The objectives of the project are:
Statistical analysis identifying rates and factor biases of technical change in Thai and Indonesian agriculture.
Dissemination of the results of above through workshops and publications.
General equilibrium analysis of the social and economic effects of technical change in Thai and Indonesian agriculture.
Dissemination of the results of above through workshops and publications.
Development of capacity for general equilibrium analysis of technical change issues in Thai and Indonesian agriculture through training and hands-on experience.
Research: To analyse the effects that technological change in Thai and Indonesian agriculture has had on key economic variables which are important for public policy, including:
The economic structure of the agricultural sectors of Thailand and Indonesia.
Capacity building: To develop the capability within BIOTEC, Chulalongkorn University, Institut Pertanian Bogor (IPB) and Center for Agro Social Economic Research and Development (CASERD) to sustain research of this kind after the project is successfully completed.
Productivity growth in the Thai and Indonesian agricultural sectors is an important driver of poverty alleviation. In Thailand more than 90 per cent of poor people reside in rural areas; in Indonesia this figure is more than 80 per cent. IN both countries the majortiy of these poor people are engaged in agricultural production. Raising productivity levels in both cases would help reduce poverty.
Growth in productivity in Thailand’s agricultural sector has been significant, but the source of this growth is uncertain. Technical changes to improve agricultural productivity, such as improved crop varieties and management practices have been undertaken but the extent to which these have contributed to overall growth is not clear. Indonesia’s experience has been different, with more rapid growth than Thailand until the early 1990s, followed by a decade of stagnating growth rates. Information about what types of technical change are most likely to reduce poverty is limited.
The role of public investment and extension services in productivity growth is also unclear. Since the economic crisis of 1997-98, both the Thai and Indonesian economies have experienced lower overall growth, and rising public debt. This has placed pressure the role of public investment, including in the use of investment in agricultural technology and its interactions with the broader economy and impacts on poverty alleviation. Answering these questions will help create an improved understanding of the role of technical change in agricultural productivity.
During 2004 the following progress was made. An Inception Workshop was held in Thailand, near Bangkok, in August 2004. At this workshop the objectives, methodology and operational details of the project were discussed and agreed upon.
In addition, the Australian team gave presentations on methodology. The Thai team gave a presentation on preliminary results from CGE modeling of the effects of technical change in Thai agriculture, using hypothetical technical change as an example. The Indonesian team gave a presentation on Indonesian agriculture, including preliminary modeling results on the effects of technical change in Indonesian agriculture. Discussion then focused on the steps needed to develop the quality and usefulness of these exercises within the work of the project.
Subsequent progress during 2004 was as follows.
The Australian team focused on working with the Thai and Indonesian teams to develop the data on agricultural inputs and outputs which will be used for statistical analysis of the nature of technical change. Substantial progress occurred in this respect with both the Thai and Indonesian teams. At the same time, progress was made in CGE modeling, especially in the case of Indonesia. The existing Wayang CGE model of the Indonesian economy was updated to 2000 data and applied to the analysis of rice import quotas and import tariffs. A substantial paper on this subject was completed. The data base for this work was assembled by the Indonesian team.
The Thai team worked on two fronts. The team at BIOTEC concentrated on acquisition of CGE modeling skills. This was to be supplemented in February 2005 by the participation of Mr Thepnarong Noppagornvisate of BIOTEC in a GEMPACK training course at Monash University in Melbourne. This will increase the number of GEMPACK users at BIOTEC from 1 to 2, with a third person to be trained later. The Chulalongkorn University team concentrated on construction of an updated database for the PARA CGE model of the Thai economy. This data base is expected to be completed in early 2005. In November 2004 the BIOTEC team joined the Chulalongkorn team in this data base assembly task. From this time, three members of the BIOTEC team work approximately half time at Chulalongkorn University on this work.
The Indonesia team made substantial progress with assembly of the data set on agricultural inputs and outputs which will be used for statistical analysis of the nature of technical change. A preliminary data set was completed late in the year. A data base was assembled for use within Wayang and this data base is presently being developed further. Progress was also made on CGE modeling of issues related to technical change and a paper on this subject was completed.
During 2005 substantial progress was made towards the achievement of the project’s core objectives. The work completed mainly represents the building blocks on which the main analytical work of the project will rest.
Part A - econometric analysis of agricultural input and output data to determine rates and factor biases of technical change.
