Capítulo 2 Liberalización del mercado A medida que las economías de los países en desarrollo siguieron deteriorándose a raíz de los choques externos e internos, los PMA experimentaron mayores dificultades para obtener préstamos externos y dependieron más del Fondo Monetario Internacional y del Banco Mundial para recibir apoyo financiero. El Banco Mundial observó que las medidas de estabilización aplicadas por los PMA habían alimentado a menudo la inflación, p. El aumento de los préstamos, los controles de divisas, la ampliación de los controles de precios, el aumento de los aranceles a las importaciones y el control de las importaciones mediante licencias. Pronto fue evidente que estos remedios eran ineficaces y soluciones alternativas tuvieron que ser encontradas. Los organismos internacionales de financiación comenzaron a insistir en que los gobiernos prestatarios aplican un programa de ajuste estructural económico (ESAP). La reforma o la liberalización de los mercados, incluidos los mercados agrícolas y alimentarios, ha sido un elemento central de los PAES. En las economías de base agraria, que incluirían casi todos los países en desarrollo, la reforma de los mercados agrícola y alimentario ha sido el componente más importante de la ESAP. Habiendo leído este capítulo, el lector debe ser capaz de: Articular los principales objetivos de la ESAP. Comprender los cambios macro y microeconómicos que deben realizarse en el proceso de implementación de las ESAP Identificar los principales obstáculos que deben superarse en el proceso de reestructuración Las estrategias para la reestructuración de las empresas paraestatales de comercialización agrícola que están abiertas a los gobiernos Identificar los factores que impiden o desalientan el desarrollo de un sector privado dinámico dentro de los sistemas de comercialización agrícola y determinan cómo podrían eliminarse tales obstáculos. En este capítulo se describe en primer lugar la naturaleza de los programas de ajuste estructural económico. En segundo lugar, se revisa el curso de acción alternativo que podría perseguirse con respecto al papel de las empresas paraestatales de comercialización agrícola en los mercados liberalizados. El tercer componente son las cuestiones relacionadas con el fomento del sector privado para participar en los mercados de los que se excluyeron o al menos se encontraron con muchos obstáculos. La prolongada recesión económica que comenzó a fines de los años setenta aceleró el rápido deterioro de la situación económica de muchos países en desarrollo en forma de una brecha cada vez mayor en sus cuentas de balanza de pagos. Muchos gobiernos de los PMA reaccionaron mediante la aplicación de medidas que realmente alimentaron la inflación. Entre ellos, el aumento de los préstamos, la restricción del acceso a divisas, la ampliación de los controles de precios, el aumento de los aranceles a las importaciones y el control de las importaciones mediante la concesión de licencias. En ocasiones, estas medidas se aplicaban de manera independiente, pero en otras eran parte de los programas de estabilización económica auspiciados por el FMI. A principios de los años ochenta era evidente que las medidas de estabilización por sí solas no resolverían el problema y se buscarían enfoques alternativos. El Banco Mundial fue el primero en concebir un programa de ajuste estructural económico (ESAP). Pronto la mayoría de las agencias de financiamiento internacionales insistían en que los gobiernos prestatarios implementaran las ESAP. Un elemento clave de todos los programas de ajuste estructural ha sido la reforma o liberalización de los mercados, incluidos los mercados agrícola y alimentario. El Banco Mundial aplicó por primera vez el término ajuste estructural para describir su programa de préstamos basados en políticas que comenzó a principios de los años ochenta. (El negocio habitual del Banco Mundial es el préstamo basado en proyectos). Los objetivos de los programas de ajuste estructural no se limitan a restablecer el equilibrio macroeconómico, sino que también tienen por objeto estimular el crecimiento económico. El ajuste estructural implica mejorar la estructura de la producción mediante la asignación de recursos de acuerdo con su costo de oportunidad en lugar de en cualquier otra base. El argumento en apoyo de este enfoque es que la eficiencia de la asignación de recursos se maximiza, aumentando el valor de la producción actual y mejorando las perspectivas de la tasa de crecimiento en el tiempo y evitando la necesidad de subsidios e impuestos para apoyar la estructura productiva. Además del aumento de la eficiencia de asignación, el ajuste estructural se ocupa de las mejoras tanto en la eficiencia operacional como económica. La eficiencia operativa aumenta cuando se minimizan los costos unitarios de producción mediante una gestión eficiente y la adopción de la tecnología apropiada. La eficiencia económica es la consecuencia de un alto nivel de eficiencia de asignación más un alto nivel de eficiencia operacional y garantiza que las necesidades de los consumidores se satisfagan a precios que reflejen el costo mínimo de producción sostenible. Si bien la mejora de la estructura de producción, a través de mayores eficiencias de asignación y funcionamiento, es la plataforma central del ajuste estructural, las mejoras estructurales en la práctica también han incluido la diversificación de la economía. Es decir, al ampliar la base de la actividad económica se puede mejorar la flexibilidad de la estructura y, por lo tanto, la economía puede soportar mejor los choques externos, como la caída de los precios mundiales de ciertos productos básicos, las condiciones climáticas adversas que afectan a determinados cultivos o Cambios sustantivos en las condiciones comerciales aplicadas por bloques económicos como la Unión Europea. La inflexibilidad interna de las economías de los PMA hizo que los choques externos de los años setenta (por ejemplo aumentos de los precios del petróleo, recesión mundial y colapso de los precios de una amplia gama de productos agrícolas comercializados en los mercados mundiales) tuvieron un impacto mucho mayor De lo que hubieran tenido si esas economías tuvieran una base más amplia. El desafío para los encargados del desarrollo de programas de ajuste estructural es encontrar diseños capaces de estimular simultáneamente el crecimiento económico y, al mismo tiempo, proteger a la población de niveles excesivos de dificultad durante el curso del programa. Además, las ESAP se esfuerzan por flexibilizar la economía nacional para que pueda hacer frente mejor a los cambios en la economía mundial. En general, los objetivos de ESAP son: restaurar el equilibrio en la balanza de pagos reducir el déficit fiscal a un tamaño manejable reducir la inflación mejorar las perspectivas de empleo a largo plazo aumentar la inversión y conducir a un crecimiento sostenido. Para lograr estos objetivos, los encargados de la formulación de políticas deben: identificar una agenda de reformas en políticas e instituciones que desarrollen una secuencia de medidas que sea técnicamente coherente y políticamente sostenible y negocien estas políticas entre los gobiernos y las agencias de crédito. 1 Los objetivos mismos son a nivel macroeconómico. En la mayoría de los casos se intentan a través de políticas diseñadas para manipular la oferta en lugar de la demanda. Estas políticas se orientan a reducir el gasto en general y reorientar la demanda hacia los bienes producidos en el país. Como se señaló al principio de este capítulo, el Banco Mundial inició su programa de ajuste estructural a principios de los años ochenta y consideró esto como una divergencia a corto plazo con respecto al negocio de préstamos para proyectos. La expectativa era que la mayoría de los países que iniciaron programas de ajuste estructural los hubieran completado en tres años. Tanto la duración de los programas individuales como la medida en que el Banco estaría involucrado en los préstamos basados en políticas fueron muy mal calculados. Algunos programas de ajuste estructural se han extendido a lo largo de ocho años o más, y muchos se encuentran en su segunda y tercera fase. Además, la participación del Banco Mundial en la financiación de estos programas ha seguido aumentando y no disminuyendo, y el Banco ha reconocido públicamente que el ajuste estructural es: 2 Todo esto indica que una institución bien informada y respetada como el Banco Mundial es Aún aprendiendo de la experiencia sobre los procesos de ajuste estructural. Por lo tanto, no debe sorprendernos que otras instituciones financieras, la comunidad internacional de donantes, los ministros de gobierno, los encargados de la formulación de políticas y otras personas implicadas en el desarrollo, la ejecución o la administración de programas de ajuste estructural estén en una curva de aprendizaje y aún no comprendan lo que constituye Con respecto a los PAES. Esto no es de extrañar, ya que, como dicen Scarborough y Kydd 1: Considerando que el Banco Mundial ha sido el principal patrocinador de las ESAP, que se centran en la oferta de las economías y el impacto indirectamente en la demanda, el FMI ha sido el campeón de la estabilización económica Programas. Éstos funcionan para estimular el lado de la demanda de la economía y tienen un efecto indirecto en el lado de la oferta de la economía. Las políticas de estabilización trabajan para reducir los niveles de gasto de un país de acuerdo con sus recursos actuales. No conducen directamente a tasas de crecimiento más altas, sino que proporcionan la estabilidad económica necesaria antes de que el aumento del crecimiento pueda ser una perspectiva real. Attwood 3 explica los objetivos de la reforma macroeconómica, por lo tanto: Los instrumentos de política empleados típicamente en la búsqueda de la estabilización económica son: política cambiaria política fiscal y, por ejemplo, el rendimiento de las exportaciones (demanda) En una devaluación de la moneda local (política cambiaria) y / o mayores niveles de confianza de los inversores debido a que la inflación está contenida mientras el gobierno mantiene su propio gasto bajo control (política fiscal) y se permite que las tasas de interés alcancen su nivel económico la política monetaria). Durante la primera ronda de ESAP hubo un grado de especialización entre el FMI, que manejó las medidas de gestión de la demanda, y el Banco Mundial, que se centró en medidas de gestión de la oferta. Sin embargo, durante los años ochenta, el FMI y el Banco Mundial empezaron a desarrollar programas para un programa de préstamos de ajuste estructural. A mediados de los años ochenta, el FMI puso en marcha su Mecanismo de Ajuste Estructural y su Mecanismo de Ajuste Estructural Reforzado (SAF y ESAF). Se trata de instrumentos de préstamos concesionales a más largo plazo que se asemejan mucho a la facilidad de préstamo basada en políticas del Banco Mundial. Los países que deseen sacar provecho de la SAF o la ESAF deben desarrollar primero un Documento de Marco de Políticas, que cubra el corto y mediano plazo y el gobierno tiene que acordar conjuntamente esto con el FMI y el Banco Mundial. La Figura 2.1 ilustra las interrelaciones entre los programas de estabilización y de ajuste estructural que existen actualmente. Así, por ejemplo, la liberalización del mercado no sólo es un instrumento de ajuste de la oferta o de ajuste estructural, sino que también tiene la capacidad de contribuir a la estabilización macroeconómica, puesto que si se logra aumentar la eficiencia se puede reducir los subsidios sin tener necesariamente un efecto perjudicial Sobre el bienestar de los receptores de subvenciones. Figura 2.1 La naturaleza de las políticas de estabilización y de ajuste estructural Hay mucho debate sobre la secuencia de las medidas de reforma. La discusión tiende a centrarse en el ordenamiento del ajuste estructural con respecto a la estabilización, la liberalización de los mercados internos con los mercados internacionales y la secuenciación de medidas destinadas a liberalizar mercados específicos. Parece existir un consenso generalizado de que la liberalización de los mercados internos, en particular los del sector agrícola, debe preceder a los intentos de liberalizar el comercio internacional. Se argumenta que el éxito en la liberalización de los mercados internos ayudaría a establecer una economía más robusta y flexible, capaz de competir mejor en los mercados internacionales 5. Un objetivo central del ajuste estructural ha sido eliminar las distorsiones en la economía resultantes de la intervención gubernamental y el control central de los mercados. Un objetivo secundario ha sido mejorar la gestión de las actividades que siguen siendo responsabilidad del Estado en el período de liberalización posterior a la liberalización del mercado. El Gráfico 2.1 ofrece algunos ejemplos típicos de medidas de liberalización del mercado que se han aplicado a los sectores agrícolas y alimentarios de las economías. Los países que llevan a cabo reformas de mercado han tenido que enfrentarse a la pesada cuestión de qué hacer con las instituciones gubernamentales de comercialización agrícola. La mayoría de estas empresas paraestatales han acumulado deudas y déficits muy grandes y, por lo tanto, han sido una enorme pérdida en sus tesorerías. En algunos casos, el mal desempeño financiero se ha debido a la mala administración ya las ineficiencias operacionales, pero en otros el gobierno ha puesto en las responsabilidades sociales paraestatales tales como la gestión de la reserva estratégica de grano y las funciones de desarrollo que promueven los intereses de los pequeños agricultores. En general, estas responsabilidades sociales y de desarrollo no pueden, por su naturaleza, ser actividades rentables. Por lo tanto, el dilema de los gobiernos que buscan reducir el gasto público, en gran parte de los cuales se ha gastado en el pasado en la financiación de empresas de comercialización agrícola, pero que no puede permitirse el abandono de objetivos sociales y de desarrollo. En algunos casos, los gobiernos han disuelto sus empresas paraestatales de comercialización agrícola (como en Zambia y Nigeria), mientras que otros están tratando de reestructurar estas instituciones de comercialización. La asignación eficiente de recursos es fundamental para todos los programas de ajuste estructural. Esto no impide la participación del Estado en las actividades de producción agrícola y comercialización. Históricamente, sin embargo, la participación del gobierno en muchas áreas de la actividad económica ha demostrado ser ineficaz en términos de asignación y operación. Se ha argumentado que las estructuras gubernamentales no son lo suficientemente flexibles como para reaccionar ante los cambios en los costos de oportunidad. Además, los recursos se asignan a menudo sobre la base de consideraciones políticas y las ineficiencias operacionales surgen de la falta de incentivos. Como resultado, el ajuste estructural también ha implicado la reducción del papel directo del Estado en la comercialización. En términos generales, existen cuatro líneas de acción alternativas que pueden adoptarse con respecto a la reestructuración de las empresas paraestatales de comercialización agrícola, a saber: la abolición de las entidades paraestatales, pasando sus funciones esenciales al sector privado y / oa las organizaciones no gubernamentales (ONG) ) Transformación de la organización paraestatal en una organización no comercial que transporta reservas estratégicas de alimentos y estabiliza los precios transformar la empresa paraestatal en una empresa totalmente comercial, operando como un mercado orientado, la preocupación de lucro b y transformar el paraestatal en una empresa totalmente comercial, Orientada hacia el mercado y con fines de lucro dentro de un mercado competitivo. a. Esta sección sobre la comercialización de las empresas paraestatales se basa en gran medida en E. Attwood, la reestructuración de la comercialización agrícola Parastatals de Zimbabwe en el marco del programa de reforma de las empresas públicas 1991 1995, Organización de Agricultura y Alimentos. (Proyecto GCP / RAF / 238 / JPN). 