Presentation by Blessings Chinsinga, FAC researcher, at an agricultural policy dialogue on 23 February 2012 in Lilongwe, Malawi.

1. The Future of the Farm Input Subsidy Programme
(FISP): A Political Economy Inquiry
Blessings Chinsinga
Department of Political and Administrative Studies
Chancellor College, University of Malawi
P.O Box 280, Zomba
E-mail: kchinsinga@yahoo.co.uk

2. Outline of the Presentation
• Setting the Context
• Origins and Context for FISP
• Donor Engagement with FISP
• Design, Implementation and Management
Experiences of FISP
• The Future and Alternative Scenarios for FISP
• Concluding Remarks and Reflections

3. Setting the Context
• FISP has been considered as a huge success both locally
and internationally since its launch in the 2005/06
growing season
• Malawi has been able to produce surplus food over
and above the annual food requirements breaking a
long time tradition of dependency on food aid and
commercial imports
• Echoes of FISP’s success have been heard in several
forums on the international stage:
– “Malawi ending famine *by+ simply ignoring experts” New
York Times, 2007
– “Africa’s green revolution may be several steps nearer after
a pioneering experiment in seed and fertilizer subsidies to
smallholder farmers in Malawi” UK Guardian

4. Setting the Context Cont’d
– “A model of success showing the rest of the African
governments the way towards a sustainable version of the
African green revolution” AGRA, 2009
– “In a few short years, Malawi has come from famine to feast:
from food deficit to surplus; food importing country to food
exporting country” UN Secretary General, undated
• The success of FISP reportedly contributed to Malawi’s
Economic Miracle between 2004 and 2009
• FISP has not been without its critics, mostly
donors, opposed to subsidies since they are ineffective and
inefficient policy instruments
– And no donor directly supported the maiden FISP
• The apparent success of the maiden FISP somewhat
moderated the position of most donors opting to engage
with government on how to improve on the
design, implementation and management of FISP
– And it appears the patience of most donors is running out
underlined by the push for a medium term strategy

5. Setting the Context Cont’d
• This is an opportune time to reflect on the future of FISP
having been implemented for six consecutive growing
seasons
• Evaluations and studies have been carried out that have
generated a wealth of policy lessons and experiences
• They present a solid basis for a thorough, critical and
deeply reflective review about the future of FISP
• Attempting to do so using a political economy framework
– But what is it all about?
• The political economy framework is ideal for this exercise
because it provides the opportunity to understand the
political, economic and social processes that promote or
block pro-poor change as well as the role of
institutions, power and the underlying context for policy
processes

6. Setting Context Cont’d
• ….policies are more effective when they are informed
by an understanding of power relations, incentives and
change processes
• ….making and shaping of policy is less of a set of
organized, predictable and rational choices than a
complex, often unpredictable and above all a political
process
• ….context matters a great deal since policies’ chances
of success cannot be judged abstractly in their
theoretic or technical attributes without considering
the institutional, political and cultural context in which
they are applied
• What is it that we can say about FISP after
implementation for six consecutive growing seasons?

7. Origins and Context for FISP
• The origins of FISP can be traced back to the May 2004 May
elections against the backdrop of less satisfactory agricultural sector
input support initiatives
– Starter Pack (SP) 1998-2000
– Targeted Input Programme (TIP) 2001-2005
• Reinforced by the incidence of two severe hunger crises in 2001/02
and 2004/05 growing seasons
– “….following the 2001/02 hunger crisis, *the question of food security
has appeared in the platforms of politicians, on the agendas of policy
makers, in the programmes of public bureaucracies, among the duties
of village chiefs, and on the pages of national newspapers and is
thoroughly debated and researched”
• Consequently all major political parties made manifesto
commitments to fertilizer subsidies as the most feasible alternative
to dealing with pervasive food insecurity and chronic food
shortages
• The differences in the subsidy proposals between and among
political parties reflected to a large extent the variations in their
regional support bases and constituencies

