Improving Market Access and Commercialization: Assessment of Scenarios with Policy Analysis Matrix

On July 25th at 9:00 am (EST), Shahidur Rashid, senior research fellow, Markets Trade and Institutions Division, IFPRI, delivered a livestreamed seminar on “Market Access and Commercialization.”

A copy of the PowerPoint presentation has been made available on this site and you can view find the abstract below.

Abstract:
The development and application of a Policy Analysis Matrix (PAM) was proposed under the IFAD-IFPRI research partnership in order to better understand the policy constraints in Northern Mozambique, where IFAD is supporting the Government in the implementation of a project called Rural Markets Promotion Programme (PROMER). Three key tasks of the study were to: (i) assess the comparative advantage of the agricultural sector in Northern Mozambique,  (ii) identify the interventions and policy changes that could influence the region’s comparative advantage and associated poverty reduction implications, and (iii) validate the PAM simulations with actual field data in collaboration with national partners as part of capacity building efforts. The International Food Policy Research Institute (IFPRI) and the University of Illinois have collaborated to construct the PAM and carry out some policy simulations, using secondary data.

In general, the results indicate that there are potential interventions in both the maize and cotton sub-sectors that can promote commercialization, alleviate poverty, and accelerate economic growth. The analysis confirms that Northern Mozambique’s exports of maize and cotton are consistent with the region’s comparative advantage and are not a product of policy distortions. However, the returns to farming are small—roughly US$100 per year for the typical farmer in Nampula—implying that there are potentials for improving households’ welfare through policies and investments to reduce transaction costs and enhance productivity. For selected crops, several policy scenarios are considered in order to draw implications about market access, poverty reduction, and overall growth in Northern Mozambique. This presentation will discuss the preliminary results and potential future work under the IFAD-IFPRI research partnership 

A.     The Activity Rationale

The development and application of a Policy Analysis Matrix (PAM) was proposed under the IFAD-IFPRI partnership in order to: (i) assess the comparative advantage of the agricultural sector in Northern Mozambique, (ii) identify the interventions and policy changes that could influence the region’s comparative advantage and associated poverty reduction implications, and (iii) validate the PAM simulations with actual field data in collaboration with national partners as part of capacity building efforts.  IFPRI researchers collaborated with a professor of applied economics from the University of Illinois to construct the PAM and carry out some policy simulations using secondary data on maize and cotton farmers. However, the research team could not accomplish one of the central tasks of the proposed study—validating the PAM with field data and training local partners—during the first phase due to the capacity constraints of the IFAD-IFPRI partners in the country. Clearly, this can be addressed in the second phase, but it is to be noted that the results of this presentation need to be interpreted with caution.

B.     Study Area and Data Sources

The geographic focus of the PAM analysis was the Rural Markets Promotion Programme (PROMER) area. Data for this analysis come from the Trabalho de Inquérito Agrícola (TIA, 2008), a national rural household survey which has been implemented by Mozambique’s Ministry of Agriculture in conjunction with USAID and the Michigan State University.  Data for Niassa and Nampula Provinces were extracted from TIA (2008) and compared with research from the Competitive Commercial Agriculture in Africa (CCAA) studies of the World Bank (Arlindo and Keyser, 2007) and other studies.  Post-farm budgets were developed based on data compiled from Arlindo and Keyser (2007), Corzine (2008), Olanda Bata et al (2005), Meews (2004), and Souza Cruz (2006).  Data from TIA (2008) were contextualized and validated against various reports listed in the draft report.

C.      The Results

The caveat for the lack of validation notwithstanding, the results indicate that there are potential interventions in both the maize and cotton sub-sectors that can promote commercialization, alleviate poverty, and accelerate economic growth. The analysis confirms that Northern Mozambique’s exports of maize and cotton are consistent with the region’s comparative advantage and are not a product of policy distortions.  Five key results are noted:

  1. The returns of MZM3100 per hectare of maize imply less than US$100 per year for the typical farmer in Nampula.  This means that investments in reducing transaction costs and enhancing productivity—something PROMER is focusing on—can improve households’ welfare.
  2. The costs of currency misalignment and trade policies are important for the PROMER region for two reasons: (i) an estimated 15% overvaluation of currency in 2008 contributed to divergences between the private and social values of tradable inputs, maize, and cotton, and (ii) trade and agricultural policies in Malawi may make the market outlet for the PROMER region unreliable.  Indeed, there is evidence to suggest that the prices in Blantyre were below those in Nampula due to Malawi’s cereal trade policies.
  3. Technology and reduced transactions costs need to go hand in hand in Northern Mozambique. This will help increase the returns to Emergent Commercial Farmers (ECF) compared to the traditional technology package.  The combination of higher yields from the ECF package and improved output prices will lead to a dramatic increase in revenues and profits.   These results support an intervention strategy that combines infrastructure investment with efforts to promote technology development and market coordination.
  4. Simulations in the PAM model can indicate the increase in profitability that would come from investments to lower the cost of accessing inputs and marketing outputs. Spatially disaggregated PAMs can then be used to indicate where input costs bind farmers the most and where change could have the largest impact. The models can also indicate where the reduced cost of marketing outputs offers the greatest impact on farmers’ returns and poverty.
  5. Integrating the PROMER region with Maputo: Given recent maize prices well over $300/MT, there appears to be the potential to market maize from Nampula into Maputo if appropriate infrastructural improvements and production technologies are adopted.

D.     The Way Forward

Because the data used in this PAM exercise were not validated in the field, these results are indicative and preliminary.  The exercise suggests the potential for an analytical approach—such as developing a spatially disaggregated PAM analysis within a value chain approach—that can triangulate the logic of the integrated market development approach of the PROMER programs, as well as transfer the methods and techniques to monitor and track the outcomes of policies/interventions. However, for the meaningful application of a PAM, the exercise needs to be validated with primary data on a regular basis, which in turn requires training relevant officials within GoM and its partners.  Without buy-ins to such a plan, conducting this type of study will have little value.

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About josheard

Josh Heard is an actor in Washington, DC.
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