Tuesday, January 13, 2009

Love and Fertilizer

Rick R. Harris

Government initiatives are often motivated by good intentions and excellent analysis but usually fall short at the implementation stage. Additionally, the civil service in Jamaica is often characterized by a shortage of resources and a plethora of aging, unmotivated mandarins. This combination equates to slow government, bad implementation and missed targets.

However, this is not always the case. As a civil servant for the past seven (7) years I have observed that for every three (3) ‘in-by-nine-out-by-four’ unproductive civil servant there is one (1) savvy, computer-literate, motivated go-getter. This minority of motivated individuals is, in my estimation, the buoy which keeps the civil service from sinking into a rising tide of bureaucratic morass.

One lasting lesson of my SALISES (Sir Arthur Lewis Institute of Social and Economic Studies) experience was that “good policy” is equal to “evidence-based policy.” We were told that research, literature reviews and the like are mandatory exercises even when sharing an opinion. As students we thought “how bothersome!” While this endearing principle is necessary for success students will soon learn that in the world of work there is sometimes very little space and time in the policy cycle for serious investigation. Lecturers should let students know that exigencies can and will highjack any process.

The policy process in government is oftentimes starkly different from the clear cut theoretical policy cycle fed to students. The process is messy and caters to personalities as much as it deals with on the ground reality. Students who venture into the wilderness of work will find that every report must be succinct and cannot necessarily explore nuances; and knee-jerk reactions are the order of the day. While thorough investigation of any matter is still of value there is usually little or no time.

Additionally, in government there are rarely any incentives for the ordinary civil servant to employ rigorous methods. Furthermore, there seems to be a ‘disconnect’ between policy-writers and the persons implementing policy. The notion that Ministries are policy-shops and Agencies the implementers--people of a lesser breed (but sometimes better paid)--creates several problems not only for morale but also for how policy gets made.

It is against this background that I share the following experience both as a past student of SALISES and a career civil servant (civil servant by choice).

In 2007 there was a sharp and unprecedented increase in the local price of most grades of fertilizer. According to the Ministry of Agriculture (MoA) some blends of fertilizer used by small and domestic farmers saw price increases of as much as 337% during the period. Blends used by commercial farmers also saw an increase of between 183% and 391%.

Policy analysts quickly concluded that the consequences of these price increases were manifold. The inability of farmers to access the quantity or grade of fertilizer needed would be dire for an already vulnerable Jamaican economy. Ultimately fertilizer price increases would result in lower agricultural output and increased food imports. This is a situation the government is desperate to avoid given its ongoing initiative of “eat what you grow and grow what you eat.”

$95 Million Subsidy
According to the MoA the first real initiative would see the Minister of Agriculture, Dr. Christopher Tufton, negotiating with the sole inorganic fertilizer producer in Jamaica, Newport Fersan, for a reduction in prices. In actuality the intervention led to government providing the company with a $95 million subsidy from November 2007 to March 31, 2008. Fersan made a convincing case that the enormous increase in the prices of the twenty (20) blends of fertilizer it produces was beyond its control. The company attributed the price increases to a higher demand for the raw materials it uses by China, India and Brazil. The company also said it was facing increased shipping costs. The subsidy offered to Fersan was intended to reduce ex-factory prices of a bag of fertilizer by 10%. However, Newport Fersan increased its prices by 40% in March 2008 effectively nullifying the subsidy

The MoA indicated that the second initiative would have government waiving the customs user fee and environmental levy for raw materials used in the production of inorganic fertilizer. This was in addition to no custom duties being charged on fertilizer raw materials except Urea. The government also secured through PetroCaribe a 40% price discount on Urea to be imported from Venezuela. Fersan indicated that this effort would have produced a 36% reduction in the ex-factory price of Urea and at least an 8% reduction in the price of all blends using significant amounts of Urea. However, it would not have led to significant price reductions in the blends such as 14-28-14 used primarily by small or domestic farmers.

Hence, the government continued to have serious concerns that the most vulnerable farmers were still facing high costs in relation to fertilizer. Furthermore, a MoA technical working group report highlighted the fact that Caribbean territories which imported fertilizer recorded lower prices than the ex-factory price offered by Fersan; the government sought clarification from Newport Fersan on its pricing method and mark up. However, the company refused to divulge the information.

Government Fertilizer Importation
It was at this point that government indicated its intention to enter the market directly. The third initiative was for government to import selected blends whose local prices remained high despite previous interventions. As such the government moved initially to import a total of 2,500 tonnes of three blends 14-28-14, 16-9-18 and 11-22-22 from the USA; with a further 25,000 tonnes to come from Russia later. The 2,500 tonnes were to arrive in 5 shipments of 500 tonnes each.