8. Origins and Context for FISP Cont’d
• National consensus on fertilizer subsidies in the May 2004
elections generated a simple but very persuasive narrative
• “…. Hunger and recurrent food crises are best responded to
by supporting agriculture, and this means providing
subsidies to get agriculture moving with a focus on key
crops notably maize and tobacco”
• UDF won the elections but was hesitant to implement the
subsidy programme for fear of jeopardizing donor support
• Uncertainty in the subsidy coupled with a serious drought
resulted in the 2004/05 devastating hunger crisis which
affected more than 4 million people
• The devastating effects of the hunger crisis coupled with
the dramatic changes in the political landscape resulted in
the implementation of FISP in the 2004/05 growing season

9. Origins and Context for FISP
• …..but FISP is a necessary evil in Malawi for two reasons
– 1) Since the 1970s Malawi’s agriculture has not survived without any form
of support forcing some scholars to characterize maize as life and Malawi’s
politics as essentially politics of maize
– …hence the legitimacy of the government in Malawi is closely linked to its
ability to make maize readily available either through subsidizing
production or guaranteeing affordability in the market
– 2)Malawi is locked up in a low maize productivity trap (LMPT) due to
instability in inter year maize prices with the following implications
Fear of low prices inhibits net producers’ investment in maize
production who make up 10 percent of maize growers
Fear of high prices inhibits net consumers’ reliance on the market for
maize who make up 60 percent of maize growers
…hence inhibits poor farmers’ exit from low productivity maize
production
• FISP is therefore seen a means of liberating Malawi from the LMPT
enabling farmers to step up and eventually step out of agriculture
• The key question, however, is how is the FISP designed, implemented
and managed?

10. Donor Engagement with FISP
• Donor engagement with FISP has evolved tremendously since it was
launched in the 2005/06 growing season
• No donor supported the implementation of the maiden FISP and three
categories of donors could be distinguished
– Those entirely against FISP using the conventional arguments against
subsidies (subsidies distort market operations)
– Those skeptical but willing to engage in search for the holy grail of subsidies
(smart subsidies); subsidies well targeted, designed to correct for market
failures and with concrete exit strategies
– Those supportive of subsidies as the only means to kick start the fledging
agricultural sector (subsidies cannot distort the market which does not exist
in the first place)
• Success of the maiden phase prompted most donors to engage with FISP
in hope of contributing to improvements in the design, implementation
and management of FISP
• Some results of donor engagement with FISP have included:
1)involvement of the private sector in the importation and distribution of
inputs particularly seed;2) Diversification of crops targeted beyond maize
and tobacco to include legumes; 3) and improvement in the design
features of coupons to enhance security features, identification and
targeting beneficiaries, and improvement in logistics to ensure timely
delivery and distribution of FISP inputs

11. Donor Engagement with FISP Cont’d
• It appears with the benefit of hindsight donors’ position on FISP is now
skewed toward the search for the holy grail of subsidies
• Donors are generally willing to continue supporting subsidy but within
the framework of a well defined medium term strategy
• Medium term strategy is justified on the following accounts:
– Would ensure predictability as opposed to the ad hoc nature of
design, implementation and management of FISP
– Clearly spell out goals and objectives of the programme
– Lay out procedures for critical elements of the programme such as
procurement and distribution of inputs
– Clearly stipulate indicators for success or failure
– Serve as a planning tool for donors either individually or as a consortium
• Call for a medium term strategy for FISP has been a bone of
contention between donors and government since the 2007/08
growing season
• Government is apparently reluctant to commit itself to the medium
term strategy for FISP on the basis that it is a strategic ploy by donors
to force it to exit from FISP
• The popular line especially among political cadres is that as a country
we cannot exit from eating

12. Design, Impletn and Mangt of FISP
• Lack of clarity of the objective of the programme
– Is FISP a productivity enhancing or social protection
programme?
• Hanging in: avoidance of falling down and out
• Stepping up: intensification and increased productivity in existing
activities
• Stepping out: moving out of agriculture into new and more
productive activities
– Unclear, inconsistent, fluid and varying criteria of targeting
within and across areas
– No clear plans for beneficiaries graduating out of FISP
– Lack of clear linkages with other complementary
programmes such as research and extension, integrated
soil fertility management, agricultural and rural
development
– No systematic linkages to post production activities such as
storage, processing, marketing etc