1994. La cuestión de la privatización no es una opción única, sino una dirección de política que por sí misma implica una gama de opciones posibles 3. Se incluyen: Privatización de la gestión Es decir, la propiedad de los activos estatales que debe retener el Estado pero la administración privatizada por vía Del contrato. Privatización de activos y funciones no básicos Otra forma limitada de privatización es la separación y privatización de activos y funciones no esenciales. Esto puede implicar la venta o arrendamiento de algunas actividades de manufactura y distribución (por ejemplo, recolección, ensayos / clasificación, entrega a mercados de baja densidad / rurales), la participación en empresas conjuntas con empresas privadas, etc. Vender parte del capital de una empresa estatal. El capital puede venderse en particular a grupos particulares, p. Productores de la materia prima, miembros del personal de la empresa, pueblos indígenas, etc. Sin embargo, este método de disposición probablemente será costoso para el gobierno, ya que el patrimonio probablemente tendría que venderse a un valor inferior al valor total del mercado. El gobierno podría optar por vender parte del capital a través de una bolsa de valores. Este es el más difícil de lograr en el caso de la mayoría de las empresas paraestatales de comercialización agrícola porque generalmente tienen objetivos sociales que han eclipsado cualquier objetivo comercial. Los inversionistas potenciales pueden tener poco interés en ser ensillados con los objetivos sociales residuales, donde éstos existen. Además, su mala situación financiera los convierte en una inversión de alto riesgo y su adquisición afectaría de forma inmediata y adversa los valores de las acciones y la situación financiera de su comprador. Por otra parte, la privatización total de un paraestatal daría una señal fuerte sobre la futura política del gobierno con respecto a la propiedad pública en general. Las opciones aquí discutidas no necesitan ser consideradas como mutuamente excluyentes. Es concebible que se puedan combinar varios elementos dentro de un solo programa de reforma. Por ejemplo, una vez que se hayan liberalizado los mercados pertinentes, sería posible contratar la gestión de un organismo paraestatal y, al mismo tiempo, privatizar las funciones y / o funciones no esenciales y, al mismo tiempo, conservar la propiedad pública de los organismos paraestatales. Otras combinaciones son igualmente posibles. El paraestatal podría dividirse en varias unidades de negocio estratégicas (SBU). Por ejemplo, una Junta de Comercialización de Carne de Ganado podría dividirse en las siguientes unidades de negocio: adquisición y engorde asesoramiento en adquisición de animales servicios de asesoramiento y salud animal servicios de clasificación y envasado de carne y servicios de comercialización de carne. En muchos sentidos cada una de estas unidades de negocio opera en mercados diferentes, aunque relacionados, ya que las UBS podrían ser un centro de costo y beneficio. Una vez organizados de esta manera, pueden ser tratados independientemente entre sí. Posteriormente, surgen varias oportunidades debido a la flexibilidad que crearía una reorganización tan importante. Dependiendo de las circunstancias, algunos podrían ser privatizados, algunos podrían ser objeto de joint ventures, otros podrían permanecer en propiedad pública, pero su administración será privatizada en un intento de aumentar la eficiencia mientras se reducen los gastos gubernamentales y otros podrían permanecer como empresas públicas administradas y administradas por el gobierno . Un consejo de comercialización agrícola, o cualquier otra forma de organización de comercialización paraestatal, puede ser comercializado y / o privatizado. El proceso de comercialización de una comercialización agrícola paraestatal implica la gestión en el establecimiento de retorno sobre la inversión, el volumen de negocios y objetivos de beneficios. Para alcanzar estos objetivos, se espera que la entidad paraestatal adopte una orientación de mercado. Además, se esperaría que la entidad comercializada paraestatal recaudar fondos en los mercados financieros del sector privado y pagar intereses a la tasa del mercado en lugar de depender de fondos públicos. La privatización toma el paso adicional de transferir la propiedad de la sociedad paraestatal del sector público y la custodia de los inversionistas privados. La transferencia de propiedad puede efectuarse de varias maneras. Las acciones de la empresa pueden ser emitidas en bolsa o pueden ser vendidas a grupos de intereses especiales tales como la dirección, los empleados o los proveedores (por ejemplo, una Junta de Comercialización de Productos Lácteos podría ser vendida a productores de leche). La reestructuración de una empresa pública implica dos pasos preliminares clave: la transformación en una empresa comercial genuinamente viable, obteniendo una rentabilidad realista del capital y con un balance totalmente alineado con los resultados comerciales. La transformación del estatuto jurídico especial de la empresa en la de una institución comercial normal sin derechos comerciales especiales ni privilegios conferidos por la ley. Un paso inicial podría ser nombrar una Junta Directiva como lo hizo Zimbabwe con sus cuatro juntas de comercialización agrícola. (Es decir, la Junta de Comercialización de Productos Lácteos, la Junta de Comercialización de Algodón, la Junta de Comercialización de Granos y la Comisión de Almacenamiento en Frío). A estos directores independientes se les puede pedir que ejerzan su juicio colectivo sobre cómo la empresa puede hacerse más eficiente y satisfacer mejor las necesidades de los clientes. Debe haber entonces un grado significativo de desregulación de los mercados a los que estas empresas prestan servicios, con mayor autonomía para las juntas de comercialización, especialmente en materia de fijación de precios. Otra prioridad es tratar con las deudas acumuladas de las empresas paraestatales, cuando éstas existan. Antes de que se inicien los procesos de comercialización o privatización, generalmente hay que superar una serie de obstáculos. Deficiencias acumuladas: Las juntas que se encuentran en una situación financiera relativamente sólida están mucho mejor situadas para emprender la reestructuración que aquellas que tienen grandes déficit acumulados. El dilema al que se enfrentan los encargados de formular políticas es decidir cómo manejar estos déficits. Si simplemente son cancelados por el gobierno, entonces esto proporciona al capital paraestatal, una ventaja injusta sobre los competidores potenciales y no proporciona evidencias de la viabilidad futura de la organización para los posibles inversionistas. Incluso cuando no existe la intención de privatizar el paraestatal, la provisión de capital libre es contraria al espíritu de transformar una organización en una empresa plenamente comercializada. Fuente de financiamiento: muchas juntas de mercadeo tienen grandes déficits y necesitan nuevas inyecciones de efectivo. Sin embargo, la magnitud de los déficits suele disuadir a las instituciones de crédito comerciales de apoyarlas. Las agencias donantes internacionales son una posible fuente alternativa de fondos, pero sus reglas de operación a menudo les impiden proporcionar préstamos concesionarios al sector privado, incluso las empresas paraestatales recientemente privatizadas podrían estar disponibles para un organismo paraestatal comercializado. Pasivos fiscales: Los inversores potenciales estarían preocupados por la responsabilidad de un consejo de comercialización reestructurado por el impuesto de sociedades. Una empresa comercial que realiza pérdidas durante un período de tiempo normalmente puede compensar estos contra los beneficios obtenidos en otros años, a los efectos de evaluar sus pasivos fiscales. La forma en que los gobiernos tratan las pérdidas hechas por las juntas de comercialización antes de la privatización tendrá una influencia significativa en la forma en que son percibidas por los inversores potenciales. La magnitud de las pérdidas es tal que, si las pérdidas acumuladas se amortizan contra los beneficios futuros, podría pasar mucho tiempo antes de que la empresa pagara cualquier impuesto. Por otra parte, si no se tienen en cuenta estas pérdidas, el consejo de comercialización constituye una inversión poco atractiva. Funciones de desarrollo: Las juntas de comercialización y otros tipos de entidades paraestatales suelen desempeñar funciones de desarrollo, es decir, actividades y proyectos cuyo objetivo es llevar al desarrollo a largo plazo de un sector de la agricultura, una parte de la población y / o una región de el país. Por ejemplo, un parastatal puede ser acusado de ayudar a convertir a los agricultores de subsistencia en agricultores de cosechas comerciales, o ayudar a los pequeños agricultores a penetrar en un mercado de productos lácteos dominado por grandes fincas comerciales. Los problemas surgen cuando el consejo tiene responsabilidades de desarrollo, pero no se ha previsto un sistema adecuado de financiamiento. En principio, el problema se resuelve fácilmente en el caso de empresas paraestatales comercializadas, pero no privatizadas. Es decir, las actividades de desarrollo no viables deben ser identificadas por separado y financiadas por el gobierno. La dificultad es que los sistemas contables utilizados por muchas entidades paraestatales simplemente no son capaces de separar con precisión las actividades comerciales de las no comerciales o sus costos asociados. Cuando la intención es privatizar el sector paraestatal, es improbable que los interesados potenciales acepten un papel de desarrollo a menos que las actividades particulares puedan llevarse a cabo con un beneficio. Incluso entonces, los inversores privados normalmente quieren reservar el derecho a retirarse de una actividad, si identifican oportunidades alternativas que ofrecen un mayor retorno de la inversión. Otra complicación es el hecho de que los gobiernos tienden a tener objetivos políticos, sociales y económicos de gran alcance, muchos de los cuales probablemente transciendan algunos de los objetivos de la reestructuración paraestatal (por ejemplo, indigenización de una economía, recuperación de la sequía, etc.). Esto hace que sea difícil lidiar con la reestructuración o reforma de una comercialización agrícola paraestatal aislada de una serie de problemas de desarrollo confusos. Legislación: La reestructuración o reforma de las juntas de comercialización y otras entidades paraestatales implicará invariablemente la enmienda o derogación de un cuerpo legislativo sustancial relacionado con un consejo y los productos de los que ha sido responsable. Rara vez se trata de una simple cuestión de retirar la legislación vigente. En el caso de los productos agrícolas, la legislación se refiere a diversos problemas económicos, de salud pública, de investigación, etc. Aunque los procesos de desregulación pueden centrarse en los aspectos económicos y de comercialización, las medidas de salud pública no pueden ser barridas Normas y prácticas relacionadas con los mercados controlados. Más bien, es probable que los aspectos de salud pública tengan que ser reforzados y fortalecidos, ya que la desregulación a menudo significa que el número de participantes en el mercado aumentará en número. Del mismo modo, la necesidad de financiación a nivel de la industria de la investigación y la prestación de servicios en toda la industria permanece inalterada. Por lo tanto, es necesario revisar todo el corpus de la legislación que se refiere directa o indirectamente al organismo de comercialización de que se trate, decidir las partes que pueden ser derogadas, las que deben conservarse y las que deben modificarse. Este proceso podría involucrar al Ministerio, la Fiscalía General, el Parlamento, un Comité de Gabinete y, quizá, el Jefe de Estado. Cada uno de estos participantes es probable que tenga una amplia cartera y la agricultura es sólo uno de ellos. No es sorprendente, por lo tanto, realizar los cambios regulatorios necesarios puede tomar un tiempo considerable, incluso cuando el gobierno y la administración de las empresas paraestatales están totalmente comprometidos con el cambio. Con demasiada frecuencia, la escala de tiempo para los cambios legislativos es subestimada por aquellos que desarrollan programas de reestructuración. La cuestión legislativa no es en sí misma una limitación importante, pero el volumen de trabajo involucrado requiere tiempo. Al igual que en todos los aspectos de las actividades gubernamentales, la aprobación de una nueva legislación a través del sistema tendrá que