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 policy environment, which is critical to the development of agribusiness. An inventory analysis permits one to examine potential effects of policies on projects or investments, to develop an agribusiness development strategy, to begin a dialogue with stakeholders, to select issues for further analysis, and to monitor policy developments. I. Importance of Policy Inventories There is a wide range of activities that can promote the development of agribusiness. These activities include policy reform (liberalization), commodity production and/or marketing projects, privatization, development of analytical capability, investment promotion, development of capital markets, and infrastructure construction and maintenance. It is well known that the effectiveness of these activities is significantly affected by the policy environment. Thus policy reform can foster the growth of agribusiness and one should understand the policies both promoting and hindering agribusiness before 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 policy inventory is a versatile tool for organizing and understanding complex information about economic and agricultural policies and their impact on agribusiness development. It is not simply a catalog, but rather an 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 spans agriculture and business, and commerce and industry, many policies affect it, and the net impact 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 more than 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 private stakeholders 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'tre for certain institutions, and therefore, likely to be difficult to change or eliminate?

Definition of a policy. For the purpose of an agribusiness policy inventory, a policy is simply a rule that influences 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 not originate with the government. For example, grades and standards may be established by producer or exporter associations, just as accounting standards may be set by a professional organization. These cases seem to be the exception rather than the rule, however. Specification of an inventory. The inventory method is flexible. Depending on the resources and information 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. This includes 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, or exports) and the clear specification of any key issues, agro-industries, or particular subsectors. The specification phase will generally result in the design of a policy matrix -- the intersection of policy areas and scopes (economy-wide, sectoral, subsectoral) -- that has the potential to reveal policy impacts not previously considered. The central features of an agribusiness policy inventory are an enumeration and analysis of policies that 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 of the 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 policy matrix. An inventory also comprises several analyses based on the matrix and accompanying information. 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 to both existing and potential agribusinesses. The private sector knows that government has the power to intervene in almost any area of the economy. In Pakistan, during the denationalization of various industries in the early 1990s, the Government devoted considerable effort, including the passage of a

law, to convincing the private sector that in the future those same industries would not be nationalized again and that key economic reforms would remain in place. If governments use their policy power capriciously, the private sector will lose faith in the government's commitment to private sector development and turn to rent-seeking activities that seem to be sustainable. Given the importance of policy stability, it should be discussed both as part of a broad perspective on the policy environment and in relation to specific policies as well. It may also deserve a separate place in the matrix or other format chosen to present a summary of policies. Moreover, many of the impact variables in an inventory 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 purpose of an agribusiness policy inventory. Data permitting, however, important aspects of agribusiness performance can be highlighted. These include: the share of agribusiness in output, employment, and investment; 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 relative importance of different types of agribusiness organizations (corporations, cooperatives, NGOs, family enterprises). 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 sufficient information 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 nonquantitative, in fact the conclusions of other quantitative studies may play a key supporting role. It is usually the case that the resources available to conduct an inventory are best deployed to gather and summarize policy information, rather than carry out quantitative analysis. Some sources of the information (some of which may be found on the world-wide web) required include:

Annual donor, national government, or private reports on the state of the economy, which 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, or other institutions. News articles (when the press is reliable).

Field data collection This phase of the project can be lengthy, due to the substantial data requirements. Information on some policies may be easy to come by, while others may be only hinted at in newspaper articles or by previous 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 the inventory process is seen as a beginning to build consensus among private and public sector participants for certain policy reforms. Analysis The analysis begins with the specification of the inventory and continues through data collection and into the formal analysis phase. The framework of the inventory must be designed to ensure that no important policy areas are omitted. Data collection must explore all of these areas. During data collection, the team must do more than collect data: ongoing organization and prioritization should lead to progressively more productive data gathering. That is, they should lead, e.g., to collection of

