Facilitating Smallholder Farmers’ Market Access
In the OIC Member Countries
16
countries elected to establish parastatal agencies and marketing boards. The agencies
varied in size and scope, but some were involved in all aspects of agricultural marketing.
They supplied inputs and credit, processed raw materials, found buyers for output, and
managed exports, imports, and domestic commodity pricing.16 Government intervention
in markets through marketing agencies was seen as a way to “get around” inefficient and
traditional marketing systems.17 Many developing countries also instituted price and
quantity restrictions, often to ensure that affordable food was available to support the
early stages of industrialization. Some governments administered prices directly by
setting fixed prices or limiting domestic price fluctuations through ceiling and/or floor
prices. Others influenced prices indirectly through output and input price subsidies. Still
others restricted the volume of imports and exports, or they maintained quotas on
domestic supply. 18
Starting in the early to mid-1980s, accompanying structural adjustment programs,
commodity and input markets gradually began to be liberalized—first in Latin America
and Asia, then in Africa, later in the socialist countries of Central and Eastern Europe, and
finally in East Asia.19 Marketing parastatals were viewed increasingly as highly inefficient,
wasteful, and fiscally unsustainable, and there was a move to restructure or dismantle
them and reduce government’s direct involvement in output marketing.20 These
institutional reforms occurred alongside efforts to liberalize input and output prices,
remove quantitative restrictions, and encourage greater private sector participation in
marketing. Studies indicate that the demise of parastatals for coffee, cocoa, and other
export crops tended to benefit farmers by increasing the share of export revenue they
received.21 The specific impacts on farmers and consumers varied, however, depending on
the completeness of reforms and underlying institutional factors, including the
appropriateness of regulatory frameworks.
As many countries embarked on reforms to remove or eliminate distortions in domestic
markets, international markets were also deregulated via the Global Agreement on Tariffs
and Trade and later the World Trade Organization (WTO).22 Trade liberalization reduced
tariffs, export taxes, consumer subsidies, and producer price controls and provided further
impetus for restructuring or dismantling parastatals. Lower trade barriers, along with
improvements in transport and technological advances in storage, processing, and
shipping, greatly increased the efficiency and distance of trade and domestic marketing.23
In the early to mid-1990s, the broader liberalization of capital markets was accompanied
by deregulation of foreign direct investment (FDI) in many developing countries.24 As FDI
flows increased and shifted toward the service sector (including retail, infrastructure, and
16 Lundberg (2005).
17 Reardon and Timmer (2007).
18 Lundberg (2005).
19 Reardon and Timmer (2007).
20 Lundberg (2005).
21 Akiyama et al. (2003).
22 Reardon and Timmer (2007).
23 Reardon and Timmer (2007).
24 Reardon and Timmer (2007).