Improving Public Expenditure on the Agriculture Sector in the Pacific Workshop on Medium-Term Expenditure Planning for National Sustainable Development Nadi, Fiji – 4 November 2015 Matthew Ho Resource Economist Pacific Agriculture Policy Project (PAPP) – Land Resources Division (LRD) Secretariat of the Pacific Community (SPC) matthewh@spc.int
About PAPP The Pacific Agriculture Policy Project (PAPP) is supported by the European Union (EU) and implemented by the Land Resources Division (LRD) of the Secretariat of the Pacific Community (SPC).
Outline 1. Agriculture and the Public Sector in the Pacific. 2. Aligning Agriculture Sector Plans with Public Expenditure. 3. Reviewing Agricultural Sector Public Expenditure in the Pacific.
1. Agriculture and the Public Sector in the Pacific
Agriculture and the public sector • Agriculture has great potential as an engine of growth and poverty reduction in the Pacific. • In 2011-12, in the larger Pacific Island Countries: – Agriculture accounted for 9 to 24 per cent of economic output. – Agriculture employed 20 to 53 per cent of workers. • Governments have a key role: – Appropriate supporting policy framework. – Well targeted public expenditure.
Agriculture in the Pacific • There is limited public funding for agriculture in the Pacific: – In 2011-12, the agriculture sector received between 1 to 3 % of public spending by Pacific Island governments and administrations. – Proportion of aid funding going to the agriculture sector is relatively small - less than 2 per cent of total aid in 2012.
Agriculture in the Pacific Chart: Agriculture share of total government expenditure and agriculture share of GDP (Source: SPC NMDI database) 30 25 Percentage share 20 15 10 5 0 Cooks FSM Fiji Kiribati Nauru Palau PNG Samoa Solomons Tonga Vanuatu Share (%) of agriculture expenditure in total budget expenditure Share (%) of agriculture value added in GDP
Share of Total Aid to Agriculture Agriculture share of total aid by region (%) (OECD, 2012) 8 7 6 5 4 3 2 1 0 Europe Asia Americas Africa Oceania
Agriculture sector priorities
Agriculture sector priorities • In addition to the six major priority areas identified in agriculture in the Pacific, the review also identified over 200 sub-categories of priorities in the region. • In short, the governments of the Pacific region have identified many priority areas in the agriculture sector that need to be addressed through public policy. • Achieving policy objectives requires resources.
Agriculture sector priorities
Agriculture sector priorities
Agriculture sector priorities
Agriculture sector priorities
Agriculture sector priorities • The governments of the region have also identified a number of priority commodities that they are seeking to assist, including: – Coconut, taro, fruits and vegetables, cassava, banana, traditional food crops, root crops, vanilla, pigs, chicken, livestock, dairy, and aquaculture.
Paying for Plans and Priorities I • Agriculture has an important role to play in many Pacific Island countries, being a major source of national output, exports and provider of people’s livelihoods. • As a reflection of the sector’s importance, the region’s governments have identified a large number of policy priorities to be achieved in the sector.
Paying for Plans and Priorities II • However, resources allocated to the sector by governments in the region and by development partners, have been limited. – Agriculture makes up 1-3 per cent of national budget allocations in the region. – Less than 2 per cent of aid in the Pacific is allocated to the agriculture sector – the lowest in the world.
Paying for Plans and Priorities III • Given the limited resources available and the large number of public policy objectives that need to be achieved, it is vital for public policy makers in the Pacific to systematically review their agriculture sector budgets and to align them with policy priorities.
“The national government budget allocation for 2014 must be structured properly. Government allocation is usually based on incremental budgeting and it is recommended that the Ministry must immediately spend its 2014 budget based on this new agriculture development agenda. The industry plan for priority industries must be immediately allocated funding. International development agencies have their own priorities. However, they can be asked to align their priorities to be consistent with the strategies outlined in this agriculture development agenda. By this cooperation, the implementation of projects is streamlined and in effect, it avoids overlapping. ” - Fiji 2020 Agriculture Sector Policy Plan
2. Aligning Agriculture Sector Plans with Public Expenditure.
Issues to consider 1. Evaluating the relative merits of competing sectoral and national priorities. 2. Aligning budget allocations to priorities. 3. Reviewing past performance.
