agribusiness policy inventory and analysis

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Agribusiness Policy Inventory and Analysis

Gary Ender, Abt Associates, Inc.

Contents

Importance of Policy Inventories

Key Issues and Principles Basic Road Map

Best Practices and Examples

Information and Resources

Annex 1

Annex 2

Abstract:An agribusiness policy inventory provides a comprehensive understanding of the policyenvironment, which is critical to the development of agribusiness. An inventory analysis permits one toexamine potential effects of policies on projects or investments, to develop an agribusinessdevelopment strategy, to begin a dialogue with stakeholders, to select issues for further analysis, andto monitor policy developments.

I. Importance of Policy Inventories

There is a wide range of activities that can promote the development of agribusiness. These activitiesinclude policy reform (liberalization), commodity production and/or marketing projects, privatization,development of analytical capability, investment promotion, development of capital markets, andinfrastructure construction and maintenance. It is well known that the effectiveness of these activities issignificantly affected by the policy environment. Thus policy reform can foster the growth ofagribusiness and one should understand the policies both promoting and hindering agribusinessbefore either carrying out an agribusiness project or related activity, or undertaking policy reform.

Policies have generally not been examined with agribusiness as the focus. An agribusiness policyinventory is a versatile tool for organizing and understanding complex information about economic andagricultural policies and their impact on agribusiness development. It is not simply a catalog, but ratheran analytical tool that brings attention to key policy issues and puts them in perspective.

What does an inventory analysis do?

Highlight interactions and inconsistencies among policies. Because agribusiness spansagriculture and business, and commerce and industry, many policies affect it, and the netimpact is not obvious.

Guide further analysis by revealing gaps in knowledge.

Permit international comparisons, because it can be carried out in a standard fashion in morethan one country.

What can you do with the inventory?

Examine the potential effects of policies on projects.

Develop an effective strategy for the promotion of agribusiness.

Create the foundation for a program of policy dialogue and reform. If key public and privatestakeholders participate in the exercise, it can be the start of a productive dialogue.

Select issues for further analysis.
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Monitor overall developments in the policy environment.

II. Key Issues and Principles

Questions that an inventory analysis can answer. The basic questions asked by an inventory are:

What policies affect agribusiness?

To what extent do these policies hamper or promote agribusiness development?

How do these policies offset or enhance each other?

Has the policy regime been stable or volatile?

Other important questions that can be included in the analysis include:

Do the public and private sectors play complementary roles?

Are there gaps in implementation or information that make changes in policy ineffective?

Are some policies the raison d'trefor certain institutions, and therefore, likely to be difficultto change or eliminate?

Definition of a policy. For the purpose of an agribusiness policy inventory, a policy is simply a rule thatinfluences the behavior of an individual, firm, or organization. Policies are generally, but not always,made by an arm of the government. There may be important policies or regulations that do notoriginate with the government. For example, grades and standards may be established by producer orexporter associations, just as accounting standards may be set by a professional organization. Thesecases seem to be the exception rather than the rule, however.

Specification of an inventory. The inventory method is flexible. Depending on the resources andinformation available, one can conduct an inventory:

As a freestanding exercise, or as one component of a sector assessment;

With a scope that is the entire agribusiness system, or with a focus on one particular issue,agro-industry, or commodity.

Because of the flexibility of the method, the parameters of the inventory must be clarified early on. Thisincludes what the sponsor can expect from the inventory (and, sometimes, what will not be included).The discussion should include the selection of impact variables (e.g., employment, investment, orexports) and the clear specification of any key issues, agro-industries, or particular subsectors. Thespecification phase will generally result in the design of a policy matrix -- the intersection of policyareas and scopes (economy-wide, sectoral, subsectoral) -- that has the potential to reveal policyimpacts not previously considered.

The central features of an agribusiness policy inventory are an enumeration and analysis of policiesthat affect the agribusiness sector. A summary of these policies can be conceived as a matrix and is

often presented in this way. To place these policies in context, the inventory includes a description ofthe general economic setting and, where possible, an overview of the performance of agribusi-nessfirms. The institutions responsible for these policies may be specified in conjunction with the policymatrix. An inventory also comprises several analyses based on the matrix and accompanyinginformation. These analyses extract key relationships from the information in the policy matrix,including a preliminary assessment of policy impacts.

Policy stability and time horizon of analysis. The stability of the policy environment is very important toboth existing and potential agribusinesses. The private sector knows that government has the power tointervene in almost any area of the economy. In Pakistan, during the denationalization of variousindustries in the early 1990s, the Government devoted considerable effort, including the passage of a


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law, to convincing the private sector that in the future those same industries would not be nationalizedagain and that key economic reforms would remain in place. If governments use their policy powercapriciously, the private sector will lose faith in the government's commitment to private sectordevelopment and turn to rent-seeking activities that seem to be sustainable. Given the importance ofpolicy stability, it should be discussed both as part of a broad perspective on the policy environmentand in relation to specific policies as well. It may also deserve a separate place in the matrix or otherformat chosen to present a summary of policies. Moreover, many of the impact variables in aninventory analysis may be affected differently in the short and long runs, so the analyst may wish to

consider these impacts separately.

