Improving Agricultural Market Performance:
Creation and Development of Market Institutions
77
Food Safety, Animal, and Plant Health Regulatory Act which formalized the National Food
Safety, Animal, and Plant Health Regulatory Authority (NAPHIS).125
Examples of Subsidy Reform
Some Governments of OIC Member Countries have in recent years managed to address the
problem of fuel and food subsidies, as well as reforming distribution systems and subsidies for
agricultural inputs. The importance of subsidy reform cannot be overstated. Subsidies for fuel
and food, as well as agricultural inputs, consume a large portion of the budgets of many OIC
Member Countries and create perverse incentives that can reduce food production and
increase dependence on imported food and inputs. Subsidy reform is often an essential
precursor to reform of the agro-food sector.
1. Egypt, where subsidies for energy, electricity, and food have historically accounted for
more than a quarter of Government spending, in 2014 began to cut subsidies, and in
the 2016/17 budget reduced fuel subsidies by more than 40%. Government also
began to cut food subsidies, which in 2013 amounted to US$4.31 billion out of a total
budget of about US$80 billion. These subsidies, covering some 18 different staple food
items, have been available to nearly 80% of Egyptians, regardless of income. In 2017,
Government introduced reforms to food subsidies, initially by cutting members of
middle- and high-income groups from the ranks of recipients and eventually by
replacing subsidies with cash transfers to poorer Egyptians. The subsidies, and the
ensuing reforms, have been the responsibility of Egypt’s Ministry of Supply and
Internal Trading.
2. Nigeria in 2012 abolished fuel subsidies, which in 2011 had amounted to US$8 billion,
or 30% of Government expenditure, 4% of GDP, and 118% of the capital budget.
3. Iran’s Parliament in 2010 passed a sweeping subsidy reform plan, with the intention of
replacing subsidies with targeted assistance to needy populations. Government
estimated annual food and fuel subsidy expenditures at US$100 billion, and the 2010
plan entailed cuts of some 40% of this amount. However, poor management with
insufficient data and universal coverage (an estimated 73 million of Iran’s 80 million
people applied) hindered the subsidy reform reduce poverty and food insecurity.
Phase 2 of the plan, introduced in 2014, entailed further cuts to subsidies, raising fuel
prices by 75% and further reducing food subsidies. Parliament in 2016 voted to
extend the reform plan to 2021, but implementation, which would entail cutting cash
transfers to some 24 million people, has met resistance from the Government.
4. Indonesia’s Government, in November 2014, raised subsidized fuel prices by 31% for
gasoline and 36% for diesel, and in January 2015, completely removed subsidies for
premium gasoline. The price of fuel is now adjusted monthly by the Government in line
with the international crude oil price. Before it reduced and then removed the fuel
subsidies, the Government took steps to mitigate the impact of higher transport and
food prices on poorer families. These included a monthly electronic cash transfer of
IDR 200,000 (about US$16.40) to more than 15 million vulnerable households and
125 FAIRS (2017), “Pakistan - Food and Agricultural Import Regulations and Standards – Narrative,” available at
Accessed July 2017].