The immediate effect was a drop in sales at Fersan even before government-imported fertilizer reached the market.

The implementation of this policy saw government using the Jamaica Commodity Trading Company (JCTC) from the Ministry of Industry, Investment and Commerce (MIIC) to handle the importation and distribution of Diamond R. Fertilizer from Florida.

The three blends were well received by the market with the only complaint being about its offensive odour. Users indicated that the average ex-factory price of $1438 per 50-lb bag and high crop yield potential made the product very affordable and worthwhile.

Shortcuts and Hard knocks
The implementation stage of the fertilizer importation project was rushed. The needs of the farmers and the potential fallout from not having fertilizer far outweighed any other concern. The policy was therefore undertaken without the requisite systems or infrastructure arrangements being in place before the first shipment arrived.

Thrown into the heart of the operational aspect of the JCTC was this proud graduate of SALISES. The responsibilities of the title-less, over burdened civil servant escalated from Trade Policy Issues to simultaneously managing five contracts for the repair of a borrowed KFZ warehouse and handling the logistics of using one ramp to unload nineteen (19) containers (500 tonnes) of fertilizer weekly from 8 am to 8 pm. This was to be done in addition to selling the product. The warehouse facility had no lights, running water or toilet facilities for the first two weeks of the operation. The yard space was barely large enough to hold each shipment let alone allow for maneuvering customer’s trucks for loading. This situation underscores the conditions under which many civil servants especially those who implement policy will have to operate.

Many in the Ministry had concluded from the inception that more work for the same pay was unacceptable and avoided being drafted into the process. They also scorned the idea of being at the tail-end of the policy cycle as much as they did the “smelly” fertilizer.

These conditions should have allowed even the best laid plans to fail. But, the unwavering commitment of a handful of willing mandarins who were not above working in fertilizer was more a factor in successful implementation than available resources. This success can be measured by JCTC sales of over $150 million worth of fertilizer to date. The civil servants at the warehouse bought into the idea that Jamaica needed this initiative. We were willing to work long beyond the prescribed hours, use car headlamps to light dark warehouses, “pee pee a bush” (relieve ourselves in makeshift restroom facilities) and spend our own money to purchase lunch and supper for casual labourers involved in the loading of trucks. The creativity spawned by the adversity we faced was not uncommon for motivated civil servants.

The advice to SALISES lecturers who teach policy is that while resource allocation is essential to successful implementation students must be taught about the importance of buy-in at all levels and how it can change the complexion of any initiative.

The fertilizer initiative can also be rated a success in so far as it has brought relief to the most vulnerable farmers and reduced/suspended the fallout from reduced agricultural production. Not surprisingly, there have been calls from many quarters for government to become a permanent player in the inorganic fertilizer market. Policy analysts including this writer are now left to grapple with the following.

Government’s Dilemma
Based on an unofficial cost assessment the government has incurred a loss of approximately $55 million because of the importation initiative. Also, the deal to secure an additional 25,000 tonnes of fertilizer from Russia which was to be cross-subsidized and used to rescue government from a loss-making position has fallen through. Furthermore, Fersan’s ex-factory prices have been significantly reduced making all blends of inorganic fertilizer cheaper. Government also has a concern that its continued intervention may drive Newport Fersan out of business. These and other factors should lead government to exit the market in February 2009 once its remaining stock of approximately 300 tonnes of fertilizer is sold.

However, stakeholders have indicated a preference for the mix of fertilizers being imported by government. It is claimed that the yield from these products are superior to similar blends offered by Fersan. This claim is yet to be substantiated. In addition, stakeholders believe that the reduction of Fersan’s prices is not solely due to changes in raw material prices but as a direct result of competition. Additionally, it is my opinion that the purported loss of $55 million incurred by government for the importation and distribution of selected blends of fertilizer has yielded better results and costs less than previous interventions/subsidies.

SALISES could not have prepared me for every scenario I would face in government especially as it relates to the operational issues of a warehouse, procurement and overseeing contracts for repairs. However, the confidence gained as a student enabled me to see past the obvious and work toward solutions. It is true that critical thinking was an unnamed part of our curriculum. SALISES must therefore do these two things (1) continue to cultivate evidence-based policy-makers and (2) place more emphasis on exercises which develop critical thinking.

Finally, the time I spent at SALISES allowed me to reorder my thinking. The Institute and its lecturers have given me one of the greatest gifts, a reliable compass with which to navigate the Jamaican public policy terrain.