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Should Industry Support a GRDC Transition to an IOC Structure?

Discussion Paper

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Grain Growers Limited Postal address: PO Box 7, North Ryde, NSW, 1670, Australia Street address: 1 Rivett Road, Riverside Corporate Park, North Ryde, NSW, 2113 Phone: +61 2 9888 9600 Fax: +61 2 9888 5821

Grain   Growers   Limited   is   Australia’s   national,   independent,  member-based, financially sustainable, technically resourced, grain producer organisation. We represent the interests of Australia’s   25,000 grain producers to ensure a sustainable, viable and globally competitive grains industry.

This discussion paper was prepared by Dr Cheryl Kalisch Gordon and Emeritus Professor Gordon MacAulay.

For further information about this course contact Dr Kalisch Gordon +61 2 9888 9600.

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Table of Contents

EXECUTIVE SUMMARY 5

1. Introduction and Background 8

2. The Economics of a Transition 8

3. The Proposal 11

4. Reasons for the governance review 11

5. Anticipated Changes 12

6. The Impact of the Transition 13

6.1 Advantages and Disadvantages 13

6.2 Risks 15

7. Should Industry Support a Transition? 15

7.1 Would the Changes meet the Needs? 15

7.2 The Economics of a transition – a preliminary assessment 16

8. Conclusions 18

9. References 20

Appendix A: What are the Lessons from Other Rural RDC Transitions? 21

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EXECUTIVE SUMMARY

The GRDC board has initiated a review of the governance of GRDC as a response to identified challenges and future risks. Indications are that transition to an Industry Owned Corporation (IOC) structure is viewed as one way to deal with the identified reasons for the review.

In this paper a framework for identifying if such a transition should be supported by growers, is presented. This framework, and accompanying discussion, is designed to stimulate the necessary conceptual and detailed assessment required to determine if a transition to an IOC would be in the best interests of Australian grain growers. In particular, the framework addresses whether:

The resultant changes can meet the identified challenges and future risks; and If the transition is likely to be worthwhile from an economic perspective.

A preliminary review suggests that IOC structure could be expected to respond to the key operational and political economy challenges and risks identified. It is less clear if a transition would or would not respond to the remaining identified challenges, and further detail on the proposed nature and operation of the IOC would be required to assess this.

From an economic perspective the framework questions:

Will the IOC structure deliver greater reductions to the marginal costs of Australian grain farmers

(that is, a supply response) than the Statutory RDC structure?

This is a key economic criterion on which to judge such a change as it is a reflection of the benefits to growers. A preliminary judgement is that there is no strong set of reasons to suggest that the IOC will result in better outcomes than the statutory RDC. In the event that a IOC had changed research priorities, it would also be pertinent to assess if the IOC would deliver benefits to growers from shifts in demand.

Will the IOC structure make the GRDC more sustainable in the political economy of Australian

agriculture?

A preliminary judgement is that there is the potential for the IOC to be more sustainable in the Australian political economy because it may be possible to be more independent of the strictures of a statutory corporation in its capacity to lobby with government either explicitly or implicitly.

What are the cost implications of making a change?

There will be a range of, potentially significant costs, in the transition phase. In the operation of an IOC into the future, it is not possible at this stage to say if the costs will increase or decrease and by how much.

How do the answers to questions 1-3 rate in the context of each other?

Given a preliminary and only qualitative consideration of Q1-3, it is only possible to use logical argument as to how they compare to each other. Given expectations that there would not be any

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additional reductions in the marginal costs of production, but potentially useful increases in the sustainability of GRDC in the political economy and moderate to large direct costs as a result of the change, there is no clear case that the transition to an IOC is a worthwhile undertaking.

