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INTERNATIONAL RICE RESEARCH INSTITUTE AND
AGRICULTURAL DEVELOPMENT COUNCIL
INTERNATIONAL RICE RESEARCH INSTITUTE
Los Bafios, Laguna, Philippines
P.O. Box 933, Manila, Philippines
MECHANIZATION OF SMALL FARMS in South and Southeast Asia affects all pro-
duction stages from land preparation through crop production, harvesting, and
postharvest processing. Because adoption of agricultural machinery increases capi-
tal input, it is expected that either the level of output should increase or the level of
other inputs decrease. Such changes are likely to have an impact on employment,
income and income distribution, and social welfare.
Evaluation of the consequences of mechanization as well as formulation of
appropriate policy guidelines is a predominantly empirical issue strongly related to
local socioeconomic conditions. The most frequently used analytical approach is a
detailed study of a relatively specific situation.
In 1977, the United States Agency for International Development (USAID)
agreed to fund a research project The Consequences of Small Farm Mechaniza-
tion on Production, Income, and Rural Employment in Selected Countries of Asia
- undertaken jointly by the International Rice Research Institute (IRRI) and the
Agricultural Development Council Inc. (A/D/C). The project has involved colla-
borative work with national research institutions in Indonesia and Thailand, as well
as smaller projects with individual researchers in many countries.
A series of planning and monitoring workshops was held at IRRI to review
project progress. The fourth workshop, in which study results from both A/D/C
and IRRI were presented, was held 14-18 September 1981. A summary report of the
papers and discussion is available upon request from the IRRI Agricultural
A committee comprising Dr. K. Adulavidhaya, Dr. H. P. Binswanger, Mr. J. B.
Duff, Mr. J. Lingard, Dr. R. Sinaga, Dr. J. P. G. Webster, and Dr. J. A. Wicks
reviewed the papers presented and selected those for inclusion in this book. The
committee recommended that three papers on farm mechanization in Pakistan be
consolidated into a single paper (second chapter). It also recommended that 12
papers for the Philippines, West Java, and South Sulawesi studies be summarized in
the final three chapters.
The work of all who prepared papers for the workshop is gratefully acknowledged.
Dr. J. A. Wicks undertook the technical editing of the papers, assisted for specific
papers by Mr. J. Lingard, Dr. G. Nelson, and Dr. J. P. G. Webster. G. P. Hettel,
assisted by G. S. Argosino, edited the final papers.
This book should provide useful information on the consequences of mechaniza-
tion, and we hope it will stimulate further research.
M. S. Swaminathan
International Rice Research Institute
The International Rice Research Institute (IRRI) was established in 1960
by the Ford and Rockefeller Foundations with the help and approval of the
Government of the Philippines. Today IRRI is one of 13 nonprofit interna-
tional research and training centers supported by the Consultative Group
for International Agricultural Research (CGIAR). The CGIAR is spon-
sored by the Food and Agriculture Organization (FAO) of the United
Nations, the International Bank for Reconstruction and Development
(World Bank), and the United Nations Development Programme (UNDP).
The CGIAR consists of 50 donor countries, international and regional
organizations, and private foundations.
IRRI receives support, through the CGIAR, from a number of donors
the Asian Development Bank
the European Economic Community
the Ford Foundation
the International Fund for Agricultural Development
the OPEC Special Fund
the Rockefeller Foundation
the United Nations Development Programme
and the international aid agencies of the following governments:
Fed. Rep. Germany
The responsibility for this publication rests with the International Rice
Mechanization of rice production in developing Asian countries:
perspective, evidence, and issues 1
R. W. HERDT
Farm mechanization in Pakistan: policy and practice 15
B. LOCKWOOD, M. MUNIR, K. A. HUSSAIN, and J. GARDEZI
Innovation in the Philippine agricultural machinery industry 31
K. W. MIKKELSEN, and N. N. LANGAM
Economic analysis of the farm machinery industry and tractor
contractor business in Thailand 39
Productivity growth of the agricultural machinery industry in
Domestic resource cost of agricultural mechanization in Thailand:
a case study of small rice farms in Supanburi 61
Causes and consequences of power tiller utilization in two
areas of Bangladesh 71
M. A. JABBAR, M. S. R. BHUIYAN, and A. K. M. BARI
Economic, technical, and social aspects of tractor operation and
use in South Sulawesi, Indonesia 85
J. HAFSAH and R. H. BERNSTEN
Economics of pump irrigation in Eastern Nepal 95
M. R. KHOJU
Effect of tubewells on income and employment: a case study in
three villages in Kediri, East Java, Indonesia 107
Comparative analysis of thresher adoption and use in Thailand
and the Philippines 119
F. JUAREZ and R. PATHNOPAS
Labor use patterns and mechanization of rice postharvest
processing in Bangladesh 139
J. U. AHMED
Consequences of small rice farm mechanization in the Philippines:
a summary of preliminary analyses 151
A. M. AGUILAR, E. C. CAMACHO, A. C. GENERALLY, P. B. MORAN,
J. F. SISON, Y. TAN, and J. A. WICKS
Consequences of small rice farm mechanization in West Java:
a summary of preliminary analyses 165
Y. SAEFUDIN, H. SISWOSUMARTO, R. BERNSTEN, A. SRI BAGYO,
J. LINGARD, and J. WICKS
Consequences of small rice farm mechanization in South Sulawesi:
a summary of preliminary analyses 177
Y. MAAMUM, I. G. P. SARASUTHA, J. HAFSAH, R. BERNSTEN,
R. SINAGA, and J. WICKS
EVIDENCE, AND ISSUES
R. W. Herdt
A generalized sequence of mechanization of Asian rice production
is developed, based on experience in Japan, Taiwan, and Korea.
By 1978, these countries had reached a relatively high level of
mechanized riceland preparation. Labor force growth rates among
Asian countries are compared. A net social benefit model for
evaluating the desirability of mechanizing rice production is out-
lined and often neglected factors are identified. Available empirical
evidence on some important factors is reviewed and the question of
who benefits from mechanization is addressed.
There is considerable controversy about the desirability of agricultural mechaniza-
tion in Asia. One extreme view equates mechanization with modernization so that it
becomes the major indicator and requirement for development. In the late 1970s,
modernization in agriculture in the People's Republic of China was synonymous
with mechanization. Those who point out the psychological benefits from riding a
tractor rather than walking behind a carabao have similar ideas in mind.
A more moderate view holds that the functional relationship between power
input and agricultural output is analogous to that between fertilizer and yield, so that
development requires added power in the form of mechanization (Hamid 1979).
Binswanger (1978) refers to this as the net contribution view.
A third view holds that the major objective is absorbing the significantly in-
creasing numbers of laborers in the agricultural sector during the next 20 years, and
that mechanization can help through intensifying land use (Southworth 1974). In
this view, mechanization is the key to increased cropping intensity which will permit
labor absorption at other times during the production cycle. A major benefit of
mechanization then is the increased agricultural output generated from larger
harvested area and higher yields resulting from deeper plowing and better cultiva-
The International Rice Research Institute.
2 CONSEQUENCES OF SMALL-FARM MECHANIZATION
A fourth view, somewhat different from the first three, opposes agricultural
mechanization on the grounds that it is a straightforward substitution of capital for
labor and, given the labor supply in most Asian countries, is socially undesirable
(Abercrombie 1975). In some cases, this is supplemented with the idea that distor-
tions in the price ratio of labor to capital have been a primary factor responsible for
speeding mechanization, and that nonmarket forces have been largely responsible
for these distortions.
The purpose of this paper is:
to provide a perspective on the issues through an examination of historical
experience in East Asia; and
to provide a framework for criteria to judge the impact of machinery introduc-
tion and other technological changes.
One additional note: mechanization means different things in different situations.
Our discussion deals with powered equipment, mostly two-wheel tractors (power
tillers) and power threshers.
PATTERN OF MECHANIZATION IN ASIAN RICE PRODUCTION
Economic, technical, and policy factors are important in determining the pattern
and speed with which rice production is mechanized in a country. Alternative
investment opportunities and the prices of land, labor and capital influence demand
for farm machinery. The perceived social opportunity costs of these resources
influence policies which restrain or encourage mechanization, and the relative
abundance of resources influences their private and social costs. Technical factors
which influence engineering feasibility and the relative cost of mechanization include
the amount of power required for a given task, the degree of judgment needed to
apply the power, and the question of whether the task requires moving through the
field. Climatic or soil conditions may also influence the relative difficulty of design-
ing successful machines.
A generalized sequence of mechanization
Because every country in Asia has different technical and economic conditions, it is
unlikely that identical patterns of mechanization will take place. However, the broad
similarities in relative factor abundance and the tasks required for wet-rice cultiva-
tion indicate a general pattern of rice mechanization is likely to emerge. To date,
among the Asian rice economies, only Japan has fully mechanized production.
Following the Japanese pattern, Taiwan and Korea are well started and a number of
other Asian countries are moving in the same direction.
In East Asia, investment in land improvements and water control preceded
mechanization. This was partly an accident of history. Improved water control was
carried out using human and draft animal power, and was one of the few ways to
improve the productivity of agricultural land in the high man:land economies. Most
of Japan's rice fields were supplied with irrigation facilities by the 19th century, and
the major subsequent improvement was investment in drainage, providing a high
degree of water control (Ishikawa 1981). The same water control investment
occurred later in Korea and Taiwan, where there were "many years of rural
MECHANIZATION OF RICE PRODUCTION IN DEVELOPING ASIAN COUNTRIES 3
infrastructure creation" prior to 1940 (Fei and Ranis 1975). Most of this took the
form of gravity irrigation and drainage but, with the availability of electricity and
internal combustion engines, power pumps have become one of the first machinery
investments for many rice producers. In areas of South and Southeast Asia, where
gravity systems are inadequate to permit efficient water control and ground water
resources are available, investment in private pumps has been substantial (Patel and
Patel 1971). Electric irrigation pumps replaced foot-operated pumps in Japan
during the 1920s, long before power tillers were used (Ishikawa 1981). A 1966 study
in an intensive rice double-cropping area of Taiwan noted that 1 water pump was
available for every 3 farms while there was only 1 power tiller for every 18 farms (Lai
In addition to pumps, other investments in land were important prerequisites for
successful mechanization in East Asia. Drainage to provide a hard enough soil base
for machines, enlargement of plots and consolidation of fragments, and construc-
tion of farm roads to reach individual plots were important in some areas (Tsuchiya
The introduction of land preparation equipment and threshers followed devel-
opment of a high quality land base. Small manual threshers were among the first
widely adopted mechanical devices (Lee 1972).
They were later introduced into a number of other countries by the Chinese and
Japanese, but never became established. Power threshers however, were widely
adopted in both East Asia and some areas of other countries. In Japan, two-wheel
power tillers were introduced in the early 1950s. Land preparation was the first
operation mechanized in parts of the Philippines and Thailand. Tillers may initially
be very small as in the case of the 2- to 3-hp "iron cow" introduced in Taiwan
(C. K. H. Wu 1972), but after some years machines in the 8- to 12-hp range seem to
It seems to be more difficult to develop appropriate machines for other rice
production tasks such as planting, fertilizing, cultivating, and drying. These opera-
tions present formidable technical problems. Weeding, for example, requires con-
siderable judgment and relatively little power. Some mechanical weeders have been
developed, but herbicides have proven to be cheaper and more effective at distin-
guishing weeds from rice. Transplanting has been mechanized, but requires special
techniques for raising seedlings and is still quite labor intensive. Despite these
problems, the Japanese had developed commercial machines for each major opera-
tion by the late 1970s.
There are substantial divergences from this path. Four-wheel tractors of 35-60 hp
have been introduced into Thailand, Malaysia, the Philippines, and Pakistan. In
some areas, these units are rented for initial land preparation, and draft cattle used
for secondary land preparation. Old and new technologies coexist. The large tractors
have, in some cases, preceded a high degree of water control development as in
central Luzon or central Thailand where their presence in sugarcane farming may
have stimulated adaption to rice. In other cases, government authorities (such as the
Muda River Development Authority of Malaysia) own the tractors and rent them to
Data to measure the degree of, and forces contributing to, mechanization are
4 CONSEQUENCES OFSMALL-FARM MECHANIZATION
somewhat fragmentary. The FAO publish data on wheel and crawler tractors,
garden tractors, and a few other kinds of machinery, but there are many gaps in the
series for Asian countries. Definitions are unclear and may be inconsistent from
country to country. Time series data on the number of power tillers and farm wage
rates are available for Japan, Taiwan, and Korea for a number of years, although the
wage rates for Taiwan are incomplete. The data provide some clues to the impor-
tance of certain forces in the mechanization process.
A supply and demand model provides an oversimplified, but still useful,view.
Rice production machinery can be supplied either by imports or from domestic
production. Imports are generally under government limitation or licensing.
Domestic production may occur through private initiative, but experience in Japan
and Taiwan shows that concessional government credit, subsidies, tax exemptions,
and government efforts have been major forces speeding the development of
appropriate rice production machinery (Kudo 1972, T. C. Wu 1972).
Machinery supply from the private sector is a function of the development stage
of the industrial sector and the alternative earning opportunities for industrial
capacity. The latter is related to the scale of investment needed to begin production
of farm machinery compared to other industrial products. Potential earnings of
export industries may make governments willing to set policies encouraging or
discouraging mechanization. Government investment in farm machinery research
and development is an obvious encouragement, while taxation and import restric-
tions are barriers. Of course, there are limitations in the extent to which governments
will subsidize imported machinery or invest in machinery research and development.
So, the supply of agricultural machinery is determined by market forces in the
industrial sector, together with the decisions of government to tax or subsidize
The demand for rice production machinery is determined by the degree to which
it substitutes for labor or other inputs, the price of labor relative to substitutes, and
the price of rice. Machinery well adapted to the technical requirements of a particu-
lar agricultural setting will be more productive and substitute for a greater value of
alternative inputs. A high price for rice increases the demand for machinery.
The data in Table 1 are broadly consistent with the preceding static equilibrium
concepts, although many other forces within each country affect the mechanization
level. They show that Japan is the most highly mechanized country of the region. In
the early 1970s, it had 6 power tillers for every 10 ha of cropland and 5 tractors for
every 100 ha. Farm wage rates approached $10/day and the price of rice was the
highest anywhere in the world. Taiwan and Korea had wage rates about four times
as high as any other country except Japan and were well started toward the adoption
of power tillers. Korea had the second highest rice price with Taiwan not far behind.
Several countries had a small number of tractors, but these were used for road
transportation, plantation and other nonrice crops (Sri Lanka and Malaysia), or on
a contract basis for initial land preparation for rice (Malaysia, Philippines, Thailand).
Power tillers had been introduced in small numbers to many countries, but except
for Thailand and the Philippines, they were still available in strictly experimental
numbers. Wage-rates and rice prices in most South and Southeast Asian countries,
with the possible exception of Malaysia, were far below those in the East Asian
MECHANIZATION OF RICE PRODUCTION IN DEVELOPING ASIAN COUNTRIES 5
Table 1. Power tiller and tractor numbers, wage rates, and rice prices in Asia, 1971-75
Tillers Wheel, Farm wage rate Farm price of
(no./1000 ha crawler rough rice
cropland) tractors US$/day rough (US$/t)
India b 1.0 0.26 2.1 125
Pakistan +c 1.6 0.39 3.3 119
Sri Lanka 0.1 6.1 0.42 2.6 161
Bangladesh + 0.3 0.68 3.3 206
Malaysia 0.4 2.3 2.53d 12.9d 195
Thailand 8.0d 1.1 0.59 7.9 75
Philippines 4.1d 1.0 0.34 3.1 109
Indonesia + 0.5 0.71d 4.3d 167d
Burma 0.1 0.8 0.39 7.0 56
Japan 615 48.5 8.78 15.6 563
Taiwan 38 0.6 2.80 17.1 164
Korea 20 0.1 2.07 9.3 223
China 130e 7.5 n.a. n.a. n.a.
aSources: Tiller numbers from the IRRI Agricultural Engineering Department. Tractor numbers
from FAO Production Yearbooks, but tiller numbers in Thailand and China are from Ishikawa
(1981). Wage rates and rice prices from World rice statistics (IRRI). World price averaged
$310/t of rice equal to about $200/t of rice over the period 1971-75. Data for China from
personal communication from Hua Guozhu, vice director, Chinese Academy of Agricultural
Mechanization Sciences. bNo data available, but the author estimates there are less than
0.5/1,000 ha. cNo statistical estimates available; the author estimates less than 0.05/1,000 ha.
dRefers to 1976. eRefers to 1978.
countries. So it appears that rice production in most of South and Southeast Asia
was not poised for rapid mechanization. However, even though Japan was so far
ahead of the other Asian countries, examining mechanization there may still be
relevant for the rest of Asia.
In 1950, agriculture in Japan wasjust entering the early stages of mechanization with
many small pedal threshers, some 13,000 power tillers, and an equal number of
power sprayers, but essentially no other machinery. The industrial sector, recovering
from World War II, was beginning to pull increasing numbers of workers from rural
areas. Thirty years later more than 4 million power tillers were being used, and rice
production, from transplanting to harvesting, was essentially mechanized.
In 1950, Japan had about 2 power tillers/ 1,000 ha of cropland. Early data on
threshers are not available, but in 1955 there was 1 thresher/ 3 ha. By 1960, there was
I tiller/12 ha and I thresher/2.5 ha. During the 1960s, the size and capacity of
Japanese tillers increased and the riding tiller was introduced. By 1970, there was
1 tiller/ 1.7 ha, apparently more than adequate. Thereafter, the number of ordinary
walking tillers remained constant while there was a rapid increase in the number of
riding tillers. The 1970s also saw the rapid introduction of powered rice transplant-
6 CONSEQUENCES OF SMALL-FARM MECHANIZATION
ing machines and combine harvesters, and more power sprayers and dusters. There
were also significant numbers of power reapers and reaper-binders during the 1960s
although data are fragmentary.
During the same period, there was a sharp decline in the agricultural labor force
and a steady reduction in the hours of labor per hectare in rice production (Ishikawa
1981) as machines were substituted for human labor. Some observers clearly saw the
trend toward mechanization as a drive to achieve economic efficiency, pushed by
rising labor costs, rather than as a continuation of the earlier Japanese drive to
increase yields. Tsuchiya (1972) claimed that "mechanization has been advanced in
order to secure a certain amount of rice at the lowest possible cost, rather than to
increase the yield."
Differences within East Asia
Korea and Taiwan are the only Asian rice producing countries other than Japan to
have achieved any significant level of mechanization by 1980. The pattern of power
tiller introduction in the three countries is in Figure 1.
In 1960, Taiwan had as many tillers per 1,000 ha as Japan had in 1950, but the
number increased more slowly. After 10 years, Taiwan still had only about 2
tillers/ 100 ha. However, by 1977, 20 years after the initial introduction, there was
nearly 1 tiller/ 10 ha, and by the 1980s nearly all of Taiwan's riceland was prepared by
machines. Power tillers were introduced into Korea's rice sector about a decade after
introduction in Taiwan, and their rapid adoption was similar to that in Japan,
reaching 7 tillers/100 ha in about 10 years, with continued rapid increases there-
Four critical points in the mechanization process are identified in Table 2: 1) the
Power tillers (na/1000 ha paddy land)
lqoln 1956 1960 1965 1970 1975 1980
1. Power tillers in 5 Asian countries, 1950-80.
MECHANIZATION OF RICE PRODUCTION IN DEVELOPING ASIAN COUNTRIES 7
Table 2. Farm-level rice prices and wage rates during comparable periods of agricultural mecha-
nization in Japan, Korea, and Taiwan.