sustituirla por otra nueva antes de que pueda pasar a la ley del país. Esto afecta inevitablemente la tasa de progreso de la reestructuración de cualquier gobierno paraestatal. La inversión de capital gubernamental en comercialización agrícola paraestatales toma a menudo la forma de préstamos irreemplazables que devengan intereses. La tasa de interés suele ser muy favorable para el sector paraestatal, en comparación con las tasas que prevalecen en los mercados de dinero abierto. En la mayoría de los casos, el gobierno no recibe realmente el interés debido a los déficits paraestatales. La conversión de la deuda en patrimonio mejora la apariencia del balance ya que las deudas deben ser pagadas y en un momento específico, mientras que la equidad pertenece a los propietarios (es decir, los accionistas) de la empresa y sólo reciben el pago cuando la empresa hace suficientes ganancias para pagar un dividendo. En general, se percibe que una empresa altamente orientada (es decir, cuyo capital se compone en gran parte de endeudamiento de deuda) es más un riesgo financiero para los inversionistas que una que depende en gran medida de los fondos de los accionistas y de las ganancias retenidas para financiar sus operaciones. Cuando los gobiernos de los países en desarrollo han considerado intercambiar sus préstamos pendientes con las empresas paraestatales por equidad, a menudo sólo tienen en cuenta la reducción o eliminación de los pagos de intereses de una junta de comercialización sitiada. Sin embargo, esto es insatisfactorio cuando se supone que la empresa tiene un carácter comercial. Si se paga poco o no se devuelve sobre las sumas de capital pendientes de pago al gobierno, entonces esto trata al capital como a las empresas paraestatales privatizadas, es una admisión del fracaso para dirigir el negocio como una preocupación comercial. Dado que el capital accionario entraña riesgos más elevados que los fondos de préstamos, durante varios años las acciones deberían obtener un rendimiento más alto, de lo contrario no se haría ninguna inversión de capital. Sin embargo, puede haber un caso para la cancelación de las inversiones de capital que se basaron en suposiciones equivocadas o políticas erróneas en años anteriores. Por ejemplo, se pueden haber realizado inversiones en el establecimiento de empresas avícolas en zonas de años rurales en previsión de la electrificación de esos distritos o aldeas. Si por cualquier motivo, esa electrificación no ha tenido lugar, esas unidades de producción serán inviables y sería mejor anotarlas. Un canje de deuda-capital sería, en el mejor de los casos, autoengaño y, en el peor de los casos, sería una ocultación de tipo inútil. En muchos casos, los donantes o las instituciones de crédito han hecho de la liberalización del mercado y alentado el aumento de la participación del sector privado en las condiciones de sus préstamos para el ajuste estructural. En algunos casos, la reforma o la abolición de una comercialización agrícola de pérdidas paraestatales también ha sido parte del acuerdo entre el prestamista y el beneficiario del préstamo. La experiencia de implementar estas reformas ha sido variada. En algunos casos, la participación del sector privado se ha desarrollado muy rápidamente, mientras que en otros, el proceso ha sido extremadamente lento. Mucho depende de la etapa de desarrollo del sector privado en el momento en que se lanzan medidas de liberalización del mercado. En algunos países, los funcionarios de marketing fuertes en el sector formal tienden a ocurrir rápidamente. Los empresarios ya existen y han acumulado una cierta cantidad de capital de sus actividades de marketing pasado. Por otro lado, cuando los gobiernos han tenido éxito en la supresión de las actividades de comercialización informal, la experiencia y la cultura del emprendimiento y la asunción de riesgos pueden haberse perdido o, al menos, haber disminuido considerablemente. En estos casos, la participación del sector privado en los mercados desregulados es un proceso mucho más lento. Para ilustrar los cambios radicales que la liberalización del mercado puede aportar a un sistema de comercialización, considere las figuras 2.2 y 2.3 al dorso. La figura 2.2 muestra los canales formales de comercialización de cereales que sirvieron a Zimbabwe antes de la liberalización del mercado. La Junta de Mercado de Granos (GMB) mantenía un monopolio y un monopolio con respecto al alimento básico del país, el maíz blanco. La GMB suministró molinos a gran escala ubicados en los centros urbanos de Zimbabwe. Un canal paralelo existía con comerciantes sin licencia que compraban y vendían cereales y pequeños molineros, utilizando la tecnología de molino de martillo, proporcionando un servicio a los clientes. Sin embargo, este comercio ilegal se llevó a cabo a una escala muy pequeña y la mayor parte del grano pasó a través del canal único formal que comprende la GMB y los molineros urbanos que utilizaban la tecnología industrial de molienda de rodillos. El gobierno de Zimbabwe pagó subsidios al GMB tanto para mantener bajos los precios al consumidor como para asegurar un suministro constante de los alimentos básicos del país. Los precios para los agricultores para el maíz fueron determinados por el gobierno en lugar de por las fuerzas del mercado. Whilst in years of normal rains Zimbabwe can grow enough grain to feed itself and can even export white maize, the total amount of grain handled by the GMB was showing a discernible fall as the large-scale commercial farmers began to grow alternative and more profitable crops. do. The section on private sector involvement in agricultural marketing draws extensively on A. Thomson and N. Terpend, Promoting Private Sector Involvement In Agricultural Marketing In Africa . FAO Agricultural Services Bulletin 106, Rome, 1993. Figure 2.2 Zimbabwe s formal grain marketing channel prior to market reform As trade in maize was deregulated, the number of custom millers increased substantially. (Custom millers mill grain which the customer brings to them. They do not provide the grain). A number of production millers also came into being. Production millers buy, mill, bag and brand maize grain using hammer mill technology. Market liberalisation brought many more players into the marketing system, giving growers a choice of market for their product. There is now more competition for the farmers maize. Consumers have also benefited. They now have a wider range of products from which to choose. Price sensitive consumers can now buy grain direct from growers, or the GMB, and take it to a custom miller. The straight-milled maize is the cheapest of the options, available. Alternatively the consumer can buy the more refined product of the production miller who dehulls the grain before milling. This is more expensive than straight-run meal but not so expensive as the highly refined meal produced by roller mill technology. The increase in the level of competition has also manifested itself in the form of marketing promotions. Prior to market liberalisation the active promotion of maize meal was virtually unheard of in Zimbabwe. The large-scale millers were assured of a sizeable demand for their product. After all, it is the staple food of the country and they were the sole suppliers. In the post-liberalisation period advertising expenditure on roller meal brands has increased substantially and in-store promotions are increasingly common. Figure 2.3 Zimbabwe s liberalised grain marketing system Initially, the World Bank attached great importance to increasing the efficiency of parastatals as a means of bringing about market reforms. After all, agricultural marketing parastatals typically represented a sizeable burden upon the governments of LDCs and were characteristically inefficient. However, in due course the Bank began to see greater potential in the liberalisation of markets and the privatisation of marketing institutions. Marketing reforms have tended to follow a pattern. In most cases, the first step has been to enfranchise private traders and actively encourage them to participate in markets from which they were previously excluded. The next step has been the removal of price controls. Marketing subsidies and parastatal subventions are then removed before the final act of market reform, i. e. the lifting of controls on international trade in agricultural products. Scarborough Kydd suggest that the following are necessary in order to promote an efficient private sector: encouraging and policing competition promoting the wider availability of information maintaining appropriate quality standards strengthening the legal system to ensure enforceability of contracts providing an adequate transport infrastructure undertaking spatial planning to allow appropriate access by marketers and consumers to central places supporting the development of credit research into the technological problems in storage and processing experienced by the private sector (which will be likely to be operating on a smaller scale, and facing different relative factor prices than parastatals) and training in technical and managerial aspects of marketing, processing and storage. Prior to liberalisation government actions were perhaps the most significant impediments to private sector trade development. Although market liberalisation has, in most instances, changed government policy towards the private sector, the relationship between the state and commercial enterprises remains critical in determining the likelihood of success of any privatisation initiatives. The state effectively sets the rules of the game within which the private sector operates, and if these rules are too restrictive, or if they change too frequently, then private sector participation may well be inhibited. Here, consideration is given to some of the potential impediments to private sector participation in agricultural markets. As shall be seen, many, but not all, of these impediments are within the direct control of government. Policy implementation: Even when government is committed to encouraging private sector participation in agricultural marketing, the bureaucracy which implements policy changes may be less committed. Years of market controls and licensing may have created large vested interests in an underpaid civil service, which may see the spectre of retrenchment in deregulation measures. It is therefore not impossible that government policy is undermined at the implementation stage. In the past, many LDC governments have been openly hostile to the private sector and so any trust established between the two parties is likely to be fragile. On the side of the private sector, bureaucratic delays will almost certainly be interpreted as an absence of real commitment, on the part of government, to free market economics and a suspicion that market liberalisation measures might be reversed at any time. Licensing: A common post-liberalisation regulation is the requirement for traders to be licensed. This has been a feature in Malawi, Mali, Senegal, Uganda, Zambia and Zimbabwe, among others. Licences allow some residual control over the private sector licences can be refused to traders suspected of unfair trading practices and can enable the state to collect marketing information. In some cases, the administration of trader licensing has presented prospective traders with few difficulties. In Malawi, for example, merely have to pay a registration fee and provide evidence of ownership of a seized weighing scale. In contrast, Uganda has used licence fees as an overt tax on traders and in Senegal, traders dealing in more than 200 kg of grain have to obtain a licence, and an authorisation to collect a specific product. Authorisation is only given after the trader has shown proof of a minimum balance in his/her bank account. The administration of licences has been inconsistent. Sometimes the bureaucracy involved in applying for licences imposes substantial costs on traders in time, bribes and fees. At the beginning of a liberalisation process, licensing regulations may not be well publicised, or may change, leading to uncertainty among traders. Quantitative restrictions: Traders are sometimes limited to transporting loads of a specified amount. This can impose costs on traders, as there may be economies of scale, which increase the efficiency of the marketing system. Quantitative restrictions can be imposed in a variety of ways. For example in Zimbabwe, even though a maize marketing liberalisation programme had been implemented, the Grain Marketing Board (GMB) refused to sell maize in quantities less than 50 kgs. This effectively prevented very small traders, without transport, from participating in the maize marketing system. Even if the prospective Zimbabwean trader can afford to hire a truck, he/she probably will not be able to purchase enough grain to make up an economic load. Chisvo et al 6 put the problem into perspective when they state: Rigid and uncertain regulations: Regulations, rather than direct intervention measures, can be the principal instrument of government policy. If regulations are too rigid then parallel or markets may re-emerge. This has happened in both Senegal and Uganda. Moreover, access to the legal system, where this becomes necessary, has to be both quick and inexpensive. The uncertainty surrounding the regulations which are to apply to the private sector can also prove an impediment to private sector participation in agricultural marketing. During the early stages of market liberalisation, changes to regulations may occur fairly frequently and this unsettles would-be investors in the agricultural marketing system. This can happen because the impact of liberalisation is difficult to predict, and as government monitors the process it may feel it necessary to tighten or relax the regulations surrounding the private sector as time passes. Price regulation: In order to retain a measure of control over food prices some governments have continued to impose price regulations in the post-market liberalisation era. These frequently take the form of floor and ceiling prices. These can have a substantial impact upon private trade. Private traders require a return on the resources which they invest in the marketing process. They will concentrate on those areas where marketing activities are most profitable, usually collection of grain near urban consuming centres, and ignore more distant