To provide a full assessment of the transition the following is recommended:

1. A clear and more detailed vision for the IOC be provided; 2. Demonstration of the potential for the IOC to improve research outcomes through reduced

costs or better technology; 3. An assessment of the anticipated changes in the expenses/costs of operation of GRDC,

including the transition itself; 4. A quantitative benefit cost analysis of the potential transition be undertaken, to guide

decision making going forward; and 5. A review (see Appendix A) of the transition experiences from other rural RDCs be undertaken

to identify approaches that may mitigate revealed risks.

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1. Introduction and Background

The Grains Research & Development Corporation (GRDC) is one of six rural research and development corporations that continue to operate as statutory research and development corporations (RDCs) under the Primary Industry & Energy Research & Development Act 1989 (PIERD

ACT, 1989). In June 2013, the GRDC board initiated a review of the governance of GRDC with a view to transitioning GRDC to an industry owned corporation (IOC).

This paper is a discussion of:

the economics of a transition; the reported prompts for the review: the potential positive and negative impacts of the changes; the risks associated with such a change; and preliminary consideration of the proposal in the assessment framework.

The framework, and accompanying discussion, is designed to stimulate the necessary conceptual and detailed assessment required to determine if a transition to an IOC would be in the best interests of Australian grain growers.

2. The Economics of a Transition

For agricultural industries, research and development is the primary stimulus of the direction and rate of technical change (Alston and Pardey, 1996; Alston et al, 2009) and the ability of primary producers to reduce their marginal costs of production. The substantial involvement of government in agricultural research and development has occurred because: 1) agricultural innovations have traditionally been mostly public good in character (non-excludible and non-rival); 2) agricultural R&D is characteristically risky; and 3) there are significant synergies in the research, extension and education for agricultural industries (Rausser et al, 2011). Traditionally, these reasons have been ample reason for the government to be involved in the organisation and co-funding of agricultural research because of the public benefit that arises from such an investment. Agricultural R&D has been a drawcard in the political economy or political market1.

In transitioning an R&D organisation to a new governance structure, there must be recognition of the core reasons for its initial existence, consideration of its existence in the political economy, the relative costs of its existence and an assessment of how the new structure will impact on these.

In particular, it needs to be considered:

1 The political economy or political market encompasses the exchange of ideas and policies for votes. Politicians tout ideas, policies and pledges and the community directs (gives) its votes to the politicians with the ideas, policies and pledges that most closely match their individual desires. Bargaining is conducted until a political-economic equilibrium is reached (Rausser, et al.,  2011).    In  this  sense,  it  is  a  market,  and  unhindered  free  elections  offer  a  ‘market  solution’.    This  market  is  influenced by those individuals/groups who are able to lobby for favourable outcomes either with the exchange of promised votes or to a lesser degree (in Australia) electoral contributions.

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Q1) Will the IOC structure deliver greater reductions to the marginal costs of Australian

grain farmers (that is, a supply response) than the Statutory RDC structure?

The impact of research and development on grain farming operations is primarily captured as a reduction in the marginal cost of production. As demonstrated in a) of Figure 1, a shift in an individual  farmer’s  marginal  cost  curve  results  in  an  increase  in  farm  supply,  from  q1 to q2. Across the industry, as shown in b) below, this corresponds to an increase in supply from Q1 to Q2. These shifts expand the amount of surplus (profits) able to be captured by the individual farmers and by extension, the industry.

Figure 1

So the first consideration regarding a transition is would a new structure deliver greater reductions in the marginal costs of production? With regard to GRDC and the Australian grains industry, the specific questions to ask are, will an IOC structure deliver:

o Better farming systems? o Better varieties (yield, quality)? o Earlier delivery /timing of research outputs? o More varieties? o Cheaper operations/costs of operation? o Better environmental /land management? o Other approaches to reducing marginal costs?