State of Tillers Real wage
mechanization (no./1000 ha) Period Rice/t Wages World (kg paddy/day)
day rice (kg paddy/day)
Initial Introduction pre-1950 na na na na
Early 2.5 1950-51 311 0.70 na 3.4
Takeoff 20 1956 328 1.00 134 4.7
Full 100 1961 327 1.47 137 6.9
Initial Introduction 1961 173 0.85 154 7.2
Early 2.5 1968 216 1.36 201 9.6
Takeoff 20 1972 338 2.02 148 9.2
Full 100 1978 559 5.99 367 16.5
Initial Introduction 1955-56 86 na 134 na
Early 2.5 1961a 98 0.88 137 9.7
Takeoff 20 1970 176 1.77 143 10.1
Full 100 1978 376 7.06 367 27.9
aTaiwan passed 2.5 tillers/1,000 ha in 1958, but wage data are not available for that year. 1961
is the first year they are available. bTaiwan had 70 tillers/1,000 ha in 1978, the year for which
data are shown. By 1979 or 1980, it had undoubtedly passed 100 tillers/1,000 ha.
initial stage; 2) the early stage with about 2.5 tillers/ 1,000 ha, a conspicuous number
of tillers with an insignificant proportion of the land served; 3) the takeoff stage with
about 20 tillers/ 1,000 ha, about 20% of the land served; and 4) full mechanization
with about 100 tillers/ 1,000 ha, enough to (theoretically) serve the entire rice area.
The data for East Asia show great differences in real agricultural wage measured in
rice equivalent at mechanization takeoff. At the takeoff stage, a day of labor cost
about 5 kg of rice in Japan, about 9 kg in Korea, and about 10 kg in Taiwan. These
differences suggest that farm-level demand for machinery may have been very
different in the three countries. However, wage rates converted into kilograms of rice
reflect the domestic price of rice as well as of labor. All three countries, indeed all
Asian countries, insulate their rice prices from the world market, thereby distorting
them in one direction or the other.
In contrast, the industrial sectors of the three countries have been well aligned to
opportunities in the international market. So, it can be argued that the cost of
mechanization reflected the world market and the price of rice reflected policy views
on how to achieve the desired pace of development. In Japan in the early 1950s, both
labor and rice were so valuable as potential foreign exchange earners that there was a
strong drive to mechanize. In addition, institutional factors, such as restraints on
land sales and consolidation to larger units, encouraged the development of part-
time farming which could only conveniently be done with machinery. Korea has
followed a similar path, but with an even higher price of rice, encouraging rapid
mechanization in the 1970s. Taiwan, in contrast, has had a low rice price and has
maintained more labor on the farm through rural industrialization policies, and thus
8 CONSEQUENCES OF SMAI.I-FARM MECHANIZATION
DESIRABILITY OF MECHANIZING RICE PRODUCTION
The East Asian countries mechanized when labor used in rice production became
sufficiently valuable in alternative industrial employment that it could no longer be
used in the rice sector. The data in Table 1 indicate that only Malaysia, Thailand,
and Burma have ratios of agricultural wages to rice prices that approach those in the
East Asian countries, but that the low value of rice in Thailand and Burma makes
wages appear high. It appears that Malaysia may be the next country to adopt rice
Labor force growth rates
Knowing the growth rate of the nonagricultural labor force, the total labor force,
and agriculture's current share, one may calculate the growth rate of the agricultural
labor force needed to absorb the available labor in an economy (Mellor 1966). This
process can be understood by examining the following relationship.
x= (I -a)Z+ aY (1)
x is growth rate in the labor force as a whole,
Z is growth rate of the agricultural labor force,
Y is growth rate of the nonagricultural labor force, and
a is proportion of the labor force in the nonagricultural sector.
This relationship states that the growth rate in the total labor force is the weighted
average of the growth rates of the labor force in the two sectors of the economy.
Given this, one can easily determine the growth rates, needed in the two sectors to
achieve certain objectives. For example, one can calculate the growth rate in
nonagricultural employment required to absorb all new entrants to the labor force.
Conversely, one can determine how fast the agricultural labor force will grow, given
certain initial conditions, by rewriting equation 1 as:
So, for a country with 25% of the labor force in the nonagricultural sector, an 8%
growth rate in the nonagricultural labor force, and a 3% growth rate in the total
labor force, the relationship yields 1.33% (3 0.25(8)/0.75), while a country with the
same proportion in the nonagricultural sector and the same overall growth in total
labor force, but only 5% growth in the nonagricultural sector, yields 2.33%.
Typical values for important Asian rice-growing countries are in Table 3. The
growth rate of the labor force in the nonagricultural sector is not readily available, so
we use the growth in urban population. This, if anything, overstates the growth rate
of the nonagricultural labor force and understates the growth rate of the agricultural
labor force. Among the Asian countries, only Korea, Taiwan, and Japan have
reached the stage of declining agricultural labor forces. Burma had a temporary
decline in the early 1970s because of very low rice prices and earlier slow population
growth. This will change over the next 2 decades with the rise in the growth rate of
the total labor force. All the other countries have added to their agricultural labor
force at 1%/year or more during the 1970s and will continue to add 1-2%/year
MECHANIZATION OF RICE PRODUCTION IN DEVELOPING ASIAN COUNTRIES 9
Table 3. Growth rates of total labor force (L. F.) and nonagricultural portion, and resulting
residual rate of growth in agricultural L. F., Asian countries, 1970-2000.a
Growth rate Growth rate Resulting calculated
of labor force of nonagrictl- % of L.F. not growth in agricultural
1970-77 1977-2000 tural L.F., in agricultural L F.
1970-75 1977 1970-75 1977-2000
Thailand 2.5 2.3 3.5 23 2.20 1.94
Pakistan 2.4 2.8 4.1 42 1.17 1.86
Philippines 2.1 2.6 3.5 49 0.75 1.74
Bangladesh 2.3 2.7 6.3 22 1.17 1.68
Burma 1.4 1.9 3.8 45 -0.56 1.46
India 1.7 1.9 3.1 27 1.18 1.46
Indonesia 2.0 1.9 3.3 40 1.13 0.97
Sri Lanka 2.1 2.2 3.7 46 0.74 0.92
Malaysia 3.6 3.0 4.8 56 2.07 0.71
Korea 2.9 1.9 5.4 55 -0.16 -2.38
Taiwan 1.9 1.6 4.4 66 -2.95 -3.84
Japan 1.3 0.8 2.4 86 -5.46 -9.03
aCalculated from data in IBRD, World Development Project Report, 1979. bGrowth rate in
urban population used as proxy.
during the next 20 years. The main rice producing countries of Asia have had, and
will continue to have, increasing numbers of people available for rice production.
Social benefit:cost framework
Given the increasing supply of agricultural labor, questions must be raised about the,
desirability of introducing machines that replace labor. The argument that farm
machinery may provide the key input necessary to overcome a labor bottleneck is
persuasive, but should be reflected in economic benefits. For economies struggling
with development problems, mechanization can only be justified if it generates
benefits for society regardless of the psychological benefits of seeing tractors in
one's field. What are the benefits and costs of mechanization and how are those costs
and benefits shared within society? The net social benefit (NSB) bf mechanization,
equal to agricultural output valued at shadow prices less agricultural inputs valued
at shadow prices, can be stated as:
NSB = QrP + QnPn LrP KP*k TrP*t LnPJ KnP*k TnP*t (3)
where the subscripts r, n, I, k, and t refer to rice, other crops, labor, capital, and land,
respectively; Q's refer to output quantities produced; L, K, and Trefer to the input
quantities of labor, capital, and land, respectively; and P*s are shadow prices.
Output can be further defined as the product of area harvested times average
yield, while area harvested equals geographic area times cropping intensity. Defining
Cr, the rice cropping intensity, as total area of rice harvested divided by geographic
crop area and C,, the other cropping intensity, as total area of other crops harvested
divided by geographic crop area gives
Qr=CrA Yr (4)
and Q,= Cn A Yn (5)
10 CONSEQUENCES OF SMALL-FARM MECHANIZATION
where A is the geographic crop area and Y, and Y, are the yields per harvested
hectare of rice and other crops.
Substituting equations 4 and 5 for 3 gives:
NSB = CrA YrP* + CA YP*n LrPl- KrP*k
T,P* L,P KnP*k TrP* (6)
The impact of any particular change, such as that generated by mechanization, can
be expressed as the total differential of equation 6:
dNSB = A YrP* + dCr + CrAP*dYr + CrA YrdP* + A YnP*,dC,
+ CA P*,dY, + CA YdP*, PidL,- LrdP P*kdKr KdP*k
P*dT, TrdP* PidLn LndP P*k dK, KndP*k
P*dT, TndP* (7)
Some components of equation 7 are expected to change dramatically with mechani-
zation. These are the focus of most investigations on the impact of mechanization.
Other components are commonly assumed to be constant while still others are
generally ignored. A brief review may be useful.
P*, P*, : The prices of rice and other crops are generally assumed to be invariant
with the techniques of production although, if output effects of
changes in technique are large, they may change.
Yr,, Y,, Yc, : The production of rice and other crops may change as a result of
changing yield and changing land use intensity.
A : The geographic crop area is generally assumed to be fixed because
there is little new land to be exploited except in a few remote areas.
Pt, P*k. P* : The shadow prices of labor, capital, and land are generally considered
to be invariant with respect to changes in production techniques. This
assumption may be valid only in the short run where the rice produc-
tion sector is small relative to total use of each input.
P* = P+Di : The shadow prices of inputs equal their market prices, Pi, plus difference
which may be recognized as a distortion factor, D,.
L,, Kr, T, : The use of inputs in rice production is a major factor usually assumed
to change with technical innovation.
Ln, K,, T, : The use of inputs in production of other crops may also change with a
change of technology, but these are usually ignored.
Because many of the factors that may change have been ignored in the empirical
work on the impact of mechanization, it is impossible to draw any firm conclusions
although investigations to date provide some indications as to the size of certain
A second dimension of the impact of mechanization is the distribution of NSB
among earners in the production process. Relatively little on this issue is available in
the empirical literature, aside from the obvious statement that, in a market-directed
economy, laborers receive the returns to labor and farmers, or capitalists, receive the
MECHANIZATION OF RICE PRODUCTION IN DEVELOPING ASIAN COUNTRIES II
returns to capital. All consuming groups would obtain some portion of the benefits
to increased output via its impact on the market price of rice.
Empirical studies have been cast in a much narrower framework than just
suggested and so it is impossible to evaluate from them the NSB of any change.
However, a necessary (but not sufficient) condition for society to benefit from the
change is that either
the total output value of crops produced be increased with no change in value of
machinery be introduced where the social cost of labor is rising relative to the
social cost of capital.
In either case, the identified change will have a positive impact on NSB, which will
be reflected in a lower social cost of rice production. This lower social cost of output,
if transmitted through the market, will result in lower rice prices. If neither condition
holds, then it is unlikely that there is any NSB from mechanization.
NSB, as used in this discussion, has only an efficiency implication. Equity or
overall social desirability is not inferred by either its increase ordecrease. A situation,
leading to an increase in NSB with a decrease in equity or a decrease in NSB with an
increase in equity, may be selected because society decides it is worthwhile to trade
off some equity for the efficiency obtained. It seems evident, however, that society
would never knowingly choose a situation that leads to a decrease in NSB and a
decrease in equity. Given the existing price distortions (taxes, tariffs, subsidies,
imperfect competition) in most developing economies, it is likely that use of market
prices to evaluate benefits may produce an erroneous conclusion of a given change
leading to increased efficiency. The importance of using shadow prices cannot be
overstressed when evaluating NSB.
A general equilibrium framework
Although the formulation of NSB in the preceding section takes account of the
impact on rice and other crops, it is a single-sector, partial-equilibrium model
because it does not account for changes that may occur in the nonagricultural sector
of the economy. That requires a whole economy or general equilibrium approach. If
rice production uses domestically manufactured machinery, rice production mechan-
ization may generate considerable income and employment in the machinery sector.
The amount will vary with the labor intensity of machinery production. The
increased income generated from manufacturing machines will generate an
increased demand for rice. If that increased income is concentrated in economic
classes with a high income elasticity of demand for rice, the feedback impact on the
rice sector will be larger than if the increased income went to classes with a low
income elasticity of demand.
These interrelationships can be measured in an input-output (I-0) model of the
type developed by Leontief (1951). 1-0 models define economy as a whole in which
all inputs used in the production of each commodity are identified and measured.
Manipulation of these models can lead to insights on the impact the changes in one
sector can have on other sectors. I-O analysis has the advantage of quantifying both
the direct employment impact of machines substituting for labor in rice production,
as well as the indirect impact of the increased labor used in producing, distributing,
12 CONSEQUENCES OF SMALL-FARM MECHANIZATION
and servicing these machines. Such models can be developed by building on existing
I-O models which planning ministries have already developed for most countries.
WHO GAINS FROM MECHANIZATION
If mechanization results in increased output, it will tend to push prices down and the
benefits will be shared by rice consumers, whether they be landless agricultural
workers, farmers, or urban people (Hayami and Herdt 1977). The absolute benefits
to various individuals are positively related to the proportion of their incomes spent
on rice consumption.
In the absence of increased output, machinery adoption may shift earnings from
one group to another. That is, a machine which replaces labor will receive the wage
formerly paid to the laborers. In such an event, the machine owner receives the
earnings formerly paid to laborers. There is an inherent difference in the ownership
pattern of capital and labor. In the absence of slavery, labor can only be owned at a
rate of I unit/person, or at most 5-10 units/household. On the other hand, owner-
ship of capital can be and, in most economies, is concentrated in the hands of
relatively few, usually through inheritance, political power, or business acumen.
Concentrated capital ownership means that income earned by capital also is concen-
trated. The introduction of machinery has redistributing effects which, when it also
leads to increased output, will add to the welfare of low income rice consumers and
technology adopters. When machinery has no output effect, it simply redistributes
Farmers will have an incentive to adopt machines when the machines reduce
production costs. However, if reduced costs are achieved through subsidies on the
purchase price or through low cost credit, then farmers are responding to artificial
(policy-induced) market prices that diverge from the real, or shadow prices. If
machine use results in a faster output growth rate, policymakers must evaluate the
trade-off between more output and income redistribution from labor to capital. But
if there is no output effect, the decision to promote mechanization supports a
transfer of income from labor to machinery owners, without an offsetting benefit.
The extent to which landless agricultural workers depend on earnings from hired
farm employment varies widely. Under many conditions, they are highly dependent
on agriculture, and perhaps even more dependent on the earnings obtained during
the harvesting season. Clearly, the actual impact of any reduction in the demand for
labor depends on the proportion of their incomes deriving from operations which
become mechanized and the alternative employment opportunities. Because that
varies, careful assessment of the likely impact of mechanization is very important.
MECHANIZATION OF RICE PRODUCTION IN DEVELOPING ASIAN COUNTRIES 13
Abercrombie, M. 1975. Agricultural mechanization and employment in developing coun-
tries. In Effects of farm mechanization on production and employment. FAO, Rome.
Binswanger, H. P. 1978. The economics of tractors in South Asia. Agricultural Development
Council and ICRISAT.
Fei, J. C. H. and G. Ranis. 1975. Agriculture in two types of open economies. In L. Reynolds,
ed. Agriculture in development theory. Yale University Press, New Haven.
Hamid, J. 1979. Agricultural mechanization: a case for fractional technology. In Tan Bock
Thiam and Shao-er Ong, eds. Readings in Asian farm management. University of
Singapore Press, Singapore.
Hayami, Y. and R. W. Herdt. 1977. Market price effects of technological change on income
distribution on semisubsistence agriculture. Am. J. Agric. Econ. 59(2):245-56.
Ishikawa, S. 1981. Essays on technology, employment and institutions in economic develop-
ment. Econ. Res. Ser. 19. Institute of Economic Research, Hitotsubashi University,
Tokyo, Kinokuniya Company, Ltd.
Kudo, Z. 1972. Implications of farm management research for government mechanization
programs. In H. Southworth, ed. Farm mechanization in East Asia. Agricultural
Development Council, New York.
Lai, W. C. 1972. Current problems of farm management on mechanized farms. In H.
Southworth, ed. Farm mechanization in East Asia. Agricultural Development Council,
Lee, C. C. 1972. Economic and engineering aspects of mechanization of rice harvesting in
Korea. In H. Southworth, ed. Farm mechanization in East Asia Agricultural Develop-
ment Council, New York.
Leontief, W. W. 1951. The structure of American economy, 1919-39. 2nd ed. Oxford
University Press, New York.
Mellor, J. W. 1966. The economics of agricultural development. Cornell U. Press, Ithaca,
Patel, S. M., and K. U. Patel. 1971. Economics of tubewell irrigation. Indian Institute of
Southworth, H. M. 1974. Some dilemmas of agricultural mechanization. In H. Southworth
and M. Barnett, ed. Experience in farm mechanization in Southeast Asia. Agricultural
Development Council, New York.
Tsuchiya, K. 1972. Mechanization and relations between farm, non-farm and government
sectors. In H. Southworth, ed. Farm mechanization in East Asia. Agricultural Devel-
opment Council, New York.
Wu, C. K. H. 1972. Analysis of machinery-labor relationship in farm mechanization. In H.
Southworth, ed. Farm mechanization in East Asia. Agricultural Development Council,
Wu, T. C. 1972. Government policies promoting farm mechanization. In H. Southworth, ed.
Farm mechanization in East Asia. Agricultural Development Council, New York.
B. Lockwood, M. Munir, K. A. Hussain,
and J. Gardezi
The first part of this report contains reviews of the government of
Pakistan's farm mechanization policy from 1975 to the present,
and of a 1975 World Bank study questioning the suitability of
rapid introduction of tractors. The study concluded that although
farmers with tractors had good returns on their mechanized
investments, these private gains were at the expense of substantial
social advances for rural society. The second part presents some
results of an A/D/C-funded study of farm mechanization in Pun-
jab Province conducted in 1978-79. Data on the behavioral pattern
of farms with a tractor generally supported the findings of the
World Bank study particularly in terms of the transfer of farmland
from tenants to farmers with tractors and the loss of jobs and
earnings for the rural landless community.
COUNTRY SITUATION AND FARM MECHANIZATION POLICY
Agriculture is the largest sector in the Pakistan economy and 75% of the population
live in rural areas. Fifty-three percent of the work force is employed in agriculture,
which produces about 30% of the GNP and accounts for about 36% of foreign
exchange earnings from merchandise exports. Large parts of the industrial and
service sectors depend on raw materials and customers from the agricultural sector.
The agricultural sector consists of some 5 million farms with an average area of
4 ha, a highly skewed distribution, and a high incidence of tenancy. About 70% of
the 19.3 million ha of cultivated farmland are irrigated, mainly from a large network
of canals which provide water to 74% of the irrigated area. The late 1960s to the early
1970s was a period of rapid agricultural change. There were improvements in the
availability and control of water through an expansion of canal capacity and
considerable farmer investment in tube wells, increasingly greater supplies of chemi-
cal fertilizer, and the rapid adoption of high yielding wheat and rice varieties. These
changes led to more intensive farm operations and land use, greater farm income,
and increasing demand for more and better farm power.
The Agricultural Development Council, Inc., and University of Agriculture, Faisalabad.
16 CONSEQUENCES OF SMALL-FARM MECHANIZATION
In 1965, animals constituted the main source of farm power there were about
10.5 million work animals and only about 10,000 tractors. Between 1966 and 1970,
18,000 tractors, mainly in the 36 to 55-hp range, were imported, but there remained
an increasing government concern that agriculture was being adversely affected by a
power shortage, and that mechanization was the answer.
The main set of guidelines governing farm mechanization policy in Pakistan was
drawn up in a major government study between 1968 and 1970 (Farm Mechaniza-
tion Committee 1969, 1970). The committee estimated that tractors supplied only
14% of available farm power in 1978 and that work animals still dominated the scene
with 75%. Total available farm power was estimated to be about 0.04 hp/ha of
cultivated farmland; a suggested minimum requirement was 0.08 hp/ha.
