IFPRI Policy Seminar "Input Subsidy Programs in Developing Countries What Works, What Doesn’t, and Why?" presentation by Shahidur Rashid, IFPRI, on 18 April 2013.

1. Input Subsidy Programs in Developing Countries:
Lessons from an Asia/Africa comparison
Shahidur Rashid (presenting)
Paul A. Dorosh, IFPRI
M.K. Mujeri, BIDS
IFPRI POLICY SEMINAR INPUT SUBSIDY PROGRAM IN DEVELOPING COUNTRIES
18 APRIL 2013
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
WASHINGTON DC 20006

2. 1.1 Differences in natural endowment:
Irrigation potential (1)
Figure: Irrigated land as% of total ag. Land-- S. Asia
A. Irrigation potential and SSA

56.0 0.30
Irrigation potential in
Asia is high 54.0 0.25
compared to Africa
 In 2009, 56% of 52.0 0.20
agricultural lands
were irrigated. 50.0 0.15
 This compares with
48.0 0.10
only 0.28% in SSA
 Cropping intensity is
46.0 0.05
also lower in SSA--
generally one main 44.0 0.00
crops
South Asia SSA
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3. 1.1 Differences in natural endowment:
Irrigation potential (2)
Irrigation potential
makes the difference
 Fertilizer use in
irrigation land is much
higher than in non-
irrigated land
 Use of fertilizer in
non-irrigated land is
only 1/3rd of irrigated
land—this is similar to
many SSA countries
including Ethiopia
and Kenya
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4. 1.1 Differences in natural endowment:
Fertilizer production capacity (1)
B. Natural gas 7.0
 Due to large markets
6.0
Share of consumption to production
and availability of
gas, fertilizer production 5.0
grew fast in all five
countries 4.0
 When the Green
Revolution began in the 3.0
1960’s, all countries
2.0
(except Pakistan) were
large net importers
1.0
 Domestic production
was 1/3rd to 1/5th of the 0.0
total use
 By mid 1980s, more or
less self-sufficient Bangladesh
East Asia
India
Indonesia
Pakistan
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5. 1.1 Differences in natural endowment:
Fertilizer production capacity (2)
Fertilizer Consumption (in Million
tons)
Regions 1970s 1980s 1990s 2000s
Dependence on fertilizer
imports declined despite World
89. 2 128.9 131.8 154.8
an increase in fertilizer Africa
use in Asia: 2.3 3.5 3.6 4.3
 More than six-fold E. Asia
12.6 27.0 42.0 56.6
increase in S. Asia
S. Asia
 Almost 7-fold 4.01 10.3 17.9 26.2
increase in India, Bangladesh 0.23 0.60 1.1 1.6
Indonesia, Pakistan
India 3.12 8.01 14.21 20.9
and Bangladesh.
Indonesia 0.50 1.9 2.50 3.60
Pakistan 0.58 1.5 2.33 3.60
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6. 2.1 Differences in policies:
Ag spending did not go into subsidies only (1)
 In Asia, public
resources were not
only used for
subsidies:
 In fact, in the early
years of the Green
Revolution, investments
in infrastructure was
higher than total
subsidies (inputs + food
subsidies)
 In fact, fertilizer
subsidies averages only
$200 million
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7. 2.1 Differences in policies:
Ag spending did not go into subsidies only (2)
Decades Top Public Spending Returns Rank
Poverty Reduction (per Mill Rs)
1960s Roads/ Rural infrastructure 1272 1
1970s Roads/ Rural infrastructure 1346 1
1980s Roads/ Rural infrastructure 295 1
1990s Roads/ Rural infrastructure 335 2
Returns W.R.T. Ag growth (per Rs Spent)
1960s Roads/ Rural infrastructure 8.79 1
1970s Educational Investment 7.88 1
1980s Agricultural R&D 6.95 1
1990s Agricultural R&D 6.93 1
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8. 3.1 Looking forward:
Ag investment does help input promotion (1)
• Comparison of retail prices Ethiopia as % of its
with its’ neighbors indicate neighbors
that Ethiopia is very Countries DAP Urea (without
competitive. adjustments)
• Retail price of DAP and DAP Urea
Urea in Ethiopia is about Ethiopia 885 710 --
--
15% lower than Kenya;
23% and 29% lower than Kenya 1,038 845 85.3 84.02
Tanzania Malawi 1,060 -- 66.98
--
• Retail price of Urea in
Rwanda 1,009 790 87.7 89.87
Ethiopia is only 67% of
Malawi Tanzania 1146 998 77.3 71.14
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9. 3.2 Looking forward:
Technology gives reasons for hope (2)
Technology gives hopes because:
I. Potential for exploring natural gas, a key
ingredients in fertilizer production, is far better
today than any time in history.
II. Potential to better understand soil health is
much better today than ever before.
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