If there is no basis for anticipating that an IOC structure will deliver better on the ground research outcomes that reduce the marginal costs of production for grain farmers, or enhanced demand, a potential transition should be questioned.

a) Impact of Research & Development

Innovations on individual farmer output

b) Impact of Research & Development

Innovations on industry supply

MC 2

MC1 P P

S 1

Q

Pw

Q2

S

Where Q = A x q and A= the number of

individual (homogenous) farmers

Individual farmers produce an amount, q, that corresponds

with the profit maximising condition of price (marginal

revenue) being equal to the marginal cost of production. As

their marginal costs of production decline (MC1-> MC

2), the

profit maximising amount of output expands.

sing amount of output expands

q

x A

q1 q

2 Q

1

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It would also be pertinent to question if an IOC structure may assist broadening the research priorities of GRDC to include research which stimulates demand shifts for the Australian industry. Could an IOC structure promote research which delivers new uses for and new markets for Australian grain? Such a possibility would lead to there being a need to consider demand shifts as well as supply shifts and the benefits of both to Australian grain growers.

Q2) Will the IOC structure make the GRDC more sustainable in the political economy of

Australian agriculture?

The role and place of agriculture in the Australian political economy has changed significantly over recent decades. Favourable rural policies can no longer be exchanged for as many votes as in previous decades: there are fewer farm businesses and fewer people living in rural areas. Combine this with the proliferation of the principles of National Competition Policy to all facets of government expenditures and it is, and will likely increasingly be, challenging to maintain government contributions to rural R&D. Equally, the existence of GRDC relies on the support of its Australian grain farmers. As such, it is pertinent to ask:

o Can GRDC position itself more strongly in the political system by transitioning to an IOC?

o Will it be possible to buy more support from farmers in an IOC structure? o Will it be possible to buy more support from government/politicians?

If the IOC structure can be demonstrated to deliver greater sustainability in a political economy sense, then the transition should be supported from this point of view. It is worth noting, that if there is increased success as per question Q1, it is likely to contribute to increased sustainability in the political economy sense (both from the point of view of government and farmers) and as such Q1 and Q2 are linked.

Q3) What are the cost implications of making a change?

A transition to an IOC is likely to incur significant costs. These costs need to be considered and not only from a financial perspective but from the perspective of the opportunity costs and unintended costs and impacts. Consideration must also extend to the changed annual operational expenses associated with operating the GRDC as an IOC compared to as a Statutory RDC. In particular, the following needs to be answered:

o What is the cost of the transition itself? o What is the change in the ongoing costs of operation under a new structure (both

increases and possible decreases)? o What are the potential unintended costs of the transition? o What are the non-financial costs of the transition? o What are the non-financial costs of operating in the new structure? o What else could have been achieved in the absence of the transition?

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In the event that costs are found to be significant then the proposal to transition to an IOC should be considered with care. However while it is important that the costs be considered as per the above questions, costs in isolation are not sufficient to make a judgement regarding support for the transition.

Q4) How do the answers to questions 1-3 rate in the context of each other?

In order to be able to make a judgment regarding support for a GRDC transition, the costs identified in Q3 above, need to be considered in the context of the additional marginal cost reductions that could be achieved under the new structure (Q1) and the increase in sustainability in the political economy (Q2). That is, is the transition worthwhile for the given costs? If evidence can be found to demonstrate the capacity of an IOC structure to deliver greater marginal cost reductions for growers and at the same time increase the sustainability of the structure so that it is more valuable to the industry than the costs of the transition and associated costs, then there will be a basis on which to support the transition.

3. The Proposal

In order to be able to assess the proposal fully, it would be necessary to have greater detail. The GRDC governance review has not prescribed the nature of the IOC in any great detail, and it is open to industry debate, however it is understood that the preliminary vision is that an IOC:

Would not include a marketing function; Would not incorporate a policy/advocacy function; Would maintain existing core functions; and It would be limited by guarantee.

Three Bills to amend the federal rural research and development legislation were introduced into the Australian Parliament in June 2013. The bills afford many possibilities for change in the operation of rural RDCs, including the GRDC. However, on the basis of the preliminary vision, whether the Bills pass or not, it is not expected to have a material impact on outcomes of a potential transition.