The Farm Mechanization Committee proposed a tractor import program (Table
1) and the popularization of tractor-powered implements. The 1968 survey had
shown that, while most tractor owners owned cultivators, very few owned mold-
board and disk plows for primary tillage, or row planters, seed drills, fertilizer
distributors, wheat threshers, and combines. The tractor import program was
expected to increase total farm power availability from 0.04 in 1968 to 0.068 hp/ha
in 1985. The share supplied by animal power would decline from 75 to 35%, the
contribution of human power would fall from 11 to 6%, and the share provided by
tractors would rise from 14 to 59%. In absolute terms, the committee predicted a
decline in work animals from 3.65 to 3.26 million hp, a small increase in human
labor from 0.53 to 0.55 million hp, and a substantial increase in tractors from 0.66 to
5.46 million hp.
This program was the crux of the committee's report and is the basis of Pakistan's
farm mechanization policy to the present. The committee also made recommenda-
tions on a wide range of related aspects of farm mechanization. These included
agricultural conditions, socioeconomic aspects of farm mechanization, standardiza-
tion, manufacturing, spare parts, repairs and servicing, prices of agricultural
machinery (including duties and taxes), the system and financing of imports, credit,
technical manpower requirements, facilities for education and training, and research
The committee recognized that tractors were going predominantly to large farms,
and that there was a tendency for large-tractor farms to grow even larger through
resumption of land previously farmed by tenants. The ex-tenants, however, were
Table 1. Farm Mechanization Committee's proposed tractor imports program.
Time Progressive total
At beginning of Replacement Net Total import/ at the end of
plan period needs addition manufacture plan period
1969 17,100 500 4,000 4,500 21,100
1971-75 25,000 12,200 23,600 35,800 48,600
1976-80 48,600 24,200 32,700 56,900 81,300
1981-85 81,300 46,100 41,100 87,200 122,400
FARM MECHANIZATION IN PAKISTAN: POLICY AND PRACTICE 17
being absorbed as farm labor and the tractors on such farms were serving as a
supplemental power source, not necessarily as tenant replacements. The small
farmers were self-cultivators and the introduction of tractors did not create any
tenant displacement problems (Farm Mechanization Committee 1970).
All machines are imported since Pakistan has not developed the capacity to
manufacture tractors. Tractor introduction began slowly, and until 1957 there were
no restrictions on makes and models. Consequently, there were at least 30 different
makes or models operating and owners were experiencing maintenance and spare
parts problems. In 1978, the government restricted future imports to seven makes,
then continued to control and standardize the range of tractors available. While this
policy made sense, it had a checkered history as the government depended increas-
ingly on credit and barter trade arrangements for the supply of tractors and changed
the range of acceptable makes accordingly.
Between 1965 and 1969, the World Bank, through provision of International
Development Association (IDA) credits totaling $43 million, was a major finance
of the farm tractor program. By 1970, the Bank had become concerned about
possible adverse effects and initiated a study to examine "the major consequences of
the introduction of large scale tractor technology in Pakistan." The report (McIner-
ney and Donaldson 1975) was based on a survey of 202 farmers who had purchased
tractors through the first IDA credit, mainly in 1967. The main findings were:
the average size of the farms grew by a factor of 2.4,
the average number of crops cultivated increased from 4.77 to 7.30 per farm and
cropping intensity increased from 111.5% to 119%,
the areas sown to fodder crops decreased by 50% with land transferred mainly
to wheat and rice,
labor use per farm increased but labor use per cultivated hectare declined by
taking into account displacement of tenants each tractor replaced 8-12 full-time
tractor use averaged about 1,200 hours/year,
the private rate of return on investment was 57%,
the social rate of return was 24%, and
significant social costs resulted from adjustments in the pattern of resource use.
Two major policy questions arose 1) why did farmers adopt such a behavioral
pattern, and 2) how can it be reversed. McInerney and Donaldson (1975) broadly
discussed the kind of policies which could increase social benefits and reduce social
costs. They also questioned the appropriateness of the basic unit of the mechaniza-
tion program: a 10- to 30-hp tractor could spread the private benefits more widely
among the rural population and incur lower social costs.
The land reform legislation of 1972 and 1977 put ceilings on land ownership and
attempted to improve the security of tenants, but landowners were adept at getting
around the legislation and the tenant position worsened. There is no evidence that
the land reform legislation did anything to curb the predatory behavior of the
tractor-farms, and the land accumulation activities of farmers who have acquired
tractors have continued unchecked.
18 CONSEQUENCES OF SMALL-FARM MECHANIZATION
Government farm mechanization policy was not affected by high social costs. It
continues to be based on the power shortage argument of the Farm Mechanization
Committee and implementation involves little more than the importing of tractors
and provision of cheap credit to tractor buyers. The policy is stated in the Fifth
Five-Year Development Plan 1978-83 as 1) the "liberal import of tractors, sold at
market price without subsidy;" 2) improved availability of tractors through their
"assembly and progressive manufacture" in Pakistan; and 3) "allowing the importa-
tion of 2-year-old second-hand tractors and power tillers... freely against genuine
foreign exchange earnings/ savings of Pakistanis working abroad" (Planning Com-
The main question is not "whether tractors" but "how many tractors." An import
program was recommended by the Farm Mechanization Committee for 1971 to
1985. In 1975, a FAO Mission was commissioned to review the program for the
Fifth Development Plan and recommended that 15,000 tractors should be imported
in each of 1976 and 1977 to catch up with "demand," and that during the plan period,
annual imports should be between 10,000 and 11,000. When the plan came out, it
specified that "about 15,000 tractors will be imported annually... to wipe out, inter
alia, the backlog demand. The net population of tractors, excluding replacement is
expected to go up from about 71,000 in 1977-78 to 111,000 in 1982-83" (Planning
Commission 1978). On 16 August 1981, the Federal Agriculture and Food Minister
announced that the government had decided to import 20,000 tractors annually.
Average annual imports from 1965-66 to 1974-75 were 4,040 units, mainly in the
36- to 55-hp range, but between 1975-76 and 1980-81 average annual imports stood
at 14,470, with a shift to the 47- to 66-hp range.
Other aspects of the mechanization policy, for example, assembly and manufac-
ture of tractors, power tillers, and implements, have not been implemented as
vigorously. The Agricultural Development Bank of Pakistan (ADBP) has played
the leading role in providing cheap credit (12%) for purchasing tractors and tube-
wells. It has consistently provided loans on about half the new tractors purchased
each year, covering about 90% of the purchase costs. A disproportionately high
percentage of these loans have gone to large (influential) farmers. To counter this,
ADBP and the Rural Supply Cooperative Corporation initiated in 1979, a special
scheme to lend up to 50% of the cost of a tractor to Punjab farmers with 5-10 ha. In
1979,784 tractors were financed under this scheme (13% of all tractor loans). Also in
1979, ADBP started making loans for purchasing wheat threshers. Until then, the
bank had kept away from financing tractor-powered farm implements.
THE A/D/C FARM MECHANIZATION STUDY
During 1978-79 A/ D/ C supported three projects on farm mechanization in Pakis-
tan to investigate:
1. farmers' decision making for investment in farm machinery, with special
reference to tractors;
2. the capacity of workshops and farmers to repair and maintain farm machinery;
3. the effect of the adoption of mechanical wheat threshing on rural labor.
FARM MECHANIZATION IN PAKISTAN: POLICY AND PRACTICE 19
The team conducted three surveys during 1978-79, two involving farmers and one
involving tractor repair/ maintenance workshops, spare parts shops, and implement
Data obtained in the first farm study covered factors affecting farmers' decision
making, their capacity to service and maintain tractors, details of tractor use in
own-farm and hire service activities, and historical information on farm mechaniza-
tion. This last requirement was the main influence on the survey design. Faisalabad
District was selected as the survey area and a random sample of 40 villages was
drawn from the district subdivisions. The villages were stratified so that half were on
main roads and half on minor roads. A presurvey visit identified 125 farmers owning
129 tractors. Villages with fewer than two tractors were excluded. Four farms were
operated by managers for absentee owners and the managers did not feel free to
cooperate; three were owned by nonfarmers and 19 farmers could not be contacted
during the survey and two subsequent visits. The survey was conducted in 25 villages
with 88 tractor-owning farmers.
The sampling method facilitated collection of historical data. It caused problems
in assessing the consequences of mechanization on the size of farms, tenants,
cropping patterns, and land use intensities. Because we were dealing with farmers
who had owned tractors between a few months and 25 years, recall data would have
been stretching the memories of some respondents. In analyzing the "before and
after" data relating to the major consequences of introducing tractors (farm area,
tenants), we compromised by excluding farmers who purchased tractors before
The thresher study was conducted near Multan, an area where wheat is the major
winter season crop and cotton the major monsoon-summer crop. Four villages were
selected two in a fairly standard farm area and two in a river-flats area of
predominantly large farms. In each village, random samples of 15 farmers each were
drawn from mechanical wheat thresher owners and those who threshed their
1978-79 wheat crop by traditional methods. A problem was that very few large and
medium farmers were still threshing by bullock. Most were contracting mechanical
threshing of their wheat. Therefore, the average wheat area for farms threshing
mechanically (by farmers who owned threshers) was 19.4 ha; that for farms thresh-
ing with bullocks, only 2.8 ha. This prevented comparing farms which differed only
(or even mainly) in threshing method.
Farm mechanization in Faisalabad District
Most farmers in areas with usable underground water began mechanization with
diesel or electric tubewells. The tubewell often preceded the purchase of a tractor and
cultivator by several years. Seventeen respondents only began active farming when
they bought their first tractor; before this they had leased out their farmland.
Generally, tractor investment committed the farmer first to mechanized land prepa-
ration and to other operations such as threshing later. The pace of farm mechaniza-
tion accelerated after 1973 (Table 2). All farmers bought their first tractor and
cultivator simultaneously. Investment in other tractor attachments before 1973 was
fairly uncommon but then increased rapidly.
Table 2. Farm machinery purchased by 88 sample farmers.
Farm machinery purchased (no.)
Tubewell aad Trailer Wheat Pulley Leveler aer Other itemsb Tractor farms
cultivator thresher crusher
To 1965 16 5 1 3
1966 5 2 1 5
1967 1 2 6
1968 7 3 1 2 1 1 9
1969 6 13
1970 5 3 4 1 4 1 15
1971 1 5 1 2 4 2 20
1972 1 3 1 2 3 1 22
Subtotal 36 29 8 4 8 8 2 3
1973 3 8 2 2 3 3 29
1974 4 13 3 1 8 1 40
1975 2 12 8 8 9 7 2 1 50
1976 7 18 9 4 6 2 2 65
1977 3 19 16 11 15 12 1 2 80
1978c 5 13 13 23 18 7 2 88
Subtotal 24 83 51 49 51 44 9 7
Total 60 122d 59 53 59 44 9 10
% of farmer
owners in 1978 50 100 63 58 63 46 10 5
aUsually purchased together. bSeed drill (5), rototiller (3), disk harrow (2). CTo August 1978 only. dAlthough 112 tractors had been pur-
chased, 22 had been sold. The 90 tractors were operating on the sample farms in. 1978.
FARM MECHANIZATION IN PAKISTAN: POLICY AND PRACTICE 21
Table 3. Expected benefits from tractor ownership.
Responses from 88 sample farmers
Expected benefit First Second Third To
priority priority priority T
More farm income 36 22 8 66
Timely farm operations 10 8 3 21
Self-cultivation (removing tenants) 16 4 20
Income from hire services 5 10 1 16
Easier farming 8 3 1 12
Saving bullock expenses 4 6 2 12
Overcoming labor shortage 3 5 4 12
Others 5 2 2 9
The sequence of events culminating in tractor purchase usually began with leasing
tractor services for land preparation, cartin, or threshing. In our sample, 96% of 72
tractor farmers who had operated farms prior to buying a tractor had been leasing
for 4 to 5 years before purchase. Expectations varied, but clearly, many anticipated
increased farm income from more timely operations, capability to manage larger
farms (ejection of tenants), and off-farm income from offering tractor services
(Table 3). Interestingly, the sons of 30 farmers demanded a tractor before agreeing to
stay on the farm.
Generally, farmers had little or no choice as they had to purchase, make and
model available when their bank loans were approved, or other funds were in hand.
So, ownership pattern is not a good guide to farmers' preferences. In most cases,
however, farmers replaced tractors with units of higher horsepower: the trend was
from 44- to 45-hp to 46- to 48-hp units and, in many cases, 55- to 65-hp units. Most
farmers preferred a particular make and model and matched it and work task with
considerable consistency: Ford 4000 (55 hp) for heavy duty general work, Fiat 640
(64 hp) for long periods in the summer heat driving a wheat thresher, Bylarus (55 hp)
for heavy hauling of bricks, and the Massey Ferguson 135 (47 hp) for general
The average cost of a tractor increased from $1,800 to $5,810 between 1968 and
1978 and, while the ADBP loans rose, many farmers had to find increasingly large
sums from other sources. After 1973, credit from sellers of secondhand tractors and
other noninstitutional loans became important, particularly for small farm tractor
Table 4. Sources of funds for tractor purchases by 88 sample farmers.
Operational Percentage of purchase cost
farm size Cash Loan
in 1978 Farms
(ha) (no.) Overseas Farm Other Bank Private Seller
remittances income income Bank Private Seller
Less than 10 23 24 17 14 34 1 11
19-19.5 31 11 17 7 52 9 4
20-39.5 23 2 52 2 4 3 0
40 & above 11 0 19 0 78 3 0
Total 88 10 23 6 49 6 5
22 CONSEQUENCES OFSMALL-FARM MECHANIZATION
Based on average cost figures (1973-78) for the different items, the package
investment in a tractor and implements cost about $8,900 tractor ($5,650),
cultivator ($320), thresher and pulley ($1,770), and trailer ($1,140). The total invest-
ment in farm machinery by the sample farms was about $680,000, of which 48% had
come from the farmers' resources, 31% from bank loans, 7% from overseas remit-
tances, and 10% from other sources. Bank loans were restricted almost completely to
tractor investments, and were biased toward larger farmers (Table 4). Smaller farms
relied more on overseas earnings because they bought a number of secondhand
tractors on credit from sellers and noninstitutional sources. Tractor attachments
were mainly financed from farmers' funds.
Consequences of tractorization
Although there were considerable differences in time and methods, between the
current survey and McInerney and Donaldson, the results are remarkably similar.
Changes infarm size. Only the 62 farmers who bought their first tractor after 1972
were included in this assessment. Changes between the year before tractor purchase
and the end of 1978 are in Table 5. The first group increased their farm size by either
reducing the farmland rented out to tenants (70%) or increasing the area rented in
(30%). Forty-five tenants lost their farms, possibly more if the area rented in by the
tractor-farmer was previously tenanted. Landlords, who became operating farmers
only when they bought tractors, accounted for 17% of the total farm area in 1978.
Thirty percent of their 1978 farm area was rented in and 70% was land previously
rented out. Thirty-three tenants lost their farms as their landlords became farmers.
Our survey, made almost 10 years after McInerney and Donaldson's, should
remove some doubts about the causal relationship between farm size expansion and
tractor ownership, although not about the direction of the relationship. The resump-
tion of tenanted land argues for the tractor as a final facilitating factor, while the
increase in farmland rented in shows the tractor initiated the farm size expansion. In
Table 6, classifying farmers into pretractor farm size categories shows that the
"predatory behavior" of a large proportion (59%) was not restricted to those
beginning as large farmers. The Farm Mechanization Committee had claimed that
small farmers behaved differently. In our sample, 82% of the pretractor farmers were
Table 5. Changes in operated farm area, before and after tractor purchase, by direction of
Farmers Area farmed Area farmed Proportional
Change (no.) before tractor in 1978 change
Increased the farm 24 279 532 1.91
Did not change the 22 274 274 1.00
farm area operated
Decreased the farm 3 56 36 0.64
Began farming 13 0 171 -
Did not farm 1 0 0 -
Total or av 62 609 1,013 1.66
Table 6. Changes in average operated farm area and sources of change before and after tractor purchase, by pretractor farm size.a
Pretractor Operated farm (ha) Rented in (ha) Rented out (ha) Tenants (no.) Proportional change
operated farm Farms" Operated Rented Rented
(ha)ted fa(no.) Before After Before After Before After Before After Operated Rented Rented
Less than 10 16 5.6 8.8 0.5 1.6 3.0 0.3 0.8 0.2 1.58 3.00 0.11
10-19.5 24 12.2 18.1 1.1 3.2 4.6 0.4 1.1 0.1 1.48 2.96 0.09
20-39.5 8 23.2 28.1 3.2 5.2 6.6 1.9 1.9 0.4 1.21 1.64 0.29
40 and above 1 40.5 40.5 10.1 10.1 1.00 1.00 -
All farms 49 12.4 17.2 1.5 3.1 4.3 0.6 1.1 0.2 1.38 2.10 0.14
befor actor 14 0 12.3 0.7 5.1 8.5 0.6 1.9 0.2 6.94 0.07
aFarmers who purchased tractors 1973-78.
Table 7. Changes in average operated farm area and sources of change before and after tractor, by year of tractor acquisition
Year of tractor Farms Operated farm (ha) Rented in (ha) Rented out (ha) Tenants (no.) Proportional change
purchase (no.) Before After Before After Before After Before After Operated Rented Rented
farm in out
1978 7 10.4 14.4 1.8 1.9 3.4 0 0.9 0 1.39 1.04 -
1977 11 11.2 16.4 0.4 1.6 6.2 1.9 2.0 0.5 1.47 4.33 0.31
1976 12 10.7 12.3 2.2 3.8 1.4 0.1 0.4 0.1 1.15 1.73 0.09
1975 5 15.1 25.3 2.9 7.0 8.1 0 1.4 0 1.67 2.39 -
1974 9 15.2 21.1 1.3 2.4 5.6 0.8 1.2 0.3 1.39 1.79 0.14
1973 5 14.4 19.1 0 3.2 1.4 0 0.4 0 1.33 -
All farms 49 12.4 17.2 1.5 3.1 4.3 0.6 1.1 0.2 1.38 2.10 0.14
aOnly farmers who acquired their tractor 1973-78 and who had previously farmed.
24 CONSEQUENCES OF SMALL-FARM MECHANIZATION
"small" by the committee's reckoning (up to 20 ha), but they expanded their farms by
a factor of 2.51 and expelled 33 tenants. The 14 pretractor landlords were also fairly
small landowners: the average holding was 8.5 ha, and only one owned more than
20 ha. The smallest landlord (0.5 ha) expelled his single tenant and rented in another
6 ha. It is clear that expelling tenants and renting in additional land are not restricted
to any one group.
We agree with the conclusion of Mclnerney and Donaldson that "the tractor is a
powerful force narrowing the spread of farm sizes by pulling up the lower end of the
size distribution." These practices do not appear to be declining (Table 7).
Changes in land use. Although one of the dominant arguments for mechanization
is that it should lead to significant increases in cropping intensity, Mclnerney and
Donaldson found an increase of only 8%. In our survey, the overall result was even
more dismal an increase of 4-5%. However, there was considerable variation in
cropping intensity changes when farms were categorized by initial size (Table 8). The
increase was also greater on farms without tubewells by a factor of 1.20. This
suggests that the tubewell farmers had already increased cropping intensity as a
result of better water supply and control, and that this, more than the tractor,
influenced cropping intensity. However, as in Mclnerney and Donaldson's study
land for farm enlargement may have been appropriated from small farms which
might have had a relatively high cropping intensity. Then, the cropping intensity of
the whole area may have dropped with tractor introduction.
There was a change in the cropping pattern of tractor farms in our sample. Most
farms increased the proportion of their cultivated area sown to wheat in the winter
season (4%), rice in the monsoon-summer season (1%), and to miscellaneous crops,
such as vegetables, in both seasons (5%). At the same time, there were declines in the
area sown to maize and cotton in summer (3%) and to fodder in both seasons (5%).
