Agriculture Sector in the Pacific Workshop on Medium-Term - - PowerPoint PPT Presentation

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

5 10 15 20 25 30 Cooks FSM Fiji Kiribati Nauru Palau PNG Samoa Solomons Tonga Vanuatu

Percentage share

Chart: Agriculture share of total government expenditure and agriculture share of GDP (Source: SPC NMDI database)

Share (%) of agriculture expenditure in total budget expenditure Share (%) of agriculture value added in GDP

Share of Total Aid to Agriculture

1 2 3 4 5 6 7 8 Europe Asia Americas Africa Oceania

Agriculture share of total aid by region (%) (OECD, 2012)

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

• f 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

• f 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

G O V E R N M E N T S PE N D IN G E C O N O M IC S P E N D IN G :

• A g ric u lt u re
• In f ra s t ru c t u re (e ne rg y ,

tra ns po r t, te le c o m , e tc .)

• T e c h no lo g y

IN C O M E P O V E R T Y S O C I A L S P E N D IN G :

• H e a lt h
• E d uc a t io n
• N ut r itio n
• S o c ia l s a fe ty ne ts

G R O W T H

• a g g re g a te g ro w t h
• s e c to r-s pe c ific (a g ric u lt u re ,

se rv ic e s , in dus t ry )

• re g io na l d is tr. o f g ro w t h

S PE N D IN G O U T C O M ES :

• B e tte r a c c e ss to inf ra s t ru c t u re
• M o re us e o f te c hno lo g y

S PE N D IN G O U T C O M E S :

• H u m a n c a pita l a c c u m u la t io n
• B a s ic ne e ds /C a pa bility
• In c o m e dis t rib u tio n

D E T E R M IN A N T S O F A LL O C A T IO N :

• F ina nc ia l
• Po lit ic a l
• E c o no m ic
• G o v e r na nc e

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
• C a pa c ity
• T a rg e ting

E X O G E N O U S F A C TO R S :

• Po p ula tio n G ro w th
• A g ro e c o lo g ic a l C o n ditio ns
• M a c ro a nd T ra de Po lic ie s
• A s se t (L a n d) D is t rib ut io n

T A X R E V E N U E S :

• In c o m e
• C o r po ra te
• V a lue -a dde d ta x e s
• e tc .

O T H E R S PE N D IN G :

• G e ne ra l a d m inis t ra t io n
• D e fe ns e
• e tc .

O T H E R S O U R C E S :

• B o r ro w ing
• E x te rna l a id
• D o m e s tic no n ta x re v e nue

Source: IFPRI/Fan (2009)

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
• utputs on outcomes that contribute toward

goals?

– Yields, production, wages, prices, trade, etc.

Reviewing Performance III

• Impact indicators: what is the ultimate effect
• n 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

What do AgPERs do? II

• Also includes analysis of budget performance:

– Flow of funds (qualitative assessment) – Public financial management – Institutional arrangements – Outputs and outcomes

• AgPERs can be used to answer questions on

allocative and technical efficiency.

Using AgPERs

• AgPER is a tool that can be used to review the

performance of past public expenditures and their alignment to policy objectives.

• Lessons learned from past expenditure

programmes can guide future budget allocations and identify ways of better aligning spending to policy targets.

• 3. Reviewing Agricultural Sector

Public Expenditure in the Pacific

“Adequate allocation and well-targeted government expenditure should strengthen the potential of the agriculture sector in the Pacific to contribute to increased growth, reduced poverty/hardship, and shared prosperity across the region.”

– World Bank (2015)

Ag Policy Planners Workshop

• Pacific Agriculture Policy Planners Workshop

held in Suva, Fiji from 22 to 24 September.

– Organised by World Bank and SPC with support from the EU, FAO, and PFTAC. – Main objective to introduce public expenditure reviews (PERs) for the agriculture sector. – Attended by finance and agriculture officials. – Aimed at achieving better planning and targeting of public spending on agriculture and to increase value for money for public funds.

AgPER in the Pacific I

• The World Bank and SPC are collaborating to

deliver an assistance programme to help Pacific governments strengthen the budget planning, execution, and monitoring and evaluation processes in the agriculture sector.

– Initial run from November 2015 to June 2016. – Assist governments in performing AgPERs. – Demand driven selection of initial participating countries.

AgPER in the Pacific II

• SPC and World Bank are currently seeking

national consultants to assist the technical assistance teams in conducting AgPERs in country.

Further Information

• SPC Resources – Pacific AgPER Programme:

– http://www.spc.int/pafpnet/our-events/icalrepeat.detail/2015/09/22/1/- /pacific-agriculture-policy-planners-workshop – http://www.spc.int/pafpnet/resources/publications/pacific-agriculture- policy-planners-workshop-report – http://www.spc.int/en/on-going-tenders/2263-request-for-expression-of- interest-eoi-technical-advisory-services-panel-national-public-financial- management-consultant.html

• World Bank Resources – AgPER Toolkit and Case

Studies

– www.worldbank.org/afr/agperprogram – https://openknowledge.worldbank.org/handle/10986/2822

Thank you for your attention Questions?

www.spc.int/pafpnet matthewh@spc.int