The Market Development Project: A case of government failure?

Abstract

The Market Development Project (MDP) was initiated by the Fresh Produce Development Company (FPDA) of Papua New Guinea (PNG) in 2006. The project involved FPDA acting as a wholesaler, buying fresh produce from farmers in the PNG Highlands and delivering it to supermarkets in Port Moresby and to a mining town, Tabubil, in the Western Province. In 2010 a review was undertaken to assess MDP's performance over the four years it had been in operation: what it had achieved and what it had not; how cost effective it was; whether and how it could have been done better; and whether a government agency should be involved in a seemingly private wholesaling business. The MDP was set up to link farmers to markets. It aimed to provide farmers with secure markets and stable prices; generate market information which the agency could use to develop policies and strategies; provide a learning ground to educate farmers and the staff to become commercial and market-oriented; and encourage farmers to save money through the establishment of bank accounts. The study showed that some of the objectives have been achieved, for example, gaining practical experience in marketing, building capacities of farmers and staff, establishing bank accounts and encouraging savings for some farmers. However, these achievements were not significant relative to the time and substantial resources that had been invested in it. More importantly, it failed to make significant inroads into addressing known supply chain issues of poor transport, poor post-harvest handling, and inconsistent supply. Our findings suggest that more effort should have been given to staff and farmers' training, gathering information on costs of production and marketing and identifying and addressing supply chain issues. In addition, a workable monitoring and evaluation framework should have been put in place so that problems and deficiencies in the design and operation of MDP, most notably its pricing structure and quality control measures, could be identified and rectified as soon as they occurred. The case of MDP demonstrates clearly that administered pricing (as is MDP pricing) is no substitute for the free play of market forces and farmers' interests can be better served by government acting as a facilitator, rather than as an interventionist.