Overview of agribusiness performance. A major review of agribusiness performance is not the purposeof an agribusiness policy inventory. Data permitting, however, important aspects of agribusinessperformance can be highlighted. These include: the share of agribusiness in output, employment, andinvestment; the shares of large-scale, small-scale, and informal agribusiness activities by sector,gender, or region; indigenous vs. foreign ownership of agribusinesses by sector; the relativeimportance of different types of agribusiness organizations (corporations, cooperatives, NGOs, familyenterprises). The overview may also include information, by industry, on the size of agribusiness units,the degree of competition, and barriers to entry.

Data requirements. The data requirements for an inventory analysis are both intensive and extensive.They are intensive because for each policy that is cataloged and analyzed there must be sufficientinformation to understand the nature and implementation of the policy and its effects. They areextensive because an inventory analysis is by its nature comprehensive in its scope.

While the appearance of the final report may give the impression that the analysis is largely non-quantitative, in fact the conclusions of other quantitative studies may play a key supporting role. It isusually the case that the resources available to conduct an inventory are best deployed to gather andsummarize policy information, rather than carry out quantitative analysis.

Some sources of the information (some of which may be found on the world-wide web) requiredinclude:

Annual donor, national government, or private reports on the state of the economy, whichinclude basic statistics on the performance of the economy and recent policy changes.

Issue-focused government documents like a customs tariff, law, or ministerial decree.

Research reports on specific policy issues.

Enterprise guides or databases published by the private sector.

Interviews with knowledgeable individuals in government, the private sector, academia, orother institutions.

News articles (when the press is reliable).

Field data collectionThis phase of the project can be lengthy, due to the substantial data requirements. Information onsome policies may be easy to come by, while others may be only hinted at in newspaper articles or byprevious studies. An inventory is an excellent device for making policy more transparent; the "flip side"of this benefit, however, is that the work is likely to be hampered by the lack of transparency in some

policy areas.

This phase of the workand the seminar/presentation phasemay be particularly important if theinventory process is seen as a beginning to build consensus among private and public sectorparticipants for certain policy reforms.

AnalysisThe analysis begins with the specification of the inventory and continues through data collection andinto the formal analysis phase. The framework of the inventory must be designed to ensure that noimportant policy areas are omitted. Data collection must explore all of these areas. During datacollection, the team must do more than collect data: ongoing organization and prioritization should leadto progressively more productive data gathering. That is, they should lead, e.g., to collection of


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information on the more important specific policies within policy areas and to specific criticalquantitative results from previous studies.

When an inventory is designed to focus on a particular commodity subsystem, using the rapidappraisal method in conjunction with the inventory should be considered (Holtzman, J. 1992 and1993). A rapid appraisal determines the strengths and weaknesses of the commodity subsystem;some of these weaknesses may be the result of policy constraints that should be investigated for theinventory analysis. In a rapid appraisal, the data gathering stage includes analysis as well. Thus the

analysis of the rapid appraisal would be available to the team while it was still in the field collectingpolicy data for the main part of the inventory and could guide such collection.Preparation of a performance review for the agribusiness sector may require a separate exercisebecause of its very specific numerical data requirements. In many countries these data will be difficultto find, because the agribusiness sector is not separated statistically in the published national accountsdata (Oudraogo et al. 1993).

RecommendationsIn general, an inventory includes two kinds of recommendations. On topics where data permit, itcontains broad options for policy reform; where they do not, it makes recommendations for furtherstudy. The value of the analysis goes well beyond its recommendations, however, in providing acomprehensive understanding of the policy environment in which agribusiness might develop.

III. Basic Road Map

IIIa. Operational Guidelines for Getting Started

Inventory initiation tripAn early trip by the team leader is important to work with the sponsor on specifying the nature of theinventory. The team leader should be available in person to discuss the selection of impact variablesand specification of any key issues, agro-industries, or subsectorsbased on previous research orother factors. On this trip the team leader can begin discussions with collaborating local institutions andrepresentatives of the private sector. S/he can also interview local analysts, and may arrange for themto begin collecting certain data.

Team formationAn inventory analysis can be carried out as a research project or as consensus-building activity, or assome combination of the two. The more consensus building is important, the more the team shouldinclude relevant stakeholders (and the more the process of analysis should include opportunities forfeedback from stakeholders not on the team).

