Improving Agricultural Market Performance:
Creation and Development of Market Institutions
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costs, high risks, missing markets and lack of social capital or collective action. The Middle
East-North Africa region, which is the most arid region in the world, needs to address issues
related water scarcity and domestic food production, which lags behind the high rates of
urbanization. Nevertheless, agricultural market institutions established across OIC Member
Countries seek to address several common concerns:
 Combatting price volatility in order to provide both reasonable income for
smallholders and affordable prices for domestic consumers;
 Stabilization of domestic markets by mitigating seasonal or cyclical fluctuations in
prices or supply, and also preventing exploitation and oligopoly;
 Demand generation to protect farmer income and risk exposure (rural poverty
alleviation), while simultaneously promoting industry development; and
 Ensuring food for increasing populations of urban consumers.
Given the special place of agriculture in so many OIC Member Countries, it would be surprising,
if Governments were to prize market efficiency and liberalization above all other
considerations, and unreasonable to expect them to do so. Setting and implementing policies
for the agro-food sector, even more than in many other sectors, requires balancing of
competing and often contradictory interests and objectives: efficiency and social protection,
rural and urban, tradition and innovation, high producer prices and low consumer prices,
openness to trade and protection of domestic producers, among others.
There is considerable variability of sophistication, size, and capabilities among the food and
agricultural market systems of the OIC Member Countries. Even the approaches to market
institutions may vary greatly, which is demonstrated by the three country case studies. For
example, Tunisia has quite a range of market institutions which facilitate the implementation
of its agricultural price support measures and regulations such as subsidized inputs,
guaranteed minimum prices, and direct market intervention. Marketing boards have a
relatively strong market interference power, as they can negotiate this price freely, thereby
guaranteeing a certain minimum price or buy common wheat and durum at prices set by the
Government while selling domestic and imported cereals at fixed prices to processing facilities.
In contrast, the agricultural market system of Uganda is - to a great extent - liberalized and
market institutions are only responsible for promotion, extension services, and (some)
regulatory and promotional functions. State intervention in the agricultural and food market in
Uganda traditionally included a number of participants, particularly some concerned line
Ministries and their marketing boards and state-owned economic enterprises. The
Government of Uganda withdrew its agricultural market institutions as the common rationale
was the marketing system should be private-sector led and not restricted by Government
involvement in agricultural marketing.
Indonesia’s approach can somewhat be positioned between the more controlled price support
measures of Tunisia and Uganda’s liberalized agricultural market system, where Government
intervention is limited. The Government of Indonesia does not let market forces entirely
decide the supply and demand of the agricultural sector and leaves room for Government
intervention. The market intervention is mixed, with public intervention in certain strategic
agricultural commodities as well as private sector-led activities.