Apart from the decline in fodder acreage, the other changes appear to be similar to
those taking place generally in the district and cannot be attributed directly to
Effects on tenants. Eighty-eight of the original 105 tenants lost their land when the
landowners bought the first tractors. The average tenant farm size declined from 4.4
to 3.4 ha (Table 9). In most cases, tenant ejection took place in the year the tractor
Effect on livestock. Because the tractor replaced the bullock in some farm
operations, we would expect a decline in draft animals on tractor farms. There were
Table 8. Cropping intensity by farm size before and after tractor purchase.
Farm category (ha) Before tractor After tractor Proportional
_____e tr (1977/78) change
Less than 10 104 141 1.36
10-19.5 135 138 1.02
20-39.5 138 146 1.06
40 and above 176 155 0.88
All farms 141 146 1.04
Table 9. Tenancy before tractor purchase and in 1978.
Area leased out (ha) Tenants (no.) Av tenancy (ha)
Kind of change Farmers Percentage Before tractor 1978 Before tractor 1978
in farm size (no.) Before tractor 1978 Difference change tractor 1978 Before tractor 1978
Increased 34 278 23 255 91 59 8 4.7 2.9
"New" farmersa 17 161 16 145 89 38 5 4.2 3.2
Total 51 439 39 400 91 97 13 4.5 3.0
No change 33 16 5 11 69 5 2 3.2 2.4
Decreased 4 7 13 6 72 3 2 2.4 6.3
Total 88 462 57 405 88 105 17 4.4 3.4
aHad not farmed before owning a tractor.
26 CONSEQUENCES OF SMALL-FARM MECHANIZATION
about 333 bullocks on the sample farms before tractor purchase (3.8/farm); in 1979
there remained 159 (1.8/farm). On the average, each tractor had replaced 2.0 bul-
locks. In the Mclnerney and Donaldson survey, the average number of bullocks per
farm declined from 5.4 to 2.9 (2.5/tractor). However, farmers did not act uniformly:
12 sold all of their bullocks (54) after buying a tractor, 44 sold some bullocks and
kept some (245 to 107), 10 kept their bullocks (30), 12 farmers had none before or
after the tractor, and 10 actually increased their bullocks (4 to 22). Most farmers did
not regard the tractor as a perfect substitute for bullocks in all farm operations. In
particular, they preferred bullocks for chopping and carting fodder, planking,
intercultural operations, cane-crushing, and line sowing. Only two farmers said that
they kept bullocks as a standby when their tractors were being repaired.
There was little change in milk animal numbers. Apparently, farmers regarded
draft and milk animals as distinct and a reduction in the number of draft animals did
not lead to a corresponding increase in the milk herd.
Effect on labor. The tractor-farm survey in Faisalabad District did not obtain
data on hired or family labor except to ask how many workers were employed on a
full-time or permanent basis. Although the number for 1978 (184) was probably
accurate, the pretractor number (164) spread over many years should be treated with
caution. Using these numbers, there was an increase of around 12% in the number of
permanently employed. Two factors complicate this simple arithmetic. First, only 71
of the 88 farmers were operating farms before buying their tractors and, therefore,
the number of permanently hired laborers per farm fell by 8%. Second, because there
was a 53% increase in the operated farm area, the number employed per cultivated
hectare declined by 17%. Another complication was that.86 tenant families were
expelled, substantially reducing the on-farm labor pool.
The 1979 survey of wheat threshing operations of traditional and mechanized
farms near Multan obtained details of labor use during the harvesting-threshing
season. Mechanization caused no change in the labor used for harvesting which was
mainly contracted out and, except for carting the cut wheat to the threshing area,
was not mechanized. Mechanization substantially reduced the use of labor for
threshing. The differences between the traditional and mechanized sample farms -
farm size, average area of wheat harvested (2.87 and 19.43 ha), and average yields
(1.47 and 2.29 t/ha) made direct comparisons tricky. Nonetheless, the orders of
magnitude were clear. The traditional threshing method required an average of
3.26 days/ha for wheat and used 101 hours/ha of labor. The mechanical method
required 0.74 day/ha and used 67 hours/ha. For traditional threshing, bullocks
worked an average of 37.7 hours/ha of wheat threshed; on farms using mechanical
threshing, the tractor and thresher were used 9.3 hours/ha.
Surprisingly, the operational costs for both methods were similar: $15.04/ ha for
traditional methods and $14.20/ha for thresher and tractor. However, the mechani-
cal method doubled the cost of power and equipment and halved the labor cost.
Therefore, mechanical wheat threshing reduced the amount of labor needed by
about 36%, and reduced labor earnings by about 55%. From the farmer's point of
view, the savings in labor cost were transferred mainly to fuel and machinery
FARM MECHANIZATION IN PAKISTAN: POLICY AND PRACTICE 27
Tractor use and development of a custom service market
The sample tractors were operated an average of 1,120 hours during the 12-month
period: 58% on land preparation and cultivation, 20% on wheat threshing, 18% on
carting and hauling work, and 4% on other jobs.
The considerable variation in tractor use was due to variation in the operated farm
area (Table 10), the tractor attachments owned, and the extent to which the owner
engaged in custom services. Clearly tractor use on the owners' farm was positively
correlated with farm size, whereas providing custom services was negatively corre-
lated with farm size. The type of custom service and the amount of time given to this
enterprise depended on the equipment and attachments owned. Only 18 of the
tractors in the survey were not used for custom jobs.
The development of the custom market in recent years is the most important
change in farm mechanization. We have seen the development of a new class of
entrepreneur who has invested heavily in farm machinery and has actively sought
business. We were unable to measure the extent of this business or how profitable it
was, but it is quite extensive and growing very rapidly.
Tractor repair and maintenance
Eighty-eight tractor-owning farmers, 47 private workshops, 11 manufacturers of
farm machinery, 2 tractor dealers, 3 cooperative farm service centers, 2 general
automobile workshops, and 16 spare parts dealers were interviewed in an attempt to
evaluate the tractor repair and maintenance facilities in Faisalabad District. The
ability of tractor-owning farmers to properly operate and maintain farm machines
was very poor. The many private workshops scattered throughout the district
offered a wide range of services, but most lacked appropriate tools and equipment.
Skilled manpower was scarce both on and off the farm and the supply of spare parts
was inadequate and costly.
Breakdowns. Fifty-nine percent of the tractors owned by the sample farmers had
major breakdowns and repairs during 1978 25% of these occurred during the
wheat threshing season. The average downtime was 14 days (range of 5-30 days).
The frequency of breakdowns was greatest for tractors between 2 and 5 years old.
Breakdowns of the hydraulic system, fuel pump, dynamo, clutch, steering mecha-
nism, and water body were most common and often caused by misuse or poor
maintenance. The average repair cost was $257 (ranging from $129 to $766), of
which spare parts were the largest component.
Table 10. Tractor use by farm size.
Operated farm area Av hours of Tractor hours (%)
(ha) tractor operation/year Owner's farm Hire services
More than 40 1431 83 17
20-39.5 1126 80 20
10-19.5 1019 48 52
Less than 10 1059 27 73
28 CONSEQUENCES OF SMALL-FARM MECHANIZATION
Farmers recognized that unskilled operators, often themselves, were the main
cause of breakdowns. However, they also placed some blame on manufacturing
defects, substandard parts, and adulterated or wrong lubricants. Farmers had poor
technical knowledge about tractors. Few understood or followed manufacturers'
instructions on periodic replacement of oil and filters, few owned even simple tool
kits or could carry out minor repairs, and few had formal training in tractor driving
Repair facilities. In 1978, there were 146 private workshops, 3 dealers' workshops,
3 cooperative service centers, I government workshop, and a number of farm
machinery manufacturers and general automobile workshops in Faisalabad Dis-
trict. Spare parts were available from 76 shops. Special service technicians tire
vulcanizers, radiator mechanics, battery specialists, dynamo and autoelectricians -
and diesel-testing facilities were generally clustered with tractor workshops on the
outskirt at most rural towns and Faisalabad City. Half of the workshops and spare
parts shops had opened since 1975.
Ninety percent of repairs were carried out at private workshops, 5% at tractor
dealers' workshops, 4% by the farmers themselves, and 1% at the government
workshop in Faisalabad. None of the sample farmers patronized the cooperative
service workshops. Private workshop mechanics had varied skills and experience as
well as facilities to work in. Workshops were visited early in the study, assessed, and
divided into four categories on the basis of the tools and equipment (Table 11).
Forty-seven having 52 owner-mechanics were studied in detail.
The level of formal education of owner-mechanics was low, but most had
attended short mechanics training courses such as those run by Millat Tractors.
Seventy-three percent of the workshop owners had less than 2 years experience as
mechanics. In the typical workshop, the owner was the only trained mechanic,
although eight also employed mechanics. All workshops employed or attached
"trainees," boys between the ages of 8 and 16. Of the 140 trainees attached to the
sample workshops, 36% received no payment and the rest received $2-$15/month,
depending on age and experience. Trainees constituted a cheap, but largely
unskilled, work force while they obtained informal training and experience in tractor
and other machinery repair. Employed mechanics earned $10-$40/ month depend-
ing on experience. There was a fairly rapid turnover with employees predominantly
moving to other workshops or opening their own. The sample workshops employed
Table 11. Type of workshop, investment in tools, and equipment, and number in category,
Faisalabad, Pakistan, 1978.
Workshop category Tools, equipmenta Value () Workshop (no.) in
Tools Equipment District Sample
A CT + SE 560 1600 25 8
B IT + SE 300 1600 25 8
C CT 370 31 10
D IT 180 65 21
Total 146 47
aCT = Complete tool kit, SE = special equipment (e.g. lathe), IT = incomplete tool kit.
FARM MECHANIZATION IN PAKISTAN: POLICY AND PRACTICE 29
211 persons, comprising 52 owner mechanics, 11 family mechanics, 8 paid mechan-
ics, and 140 trainees.
Of an estimated 2,000 repair and maintenance jobs completed in 1978, 525 were
by type A workshops, 367 by type B, 778 by type C, and 330 by type D. The more
complicated jobs, such as engine overhauling, went mainly to type A and B work-
shops. The higher job rate of type C workshops was due to their more frequent
location in rural areas and willingness to provide on-farm services. Few workshops
specialized in particular tractor makes or types of repairs. Seasonal peaks for tractor
repair were in March-June and October-December when tractors were heavily
engaged in plowing, threshing and carting. Forty percent of the workshops reported
that they received as much work as they could handle. Most that could have taken
more work were located in urban and rural town areas. Half of the workshops
reported their ability to do many repair obs was constrained by lack of appropriate
tools and equipment. Many claimed to be willing to invest more if they could obtain
credit on reasonable terms.
The three cooperative farm service centers in the district were very well equipped
with tools, machine, workshop areas, and other facilities. These represented a total
fixed investment of about $45,000. Charges were generally lower than at private
workshops and some spare parts were stocked and sold at lower prices than at
private shops. However, they had very little work. One center was not covering
variable costs, the second turned in a small profit, and the third had been waiting
about 4 years for electricity so work could start.
Spareparts supply. The widest range of tractor spare parts, particularly imported
parts, was available from tractor and parts importers and assemblers in Lahore and
tractor dealers. Faisalabad City tractor dealers and subdealers also maintained
reasonable stocks, although they reported delays while parts were brought from
Lahore. Most rural towns had spare parts shops, but these generally maintained very
limited stocks of a narrow range of fast-moving parts. The three cooperative farm
service centers maintained stocks of spares, but very few of the private workshops
Farmers and mechanics reported that parts were not always available even in
Lahore and that they were often forced to substitute "inferior" locally made parts,
and to adapt parts from other makes. Most farmers were willing to pay the higher
costs for "genuine" parts. Prices for all parts were considerably higher in the rural
town shops than in Faisalabad and Lahore.
Since 1970, the Pakistani Government has implemented a straightforward farm
mechanization policy to increase the availability of farm power through the
importation and manufacture of four-wheel tractors, and the subsidization of credit
for tractor purchases.
In practice, the number, makes, and models of imported tractors have been
controlled and have varied from year to year according to foreign exchange alloca-
tions and special credit or trade arrangements with suppliers and supplying coun-
tries. It appears that the demand for tractors, although partly conditioned by
30 CONSEQUENCES OF SMALL-FARM MECHANIZATION
government allocations of credit through the Agricultural Development Bank of
Pakistan, exceeds supply and that the distribution process greatly favors farmers at
the top end of the traditional power structure. The recent provision of a limited
amount of subsidized credit to small farmers is too small and too late to alter the
overall balance. However small farmers appear to provide an expanding market for
used tractors, using funds obtained through foreign remittances and sellers' credit.
Although it is government policy to increase the efficiency of tractor use and the
level of farm productivity by encouraging the adoption of cultivation attachments,
that policy has not been implemented as vigorously as the simpler activity of
importing tractors. The recent, rapidly increasing demand for and local fabrication
of tractor-driven wheat threshers is the only significant change of interest in attach-
ments since 1970. While subsidized credit has always been provided for tractor
purchases, the ADBP only began making loans for thresher purchases in 1979.
By controlling imports, the government has effectively removed competition
among tractor sellers, resulting in poor service, inadequate supplies of spare parts,
and a lack of interest in training in tractor use and machinery maintenance facilities.
Repair and maintenance services have developed rapidly in the private sector, but
facilities generally are poorly equipped with tools and technical expertise. Likewise,
most tractor owners have little technical knowledge of tractor use and maintenance.
However, in the present situation of relatively small tractor numbers and limited
annual imports, private gains from tractor ownership are high enough to more than
compensate for high maintenance costs and inefficient tractor use.
Although there is evidence of high returns to farmers on investments in tractors
and attachments, there is little evidence of appreciable social benefits. Tractors do
not appear to have contributed to significant increases in farm productivity, either
by bringing uncultivated land into production or by increasing the intensity of
cultivation and crop yields. On the other hand, the opportunity costs of foreign
exchange allocated for tractor imports and fuel, social hardship and reduced earn-
ings of the rural landless, and the reinforcement of an inequitable traditional rural
power structure indicate the very high cost of the present program.
Farm Mechanization Committee. 1969. Report on the farm mechanization survey, 1968.
Government of Pakistan, Planning and Development Department, Lahore.
Farm Mechanization Committee. 1970. Farm mechanization in West Pakistan. Government
of Pakistan, Ministry of Agriculture and Works, Islamabad.
McInerney, J. P., and G. F. Donaldson. 1975. The consequences of farm tractors in Pakistan.
World Bank Staff Working Paper 210.
Pakistan Government Planning Commission. 1978. The fifth five year plan (1978-83).
INNOVATION IN THE
K. W. Mikkelsen and N. N. Langam
Data from a partially completed survey were used to investigate
innovative activity and product-improving technological change in
the Philippine agricultural machinery industry. Most firms had
one or more persons engaged in inventing new products, improv-
ing products, and improving production methods, usually on an
informal basis. Nearly all firms had made significant improve-
In most discussions of the consequences of agricultural technology, private agents in
agriculture and related industries are considered to have a very minor role in
generating new technology. New technology is developed outside the agricultural
sector and can either be accepted at some rate and to some degree, or rejected. This
view may be appropriate for basic agricultural research which, because private
agents lack either the incentive or capacity, must be undertaken by public and
quasi-public institutions. In contrast, a new machine, in addition to being accepted
or rejected, may be modified and adapted to local conditions. This paper explores
innovative activity and product-improving technological changes among agricul-
tural machinery manufacturers in the Philippines.
DESCRIPTION OF SAMPLE FIRMS
The data used for this preliminary report were obtained from interviews with 47
agricultural machinery manufacturing firms. The sample was drawn from two
sources. First, the survey was to cover all firms which have actively participated in
Yale University and The International Rice Research Institute.
32 CONSEQUENCES OF SMALL-FARM MECHANIZATION
the Industrial Extension Program developed by the Agricultural Engineering
Department of the International Rice Research Institute (IRRI). Actively partici-
pating firms were defined as those having received designs of one or more machines
developed at IRRI and having produced at least one commercially. Of the 37 firms
initially identified, the interviews revealed only 27 were active participants. Data
from the 10 other firms were retained for added information. The second source of
sample firms was a list of about 75 non-IRRI agricultural machinery mariufacturers
compiled from several directories. After stratifying by region, a systematic sample of
25 firms was drawn. Ten of these firms have been interviewed to date. Figure I shows
the geographic dispersion of the sample.
* Cooperators producing
V Cooperators not producing
" CELEBES SEA
1. Location of agricultural machinery manufacturers in the Philippines.
INNOVATION IN THE PHILIPPINE AGRICULTURAL MACHINERY INDUSTRY 33
Ninety-one percent of the sample firms manufactured more than one product.
The most common agricultural machines were rice threshers and two-wheel tractors
(Table 1); others were rice dryers, rice and maize mills, and maize sellers. Many
firms also produced furniture and jeep bodies, or performed metalworking services.
Some firms retailed machinery usually made by foreign manufacturers. Firm size
showed considerable diversity (Tables 2, 3). Employment ranged from several one-
man shops to three firms each employing more than 100 workers. Despite their
numerical dominance, small firms accounted for only 16.3% of total employment,
whereas the 8 firms employing 50 or more provided 52.3%. More than half of the
firms employed fewer than 20 workers. A similar picture emerged in sales. Twelve of
the 40 firms reported sales of $20,000 or less in 1980; the median value was $37,467.
Ten large firms, four of which were also in the largest employment group, reported
sales of more than $500,000, and together they captured 87% of 1980 sales.
Table 1. Common agricultural machinery products.
Firms Av no. Av
Product producing of units price
(no.) produced ($)
IRRI portable thresher 18 71 696
IRRI axial-flow thresher 15 58 2,548
IRRI two-wheel tractor 15 102 754
Non-IRRI two-wheel tractor 7 167 1,247
Blower 6 50 67
Non-IRRI thresher 5 47 1,002
Table 2. Distribution of firms by level of employment.
Range Firms Employees Employees/firm
1-9 employees 16 87 5.4
10-19 employees 10 126 10.6
20-49 employees 13 411 31.6
50 and above 8 685 85.6
Total 47 1,309 27.9
Table 3. Distribution of firms by sales.
Range Firms Sales (thousand $)
(thousand $) (no.) Total Average
Up to 20 12 76 6.4
21-40 12 380 31.6
41-100 6 396 65.9
101-500 6 1,936 322.6
501 and above 4 3,658 914.5
Total 40 6,446 (av) 161.1
34 CONSEQUENCES OF SMALL-FARM MECHANIZATION
The most common measure of innovative activity is expenditure on research and
development (R&D). Seventeen of the sample firms reported some R&D expendi-
ture in 1980 (Table 4). R&D activities and firm size appeared to be positively
correlated and no firms with annual sales of $20,000 or less reported R&D. How-
ever, these figures probably understate the amount of innovative activity, particu-
larly among smaller firms where R&D is frequently not explicitly organized as a
separate activity within the firm and may not be identified or reported. Measure of
innovative activity which includes informal innovative effort, sometimes called
"blue-collar R&D," was obtained by asking each firm how many persons performed
various technical functions within the firm, and what percentage of their time was
spent on each function in 1980. Three of these functions, corresponding to the
central purposes of formal R&D, were inventing new products, improving products,
and improving production methods (Table 5). Almost 25% of the firms made no
effort to invent new products, nearly all attempted to improve existing products or
processes. Only 2 of the 45 responding firms reported no innovative activity.
Summing the three activities, an average of about one man-year/firm was devoted
to technology improvement. Unlike the R&D measure, which indicated that less
than half of the firms participated in innovative activity, the function-oriented
measure showed that even the smallest firms participated. This appears consistent
with the evidence on product improvement.
Table 4. Distribution of firms performing R&D, by firm sales.
Range Firms Firms (no.)
(thousand $) (no.) reporting R&D
Up to 20 11 0
21-40 12 5
41-100 6 3
101-500 6 5
501 and above 4 3
Total 39 16
Table 5. Allocation of resources to various forms of innovative activity.
