The purpose of this study is to analyze the actual condition of the agricultural investment policy system and to propose directions of improvement in the position of a local government. The UR agreement in 1992 and the progress of localization brought a paradigm shift of agricultural investment policy. The system of agricultural investment policy was changed from a top-down system to a bottom-up system. This shift meant that the price support by the government was abolished and the policy consumers (local government, farmers and the agencies concerned) can apply for their required businesses to the central government or a local government.
Because of localization and the bottom-up system, the role of local governments has been becoming significant. Local governments are playing an important role in implementing agricultural policy in farming fields and rural districts. But until now, the analyses and researches of the agricultural investment system have been performed in the viewpoint of the central government. Many researchers presumed that the central government and local governments would have the same purpose and direction of agricultural investment policy.
As the analysis results of the current situation of agricultural investment policy show, local governments have some different purpose of agricultural policy from the central government. The central government has been trying to improve the competitiveness of agriculture, increase farm size, and promote specialized farming. But the first purpose of local governments is to maintain or increase their local communities. The local governments that have lots of disadvantageous areas in their administrative districts make full use of agricultural investment policy for achieving their first purpose, that is, to keep their community.
The central government and a local government should have a correct understanding that the purpose of agricultural investment policy might be different between the two governments. However, a local government has weak fiscal power and it is almost impossible for the local government to perform its own agricultural investment policy without support from the central government. Because of that, the current system of agricultural investment policy needs to be changed in the position of a local government, following the localization paradigm.
On the basis of the analyses of the current agricultural investment system, this study suggested some policy directions for improving the performance of agricultural investment policy. First, it is important to reshape the principle and role of agricultural investment policy between the central government and a local government. The agricultural investment system needs to be changed to enlarge the autonomy of a local government. The concrete methods are diversification of agricultural investment supporting means, expansion of the block grant system, and reduction of inefficient farm input support.
Second, it needs to improve the effectiveness of agricultural investment policy. Many public officials in charge of implementing agricultural policy insisted that the communication system between the central government and a local government must be improved to increase the effectiveness of agricultural investment policy. And it is important to improve the follow-up control system of agricultural investment policy and merge similar unit investment businesses.