To conduct an agribusiness policy inventory, extensive knowledge and skills are required, and a teamshould be constituted accordingly. It should include at least one person with knowledge of policiestargeting agricultural production, one for agricultural marketing and international trade, and one formacroeconomic policies. Of course each of these individuals should understand the impact of thesepolicies on agribusiness. Local knowledge and entrees are extremely important. Questions to askoneself in constituting the team include, Is their thinking and experience broad enough, or are theynarrow specialists? Are there team members to perform all required roles?

|Annex 1. Terms of Reference|

Home office preparationGathering secondary materials, working on questionnaire(s), and beginning a work plan before startingthe field data collection allows the analyst to study previous work on the topic efficiently that is,without the competing needs of fieldwork. At the same time, if limited field data collection by the local

consultants has begun, the consultants may be able to relate likely data gaps that can sometimes befilled better from the home office.

Field workThis phase of the project will take up most of the time in the field and will be a major part of theexercise. In planning and allocating the time required for the inventory activity, it is important to allowsufficient time for obtaining the wide range of data needed. Delays may result from tracking downreports or locating and setting up appointments with key individuals. Management of this phaserequires technical leadership and careful agreement among team members on format, method, anddivision of the work.

Preliminary analysis
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During data gathering, preliminary analysis should continue to refine and redirect the data collectionprocess. At the end of data collection, preliminary analysis prepares the analyst to make a presentationto the sponsor before undertaking the full analysis and writing the report.

Presenting early findings to sponsor and/or stakeholdersFeedback from the sponsor, stakeholders, and other professionals provides guidelines for timeallocation and emphasis in the analysis phase.

IIIb. Analytical Guidelines

Description of the general economic settingTo set the scene for the subsequent policy analysis, an inventory begins with a brief description of theeconomy. This description covers the major economic, technological, socio-cultural, and politicalrelationships that affect the agribusiness sector. It delineates the major linkages of the agribusinesssector to the national and world economies. Some of the data that might be presented and discussedbriefly include: inflation; GDP growth; the trade balance; nominal and real exchange rates; public andprivate investment; unemployment; remittances; major products, exports, and imports; and majoragricultural products, exports, and imports. When the inventory is focused on a commodity subsystem,the setting should detail the operators of that system, its supporting economic agents, andcoordinators.

A key section in this introductory description will be one that reviews recent policy changes. Thisorients the reader to the current context of policymaking. It also helps to date the snapshot that aninventory inevitably is. Some of the important topics of this section are the trade regime; the investmentregime, including the tax code; and the role of parastatals, including any privatization under way orcontemplated. The role of the informal sector may also be covered.

Matrix of policiesIn a particular country, there are likely to be many kinds of policies affecting agribusiness, having manykinds of effects. To glean an appropriate picture of the effects of these policies, they need to beorganized in a useful fashion. One way to organize policies is by their (intended) scope. Some policiesare implemented for their direct effects on the entire economy, while others are targeted atagribusiness, individual industries, or particular commodity subsectors.

Another way to categorize policies is by economic type. Thus fiscal, monetary, trade and price,regulatory, labor and human capital, and non-traded factors (like infrastructure) are a set of categoriesthat cover many policies affecting agribusiness. Other sets of categories could also be conceived.

A matrix of policies by type (fiscal, monetary, regulatory, etc.) and intended scope (economywide,sectoral, subsectoral) is a useful way to organize these policies both for summary presentation (as atext table with cells) and for analysis. If this form of organization is used for the analysis, each cell ofthe matrixcontaining several policies pertaining to one scope and one policy typeis analyzedseparately.

|Annex 2 for examples of matrices|

Policy analysisThe majority of the text of an agribusiness policy inventory is devoted to description and analysis ofpolicies that affect agribusiness. This main body of the report is organized by policy types or aroundkey issues, or in some other fashion that clarifies the presentation. Each policy analysis shoulddescribe:

relevant policies

who implements them how effectively they are implemented

what impact they have on agribusiness, and

key interactions among the policies in the group

The actual text of key laws and other important documents can be included in an appendix.

It should be pointed out that the nature of an inventory allows for qualitative assessments of the effectsof policies, but generally not for quantitative analysis of their impact. It may be possible to usegraphics, e.g., flow charts, to clarify the presentation of complex patterns of interactions and impacts.


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The analysis should highlight both the positive aspects of the policy environment and the weaknesses.For example, the analysis of regulatory policies should distinguish between restrictive regulations andthose that, when carefully designed and administered, have beneficial effects. Examples of the formerare investment licensing and domestic content laws; examples of the latter are commodity grades andstandards, and accounting standards.