4. Reasons for the governance review

In reviewing the preliminary proposal to transition to an IOC it is necessary to identify the reasons that the GRDC governance review was initiated. The reasons that have been gleaned from communication with GRDC can broadly be categorised into three main areas: impediments to operation; a changed political economy in Australia; and industry concern with GRDC performance. These are listed below with further detail where available:

Impediments to Operation

GRDC is reported to have a culture of delay/slow response and risk aversion. This is reported to result from the nature of reporting and accountability in the statutory structure.

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Required Ministerial signoff creates reportedly avoidable delay in key processes and appointments.

GRDC is reportedly unable to negotiate with international R&D agencies in a timely or professional manner due to the compliance required of statutory agencies. In the changing global crop research industry, where there is increased consolidation, GRDC is a small player which operates within government processes, and is therefore not viewed as a compatible research partner. This prohibits GRDC from leveraging R&D dollars in the international research market.

The GRDC workforce is reported to be challenged by the influence of government restrictions/union agreements on employment conditions and remuneration negotiations.

GRDC has an ineffective capacity to invest in commercial development of the intellectual property it generates.

A Changed Political Economy

There is reduced support generally for rural and agricultural policies and Treasury appears to support the diversion of government funds away from RDCs. The GRDC board has identified the need to consider a structure which ensures sustainability into the future and the safeguarding  of  any  assets  that  the  GRDC  holds  on  industry’s  behalf.    

Industry Concern

Grower concern about the performance of GRDC in terms of rates of return for levy funds and government matched funds has been voiced.

5. Anticipated Changes

Transition  to  an  IOC  would  change  GRDC’s  operational,  financial  functions  and  responsibilities,  as  well as, its relationship with growers. A new IOC would be enabled and governed by new industry specific legislation and the Corporations Act 2001. Some detail regarding the functions and responsibilities of a new IOC would only be determined when the new industry specific legislation is drafted, however, in its absence the following is a summary of the material changes that might be expected on the premise of the functionality of other rural industry IOCs under the Corporations Act. The changes listed are those that would occur as a result of the change to an IOC only (given the assumption that the R&D bills are passed). These are the key material changes that have been identified to date, and others may be revealed in the course of time.

Operational Employment/human resource management as per any other private enterprise in Australia; Procurement and expense of funds consistent with the Corporations Act 2001; Capacity to establish subsidiary research/commercial companies; and An external review would be required each 4-5 years.

Financial Funds in reserve are industry’s  and  can  be  managed  by  the  IOC  on  behalf  of  industry  for  a  

financial return; and

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The IOC would be required to submit annual reports to/compliant with ASIC, as well as government reporting/SFOs.

Industry relations Direct voting for the board and for a Chairman, consistent with the Corporations Act. Necessity to run an Annual AGM, consistent with the Corporations Act.

Government Relations

The nature of reporting and access to levy funds would be determined in the industry specific legislation, however, this would be enacted practically by GRDC entering a statutory funding agreement (SFA) and corresponding sign-off of strategic plans.

6. The Impact of the Transition

In this section, key changes have been considered in terms of the potential advantages or disadvantages of each. Following this, potential risks are listed for consideration.

6.1 Advantages and Disadvantages

Operational

Non-government employment policy

The ability for GRDC to manage their human resources with a non-government employment policy would allow them flexibility in their remuneration negotiations, promotion structure and conditions and review. Such flexibility could allow:

Cultural change in the organisation, potentially leading to better research outcomes; and The ability to obtain better value for money from human resources, potentially leading to

better research outcomes or reduced costs of operation.

Procurement and expense of funds consistent with Corporations Act 2001

The capacity of GRDC to enter contracts without the restrictions of government procurement regulations would afford them a capacity to:

Enter into contracts with international collaborators in a more expedient way, potentially leading to better research outcomes; and

Enter into high value contracts with reduced compliance requirements, leading to reduced costs.

