The role of government in
enhancing competitiveness of
the agrifood sector
Siemen van Berkum
Structure of the presentation
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Concept of competitiveness
Government’s role in enhancing competitiveness
Market failures
Dutch policies
Relevance to Baltic countries
Competitiveness is
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…the ability to maintain and expand market
position
...affected by many factors
(resource endowments, technology, demand conditions,
firm strategies, scale economies, institutions,
governments)
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„
…evaluated at different levels
…dynamic.
…difficult to measure.
Reasons for potential lack of competitiveness
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technical inefficiency
(low quality inputs, unexploited e.o.s., lack of investment, poor skills)
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marketing inefficiency
(lack of experience, unexploited e.o.s, lack of investment, inadequate
information)
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market inefficiency
(inadequate competition, suppressed price signals, lack of market
transparency)
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government regulations (may distort price signals)
macroeconomic conditions (exchange rate and interest)
Public policy objectives
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Competitiveness is a matter of private business
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To promote competitiveness of the agricultural
sector is not a public policy objective (yet, taking
care of public interest is)
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Governments striving at max. social welfare can
do so by countering market failure and by
fostering favourable conditions and facilitating in
adjustment processes
Market failure
Issues to be covered:
„ Inadequate competition: entry barriers
„ Public goods: goods that are characterised by
non-rivalry and non-excludability
„ Externalities: costs and benefits of production
affect those who are not directly involved in the
market
Government policies enhancing
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Find key reason for inefficiency.
competitiveness
If markets do not function, government may
intervene to correct market failure
Examples:
„ Improve technical efficiency by a sound legal
environment, education, rural policy
„ Improve marketing efficiency by encouraging
formation of producer groups/marketing coops
„ Improve market efficiency by ensuring free entry,
competition policy, increase market transparency
„
Dutch policies to enhance competitivenes s
T rading nation - liberal tradition with regard to policy
intervention
Competitiveness strengthened by:
„ Sound macroeconomic environment (stable
exchange rate and low inflation)
„ policies aimed at structural improvement of sector
„ Organisational innovations (producer coops)
„ Stimulating technological progress by triad
‘research, extension, education
Dutch policies in first decades after WW-II
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Context: Food shortage, small-scale low
productive agriculture
Policy response: encouraging production and
productivity growth by structure improving
measures and access to capital. Technology and
innovation system focused primarily on scale,
productivity and cost reduction
Changing world
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Context: saturated food markets, gradual
reduction of EU market support, increased
competition among and concentration of food
industry and retail
Consumer preferences matter: market
segmentation and product differentiation
Vertical coordination in the supply chain as
competitive tool
Dutch policies in the ‘new world’
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Agricultural and public interests no longer parallel
Government cares for public goods – landscape,
nature, environment, (knowledge) infrastructure,
food safety, animal welfare
Outsourcing ‘operational responsibility’ to
private/public sector and build-in checks
(inspecting the inspector)
Dutch policies
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Facilitating policies focus on investments in
quality and market perspectives: from technology
push to demand pull
Support to innovations in the development of
supply chains through targeted programmes, in
which public knowledge system and agrifood
sector closely cooperate on is sues as
organisation and management of supply chain
networks
Future economic progress …....
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Relevance to the Baltics
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With EU-integration, suppliers markets may
quickly turn into buyers markets
Government policies to enhance competitivenes s
should be based on the identification of market
failures that are obstacles for improved efficiency
– do market failures exist?
Facilitate adjustment processes by policies
encouraging structural improvement,
organisational innovation, and by strengthening
the knowledge system
Thank you for your attention
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