Similarly, where possible, the analysis should distinguish between policies that were well-conceived

but poorly implemented, and those that were not well-conceived. The implementation of a policy maynot follow the announced plan or objectives. The analyst should also be alert to the effects of policiesquite different from their apparent objectives; for example, a subsidy on wheat or bread intended tolower the price to consumers may also lead to the use of these foodstuffs in animal feed.

The analyst should be alert to the effects of agricultural policies downstream on agribusiness. Thepresentation of such policies with their effects on agribusinessrather than on agriculturemay bevery educational for some policymakers. For example, price policies that make a commodity cheaperlower the production of what is an agribusiness input, so less supply may be available for processing.The policies that limit the allocation of resources to research can also result in lower production ofcertain commodities, but in addition it may result in the diminished availability of processing orproduction technology used or sold by agribusinesses.

Agencies responsible for policy formulation and implementationAny attempt to change an existing policy requires knowledge of who makes that policy. Similarly, if

implementation is carried out by a different agency, knowledge of that agency could also be critical tothe success of an agribusiness promotion activity or policy reform. There may be several levels ofgovernment with the power to affect agribusiness development, either directly or indirectly. Forexample, the national government has jurisdiction over foreign (agricultural) trade; state or provincialgovernments may address agricultural production issues; and local governments may tax localmovements of agricultural produce. An understanding of how these policies complement or offset oneanother is important to both coherent policymaking and successful operation of an agribusiness.

While discussing the role of institutions, one should distinguish between those that make policy andthose that implement it, and to describe the interactions among these agencies. Finding out whomakes certain policies (that is, who really has the power to change them) is not always easy. Thoseresponsible for sensitive policies may not wish to be visible. To the extent that a map of policymakinginstitutions differs from the actual wielders of such power, the process of policy reform will be retardedand possibly thwarted.

Preliminary assessment of policyimpact

In conducting an agribusiness policy inventory, one often does not undertake the estimation ofquantitative impacts. On the other hand, the question, "Which policies individually impose the mostsevere constraints on the development of agribusiness or on the selected variables", is still a key one.For this reason, a preliminary, qualitative assessment of the influence of each policy on the chosenimpact variables is an important part of the analysis. These assessments, while somewhat subjective,are based on the data gathered from secondary sources (which may indeed include quantitativeestimates of impact), on the results of interviews, and on economic principles.

Assessments can be presented through the use of a crude numeric scale (e.g., from -2 to +2) to ratepolicy impact. These numbers indicate impacts ranging from strongly positive to strongly negative. Theanalyst may feel, however, that this would imply a level of quantification that is not justified. Anotheroption is to rank the impact in words only as strongly or weakly positive or negative, or zero. Economicvariables may be affected differently in the short and long runs, so the analyst may wish to considerthese impacts separately.

Analysis of policy interactionsOne of the complexities that an agribusiness policy inventory helps to elucidate is the conflicts andcomplementarities among policies affecting agribusiness. The analysis should specifically mention theways that policies reinforce or offset each other. For example, an overvalued exchange rate and poormarket information would reinforce each other to depress agricultural exports. Duty-free, open accessto imported packaging materials and public sector agricultural research priorities that includeexportable agricultural commodities would be offsetting factors from the point of view of an agro-industry.

Analyzing the interactions among all the combinations of policy groups would probably prove verylengthy and dissipate the clarifying power of the analysis. To maintain focus, the analyst should refer tothe selected important issues or impact variables and analyze the conflicting or reinforcing policies that


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affect them.

Monitoring Advice

Because of the complexity of this undertaking, monitoring should begin with the setting of thespecifications and the selection of the team. The degree to which the sponsor wishes the analyticalexercise to be carried out jointly with stakeholders (to build consensus) will partly determine the teamcomposition and also the nature and frequency of monitoring.

During data gathering, reviews of the information collected help to refine and redirect the datacollection process. Regular meetings with the team allow the sponsor to ensure that issues importantto the sponsor receive adequate attention in both the data collection and analysis phases. At the endof the data collection phase per se, the analyst may undertake a preliminary analysis and presentationto the sponsor before beginning the full analysis and writing the report.

IV. Best Practices and Examples

The volume of information to be presented and the numerous interpretations and analyses will makethe inventory document inaccessible unless significant care is applied. A report in the form of a mainreport and a shorter synthesis volume may be very valuable for the sponsor and other readers.Another possibility is to insert hyperlinks into the document to make navigation easier and emphasizethe cross-cutting nature of the analysis.

If the exercise is used to build consensus on policy reforms, frequent interactions with stakeholders inthe form of workshops or document reviews should be designed into the process. These build on thecomposition of the team, which should include representatives of key stakeholders.

Graphical presentation of relative policy impacts in a matrix can help to summarize the results of theanalysis. Examples of some presentation formats appear in Resources, Section V. An example of animpact matrix follows.