But may also:

Allow the forming of high value contracts with reduced compliance requirements and potentially higher risk; and

Lead to higher costs of key inputs (e.g. insurance) because the IOC would no longer be part of government bulk purchasing arrangements.

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Financial

Industry ownership of reserves

If GRDC were able to retain ownership of the industry reserves it would be in a position to:

Manage the reserves with the aim of generating an investment returns for industry, allowing for increased investment in R&D and possibly better research outcomes; and

Gain the capacity, and the incentive, to manage research funds over longer time frames, leading to greater returns from strategic investments.

But may also:

Expose GRDC to greater financial risks in managing the funds without the final backup of government support.

Lead to the taking of business risks outside the financial capacity to support these risks.

Financial Reporting

As an IOC, GRDC would be required to submit Corporations Act compliant reporting to ASIC in addition to reporting to government (which would be dependent on the nature of Industry Legislation that is negotiated, but would be required in some form as a requirement of the Statutory Funding Agreement (SFA). This may lead to higher costs of reporting.

Industry Relations

In transition to an IOC, the nature of the engagement with industry members is changed significantly, so that there is:

Direct voting for the board and for the Chairman. This may lead to the selection of a board that more closely matches the needs and desires of industry, leading to better leadership.

A requirement to hold an Annual General Meeting. This may have the effect of engaging the members more fully in the direction of the industry, leading to potentially better research outcomes.

But this may also:

Lead to increased (futile) political activity within the membership; Lead to the election of less skilled board members; Create a forum for members to move the focus of the GRDC away from R&D; Create a forum for members to remove the levy and/or GRDC; Depending on the frequency of elections, create a pressure for the board to attempt to pick

winning research projects so as to ensure re-election; and Lead to added costs of operation.

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6.2 Risks

Risks related to a potential transition to an IOC can be identified in terms of both the transition itself and in the operation of the IOC once established.

Risks in Transition Growers do not support the change and confidence in the GRDC is undermined. Growers withdraw support for/express desire to remove the levy.

Risks in Operation of the IOC

Research outputs are not enhanced or decline in quality and quantity (note however,

diminishing returns to research effort may be involved in the current research

priorities so this may be a risk under both the statutory and IOC structure); Reduced government checks and balances on spending and operations; Distanced relationship from government leading to less supportive government

actions in adverse circumstances; Concentration of control (small number of players hold control); and Growers withdraw support for/express desire to remove, levy.

It is anticipated that some of the risks listed above may be mitigated through consideration of issues, strategies and lessons learnt in the transition of other rural RDCs to the IOC structure.

7. Should Industry Support a Transition?

To determine if industry should support a transition of GRDC from a statutory RDC to an IOC, it is necessary to consider:

1. Whether the transition achieves changes that appropriately accommodate the identified drivers of change: does the action result in outcomes that can respond to the initial reasons for considering a change?

2. Whether the resultant outcomes are more valuable to industry than the cost of the transition: does the transition achieve outcomes that are more valuable to industry than could have been achieved under the existing structure, relative to the cost of the change?

These questions are considered in the following two sections.

7.1 Would the Changes meet the Needs?

Whether material changes that result under an IOC structure meet the initial drivers for the transition will, in many senses, be open to interpretation and most definitely to uncertainty. In the following, the drivers for change are listed together with aspects to consider when judging if outcomes correspond with the initial drivers for change.

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Impediments to Operation:

Under an IOC structure, GRDC would have increased flexibility to manage their procurement process. This would change the nature of their employment and other procurement processes. Arguably this could lead to a change in the culture of risk aversion that is reported in GRDC, however, equally arguable, this could be achieved by a change in management. The flexibility afforded by an IOC structure would provide greater potential to engage in large, international collaborations but these may hold substantial risk in the achievement of advantageous outcomes.