information on the more important specific policies within policy areas and to specific critical quantitative results from previous studies. When an inventory is designed to focus on a particular commodity subsystem, using the rapid appraisal method in conjunction with the inventory should be considered (Holtzman, J. 1992 and 1993). 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 the inventory 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 collecting policy 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 exercise because of its very specific numerical data requirements. In many countries these data will be difficult to find, because the agribusiness sector is not separated statistically in the published national accounts data (Oudraogo et al. 1993). Recommendations In general, an inventory includes two kinds of recommendations. On topics where data permit, it contains broad options for policy reform; where they do not, it makes recommendations for further study. The value of the analysis goes well beyond its recommendations, however, in providing a comprehensive understanding of the policy environment in which agribusiness might develop. III. Basic Road Map IIIa. Operational Guidelines for Getting Started Inventory initiation trip An early trip by the team leader is important to work with the sponsor on specifying the nature of the inventory. The team leader should be available in person to discuss the selection of impact variables and specification of any key issues, agro-industries, or subsectorsbased on previous research or other factors. On this trip the team leader can begin discussions with collaborating local institutions and representatives of the private sector. S/he can also interview local analysts, and may arrange for them to begin collecting certain data. Team formation An inventory analysis can be carried out as a research project or as consensus-building activity, or as some combination of the two. The more consensus building is important, the more the team should include relevant stakeholders (and the more the process of analysis should include opportunities for feedback 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 policies targeting agricultural production, one for agricultural marketing and international trade, and one for macroeconomic policies. Of course each of these individuals should understand the impact of these policies on agribusiness. Local knowledge and entrees are extremely important. Questions to ask oneself in constituting the team include, Is their thinking and experience broad enough, or are they narrow specialists? Are there team members to perform all required roles? | Annex 1. Terms of Reference | Home office preparation Gathering secondary materials, working on questionnaire(s), and beginning a work plan before starting the 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 be filled better from the home office. Field work This phase of the project will take up most of the time in the field and will be a major part of the exercise. In planning and allocating the time required for the inventory activity, it is important to allow sufficient time for obtaining the wide range of data needed. Delays may result from tracking down reports or locating and setting up appointments with key individuals. Management of this phase requires technical leadership and careful agreement among team members on format, method, and division of the work. Preliminary analysis

During data gathering, preliminary analysis should continue to refine and redirect the data collection process. At the end of data collection, preliminary analysis prepares the analyst to make a presentation to the sponsor before undertaking the full analysis and writing the report. Presenting early findings to sponsor and/or stakeholders Feedback 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 setting To set the scene for the subsequent policy analysis, an inventory begins with a brief description of the economy. This description covers the major economic, technological, socio-cultural, and political relationships that affect the agribusiness sector. It delineates the major linkages of the agribusiness sector to the national and world economies. Some of the data that might be presented and discussed briefly include: inflation; GDP growth; the trade balance; nominal and real exchange rates; public and private investment; unemployment; remittances; major products, exports, and imports; and major agricultural 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, and coordinators. A key section in this introductory description will be one that reviews recent policy changes. This orients the reader to the current context of policymaking. It also helps to date the snapshot that an inventory inevitably is. Some of the important topics of this section are the trade regime; the investment regime, including the tax code; and the role of parastatals, including any privatization under way or contemplated. The role of the informal sector may also be covered. Matrix of policies In a particular country, there are likely to be many kinds of policies affecting agribusiness, having many kinds of effects. To glean an appropriate picture of the effects of these policies, they need to be organized in a useful fashion. One way to organize policies is by their (intended) scope. Some policies are implemented for their direct effects on the entire economy, while others are targeted at 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 categories that 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 of the matrixcontaining several policies pertaining to one scope and one policy type is analyzed separately. | Annex 2 for examples of matrices | Policy analysis The majority of the text of an agribusiness policy inventory is devoted to description and analysis of policies that affect agribusiness. This main body of the report is organized by policy types or around key issues, or in some other fashion that clarifies the presentation. Each policy analysis should describe:

