AGRICULTURAL MARKETING IN FAO

All decisions and transactions from farm until final sale to consumers can be considered part of a marketing system, as is the supply of inputs from the producer or importer to the farmer. Physical processes such as assembly, transport, drying, storage and processing, wholesaling and retailing are integral elements of this system as are trade finance and marketing infrastructure and the legal, administrative and macro-economic policy framework.

An efficient marketing system is essential for the development of the agricultural sector. Inasmuch as it provides outlets and incentives for increased production, the marketing system contributes greatly to the commercialisation of subsistence farmers. Failure to develop the agricultural marketing system is likely to negate most, if not all, efforts to increase agricultural production.

MARKET LIBERALIZATION WORLDWIDE

With few exceptions governments have recognised the importance of liberalizing agricultural markets. From a situation of dominant state control, countries have turned to the promotion of market-oriented economic activities carried out by the private sector. The process is, however, far from complete and continued attention is required to ensure that government policy effectively incorporates and addresses issues of marketing liberalization and helps to overcome the constraints faced by the private sector.

What role remains for Governments

in a liberalised market economy?

The private sector is now more or less universally acknowledged for its dynamism in carrying out marketing functions. In many countries, the so-called "informal" sector must be singled out for its efficient use of limited resources, vitality and adaptability, witnessed by the way it has responded to opportunities presented by the liberalization of markets.

The question then arises as to the role remaining for governments in a liberalized market economy. Providing answers to this question and assisting governments to adapt to the changed environment is one of the major roles for FAO.

PUBLIC MARKETING POLICY IN A LIBERALIZED ENVIRONMENT

In promoting private-sector marketing systems, governments initially need to examine all existing policies, rules and regulations with a view to minimising conflict with successful private-sector operations. For example, do present policies continue to favour state bodies, despite a stated commitment to liberalization? Do state bodies continue to receive preferential access to finance? Are there controls on prices, imports, exports and in-country produce movement which hinder the private sector?

Once these issues have been addressed, attention can be turned to specific government actions to facilitate private-sector marketing. Such actions can include:

• identification of constraints to promote marketing sector development and the formulation of policies, strategies and programmes to alleviate or resolve these;
• support to the development of marketing infrastructure (wholesale and retail markets, storage);
• support to the private sector in facilitating access to finance for marketing (inputs and crops);
• the development of an appropriate legal environment conducive to private-sector marketing;
• ensuring that private-sector marketing is not disrupted by, e.g., the injudicious use of food aid or untimely release of food security reserves;
• the provision of support services such as market information and marketing extension;
• recognition and promotion of trade associations and development of dialogue with such associations.

Preconditions for Government Support

Government actions, such as those listed above, cannot be carried out without policymakers and administrators being fully aware of the complexity of marketing systems.

Governments' key role today:

to be an informed partner

in constructive dialogue

with the private sector

It is therefore essential for governments to promote:

• transparency in the marketing and post-harvest system through information and research, and;
• cooperation as a result of constructive dialogue between the private sector and government.

These two requirements are interdependent, since

• without the cooperation of marketing system participants, transparency cannot be obtained, and
• without knowledge of the system, governments will be poor, often misguided, partners in the dialogue.

Transparency can be achieved in two ways:

• through ongoing studies of the marketing systems for specific commodities; and
• via effective market information services.

Dialogue with the private sector will require:

• mechanisms which promote trade sector representation, e.g. on the basis of the commodity traded or via associations of users of public or private markets;
• a coordinating institution to promote dialogue and follow up on decisions taken at meetings with the private sector.

The Legal Framework

laws reflect, support and protect the

ambitions of society

Beyond promoting transparency and dialogue, there must be a commitment on the part of governments to maintain and expand, if necessary, a legal framework which supports private secor development. Such legislation should provide for the removal of unnecessary controls, facilitate contracts, permit trade asociations and protect market participants against unfair competition, collusion, discrimination and harassment, as well as corrupt officialdom. Existing laws are in need of alignment with market economy concepts in many countries.

It goes without saying that changes to the legal framework should make maximum use of dialogue with the private sector.