A Changed Political Economy:

Under an IOC structure, GRDC would be custodian of industry reserves and so have the capacity to invest the reserves for a market return. Arguably, this offers industry the basis on which to aim for a self-sustaining future for operation in a changed political economy. Equally important to achieving sustainability in a changed political economy is the achievement of research and development goals, such as enhanced profitability, improved asset values and longer-term farm sustainability for growers.

Industry Concern:

A transition to an IOC would not necessarily alleviate industry member concerns about the use of levies and government matched funds. The transition in this sense is uncertain. Once transitioned, if a sense of ownership can be created for members, concern may be reduced. The ability of an IOC to deliver greater R&D returns would most certainly reduce concern, and garner greater support. However,  it  is  unlikely  to  change  the  perceived  ‘double  charging’  involved  in a research levy used to support plant breeding and then royalties on the use of plant varieties.

This review gives a sense that the transition to an IOC may be worthwhile for the industry because there is an apparent matching of the outcomes of a transition with the drivers of the transition. However, at this stage, there is insufficient detail to make such a judgement. In any case such a match is a necessary condition for determining if a transition is to be effective, but is, however, not sufficient to judge if it is an advantageous proposal. It tells nothing of the value of the transition from the perspective of the industry. It is necessary to consider whether the transition delivers greater total value to the industry: is it of real benefit to the industry?

7.2 The Economics of a transition – a preliminary assessment

Q1) Will the IOC structure deliver greater reductions to the marginal costs of Australian

grain farmers than the Statutory RDC structure?

There is no obvious basis on which to argue that an IOC structure will deliver better on the ground research outcomes. In considering the questions of whether there will be better farming systems, or more and better varieties developed, or if innovations will be produced at a faster rate, etc., there is no immediate reason to suggest this would be the case under an IOC.

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Arguably, this might be achieved by a change of culture, staff, strategic direction and a changed way of doing business. These things are, however, not inextricably linked to a transition to an IOC. They could potentially be achieved in the absence of the transition. The exception would be the potential for GRDC to engage in expedited negotiations with international collaborators and to gain significantly improved income flows from investment of the financial reserves.

In this preliminary review, it is not possible to judge if the IOC would deliver greater reductions in marginal costs than a statutory RDC, however, the concern that it may not is flagged. Further, it is not anticipated that an IOC structure would deliver benefits to growers from shifts in the demand for Australian grain unless research priorities under an IOC are different to current research priorities.

Q2) Will the IOC structure make the GRDC more sustainable in the political economy of

Australian agriculture?

That a transition will change the position of GRDC in the political economy with respect to grower constituents is clear. Whether, that change will be positive or negative is not clear, and is likely to depend entirely on the process of transition and whether the new GRDC does deliver improved research outcomes.

More broadly, GRDC is anticipated to be more sustainable in the political economy. It has the potential to establish itself as a non-government organisation in an environment where it is increasingly difficult for the benefits of agricultural R&D to be conveyed to and investment in it justified by government because of the relative shift of the size of agriculture in relation to the rest of the economy.

Q3) What are the cost implications of making a change?

The annual costs of operation may or may not change significantly. The expenses of GRDC would need to be analysed, even if just at the category level (see list following), to identify key areas that are likely to be impacted. The cost of corporate governance could be expected to increase for example, however other costs such as panel expenses might not be expected to increase, but legal and procurement may or may not increase.

GRDC Expense Categories:

Employee Costs Staff travel and accommodation

Consultants Panel expenses

Program team expenses Communications

Corporate governance

Corporate services Legal and procurement

Levy collection costs Other

Operating lease rentals Depreciation and Amortisation

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The transition itself is likely to incur significant costs and be an important consideration, especially from the view of farmers. This might be even more so when considered in the context of what might otherwise have been achieved in terms of research outcomes if the funds were not diverted to the transition.

Potential opportunity costs that may eventuate are considered key to the calculation of costs. For example, the potential for current research programs to be disrupted and findings not to be extended, the delay in the delivery of key research outcomes etc., could be high and should not be discounted. Non-financial costs related to loss of goodwill and the potential to lose staff are also of import.