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 effects of policies, but generally not for quantitative analysis of their impact. It may be possible to use graphics, 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 and those that, when carefully designed and administered, have beneficial effects. Examples of the former are investment licensing and domestic content laws; examples of the latter are commodity grades and standards, 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 may not follow the announced plan or objectives. The analyst should also be alert to the effects of policies quite different from their apparent objectives; for example, a subsidy on wheat or bread intended to lower 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. The presentation of such policies with their effects on agribusiness rather than on agriculturemay be very educational for some policymakers. For example, price policies that make a commodity cheaper lower 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 of certain commodities, but in addition it may result in the diminished availability of processing or production 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, if implementation is carried out by a different agency, knowledge of that agency could also be critical to the success of an agribusiness promotion activity or policy reform. There may be several levels of government with the power to affect agribusiness development, either directly or indirectly. For example, the national government has jurisdiction over foreign (agricultural) trade; state or provincial governments may address agricultural production issues; and local governments may tax local movements of agricultural produce. An understanding of how these policies complement or offset one another 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 and those that implement it, and to describe the interactions among these agencies. Finding out who makes certain policies (that is, who really has the power to change them) is not always easy. Those responsible for sensitive policies may not wish to be visible. To the extent that a map of policymaking institutions differs from the actual wielders of such power, the process of policy reform will be retarded and possibly thwarted. Preliminary assessment of policyimpact In conducting an agribusiness policy inventory, one often does not undertake the estimation of quantitative 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 chosen impact 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 quantitative estimates 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 rate policy impact. These numbers indicate impacts ranging from strongly positive to strongly negative. The analyst may feel, however, that this would imply a level of quantification that is not justified. Another option is to rank the impact in words only as strongly or weakly positive or negative, or zero. Economic variables may be affected differently in the short and long runs, so the analyst may wish to consider these impacts separately. Analysis of policy interactions One 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 the ways that policies reinforce or offset each other. For example, an overvalued exchange rate and poor market information would reinforce each other to depress agricultural exports. Duty-free, open access to imported packaging materials and public sector agricultural research priorities that include exportable agricultural commodities would be offsetting factors from the point of view of an agroindustry. Analyzing the interactions among all the combinations of policy groups would probably prove very lengthy and dissipate the clarifying power of the analysis. To maintain focus, the analyst should refer to the selected important issues or impact variables and analyze the conflicting or reinforcing policies that

affect them. Monitoring Advice Because of the complexity of this undertaking, monitoring should begin with the setting of the specifications 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 team composition and also the nature and frequency of monitoring. During data gathering, reviews of the information collected help to refine and redirect the data collection process. Regular meetings with the team allow the sponsor to ensure that issues important to the sponsor receive adequate attention in both the data collection and analysis phases. At the end of the data collection phase per se, the analyst may undertake a preliminary analysis and presentation to 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 make the inventory document inaccessible unless significant care is applied. A report in the form of a main report 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 in the form of workshops or document reviews should be designed into the process. These build on the composition 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 the analysis. Examples of some presentation formats appear in Resources, Section V. An example of an impact 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 policy environment, which is critical to the development of agribusiness. An inventory analysis permits one to examine potential effects of policies on projects or investments, to develop an agribusiness development strategy, to begin a dialogue with stakeholders, to select issues for further analysis, and to monitor policy developments. I. Importance of Policy Inventories There is a wide range of activities that can promote the development of agribusiness. These activities include policy reform (liberalization), commodity production and/or marketing projects, privatization, development of analytical capability, investment promotion, development of capital markets, and infrastructure construction and maintenance. It is well known that the effectiveness of these activities is significantly affected by the policy environment. Thus policy reform can foster the growth of agribusiness and one should understand the policies both promoting and hindering agribusiness before 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 policy inventory is a versatile tool for organizing and understanding complex information about economic and agricultural policies and their impact on agribusiness development. It is not simply a catalog, but rather an 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 spans agriculture and business, and commerce and industry, many policies affect it, and the net impact 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 more than 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 private stakeholders 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'tre for certain institutions, and therefore, likely to be difficult to change or eliminate?

Definition of a policy. For the purpose of an agribusiness policy inventory, a policy is simply a rule that influences 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 not originate with the government. For example, grades and standards may be established by producer or exporter associations, just as accounting standards may be set by a professional organization. These

