Reference is made to Sione Mokofisi’s letter dated 15 September 2007 titled ‘Agricultural Policy a Brilliant Idea’. I thank Sione Mokofisi for his contribution to the subject matter of which I believe only encourage positive synergistic dialogue to the development of the agricultural sector in Tonga. Noting his own views on the matter, I do wish to emphasise the following issues that perhaps deem furher discussion.
While I have provided some potential reasons why the Squash Growers may be withdrawing (economic basis as reemphasised by Sione Mokofisi’s letter - elasticity of supply, high freight costs, diseconomies of scale, poor infrastructure and the very simple fact that it is a niche market with time, price, demand restrictions) I dare not put forward any assumptions outside economics to explain this market behaviour as has being ‘smartly’ challenged by Sione Mokofisi for me to response with. It needs further analysis and data collection in Tonga of which is not my intention. However, I do believe that other domestic factors - political economic variables may need to be controlled comprehensively before any reliable valid inferrence be made.
The rationale of my first letter was a point of ‘Economic Efficiency’ through ‘Policy Interventionist’. I believe Mr. Mokofisi has concurred to the rationalization of policy interventionist under a small economy context (as he noted the point that was initially raised). One believes that point is clear-cut and does not need to be further debated (although interventionist of this nature is similarly not favoured by most developed nations - that is certainly another interesting debate!)
I also strongly agree with Sione Mokofisi’s point that ‘Subsidisation’ is most certainly not the way forward for agricultural producers in Tonga (although I doubt that Tonga or any small economy in the Pacific would be the position to effecively subsidise any industry sector even if it wanted to, limited public funding etc etc - historical subsidisation data points to this issue).
However, I depart from Sione Mokofisi’s line of arguments when he claimed that ”The Tongan Government’s decision is the reversed thinking to subsidies”. I initially argued that when policy interventionist takes place under a particular condition (Small Economy), there is an optimal point of policy interventionist whereby economic efficiency no longer flourishes but rather diminishes. Indeed, more amplified in a small economy, the acuteness of scarce resource (public fund for investment of any form) INEFFICIENTLY dispersed is many many many times higher relative to developed nations like ANZ.
The list of ‘questionable’ public investments by the Tongan Government since the 1980s in Agriculture and indeed other sectors interestingly reflect the trend towards economic inefficiency of public resources and mismanagement of public funds - refer Ministry of Finance past Budget Statements and Min. of Finance Annual Reports plus other Govt documentation on the issue. One of the variable that reflect this general trend is the profit turnovers and returns to Government and also the number of companies that have been either liquidated or have filed for bankruptcy due to various questionable policy interventionist.
Put simply, the history of past interventionist policy by Tongan Government is rather gloomy. So why should this one be different? Has the Tongan Govt undertaken a feasibility study of how viable this policy interventionist will be for Tonga? If there has been a study, have they undertaken public consultation to ensure stakeholders involvement and contribution? Has there been dialogue with the Squash Growers to find out their views on the matter, why they are withdrawing and how can Government address their problems?
To my knowledge, the only time that this issue has surfaced was when it was reported that the Tongan Ministry of Agriculture was going to grow X acres of squash to fill a quota shortage. Is there an existing strategy of a specific timeframe and in what way will the Agiculture policy exit? - assuming that the Tonga Ministry of Agriculture intends to exit soon and that there is some proof that the Squash industry and more importanly the squash growers will come back. Bottom line is, to merely intervene to fulfil a quota does not guarantee market price or demand increase!
So rather than addressing the problem itself, the policy interventionist may be directly addressing the symptoms. This is most certainly not sustainable in the long term and may counter the current economic reform the Tongan Government has undertaken so far.
brian0sutton [at] yahoo [dot] co [dot] nz