Improving Agricultural Market Performance:
Creation and Development of Market Institutions
42
membership fees and trading fees “had to be kept high in relation to the actual
business that members and users could do on the exchange.”
4. Low trade volumes and domination of the exchange by a small number of traders
caused other operators that might otherwise have joined to fear collusion and to view
the exchange as a vehicle for price manipulation.
5. Substantial Government intervention in the maize market, such as import and export
restrictions and procurement and sale of grain at non-market prices by the Food
Reserve Agency created uncertainty in the physical market. 83
Bursa Malaysia Berhad
Bursa Malaysia Berhad, the Malaysian Securities Exchange, is an exchange holding company
under the regulation of the Securities Commission and the Ministry of Finance, under several
laws governing the trade of different securities and the respective roles and responsibilities of
the Exchange and its regulators. Bursa Malaysia is descended from the Malayan Stockbrokers’
Association, founded in 1937, and the Malayan Stock Exchange, established in 1960. It
launched its first commodity futures contract, for crude palm oil, in 1980. Today it offers
commodity futures contracts for metals and for crude and refined palm oil. The standard crude
palm oil futures contract is for 25 MT, and the exchange specifies maximum weight variance;
product quality specifications; locations, procedures, and fees for physical delivery. Traders
and clearing houses must be licensed and meet minimum capital requirements. Bursa Malaysia
has stringent compliance regulations and can impose fines and other sanctions on brokers and
clearing houses that breach these regulations.
2.5.2 Marketing Boards
Many countries have had – and many still have – marketing boards, which play varying roles in
the production and marketing of agricultural commodities. As has been discussed in previous
Sections, several countries, though they have not abolished these institutions, have reformed
them to play more of a facilitative rather than a directive or controlling role. Examples in the
context of this study include Uganda’s Coffee Development Authority and Tunisia’s National Oil
Board and Cereals Board.
Such marketing boards can play a vital role in assuring domestic food supplies and product
quality for both internal and export markets. In countries with well-developed market systems
and infrastructure, these functions are often handled by private associations or cooperatives.
In countries with less-developed market systems and infrastructure, public sector boards or
state-owned economic enterprises often carry out these functions. But it is precisely in these
countries that institutional capacity is most limited, thus preventing marketing boards and
similar structures from imparting stability to markets. Examples from The Gambia and Cote
d’Ivoire, shown below, illustrate such failures. Examples provided elsewhere in this study,
from Tunisia and Uganda, among other countries, show how such institutions can succeed if
their function is to facilitate effective market operations rather than to control and participate
directly in those markets.
83 Sitko, N. & Jayne, T. (2011), “Constraints to the Development of Commodity Exchanges in Africa: A Case Study of ZAMACE,”
FSRP Working Paper, No. 53, pp. 13-14.