Agribusiness Policy Inventory and Analysis

Gary Ender, Abt Associates, Inc.

Contents

Importance of Policy Inventories

Key Issues and Principles

Basic Road Map

Best Practices and Examples

Information and Resources

Annex 1

Annex 2

Abstract:An agribusiness policy inventory provides a comprehensive understanding of the policyenvironment, which is critical to the development of agribusiness. An inventory analysis permits one toexamine potential effects of policies on projects or investments, to develop an agribusinessdevelopment strategy, to begin a dialogue with stakeholders, to select issues for further analysis, andto monitor policy developments.

I. Importance of Policy Inventories

There is a wide range of activities that can promote the development of agribusiness. These activitiesinclude policy reform (liberalization), commodity production and/or marketing projects, privatization,development of analytical capability, investment promotion, development of capital markets, andinfrastructure construction and maintenance. It is well known that the effectiveness of these activities issignificantly affected by the policy environment. Thus policy reform can foster the growth ofagribusiness and one should understand the policies both promoting and hindering agribusinessbefore either carrying out an agribusiness project or related activity, or undertaking policy reform.
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Policies have generally not been examined with agribusiness as the focus. An agribusiness policyinventory is a versatile tool for organizing and understanding complex information about economic andagricultural policies and their impact on agribusiness development. It is not simply a catalog, but ratheran analytical tool that brings attention to key policy issues and puts them in perspective.

What does an inventory analysis do?

Highlight interactions and inconsistencies among policies. Because agribusiness spansagriculture and business, and commerce and industry, many policies affect it, and the netimpact is not obvious.

Guide further analysis by revealing gaps in knowledge.

Permit international comparisons, because it can be carried out in a standard fashion in morethan one country.

What can you do with the inventory?

Examine the potential effects of policies on projects.

Develop an effective strategy for the promotion of agribusiness.

Create the foundation for a program of policy dialogue and reform. If key public and privatestakeholders participate in the exercise, it can be the start of a productive dialogue.

Select issues for further analysis.

Monitor overall developments in the policy environment.

II. Key Issues and Principles

Questions that an inventory analysis can answer. The basic questions asked by an inventory are:

What policies affect agribusiness?

To what extent do these policies hamper or promote agribusiness development?

How do these policies offset or enhance each other?

Has the policy regime been stable or volatile?

Other important questions that can be included in the analysis include:

Do the public and private sectors play complementary roles?

Are there gaps in implementation or information that make changes in policy ineffective?

Are some policies the raison d'trefor certain institutions, and therefore, likely to be difficultto change or eliminate?

Definition of a policy. For the purpose of an agribusiness policy inventory, a policy is simply a rule thatinfluences the behavior of an individual, firm, or organization. Policies are generally, but not always,made by an arm of the government. There may be important policies or regulations that do notoriginate with the government. For example, grades and standards may be established by producer orexporter associations, just as accounting standards may be set by a professional organization. These


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cases seem to be the exception rather than the rule, however.

Specification of an inventory. The inventory method is flexible. Depending on the resources andinformation available, one can conduct an inventory:

As a freestanding exercise, or as one component of a sector assessment;

With a scope that is the entire agribusiness system, or with a focus on one particular issue,agro-industry, or commodity.

Because of the flexibility of the method, the parameters of the inventory must be clarified early on. Thisincludes what the sponsor can expect from the inventory (and, sometimes, what will not be included).The discussion should include the selection of impact variables (e.g., employment, investment, orexports) and the clear specification of any key issues, agro-industries, or particular subsectors. Thespecification phase will generally result in the design of a policy matrix -- the intersection of policyareas and scopes (economy-wide, sectoral, subsectoral) -- that has the potential to reveal policyimpacts not previously considered.

The central features of an agribusiness policy inventory are an enumeration and analysis of policiesthat affect the agribusiness sector. A summary of these policies can be conceived as a matrix and isoften presented in this way. To place these policies in context, the inventory includes a description ofthe general economic setting and, where possible, an overview of the performance of agribusi-ness

firms. The institutions responsible for these policies may be specified in conjunction with the policymatrix. An inventory also comprises several analyses based on the matrix and accompanyinginformation. These analyses extract key relationships from the information in the policy matrix,including a preliminary assessment of policy impacts.

Policy stability and time horizon of analysis. The stability of the policy environment is very important toboth existing and potential agribusinesses. The private sector knows that government has the power tointervene in almost any area of the economy. In Pakistan, during the denationalization of variousindustries in the early 1990s, the Government devoted considerable effort, including the passage of alaw, to convincing the private sector that in the future those same industries would not be nationalizedagain and that key economic reforms would remain in place. If governments use their policy powercapriciously, the private sector will lose faith in the government's commitment to private sectordevelopment and turn to rent-seeking activities that seem to be sustainable. Given the importance ofpolicy stability, it should be discussed both as part of a broad perspective on the policy environmentand in relation to specific policies as well. It may also deserve a separate place in the matrix or otherformat chosen to present a summary of policies. Moreover, many of the impact variables in aninventory analysis may be affected differently in the short and long runs, so the analyst may wish toconsider these impacts separately.