Conceptual Framework O T H E R S O U R C E S : -B o r ro w ing G O V E R N M E N T D E T E R M IN A N T S -E x te rna l a id S PE N D IN G O F A LL O C A T IO N : -D o m e s tic no n ta x re v e nue -F ina nc ia l -Po lit ic a l -E c o no m ic S O C I A L S P E N D IN G : E C O N O M IC S P E N D IN G : O T H E R S PE N D IN G : -G o v e r na nc e -H e a lt h -A g ric u lt u re -G e ne ra l a d m inis t ra t io n -E d uc a t io n -In f ra s t ru c t u re (e ne rg y , -D e fe ns e -N ut r itio n tra ns po r t, te le c o m , e tc .) -e tc . -S o c ia l s a fe ty ne ts -T e c h no lo g y D E T E R M IN A N T S O F E F F C A C Y : - G o v e rna nc e T A X R E V E N U E S : S PE N D IN G O U T C O M E S : S PE N D IN G O U T C O M ES : -C a pa c ity -In c o m e -H u m a n c a pita l a c c u m u la t io n -B e tte r a c c e ss to inf ra s t ru c t u re -T a rg e ting -C o r po ra te -B a s ic ne e ds /C a pa bility -M o re us e o f te c hno lo g y -V a lue -a dde d ta x e s -In c o m e dis t rib u tio n -e tc . E X O G E N O U S F A C TO R S : G R O W T H -Po p ula tio n G ro w th -a g g re g a te g ro w t h -A g ro e c o lo g ic a l C o n ditio ns -s e c to r-s pe c ific (a g ric u lt u re , -M a c ro a nd T ra de Po lic ie s se rv ic e s , in dus t ry ) -A s se t (L a n d) D is t rib ut io n -re g io na l d is tr. o f g ro w t h Source: IFPRI/Fan (2009) IN C O M E P O V E R T Y
Is there a rationale for spending? • Market failures: public investments can help raise the overall efficiency of the economy or the sector by addressing market failures; and – Public versus vs private goods (non-rival/rivalrous; non-excludable/excludable) • Poverty/hardship and inequality: public investments mitigate levels of inequality and poverty that society deems undesirable. – Poverty/hardship-targeting goods and services Source: World Bank (2015)
Setting priorities • Questions to consider in setting public expenditure priorities: – Alignment to public policy goals. – Targeting: • High vs low potential areas? • Environmental goods vs bads? • Social goods vs bads? – Crowding in or crowding out? • Public investments can increase or decrease the profitability of private investment under different conditions.
Reviewing Performance I In evaluating public expenditures on a sector, the World Bank (2015) identified five major indicators to consider. • Input indicators: what is the overall level of effort invested? – Strategy processes, policies, institutions, investments, etc.
Reviewing Performance II • Output indicators: what is the level of provision, coverage, and utilization of goods and services? – Extent of provision of goods and services (e.g. ag services, provision of technologies; access to infrastructure). • Outcome indicators: what is the effect of outputs on outcomes that contribute toward goals? – Yields, production, wages, prices, trade, etc.
Reviewing Performance III • Impact indicators: what is the ultimate effect on goals? – Growth, income, poverty, food security, hunger, etc. • Conditioning indicators: how confident are we that any observed changes are due to the intervention(s)? – Total budget resources, climate, natural disasters, wars, etc.
Public Expenditure Review • A Public Expenditure Review (PER) is a diagnostics instrument that can be used to evaluate the effectiveness of public finances. – Typically analyses government expenditures over a period of years to assess their consistency with policy priorities, and what results were achieved. • Agriculture sector Public Expenditure Reviews (AgPERs) can be used to identify trends in the level and distribution of public investment in agriculture.
AgPER • The ultimate goal of an AgPER is to promote a stronger link between expenditure and desired sector outcomes.
What could AgPERs do? • AgPERs could evaluate the public sector’s performance in agriculture, such as: – Effectiveness of the enabling policy environment. – Planning and budget process. – Administrative structure of service delivery. – Effectiveness and efficiency of public expenditure programs.
What do AgPERs do? I • Pre-requisite to other types of analysis • Includes analysis of sector budget: – Expenditure levels and trends – Expenditure composition – Financing sources – Subsidies and cost recovery
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