Infrastructure

Governments will have to continue to provide much of the infrastructure required for efficient marketing. Rarely, for example, will private provision of roads be possible. In some other areas, however, liberalization of marketing can logically be accompanied by liberalization of infrastructure provision. An obvious area is storage, where governments should consider selling off or leasing redundant state-agency warehouses. Active participation by the private sector in planning, financing and managing infrastructure should be encouraged. Infrastructure relevant to the marketing system includes:

• transport facilities (roads, railways, ports);
• communication facilities (mail, phone-fax, telex);
• public utility supply (water, electricity)
• fiscal and trade administration (customs, port, market authorities, licensing departments, etc.)
• information and extension services;
• public storage, market and abattoir facilities.

FAO MARKETING SERVICES TO ASSIST GOVERNMENTS TO SUPPORT THE PRIVATE SECTOR

Three guiding principles in organising support facilities and services

+ cost-effectiveness

+ simplicity

+ sustainability

The following, far from exhaustive, list identifies areas in which FAO's Marketing and Farm Supply Group can provide general and country-specific guidance, either as part of FAO's Regular Programme or within a project framework.

+ the development of appropriate policies to promote and sustain competitive marketing systems for farm inputs and outputs, including the design of transition measures and the sequencing of marketing liberalization;

+ the promotion of trade associations and of mechanisms to ensure regular government dialogue with the private sector;

+ the harmonization of the legal and regulatory framework with market economy requirements and the preparation of legislation to protect free-market trade;

+ the establishment of an effective, low-cost service capable of providing commercially useful market information;

+ the planning of cost-effective improvements to wholesale, retail and assembly markets for crops and livestock and the financing of such infrastructure;

+ the strengthening of marketing and post-harvest knowledge of extension workers;

+ the improvement of urban food distribution systems and of linkages between urban areas and rural producers;

+ evaluation of the effectiveness of existing marketing systems in relation to changed policy objectives and the preparation of specific commodity marketing profiles;

+ advice on food security reserves, their establishment, operation and management arrangements and the preparation of recommendations regarding the use of food aid in a way which does not disrupt the marketing system.

FAO'S MARKETING PROGRAMME - PRESENT AND PLANNED

Present activities of the Marketing Group include:

+ Food Supply to Urban Areas - a review of how the world's major cities have responded to the need to ensure effective food marketing arrangements. With support from donor funds, particular stress is being laid on cities in francophone Africa;

+ A worldwide survey of the effectiveness and sustainability of existing market information services, as the basis for the preparation of recommendations on how to promote low-cost, commercially useful services;

+ Support to governments wishing to establish marketing extension services, thus furthering the integration of marketing considerations into agricultural extension work;

+ Support to input marketing liberalization;

+ Policy, technical and organizational assistance to TCDC (Technical Cooperation Amongst Developing Countries) Marketing Networks in Africa, Asia, Latin America and the Near East;

In addition to the above, planned activities will embrace:

+ Improvements to national legislation necessary as a result of marketing liberalization;

+ Recommendations to governments regarding food security reserve policy and reserve management;

+ Regional and national workshops to promote improved dialogue between governments and the private sector and to encourage establishment of associations representing the private sector;

+ Increased attention to the policy issues related to export crop marketing liberalization;

+ Improvements to planning and management of marketing infrastructure, and the identification of low-cost improvements to urban and rural markets.

MARKETING AND GOVERNMENTS

The value added by the post-harvest and marketing systems is estimated to equal the value of production. This is reflected in FAO's founding mandate, which spells out "distribution and marketing" as one of the five major areas of the Organization's concern.

In spite of its importance, the marketing system receives inadequate attention from most governments. To some extent this can be attributed to the fact that in the pre-liberalization era marketing was seen as the responsibility of a range of state marketing agencies.

As many of these state agencies have been closed down and others have seen their responsibilities significantly reduced, it is now necessary for central government ministries to pay increased attention to the effective functioning of the marketing sector. The Marketing Group stands ready to assist in the planning and implementation of such strengthening.

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