Overview of agribusiness performance. A major review of agribusiness performance is not the purposeof an agribusiness policy inventory. Data permitting, however, important aspects of agribusinessperformance can be highlighted. These include: the share of agribusiness in output, employment, andinvestment; the shares of large-scale, small-scale, and informal agribusiness activities by sector,gender, or region; indigenous vs. foreign ownership of agribusinesses by sector; the relativeimportance of different types of agribusiness organizations (corporations, cooperatives, NGOs, familyenterprises). The overview may also include information, by industry, on the size of agribusiness units,the degree of competition, and barriers to entry.

Data requirements. The data requirements for an inventory analysis are both intensive and extensive.They are intensive because for each policy that is cataloged and analyzed there must be sufficientinformation to understand the nature and implementation of the policy and its effects. They are

extensive because an inventory analysis is by its nature comprehensive in its scope.

While the appearance of the final report may give the impression that the analysis is largely non-quantitative, in fact the conclusions of other quantitative studies may play a key supporting role. It isusually the case that the resources available to conduct an inventory are best deployed to gather andsummarize policy information, rather than carry out quantitative analysis.

Some sources of the information (some of which may be found on the world-wide web) requiredinclude:

Annual donor, national government, or private reports on the state of the economy, which


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include basic statistics on the performance of the economy and recent policy changes.

Issue-focused government documents like a customs tariff, law, or ministerial decree.

Research reports on specific policy issues.

Enterprise guides or databases published by the private sector.

Interviews with knowledgeable individuals in government, the private sector, academia, orother institutions.

News articles (when the press is reliable).

Field data collectionThis phase of the project can be lengthy, due to the substantial data requirements. Information onsome policies may be easy to come by, while others may be only hinted at in newspaper articles or byprevious studies. An inventory is an excellent device for making policy more transparent; the "flip side"of this benefit, however, is that the work is likely to be hampered by the lack of transparency in somepolicy areas.

This phase of the workand the seminar/presentation phasemay be particularly important if the

inventory process is seen as a beginning to build consensus among private and public sectorparticipants for certain policy reforms.

AnalysisThe analysis begins with the specification of the inventory and continues through data collection andinto the formal analysis phase. The framework of the inventory must be designed to ensure that noimportant policy areas are omitted. Data collection must explore all of these areas. During datacollection, the team must do more than collect data: ongoing organization and prioritization should leadto progressively more productive data gathering. That is, they should lead, e.g., to collection ofinformation on the more important specific policies within policy areas and to specific criticalquantitative results from previous studies.

When an inventory is designed to focus on a particular commodity subsystem, using the rapidappraisal method in conjunction with the inventory should be considered (Holtzman, J. 1992 and1993). A rapid appraisal determines the strengths and weaknesses of the commodity subsystem;

some of these weaknesses may be the result of policy constraints that should be investigated for theinventory analysis. In a rapid appraisal, the data gathering stage includes analysis as well. Thus theanalysis of the rapid appraisal would be available to the team while it was still in the field collectingpolicy data for the main part of the inventory and could guide such collection.Preparation of a performance review for the agribusiness sector may require a separate exercisebecause of its very specific numerical data requirements. In many countries these data will be difficultto find, because the agribusiness sector is not separated statistically in the published national accountsdata (Oudraogo et al. 1993).

RecommendationsIn general, an inventory includes two kinds of recommendations. On topics where data permit, itcontains broad options for policy reform; where they do not, it makes recommendations for furtherstudy. The value of the analysis goes well beyond its recommendations, however, in providing acomprehensive understanding of the policy environment in which agribusiness might develop.

III. Basic Road Map

IIIa. Operational Guidelines for Getting Started

Inventory initiation tripAn early trip by the team leader is important to work with the sponsor on specifying the nature of theinventory. The team leader should be available in person to discuss the selection of impact variablesand specification of any key issues, agro-industries, or subsectorsbased on previous research orother factors. On this trip the team leader can begin discussions with collaborating local institutions andrepresentatives of the private sector. S/he can also interview local analysts, and may arrange for themto begin collecting certain data.


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Team formationAn inventory analysis can be carried out as a research project or as consensus-building activity, or assome combination of the two. The more consensus building is important, the more the team shouldinclude relevant stakeholders (and the more the process of analysis should include opportunities forfeedback from stakeholders not on the team).