markets where the information is poorer. This is certainly what happened in Malawi and Tanzania. Where government set narrow price bands within which the private sector must operate, these patterns are reinforced. Smith 8 recommends that government seeks to reduce the number and breadth of regulations to a minimum consistent with orderly production and marketing. He cites the example of the frequent requirement to obtain licences to trade and the need for separate permits for each commodity or groups of commodities in which traders wish to deal. Very often it is necessary to register the premises within which trade is to take place, and there may be restrictions on the quantities which can be traded and the times and forms of trading (e. g. wholesaling or retailing). Very often the reasons for many of these regulations have long since forgotten but traders remain on the statutes of the country. There are thus many instances where a simplification and reduction of regulations, and their consistent application, would remove a deterrent to private sector activities. Case 2.1 Tanzania - Policy Transparency And Implementation Effective liberalisation requires that prospective traders know what activities can be legally undertaken. In Tanzania, there was confusion at the local and village level as to the degree of liberalisation which had been implemented. Policy was primarily communicated through ministerial statements and answers to parliamentary questions. These channels of communication were neither reliable nor consistent in reaching the target audiences. Changes in regulations were not formally incorporated in legislation. In consequence, the enforcement of regulations varied from district to district. Some of the confusion appeared to be the result of changes in regulations. Deregulation of the wholesale trade in 1988 resulted in the private sector being able to transport grain to the main urban areas at a lower cost than the public sector through more efficient use of resources. This cost differential was reinforced by the absence of storage costs in the private sector (little storage was undertaken by the private sector), but with considerable storage costs being covered in the public sector. Open market prices fell below official prices, and made it difficult for the grain marketing parastatal NMC to sell grain, a necessary element for the effective management of the Strategic Grain Reserve. Government responded, in 1989 90, by forbidding private traders from buying grain direct from farmers. Instead, they had to buy from NMC or the co-ops. This policy was reversed just a few months later when NMC became insolvent and was removed from the grain markets. Frequent policy changes of this kind add to the private sector s costs in the form of risks and information collection with respect to current government regulations and disruption to their planning activities. If traders cannot rely upon a stable regulatory environment then they may be discouraged. The costs of operating in a formal economy with changing regulations may be greater than those of operating on parallel markets. Differing interpretations of policy, at local and central levels, due to conflicts of interest, can add further to the confusion. Local government has been partly financed through taxes on crop sales which have been collected through the primary co-operatives. Present legislation enables traders to buy direct from farmers, with the permission of the local authorities, and on payment of the crop tax. However, some local authorities prefer purchases to go through the primary co-ops because it is easier to collect the crop tax. Local authorities cannot forbid movement of grain out of a district, if taxes are paid. However, in a bad harvest year they may try to prevent movements out of areas normally in surplus, though they have no right to do so. Officially, only imports and exports are controlled. However, local authorities may feel that they can protect their own areas from the effects of drought by introducing movement controls. There appear to be considerable problems in communicating policy from central to local government, which is compounded by frequent re-interpretations of policy. Some experts believe that uncertainty over regulations is a major impediment to private sector entry into grain marketing in Tanzania. In practice, those who have good political connections seem to fare best. 7 Public and private sector competition: In many countries, liberalisation has allowed for the co-existence of public sector agricultural marketing institutions (i. e. parastatals and/or government supported co-ops). The public sector institutions may perform a market stabilising function, as say a buyer-of-last-resort, they may be the conduit through which food aid is released on to the market or they may manage the Strategic Grain Reserve. Problems arise when public sector bodies benefit from support which is not extended to the private sector. For example, subsidies on inputs, such as fuel, may only be available through public sector agents. Similarly, public and private organisations may not have equal access to credit and finance. Many state bodies have historically had easy access to finance, often at subsidised terms, and without regard to the profitability of their operations. This has two negative effects on the private sector: it reduces the public sector s costs of operations, giving it an unfair competitive advantage, and it reduces the capital available for investment in private sector agricultural marketing operations. Tanzania s private sector became the dominant grain marketing force in 1990 when it was decided that parastatals and co-ops should only have access to credit on commercial terms. Neither of these parties was considered a commercially viable agency so they could not obtain the funds they needed to carry on their marketing activities at the same level as in the past. Public sector marketing organisations have often enjoyed preferential access to foreign exchange. Input and output markets are often interlinked through credit arrangements. Where farmers rely on credit from marketing agents to buy imported inputs, private traders who have difficulty in acquiring these imports, may be disadvantaged in dealings over output trading. They may also have difficulty in obtaining access to fuel and transport, spare parts in particular, if they cannot compete for foreign exchange. In many countries, exporters are prohibited from retaining foreign exchange earnings but must convert it to local currency at official exchange rates. This has sometimes led to flourishing cross-border parallel markets. This caused the Ghanaian government to institute a foreign exchange retention system, in the post-liberalisation period, whereby cocoa exporters could keep a proportion of the foreign exchange they earned, thereby reducing the incentive for smuggling. A similar scheme operates in Tanzania where 35 of export earnings can be retained to purchase production inputs. Inadequate infrastructure: A major problem for traders in many countries is the low investment in infrastructure. In Africa, poor roads and inadequate storage facilities contribute to high marketing costs and commodity losses. In Uganda, some traders claim that the number of trips they can make have decreased to a fifth of what they could make ten years ago because of large increases in transport times and costs. Most small traders rely on public transport, or hiring space on trucks. Access to transport and ownership of trucks is often the basis for local monopolies in the transport sector, which increase traders costs. The problem is all the more acute where foreign exchange shortages compel government to restrict the import of trucks and spare parts. Adequate storage facilities can reduce crop losses and thereby food marketing costs. These often tend to be lacking in local markets, where a high proportion of grain trading takes place. Local market organisation is often the responsibility of local government. In some instances, market fees may be inadequate to maintain the market structure, or may be diverted to other areas of government expenditure. The absence of storage facilities also discourages traders from holding grain over time. This in turn prevents the development of private sector arbitrage which can moderate seasonal price fluctuations. Credit constraints: Most small traders have restricted access to formal credit markets, and tend to borrow from informal sources. These can be extremely expensive sources of funds and often lock the borrower into a never-ending cycle of debt. Commercial lending institutions are neither used to, nor motivated to lend to small-scale marketing enterprises. Financial institutions prefer to lend in large amounts to large, established enterprises operating in high profit markets. Complete liberalisation of financial markets can actually lead to a shortage of capital for investment in agriculture since it tends to be a low profit sector of the economy. Lack of access to credit and finance prevents small traders from expanding. The quantities of commodities bought and sold, the amounts stored and transported and the ability to exploit economies of scale are all restricted by poor access to credit. Problems are bound to arise in the agricultural marketing systems of countries which have implemented market liberalisation programmes if the financial system cannot be reoriented to service a large number of small private sector marketing agents as opposed to a few very large public sector organisations. Marketing information: With long established private sector marketing systems, informal networks usually exist to provide traders with information on market conditions, prices and the credit-worthiness of other parties. Conversely, where suppression of the private sector has been effective, in the past, the marketing information system tends to be underdeveloped. This was the case in Malawi where traders remained unaware of price differentials between markets and were unable to exploit opportunities for profitable market arbitrage which would also have increased market efficiency. Where there have in the past been strong parallel markets, information systems may exist but access to them may not be extended to post-liberalisation market entrants. So far in this chapter consideration has only been given to impediments to private sector investment in newly liberalised markets that operate at the micro-economic level but there are also macro-economic aspects of the problem. In particular, private sector participation is affected by exchange rate policy, economic stabilisation measures and the level and nature of economic aid. Exchange rate policy: To improve the balance of payments, exchange rate devaluation is usually implemented. Devaluation increases the cost of imports, and with it many agricultural marketing costs are increased e. g. packaging/bags, fuel and transport costs, agricultural inputs and imported foods. Where the private sector is involved in the marketing of imports, government needs to acknowledge where price increases are due to devaluation rather than the result of privatisation. Equally, where the private sector is operating under controlled prices, the allowance for marketing margins accommodates increases in cost due to devaluation. Domestic stabilisation policy: Stabilisation programmes usually mean improved budgetary control through stricter monetary control, reductions in expenditures and tax increases. Each of these is likely to impact on both traders costs and revenues. Austerity measures invariably reduce demand for most products and at the same time traders can find that they result in substantial increases in interest rates, licence fees, market fees, sales taxes, etc. The danger is that traders can be driven back into informal markets where some of these costs can be avoided. Economic aid: Structural adjustment programmes normally attract an increased inflow of aid from donors wishing to support the reforms. Much of the additional aid will be in the form of foreign exchange but some will be food aid or fertilizer aid. The way in which this aid is distributed can impact seriously on the development of the private sector. For instance, the private sector needs access to foreign exchange on the same basis as the public sector and co-operative agencies. Food and fertilizer aid distribution can have a more disruptive effect on private trade if it is not carefully timed. An influx of cheap food can reduce prices and cause considerable losses for private traders who have stored food grains. A system of distributing aid through auctions has worked well in Somalia and could work elsewhere. Governments have to be careful in accepting aid projects which compete with potential private sector initiatives. These might be, for example, projects to build processing plants or storage facilities. Government has to be clear where it wants to encourage private sector investment. Governments can seek assistance from international donors on behalf of the private sector. Help can be sought to improve transport facilities or access to credit, or to fund training in technology, technical competence or business skills. There are a number of areas in which government can lend support to the development and expansion of the private sector. Clear policy statements: The state has to make clear its view of the role of the private sector in agricultural marketing system, i. e. it must have clear objectives with the respect to the marketing system. It is not enough to simply lift existing restrictions on the functions of the private sector. A positive role should be developed for it. The government s policy has to be announced in unambiguous public statements, which make clear the extent of market deregulation. It is equally important that the extent of the future involvement of the public sector in the agricultural marketing system be clearly articulated. If the public sector is allowed to enter the market, it must be known under what conditions, at what prices, and for what purpose this will occur. If a Strategic Grain Reserve is held then the trigger for grain release must be known to the private sector. Otherwise, uncertainty about the likely effect of government policy on market conditions will prevail. Regulatory framework: All to often in structural adjustment programmes the need for supporting legislation is either under-estimated or neglected altogether. Government can provide a set of stable regulations which would: clearly lay out the rights and obligations of consumers, producers and traders, underpinned by a carefully constructed contract law establish an acceptable system of weights and measures and perhaps a product grading system clearly specify the kind of exchanges that are legal, between which parties, and the constraints placed upon the place of exchange and the designation of an inspectorate to enforce the rules and regulations. Case 2.2 Uncertainty Over Government Policy With Respect To Public Versus Private Sector Marketing Of Agricultural Products In Malawi, one of the problems which has been identified in the process of liberalisation is the very seasonal nature of private sector trade. Traders are also unwilling to become involved in the distribution of inputs, and, perhaps more importantly, sell grain in the rural areas in the pre-harvest period. There are a number of possible reasons for this. ADMARC, the state marketing agency, operates on a pan-seasonal price basis, which may give insufficient profit to the private sector to operate outside of the harvest period. Much of the private sector trade appears to take place before the ADMARC buying stations open for the season. There appears to be a lack of storage in the private sector. There may be insufficient information about the need for urban-rural grain flows in the pre-harvest season. Survey evidence suggests a substantial demand for grain in rural areas but most private trade moves grain from the rural areas to the towns. In the case of fertilizer distribution, lack of private sector distribution is undoubtedly related to the operation of the government subsidy programme. Overall development of medium to large firms, specialised in grain trading, will be hindered unless the obstacles to building up a year-round business dealing in both inputs and outputs are identified. There may be problems both of uncertainty and transitional adaptation, and of government policy, with respect to pricing and the activities of ADMARC. 