Improving Agricultural Market Performance:
Creation and Development of Market Institutions
36
these agricultural market institutions and interventions – particularly the pricing control
policies – became under increased scrutiny given their pressure on Governments’ budgets and
adverse impact on the efficiency of market channels.
IMF and World Bank programs required Governments to retreat from agricultural market
intervention in an attempt to address fiscal imbalances and to redefine the roles of the
agricultural market institutions56 in order to align local prices with world market prices. 57 It
became widely acknowledged subsidizing farmers and food for urban consumers
simultaneously conflicted, just as achieving food self-sufficiency and promoting exporting
commodities.58 Such agricultural market intervention was fiscally unsustainable. In response,
Governments searched to lower production prices, which, in turn, encouraged farmers to
undertake other non-agricultural activities or to move into illegal or parallel markets.59
Most countries, among many OIC Member Countries, started to reform their agricultural
market intervention. Hence, institutional development in the agricultural market of the 1980s
and 1990s is characterized as “getting the price right” as opposed to “getting the markets
right” sentiment which prevailed throughout the 1970s and early 1980s. The focus shifted to
free markets and reducing involvement and interference of Governments in agricultural
market.60
Uganda’s development path is a good example in this regard. Uganda’s agricultural marketing
system became liberalized61 and is now particularly private-sector led, as the interference of
the Government is limited to regulation, providing extension services, quality assurance,
standardization, research, and provision of inputs in order to improve market access.62 The
liberalization of Uganda’s agricultural sector started with large-scale privatization of its
agricultural state-owned economic enterprises in the early 1990s. Examples include the
Agricultural Enterprises Ltd, Uganda Tea Corporation Ltd, Uganda Fisheries Enterprises,
Uganda Meat Packers Ltd, Uganda Meat Packers Ltd, Uganda Grain Milling, and the Dairy
Corporation.
In Indonesia, a similar pattern can be witnessed, though to a lesser extent. The privatization of
Indonesia’s state-owned enterprises can be witnessed though only for a number of industries
(e.g. cement, telecommunications, mining, energy, pharmaceuticals, construction, highways,
steel manufacturing, airlines, and banking). The natural resource sector is exempt from state-
owned enterprise privatization. Previous state-owned economic enterprises have merged,
however, as is the case with Perkebunan Nusantara III, the holding company of fourteen state-
owned subsidiaries engaged in the agricultural sector. Indonesia’s National Logistics Board
56 Poole (2010), “From ‘market systems’ to ‘value chains’: what have we learnt sinc the post-colonial era and where do we
go?,” in Van Trijp, H. & Ingenbeek, P. (eds.), Markets, market and developing countries: Where we stand and where we are
heading, pp. 17-22, Wageningen: Wageningen Academic Publishers.
57 Barrett, C. & Mutambatsere, B. (2008), “Agricultural Markets in Developing Countries,” in Blume, L. & Durlauf, S. (eds.), The
New Palgrave Dictionary of Economics, pp. 2-3, London: Palgrave Macmillan.
58 Lundberg, M. (2005), “Agricultural Market Reforms,” in World Bank Group (eds.), Analyzing the Distributional Impact of
Reforms, pp. 145-153, Wageningen: World Bank Group.
59 Ibid
60 Van Trijp, H. & Ingenbleek, P. (2010), “Markets, market and developing countries: Where we stand and where we are
heading”, pp. 9-16, Wageningen: Wageningen Academic Publishers.
61 Interview conducted with Ministry of Trade, Industry & Cooperatives in Kampala, June 7, 2017
62 WTO (2012), Trade Policy Review: East African Community, Geneva: World Trade Organization.