To conduct an agribusiness policy inventory, extensive knowledge and skills are required, and a team

should be constituted accordingly. It should include at least one person with knowledge of policiestargeting agricultural production, one for agricultural marketing and international trade, and one formacroeconomic policies. Of course each of these individuals should understand the impact of thesepolicies on agribusiness. Local knowledge and entrees are extremely important. Questions to askoneself in constituting the team include, Is their thinking and experience broad enough, or are theynarrow specialists? Are there team members to perform all required roles?

|Annex 1. Terms of Reference|

Home office preparationGathering secondary materials, working on questionnaire(s), and beginning a work plan before startingthe field data collection allows the analyst to study previous work on the topic efficiently that is,without the competing needs of fieldwork. At the same time, if limited field data collection by the localconsultants has begun, the consultants may be able to relate likely data gaps that can sometimes befilled better from the home office.

Field workThis phase of the project will take up most of the time in the field and will be a major part of theexercise. In planning and allocating the time required for the inventory activity, it is important to allowsufficient time for obtaining the wide range of data needed. Delays may result from tracking downreports or locating and setting up appointments with key individuals. Management of this phaserequires technical leadership and careful agreement among team members on format, method, anddivision of the work.

Preliminary analysisDuring data gathering, preliminary analysis should continue to refine and redirect the data collectionprocess. At the end of data collection, preliminary analysis prepares the analyst to make a presentationto the sponsor before undertaking the full analysis and writing the report.

Presenting early findings to sponsor and/or stakeholdersFeedback from the sponsor, stakeholders, and other professionals provides guidelines for time

allocation and emphasis in the analysis phase.

IIIb. Analytical Guidelines

Description of the general economic settingTo set the scene for the subsequent policy analysis, an inventory begins with a brief description of theeconomy. This description covers the major economic, technological, socio-cultural, and politicalrelationships that affect the agribusiness sector. It delineates the major linkages of the agribusinesssector to the national and world economies. Some of the data that might be presented and discussedbriefly include: inflation; GDP growth; the trade balance; nominal and real exchange rates; public andprivate investment; unemployment; remittances; major products, exports, and imports; and majoragricultural products, exports, and imports. When the inventory is focused on a commodity subsystem,the setting should detail the operators of that system, its supporting economic agents, andcoordinators.

A key section in this introductory description will be one that reviews recent policy changes. Thisorients the reader to the current context of policymaking. It also helps to date the snapshot that aninventory inevitably is. Some of the important topics of this section are the trade regime; the investmentregime, including the tax code; and the role of parastatals, including any privatization under way orcontemplated. The role of the informal sector may also be covered.

Matrix of policiesIn a particular country, there are likely to be many kinds of policies affecting agribusiness, having manykinds of effects. To glean an appropriate picture of the effects of these policies, they need to beorganized in a useful fashion. One way to organize policies is by their (intended) scope. Some policiesare implemented for their direct effects on the entire economy, while others are targeted at


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agribusiness, individual industries, or particular commodity subsectors.

Another way to categorize policies is by economic type. Thus fiscal, monetary, trade and price,regulatory, labor and human capital, and non-traded factors (like infrastructure) are a set of categoriesthat cover many policies affecting agribusiness. Other sets of categories could also be conceived.

A matrix of policies by type (fiscal, monetary, regulatory, etc.) and intended scope (economywide,sectoral, subsectoral) is a useful way to organize these policies both for summary presentation (as a

text table with cells) and for analysis. If this form of organization is used for the analysis, each cell ofthe matrixcontaining several policies pertaining to one scope and one policy typeis analyzedseparately.

|Annex 2 for examples of matrices|

Policy analysisThe majority of the text of an agribusiness policy inventory is devoted to description and analysis ofpolicies that affect agribusiness. This main body of the report is organized by policy types or aroundkey issues, or in some other fashion that clarifies the presentation. Each policy analysis shoulddescribe:

relevant policies

who implements them

how effectively they are implemented what impact they have on agribusiness, and

key interactions among the policies in the group

The actual text of key laws and other important documents can be included in an appendix.

It should be pointed out that the nature of an inventory allows for qualitative assessments of the effectsof policies, but generally not for quantitative analysis of their impact. It may be possible to usegraphics, e.g., flow charts, to clarify the presentation of complex patterns of interactions and impacts.

The analysis should highlight both the positive aspects of the policy environment and the weaknesses.For example, the analysis of regulatory policies should distinguish between restrictive regulations andthose that, when carefully designed and administered, have beneficial effects. Examples of the formerare investment licensing and domestic content laws; examples of the latter are commodity grades andstandards, and accounting standards.

