Nuno Santos FAO, Investment Centre. December 17,2012

Transcription

1 Nuno Santos FAO, Investment Centre December 17,2012

2 Dynamics of Laos rice sector Policy analysis Public expenditure scenarios Conclusions and recommendations Observations on analytical tools

3 Total pop.: 6.2 million (about 70% rural) Agriculture VA about 35% of GDP Rice production important for more than 700,000 HHs

4 Five provinces (all in Seven Large Plains) accounted for 70% of production increase in Share of rice production increase (in %) Share in rice area increase (in %) 30.0% 25.0% North Centre South 35% 30% North Centre South 20.0% 15.0% 10.0% 25% 20% 15% 10% 5.0% 5% 0.0% 0% -5% -10% Source: MAF data and authors calculations

5 Only 5 years registered covariate events Productivity helps increasing resilience in a national perspective

6 Declining per capita consumption with higher incomes, in line with international evidence Culture may play a role but Laos not an exception Similar results with diary data Figure 9 Laos total per capita rice consumption and income levels (using nutrition module) log total per capita expenditure (2003 prices) 2002/ /08 Source: LECS 3 and 4 datasets and authors calculations

7 Per capita rice consumption (kg/person/year) Per capita rice consumption (kg/person/year) /03 and 2007/08 LECS data show significant part of the population past max per capita consumption level Moving from 2002/03 to 2007/08 effect becomes more pronounced LECS 3 (2002/03) LECS 4 (2007/08) log total per capita expenditure (2003 prices) Per capita rice consumption (right hand scale) Income distribution (histogram) Source: LECS 3 and 4 datasets and authors calculations log total per capita expenditure (2003 prices) Per capita rice consumption (right hand scale) Income distribution (histogram)

8

9

10 Undernourishment still a big problem in most rice surplus regions in South East Asia

11 Provinces with very high rice surplus do not necessarily have improved nutritional outcomes

12 Three indicative farm models developed: Low input/low output Wet Season only (Type A) Average input, Wet Season only (Type B) Commercially oriented (Type C) Farmer typology Yield (kg/ha) Land (ha) Cropping intensity (%) Production (kg) Price (US$) Production value (US$) Inputs costs (US$) Gross margin incl. hired labour (US$) Labour (mandays) Return to labour (US$/manday) Return to family labour (US$/man-day) Type A , WS 2, , DS Type B , , WS 3, , , DS Type C , , WS 3, , , DS 4, ,

13 Insufficient returns to labor at current prices and productivity levels for Type A and at limit for Type B

14

15 About 18,000 rice mills Mostly small and medium-sized mills with maximum 2-4 ton per day of paddy rice processing capacity Most with old technology, very few large modern mills but numbers increasing Processing quality still insufficient in most cases => main impediment for exports of milled rice in near future Low milling margins suggest no excessive profits

16 Laos is part of larger regional market for glutinous rice Thai prices cause the movements of Lao prices Analysis suggests there must be significant informal trade

17

18 Targets for 2015 Total paddy rice production of 4.2 million tonnes Average yield of paddy increased significantly 170,000 ha in plains opened up/intensified 600,000 mt of high-quality, non-glutinous rice exported Malnutrition reduced by half Achieving food security and rice price stability are most important [political economy] Big confusion on policies, instruments and institutional responsibilities: Conflicting policy objectives need to be disentangled Multiple policy instruments may be required

19 75 % of urban HHs dedicate less than 30% of total expenditure to rice Small food reserve/ safety nets probably better option

20 1/ MoIC Ministry of Industry and Commerce; DTD Domestic Trade Department; IED Import-Export Department; PICD Planning and International Cooperation Department; MLSW Ministry of Labour and Social Welfare; PG Provincial Government 2/ Strategic Rice Reserve has three components with different institutional responsibilities: (i) rice reserve (including subsidized credit to millers in exchange for keeping minimum stocks) under MoIC DTD, (ii) seed reserves under MAF responsibility and (iii) rice distribution as part of safety nets under MLSW.

21 Total around US$ 9 million in 2010/11

22 Budget transfers insignificant PSE analysis suggests implicit taxation of Laos rice producers in five out of six years Trade restrictions and unpredictability imposing extra risks and costs which reflect in producer prices

23 Probably lower margins by traders etc and therefore actually just an estimate issue

24

25 3 scenarios for production and demographic trends for 2013 to 2015 (base case, low case and high case) 9 simulation runs 3 types of farmers (A, B, C) 5 investment options for each farmer type Helps to analyze trade-offs between different public investment options and Government targets

26 Baseline demographic trends assume declining pop growth rates, slow growth in urbanization and marginal decline in per capita rice consumption Paddy production will increase at annual rate of 3% even under base case, but is expected to fall short of 4.2 mill. ton target Yet, exportable surpluses are expected to increase to respectable levels

27

28 Five public investment options have been considered to create investment scenarios (3 extension and 2 irrigation) Option 1 - Adoption of R3 seed Option 2 - Introduction of improved fertilizer use Option 3 Introduction of best practice package (improved seed + fertilizer + extension) Option 4 - Rehabilitation of existing irrigation infrastructure in dry season paddy areas along with extension support Option 5 - Development of new irrigation infrastructure in wet season paddy areas along with extension support.

