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Abstract
The fitness of an economy and its prospects for continued prosperity will be measured and determined by its robustness and its ability to
adapt to changing circumstances. Some countries in transition are adapting much more easily than others to rapid changes in the orientation
of their economy, the common objective of which is to achieve economic growth through the adoption of a range of characteristics generally
associated with a market economy.
Economic growth does not have to be very fast, but it must be efficient and sustainable. Policy adjustments must address political
economy concerns, while seeking to achieve macroeconomic equilibrium and price stabilization, competitiveness, efficiency and flexibility,
and the protection of the living standards of the most vulnerable population. The process of agricultural sector reform will be determined
both by economy-wide policies and sector-specific policies.
This paper first outlines a taxonomy of the objectives of agricultural sector reform, and then discusses the way in which indirect price
interventions (specifically exchange rate and interest rate policies, expansive fiscal policies and industrial protection policies), influence
agricultural growth. Lessons of experience drawn from the UNDP /World Bank Trade Expansion Program structural and sectoral adjustment
operations in Poland, and the cases of New Zealand and Chile are employed to illustrate not only the constraints that countries face in this
regard, but also in identifying targets for further action.
The third section presents what is called the 'architecture of incentives for agriculture'. In defining a strategy of agricultural sector
reform, experience has shown that a structure of incentives can be developed that creates an environment ripe for agricultural growthincentives
relating, for example, to taxation, prices, foreign investment, privatization and demonopolization, decentralization and institutional
reform. Special considerations that will require additional attention by policy-makers outside of this structure include the maintenance
of GA TT-legal principles in trade policies, issues relating to tariffication (including concerns about price risk management, food supply, and
the role of food aid), input and credit subsidies as a means to correct for market failures, and the role of regional trading blocks in world
trade.