A Reappraisal of the Role of Agriculture in Economic Growth in Melanesian Countries

Fortunes in the agricultural sectors of four of the largest South Pacific countries are traced in recent decades by estimating the single factoral terms of trade index. The single factoral terms of trade are measured for agriculture in four Melanesian countries-Fiji, Papua New Guinea, Solomon Islands and Vanuatu-over the period, 1970 to 2002. This index provides a useful method to assess changes in returns to factors employed in agricultural production in these countries. Except in Solomon Islands, farmers experienced a deteriorating index, indicating that they have reaped progressively lower returns to their resources. In Solomon Islands, returns to resources are shown to have increased slightly. A sustained contribution by the agricultural sector to economic growth requires a major improvement in returns to farm resources. Of the three components of the factoral terms of trade index, product price increases and cost decreases are argued to be unlikely to yield great dividends in the foreseeable future. Most potential lies in increasing TFP, which will depend on more effective work from the national research and extension services, and greater transfer of improved technologies from international research centres than achieved to date.factoral terms of trade, Melanesia, smallholders, total factor productivity, International Development, D24, O12, O47, Q17,

Use of the single factoral terms of trade to analyse agricultural production

The aim in this note is to reintroduce the single factoral terms of trade into the policy arena. This economic concept has scarcely been used by analysts or policy makers over the past three decades. It is defined and compared favourably with other terms of trade concepts in terms of their usefulness to agricultural policy makers in Australia. A distinction is made between the single factoral terms of trade from the viewpoint of the farm business and from the viewpoint of the farm household, but only slightly different indices are specified in each case because of the very high positive correlation between farm prices paid and consumer prices. Developing industry-level indices appears to be a more attractive way to proceed given the substantially different rates of growth in total factor productivity (TFP) between agricultural industries. Despite its usefulness, challenges lie ahead in accurately estimating each of the two components of the single factoral terms of trade, the net barter terms of trade and TFP, and the relations between these two components.net barter terms of trade, single factoral terms of trade, total factor productivity, Farm Management, International Relations/Trade,

Evidence on trends in the single factoral terms of trade in African agricultural commodity production

The ability of African countries to achieve sustained improvements in agricultural incomes depends on their ability to generate total factor productivity (TFP) change in their agricultural sectors and adjust to movements in agricultural output and input prices. The single factoral terms of trade index measures these changes, calculated as changes in the product of TFP and the agricultural terms of trade. Estimates of the single factoral terms of trade index for the selected commodities over the period 1970-2002 are reported and discussed for 33 African countries for which data sets are available. The index is estimated for producers of coffee, cocoa, copra, palm kernel oil, coconut oil, palm oil, rice, cotton and sugar using annual agricultural sector data. Few countries managed to achieve an increase in the index over this period and it declined in many countries. In the light of the empirical evidence assembled, three broad strategic options are considered, covering agricultural trade reform, economic diversification strategies and strategies to improve total factor productivity in commodity production.Crop Production/Industries, International Relations/Trade,

Export Performance in Fiji, 1960 to 1999

Stochastic dominance analysis was used to assess export performance in Fiji from 1960 to 1999. A country with reasonably abundant resources, Fiji has made effective use of its quite substantial resources to increase total export values significantly over the study period, with an average rate of growth of 2.6 per cent per annum. Non-agricultural exports were the source of this growth, increasing annually by 7.3 per cent. Growth was particularly strong from the late 1980s despite the loss of skills and capital flight in the wake of the May 1987 coup and military takeover. The economy clearly benefited from a policy switch from a trade protectionist policy with a high degree of government intervention to an export-oriented strategy based on private sector-led development. The values of total exports in the 1990s were dominant overall. The values in the 1980s dominated values in the 1960s and 1970s as a result of the expansion of non-agricultural exports. The 1970s stochastically dominated the 1960s clearly and the 1980s dominated the 1970s for non-agricultural exports. Non-agricultural export values continued to expand in the final decade of the study period, rendering overall stochastic dominance of the 1990s over the 1980s and preceding decades. The dominant decade for agricultural exports was the 1970s. However, the increase in agricultural export values during the 1970s was offset by a decline in agricultural export values in the final two decades of the study period such that there was no trend in agricultural export values over the whole study period.export performance, Fiji, stochastic dominance, International Relations/Trade,

An Analysis of Scope Economies and Specialisation Efficiencies Among Thai Shrimp and Rice Smallholders

