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

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: 1.A substantial improvement in productivity of small holding farmers through creating an appropriate incentive system, and 2.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