RISKY AGRICULTURE AND THE STATE: IN SEARCH FOR OPTIMAL RELATIONSHIPS

Abstract

Directly or indirectly, the government has a significant impact on the formation of decisions on agricultural risk management taken at the enterprise level. The direct influence of the government lies in the implementation of various agricultural programmes, partially or fully funded from the budget (for example, compulsory crop insurance programmes, promotion of diversification of the
industry by granting various preferences in subsidizing individual crops, etc.). Indirect influence consists in creation of normative and legal conditions for development of competitive environment. However, government involvement in agricultural regulation is in itself another important source of risk. The government should be aware that not all of its decisions and agricultural programmes are perfect and can not always be effectively implemented. With the deepening of market liberalization, of increasing importance
becomes the question of the use of regulatory instruments for agricultural risks, which are more consistent with the World Trade Organization rules and do not violate the market laws. However, any participation of the state in regulating agricultural risks inevitably leads to the distortion of market signals on the validity of the production efficiency of a particular product. Therefore, in order to minimize the distortion of such signals and a more rational use of budget resources, the Kazakhstani government should focus primarily on the regulation of catastrophic risks. The isolation of a damage, which is caused by catastrophic and only a catastrophic risk, is of paramount importance to determine to what extent the state should participate in compensation for losses caused by adverse natural events