Smallholders increasingly combine shrimp culture with the more traditional rice enterprise in regions of Thailand suitable for raising shrimps. They can exploit cost complementarities in production by combining activities in these enterprises within their farming systems. At the same time, it makes them more susceptible to on-farm negative externalities between rice and shrimp production, in both directions, causing scope diseconomies. A stochastic input distance model is estimated using data on shrimp and rice production by 52 smallholder households. Results from the estimated model are used to establish whether scope economies or diseconomies exist and whether specialisation in either shrimp or rice production significantly influences technical efficiency on the sampled smallholdings. Significant scope economies were found to exist between the two enterprises among best-practice smallholders but they were offset by diversification inefficiencies beneath the frontier. Hence, specialisation in one of the two enterprises has two effects on productivity that operate in opposite directions. The first effect is a negative impact on productivity via loss of scope economies. The second effect is an increase in productivity by reaping specialisation efficiencies or, put another way, avoidance of diversification inefficiencies. If on-farm negative externalities between rice and shrimp production do exist, they appear to be strongly outweighed by cost complementarities on the frontier. It is likely that 'best-practice' smallholders are able to 'internalise' the negative externalities in both directions to a substantial degree. They achieve this 'internalisation' by regular use of fresh water in a semi-closed pond system of shrimp production that minimises pond contamination and protects them from the activities of surrounding producers who discharge effluent into the waterways or whose shrimp suffer from diseases. In addition to the degree of enterprise specialisation, the level of schooling of the household head and the tenure system in shrimp and rice production were identified as variables that significantly influence technical inefficiency. As expected, higher education is associated with lower technical inefficiency. Tenancy is also associated with lower technical inefficiency. Results indicate that a small but significant level of technical inefficiency exists, which means there is limited opportunity to expand crop output without resort to greater use of factor inputs or the introduction of improved production technologies.scope economies, specialisation efficiencies, input distance function, Thailand, smallholders, technical efficiency, Crop Production/Industries, Farm Management, Livestock Production/Industries,

Export Performance in Papua New Guinea, 1960 to 1999

Stochastic dominance analysis was used to assess export performance in Papua New Guinea from 1960 to 1999. A country with abundant natural resources, Papua New Guinea was able to experience significant growth in total export values throughout the final four decades of the 20th century, with each succeeding decade stochastically dominating the previous one. The expansion of mineral and energy exports from the early 1970s was the major source of this growth. The powerful influence of an expanding minerals and energy sector must nevertheless be of concern in that this sector and other non-agricultural resource sectors comprise mainly extractive or quasi-extractive industries given the production practices that currently exist. Little progress has been made in diversifying into secondary and tertiary exports. Furthermore, prospects for the mineral and energy sectors do not look bright, with a collapse of exploration and development in the mining industry (Duncan 2001:11). Growth also took place in agricultural export values during the study period. However, it was more modest than the growth in resource based non-agricultural exports and confined mainly to the 1960s and 1970s.export performance, Papua New Guinea, stochastic dominance, International Relations/Trade,

Export Performance in South Pacific Countries Comparatively Well Endowed with Natural Resources: Solomon Islands and Vanuatu, 1960 to 1999

Stochastic dominance analysis was used to assess export performance in two Melanesian countries of similar size and structure that are comparatively well endowed with natural resources: Solomon Islands and Vanuatu. Total export values increased over the study period in Solomon Islands, brought about by a significant increase in the value of non-agricultural resource exports. Agricultural exports showed small increases but the average annual rate of growth was only 1.3 per cent for agricultural export values compared with 10.7 per cent in non-agricultural export values. The record of commodity export performance in Vanuatu over the study period was less impressive, with a small average annual decline in total export values. This decline was caused by agricultural export values falling by 1.5 per cent per annum although it showed signs of abating in the final decade of the study period. Results suggest that both countries are capable of achieving sustainable economic development, given their generous natural resource endowments, but many factors may militate against this achievement, as witnessed by the current political unrest and crisis in public finance in Solomon Islands.export performance, stochastic dominance, Solomon Islands, Vanuatu, International Relations/Trade,

Setting Policy Priorities for the Development of Tree Crop Industries in Papua New Guinea

Crop Production/Industries,

Export Performance in South Pacific Countries With Inadequate Endowments of Natural Resources: Cook Islands, Kiribati, Niue and Tuvalu, 1960 to 1999

Stochastic dominance analysis was used to assess export performance in four South Pacific island countries with very limited natural resources: Cook Islands; Kiribati; Niue; and Tuvalu. Total export values declined significantly over the study period in all four countries, brought about by a significant decline in the value of agricultural exports while non-agricultural exports showed only small increases. Results seem to confirm the view that these countries have insufficient natural resource endowments for sustainable economic development without outside support. The fisheries sector holds the key to whether the economies under study (bar Niue) can transform themselves into productive ones by exploiting further the fishery resources within their EEZs to develop domestic fishing industries.export performance, Cook Islands, Kiribati, Niue, stochastic dominance, Tuvalu, International Relations/Trade,

Export Performance in South Pacific Countries Marginally Endowed with Natural Resources: Samoa and Tonga, 1960 to 1999

Stochastic dominance analysis was used to assess export performance in two Polynesian countries of similar size and structure that are both marginally endowed with natural resources: Samoa and Tonga. In general, total and agricultural export values declined over the study period in both countries, brought about by a significant decline in the value of agricultural exports while non- agricultural exports showed small increases. The one exception to this trend was in Tonga during the 1990s when squash exports brought about a revival in agricultural export values. Results suggest that these countries are likely to struggle to achieve sustainable economic development, given their limited natural resource endowments. The fisheries sector holds the key to whether their economies can continue to be productive by exploiting further the fishery resources within their EEZs to develop domestic fishing industries.export performance, stochastic dominance, Samoa, Tonga, International Relations/Trade,