Firms (no.) engaged in given innovative activity
Allocation Inventing Improving Improving production
(man-yr) new products products methods
0 10 4 3
0.0-0.25 19 28 25
0.26-0.5 7 6 9
0.51-1.0 6 4 5
1.01-2.0 0 1 0
2.01 and more 2 2 2
Total 44 45 44
Average level .35 .34
INNOVATION IN THE PHILIPPINE AGRICULTURAL MACHINERY INDUSTRY 35
To identify the important resources used in innovation, firms were asked to rate
sources of technology and new ideas on a scale from 1 (not important at all) to 4
(extremely important). The average rating for customers (3.5) was the highest.
Customers frequently identified problems in machine performance and offered
suggestions for improvements based on personal experience with the products. In
some cases, features requested by the buyer of a custom-built machine proved so
successful that they were incorporated into the standard design. The second ranking
source was technical personnel with the firm (3.3). In most cases, innovative activity
was not carried out by specialized personnel. The owner or manager of the firm was
frequently involved, as were production supervisors and foremen. Formal technical
training among the 208 persons reportedly performing any of the innovative func-
tions included 4 MS degrees, 47 BS degrees, and some training past high school for
an additional 48 persons. IRRI was ranked third as a source of new technology (3.0).
In addition to supplying machine designs, IRRI responds to requests from cooperat-
ing firms with advice on production management and assistance in product
improvements initiated by the firm. Less important sources of technology were
suppliers, subcontractors, non-IRRI consultants, workers, trade journals, and pat-
The success of innovative efforts in generating new technology was investigated
through information collected about product improvements. Each firm was asked
to list all changes made in its four main agricultural machinery products since the
beginning of 1976. When possible, this list was supplemented by, and checked
against, an actual examination of the current product. Forty-two of 46 firms made at
least one change (Table 6).
Changes can be classified as minor or major. A typical minor change was
alteration of material specifications. Other minor changes included modifying the
shape of various parts or the configuration of parts on the machine, and adding parts
or features to enhance the machine functions. Some major changes required consid-
erable redesign. One indication that a firm's product changes were not trivial was
the number of patents held. Patents are only granted for changes meeting certain
standards of novelty, usefulness, and significance. Sixty patents had been issued to
18 firms, and applications were pending for another eight. An additional 27 changes
Table 6. Distribution of firms by number of product changes.
Firms Av no. of
Number of changes Firms Av no. of
r o c (no.) changes/firm
0 4 0.0
1-5 22 3.0
6-10 11 7.3
11-15 7 11.7
16-20 1 17.0
21 or more 1 23.0
Total 46 5.8
36 CONSEQUENCES OF SMALL-FARM MECHANIZATION
were judged by both the authors and the innovating firms to be patentable, although
no application had been made. These patented and patentable changes accounted
for 35% of the listed changes.
The extent to which these changes indicate activity among agricultural machinery
firms is also influenced by the degree of overlap or duplication of changes between
firms. Several features of the industry suggested that the changes made by one firm
may not be very different from those made by others. First, it was apparent from the
survey that most firm managers were quite familiar with the competing designs sold
in their region. Second, firms had little reservation about copying designs. Even
though many firms held patents, few considered it worthwhile to prosecute for
patent infringement. Third, firms felt a great deal of competitive pressure. Seventy
percent indicated that their customers as well as potential customers would have
little or no difficulty finding an alternative supply source if they stopped production.
Under such conditions, rapid dissemination of profitable innovations would be
To investigate their individuality, a list was compiled of the changes made in the
most common products the IRRI-designed two-wheel tractor, portable thresher,
and axial-flow thresher. Individual changes were grouped by feature, or component.
For example, all changes on the threshing drum were grouped together, all changes
on the blower formed a separate group. The results (Table 7) showed that, for each
of the three products, most changes were made by a very few firms. This high degree
of individuality actually understated the situation since firms changing the same
component often made very different improvements. This individuality can proba-
bly be attributed to the segmented nature of the agricultural machinery market.
Most firms sell to a local, not national or international, market. Localities differ in
agricultural conditions such as soil type, water patterns, and in customer preferen-
ces. Consequently, a change that enhances product performance or desirability in
one area would not necessarily be effective elsewhere.
As noted earlier, firms rely heavily on their customers as a source of new ideas.
One point of interaction between manufacturers and users is direct sales. All but six
of the sample firms made at least some sales directly to end users, and 68% sold 50%
or more of their output by this method. The industry has responded to contacts with
the local market by developing a variety of differentiated products appealing to
Table 7. Distribution of component changes by firms.a
Component changes (no.)
Two-wheel Portable Axial-flow
tractor thresher thresher
Firms (no.) 11 14 13
By 1 firm 11 5 11
By 2 firms 3 5 2
By 3 firms 3 4 3
By 4 or more firms 2 4 3
Total 19 18 19
aNumbers in parentheses indicate the number of firms that made changes in the
INNOVATION IN THE PHILIPPINE AGRICULTURAL MACHINERY INDUSTRY 37
different needs and tastes, instead of highly homogeneous products. This allows
farmers and other users to choose the machine with features most suited to their
Any mechanical technology introduced to the agricultural sector is likely to be
altered. In a sample of Philippine agricultural machinery manufacturers, almost all
firms engaged in some technology-improving activities. Most firms made improve-
ments in existing machine designs, and different firms tended to make different
improvements. Over time, such private efforts can help to increase the level of
technology and to adapt it to diverse agricultural conditions.
OF THE FARM
This paper provides information on the local farm machinery
industry in Thailand and looks at the economics of farm machin-
ery hire services. The local industry, developed during the past 2
decades, is now facing strong competition within the country and
from abroad. The tractor contractor has provided access to farm
machinery throughout the country. Custom services are profitable
but because of increases in operating costs and competition, con-
tractors' profits are declining and farmers are paying higher custom
In most developing countries, food policy has aimed at increasing production
through introduction of modem technologies. These include the development of
new crop varieties, improved cultural practices, irrigation systems, and farm
mechanization. Although mechanization may be blamed for increasing unemploy-
ment, it is frequently justified because it permits faster and more efficient cultivation,
particularly of heavier and more difficult soils. This may lead to increases in
cropping intensity and employment.
In developing countries where labor is abundant, attempts to introduce higher
levels of mechanization should be preceded by investigation of both social and
economic repercussions. Many studies on these questions have been conducted in
Thailand. Two specific aspects, the development of the local farm machinery
industry and the economics of providing farm machinery custom services, are
investigated in this paper.
USE OF FARM MACHINERY
According to Kitdhakorn (1971), one of the pioneers of modern farming in Thai-
land, the first tractor was imported during World War I for experimental use in the
40 CONSEQUENCES OF SMALL-FARM MECHANIZATION
rice fields near Bangkok, but was too heavy for the soil conditions. In 1920,
Kitdhakorn used a tractor for cultivating upland crops in Pracheub Kirikhan, about
200 km south of Bangkok.
After World War II, heavy mechanical equipment was needed to open up new
land for cultivation of upland crops. This led to the importation of farm tractors. In
1957, the Department of Customs recorded the import of 267 tractors, mostly from
England. It was not until 1970 that imported farm tractors were recorded separately
from other tractors. Imports peaked at 6,161 in 1977 (Table 1). The decline thereafter
was mainly due to an increase in the number of locally produced or assembled
tractors. The Thailand Office of Agricultural Economics (1980) reported that there
were 230,591 two-wheel tractors, 31,158 small four-wheel tractor, 33,285 full-size
tractors, and 8,000 motor rollers during the 1979-80 crop year, an average of 1
DEVELOPMENT OF THE FARM MACHINERY INDUSTRY
The Engineering Division, Department of Agriculture, Ministry of Agriculture and
Cooperatives, has long been involved in developing and testing farm machinery
adapted to the Thai environment. Examples of machinery developed are the well-
known Tebariddhi pump in 1955 and the "Iron Buffalo" in 1958. Several models of
the "Iron Buffalo" were developed during the early 1960's and sold by a private
company (Taenkam 1980). Due to the small scale of operation, relatively high costs,
and competition from other local and imported machines, the company ceased
operation in 1967.
In addition to government agencies, various private firms have undertaken
research and development of farm machinery, in particular power tiller or two-wheel
tractor. The design was originally simplified from a Japanese power tiller. In the
1980 survey, several firms accredited Singkru Utsahagam at Prapradaeng as their
source of design. That firm's first two-wheel tractor was a modification, to suit local
conditions, of a Mitsubishi tiller imported in 1963. These tractors were first mar-
keted in the area in 1965 and gained popularity due to the low price compared to
imported machines, and their ability to perform well under local conditions. Because
this tractor design is simple and requires no special manufacturing technology, many
firms have started manufacture in Prapradaeng and other provinces.
Table 1. Farm tractors imported or locally produced during 1975-79.
Item 1975 1976 1977 1978 1979
Imported farm tractors 4,231 5,257 6,161 4,298 3,559
Sma four-we trdcors 2,582 2,914 4,568 5,631 4,920
Tw(locally produced) 27,860 31,766 49,722 52,281 54,124
aSources: Department of Customs; estimates by Thailand Office of Agricultural
Economics, Ministry of Agriculture and Cooperatives.
ECONOMIC ANALYSIS OFTHE FARM MACHINERY INDUSTRY 41
Even though the demand for small, locally produced tractors is increasing, there is
considerable competition among producers. Many large producers, who have access
to credit and modern equipment, are more capable than smaller firms of producing
at low cost. In addition, the marketing and managerial abilities of the owner are
important for success. The survey, found that many firms, especially in the Prapra-
daeng area, have ceased doing business because of competition.
The development of an alternative to the "Iron Buffalo" started a few years after
the local two-wheel tractor was widely accepted. A simple four-wheel tractor was
developed by a group of firms in Ayutthaya by adding two more wheels so that the
driver could operate from a seat instead of walking. The design was modified later to
include gear and hydraulic systems similar to those of imported tractors. Develop-
ment of small four-wheel tractors is still in progress, but the two-wheel tractor design
In general, a firm will produce more than one type of farm machine so as to fully
utilize its resources and to meet seasonal market demands. For example, a firm may
produce small tractors between January and June, before the planting season, and
rice threshing machines and water pumps during the rest of the year. According to
the survey, which covered most major firms in Bangkok metropolis and the nearby
provinces, more than 33% of the firms produce only two-wheel tractors, 20%
produce two-wheel and four-wheel tractors, 20% produce two-wheel tractors and
rice threshers, and 9% produce all three machines (Table 2). For subsequent analysis,
firms were divided into three types based on their main product as defined by value:
Type Ifirms (23 of 35) produced mainly two-wheel tractors.
Type 2 firms (7) produced mainly four-wheel tractors.
Type 3firms (5) produced mainly threshing machines.
The former activity of the manufacturer is in Table 3. Firm size in each type
ranged from a few to more than 100 workers. Table 4 shows the number of firms
classified by the number of workers and the operating period during the year. The
survey showed that more than half of the firms produced throughout the year, but
some reduced the number of workers in the off-season, maintaining sufficient skilled
labor to produce tractors essential for stock.
Table 2. Surveyed firms classified by type of machinery.
Type of machinery No.
Two-wheel tractor 12 34
Four-wheel tractor 1 3
Maize thresher 5 14
Both two-wheel and
four-wheel tractors 20
Both two-wheel tractor and
rice thresher 20
Two-wheel, four-wheel tractors
and rice thresher
Total 35 100
42 CONSEQUENCES OF SMALL-FARM MECHANIZATION
Table 3. Frequency of former activities by manufacturers.
Occupation Type 1 Type 2 Type 3 Total
firm firm firm
Metal worker 6 4 3 13
Machinery repairman 2 2 3 7
Farm machinery dealer 3 1 4
Metal dealer 2 1 3
Dealer in other products 6 6
Farme 2 2
Others 9 2 3 14
Total 30 10 9 49
aType 1 firm produced mainly two-wheel tractors; type 2 firm, four-wheel trac-
tors; and type 3 firm, threshing machines, bRice miller, automotive repairman,
bicycle repairman, water pump manufacturer, etc.
Table 4. Firms classified by number of workers and operating periods.
Item Type 1 Type 2 Type 3 Total
Number of workers
Less than 20 11 2 1 14
20-39 5 1 3 9
40-100 6 1 1 8
More than 100 1 3 4
Total 23 7 5 35
Throughout the year 13 6 19
By order 6 1 1 8
Seasonal 4 4 8
Total 23 7 5 35
aType 1 firm produced mainly two-wheel tractors; type 2 firm, four-wheel trac-
tors; and type 3 firm, threshing machines.
SOURCES OF DESIGN CHANGES
There has never been any patent law covering farm machinery in Thailand so firms
are free to copy from abroad or from each other. Table 5 shows design sources
reported by the sample firms. Although several firms reported designing their own
machines many admitted copying from other sources, especially from Singkru
Utsahagam. In fact, many of those who claimed to be designers probably copied a
machine and made some minor changes. It was also found that many firms intro-
duced changes based on customers' recommendations (Table 6). Design changes
were most frequently made to improve performance and suit a customer's needs.
Some firms reported changes in design to eliminate unnecessary costs.
PRODUCTION PROCESS AND COST OF PRODUCTION OF FARM MACHINERY
The main tractor components produced by the firms are body parts such as wheels,
engine housing, chassis, and handle. Other parts, such as engine, chain, and bearing,
Table 5. Frequency of sources of design for machines.
Sources of design Two-wheel tractor
tractor T tractor h c h Four-wheel tractor Rice thresher Maize thresher
Any brand in the market 7 1 1 1
Another brand in the same location 2 2 2
Another brand in different location 15 2 3 2 -
Foreign design 1 2 3 2
Own design 1 3 6 5 -
IRRI design 1 4 -
Others' 3 2 1
Total 30 8 15 13 6
aDivision of Agricultural Engineering, mechanic previously employed by another firm, etc.
44 CONSEQUENCES OF SMALL-FARM MECHANIZATION
Table 6. Source of changes in design and reason for changing.
Item Type 1 Type 2 Type 3 Total
Sources of changes
Recommended by customer 19 3 5 27
Owner 6 1 1 8
Followed other firms 6 6
Copied from imported machine 1 1 2
Own mechanic 1 2 3
Others 2 1 3
Total 34 6 9 49
Reasons for changing
Reduced cost 5 2 7
Improved performance 20 2 5 27
Suited customer's need 8 2 3 13
Better looks 4 4 8
Others 2 1 3
Total 39 11 8 58
aType 1 firm produced mainly two-wheel tractors; type 2 firm, four-wheel trac-
tors; and type 3 firm, threshing machines.
are purchased. Machines used can be very simple. A small firm may have a welder,
lathe, sprayer, and acetylene cutter, while a large firm may employ more labor-
saving machines such as hydraulic press, shapers, steel roller, honing machine,
electric power drive, and sprocket wheel cutter (Pinthong 1974).
Estimated costs of production of two-wheel and four-wheel tractors are shown in
Table 7. Excluding the diesel engine, steel, which is the main input for two-wheel
tractors, accounts for 50% of the cost. The cost of an 8-hp diesel engine is around
$650. Total cost of two-wheel tractor with engine is $849 compared to $1,500 for an
imported two-wheel tractor. However, imported tractors are better built, lighter,
and perform more functions. A small four-wheel tractor, including the 15-hp diesel
engine, costs around $2,150. The sale price of the imported small four-wheel tractor
is around $3,650. In general, there is more variation in the cost and design of
four-wheel tractors than of two-wheel tractors.
MARKETING OF FARM MACHINERY
Marketing of local farm machinery is very important. Because product differentia-
tion among two-wheel tractors is low, firms have to use special techniques to gain
popularity. Machines manufactured outside the Bangkok Metropolitan Area were
produced predominantly for the local market and sold directly rather than through
dealers. The large firms in Bangkok and one firm in Prathum Thani sold for cash or
on credit through dealers throughout the country. Dealers were crucial to the firms
because they also provided useful customer feedback on potential design changes.
Products from large firms were usually cheaper because of economies of scale in
mass production. Smaller firms maintained their market share by having close
contact with the customers.
ECONOMIC ANALYSIS OF THE FARM MACHINERY INDUSTRY 45
Table 7. Estimated cost of production of two-wheel and four-wheel tractors.a
Item Two-wheel tractor Four-wheel tractor
Cost ($) % Cost ($) %
Steel plate 66 34 167 15
Steel rod 29 15 47 4
Cast iron 24 2
Cast aluminum 123 11
Lubricated oil 15 7 10 1
Bearing 16 8 61 5
Chains 17 9 37 3
Hydraulic pump 126 11
Other parts 24 12 233 21
Wage 11 6 87 8
Electricity and fuel 2 1 52 5
Depreciation 1 1 52 5
Other expenses 7 3 70 6
Production tax 7 3 39 3
Tax on machinery 24 0
Subtotal (without engine) 195 100 1132 100
Diesel engine 654 1037 -
(8 hp and 15 hp)
Total cost 849 2169 -
aSource: estimates by Industrial Service Institute 1981.
At the time of the study, there was no serious competition among four-wheel
tractor manufacturers because there was excess demand and each firm was produc-
ing close to its full capacity. Most four-wheel tractors were sold direct to farmers
growing broadcast rice in the Central Plains because such tractors were too heavy to
perform well in wet paddy fields. Farmers who transplant paddy prefer two-wheel
The foreign market is the next logical step for large manufacturers. Some have
sent trial shipments to Indonesia, but improvements are necessary before they are
ROLE OF GOVERNMENT IN THE FARM MACHINERY INDUSTRY
Two government agencies are involved in the extension of farm machinery (Mong-
koltanatas 1981). The Industrial Service Institute (ISI), Ministry of Industry, assists
manufacturers by providing technical training and advisory services to owners,
managers, and workers. ISI also organized the Forum of Tractor Manufacturers of
Thailand in 1977. The objectives of the forum are to support local farm machinery
manufacturers and to improve production techniques. At present the 40 members
are mostly in the central region. The second agency the Agricultural Engineering
Division (AED) of the Ministry of Agriculture and Cooperatives assists manufac-
turing firms in testing and modifying new products. The survey showed 40% of the
firms received government assistance in the form of investment credit, machine
design, tax exemption for equipment and management, and technical training.
46 CONSEQUENCES OF SMALL-FARM MECHANIZATION
MAJOR PROBLEMS AND SUGGESTED SOLUTIONS
Major problems facing the local farm machinery industry and solutions suggested
by producers were as follows:
I. Financial. Forty percent of the respondents, especially smaller firms, reported
financial problems, in particular, the difficulty of obtaining low interest loans
from the government. It was suggested that the government should encourage
small firms by providing sufficient funds to help reduce production costs and
lower the price of machinery to farmers.
2. Technological difficulties. Although there are no patent laws and firms could
copy designs, the unavailability of suitable technology was considered an
3. Lack of skilled labor. Most workers gained experience through on-the-job
training. Many skilled workers had been attracted to the Middle East and
training was needed for young unskilled workers.
4. Marketing. The demand for machinery depends on crop yield and price.
Because these are variable, manufacturers must be ready to respond to changes.
There were also minor problems, such as lack of proper equipment and unfair
taxation (Industrial Service Institute 1981). For example, imported materials are
taxed higher than imported farm machinery (13.55% and 11.27% tax for local
two-wheel and four-wheel tractors, and 8.85% tax for imported machines).
In conclusion, the farm machinery industry in Thailand has been developed by
private rather than government effort, but requires government assistance and
protection for its continuation. If the goal of the government is to induce mechaniza-
tion, it should support local farm machinery manufacture because these machines
are inexpensive, simple, and designed to fit local conditions. Standardization of
farm machinery for export markets, may be necessary but this will raise production
cost to some extent. Taxation of imported machines and materials should also be
revised if the government wants to generate employment and reduce the trade
ROLE OF THE TRACTOR CONTRACTOR IN FARM MECHANIZATION
Tractor contractors have played an important role in farm mechanization. Farms
average 4 ha and most farmers cannot afford to own tractors. Contractor services,
using full-size tractors, are mainly for cultivation of dryland for upland crops and
broadcast rice. Contract services are also available for transporting and threshing,
while farmers use their own bullocks for planting and weeding.