29 Best Practice extension package has highest efficiency of public spending New irrigation infrastructure provides highest volume of paddy per hectare but has lowest incremental paddy production per dollar spent

30 Government could achieve its production targets by focusing its additional resources just on 200,000 hectares of wet season lowland paddy => core area Target about ,000 farmers Investment model No of HHs Area (ha) Incremental production (tons) Public investments (US$) Best practice package 81, , ,440 24,904,148 Irrigation scheme rehabilitation 10,526 20,000 64,657 31,578,427 New Irrigation scheme construction 23,132 40, , ,470,542 TOTAL 115, , , ,953,117

31 Assuming that Government will invest additional $100 million over into rice production as per MAF PIP (30% extension and 70% irrigation), it could achieve 4.2 mill paddy production by 2015 Investment model No of HHs Area (ha) Incremental production (tons) Public investments (US$) Best practice package 98, , ,841 30,000,000 Irrigation scheme rehabilitation 10,000 19,000 61,424 30,000,000 New Irrigation scheme construction 4,616 7,862 34,263 40,000,000 TOTAL 112, , , ,000,000

32 Geographical focus on development of 7 Plains Largest incremental gains could be achieved by focusing on Type B farmers in lowland WS areas => largest concentration of such farmers is in 7 Plains Developing viable seed sector is a key for achieving paddy production targets => introduction of R3 seed counts for % of incremental paddy production Need to consider farmers incentives => farmers respond to Government investments only if prices are at levels which provide attractive return Trade policies, if not changed, could undermine effectiveness of public investments in rice sector.

33

34 Increasing per capita incomes, urbanization and lower population growth Rice availability no longer problem at national level Food security improvements require addressing malnutrition and specific locations/ target groups => remote areas and urban poor (affordability) Returns to labor of rice farmers with growing competition from non-ag sectors and alternative crops

35 Apparent conflict between Government food security goals and farmer incentives Trade may be single most important factor for achieving Government production goals Current trade policies may undermine effectiveness of public investments Need for more balanced public investments between extension/technology transfer and irrigation Other public investment support for seed production, post-harvest losses, credit, development of national rice standards

36 Transparent and predictable export policy Abolish export bans for milled rice Allow informal exports of paddy Establish prudent coordination mechanisms between MoIC and MAF Additional policy options what could be considered: Variable export tariff for price stabilization Index insurance could help stabilize against quantity fluctuations Establish better information base on production, consumption, and trade flows

37 Establish rice and cash reserves to target vulnerable groups in short term Buffer stocks may not have much impact on prices Focus on emergency and food security stocks for vulnerable groups Complement rice stocks with cash transfers for those who can not afford rice when prices increase Current stock management system needs to be well designed to be cost efficient Improve targeting and distribution mechanism design

38 The simulation analysis demonstrates that there are options for improved efficiency of public spending Balance investments between extension and irrigation infrastructure Establish foundation for sustainable development of seed sector Seed sector key for productivity growth

39 Need for improved data Consumption data, nutrition Farm level (prices, wages) Much can be done with HH surveys Demand trends Political economy considerations Rice food balances Combining PSE and value chain analysis Policy analysis should go beyond PER

40

41 1995-regained rice self sufficiency 1996-started informal paddy exports to VTN but Government banned exports same year 2000-ban was lifted but Cambodia was hit by the worst floods in the decade => shortages Average annual growth of paddy production 6 % from 2001 to 2011 despite low levels of public spending on agriculture Paddy production reached 8.3 million tons and surplus nearly 4 million tons by 2011 Exports of paddy >2 MT, exports of milled rice about 200,000 tons

42 Formal exports of at least 1MTof milled rice Produce at least 4 MT of surplus paddy Identifies 3 levels of actions/investments => short (quick wins); medium and long term Covers issues from institutional development, regulatory and legal framework, to trade facilitation and investments Two-prong strategy: Revert informal paddy to formal rice exports Enhance competitiveness along the value chain

43 Food Security National food availability Reasonable cost and stable food prices Household/child nutrition Manage/respond to shocks/natural disasters Rural and Regional Socio-Economic Development Farmer incomes/welfare Non-farm employment/economic multipliers Resource use efficiency (farm; supply chain) Minimize environmental impact Trade Export surplus rice to release pressure Strengthen VN s ASEAN/international relations Commercial trade development and value addition

44 Resources and Technology Rice land and production targets Restrictions on land uses and conversions Public irrigation water management to protect rice production ($) Varietal research and foundation seed production ($) Mechanization subsidies ($) Rice Market and Trade Management Quantities Targets/managed limits on annual rice exports SOE rice export trade and G2G transactions ($) Strategic reserves/other SOE rice warehousing ($) Prices Periodic paddy floor price interventions ($) Minimum export prices Periodic schemes to curtail food inflation ($)

45 Original goal to allow farmers to better time rice sales and thus increase their income Farmers take low-interest loans from BAAC which is used as collateral valued at market prices Farmers store paddy with participating rice millers and use receipts to obtain loans from BAAC Over time program was transformed into price support scheme Since 2001 Government increased pledging prices above market prices => increasing loan defaults New Government increased pledging price THB15,000/t for white rice and THB20,000/ton for Jasmine rice => 50-60% above market prices

46 12.5 MT of rice in government storage facilities - well over amount that Thailand exports normally Per ton purchase price of Thai rice is almost $200 above equivalent Indian or Vietnamese rice. Potential budgetary loss close to 5% of GDP Government talks about imposing production quotas to minimize fiscal losses Less than a fifth of the subsidy is estimated to reach poor farmers Most goes to millers and large farmers Thai exporters losing reputation for reliability Decline in Thailand s share in global rice market