cases seem to be the exception rather than the rule, however. Specification of an inventory. The inventory method is flexible. Depending on the resources and information 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. This includes 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, or exports) and the clear specification of any key issues, agro-industries, or particular subsectors. The specification phase will generally result in the design of a policy matrix -- the intersection of policy areas and scopes (economy-wide, sectoral, subsectoral) -- that has the potential to reveal policy impacts not previously considered. The central features of an agribusiness policy inventory are an enumeration and analysis of policies that 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 of the 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 policy matrix. An inventory also comprises several analyses based on the matrix and accompanying information. 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 to both existing and potential agribusinesses. The private sector knows that government has the power to intervene in almost any area of the economy. In Pakistan, during the denationalization of various industries in the early 1990s, the Government devoted considerable effort, including the passage of a law, to convincing the private sector that in the future those same industries would not be nationalized again and that key economic reforms would remain in place. If governments use their policy power capriciously, the private sector will lose faith in the government's commitment to private sector development and turn to rent-seeking activities that seem to be sustainable. Given the importance of policy stability, it should be discussed both as part of a broad perspective on the policy environment and in relation to specific policies as well. It may also deserve a separate place in the matrix or other format chosen to present a summary of policies. Moreover, many of the impact variables in an inventory 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 purpose of an agribusiness policy inventory. Data permitting, however, important aspects of agribusiness performance can be highlighted. These include: the share of agribusiness in output, employment, and investment; 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 relative importance of different types of agribusiness organizations (corporations, cooperatives, NGOs, family enterprises). 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 sufficient information 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 nonquantitative, in fact the conclusions of other quantitative studies may play a key supporting role. It is usually the case that the resources available to conduct an inventory are best deployed to gather and summarize policy information, rather than carry out quantitative analysis. Some sources of the information (some of which may be found on the world-wide web) required include:

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

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, or other institutions. News articles (when the press is reliable).

Field data collection This phase of the project can be lengthy, due to the substantial data requirements. Information on some policies may be easy to come by, while others may be only hinted at in newspaper articles or by previous 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 the inventory process is seen as a beginning to build consensus among private and public sector participants for certain policy reforms. Analysis The analysis begins with the specification of the inventory and continues through data collection and into the formal analysis phase. The framework of the inventory must be designed to ensure that no important policy areas are omitted. Data collection must explore all of these areas. During data collection, the team must do more than collect data: ongoing organization and prioritization should lead to progressively more productive data gathering. That is, they should lead, e.g., to collection of information on the more important specific policies within policy areas and to specific critical quantitative results from previous studies. When an inventory is designed to focus on a particular commodity subsystem, using the rapid appraisal method in conjunction with the inventory should be considered (Holtzman, J. 1992 and 1993). 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 the inventory 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 collecting policy 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 exercise because of its very specific numerical data requirements. In many countries these data will be difficult to find, because the agribusiness sector is not separated statistically in the published national accounts data (Oudraogo et al. 1993). Recommendations In general, an inventory includes two kinds of recommendations. On topics where data permit, it contains broad options for policy reform; where they do not, it makes recommendations for further study. The value of the analysis goes well beyond its recommendations, however, in providing a comprehensive understanding of the policy environment in which agribusiness might develop. III. Basic Road Map IIIa. Operational Guidelines for Getting Started Inventory initiation trip An early trip by the team leader is important to work with the sponsor on specifying the nature of the inventory. The team leader should be available in person to discuss the selection of impact variables and specification of any key issues, agro-industries, or subsectorsbased on previous research or other factors. On this trip the team leader can begin discussions with collaborating local institutions and representatives of the private sector. S/he can also interview local analysts, and may arrange for them to begin collecting certain data.

Team formation An inventory analysis can be carried out as a research project or as consensus-building activity, or as some combination of the two. The more consensus building is important, the more the team should include relevant stakeholders (and the more the process of analysis should include opportunities for feedback 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 policies targeting agricultural production, one for agricultural marketing and international trade, and one for macroeconomic policies. Of course each of these individuals should understand the impact of these policies on agribusiness. Local knowledge and entrees are extremely important. Questions to ask oneself in constituting the team include, Is their thinking and experience broad enough, or are they narrow specialists? Are there team members to perform all required roles? | Annex 1. Terms of Reference | Home office preparation Gathering secondary materials, working on questionnaire(s), and beginning a work plan before starting the 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 be filled better from the home office. Field work This phase of the project will take up most of the time in the field and will be a major part of the exercise. In planning and allocating the time required for the inventory activity, it is important to allow sufficient time for obtaining the wide range of data needed. Delays may result from tracking down reports or locating and setting up appointments with key individuals. Management of this phase requires technical leadership and careful agreement among team members on format, method, and division of the work. Preliminary analysis During data gathering, preliminary analysis should continue to refine and redirect the data collection process. At the end of data collection, preliminary analysis prepares the analyst to make a presentation to the sponsor before undertaking the full analysis and writing the report. Presenting early findings to sponsor and/or stakeholders Feedback 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 setting To set the scene for the subsequent policy analysis, an inventory begins with a brief description of the economy. This description covers the major economic, technological, socio-cultural, and political relationships that affect the agribusiness sector. It delineates the major linkages of the agribusiness sector to the national and world economies. Some of the data that might be presented and discussed briefly include: inflation; GDP growth; the trade balance; nominal and real exchange rates; public and private investment; unemployment; remittances; major products, exports, and imports; and major agricultural 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, and coordinators. A key section in this introductory description will be one that reviews recent policy changes. This orients the reader to the current context of policymaking. It also helps to date the snapshot that an inventory inevitably is. Some of the important topics of this section are the trade regime; the investment regime, including the tax code; and the role of parastatals, including any privatization under way or contemplated. The role of the informal sector may also be covered. Matrix of policies In a particular country, there are likely to be many kinds of policies affecting agribusiness, having many kinds of effects. To glean an appropriate picture of the effects of these policies, they need to be organized in a useful fashion. One way to organize policies is by their (intended) scope. Some policies are implemented for their direct effects on the entire economy, while others are targeted at