Contractor characteristics and services
Some tractor owners offering contract services travel more than 100 km for plowing
during the off-season. A contractor survey was carried out during April and May
1980 in Phra Buddhabaht, Pak Chong, and Bang Pa In. The first two are major
upland crop growing areas and the third is the broadcast rice area where most
contractors are located. Thirty-four contractors, owning 48 tractors, were contacted.
Of the 48 tractors, 22 were purchased new. Seventy-six percent of the contractors
were rice or maize growers, 15% were upland crop middlemen, and the rest were
ECONOMIC ANALYSIS OF THE FARM MACHINERY INDUSTRY 47
general merchants. The average landholding was 14 ha. Two contractors operated
only contract services.
Most contractors serviced neighboring areas after finishing their own work.
Contracts were usually made directly with farmers and the custom rate was deter-
mined by soil conditions and the contract market situation. Some were made
through commission agents, who looked for customers in nearby areas. The number
of tractor owners is increasing and some contractors travel in groups to other
provinces to find new customers.
Fuel is the most important factor in the contracting business. Because only a part
of this increase can be passed on to the farmers, rising prices and shortages that
increase operating cost discourage contractors from traveling long distances for
Work and revenue from owning a tractor
Tractors plowed an average of 176 ha in 1979,29 ha (17%) of which was owned land
and 147 ha (83%) was contract (Table 8). The work averaged 432 hours. Contractors
in Bang Pa In utilized their tractors more than those in the two other areas; however,
the total revenue per tractor was less because of lower custom rates. The 1979 custom
rate for plowing was $22/ha for upland and $11/ha for paddy land. That year, the
contractors received an average total revenue of $3,077, 88% from plowing and the
rest from activities such as threshing and transportation of farm produce. In Phra
Buddhabaht, 96% of the revenue was from plowing.
Cost of operation and profitability
The cost of operation can be divided into cash and noncash costs. Cash costs, which
refer to actual outlays such as fuel, oil, driver, maintenance, etc. accounted for 75%
of total cost (Table 9). The cost of maintenance and repairs was the largest (41%)
Table 8. Average amount of work and revenue per tractor in 1979.
Item Phra Buddhabaht Pak Chong Bang Pa In Average
Area plowed (ha)
Own land 25 25 40 29
Service 167 93 196 147
Total 192 117 237 176
Length of plowing (h)
Own land 47 85 61 67
Service 352 319 446 365
Total 399 404 506 432
Revenue from plowing ($)
Own land 347 575 466 465
Service 2672 1933 2059 2229
Total 3019 2508 2525 2694
Revenue from other activities ($)
Own land 61 111 215 121
Service 45 627 40 262
Total 106 738 255 383
Total revenue ($)
Own land 408 685 681 586
Service 2718 2560 2099 2491
Total 3126 3245 2780 3077
48 CONSEQUENCES OF SMALL-FARM MECHANIZATION
Table 9. Cost structure and profitability of tractors in 1979.
Costs and returns ($)
Phra Buddhabaht Pak Chong Bang Pa In sample
Depreciation 120 330 34 176
Opportunity cost of 53 4
investment (8%) 471 463 530 484
Opportunity cost of owner 29 50 53 43
Subtotal 620 843 617 703
Repair and maintenance 1264 1242 673 1096
Fuel 988 692 593 782
Oil 62 143 81 94
Driver 109 139 168 136
Others 14 13 76 31
Subtotal 2437 2229 1591 2139
Total cost 3057 3072 2208 2842
Total revenue 3125 3245 2781 3077
Net return over cash cost 688 1016 1191 938
Net profit 68 173 573 236
Return from investment (%) 8.3 12.7 14.5 11.5
aPrevailing interest rate on bank savings accounts.
expense because most tractors had been operating for more than 5 years in poor soil
conditions and required regular repairs. The cost of fuel accounted for nearly 28% of
the total cost. As mentioned earlier, plowing land for broadcast rice is easier than for
upland crops. So, tractor operation cost was much lower in Bang Pa In than in the
two other areas, and therefore even though the revenue within the year was lower,
the contractors made more profit.
Break-even point analysis
Annual tractor use required for economic viability can be evaluated by break-even
point analysis (Fordson 1959). Because the tractors surveyed were used for a wide
range of activities, each with varying contract rates, no common unit could be
defined for measuring output. The analysis was therefore limited to use for plowing
and fixed costs were determined in proportion to total use. Break-even points were
estimated for each region and for the entire sample.
The results (Table 10) show the whole sample break-even point as 116 ha, while
the actual average area plowed was 176 ha. For each region, the break-even area
plowed was also less than the actual. It is reasonable to conclude that contractors
are, on the average, making a profit from their operations.
Table 10. Break-even point of using tractor for land preparation in 1979.
Bang Pa In
Total fixed Average
cost ($) variable cost
ECONOMIC ANALYSIS OF THE FARM MACHINERY INDUSTRY 49
The tractor contractor has helped increase agricultural productivity by expanding
new cultivated area and speeding up cultivation. This is beneficial to tractor owners
and users because few owners can economically justify tractor ownership without
contract operations. At present, tractor owners are making profits. However, with
increasing competition and rising costs of operation, investment in tractors may not
be worthwhile in the future unless sufficient demand for contractor services can be
assured. Cost increases for fuel and spare parts have increased custom rates, and
therefore costs of production. It is expected that there will be some substitution of
buffalo for machines. Unless ways can be found to either increase yields or reduce
other costs, there will be pressure on the government to increase crop prices.
Fordson, J. C. 1959. Break-even points for harvesting machines. University of Georgia,
Georgia. 91 p.
Industrial Service Institute. 1981. Small tractor industry [in Thai]. Ministry of Industry,
Bangkok, Thailand. 12 p.
Kitdhakorn, M. C. S. 1971. The use of farm machinery in Thailand [in Thai]. Pages 132-153 in
Society of Social Science, ed. A report by and about M. C. Sithipom Kitdhakorn.
Sivaporn Press, Bangkok, Thailand.
Mongkoltanatas, J. 1981. Survey of agricultural machinery manufacturers. Agricultural
Engineering Division, Ministry of Agriculture and Cooperative, Bangkok, Thailand.
Pinthong, J. 1974. Economics of small tractor production in Thailand. MS, Faculty of
Economics, Thammasat University, Bangkok, Thailand. 76 p.
Taenkam, P. 1980. The small tractor industry. MS, Faculty of Economics, Thammasat
University, Bangkok, Thailand. 211 p.
Thailand Office of Agricultural Economics, Ministry of Agriculture. 1980. Small tractor
industry in Thailand, Bangkok, Thailand. 25 p.
GROWTH OF THE
The rate of total factor productivity growth (TFPG) of the agricul-
tural machinery industry in Thailand from the initial year of
production to 1979 was estimated using data from two sources:
1) survey and interview of large and medium-sized firms, and
2) aggregate census data. Estimation from the first source showed
the TFPG rates of all firms increased until 1976, then declined.
Estimation from the second source showed the rate was small
compared with that in developed countries and other manufactur-
ing industries in Thailand.
One immediate impact of farm mechanization in Thailand has been the growth of
the tractor manufacturing industry. The number of firms grew from a few in the
mid-1960s to more than 100 in 1980, employing over 2,000 workers. Production
grew about 16% annually. Growth came from two sources: the increase in resources
used and an increase in the productivity of these resources which can be measured as
total factor productivity growth (TFPG). This paper measures and analyzes TFPG
of the agricultural machinery industry in Thailand. Basically, TFPG can be mea-
sured by subtracting the average of the rates of growth of real inputs, properly
weighted, from the rate of growth of real output. For developed countries such as the
USA (Solow 1957, Christensen and Jorgenson 1970, Kendrick 1973, and Denison
1974) and Japan (Jorgenson and Ezaki 1973, and Nishimizu and Hulton 1978),
measured TFPG accounts for more than 50% of the rate of growth of real output of
all manufacturing industries. Due to data limitations, there are few TFPG studies for
DEVELOPMENT OF THE TRACTOR INDUSTRY
Small farm tractors were introduced from Japan in the mid-1950s. In the mid-1960s,
local firms modified and started to manufacture the Japanese designs. They were
Department of Economics, University of Minnesota.
52 CONSEQUENCES OF SMALL-FARM MECHANIZATION
readily accepted because they were more suited to local soil conditions, easier to
operate and repair, and less expensive than imported tractors. Since the late 1960s,
with increases in farm incomes, higher food prices, and increases in agricultural
wages, the industry has expanded rapidly. Nowadays many farmers own tractors
and about 90% of total sales are produced domestically.
Tractor production in Thailand is labor-intensive and the market is free from
government intervention. Other than the common business taxes, which are applied
to all industries, subsidies and international trade protection are negligible. Local
production is also competitive. Firms are numerous, products are similar, and entry
is relatively easy. With some experience in machine shops and an initial investment
of about $4,000 on machinery and equipment, production can start.
Both two-wheel power tillers and small four-wheel tractors are produced in
Thailand. The two-wheel power tillers are equipped with 5- to 9-hp imported diesel
engines and the four-wheel tractors with 10 hp and larger engines. About 85% of
tractors used by Thai farmers are power tillers. In 1980, the survey year, there were
about 99 tractor-producing firms, 79 producing two-wheel tractors only, 2 pro-
ducing four-wheel tractors only, and 18 producing both. Eighty percent of the firms
were located in the central region, and more than 70% of these were in the greater
metropolitan areas, which provide both a better infrastructure and better access to
The firms were placed into small, medium, and large categories. Most of the 62
small firms, producing less than 300 units/year and employing 2-10 workers, were
located near farming areas. Their principal activity was assembling parts and
components bought from others. Twenty-three medium firms produced 300-1,000
units annually and employed about 10-50 workers. They usually produced other
farm machines, such as threshers and irrigation pipes in addition to tractors.
Fourteen large firms produced more than 1,000 units annually and employed 50-200
workers. They were normally more vertically integrated, producing many parts and
Most of the medium and large firms were located in the central region. Although
the number of medium and large firms was increasing, the number of small ones was
decreasing. All the firms were owned by Thais.
TFPG MEASUREMENT OF VARIABLES AND DATA SOURCES
Measurement of TFPG is based on an unrestricted, linear homogeneous, smooth,
aggregate production function which allows substitution possibilities between all
inputs. The inputs are categorized as labor, capital, and raw materials. The i-th firm's
production at time t may be defined as:
i (t) = f (L f(t), K, (t), Mi ). (1)
Q, (t) is real output of the i-th firm at time t,
Li (t) is labor employed by the i-th firm at time t,
K, (t) is physical capital used by the i-th firm at time t,
Mi (t) is real intermediate inputs used by the i-th firm at time t,
t is a "shift" variable subject to time,
PRODUCTIVITY GROWTH OF THE AGRICULTURAL MACHINERY INDUSTRY IN THAILAND 53
and the subscripts
i= 1,2,...,n and t= 1,2,..., T.
Totally differentiating equation I with respect to time we obtain:
t)_ L(t) L(t) Ki(t) Ki(t)
,t Li ( t) + Kf i t)0 .
Oi(t)N= Q,(t) Li(t) Qj(t) Ki(t)
+M,)",(t) l ) +L (2)
Qi(t) Mi() Q,(t)
where (^) denotes the rate of change of the variables over time.
Equation 2 shows that the rate of growth of real output can be decomposed into
the weighted averages of the rates of growth of labor input, physical capital, and raw
materials, where the weights are the output elasticities of the corresponding factors
of production and the rate of growth of the shift variable.
Under competitive equilibrium, where each input is paid according to the value of
its marginal product, equation 2 can be written as:
Qi(t) wi(t) Li(t) Li(t) ri(t) kit Ki ( ift) w i (t) f., (t)
+ + + (3)
Qi(t) P,(t) Qi(t) Li(t) P,(t) Q,(t) Ki(t) Pi(t) Qi(t) Mi() Q(t)
ww(t) is the nominal wage rate of the i-th firm at time t,
ri(t) is the nominal rental rate of capital of the i-th firm at time t,
P'(t) is the price of raw materials of the i-th firm at time t,
Pi(t) is the price of products of the i-th firm at time t.
By letting a and / represent labor and raw material shares of the value of the i-th
firm's total production, respectively, Euler's theorem, which assumes a linear
homogeneous production function, implies that the capital share is (l-a-/3), and
equation 3 can be rewritten as:
Qit) Li F Kt) Mi ft) f, ,(t)
(t) =act) L + -a(t)--b( + 0(t) --- +--- (4)
Qi(t) L(t) J Kit) Mit) Qi(t)
Notice that, given these assumptions, the TFPG of the i-th firm can be
measured from the following differential equation, or accounting identity, with-
out estimating directly the production function or the output elasticities.
f.t) Qi(t) () L"L l) ki(t) + il(t) (5)
--- -- at) --+ -at)-(t) + f)- (5)
Qft) Qi(t) Lit) L Ki(t) MI(
Estimation of TFPG of tractor firms from equation 5 requires measures of real
output, real inputs, and shares of all factors of production for successive years.
This is possible given the availability of annual data on units of production,
values of intermediate inputs, numbers of workers, capital stock, and factor
shares. Data were obtained from surveys and interviews of firms in the peak
producing season, February to April 1980. Only medium and large firms were
included in the surveys because small firms did not maintain records on inputs
and output. Also, it would have been expensive to survey the small firms they
were too numerous and scattered throughout the country, while accounting for
less than 15% of total production.
54 CONSEQUENCES OF SMALL-FARM MECHANIZATION
The initial year of production, yearly production, raw materials used, labor
employed, and investment in structures, machinery, and equipment were
recorded in the interviews. Most medium firms started production in the mid-
1960s, half of the large firms started in the early 1970s. The latest year of records
was 1979. Details of the survey and the methods of estimating all variables from
these data are described below.
The physical output of single-product firms was the number of tractors produced
each year. For firms producing more than one product, the physical output was
estimated by aggregating all products weighted by relative prices. The weighting
procedure was as follows. Let
Q,,(t) be the units of the j-th product produced by the i-th firm at time t,
Pi(t) be the price of the j-th product of the i-th firm at time t,
where i = 1, 2,..., n,j = 1,2,... ,..., m andt = 1, 2,..., T. The aggregate
physical output of the i-th firm at time t, Q,(t), in terms of the 1-th.product can be
m Qi() (6)
Qi(t) = Y= Pii(t) (6)
The continuous growth rate of physical output of time t, qi(t), is found by
subtracting the logarithm of the output of the previous period from the logarithm of
the output of the current output. That is:
Q,(t) = In Q,(t) In Q,(t-1). (7)
Real intermediate inputs
Intermediate inputs comprised raw materials, electricity, and fuel. The raw materials
included sheet steel, steel rods, angle steel, chains, bearings, seals, gears, pulleys,
steering sets, wheel rims, bolts, and nuts.
More than half of these were produced domestically. If the number of units of
each of the raw materials used each year were available, they could have been
aggregated using relative prices as weights in the same way as for physical output.
Unfortunately, such data were available for only a few large firms and then only for
1979. No data were available for the medium firms; however, all firms could provide
the total value of raw materials used each year. We therefore estimated the values of
real intermediate inputs by disaggregating the total values in proportion to the value
shares of the major purchased inputs. The major purchased inputs were defined as
those accounting for at least 1% of total purchased inputs, subject to at least 90% of
the value of purchased inputs. The value shares were computed from the 1975
input-ouput table, which is presently the only one available (NESDB 1980). Because
the interviews indicated no major changes in purchased input coefficients and
product composition over time, the 1975 value shares were applied to all years.
PRODUCTIVITY GROWTH OF THE AGRICULTURAL MACHINERY INDUSTRY IN THAILAND 55
Real capital stock
Capital stock was classified into 1) buildings and structures, and 2) machinery,
equipment, and vehicles. For each type in any year, real capital stock was obtained
by adding current investment at constant prices to the real capital stock of previous
year minus real depreciations accumulated up to that year.
That is, if we let
Kik., be the real capital stock of the k-th type for the i-th firm at time t,
lik., be the investment flow of the k-th type of capital for the i-th firm at time t,
evaluated at constant prices, and
6ik be the rate of replacement of the k-th type of capital stock by the i-th firm,
where i= 1, 2,..., n, k = 1, 2, and t = 0, 1, 2,..., T, then
Kik,= lik. + (l-6ik)Kik.,-. (8)
By a process of iterative substitution of Kik,,.-
Kik., = (1-)Kik.o + (1-64,k-sk., (9)
where Kik.o is the initial capital stock of the k-th type for the 1-th firm.
For estimating real capital stock from equation 9, we need an estimate of initial
real capital stock, flows of real investment, and rates of replacement. The initial real
capital stock and annual real investment were obtained by deflating investment data
from the surveys. The rate of replacement was defined as the reciprocal of the
economic life of capital. The methods of measuring investment deflators and
economic life of capital follow.
Investment deflators were obtained from the Ministry of Commerce. The wholesale
price indexes of construction materials were used for buildings and structures. The
weighted averages of the indexes of machinery and equipment and transportation
equipment were used for machinery, equipment, and vehicles. The weights were the
value shares of total investment and amounted to about two-thirds for machinery
and equipment and one-third for transportation.
Economic lives of assets
Buildings and structures are more durable than machinery and equipment. Krueger
and Turner (1980) provide some estimates for Turkey. Assuming that structures,
machinery, and equipment of Thai manufacturers have a life which is not significant-
ly different from the Turkish, we have used an average structure life of 33 years and
machinery and equipment life of 15 years.
Structure life was assumed to be invariant across industries, whereas machinery
and equipment lives were made specific to each industry, based on estimates for U.S.
industries (Park 1973). Because the average life of machinery and equipment in the
U.S. is longer than in Thailand, Park's estimates were scaled down so that the
weighted average for the entire manufacturing sector was 15 years.
The labor input of a firm is the number of workers employed by that firm during the
year. Initially, we intended to take account of quality differences. In the surveys, we
56 CONSEQUENCES OF SMALL-FARM MECHANIZATION
asked firms to categorize the number of workers by sex, age, and education. After
analyzing the data, we decided to use the total number of workers because there were
no significant differences in labor quality among firms. Only one firm employed
some female workers. Workers were from 15 to 50 years old. None had any formal
education beyond high school and their skills were learned from working in machine
shops. The proportions of workers by age and education did not vary much across
The share of intermediate inputs was obtained for each year by dividing the value of
intermediate inputs by the value of production. Labor shares were obtained likewise,
where the value of labor was computed by multiplying the number of workers of
each type by the corresponding wage rate, including adjustments for other benefits
such as meals and lodging. The capital share was simply the residual.
ESTIMATING TFPG OF THE AGRICULTURAL MACHINERY INDUSTRY
Of the 30 firms interviewed only 14 (6 large and 8 medium) provided sufficiently
complete and reliable data for estimating TFPG. Data were checked for reliability
by comparing with reports of other financial and government institutions. Of the 14
firms, 6 were in the greater metropolitan area; the rest were in other major rice
growing provinces in the central region: Ayuddhaya, Chachoengsao, and Nakors-
wan. Four of the 6 large firms were the major four-wheel tractor producers in the
country, accounting for more than 85% of domestic production. The rest of the large
firms and all of the medium firms produced 75% of the two-wheel power tillers and
other farm machinery. Among the large firms, four started production after 1970
and two in the late 1960s. Among the medium firms, six started production after the
mid-1960s and two in the mid-1970s.
Table I shows the average growth rates of output, input, and total factor produc-
tivity of the surveyed firms for three periods (initial year of production to 1970,
1970-76, and 1976-79) and also from the initial year of production to 1979. From the
initial year to 1979, TFPG accounted for about 19% of the rate of growth of real
output while 81% was from input growth. Output and employment grew faster in the
first period when two-wheel tillers were newly introduced and in the second period
when four-wheel tractors became more popular. During the second period, large
Table 1. Output, input, and productivity growth of all farm machinery firms.