Similarly, where possible, the analysis should distinguish between policies that were well-conceivedbut poorly implemented, and those that were not well-conceived. The implementation of a policy maynot follow the announced plan or objectives. The analyst should also be alert to the effects of policiesquite different from their apparent objectives; for example, a subsidy on wheat or bread intended tolower the price to consumers may also lead to the use of these foodstuffs in animal feed.

The analyst should be alert to the effects of agricultural policies downstream on agribusiness. Thepresentation of such policies with their effects on agribusinessrather than on agriculturemay bevery educational for some policymakers. For example, price policies that make a commodity cheaperlower the production of what is an agribusiness input, so less supply may be available for processing.The policies that limit the allocation of resources to research can also result in lower production ofcertain commodities, but in addition it may result in the diminished availability of processing orproduction technology used or sold by agribusinesses.

Agencies responsible for policy formulation and implementation

Any attempt to change an existing policy requires knowledge of who makes that policy. Similarly, ifimplementation is carried out by a different agency, knowledge of that agency could also be critical tothe success of an agribusiness promotion activity or policy reform. There may be several levels ofgovernment with the power to affect agribusiness development, either directly or indirectly. Forexample, the national government has jurisdiction over foreign (agricultural) trade; state or provincialgovernments may address agricultural production issues; and local governments may tax localmovements of agricultural produce. An understanding of how these policies complement or offset oneanother is important to both coherent policymaking and successful operation of an agribusiness.

While discussing the role of institutions, one should distinguish between those that make policy andthose that implement it, and to describe the interactions among these agencies. Finding out who


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makes certain policies (that is, who really has the power to change them) is not always easy. Thoseresponsible for sensitive policies may not wish to be visible. To the extent that a map of policymakinginstitutions differs from the actual wielders of such power, the process of policy reform will be retardedand possibly thwarted.

Preliminary assessment of policyimpactIn conducting an agribusiness policy inventory, one often does not undertake the estimation ofquantitative impacts. On the other hand, the question, "Which policies individually impose the most

severe constraints on the development of agribusiness or on the selected variables", is still a key one.For this reason, a preliminary, qualitative assessment of the influence of each policy on the chosenimpact variables is an important part of the analysis. These assessments, while somewhat subjective,are based on the data gathered from secondary sources (which may indeed include quantitativeestimates of impact), on the results of interviews, and on economic principles.

Assessments can be presented through the use of a crude numeric scale (e.g., from -2 to +2) to ratepolicy impact. These numbers indicate impacts ranging from strongly positive to strongly negative. Theanalyst may feel, however, that this would imply a level of quantification that is not justified. Anotheroption is to rank the impact in words only as strongly or weakly positive or negative, or zero. Economicvariables may be affected differently in the short and long runs, so the analyst may wish to considerthese impacts separately.

Analysis of policy interactionsOne of the complexities that an agribusiness policy inventory helps to elucidate is the conflicts and

complementarities among policies affecting agribusiness. The analysis should specifically mention theways that policies reinforce or offset each other. For example, an overvalued exchange rate and poormarket information would reinforce each other to depress agricultural exports. Duty-free, open accessto imported packaging materials and public sector agricultural research priorities that includeexportable agricultural commodities would be offsetting factors from the point of view of an agro-industry.

Analyzing the interactions among all the combinations of policy groups would probably prove verylengthy and dissipate the clarifying power of the analysis. To maintain focus, the analyst should refer tothe selected important issues or impact variables and analyze the conflicting or reinforcing policies thataffect them.

Monitoring Advice

Because of the complexity of this undertaking, monitoring should begin with the setting of thespecifications and the selection of the team. The degree to which the sponsor wishes the analytical

exercise to be carried out jointly with stakeholders (to build consensus) will partly determine the teamcomposition and also the nature and frequency of monitoring.

During data gathering, reviews of the information collected help to refine and redirect the datacollection process. Regular meetings with the team allow the sponsor to ensure that issues importantto the sponsor receive adequate attention in both the data collection and analysis phases. At the endof the data collection phase per se, the analyst may undertake a preliminary analysis and presentationto the sponsor before beginning the full analysis and writing the report.

IV. Best Practices and Examples

The volume of information to be presented and the numerous interpretations and analyses will makethe inventory document inaccessible unless significant care is applied. A report in the form of a mainreport and a shorter synthesis volume may be very valuable for the sponsor and other readers.Another possibility is to insert hyperlinks into the document to make navigation easier and emphasize

the cross-cutting nature of the analysis.

If the exercise is used to build consensus on policy reforms, frequent interactions with stakeholders inthe form of workshops or document reviews should be designed into the process. These build on thecomposition of the team, which should include representatives of key stakeholders.

Graphical presentation of relative policy impacts in a matrix can help to summarize the results of theanalysis. Examples of some presentation formats appear in Resources, Section V. An example of animpact matrix follows.

agribusiness policy inventory and analysis

Documents