Inefficient infrastructure hinders agricultural productivity

The major constraint to productivity growth of agriculture in the developing world is the absence of efficient infrastructure system particularly transport, power supply, and communication infrastructure.
 
This was stressed by Socio-economic Planning Sec. Arsenio Balisacan during the Asia Pacific agricultural policy roundtable in Japan on Monday.
 
The immediate consequence is the high transaction costs of doing business in rural areas, effectively inhibiting farmers from taking advantage of opportunities in rapidly growing areas and urbanizing centers, including foreign markets for exports, said Balisacan.
 
“With the more prevalent changes in average weather conditions nowadays, and given the sector’s vulnerability to climate-related risks, the need for infrastructure that would help farmers cope with the effects of climate change is more urgent now than ever before.”
 
Balisacan said the second set of binding constraints relates to the regulatory and policy regime for agriculture.
 
High tariffs and quantitative restrictions set up to achieve food self-sufficiency goals induce inefficiency in production and consumption choices, dampen competitiveness and productivity, encourage rent-seeking behavior, and ultimately hurt the poor who are usually net buyers of food, said Balisacan.
 
“Partly because of high transaction costs and the high co-variance of production risks in agriculture, access to finance is far more limited for small and medium farmers, especially in developing countries, compared to their counterparts in manufacturing sector or urban areas.”
 
Balisacan noted that the inadequacy of working capital holds back the adoption of modern technologies embodied in new plant varieties, farm equipment or  post-harvest facilities.
 
“Even in cases where productivity-enhancing technologies are available, farmers too remote and too poor to purchase the inputs to use the technologies do not benefit from these innovations.”
 
“Considering the numerous development priorities and programs that governments of developing countries attend to in order to address the binding constraints to economic growth and poverty reduction, including those for agriculture, investment partnership with stakeholders particularly the private sector, is deemed crucial,” said Balisacan.
 
Balisacan stressed that public-private partnership (PPP) PPP schemes are increasingly being utilized to implement certain public sector programs and projects. 
 
“In a PPP arrangement, it is recognized that the public sector and the private sector have strengths and advantages that they could bring together to deliver a project and/or service of mutual interest, through the sharing of funds, technologies, skills, and other assets,” he added. 
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