7 Training: Many of the entrepreneurs who come into a liberalised market will lack the basic knowledge and skills to ensure that their businesses can survive the periodic adverse economic conditions. Some may be technically proficient but know little about financial management or marketing others may possess the basic entrepreneurial skills but have very limited levels of technical know-how. If government wishes to establish a private sector capable of growth and development then training programmes will be required. This does not necessarily mean that government has to provide or even fund the training. It may mean, instead, that government facilitates the training. Infrastructure: Investment in roads, market places and storage facilities can reduce marketing costs and thereby increase levels of commercialisation. This might involve investing in new facilities and/or rehabilitating existing facilities. Where public sector marketing boards have under-utilised capacity, particularly in storage, this should be made available to the private sector, either through divestiture or through leasing arrangements. Information systems: The provision of market intelligence removes a barrier to market entry. Larger and longer established organisations, including marketing parastatals, have usually developed intelligence gathering systems over time. They have little motivation to share their information with smaller enterprises. In fact, to do so would lose them an important competitive advantage. This being the case, a government sponsored marketing information system would improve market transparency and help small-scale enterprises compete more effectively with larger organisations. Case 2.3 Providing Appropriate Market Infrastructure In Dar Es Salaam and the regional capitals in Tanzania, wholesale marketing takes place in cramped conditions with few facilities for shelter or storage. Traders move their produce on as quickly as possible, to reduce losses from rain and theft. In most of these locations there are few facilities for weighing grain, and sometimes water and sanitation are also missing. In some markets, traders have organised in small groups to build crude shelters, but provision of more elaborate facilities are clearly beyond their capacity. Care has to be taken that these are built in appropriate locations. In Dodoma, the council has built a new wholesale market which is currently being used to about 10 of capacity. This is partly because of its location, and partly because it has been built as an auction market, which is not the basis on which wholesale grain trade takes place in Tanzania. Consultation with traders would help avoid this waste of resources. However, there are indications that other local authorities have been impressed by the appearance of the Dodoma market, and are contemplating building similar markets. 7 Transport: Transport shortages are a common complaint among private sector agribusinesses. This is especially true of small-scale businesses located in rural areas. Perhaps the best government can do is to give transportation a high priority within its foreign exchange allocation so that more vehicles, spares and fuel can be brought into the country. Emphasis should be placed on increasing the number of vehicles in the possession of the private sector. Credit: Since poor access to credit and other forms of finance are a major obstacle to the private sector, especially the small-scale operator, government may have no choice but to get involved in establishing appropriate lending schemes. These may be financed from the Treasury, through special funds provided by international donors or through savings and credit schemes initiated by the private sector itself. Alternatively, government can encourage commercial banks to set special loan schemes targeted at various sub-sectors of agriculture and agribusiness. Due to the inherent risks in agriculture, and in dealing with small businesses with very limited resources, lending institutions will probably require some form of government underwriting of these schemes. Case 2.4 Malawi s Attempt At Directing Credit Towards Private Traders The difficulties which can arise in developing and implementing credit schemes for private traders are immense, and not always easy to anticipate. An agreement was reached between the Government of Malawi and the World Bank, in the mid-80s, that 1.5 million Kwacha was to be made available for lending to private traders. The money was lodged with the Reserve Bank of Malawi (RBM) which would lend it on to a disbursing institution. After much discussion, the government decided that SEDOM, (Small Enterprise Development Organisation of Malawi), an organisation set up with EEC funds to lend to small-scale industry, should be the disbursing institution. SEDOM appears to have been reluctant to handle this programme and negotiations with RBM over who would cover the running costs of the programme were protracted. Eventually an agreement was signed between RBM and SEDOM in 1990. The announcement of the programme excited considerable interest among Malawian businessmen. However, there was confusion as to the precise process for the loan disbursement from RBM, SEDOM expected a tranche of money to be transferred up front, whereas RBM operates a system of reimbursing organisations after the loans have been made. Up Until August 1991, no loans had been made under the programme. This may be a rather extreme example of poor communications between organisations, but it is also indicative of a general unwillingness to get involved in extending credit to private traders, who are seen as having little collateral to offer and therefore are very poor risks. It is not enough for donor agencies such as the World Bank, or governments, to allocate funds for credit programmes. They have to be prepared to invest time and money in developing new and flexible lending procedures. 7 Market liberalisation, including the reform of agricultural and food markets, is a key element of economic structural adjustment programmes. The origins of the term structural adjustment rest with the entry of the World Bank into policy-based lending, in the early 1980s. It refers to restructuring production so that the allocation of resources is based upon opportunity cost and in this way optimises the outputs of those resources. Thus structural adjustment is intended to lead to economic growth. Originally the supply side policies of the World Bank were pursued independently of the economic stabilisation programmes of the IMF, which deal more with the demand side of an economy. However, since the mid-1980s the two organisations have worked together to ensure that structural adjustment and stabilisation programmes have complemented one another. Before the benefits of ESAP can be realised, policy makers must arrive at an agenda of policy and institutional reforms and design a sequence of measures which is technically consistent and politically sustainable. Unfortunately, there is little informed guidance available to them in their task, because there is no substantive empirical understanding of best practice in structural adjustment. It is likely to be a considerable time yet before enough data has been collected and analysed to provide a basis for guiding policy makers. A major question for most LDCs that seek to implement ESAPs is what role, if any, to assign to agricultural marketing parastatals after markets have been liberalised. The options range from disbanding them altogether to privatising either the organisations themselves or their functions. These are not easy decisions. If these parastatales are abolished then there has to be solid evidence that there are other organisations both able and willing to perform their functions. Some of these functions may prove wholly unattractive to commercial enterprises but must be performed by one agency or another (e. g. management of the strategic food reserve and developmental projects). If, alternatively, the decisions is to privatise an agricultural marketing parastatal then, in most cases, difficulties such as accumulated deficits, credibility with lending institutions and future tax liabilities first need to be overcome. More often than not encouraging the private sector to invest in liberalised markets is an integral component of ESAPs. It is reasoned that a competitive private sector can greatly improve the efficiency of a marketing system. There are, however, a number of impediments to the participation of the private sector when markets are opened up to competition for the first time. These include a lack of trust, on the part of prospective entrepreneurs, that market liberalisation measures will not be reversed, trade licensing and regulatory arrangements that are perceived to be too restrictive, the continuance of any form of price control and uncertainty that surviving marketing parastatales will not be given unfair advantages over them. Other common impediments are inadequacies in marketing infrastructure, access to credit and access to marketing information. Private sector participation in liberalised agricultural markets is also influenced by macro-economic as well as micro-economic policies. Exchange rate policy, economic stabilisation measures and the inflow of economic aid to the country all influence the incentive to private entrepreneurs to enter the liberalised market. Governments that sincerely wish to encourage private sector participation in the marketing system should ensure that policy statements are widely communicated and unambiguous in the intent to promote private sector involvement should develop a supportive regulatory framework need to provide technical and entrepreneurial training have to initiate improvements in the marketing infrastructure promote the establishment of a marketing information system to guarantee market transparency and help prospective participants to gain access to formal sources of credit. From your recall of the material presented in this chapter, give brief answers to the following questions: What are the fundamental distinctions between structural adjustment and stabilisation programmes What would be the purposes of any regulatory framework designed to support market liberalisation measures List the main obstacles to the entry of the private sector into deregulated agricultural marketing systems. What are the alternative ways in which a marketing parastatal might be restructured Distinguish between commercialisation and privatisation. What are the alternatives to the full privatisation of agricultural marketing parastatal Name the 3 policy instruments used in IMF sponsored economic stabilisation programmes Briefly outline the main issues to be addressed before privatising or commercialising an agricultural marketing parastatal. Why is the new wholesale market in Dodoma under-utilised Specify 3 major objectives of Economic Structural Adjustment programmes. 1. Scarborough, V. and Kydd, J. (1992), Economic Analysis Of Agricultural Markets: A Manual. Chatham, UK, Natural Resource Institute, p. 140. 2. World Bank (1989), , A Long-Term Perspective Study. World Bank, Washington D. C. USA. 3. Attwood, E. (1994), The Restructuring Of The Agricultural Marketing Parastatals Of Zimbabwe Under The Public Enterprise Reform Programme (1991 1995), Food And Agriculture Organization. (Project GCP/RAF/238/JPN). 4. IMF (1987), IMF Survey, February 9. 5. Spooner, N. and Smith, L. (1989), Structural Adjustment Policy Sequencing in Sub-Saharan Africa, Rome: Economic and Social Policy Division, Food and Agriculture Organization. 6. Chisvo, M. Jayne, T. S. Telft, J. Weber, M. and Shaffer, J. (1991), In: Market Reforms, Research Policies And SADCC Food Security UZ/MSU Food Security Research in Southern Africa Project, Rukuni, M. and Wyckoff, J. B. (eds), Department of Agricultural Economics and Extension, University of Zimbabwe. 