reforms in …

Reforms and Rural Transformation :

Are there Lessons for Africa from the Reform Experiences in China or Eastern

Europe ?

J. Swinnen

University of LeuvenCEPS

Stanford University

Brussels Dev Briefings September 2011

Reforms in …

• EAST ASIA: – “lifted hundreds of millions of people out of

dire poverty” (World Bank, 2000) – “the biggest antipoverty program the world

has ever seen” (McMillan, 2002)

• EUROPE: initial disappointments & decline; recovery after a decade

• AFRICA: “evidence is inconclusive … reforms have not met expectations” (Kherallah et al. 2002)

The Puzzle

•Why such differences ?

•What are lessons / implications ?

Papers• Rozelle S. and J. Swinnen, 2004, “Success and

Failure of Reforms: Insights from the Transition of Agriculture” Journal of Ecomic Literature

• Swinnen, J., Vandeplas, A. and M. Maertens, 2011, “Liberalization with Endogenous Institutions. A Comparative Analysis of Agric Reforms in Africa, Asia and Europe”, World Bank Economic Review

Some Lessons1. Are perceptions correct ?

2. Price distortions

3. Farm structures

4. Institutions of exchange

5. FDI

1. Developments

Reforms and changes in gross agricultural OUTPUT (GAO) *

-40

-20

0

20

40

60

80

100

0 1 2 3 4 5 6 7 8 9 10 11 12

Years after start of reform

GA

O In

dex CEE

FSU

EA

SSA

*Year 1 is start of reform

Data source: calculated and adapted from FAO statistics

Reforms and changes in average gross agricultural OUTPUT PER CAPITA*

-50

-40

-30

-20

-10

0

10

20

30

40

50

0 1 2 3 4 5 6 7 8 9 10 11 12

Years after start of reform

GA

O/c

apita

Ind

ex

CEE

FSU

EA

SSA

*Year 1 is start of reform

Data source: calculated and adapted from FAO & ILO statistics

Reforms and changes in average Agricultural LABOR PRODUCTIVITY (ALP)*

-30

-20

-10

0

10

20

30

40

50

0 1 2 3 4 5 6 7 8 9 10 11 12

Years after start of reform

ALP

Inde

x CEE

FSU

EA

SSA

*Year 1 is start of reform

Data source: calculated and adapted from FAO statistics

Reforms and changes in average agricultural YIELDS (land productivity) *

-20

-10

0

10

20

30

40

0 1 2 3 4 5 6 7 8 9 10 11 12

Years after start of reform

Yie

ld In

dex

CEE

CIS

EA

SSA

*Year 1 is start of reform

Data source: calculated and adapted from FAO statistics

Agricultural Output per Capita for SSA by commodity types

Source: FAOstat

-10

-5

0

5

10

15

0 2 4 6 8 10 12

Years after start of reform

GA

O p

er

ca

pit

a In

de

x

cereals, rootsand tubers

fruits andvegetables

industrial crops

all commodities

Agricultural Labor PRODUCTIVITY for Sub SSA by commodity types

Source: FAOstat

2. Agricultural price distortions

Source: OECD & World Bank

3. Farms & Labour

Cost and benefits of small farms

OK/L

Efficiency gains in labour governance

Losses in scale economies and disorganization

Net benefits of shift to household farms

Labor intensity and the shift to small farms

Balkan

Caucasus

Central EurCore CIS

China

0

20

40

60

80

100

0 0,2 0,4 0,6 0,8

Pre-reform labor intensity (person/ha)

Ind

ivid

ua

l fa

rmin

g 5

ye

ars

afte

r re

form

(s

ha

re o

f la

nd

use

)

Technology and the Nature of Productivity Gains

• In labour-intensive regions: shift to small-scale individual farming caused dramatic gains in efficiency

• In capital and land intensive regions, gains in productivity came from large farms shedding labour

• => Labor adjustment is jointly endogenous with farm restructuring

PATTERNS OF RURAL TRANSITION

TaTuRu Uz

Md KyUk

Be

Ro

Li

Po

Lv Sn

Sk

Cz

Hu

Es

Bu

Bu

RoLi

Lv Sn

Po

Ky

TuTa

Md

Uz

Uk

Ru

BeSk

Cz

Hu

Es

0

10

20

30

40

50

60

70

80

90

100

-80 -60 -40 -20 0 20 40 60

Change in agr. labour

Sh

are

of

lan

d in

IF

year 0

year 4

year 8

4. Institutions of Exchange

• Vertical coordination and interlinked contracting was very important both BEFORE and AFTER liberalization

• Before: state-organized input and output markets

• During: disintegration & disruptions

• After: private VC

“Vertical coordination” includes :

• Input supply programs• Trade credit• Investment assistance program• Bank loan guarantee programs• Extension services (technology

and management)• .....

Reforms and vertical coordination in Eastern Europe

(% of VC by dairy companies)

0

10

20

30

40

50

60

70

80

90

2 2.5 3 3.5 4

EBRD Reform IndexSource: Swinnen et al. 2009

Institutions of exchange and commodity variations in SSA

– Low value staple food crops• State remains important in exchange & VC• Private sector limited to spot market transactions • Less disruptions because limited external inputs

– Industrial crops : • Medium value traditional export commodities • External inputs : Shift from public to private VC• Major contract enforcement problems

– High value, high input non-traditional exports• Recent growth

• Entirely private sector VC organized

High-value vegetable exports from Africa to Europe

• All strongly vertically coordinated

Cases: • Madagascar: all small farms• Senegal 1: no small farms• Senegal 2: mixture & dynamic

changes

Household participation in High Value Vegetable Exports from

Senegal

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

1990 1992 1994 1996 1998 2000 2002 2004

Year

Sh

are

of

ho

us

eh

old

s

contract-farming wage employment total

Growth in Fruit and Vegetable Exports in Africa, 1961 - 2005

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

1961 1966 1971 1976 1981 1986 1991 1996 2001

Year

ex

po

rt v

alu

e (

mill

ion

$)

Data source: FAO Statistics

5. FDI growth with liberalization (flow)

Concluding comments