Q4) How do the three parts (1-3) rate in the context of each other?

Given a preliminary and only qualitative consideration of Q1-3, it is only possible to speculate as to how they compare to each other. Given expectations that there would be, if any, only minor additional reductions in the marginal costs of production, but potentially valuable increases in the sustainability of GRDC in the political economy and moderate to large costs as a result of the change, there is no clear case that the transition to an IOC is a worthwhile undertaking.

8. Conclusions

There are many reasons which justify the initiation of a governance review for GRDC. These range from changed market conditions, changes in the political economy in which GRDC sits, operational issues and concern about its performance as an RDC. The review is not only justified but part of the board’s  responsibility  to  ensure  that  the  RDC  is  at  its  best.    

These reasons do not, however, automatically justify the transition of the RDC to an IOC structure. Justification needs to be considered from the perspective of whether the resultant changes will respond to the identified issues, but also, and more importantly, whether the change will be worthwhile  from  the  industry’s  perspective  in  an  economic  sense.

In order to fully explore this, a detailed vision of the nature and operation of the IOC is required. Once this is available, a full investigation of whether the changes respond to the identified issues and if the change will deliver an economically superior outcome for the industry, can be undertaken.

A preliminary consideration, given scant detail, indicates that the change would satisfy the key identified needs but that change may or may not be worthwhile from an industry view. This is primarily because there is no indication that the IOC structure would deliver greater reductions in the marginal costs of producing grain and therefore greater profits to growers. Preliminary consideration of the potential transition also reveals a number of risks, both in transition and in operation as an IOC. There may however also be risks involved in staying as a statutory body.

To provide a fuller assessment of the transition the following is recommended:

1. A more detailed vision for the IOC be provided;

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2. A clear demonstration of the potential for the IOC to improve research outcomes; 3. An assessment of the anticipated changes in the expenses/costs of operation of GRDC, and

the transition itself 4. A quantitative benefit cost analysis of the potential transition be undertaken, to guide

decision making; and 5. A review (see Appendix A) of the transition experiences from other rural RDCs be undertaken

to identify approaches that may mitigate revealed risks.

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9. References Alston, J.M. and Pardey, P.G. (1996) Making Science Pay: The Economics of Agricultural R&D Policy. American Enterprise Institute Press, Washington, DC. Alston, J. M., Pardey, P.G., James, J.S. and Anderson, M.A. (2009) A Review of Research on the Economics of Agricultural R&D. In Annual Review of Resource Economics 1. Rausser, G.C., Swinnen, J. and Zusman, P. (2011) Political Power and Economic Policy: Theory,

Analysis, and Empirical Applications. Cambridge University Press, New York.

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Appendix A: What are the Lessons from Other Rural RDC Transitions?

A cursory search has revealed no public evaluation or review of the processes of transition to IOC structures in other industries. In the absence of such a report, it is recommended that such a review of processes be undertaken. In particular, the review should answer:

What should be done in transition and establishment phases to minimise the risk of the transition not achieving desired outcomes?

The review would include, but not be limited to:

MLA APL AWI HAL DAL

Questions would include, but not be limited to:

What were the key drivers for change? What was done well? What  wasn’t  done  well? How much did it cost? Regrets in structure or process? Current risks? Current impediments? Evidence of better research outcomes for primary producers under IOC structure? Changes you would make to your current constitution/MOU if it were being re-written? Perceived advantages to remaining a statutory RDC? Who was there at the time that could be consulted? Were there changes to the Registered Organisation involvement at the time? Recommendations for the best arrangement with the Registered Organisation and the type of

Registered Organisation? Others?

It will be necessary to consult more than one person in each organisation (probably 4-5). A structured phone consultation would be likely appropriate with:

Current CEO; Current Chair; CEO and Chair at the time of transition; Current head of research/appropriate general manager; and Other stakeholders that are identified as not being supportive.

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