7. Thomson, A. and Terpend, N. (1993), Promoting Private Sector Involvement In Agricultural Marketing In Africa, FAO Agricultural Services Bulletin 106, Rome. 8. Smith, L. (1992), Agricultural Sector Performance And Policy And The National Economy. Network And Centre For Agricultural Marketing Training In Eastern And Southern Africa, p. 74 80. When an organisation has made a decision to enter an overseas market, there are a variety of options open to it. These options vary with cost, risk and the degree of control which can be exercised over them. The simplest form of entry strategy is exporting using either a direct or indirect method such as an agent, in the case of the former, or countertrade, in the case of the latter. More complex forms include truly global operations which may involve joint ventures, or export processing zones. Having decided on the form of export strategy, decisions have to be made on the specific channels. Many agricultural products of a raw or commodity nature use agents, distributors or involve Government, whereas processed materials, whilst not excluding these, rely more heavily on more sophisticated forms of access. These will be expanded on later. The objectives of the chapter are: The chapter begins by looking at the concept of market entry strategies within the control of a chosen marketing mix. It then goes on to describe the different forms of entry strategy, both direct and indirect exporting and foreign production, and the advantages and disadvantages connected with each method. The chapter gives specific details on between production and marketing. An organisation wishing to faces three major issues: i) Marketing - which countries, which segments, how to manage and implement marketing effort, how to enter - with intermediaries or directly, with what information ii) Sourcing - whether to obtain products, make or buy iii) Investment and control - joint venture, global partner, acquisition Decisions in the marketing area focus on the value chain (see figure 7.1). The strategy or entry alternatives must ensure that the necessary value chain activities are performed and integrated. Figure 7.1 The value chain - marketing function detail In making international marketing decisions on the marketing mix more attention to detail is required than in domestic marketing. Table 7.1 lists the detail required 1. Table 7.1 Examples of elements included in the export marketing mix 1. Product support - Product sourcing - Match existing products to markets - air, sea, rail, road, freight - New products - Product management - Product testing - Manufacturing specifications - Labelling - Packaging - Production control - Market information 2. Price support - Establishment of prices - Discounts - Distribution and maintenance of pricelists - Competitive information - Training of agents/customers 3. Promotion/selling support - Advertising - Promotion - literature - Direct mail - Exhibitions, trade shows - Printing - Selling (direct) - Sales force - Agents commissions - Sale or returns 4. Inventory support - Inventory management - Warehousing - Distribution - Parts supply - Credit authorisation 5. Distribution support - Funds provision - Raising of capital - Order processing - Export preparation and documentation - Freight forwarding - Insurance - Arbitration 6. Service support - Market information/intelligence - Quotes processing - Technical aid assistance - After sales - Guarantees - Warranties/claims - Merchandising - Sales reports, catalogues literature - Customer care - Budgets - Data processing systems - Insurance - Tax services - Legal services - Translation 7. Financial support - Billing, collecting invoices - Hire, rentals - Planning, scheduling budget data - Auditing Details on the sourcing element have already been covered in the chapter on competitive analysis and strategy. Concerning investment and control, the question really is how far the company wishes to control its own fate. The degree of risk involved, attitudes and the ability to achieve objectives in the target markets are important facets in the decision on whether to license, joint venture or get involved in direct investment. Cunningham 1 (1986) identified five strategies used by firms for entry into new foreign markets: i) Technical innovation strategy - perceived and demonstrable superior products ii) Product adaptation strategy - modifications to existing products iii) Availability and security strategy - overcome transport risks by countering perceived risks iv) Low price strategy - penetration price and, v) Total adaptation and conformity strategy - foreign producer gives a straight copy. In marketing products from less developed countries to developed countries point iii) poses major problems. Buyers in the interested foreign country are usually very careful as they perceive transport, currency, quality and quantity problems. This is true, say, in the export of cotton and other commodities. Because, in most agricultural commodities, production and marketing are interlinked, the infrastructure, information and other resources required for building market entry can be enormous. Sometimes this is way beyond the scope of private organisations, so Government may get involved. It may get involved not just to support a specific commodity, but also to help the . Huge investments may have to be undertaken, with the investor paying a high risk price, long before the full utilisation of the investment comes. Good examples of this include the building of port facilities or food processing or freezing facilities. Moreover, the equipment may not be able to be used for other processes, so the asset specific equipment, locked into a specific use, may make the owner very vulnerable to the bargaining power of raw material suppliers and product buyers who process alternative production or trading options. Zimfreeze, Zimbabwe is experiencing such problems. It built a large freezing plant for vegetables but found itself without a contract. It has been forced, at the moment, to accept sub optional volume product materials just in order to keep the plant ticking over. In building a market entry strategy, time is a crucial factor. The building of an intelligence system and creating an image through promotion takes time, effort and money. Brand names do not appear overnight. Large investments in promotion campaigns are needed. Transaction costs also are a critical factor in building up a market entry strategy and can become a high barrier to international trade. Costs include search and bargaining costs. Physical distance, language barriers, logistics costs and risk limit the direct monitoring of trade partners. Enforcement of contracts may be costly and weak legal integration between countries makes things difficult. Also, these factors are important when considering a market entry strategy. In fact these factors may be so costly and risky that Governments, rather than private individuals, often get involved in commodity systems. This can be seen in the case of the Citrus Marketing Board of Israel. With a monopoly export marketing board, the entire system can behave like a single firm, regulating the mix and quality of products going to different markets and negotiating with transporters and buyers. Whilst these Boards can experience economies of scale and absorb many of the risks listed above, they can shield producers from information about, and from. buyers. They can also become the of vested interests and become political in nature. They then result in giving reduced production incentives and cease to be demand or market orientated, which is detrimental to producers. Normal ways of expanding the markets are by expansion of product line, geographical development or both. It is important to note that the more the product line and/or the geographic area is expanded the greater will be the managerial complexity. New market opportunities may be made available by expansion but the risks may outweigh the advantages, in fact it may be better to concentrate on a few geographic areas and do things well. This is typical of the horticultural industry of Kenya and Zimbabwe. Traditionally these have concentrated on European markets where the markets are well known. Ways to concentrate include concentrating on geographic areas, reducing operational variety (more standard products) or making the organisational form more appropriate. In the latter the attempt is made to (develop a market which will be a best predictor of other markets). Global approaches give economies of scale and the sharing of costs and risks between markets. There are a variety of ways in which organisations can enter foreign markets. The three main ways are by direct or indirect export or production in a foreign country (see figure 7.2). Exporting is the most traditional and well established form of operating in foreign markets. Exporting can be defined as the marketing of goods produced in one country into another. Whilst no direct manufacturing is required in an overseas country, significant investments in marketing are required. The tendency may be not to obtain as much detailed marketing information as compared to manufacturing in marketing country however, this does not negate the need for a detailed marketing strategy. Figure 7.2 Methods of foreign market entry The advantages of exporting are: reduces the potential risks of operating overseas. The disadvantage is mainly that one can be at the of overseas agents and so the lack of control has to be weighed against the advantages. For example, in the exporting of African horticultural products, the agents and Dutch flower auctions are in a position to dictate to producers. A distinction has to be drawn between passive and aggressive exporting. A passive exporter awaits orders or comes across them by chance an aggressive exporter develops marketing strategies which provide a broad and clear picture of what the firm intends to do in the foreign market. Pavord and Bogart 2 (1975) found significant differences with regard to the severity of exporting problems in motivating pressures between seekers and non-seekers of export opportunities. They distinguished between firms whose marketing efforts were characterized by no activity, minor activity and aggressive activity. Those firms who are aggressive have clearly defined plans and strategy, including product, price, promotion, distribution and research elements. Passiveness versus aggressiveness depends on the motivation to export. In countries like Tanzania and Zambia, which have embarked on structural adjustment programmes, organisations are being encouraged to export, motivated by foreign exchange earnings potential, saturated domestic markets, growth and expansion objectives, and the need to repay debts incurred by the borrowings to finance the programmes. The type of export response is dependent on how the pressures are perceived by the decision maker. Piercy (1982) 3 highlights the fact that the degree of involvement in foreign operations depends on motivating factors, that is, whether the motivations were as a result of active or aggressive behaviour based on the firm s internal situation (endogenous) or as a result of reactive environmental changes (exogenous). If the firm achieves initial success at exporting quickly all to the good, but the risks of failure in the early stages are high. The (see figure 7.3). Figure 7.3 Aggressive and passive export paths Exporting methods include direct or indirect export. In direct exporting the organisation may use an agent, distributor, or overseas subsidiary, or act via a Government agency. In effect, the Grain Marketing Board in Zimbabwe, being commercialised but still having Government control, is a Government agency. The Government, via the Board, are the only permitted maize exporters. Bodies like the Horticultural Crops Development Authority (HCDA) in Kenya may be merely a promotional body, dealing with advertising, information flows and so on, or it may be active in exporting itself, particularly giving approval (like HCDA does) to all export documents. In direct exporting the major problem is that of market information. The exporter s task is to choose a market, find a representative or agent, set up the physical distribution and documentation, promote and price the product. Control, or the lack of it, is a major problem which often results in decisions on pricing, certification and promotion being in the hands of others. Certainly, the phytosanitary requirements in Europe for horticultural produce sourced in Africa are getting very demanding. Similarly, exporters are price takers as produce is sourced also from the Caribbean and Eastern countries. In the months June to September, Europe is because it can grow its own produce, so prices are low. As such, producers are better supplying to local food processors. In the European winter prices are much better, but product competition remains. According to Collett 4 (1991)) exporting requires a partnership between exporter, importer, government and transport. Without these four coordinating activities the risk of failure is increased. Contracts between buyer and seller are a must. Forwarders and agents can play a vital role in the logistics procedures such as booking air space and arranging documentation. A typical coordinated marketing channel for the export of Kenyan horticultural produce is given in figure 7.4. In this case the exporters can also be growers and in the low season both these and other exporters may send produce to food processors which is also exported. Figure 7.4 The export marketing channel for Kenyan horticultural products. Exporting can be very lucrative, especially if it is of high value added produce. For example in 1992/93 Zimbabwe exported 5 338,38 tonnes of flowers, 4 678,18 tonnes of horticultural produce and 12 000 tonnes of citrus at a total value of about US 22 016,56 million. In some cases a mixture of direct and indirect exporting may be achieved with mixed results. For example, the Grain Marketing Board of Zimbabwe may export grain directly to Zambia, or may sell it to a relief agency like the United Nations, for feeding the Mozambican refugees in Malawi. Payment arrangements may be different for the two transactions. Nali products of Malawi gives an interesting example of a exporting mode. CASE 7.1 Nali Producers - Malawi Nali group, has, since the early 1970s, been engaged in the growing and exporting of spices. Spices are also used in the production of a variety of sauces for both the local and export market. Its major success has been the growing and exporting of Birdseye chilies. In the early days knowledge of the market was scanty and thus the company was obtaining ridiculously low prices. Towards the end of 1978 Nali chilies were in great demand, yet