Growth rate per annum (%)
Period Total factor
Output Labor Capital productivity
Initial to 1970 34.94 23.21 9.67 5.91
1970-76 38.02 20.56 23.90 8.29
1976-79 13.23 6.18 11.69 2.10
Initial to 1979 28.02 13.81 18.96 5.33
PRODUCTIVITY GROWTH OF THE AGRICULTURAL MACHINERY INDUSTRY IN THAILAND 57
rises in farm income, food prices, and wages occurred. Capital input increased much
faster in 1970-76 due to the initial investment of some new large firms. TFPG from
the initial year to 1976 was about 7%, accounting for about 10% of growth in real
output. For the most recent period, TFPG was about 2%.
The growth rates of output, input, and total factor productivity of the large and
the medium firms from the initial year to 1979; and for the three periods; are in
Table 2. For the initial year to 1970, the sample consisted of two large and six
medium firms. Output, labor, and capital of the large firms grew much faster than
those of the medium ones, but TFPG was similar. During 1970-76, output and the
TFPG of the medium firms increased substantially. However, the growth rate of
employment for the large firms slowed down, but capital growth increased because
of the entry of four new large firms. The TFPG of the large firms in this period was
almost the same as in the previous one. During 1976-79, all firms showed a
slowdown in the growth of output, inputs, and total factor productivity. However,
the growth rate of capital of the medium firms was influenced by the entry of two
new firms. For all periods, TFPG was higher for medium than large firms.
TFPG for all manufacturing industries, including machinery and equipment, is in
Table 3. The industries were disaggregated in accordance with the three-digit
International Standard Industrial Classification (ISIC) of manufacturing industries
and the estimates of TFPG derived from secondary data for 1963-76. Details of the
data sources and estimation procedures are given in Wiboonchutikula (1982). From
Table 3, the TFPG of the machinery and equipment industry, which includes the
manufacturers of all agricultural machines and equipment as well as other wood or
metal working machines was -1.36. This is much lower than the TFPG estimated
for the sample large and medium agricultural machinery firms during the same
period. There are several possible reasons for the difference:
The assumptions necessary for estimating TFPG may not be valid. It would
therefore be unreasonable to expect consistent results. This could be investi-
gated by relaxing some of the assumptions and reestimating TFPG.
ISIC industry 382 includes a wider range of firms than medium and large-scale
manufacturers of agricultural machinery. TFPG of these other firms may have
been even more negative than that of the aggregate.
The data were from firms still in business, and these we would expect to be the
more successful. It is therefore likely that TFPG of the sample may have
overestimated that of the population.
Table 2. Output, input, and productivity growth of large and medium farm machinery firms.
Growth rate per annum (%)
Period Output Labor Capital Totl ctoiv
Large Medium Large Medium Large Medium Large Medium
Initial to 1970 46.05 33.6 53.65 18.14 14.08 8.94 5.72 5.94
1970-76 40.05 36.86 20.73 20.46 36.40 16.76 5.74 9.63
1976-79 10.73 14.80 7.75 5.20 11.05 12.09 0.63 3.02
Initial to 1979 25.56 29.55 16.48 12.15 22.05 17.03 3.71 6.35
58 CONSEQUENCES OF SMALL-FARM MECHANIZATION
Table 3. The TFPG of 3-digit ISICa manufacturing industries, 1963-76.
industry Material Labor Growth rate of TFPG
ISIC industry TFPG
share share Output Labor Capital
311 Food processing .7137 .0511 12.16 9.41 8.41 1.25
312 Food products .7984 .1022 25.26 21.25 20.91 -1.30
313 Beverages .3329 .0690 16.02 12.20 12.50 1.38
314 Tobacco .4318 .0520 6.82 3.04 3.33 1.44
321 Textiles .5746 .1050 15.42 9.93 16.53 1.78
322 Wearing apparel .5990 .1682 16.30 7.74 17.49 -0.37
323 Leather & leather products .7210 .0717 16.30 14.16 13.72 1.98
324 Shoes .6878 .1880 16.30 12.61 14.35 -1.06
331 Wood and cork .6717 .1264 5.70 4.17 5.97 0.15
332 Furniture & Fixtures .7015 .1013 16.30 11.85 16.95 -1.41
341 Paper & paper products .6765 .1012 16.76 11.03 9.99 2.98
342 Printing & publishing .5595 .1493 16.30 9.92 13.26 3.00
351 Basic chemicals .5661 .0669 20.81 22.01 13.83 1.57
352 Chemical products .6316 .0901 11.45 7.14 8.49 1.16
353 Rubber & rubber products .6944 .0530 25.16 20.20 27.15 1.05
361 Nonmetallic minerals .6241 .2658 29.00 25.07 28.58 -1.99
362 Glass & glass products .4816 .1312 14.55 13.19 18.66 -2.99
369 Other nonmetallic .7086 .0871 11.46 5.29 11.98 -1.36
371 Ferrous metals .8308 .0609 17.37 14.76 17.33 0.04
372 Nonferrous metals .5775 .0431 26.68 12.94 14.88 3.18
381 Metal products .7059 .0655 1.29 0.25 5.49 -0.39
382 Machinery and equipment .6431 .0589 16.30 9.22 17.93 -1.36
383 Electrical machinery .6911 .0809 53.15 45.89 45.87 3.22
384 Transport equipment .8151 .0618 20.18 14.28 18.68 -2.09
390 Miscellaneous .6341 .0991 16.30 10.30 16.21 -0.32
Average .6429 .0980 17.73 13.11 15.94 0.38
aInternational Standard Industrial Classification.
Comparison of the aggregate estimate of TFPG for the machinery and equipment
industry shows that it is well below the overall average for manufacturing industries;
in fact, only four of the other industries had lower TFPG. This could be because the
industry is relatively young and still developing. As yet, most agricultural machinery
firms have been operated by workers without any formal training and who work
with rather old or secondhand machines in plants with poor layouts. Training
programs to upgrade the skills of workers, technical assistance at the plant level, and
incentives to increase investments may help improve the total factor productivity of
PRODUCTIVITY GROWTH OF THE AGRICULTURAL MACHINERY INDUSTRY IN THAILAND 59
Christensen, L. R., and D. W. Jorgenson. 1970. U. S. real output and real factor input,
1927-1967. Rev. Income and Wealth 16:19-50.
Denison, E. F. 1974. Accounting for United States economic growth 1929-1969. The Brook-
ings Institution, Washington, D.C.
Jorgenson, D. W., and M. Ezaki. 1973. The measurement ofmacroeconomic performance in
Japan, 1951-1968. In K. Ohkawa and Y. Hayami, eds. Economic growth: the Japanese
experience since the Meiji era, Vol. 1, No. 19, Tokyo.
Kendrick, J. 1973. Postwar productivity trends in the United States, 1948-1969. National
Bureau of Economic Research, New York.
Krueger, A. 0., and B. Tuncer. 1980. Total factor productivity growth in Turkish manu-
facturing. University of Minnesota. (mimeo.)
NESDB (National Economic and Social Development Board), Institute of Developing
Economies, and National Statistical Office of Thailand. 1980. Basic input-output table
of Thailand, 1975, Bangkok.
Nishimizu, M., and C. R. Hulton. 1978. The sources of Japanese economic growth: 1955-
1971. Rev. Econ. Stat. 351-361.
Park, W. R. 1973. Cost engineering analysis. John Wiley and Sons, New York.
Solow, R. M. 1957. Technical change and the aggregate production function. Rev. Econ.
Thailand Ministry of Commerce, Price Index Division. Various years. Wholesale price
indexes in Thailand. Bangkok.
Wiboonchutikula, P. 1982. The measurement and analysis of the total factor productivity
growth of the manufacturing industries in Thailand. Ph D dissertation, University of
THAILAND: A CASE
STUDY OF SMALL RICE
FARMS IN SUPANBURI
Farm mechanization, especially expansion of labor-displacing
technologies for rice production, reduces the use of domestic
resources and increases the demand for imported inputs such as
fuel, oil, engines, and spare parts. The effects of farm mechaniza-
tion on the domestic resource cost of earning a net unit of foreign
exchange from rice production are less than the effects of yield and
the opportunity cost of land. Mechanization has a tendency to
generate profits for society even though the demand for imports of
machinery-related items is increased.
There are two kinds of rice production technology land augmenting and labor
displacing. The first increases output without expansion of the area of farmland; the
second reduces the requirement of labor per unit of farmland. Examples of land
augmenting technologies are improved seeds, chemical fertilizers, insecticides, her-
bicides, fungicides, and improved cropping patterns. Labor-displacing technologies
include tractors and threshers. Adoption of a new technology affects the use of
domestic resources (land, labor, and domestic capital) directly and indirectly. These
effects need to be identified and measured, because they may have implications for
policies relating to resource utilization and allocation.
This study investigates the direct and indirect effects of farm mechanization and
the domestic resource and foreign exchange costs of machinery production and
the effects of farm mechanization on domestic resource and foreign costs of rice
production, that is, the ratio of domestic resource cost to the net foreign
exchange earned from rice production.
Economics Department, Kasetsart University.
62 CONSEQUENCES OF SMALL-FARM MECHANIZATION
The first stage in measuring the domestic resource cost of mechanized rice produc-
tion involves estimating the per unit social cost of production for each machine type
and the social cost of-operating a machine or an animal for crop production. The
marginal costs of undertaking farm activities using different machine types and
intensities, such as land preparation by two-wheel and four-wheel tractors, or rice
threshing by animal power, two-wheel tractor, or thresher, can then be estimated.
The second stage measures the domestic resource cost per unit of net foreign
exchange earned from rice production at different levels of farm mechanization.
The social cost of machine production and use
The social cost of machine production and use can be measured by estimating the
costs of component inputs valued at their social prices. For primary or nontradable
inputs (land, labor, and domestic capital), the social price was assumed to be the
same as the market price. For imported and tradable inputs, the social prices were
equated with their border values: c.i.f. if imported, and f.o.b. if exported. The social
cost pet unit is the sum of the social costs of the individual components. This can be
SCk = piqi + I p/ji SER (1)
p's are the social prices,
q's are the amounts,
SER is the shadow exchange rate (baht/dollar),
i = 2,... n refers to primary and nontradable inputs, and
j = n + 1,... m refers to the tradable inputs.
By convention the Pi's are measured in local currency and the Pj's are converted to
local currency using the shadow exchange rate which reflects the tax structure on
imports and exports (McCleary 1976).
Domestic resource cost of a unit of net foreign exchange earned
The domestic resource cost (DRC) of a unit of net foreign exchange earned is
defined as the social cost of primary inputs used divided by the net foreign exchange
earned. The net foreign exchange earned is defined as the difference between the
border value of output and the value of tradable inputs at border price.
DRC= DC i= 2 (2)
NF pql- Y paj -SER
pi = social price of output;
q, = quantity produced; and
all other terms are as defined above
DOMESTIC RESOURCE COST OF AGRICULTURAL MECHANIZATION IN THAILAND 63
The DRC reflects a comparative advantage in rice production if its value is less
than the shadow exchange rate (SER) (Akrasanee and Wattananukit 1976, Monke
et al 1976, and Pearson et al 1976).
Since farm mechanization requires both imported capital input (engines) and
imported operating inputs (fuel and spare parts), the quantity of foreign exchange
used will increase with machine use. For a given yield, if an increase in machine use
does not reduce the quantity of domestic resources used sufficiently to compensate
for the DRC increase, production at that level of farm mechanization will be
relatively inefficient. The effects of farm mechanization on DRC can be measured by
the mechanization elasticity of DRC, defined as the percentage change in DRC
resulting from a 1% change in mechanization.
DATA SOURCES AND THE LEVEL OF FARM MECHANIZATION
The primary data used for the analysis came from the farm record-keeping activity
of the Thailand component of the Consequences of Mechanization project, 1979-80
wet season.The mechanization levels for the rainfed areas were animal only (A),
animal and four-wheel large tractor (A+TL), animal combined with power tiller and
tractor (A+PT+TL), and power tiller and tractor (PT+TL). The mechanization
levels for the irrigated areas were (A+PT), (A+TS), (A+PT+TS), (PT+TS), (PT),
and (TS), where TS indicates a small locally manufactured tractor. In the rainfed
areas, large tractors were usually hired by the farmers for the first land preparation.
In contrast, the tillers and locally manufactured four-wheel tractors used in the
irrigated areas were owned by the farmers. Although observations for each mechani-
zation category were few, the details collected should ensure accuracy.
Secondary data on tax and tariff rates, the cost structure of farm machine
production, marketing, and transportation costs were collected from the reports of
Customs Department, The Bank of Thailand, and National Economic and Social
Development Board (NESDB).
Social cost of machine production
The engine is the major imported component of locally made machinery. The
foreign cost of locally made machinery, at the border, ranged from 56 to 60% of
production cost, whereas the primary factors used ranged from 33 to 39% (Tables I,
2, and 3). For the imported large tractors, the share of foreign cost in the assembling
cost was 83% and the primary input required for assembly was only 17%.
Table 1. Share of engine and body in the total value of locally made farm machines.
Body and Average investment cost
Type of machine
Engine accessories Year
(%) (%) $ of estimate
Two-wheel tractor (PTf 65 35 1020 1974-79
Small four-wleel tractor (TSf 46 54 1540 1973-79
Rice thresher 51 49 1072 1978
Water pumpa 82 18 119.8 1973-79
aFrom farm record-keeping data, Supanburi Province, 1979-80 wet season. bPathnopas (1980).
64 CONSEQUENCES OF SMALL-FARM MECHANIZATION
Table 2. Cost breakdown of machine body by type of locally made farm implement.
Item Power tiller Local tractor Imported tractor Rice thresherc
Imported 41 32 83 41
Domestic 36 40 14 40
Direct labor cost 12 10 1 15
Electricity 5 5 0 2
Depreciation, interest, 7 13 2 2
Total 211 761 10000 748
Year 1978 1978 1978 1980
aExchange rates, 1978 baht 20.25 = US$1, 1980 baht 20.40 = US$1. bSamahito and Kongkiet-
ngarm (1979). cRungroj shop. A Rice Thresher Manufacturer in Chachoengsao Province,
Thailand, April 1981.
Table 3. Primary and imported input components of farm machines.
Item Two-wheel Small four- Large Rice Water
tractor wheel tractor tractor thresher pump
Primary inputa in
Machine body and 1n 28 na
implement 19 33 na 28
Engine 15 11 na 12 na
Subtotal (1) 34 44 17 40 21
Machine body and 14 18 na 20 na
Engine 46 32 na 36 na
Subtotal (2) 60 50 83 56 66
Taxes levied on
Machine body and
implement 2 3 na 1 na
Engine 4 3 na 3 na
Subtotal (3) 6 6 0 4 13
a Included all nonforeign costs of manufacturer. Costs of engine were calculated from the equa-
tion ui = (1 + aj + tj + 77) ui*. See Appendix 1. na = not available.
Social cost of machine operation among mechanization methods
The social costs of farm mechanization for land preparation and rice threshing are in
Tables 4 and 5. The social cost of land preparation by a two-wheel tractor is higher
than that by a locally made four-wheel tractor because two-wheel tractors use more
primary and tradable inputs. This is explained largely by the slower work rate of a
two-wheel tractor while still requiring one man for operation, and the higher cost per
hp for smaller engines. Land preparation by buffalo, costs more per hectare than
land preparation by a two-wheel tractor, but no imported inputs are required
Because of the considerably lower use of domestic resources, the social cost of rice
DOMESTIC RESOURCE COST OF AGRICULTURAL MECHANIZATION IN THAILAND 65
Table 4. Social cost of alternative methods of land preparation, 1979-80 wet season, Supanburi,
Two-wheel Small four- Buffalo
Item tractor wheel tractor
(baht/ha) (baht/ha) (baht/ha)
Labor 56.13 28.06 168.38
Capital 57.37 24.55 -
Indirect labor and capital 22.33 16.63 60.00
Total primary input 135.83 69.21 228.38
Tradable input 47.70 17.69
Taxes 19.50 10.00 -
Total 203.80 96.93 228.38
aValued at shadow exchange rate: baht 23.44 = US$1. Source: Farm record keeping data,
1979-80 wet season.
Table 5. Social cost of alternative methods of threshing rice, Supanburi, Thailand, 1978 wet
Thresher Two-wheel Buffalo
Cost item (baht/t) tractor treading
Labor 35 97 180
Capital 15 19 -
Indirect labor and
indirect capital 12 37 13
Totalprimary inputs 63 152 193
Tradable inputsa 27 34 -
Tax 1 3 -
Total costs 92 190 193
aValued in baht at shadow exchange rate: baht 23.44 = US$1. Source: Pathnopas (1980).
threshing with a thresher is much lower than that with a two-wheel tractor or buffalo.
The use of tradable inputs is also lower for the thresher. Threshers can save domestic
resources, but they require imported fuel, oil, and an engine (Table 5).
DOMESTIC RESOURCE COST AND COMPARATIVE ADVANTAGE
The DRC coefficients of rice production in the rainfed areas were 26-75 baht/dollar,
considerably higher than the 9.40-25 baht/dollar in the irrigated area (Table 6). The
DRC coefficients for the rainfed areas were all greater than the SER as estimated by
McCleary (1976), indicating no comparative advantage to rice production in these
areas given the yields obtained in 1979-80.
The favorable coefficients for each category in the irrigated area resulted from the
much higher yields obtained. Only power tiller users did not have a comparative
advantage in rice production, and this group also had the lowest yield.
From Table 7, the elasticities of DRC with respect to tractor, rice thresher, and
water pump use are positive, indicating that an increase in machine use will increase
66 CONSEQUENCES OF SMALL-FARM MECHANIZATION
Table 6. Domestic resource cost (DRC) for selected rainfed and irrigated rice production tech-
niques in Supanburi, Thailand, 1979 wet season.
Water Level of Observations Area Yield DRC DRC/SERb
control mechanization (no.) (ha) (t/ha) (baht/$)
Rainfed A 9 3.7 0.37 56.43 2.41
A+PT+TL 3 5.9 0.46 75.08 3.20
A+TL 3 4.1 1.19 31.08 1.33
PT+TL 2 4.1 0.85 26.60 1.13
Irrigated A+TL 5 3.0 2.68 16.90 0.72
A+PT 2 2.5 3.84 13.61 0.58
PT 6 4.0 1.89 25.23 1.08
A+PT+TS 2 6.2 2.28 17.50 0.75
TS 3 3.0 3.33 15.60 0.67
PT+TS 2 5.6 6.25 9.64 0.41
aA = animal, PT = two-wheel tractor, TS = small four-wheel tractor, TL = large four-wheel
tractor. A shadow exchange rate (SER) of baht 23.44 = $1 was used for all calculations.
Table 7. Estimated in ut and output elasticities of domestic resource cost (DRC) coefficients,
Water control Type of land DRC coefficients
preparation Rice Water
Yield Land PT T
Rainfed A -0.50 0.61 0.00
A+PT+TL -0.58 0.60 0.17 0.05 0.05
A+TL -0.30 0.52 0.14 0.01
PT+TL -0.44 0.62 0.30 0.0 0.01
Irrigated A+TS -0.33 0.44 0.04 0.02 0.0
A+PT -0.35 0.39 0.04 0.0
PT -0.44 0.51 0.17 0.02 -
A+PT+TS -0.40 0.50 0.00 0.03 -
TS -0.37 0.40 0.08 0.02 0.02
PT+TS -0.28 0.34 0.01 0.06 -
aA = animal, PT = two-wheel tractor, T = four-wheel tractor, WP = water pump, TL = large four-
wheel tractor, TS = small four-wheel tractor.
the ratio of domestic resource to the net foreign exchange earned from rice produc-
tion DRC. The elasticity with respect to farm mechanization, however, is less than
that with respect to land.
