exchange experiences made

during the 2007/08 crisis;

– Raise awareness of the various policy options and

programmatic actions and their implications;

– Identify needs and opportunities for technical support and

financial assistance;

– Identify next steps to be undertaken at country level.

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• Overview of food price situation at global and regional levels;

• Macro-economic policies and trade measures;

• Consumer policies and programmatic actions;

• Producer policies and programmatic actions;

• Way forward.

• Setting the stage at the global and regional level;

• Short-term responses to high food prices- an assessment of the food crisis of 2007-2008 and lessons learned;

• Long-term challenges

• Strategies and policy responses in the long-run;

• How others can help;

• Follow-up at county level.

Examples of seminar agenda

6 mercredi 25 mai 2011

FAPDA FAPDA

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Three policy objectives:

1.Protecting consumers by reducing world (and

domestic) price transmission

2.Facilitating access to food by consumers

3.Increasing food production

Selected examples follow.

Example of policy options and programmatic

actions.

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Reducing price transmission

from world markets

Reduce import tax

Tax breaks for importers

Facilities for importers

-Lowers prices

-Stimulates imports

-Impact on budget

-Needs budget provisions

to avoid high deficit

-May contribute to higher

world prices

Simplify import

procedures

-Same as above

-Speeds up imports

-requires time, challenges

vested interests

Reduced, banned or

taxed export

-Lowers prices

-Medium and long term

implications

-Will contribute to higher

world prices

-Risk of smuggling and

corruption

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Reducing prices on domestic markets

Reduce VAT and other

taxes on food

-Lowers prices

-Impact on budget

-Limited scope

-Effective if competition

-Price monitoring

Reduce local road taxes

and tolls

-Lowers prices

-Improved flow of

commodities

-Difficult to target food

-Compensations to local

authorities

Reduce fuel tax -Reduces transport costs

-Improves real income

-Needs budget

arrangements to avoid

high deficit

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Reducing prices on domestic markets

Progressive release of

public food stocks

- May lower prices

temporarily, depending on

size of stocks

- Can be used for safety

nets

- Consultation with private sector

needed

- Resources for replenishment

and budgetary implications

Consumer prices control

- Lowers prices for all

- May impact negatively

on producer prices and

future production

- Risk of black market

- Requires institutional capacity

Infrastructure

development / roads/

storage

- Long term action Multi-year engagement required

Improve value chain

efficiency - Long term action Low visibility, takes time

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Improved access: safety nets

Cash transfers or food

vouchers (with or without linkage to

work contribution or other

conditions)

- Increased resources for

beneficiaries

- Parallel currency

- Risk of theft, corruption and

embezzlement

-Targeting possible

-Could have inflationary effects

-Budget implications

-Where markets function and

food is available

Food distribution

- Direct access

- Where food not available

- Where markets don’t work

- Food habits

- Risks of corruption

-Targeting possible

-Under certain conditions can

encourage local production

Universal food subsidy

- Everyone benefits

- Generally very expensive

- Targeting possible on some

food products

- With rationing, risk of black

market

- Very hard to phase out

Income generating

activities

- Sustainable model for

medium and long term long startup

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Improvement of food production

short term

Direct Crop Seed

Distribution

- Lead time for procurement

- Needs good source of

adapted quality seeds

- Must be based on needs of

farmers

- Not sustainable

- May undermine local seed

systems

Community based seed

production

- seed supply of appropriate

crop varieties

- Longer startup

- Technical supervision

needed

- May help develop seed

system

Input vouchers for

vulnerable farmers

- Low cost

- Farmers allowed to chose

- Cost effective

-Input markets must work

-System to check quality of

inputs needed

Input trade fairs

-Farmers left to chose

-May help develop seed

system

-Easy to check quality of

inputs

-Difficult to reach large

numbers of farmers

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Improvement of food production: fertilizer

Bulk purchase by

government

Credit for private sector

Risk sharing fund

-Fertilizer available on time in

appropriate quantities and

quality

-Requires platform for

constructive dialogue

among public and private

sector

Universal (untargeted)

subsidized fertilizers

-Distorts production decisions

and encourages overutilization

- If input markets imperfect can

increase economic efficiency

- Small farmers have easier

access to fertilizer and can

increase yields

-Success is more likely in

areas where rain is

sufficient or reliable or in

irrigated areas

-Existence of reliable

delivery systems

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Improvement of sustainable food production

Increase extension and

advisory services on food

production

-More efficient use of fertilizer,

taking into account it higher

price

- expensive and labor

intensive

Reduce post-harvest losses

and promote longer shelf-life

products

-Reduced losses and cost of

transportation

-Nutritious food immediately

available in rural areas

-Profit through added-value

goes to the rural poor

-Employment and income for

non-farming rural dwellers

Integrated Pest Management

(IPM)

-More efficient production

-Reduced risks of pesticide

induced pest outbreaks

-Less hazards for environment

and public health

-Adequate training

-Conducive policy framework

(no subsidies on pesticides,

promoting IPM research,

farmer education, etc.)

- standards for pesticide

residue levels give incentives

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Some features of good interventions

Do (No Harm) as little harm as possible

Be clear on humanitarian versus economic scale

Ownership and participation

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Some statistics of past consultations

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Schedule of consultations

http://www.fao.org/isfp/isfp-highlights/detail-highlights/en/item/51583/icode/

Eleven consultations conducted so far:

Asia

– Asia and pacific – RAP (Bangkok)

– Pacific Islands – SAP ( Fiji)

Africa

– Eastern Africa – SFE (Addis Ababa)

– North Africa – SFC (Tunis)

– Southern Africa - SFS ( Lilongwe)

Europe and Central Asia

– Europe and Central Asia - SEC SEU (Istanbul)

Latin America and the Caribbean

– Central America SLM (San Salvador)

– Southern America (Santiago, Chile)

– Caribbean – SLC( Trinidad and Tobago)

North Africa and the Middle East

– North Africa (Tunis)

– Oriental Near East and Gulf Countries (Amman)

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Lessons learnt

• Participation of private sector, NGOs and farmers organizations crucial for wholesome debate

• High level government participation leads to concrete commitment to country-level follow-up

• Very positive feedback from the participants on the usefulness of the consultations, including for cross-ministerial domestic dialogue

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Lessons learnt (contd)

•Participants appreciate why (coordinated) policy implementation matters for mitigating high food prices issues •Participants experience that sub regional cooperation is an important step towards prize stabilization •Discussion about country level follow-up is important for real impact

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Way forward

• Follow up and next steps – Seminars at national level highly recommended (policy

dialogue); – Creation of regional online fora to discuss the outcomes

of the seminars; – Strengthening of information systems (GIEWS, FAPDA,

MAFAP, AMIS etc.) – Improve regional cooperation – Long term project for supporting the Developing

Countries to adjust to higher food prices for sustainable food security and agriculture development.

– Regional and Subregional fora of this nature to be held periodically on this and other emerging themes.

• Overall results important input to the Committee for World Food Security (CFS) next week;

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As we are in the country of the wise

“Koch Barma” who always think ahead

Jeredief = Thank you!