Download Structural Implications of Economic Liberalization on Agriculture and

Structural Implications of Economic
Liberalization on Agriculture and
Rural Development in Kenya
PAUL GAMBA
Historical perspective
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Import Substitution Policy (ISP) dominated the
pre and post colonial Kenyan economy up to
1980.
Created dualities in the agricultural and rural
economy
1980 onwards- SAPs and Economic reforms
1993 Economy classified as open
Coincided with Political reforms especially the
clamor for increased democratic space.
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Macro and micro variables were perceived to be
stable during ISP
Changed to instability from early 1990s following
Economic and Political reforms
Several policies reformulated, Acts were amended
while organizations, institutions and parastatals
commercialized and privatized
Unsynchronized liberalization processes created
major hurdles in effecting reforms
GDP and AgGDP trend
Real GDP mirror AgGDP but AgGDP is
declining-more non-agricultural
contribution
Kenya's AgGDP and Real GDP trends, 1964-2002 (Kshs. Billions)
120
100
80
60
40
20
0
19
64
19
66
19
68
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
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Real GDP
AgGDP
Causes of structural changes
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Political reforms that resulted in Economic
Recovery Strategy and Strategy for
RevitalizingAgriculture
Economic reforms:-trade reforms, monetary
and fiscal reforms, institutional and market
reforms
Changing environmental regimes and
production levels
Increasing population pressure on natural
resources-resulting to land subdivision into
uneconomical plots
Rural poverty
Observed Outcomes of economic reforms
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Generally declining agricultural productivity
Declining agricultural revenue
Changes in production structure-increased/
decreased input use/ adoption of intensive
production technologies
Emerging, diminishing markets and enhanced
distribution systems (labour, land markets)
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Shifts in sources of rural household incomes
and new livelihood strategies
Increasing poverty incidences
Labour force migration (shifting) i.e. rural
depopulation and increasing urban
population concentration
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Changing value chains (integration and
concentration)
Improved institutional efficiency
Influence on the on-going processes
of segmentation and concentration
1)Changes in production and productivity trends
 Productivity (output per Hectare) declining on
specific sub-sectors coffee, sugarcane and maize,
while increasing in tea.
2)Input productivity-land and labour
While initially increased, now declining
Labourand land productivity(AgGDP/Ha)1964-2002
16000
14000
12000
10000
8000
6000
4000
2000
land productivity (AgGDP/ag areaHA) Kshs)
labour productivity(Ksh)
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
19
78
19
76
19
74
19
72
19
70
19
68
19
66
0
19
64
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3)Changes in rural household income sources
Source of income
Crops
Livestock
Business
Salaries and remittances
Total income
%change 1997/04
-40%
-57%
+20%
+198%
-60%
4) Declining agricultural revenue
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Revenue from agricultural production
currently declining in all major
agricultural productions
• Coffee
• Tea
• Sugar
• maize
5)Poverty incidence increasing
1992
1994
1997
Rural
46.33%
46.75%
52.93%
Urban
29.29%
28.95%
49.2%
overall
46.3%
52.3%
56.78%
6)Value chain integration and
concentration
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Domestic Input markets
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Fertilizer
Seed
AI
Domestic Output markets
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Initially dominated by Parastatals
Liberalization opened up market to multiple
players
Risk of private monopolies real
6)Value chain integration and
concentration
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Effects of globalization on producers
beginning to bear
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EUREPGAP (Horticulture)
Traceability (Livestock)
6)Value chain integration and concentration
Coffee and Tea export chains are integrated
(producer and export price differentiation minimal)
coffee Nairobi auction and producer prices
coffee Nairobi auction price trends and prices paid to farmers
350000
coffee auction price nrb (Kshs/tonne)
coffee prices paid to farmers kshs/tonne
20
04
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
19
78
19
76
19
74
19
72
19
70
19
68
300000
250000
200000
150000
100000
50000
0
19
66
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tea farmer prices
tea domestic exportprices
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
180
160
140
120
100
80
60
40
20
0
1985
Kshs/Kg
Tea producer and export prices
Dairy industry
Producer and consumer prices 1986-2001
producer price
01
20
99
98
consumer prices
19
19
97
19
96
19
95
19
94
19
93
92
19
19
91
19
90
19
89
19
88
19
87
19
86
19
85
8
7
6
5
4
3
2
1
0
19
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Increasing consumer and declining
producers prices in dairy industry
Dairy producer and consumer prices
Kshs
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Concentration ratio
Dairy industry-segmented i.e. increasing
consumer and declining producer prices
Dairy industry value chain CR
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2CR
4CR
1999
42%
65%
2001
64.5%
79.5%
7)Land and labour markets
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Labour market opening up-increasing wage
levels
Land markets diminishing-declining
proportion land offered for rent
Transition impasses
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Diminishing on-farm employment
opportunities
Weak producer organizations
Declining productive land
Fixed capital that cannot be adjusted in the
short run (constrains engagement in new
enterprises)
Prohibitively high compliance costs
Transition impasses
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Under-developed contract and business
ethics culture
Inappropriate Legislative and regulatory
framework
Adjustments in rural and agricultural
economies
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Reduced R-U migration (New urban centres)
Period
Migration
rate
Pre liberalization 1961/80 7.66
Transition 1981/92
6.84
Liberalization 1993/02
1.93
Post-liberalization 2003/04 -2.09
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Forest products marketing- forest
degradation
Increased off-farm income and remittances
(developing rural financial services)
Adoption of intensive production
technologies
Intensified use of inputs such as fertilizers
Perceived GAPS for the second phase
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Migration and labour force
Determinants of migration, destination and
sector of choice
Remittances- from abroad and within
the country
Remittances, poverty, investment and
welfare in migrants home area
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Value chain analysis
Market (input and output) concentration
in major value chains.
Market integration (vertical and horizontal
integration)
Impacts of liberalization (reanalysis) on
specific sectors of the rural economy,
poverty and household welfare
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Examine livelihood strategies adopted
due to the effects of liberalization
especially in selected areas and
enterprises
 Discern factors influencing choice of
enterprise mix / livelihood strategies
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Liberalization, urbanization and
poverty
 Effects of liberalization on
urbanization and urban poverty
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Baby Sereria
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Thank you