On Tuesday last week, the Legislative Yuan passed the Farmers’ Insurance Act (農業保險法), marking a new milestone in the development of the agricultural sector and guarantees that the policy goal for farmers’ incomes would be reached.
As early as in 1956, the Taiwan Provincial Farmers’ Association drew up an agricultural produce harvest insurance and livestock insurance framework, and Taiwan Cooperative Bank requested that the provincial government organize an agricultural insurance company.
Drawing on the response from farmers, the association drafted and submitted an agricultural produce harvest insurance act to the provincial government’s Agriculture and Forestry Office for approval. The office then formulated the Regulations for the Establishment of the Taiwan Province Agricultural Insurance Research and Planning Committee.
The draft was studied and debated for many years by the provincial government’s Social Affairs Office, Financial Office, the bank, the Grain Bureau, the Agriculture and Forestry Office, and Taiwan Fire and Marine Insurance Co without achieving any concrete results.
Article 58 of the 1973 Agricultural Development Act (農業發展條例) states: “The government shall initiate an agricultural insurance program to secure farmers’ income, to stabilize rural communities and to make full use of agricultural resources. Before the agricultural insurance program is enacted into law, the central competent authority shall establish regulations in accordance with which agricultural insurance program by districts, categorization and stage may be implemented on a trial basis.”
Despite Article 58, concerns remained that the burden on government finances would be too heavy, and in the end nothing happened. Risk management and insurance were not considered in the implementation of agricultural policy, which instead protected farmers’ incomes and compensated income losses through fixed procurement prices, supply subsidies, disaster relief aid and protection against losses caused by imports.
Frequent natural disasters disrupt distribution channels, and climate change and economic and trade liberalization have aggravated the instability of farmers’ incomes. However, disaster relief aid makes up less than 30 percent of farmers’ losses, and fixed procurement prices and supply subsidies contravene WTO regulations.
The result is that farmers’ only recourse when disaster hits is to ask for government assistance, which responds with urgent subsidies and relief aid. The same scenario is repeated year after year, and local agriculture looks as if it has no future.
The Council of Agriculture has in the past few years introduced agricultural insurance trials, and there are now more than 20 kinds of insurance for agricultural and aquatic products.
The Farmers’ Insurance Act relies on the spirit of self-help and promotes stable agricultural operations by protecting farmers’ incomes through insurance premiums paid by farmers and government support.
It also gives farmers a risk management tool in the face of natural disasters and changing market conditions, raising hopes that more young people might turn to farming without having to worry about their choice, while encouraging farmers to invest in agriculture.
The government can also avoid getting caught in a financial black hole because of subsidies and relief aid, and the insurance farmers buy will give the government more information about agricultural production, which should help create balanced distribution channels.
Min-hsien Yang is a professor at Feng Chia University and former president of the Rural Economics Society of Taiwan.
Translated by Perry Svensson
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