Thailand: Work proceeded on the assembly of data for the above exercise and the review of feasible methodologies to be used in the analysis of these data. The data are derived from the Office of Agricultural Economics of the Ministry of Agriculture and Cooperatives and are available in two parts - before and after 1989. Before 1989 data are available on both inputs and outputs, expressed in both quantity and value terms. Since 1989 data are available only in a different format, specified in total cost terms, and some years are missing. The econometric analysis of these data has begun, but some missing data are still being sought. Two new data sets have now been located. The first originated with the Thailand Development Research Institute, with data available from 1961 to 1999. It is being explored for its suitability for the purposes of this project, but a major problem with this data set is that inputs such as land and labour are available only in total and not allocated across individual commodities. The second data set was assembled by researchers (Mundlak, Larson and Butzer) working at the World Bank, but it contains only aggregate data relating to the whole of the agricultural sector. An advantage of this data set is that it has data for both Thailand and Indonesia, in a comparable format. Work has now begun with both of these data sets, specifying an aggregate production function for the Thai agricultural sector, rather than individual commodities, and analyzing technical change at this level. This work is considered preliminary to the analysis of the main data set, which is needed at the level of individual commodities. However, the data problems mentioned above are problematic for this disaggregated work.
Indonesia: A large data set has been assembled, mainly derived from the Centre for Agricultural Socio Economic Research (CASER), Bogor, of the Ministry of Agriculture. A strong feature of this data set is that it specifies regional levels of inputs and output, giving many more degrees of freedom for statistical analysis. However, there are serious problems with the data. Several years are missing because the primary data were not collected. A further problem is the absence, for most years, of data on agricultural machinery used directly in agricultural production. The search for these data is continuing, but econometric analysis of the existing data set has now commenced. As noted above, the Mundlak, Larson and Butzer data set for the aggregate agricultural sector has been obtained, and its analysis has begun.
Part B - general equilibrium modelling of the effects of technical change.
Thailand: The data base of the PARA general equilibrium model has been updated to the year 2000 and the construction of a balanced data base is almost complete. This exercise has been a major undertaking. Structural changes have also been introduced to make the model more useful for the purposes of this project, especially the incorporation of multiple households for the purpose of poverty and inequality measurement. The model is now ready to be used for simulation purposes. Substantial work has been done on training the project staff from BIOTEC in the use of general equilibrium modeling software in the context of this particular model.
Indonesia: The release during 2005 of a new 2003 IO table for Indonesia made it desirable to update the Wayang general equilibrium model of the Indonesian economy to 2003. This updating commenced in 2005 and is now almost completed. The 2000 version of the model is already being used, both in Bogor and in Canberra, for modeling purposes. Because the updating of the model data base is more modest in the case of the Indonesia part of the project, this work is well ahead of the Thailand component of the project.
1. Statistical analysis identifying rates and factor biases of technical change in Thai and Indonesian agriculture.
Problems were encountered with official data on agricultural production and input use for both Thailand and Indonesia. Official data assigning inputs to particular commodity outputs have proven to less satisfactory than was hoped.
In the case of Thailand, the data from the Office of Agricultural Economics on allocated input use by commodity output has not been continued beyond 1989. In the case of Indonesia, the data that CASERD had intended to provide, and which was to be the basis of their main input into the project, have been found to be unusable. The reason is that the computer tape which contained these data has deteriorated to the point where the data cannot be read. There is no known copy of the data set.
New data sets were required for both countries. Three such data sets were identified and obtained. First is a data set for Thai and Indonesian agriculture from Yair Mundlak and Donald Larson from the World Bank and the International Food Policy Research Institute. Second, there is a data set for Indonesian agriculture assembled by Keith Fuglie at the International Potato Research Institute in Bogor, Indonesia. Third, there is a data set on Thai agriculture from Masahiro Shintani from Japan. None of these data sets are fully satisfactory in that they either do not allocate factor use to agricultural commodities at all (each of the above except Fuglie) or do so incompletely (Fuglie). Nevertheless, they do make aggregate level analysis feasible. All three data sets were acquired during 2006 and they will be analyzed during 2007. The Indonesian project personnel also assisted CASER to do econometric analysis and to write a report on technical change in Indonesian agriculture.
2. General equilibrium analysis of the social and economic effects of technical change in Thai and Indonesian agriculture. Progress was good for the Indonesian modelling.
This included completion of the updated data base to 2000, including consumer demand system and updated database to 2003 for Wayang. In the case of the Thailand modelling, technical problems were encountered with the model structure. A robust test of simulation results is whether the measures of GDP on the income and expenditure sides are equal. This test was not passed by the Thai model. The decision was made to overhaul the structure of the model to make it consistent with the ORANI - G structure, as was done with the Indonesia model. This work was scheduled for the first half of 2007.
3. Development of capacity for general equilibrium analysis of technical change issues in Thai and Indonesian agriculture through training and hands-on experience.
This objective of the project was achieved well during 2006 and the modelling problems described above proved to be helpful in training project participants in the rigorous testing of general equilibrium models for consistency.
Postscript (July 1, 2007)
As of mid 2007 the statistical analysis described under point 1 was proceeding very successfully. The modelling problems described under point 2 were fully resolved in a newly constructed version of the Thai model. This version now passes all consistency checks (nominal and real homogeneity and the equality of the two measures of GDP mentioned above). These matters will be reported upon fully in the next annual report.