still the company, in its passive mode, did not fully appreciate the competitive implications of the business until a number of firms, including Lonrho and Press Farming, started to grow and export. Again, due to the lack of information, a product of its passivity, the firm did not realise that Uganda, with their superior product, and Papua New Guinea were major exporters, However, the full potential of these countries was hampered by internal difficulties. Nali was able to grow into a successful commercial enterprise. However, with the end of the internal problems, Uganda in particular, began an aggressive exporting policy, using their overseas legations as commercial propagandists. Nali had to respond with a more formal and active marketing operation. However it is being now hampered by a number of important factors. The entry of a number of new Malawian growers, with inferior products, has damaged the Malawian chili reputation, so has the lack of a clear Government policy and the lack of financing for traders, growers and exporters. The latter only serves to emphasise the point made by Collett, not only do organisations need to be aggressive, they also need to enlist the support of Government and importers. It is interesting to note that Korey (1986) warns that direct modes of market entry may be less and less available in the future. Growing trading blocs like the EU or EFTA means that the establishing of subsidiaries may be one of the only means forward in future. It is interesting to note that Korey 5 1986 warned that direct modes of market entry may be less and less available in the future. Growing trading blocks like the EU or EFTA means that the establishment of subsidiaries may be one of the only ways forward in future. Indirect methods of exporting include the use of trading companies (very much used for commodities like cotton, soya, cocoa), export management companies, piggybacking and countertrade. Indirect methods offer a number of advantages including: Credit acceptance takes burden from manufacturer. Piggybacking is an interesting development. The method means that organisations with little exporting skill may use the services of one that has. Another form is the consolidation of orders by a number of companies in order to take advantage of bulk buying. Normally these would be geographically adjacent or able to be served, say, on an air route. The fertilizer manufacturers of Zimbabwe, for example, could piggyback with the South Africans who both import potassium from outside their respective countries. By far the largest indirect method of exporting is countertrade. Competitive intensity means more and more investment in marketing. In this situation the organisation may expand operations by operating in markets where competition is less intense but currency based exchange is not possible. Also, countries may wish to trade in spite of the degree of competition, but currency again is a problem. Countertrade can also be used to stimulate home industries or where raw materials are in short supply. It can, also, give a basis for reciprocal trade. Estimates vary, but countertrade accounts for about 20-30 of world trade, involving some 90 nations and between US 100-150 billion in value. The UN defines countertrade as . Countertrade is the modem form of barter, except contracts are not legal and it is not covered by GATT. It can be used to circumvent import quotas. Countertrade can take many forms. Basically two separate contracts are involved, one for the delivery of and payment for the goods supplied and the other for the purchase of and payment for the goods imported. The performance of one contract is not contingent on the other although the seller is in effect accepting products and services from the importing country in partial or total settlement for his exports. There is a broad agreement that countertrade can take various forms of exchange like barter, counter purchase, switch trading and compensation (buyback). For example, in 1986 Albania began offering items like spring water, tomato juice and chrome ore in exchange for a contract to build a US 60 million fertilizer and methanol complex. Information on potential exchange can be obtained from embassies, trade missions or the EU trading desks. Barter is the direct exchange of one good for another, although valuation of respective commodities is difficult, so a currency is used to underpin the item s value. Barter trade can take a number of formats. Simple barter is the least complex and oldest form of bilateral, non-monetarised trade. Often it is called barter. Barter is a direct exchange of goods and services between two parties. Shadow prices are approximated for products flowing in either direction. Generally no middlemen are involved. Usually contracts for no more than one year are concluded, however, if for longer life spans, provisions are included to handle exchange ratio fluctuations when world prices change. Closed end barter deals are modifications of straight barter in that a buyer is found for goods taken in barter before the contract is signed by the two trading parties. No money is involved and risks related to product quality are significantly reduced. Clearing account barter, also termed clearing agreements, clearing arrangements, bilateral clearing accounts or simply bilateral clearing, is where the principle is for the trades to balance without either party having to acquire hard currency. In this form of barter, each party agrees in a single contract to purchase a specified and usually equal value of goods and services. The duration of these transactions is commonly one year, although occasionally they may extend over a longer time period. The contract s value is expressed in non-convertible, clearing account units (also termed clearing dollars) that effectively represent a line of credit in the central bank of the country with no money involved. Clearing account units are universally accepted for the accounting of trade between countries and parties whose commercial relationships are based on bilateral agreements. The contract sets forth the goods to be exchanged, the rates of exchange, and the length of time for completing the transaction. Limited export or import surpluses may be accumulated by either party for short periods. Generally, after one year s time, imbalances are settled by one of the following approaches: credit against the following year, acceptance of unwanted goods, payment of a previously specified penalty or payment of the difference in hard currency. Trading specialists have also initiated the practice of buying clearing dollars at a discount for the purpose of using them to purchase saleable products. In turn, the trader may forfeit a portion of the discount to sell these products for hard currency on the international market. Compared with simple barter, clearing accounts offer greater flexibility in the length of time for drawdown on the lines of credit and the types of products exchanged. Counter purchase, or buyback, is where the customer agrees to buy goods on condition that the seller buys some of the customer s own products in return (compensatory products). Alternatively, if exchange is being organised at national government level then the seller agrees to purchase compensatory goods from an unrelated organisation up to a pre-specified value (offset deal). The difference between the two is that contractual obligations related to counter purchase can extend over a longer period of time and the contract requires each party to the deal to settle most or all of their account with currency or trade credits to an agreed currency value. Where the seller has no need for the item bought he may sell the produce on, usually at a discounted price, to a third party. This is called a switch deal. In the past a number of tractors have been brought into Zimbabwe from East European countries by switch deals. Compensation (buy-backs) is where the supplier agrees to take the output of the facility over a specified period of time or to a specified volume as payment. For example, an overseas company may agree to build a plant in Zambia, and output over an agreed period of time or agreed volume of produce is exported to the builder until the period has elapsed. The plant then becomes the property of Zambia. Khoury 6 (1984) categorises countertrade as follows (see figure 7.5): One problem is the marketability of products received in countertrade. This problem can be reduced by the use of specialised trading companies which, for a fee ranging between 1 and 5 of the value of the transaction, will provide trade related services like transportation, marketing, financing, credit extension, etc. These are ever growing in size. Countertrade has disadvantages: may occur Quality is not of international standard so costly to the customer and trader Variety is tow so marketing of wkat is limited Difficult to set prices and service quality Inconsistency of delivery and specification, Difficult to revert to currency trading - so quality may decline further and therefore product is harder to market. Figure 7.5 Classification of countertrade Shipley and Neale 7 (1988) therefore suggest the following: Ensure the benefits outweigh the disadvantages Try to minimise the ratio of compensation goods to cash - if possible inspect the goods for specifications Include all transactions and other costs involved in countertrade in the nominal value specified for the goods being sold Avoid the possibility of error of exploitation by first gaining a thorough understanding of the customer s buying systems, regulations and politics, Ensure that any compensation goods received as payment are not subject to import controls. Despite these problems countertrade is likely to grow as a major indirect entry method, especially in developing countries. Besides exporting, other market entry strategies include licensing, joint ventures, contract manufacture, ownership and participation in export processing zones or free trade zones. Licensing: Licensing is defined as . It is quite similar to the operation. Coca Cola is an excellent example of licensing. In Zimbabwe, United Bottlers have the licence to make Coke. Licensing involves little expense and involvement. The only cost is signing the agreement and policing its implementation. Licensing gives the following advantages: Options to buy into partner exist or provision to take royalties in stock. The disadvantages are: Requires considerable fact finding, planning, investigation and interpretation. Those who decide to license ought to keep the options open for extending market participation. This can be done through joint ventures with the licensee. Joint ventures can be defined as . Joint ventures are a more extensive form of participation than either exporting or licensing. In Zimbabwe, Olivine industries has a joint venture agreement with HJ Heinz in food processing. Joint ventures give the following advantages: Sharing of risk and ability to combine the local in-depth knowledge with a foreign partner with know-how in technology or process Joint financial strength May be only means of entry and May be the source of supply for a third country. They also have disadvantages: Partners may have different views on expected benefits. If the partners carefully map out in advance what they expect to achieve and how, then many problems can be overcome. Ownership: The most extensive form of participation is 100 ownership and this involves the greatest commitment in capital and managerial effort. The ability to communicate and control 100 may outweigh any of the disadvantages of joint ventures and licensing. However, as mentioned earlier, repatriation of earnings and capital has to be carefully monitored. The more unstable the environment the less likely is the ownership pathway an option. These forms of participation: exporting, licensing, joint ventures or ownership, are on a continuum rather than discrete and can take many formats. Anderson and Coughlan 8 (1987) summarise the entry mode as a choice between company owned or controlled methods - channels. Integrated channels offer the advantages of planning and control of resources, flow of information, and faster market penetration, and are a visible sign of commitment. The disadvantages are that they incur many costs (especially marketing), the risks are high, some may be more effective than others (due to culture) and in some cases their credibility amongst locals may be lower than that of controlled independents. Independent channels offer lower performance costs, risks, less capital, high local knowledge and credibility. Disadvantages include less market information flow, greater coordinating and control difficulties and motivational difficulties. In addition they may not be willing to spend money on market development and selection of good intermediaries may be difficult as good ones are usually taken up anyway. Once in a market, companies have to decide on a strategy for expansion. One may be to concentrate on a few segments in a few countries - typical are cashewnuts from Tanzania and horticultural exports from Zimbabwe and Kenya - or concentrate on one country and diversify into segments. Other activities include country and market segment concentration - typical of Coca Cola or Gerber baby foods, and finally country and segment diversification. Another way of looking at it is by identifying three basic business strategies: stage one - international, stage two - multinational (strategies correspond to ethnocentric and polycentric orientations respectively) and stage three - global strategy (corresponds with geocentric orientation). The basic philosophy behind stage one is extension of programmes and products, behind stage two is decentralisation as far as possible to local operators and behind stage three is an integration which seeks to synthesize inputs from world and regional headquarters and the country organisation. Whilst most developing countries are hardly in stage one, they have within them organisations which are in stage three. This has often led to a against the operations of multinationals, often unfounded. Export processing zones (EPZ) Whilst not strictly speaking an entry-strategy, EPZs serve as an into a market. They are primarily an investment incentive for would be investors but can also provide employment for the host country and the transfer of skills as well as