13. Design, Impletn and Mangt of FISP Cont’d
• Poor information flow and management
– Overestimates of production surplus with 2007/08
growing season serving as a very good example
– Disparities between NSO and MoAI&WD statistics of
farming families in Malawi with no sense of urgency to
reconcile them (2.3 versus 3.8 million farming
families)
– No knowledge of the full cost of the FISP particularly
in relation to the overheads
– No knowledge about how the proceeds from FISP are
used
– Inconsistent and vague targeting criteria for districts
with the share of households allocated coupons
varying between 33 and 49 percent
• Variations justified on the basis of very general statements
such as population size, maize area and soil quality

14. FISP PROGRAMME COSTS 2005-2009
2005/06 2006/07 2007/08 2008/09
Total Programme Costs (MK billion)
Planned 5,100 7,500 11,500 19,480
Actual 7,200 10,346 13,362 33,922
Total as % of MoI&WD n/a 61 61 74
Total as % national budget 5.6 8.4 8.9 16.2
Total as % GDP 2.1 3.1 3.4 6.6

15. Design, Impletn and Mangt of FISP Cont’d
• Almost routinely spending more than actually planned
• Increasing share of the programme budget as a proportion
of MoAI&WD and national budget
• Increasing share of the programme budget as a proportion
of GDP
• No clear sense of the exact scope of programme
expenditure since overheads are not computed
• No proper accountability on the usage of proceeds from
FISP
• Increasing levels of subsidy to farmers instead of decreasing
• No proper accountability for supplementary or second
round of coupons peaking to the tune of 1 million in some
cases
• Opportunity cost for the apparent displacement of some
critically important activities in MoI&WD such as research
and extension

16. Design, Impletn and Mangt of FISP Cont’d
• Fraud and Corruption
– Unclear targeting criteria easily renders the
programme to manipulation
– Awarding of contracts/tenders for fertilizer
importation and distribution degenerating into a
source of patronage
• Paying political debts?
– Disparities between MoAI&WD and NSO statistics on
farming families
• What is the motivation?
– Second round of coupons controlled by political
functionaries

17. Design, Impletn and Mangt of FISP Cont’d
• Deinstitutionalization of the agricultural sector
– Marginalization of the development of the private sector
due to displacement of commercial sales estimated at
between 30-40 percent
– Displacement of the ideal agro-dealers network with
opportunists whose lifespan is tied to FISP defeating the
goal of easing farmers’ access to productivity enhancing
technology
– Weakening of the domestic seed industry by fostering
coincidence of interests of donors, government and seed
companies
– Weakening of the fertilizer industry since FISP contracts
are sidelining established fertilizer companies with heavy
sunk costs but without political connections
– Marginalization of other important activities in the
mandate of MoAI&WD such as research and extension due
to heavy demands of FISP on staff time

18. The Future and Options for FISP
• Absolutely no concern about the future of FISP even if there is
change of government in May 2014 since there is somewhat a
national consensus about the desirability of FISP
– An integral part of the social contract between government and
citizens
– FISP is a vote spinner and bolsters a government’s legitimacy
• The next President is likely to inherit the championship of the FISP
because of the legitimacy it bestows on a government
• The concern should be about the manner in which the new
champion will relate himself or herself to the technocrats
• The success of the programme depends as much on the political
will as on the technical competence underpinning the FISP’s
design, implementation and management
– Maize is life and Malawi’s politics is about maize
• The main challenge is that the programme is highly personalized
and heavily politicized which crowds out room for technical
initiatives geared toward the improvement of the programme

19. The Future and Options for FISP Cont’d
• The President was the Minister of Agriculture and Food
Security directly overseeing the implementation of the
programme, having a huge imprint on the key parameters of
the programme
– Limiting technocratic engagement with regard to potential
improvements about programme design, implementation and
management
– Worsened by two key factors:
• Heavy politicization of the civil service to the extent that those
championing alternative views are often branded as opposition
elements
• Nature of the country’s political culture which places emphasis on
deference to authority
• What more with the numerous international awards with respect to the
programme?
• Change of the incumbent may either present opportunities or
constraints
– It will all depend on the incoming champion; the role of
leadership is critical but it is difficult to see how food security
cannot be politicised in this country

