The Response of Ethiopian Grain Markets to Liberalization

4.     nurturing the political and legal foundations of marketing systems (e.g., strengthened

mechanisms of specifying and enforcing contracts, raising the costs of contract non-
compliance, and more pluralistic procedures for developing the rules governing market
activity). A well-functioning legal and political framework for market activity reduces the
risks and transactions costs of private trade. These measures are important adjuncts to
developing reliable markets, and inherently involve strengthening the regulatory abilities
of the state rather than “getting the state out of market regulation.” In general, this means
a reorientation of the state from “control” activities to “facilitation” activities designed to
reduce farmers’ and traders’ costs of transacting across inputs, credit, and commodities.

5. Invest in local analytical capacity: Lasting policy change depends critically on
governments’ actual belief in the analysis supporting the reforms. There is ample evidence
that governments that have reluctantly undertaken reform programs have reversed them
and reimposed the old system on price and trade controls as soon as a drought or other
shock has occurred. Local analytical units are often seen as more neutral and sensitive to
domestic policy concerns than analysis conceived and driven by donor interests using
expatriate analysts. The demand for, and credibility of, food policy analysis to guide
market development is enhanced by a collaborative research process driven by local
researchers and government analysts who take “ownership” of the research agenda and
findings.

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