provide a base for the flow of goods in and out of the country. One of the best examples is the Mauritian EPZ 12. founded in the 1970s. CASE 7.2 The Mauritian Export Processing Zone Since its inception over 400 firms have established themselves in sectors as diverse as textiles, food, watches. And plastics. In job employment the results have been startling, as at 1987, 78,000 were employed in the EPZ. Export earnings have tripled from 1981 to 1986 and the added value has been significant - The roots of success can be seen on the supply, demand and institutional sides. On the supply side the most critical factor has been the generous financial and other incentives, on the demand side, access to the EU, France, India and Hong Kong was very tempting to investors. On the institutional side positive schemes were put in place, including finance from the Development Bank and the cutting of red tape. In setting up the export processing zone the Mauritian government displayed a number of characteristics which in hindsight, were crucial to its success. The government intelligently sought a development strategy in an apolitical manner It stuck to its strategy in the long run rather than reverse course at the first sign of trouble It encouraged market incentives rather than undermined them It showed a good deal of adaptability, meeting each challenge with creative solutions rather than maintaining the status quo It adjusted the general export promotion programme to suit its own particular needs and characteristics. It consciously guarded against the creation of an unwieldy bureaucratic structure. Organisations are faced with a number of strategy alternatives when deciding to enter foreign markets. Each one has to be carefully weighed in order to make the most appropriate choice. Every approach requires careful attention to marketing, risk, matters of control and management. A systematic assessment of the different entry methods can be achieved through the use of a matrix (see table 7.2). Table 7.2 Matrix for comparing alternative methods of market entry Details of channel management will appear in a later chapter. As has been pointed out time and again in this text, the international marketing of agricultural products is a affair between production and marketing and end user. Certain characteristics can be identified in market entry strategies which are different from the marketing of say cars or television sets. These refer specifically to the institutional arrangements linking producers and processors/exporters and those between exporters and foreign buyers/agents. Institutional links between producers and processors/exporters One of the most important factors is contract coordination. Whilst many of the details vary, most contracts contain the supply of credit/production inputs, specifications regarding quantity, quality and timing of producer deliveries and a formula or price mechanism. Such arrangements have improved the flow of money, information and technologies, and very importantly, shared the risk between producers and exporters. Most arrangements include some form of vertical integration between producers and downstream activities. Often processors enter into contracted outgrower arrangements or supply raw inputs. This institutional arrangement has now, incidentally, spilled over into the domestic market where firms are wishing to target higher quality, higher priced segments. Producer trade associations, boards or cooperatives have played a significant part in the entry strategies of many exporting countries. They act as a contact point between suppliers and buyers, obtain vital market information, liaise with Governments over quotas etc. and provide information, or even get involved in quality standards. Some are very active, witness the Horticultural Crops Development Authority (HCDA) of Kenya and the Citrus Marketing Board (CMD) of Israel, the latter being a Government agency which specifically got involved in supply quotas. An example of the institutional arrangements 13 involved is given in table 7.3. Table 7.3 Institutional arrangements linking producers with processors/exporters XX Dominant linkage Once again, it can not be over-emphasized that the smooth flow between producers, marketers and end users is essential. However it must also be noted that unless strong relationships or contracts are built up and product qualities maintained, the smooth flow can be interrupted should a more competitive supplier enter the market. This also can occur by Government decree, or by the erection of non-tariff barriers to trade. By improving strict hygiene standards a marketing chain can be broken, however strong the link, by say, Government. This, however, should not occur, if the link involves the close monitoring and action by the various players in the system, who are aware, through market intelligence, of any possible changes. Having done all the preparatory planning work (no mean task in itself ), the prospective global marketer has then to decide on a market entry strategy and a marketing mix. These are two main ways of foreign market entryeither by entering from a home market base, via direct or indirect exporting, or by foreign based production. Within these two possibilities, marketers can adopt an export path. Entry from the home base (direct) includes the use of agents, distributors, Government and overseas subsidiaries and (indirect) includes the use of trading companies, export management companies, piggybacking or countertrade. Entry from a foreign base includes licensing, joint ventures, contract manufacture, ownership and export processing zones. Each method has its peculiar advantages and disadvantages which the marketer must carefully consider before making a choice. 1. Review the general problems encountered when building market entry strategies for agricultural commodities. Give examples. 2. Describe briefly the different methods of foreign market entry. 3. What are the advantages and disadvantages of barter, countertrade, licensing, joint venture and export processing zones as market entry strategies 1. General problems: i) Interlinking of production and marketing means private investment alone may not be possible, so Government intervention may be needed also e. g. to build infrastructure e. g. Israeli fresh fruit. Method of foreign operation whereby a firm in one country agrees to permit a company in another country to use the manufacturing, processing, trademark, knowhow or some other skill by the licensor. ii) building capacity long before it may be currently utilised e. g. port facilities opportunities to buy into partner or royalties on the stock. iii) Time - processing, transport and storage - so credit is needed e. g. Argentina beef. iv) Transaction costs - logistics, market information, regulatory enforcement. requires a lot of planning beforehand. v) Risk - business, non-business iv) Joint ventures - An enterprise in which two or more investors share ownership and control over property rights and operation. vi) Building of relationships and infrastructural developments 2. Different methods These are either based. may be source of supply for third country. Direct - Agent, distributor, Government, overseas subsidiary partners have different views on exported benefits. Indirect - Trading company, export management company, piggyback, countertrade v) Export processing zones - A zone within a country, exempt from tax and duties, for the processing or reprocessing of goods for export Foreign - Licensing, joint venture, contract manufacture, ownership, export processing zone. Students should give a definition and expand on each of these methods. . Direct exchange of one good for another. (may be straight or closed or clearing account method) bureaucracy creation. commodity based valuation or currency based valuation. marketability of products. Customer agrees to buy goods on condition that the seller buys some of the customer s own products in return (may be time, method of financing, balance of compensation or pertinence of compensating product based) market. difficult to revert to currency trading. Exercise 7.1 Market entry strategies Take a major non-traditional crop or agricultural product which your country produces with sales potential overseas. Devise a market entry strategy for the product, clearly showing which you would use and justify your choice indicating why the method chosen would give benefits to your country and the intended importing country(s). 1. Cunningham, M. T. . In D. W. Turnbull and J. P. Valla (eds.) Croom Helm 1986, p 9. 2. Pavord and Bogart. , Network and Centre for Agricultural Marketing Training in Eastern and Southern Africa 1991. 3. Piercy, N. . European Journal of Marketing, Vol. 15, No. 3, 1982, pp 26-40. 4. Collett, W. E. . Network and Centre for Agricultural Marketing Training in Eastern and Southern Africa, 1991. 5. Korey, G. . European Journal of Marketing, Vol. 20, No. 7, 1986, pp 34-42. 6. Khoury, S. J . Journal of Business Research, Vol. 12, 1984, pp 257-270. 7. Shipley, D. D. and Neale, C. W. , Vol. 26, No. 1, pp 49-52. 8. Anderson, E. and Coughlan, A. T. . Journal of Marketing, Vol. 51. January 1987, pp 71-82. 9. Keegan, W. J. , 4th ed. Prentice Hall International Editions, 1989. 10. Khoromana, A. P. . In S. Carter (ed.) Export Procedures Network and Centre for Agricultural Marketing Training in Eastern and Southern Africa, August 1991. 11. Basche, J. R. Jr. . New York: The Conference Board, 1971, p4. 12. Bheenich, R. and Shapiro, M. O. Mauritius: , EDI Development Policy Case Series, No. 1, 1989, pp 97-127. 13. Jaffee S. pp 198, 1993. Proceedings of the 8th International Conference on Carbon Dioxide Utilization Global challenges and strategies for control, conversion and utilization of CO 2 for sustainable development involving energy, catalysis, adsorption and chemical processing Chunshan Song . Clean Fuels and Catalysis Program, The Energy Institute, and Department of Energy Geo-Environmental Engineering, The Pennsylvania State University 209 Academic Projects Building, University Park, PA 16802, USA Available online 15 May 2006. Abstract Utilization of carbon dioxide (CO 2 ) has become an important global issue due to the significant and continuous rise in atmospheric CO 2 concentrations, accelerated growth in the consumption of carbon-based energy worldwide, depletion of carbon-based energy resources, and low efficiency in current energy systems. The barriers for CO 2 utilization include: (1) costs of CO 2 capture, separation, purification, and transportation to user site (2) energy requirements of CO 2 chemical conversion (plus source and cost of co-reactants) (3) market size limitations, little investment-incentives and lack of industrial commitments for enhancing CO 2 - based chemicals and (4) the lack of socio-economical driving forces. The strategic objectives may include: (1) use CO 2 for environmentally-benign physical and chemical processing that adds value to the process (2) use CO 2 to produce industrially useful chemicals and materials that adds value to the products (3) use CO 2 as a beneficial fluid for processing or as a medium for energy recovery and emission reduction and (4) use CO 2 recycling involving renewable sources of energy to conserve carbon resources for sustainable development. The approaches for enhancing CO 2 utilization may include one or more of the following: (1) for applications that do not require pure CO 2 . develop effective processes for using the CO 2 - concentrated flue gas from industrial plants or CO 2 - rich resources without CO 2 separation (2) for applications that need pure CO 2 . develop more efficient and less-energy intensive processes for separation of CO 2 selectively without the negative impacts of co-existing gases such as H 2 O, O 2 . and N 2 (3) replace a hazardous or less-effective substance in existing processes with CO 2 as an alternate medium or solvent or co-reactant or a combination of them (4) make use of CO 2 based on the unique physical properties as supercritical fluid or as either solvent or anti-solvent (5) use CO 2 based on the unique chemical properties for CO 2 to be incorporated with high atom efficiency such as carboxylation and carbonate synthesis (6) produce useful chemicals and materials using CO 2 as a reactant or feedstock (7) use CO 2 for energy recovery while reducing its emissions to the atmosphere by sequestration (8) recycle CO 2 as C-source for chemicals and fuels using renewable sources of energy and (9) convert CO 2 under either bio-chemical or geologic-formation conditions into new fossil energies. Several cases are discussed in more detail. The first example is tri-reforming of methane versus the well-known CO 2 reforming over transition metal catalysts such as supported Ni catalysts. Using CO 2 along with H 2 O and O 2 in flue gases of power plants without separation, tri-reforming is a synergetic combination of CO 2 reforming, steam reforming and partial oxidation and it can eliminate carbon deposition problem and produces syngas with desired H 2 /CO ratios for industrial applications. The second example is a CO 2 molecular basket as CO 2 - selective high-capacity adsorbent which was developed using mesoporous molecular sieve MCM-41 and polyethylenimine (PEI). The MCM41-PEI adsorbent has higher adsorption capacity than either PEI or MCM-41 alone and can be used as highly CO 2 - selective adsorbent for gas mixtures without the pre-removal of moisture because it even enhances CO 2 adsorption capacity. The third example is synthesis of dimethyl carbonate using CO 2 and methanol, which demonstrates the environmental benefit of avoiding toxic phosgene and a processing advantage. The fourth example is the application of supercritical CO 2 for extraction and for chemical processing where CO 2 is either a solvent or a co-reactant, or both. The CO 2 utilization contributes to enhancing sustainability, since various chemicals, materials, and fuels can be synthesized using CO 2 . which should be a sustainable way in the long term when renewable sources of energy are used as energy input. Keywords Carbon dioxide Strategy Sustainable development Atom efficiency Utilization energy Tri-reforming CO 2 reforming Emissions Catalysis Conversion Capture Separation Reforming Dimethylcarbonate Supercritical CO 2 Fuels Table 2. Fig. 1. Fig. 2. Fig. 3. Fig. 4.
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