20. Alternative Scenarios for FISP
• Critical considerations
– FISP is a necessary evil given the current state of
the country’s agricultural sector (the LMPT trap)
– The main challenge is that FISP is seen as a quick
fix to the country’s food security problems and
not as a means for catalyzing transformation of
the country’s rural economy
– Evident in the fact that the programme is designed
and implemented without any thought about
beneficiaries graduating from the programme let
alone exit strategies

21. Alternative Scenarios for FISP Cont’d
• Continue with the implementation of FISP as it is
– The status quo will mean that the abrupt end of the programme will
have disastrous consequences for the agricultural sector
– 1) The country is likely to be plunged back into a situation of chronic
food insecurity as was the case prior to the implementation of the
subsidy
– 2) Plunging into a state of chronic food insecurity will be inevitable due
to the disinstitutionalization of the key aspects of the agricultural
sector the implementation of FISP has caused
• Consider scaling down the programme to few geographical areas
especially if the idea is to enhance national food self-sufficiency
– Reduction of scale would reduce the administrative and logistical
challenges associated with the programme
– Target those districts considered as key producers of maize to support
the country’s food security agenda
– An efficiently managed FISP run in a few districts would help make
maize affordable
– Not everyone should be involved in maize production in order for
Malawi to achieve self food sufficiency
– Would obviously not be politically feasible given the centrality of food
security in the country’s politics

22. Alternative Scenarios for FISP Cont’d
• Return to Starter Pack but the limitations of SP are well
known
• Redesign FISP within the framework of the mid-term
strategy with clear graduation or exit strategies while
addressing the challenges currently affecting the
programme
– Clarify the notion of graduation which is well developed in the
area of social protection
– Chirwa, et al (2011) have attempted to define graduation from
FISP’s perspective including setting out potential conditions of
graduation
– They construe graduation as follows: “removal of access to
[FISP] does not reduce land, labour and capital productivity in
maize production”
– Conditions of graduation would help implementers to attend to
the implementation challenges associated with FISP

23. Potential Graduation Conditions from FISP
Potential Graduation Likely Processes and Requirements
Conditions
Reduced input prices Efficient and competitive importers, suppliers,
transporters, improved infrastructure
Increased efficiency in input Improved agronomy, complementary seed, inorganic and
use organic fertilizers, soil fertility management. Investment in
agricultural research and extension
Substitution by cheaper inputs Increased legume cultivation with rotational fallows. Good
legume seed supply, produce demand and markets; stable
and reliable low maize prices; and high maize productivity
for transition before subsidy removal
Increasing working capital for Increased incomes, diversified incomes with reduced
input purchases income seasonality
Diversification out of maize Stable and reliable low maize prices; strong demand for
production high value farm products and/or non-farm goods and
services, land markets and safety nets
Access to low cost credit for Increased and diversified incomes, innovative and low cost
inputs micro-finance system
Source: Chirwa, et al., 2011

24. Concluding Remarks and Reflections
• FISP is a necessary evil for Malawi given the state of Malawi’s economy
and an apparent national consensus on the desirability of FISP as a way of
revamping the agricultural sector
– There is so to speak a political-economic bind of the FISP since the question
of food security is firmly at the centre of the country’s electoral politics
• The manner in which FISP is implemented is critical especially in the
context like Malawi where the question of food security is highly
politicised
• Political will to the implementation of FISP is vital but it has to be in such
away that it does not crowd room for technocratic maneuver and
engagement geared toward the improvement of FISP
• Several possible scenarios exit for FISP but the most promising one is to
redesign it with clear exit strategies and implemented in a manner that
will catalyze dramatic and sustainable transformation of the rural
economy
• Implementation of FISP as usual will simply lock the country in the LMPT
with disastrous consequences should the programme be discontinued
abruptly
• Food security should be one of those areas that should be insulated from
undue political influence in a new negotiated political settlement just as is
the case with the Bank of England in the UK