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 categories that 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 of the matrixcontaining several policies pertaining to one scope and one policy type is analyzed separately. | Annex 2 for examples of matrices | Policy analysis The majority of the text of an agribusiness policy inventory is devoted to description and analysis of policies that affect agribusiness. This main body of the report is organized by policy types or around key issues, or in some other fashion that clarifies the presentation. Each policy analysis should describe:

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 effects of policies, but generally not for quantitative analysis of their impact. It may be possible to use graphics, 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 and those that, when carefully designed and administered, have beneficial effects. Examples of the former are investment licensing and domestic content laws; examples of the latter are commodity grades and standards, 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 may not follow the announced plan or objectives. The analyst should also be alert to the effects of policies quite different from their apparent objectives; for example, a subsidy on wheat or bread intended to lower 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. The presentation of such policies with their effects on agribusiness rather than on agriculturemay be very educational for some policymakers. For example, price policies that make a commodity cheaper lower 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 of certain commodities, but in addition it may result in the diminished availability of processing or production 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, if implementation is carried out by a different agency, knowledge of that agency could also be critical to the success of an agribusiness promotion activity or policy reform. There may be several levels of government with the power to affect agribusiness development, either directly or indirectly. For example, the national government has jurisdiction over foreign (agricultural) trade; state or provincial governments may address agricultural production issues; and local governments may tax local movements of agricultural produce. An understanding of how these policies complement or offset one another 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 and those that implement it, and to describe the interactions among these agencies. Finding out who

makes certain policies (that is, who really has the power to change them) is not always easy. Those responsible for sensitive policies may not wish to be visible. To the extent that a map of policymaking institutions differs from the actual wielders of such power, the process of policy reform will be retarded and possibly thwarted. Preliminary assessment of policyimpact In conducting an agribusiness policy inventory, one often does not undertake the estimation of quantitative 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 chosen impact 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 quantitative estimates 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 rate policy impact. These numbers indicate impacts ranging from strongly positive to strongly negative. The analyst may feel, however, that this would imply a level of quantification that is not justified. Another option is to rank the impact in words only as strongly or weakly positive or negative, or zero. Economic variables may be affected differently in the short and long runs, so the analyst may wish to consider these impacts separately. Analysis of policy interactions One 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 the ways that policies reinforce or offset each other. For example, an overvalued exchange rate and poor market information would reinforce each other to depress agricultural exports. Duty-free, open access to imported packaging materials and public sector agricultural research priorities that include exportable agricultural commodities would be offsetting factors from the point of view of an agroindustry. Analyzing the interactions among all the combinations of policy groups would probably prove very lengthy and dissipate the clarifying power of the analysis. To maintain focus, the analyst should refer to the selected important issues or impact variables and analyze the conflicting or reinforcing policies that affect them. Monitoring Advice Because of the complexity of this undertaking, monitoring should begin with the setting of the specifications 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 team composition and also the nature and frequency of monitoring. During data gathering, reviews of the information collected help to refine and redirect the data collection process. Regular meetings with the team allow the sponsor to ensure that issues important to the sponsor receive adequate attention in both the data collection and analysis phases. At the end of the data collection phase per se, the analyst may undertake a preliminary analysis and presentation to 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 make the inventory document inaccessible unless significant care is applied. A report in the form of a main report 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 in the form of workshops or document reviews should be designed into the process. These build on the composition 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 the analysis. Examples of some presentation formats appear in Resources, Section V. An example of an impact matrix follows.