Malaysia - Incentive policies in agriculture
Kolodko, Grzegorz W. | Ferge, Zsuzsa | Aslund, Anders | Scott, Evan | Gao Shangquan | Dollar, David | Litvack, Jennie | Davies, Peter | Stiglitz, Joseph E. | Hirschler, Richard [editor]
This report is based on an earlier recommendation for Malaysia's national agricultural policy to remove specific biases against the agricultural sectors so that its terms of trade vis-a-vis the rest of the economy could improve sufficiently to make agriculture a more attractive source of income. The focus of this report is on pricing interventions in agricultural markets, i.e. the numerous mechanisms whereby returns to agricultural activity are affected through changes in the prices of outputs, intermediate inputs or factors of production. Rural development programs depend crucially on the price environment in which farmers operate. In the absence of proper incentives for production, the provision of infrastructure and/or research and extension will have little effect. Conversely, a sectoral approach to agriculture policy requires a comprehensive assessment of the feasible role for prices, taxes, and subsidies in the sector. Appropriate price incentives by themselves may be inadequate for overcoming the major land, labor, technical, and institutional constraints that currently restrict agricultural growth in Malaysia.
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