The Regulation of Sugar Market Price in Developing Countries

Abstract

This study investigates on the regulation of sugar market price in developing countries. Sugar industry is one of the most regulated industry subjected to import duties, subsidies and quotas. Most of the sugar produced in developing countries is for home consumption that is to satisfy the local market and only a small proportion is exported. In this case, the sugar industry need policy reforms given the current public awareness on the negative effects of consuming sugar from the health sector perspective.

In practice, sometimes, sugar is exported illegally to create artificial shortages. Theoretically, government intervenes to regulate the industry because of market failure or inefficiencies. Market failure may arise when prices fail to fully adjust to equilibrium, existence of imperfect competition due to monopoly and imperfect information. Although, government intervention has varying intervention costs and impacts in terms of policy goals such as economic efficiency. Government can intervene in the economy through government regulation, tax/subsidy or direct provisioning of public goods and services. Government intervention has been effective in regulating the industry.

Keywords: Market failure; Government intervention

JEL Classification: D42; E12