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by CWG1 Co-Chair, Yuzuru Ozeki/ JICA at the GBS Annual Review 2008 on 25 th November 2008

Accelerating Agricultural Transformation as a Key Instrument for Reducing Rural Poverty and Enhancing Food Security: DP Commentary. by CWG1 Co-Chair, Yuzuru Ozeki/ JICA at the GBS Annual Review 2008 on 25 th November 2008. Public Goods and Role of Government (1).

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by CWG1 Co-Chair, Yuzuru Ozeki/ JICA at the GBS Annual Review 2008 on 25 th November 2008

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  1. Accelerating Agricultural Transformation as a Key Instrument for Reducing Rural Poverty and Enhancing Food Security: DP Commentary by CWG1 Co-Chair, Yuzuru Ozeki/ JICA at the GBS Annual Review 2008 on 25th November 2008

  2. Public Goods and Role of Government (1) • Provision of public goods: the core responsibility of the Government and constitutes the foundation of an enabling business environment – including; • infrastructure (rural roads and irrigation), • R&D, • extension services • financial sector policy, etc

  3. Public Goods and Role of Government (2) • However, the most important public good is an appropriate regulatory and institutional framework for private sector initiative where we need to newly concentrate our attention. • Pricing • Land registration • Taxation • Markets for agricultural inputs

  4. Public Goods and Role of Government (3) • The position paper makes a strong case for scaling up public expenditures to make up for the past underinvestment for the sector. This should, however, be accommodated within a macroeconomically consistent resource envelope where there are other competing sectors. • The acceleration of agricultural growth that is needed if Tanzania was to achieve the MDG goal of halving the poverty rate by 2015, say to 7 or 8 percent per annum is likely to require more than scaling up of fiscal resources within the realistic resource envelope.

  5. Public Goods and Role of Government (4) • Thus, an innovative approach is needed beyond simply scaling up fiscal resources devoted to the sector. It calls for: • A substantial improvement in productivity of small holding farmers through creating an appropriate incentive system, and • Private sector initiatives in the form of PPPs in extension services, credit schemes, and agro businesses.

  6. Case Studies: Coffee, Maize, and Cotton • In all case studies it has been found that cumbersome institutional arrangements and excessive taxes are serious bottlenecks. • The main costs in the value chains are seeds, fertilizers, and other inputs, and small holding farmers are operating with very thin profit margins. • Consequently, recent increases in the prices of fertilizers and insecticides could easily wipe out any thin profit margin they may have had the previous crop season.

  7. Way forward: Regulatory Reforms and Fiscal incentives • Streamlining & simplifying licensing procedures • Implementing the Land Act • Removing price distortions (minimum wages, export ban, inefficient traders to maximize cross border trade and ensure pass through of global market prices) • Rationalizing the present cumbersome tax structure with a view to creating a level playing field, encompassing produce cess, payroll levy, fuel levy, NSSF contributions, VAT exemptions, and duty drawbacks

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