Comparing the types of power used for land preparation, the mechanization
elasticity of DRC was lower on irrigated farms which used small four-wheel tractors
than on farms which employed two-wheel tractors. The main reasons appear to be
the lower operating cost and the lower work hours per hectare of the small four-
Where land preparation was done with a combination of tractor and animal
power, the mechanization elasticity of DRC was less than where machines were used
alone, regardless of whether the farm was irrigated or rainfed.
The negative sign of the yield elasticity of DRC indicates that an increase in yield
will lower the DRC coefficient, whereas a yield reduction will increase the DRC
DOMESTIC RESOURCE COST OF AGRICULTURAL MECHANIZATION IN THAILAND 67
coefficient. The elasticities, ranging between -0.30 and -0.58, imply that the yield
effect on the DRC value is greater than the mechanization effect.
The best alternative methods were the locally made four-wheel tractor for land
preparation and the thresher for harvesting. These reduced the use of both domestic
and nondomestic resources.
The estimated elasticities indicate that farm mechanization affects the DRC
coefficient value less than either yield or land does, because DRC elasticities with
respect to the varied types of machine are less than those with respect to yield and
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Pearson, S. R., N. Akrasanee, and G. C. Nelson. 1976. Comparative advantage in rice
production: a methodological introduction. Food Res. Inst. Stud. 15, 2.
Samahito, P., and K. Kongkietngarm. 1979. Report on farm machinery and farm equipment
production: Part I. Farm tractor and power tillers. Bangkok: Industry Section, Eco-
nomic Research Department, Bank of Thailand.
68 CONSEQUENCES OF SMALL-FARM MECHANIZATION
Appendix 1. Social value of output and tradable inputs.
I. Social value of output in 1979
1) f.o.b. export price of 5% broken white rice = 6.8136 B/kg
2) farm price of paddy (1.5 kg of paddy = 1 kg
white rice) = 4.42 B/kg
3) Export taxes = 0.95 B/kg
4) Processing cost, transportation cost and the
profit of trader = 1.4437 B/kg
Assuming that 20% of 1.4437 B/kg (or 0.289 B/kg) is the foreign cost and the rest was un-
allocated primary input.
II. Social value of tradable input
Tradable inputs are seed fertilizer, insecticide, herbicide, fuel, and oil. Tradable inputs also
include the tradable component of machine services.
Rice seed was valued at the farm price. The following equation was used to calculate the
border value of imported inputs:
U= (1 + a + ti + T) Uf*
where Uj is user's cost (value in baht at official exchange rate),
a is added cost including wholesale retail and semi-processing cost,
t is transportation rate,
Tis overall tax,
Uj* is border value of imported inputs (valued in baht at official exchange rate).
In this study, al is given as the share of wholesale and retail value added to gross domestic
product (GDP). The t, is also assumed as the share of transportation and communication value
added into GDPi. In 1979 a, and t, were 24.36 and 7.65%, respectively. The imported content
in transportation cost was small. The straight line method, assuming a 10-year machine life,
was used to calculate machine depreciation. The average annual utilization of two-wheel four-
wheel, and large tractors used in the calculations were 246, 360, and 1,000 hours, respectively.
Annual utilization of rice threshers was set at 304 hours and that of water pumps at 300 hours.
The overall tax (T) for each type of imported input was calculated from
T= t + b (1 +P) +t) + mb (1 +P) (1 + t)
St+b (1 +m) ( +P)(1 +t)
where P standard profit,
t = tariff,
b = business tax, and
m = municipal tax.
The tax rate of each import item was obtained from the Department of Customs, Ministry
of Finance, Thailand (Tariff and Business Tax, 1977). Overall tax rates for each imported input
are in Appendix 2.
The primary and imported input components of farm machines used in the calculation of
tradable and nontradable components for the depreciation of machines at users' costs are in
Appendix 3. These included the added cost between the manufacturer and farmer. The shares
of primary inputs are higher than in Table 3 which was calculated at the factory. Similarly,
the share of foreign costs here is lower than in Table 3.
DOMESTIC RESOURCE COST OF AGRICULTURAL MECHANIZATION IN THAILAND 69
Appendix 2. Tax rates for imported agricultural inputs.
Tax rates (%)
Import items (t) (p) (b) (m) (T)
Tariff Standard Business Municipal Overall
profit tax tax tax rate
Fertilizer free 11.5 1.5 10 1.84
Insecticide 5% 11.5 1.5 10 6.84
(arsenic) 10% 8.5 1.5 10 11.97
Tractor with implements free 16.0 8.0 10 3.83
for tractor free 26.0 3.0 10 4.158
Power engine 5% 13.0 3.0 10 8.915
complete set 15% 16.0 3.0 10 19.40
Accessory and spare
parts for water pump 15% 26.0 3.0 10 19.78
Diesel oil 0.22 B /1 value 0.7065 B /1 10 1.30 B /1
Gasoline oil 0.93 B /1 value 3.045 B /1 10 3.48 B /1
Engine oil and
lubricant 25 B /1 value 0.30 10 25.45 B /1
Appendix 3. Component shares for farm machines.
Component share (%)
Cost item Two-wheel Small four- Large Rice Water
tractor wheel tractor tractor thresher pump
Primary input in
machine body and
implements 23 38 na 34 na
engine 15 11 na 12 na
Subtotal (1) 38 49 37 46 21
Foreign cost in
machine body and
implements 11 13 na 15 na
engine 46 32 na 36 na
Subtotal (2) 57 45 63 51 66
Taxes levied on
machine body and
implement 1 2 na na na
engine 4 3 na 3 na
Subtotal (3) 5 5 0 3 13
UTILIZATION IN TWO
M. A. Jabbar, M. S. R. Bhuiyan, and A. K. M. Bar
Causes and consequences of power tiller utilization were examined
using, data collected from 63 tiller owners and 56 nonowners.
Timely and quick cultivation, difficulty in managing large numbers
of animals, low cost and better quality tillage, and animal shortage
were the main reasons for purchasing tillers. Costs were low
because of distortions in the prices of tillers and fuel. Unavailability
of spare parts and lack of repair facilities were major problems.
Tiller use increased size of cultivated holding, decreased regular
labor, evicted tenants, changed tenure status, increased cropping
intensity, and increased machine orientation of farmers. The find-
ings indicated that mechanization of tillage would greatly benefit
rich farmers at the expense of small and marginal ones.
The level of tillage mechanization in Bangladesh is quite low, with more than 98% of
the land cultivated by bullock-drawn plows. There is, however, a growing shortage
of power because long-term neglect of the livestock sector has resulted in decreased
availability of bullocks. Use of mechanical power has not increased fast enough to
fill the gap. The power gap, along with other factors, has probably been responsible
for the slow growth of output and employment, and unless that gap is immediately
filled, growth of agriculture might be further constrained (Jabbar 1980). The use of
mechanical power has grown very slowly. Causes of the slow growth need to be
identified and eliminated before any rapid increase can take place. The consequences
also need to be measured for appropriate policy making.
A survey of power tiller owners and nonowners was conducted in two selected
Identify the reasons for buying or not buying tillers;
Study the characteristics of the tillers and the process of their acquisition and
Identify factors affecting the nature and extent of tiller use; and
Measure the consequences of tiller use on selected aspects of the farm business,
Particularly 1) ownership of animal power, 2) ownership of land, 3) cultivation
Bangladesh Agricultural University.
72 CONSEQUENCES OF SMALL-FARM MECHANIZATION
of land, 4) tenure status, 5) cropping pattern and intensity, 6) employment of
labor, and 7) machine orientation.
SELECTION OF AREA AND SAMPLE
Since the early sixties, 6,362 power tillers have been imported, of which 4,278 were
reportedly sold to the private sector on highly subsidized credit provided through the
Bangladesh Krishi Bank (BKB). The actual number and geographical distribution
were not known but it was believed that operational tillers were scattered throughout
the country, with a few small pockets of higher concentration. Mymensingh District
and a cluster of four villages in Munshigonj Thana of Dacca District were selected as
areas of low and high tiller density, respectively. The four Munshigonj villages were
about 3 miles south of Munshigonj Thana headquarters. Mymensingh District
covered over 10,000 km2 while the 4 Munshigonj villages covered about 7.7 km2.
Preliminary fieldwork revealed that a large number of tillers had been sold by the
original owners, some to buyers outside Mymensingh. A large number of tillers had
been out of operation for a number of years, and some operating tillers had been
purchased from sources other than BKB. Complete enumeration showed 34 opera-
tional and 26 nonoperational tillers. Apparently, more than 150 tillers sold by BKB
had been resold outside Mymensingh. Subsequent analyses were based on data
collected from these tiller owners plus data from 26 nonowners located in the same
Of the 29 operational tillers found in the four Munshigonj villages, 73% were in 1
village, South Char Masura. Data were collected from all 29 owners plus 22
nonowners on 3 visits to each farm.
REASONS FOR BUYING AND NOT BUYING TILLERS
Reasons for buying tillers
Tiller owners were asked their reasons for purchasing tillers. Nonowners were asked
whether they were interested in buying and, if so, why. Fifty-six percent of non-
owners in Mymensingh and 82% in Munshigonj expressed interest in buying tillers.
The relative importance of the reasons varied among owners and intending owners
and also between the two areas. In general, frequently stated reasons included
increased output, reduced costs, and reduced drudgery (Table 1).
The implications of some of the responses need explanation. First, 30% of both
owners and intending owners reported a shortage of animal power. Only 8% of
intending owners mentioned labor saving. This supports recent findings of a signifi-
cant shortage of animal power, which machines would overcome (Jabbar 1980).
Second, 67% of the owners and 24% of intending owners expected tiller cultiva-
tion to be cheaper. At market prices, bullock cultivation was found to be 3-5 times
more expensive than tiller or tractor cultivation (GOP 1970, Lawrence 1970, Mian
and Hussain 1975) because the overvalued currency underpriced both tillers and fuel
by 40-50%. At real prices, tractor or tiller cultivation was found to be 2-3 times more
expensive than bullock cultivation (Lawrence 1970). Such distorted markets
encourage substitution of animals by machines even in situations where labor is still
plentiful and cheap.
CAUSES AND CONSEQUENCES OF POWER TILLER UTILIZATION IN BANGLA)ESH 73
Table 1. Distribution of reported reasons for purchase and intended purchase of
Reported Owners (%) Intending owners (%)
reasons Mymensingh Munshigonj Mymensingh Munshigonj
cultivation by tiller 100 100 45 76
difficult 50 100 10 17
by tiller 82 48 25 22
Better land preparation 50 14 55 17
shortage 15 48 30 28
Multiple uses of tiller 18 10 -
Tiller custom service 13 5 33
Available on credit 12 3 -
Good for puddling
dry hard soil 3 -
Labor saving -
High death rate of
weak animals 10 -
Sample size 34 29 18 18
Third, it has been argued there is a technical limit to the optimum size of a farm
using animal and human labor. One reason is the management problem. Seventy-
three percent of the owners and 14% of the intending owners indicated they had
difficulty managing a large number of animals. Large landholders generally cultivate
land up to that technical limit and rent out any excess. But engine power was
expected to, and did, induce more self-cultivation (Jabbar 1977, 1980).
Fourth, one-third of the intending owners, mostly in Munshigonj, wanted to buy
a tiller so they could provide custom services. Custom operation was already
booming in Munshigonj and intending buyers might have been influenced by the
Fifth, only 7% of the owners mentioned availability of credit as a cause for buying
a tiller. Credit was available for purchase of all new tillers.
Reasons for not buying a tiller
The reasons nonowners did not buy a tiller are in Table 2. More than 50% of the
nonowners were interested in buying when their neighbors bought, but they could
not because of capital shortage or unavailability of tillers. Most nonowners not
interested in a tiller were located in Mymensingh. Their primary reasons were related
to repair and maintenance. Many of the current tiller owners already face this major
74 CONSEQUENCES OF SMALL-FARM MECHANIZATION
Table 2. Distribution of nonowners' reported reasons for not purchasing a tractor.
Reported All nonowners (%) Unwilling nonowners (%)
cause Mymensingh Munshigonj Mymensingh Munshigonj
Lack of capital 38 18 -
Not available 21 27 -
Could not manage 14 -
Lack of knowledge or
experience with 6 23 14
Had/have adequate 6 14 29 -
maintenance, 15 5 85 50
Did not like 5
12 5 -
Animal cheaper 6 5 36 50
Sample size 34 22 16 4
CHARACTERISTICS, PROCESS OF ACQUISITION, AND OPERATION OF TILLERS
Brand and capacity
Tillers were either received as grant aid or imported on credit from Japan. Of the
sample, 48% were Yanmar, 40% Mitsubishi, and 6% Kubota and Isaki. However,
70% in Mymensingh were Mitsubishi and 83% in Munshigonj were Yanmar.
Tiller capacity was 6-10 hp. Ninety-two percent of the Mitsubishi tillers were 6-8
hp and 82% of the tillers in Mymensingh were 6-8 hp. In Munshigonj, 55% were 6-8
hp and 45% were 8-10 hp.
Additional equipment and tiller
In Mymensingh, 50% of the tillers were purchased with one or more attachment.
Attachments reported were pump (25%), trolley (23%), hauler (6%), and furrower
(6%). Nine percent of tillers were purchased without additional equipment, but the
owners bought them later. In Munshigonj, only one tiller was purchased with a
pump attachment and two other owners purchased threshing equipment later.
Most owners of tillers with no attachments wanted to buy and those with some
wanted more. In Mymensingh, tiller owners wanted to buy a trolley (35%), pump
(32%), hauler (24%), and equipment for threshing, seeding, and electric generation
(12%). In Munshigonj, 34% wanted a trolley and 65% wanted a pump.
Source and time of purchase
The government first imported tillers for experimental purposes, but a few were
subsequently sold to farmers. Later tillers were imported and distributed through the
BKB and also through private dealers who generally sold on credit from BKB.
During 1972-74, the Bangladesh Agricultural Development Corporation (BADC),
the public corporation responsible for import and distribution of agricultural inputs,
distributed tillers with BKB providing credit.
CAUSES AND CONSEQUENCES OF POWER TILLER UTILIZATION IN BANGLADESH 75
Acquisition dates suggest that tillers have been use longer in Mymensingh than
Munshigonj. In Mymensingh, 32% of the tillers were purchased during 1963-68,
41% in 1969-74, and 27% in 1975-80. For Munshigonj, the corresponding figures
were 7%, 24%, and 69%, respectively. Sources for purchase of tillers are in Table 3.
Secondhand purchases from other farmers have increased consistently. In
Mymensingh, secondhand tillers were 44% compared to 55% in Munshigonj. Six
percent were more than 6 years old at the time of purchase, 39% were 5-6 years old,
and 39% were 3-4 years old. The main reasons for selling were repair, maintenance,
and operational problems.
Tiller price and sources of capital
Tiller prices varied with time of purchase, machine condition, brand and capacity,
number and type of accessories included, type of payment, and supply source. For
new tillers brand and capacity and supply source had minimal effect. An index of
average price by time of purchase, and tiller condition is in Table 4. Up to 1974,
prices were quite low, and secondhand tillers were sometimes more expensive than
new ones. After 1974, the price of new tillers increased about 300%, but prices of
secondhand tillers remained fairly constant.
All tillers purchased on full cash were secondhand and those purchased on full
credit were new. Although they were purchased from BKB, BADC, and private
dealers, BKB provided the credit in all cases. With part cash payments, 38% of the
price was paid in cash. Most tillers purchased with part cash were new and supplied
Table 3. Percentage of tillers purchased from different sources by period.a
Sources (%) of supply
Period Dealer BKB Other farmers Othersb
1963-65 33 67 -
1966-68 50 40 10 -
1969-71 14 58 14 14
1972-74 7 7 29 57
1975-77 50 38 12
1978-80 10 19 71 -
All periods 16 31 38 15
aSource: Field survey 1980. bInclude tiller mechanics, Foreign Voluntary Agency,
and Bangladesh Agricultural Development Corporation.
Table 4. Index of average price by time of purchase and condition of tiller.
Period Index of av price
purchased Mymensingh Munshigonj
New Used New Used
1963-65 1.00 -
1966-68 0.90 1.20 0.78 -
1969-71 1.00 1.06 1.51
1972-74 0.76 1.01 1.94 -
1975-77 4.23 0.68 4.24 2.00
1978-80 3.05 1.63 3.58 2.23
76 CONSEQUENCES OF SMALL-FARM MECHANIZATION
by BKB, BADC, or a private dealer with BKB credit. Most sellers of used tillers
accepted part cash payment. In two cases, full cash payment was made by borrowing
from private lenders. The interest rate for BKB credit increased from 5% in the
mid-1960s to 10% in the late-1970s.
Of 36 owners purchasing with credit, 64% had repaid fully, 25% partially, 6% not
at all, and 5% had not yet reached the repayment stage. The number of defaulters
was similar in both areas, but those in Mymensingh had been defaulting longer,
some since 1966.
Characteristics of tiller operators
Respondents were asked who operated the tiller during the survey year. In Mymen-
singh, 12% used only family members, 32% annual hired labor and family members,
35% only annual hired labor, 12% hired tiller drivers, and 9% hired tiller drivers and
family members. In Munshigonj, 14% used only family members, 45% hired tiller
drivers, and 41% hired tiller drivers along with family members.
Over 90% of the family members operating tillers in Mymensingh had some
secondary education and 15% were high school graduates. In Munshigonj, more
than 40% of family tiller operators had no formal education and none had above
secondary education. In both places, few tiller operators from theother categories
had any education; none were educated beyond primary level.
Nine percent of the tiller owners in Mymensingh and 35% in Munshigonj reported
receiving no training in tiller operation and maintenance. They learned mostly from
other tiller drivers. Those receiving training obtained it predominantly from sellers:
29% of owners in Mymensingh and 48% in Munshigonj reported that a member of
the family, who was trained by the supplier, taught other family members and hired
Major and minor breakdowns
The number of major breakdowns of the tillers since acquisition is in Table 5.
Breakdowns increased with the tiller age at the time of purchase. The main reasons
given for breakdowns were overturning during operation, loose-fitting parts, irregu-
lar gasoline delivery, and excessive or insufficient oil use. No owners could specify
the reason for the third and fourth major breakdowns and 54% could not name the
cause of the first and second major breakdowns.
During 1978-80, 64, 23, and 13% of the owners reported doing 1 to 4, 5 to 8, and
more than 8 minor repairs, respectively. Repair frequency was significantly higher in
Munshigonj. Average repair costs for the 2 years were $24 in Mymensingh and $41
in Munshigonj, and 20 and 14 potential work days, respectively, were lost.
Table 5. Major breakdowns of tillers by region.
Breakdowns (no.) Mymensingh Munshigonj
0 29 52
1 35 28
2 27 17
3and4 9 3
CAUSES AND CONSEQUENCES OF POWER TILLER UTILIZATION IN BANGLADESH 77
Service guarantees, ranging from I to 3 years, were assured for 79% of the new tillers
purchased in Mymensingh and 56% in Munshigonj. No guarantee was available for
used tillers. Of those with service guarantees, 59% reported receiving proper service,
14% did not require service, and 27% (located in Mymensingh) did not get service
apparently because of problems with suppliers.
In Munshigonj, repair facilities were available within 8 km. In Mymensingh, 30%
of owners reported that the nearest repair shop was more than 64 km away, 30%
reported between 32 and 64 km, and the remainder reported between 8 and 32 km.
Tillers usually had to be hauled to repair shops on trains, trucks, boats or bullock
carts, and then most of the repair shops did not stock sufficient parts. Sometimes
transportation was not possible and mechanics, who charged very high fees, were
The main problems in tiller use were unavailability of spare parts, lack of repair
facilities, high priced spare parts and fuel, and unavailability of pure diesel (Table 6).
EXTENT OF TILLER USE AND RELATED FACTORS
Information on the extent of tiller use was collected from the owners for 1976-77 to
1979-80. For 1979-80, data were collected for each operation whereas for the 3 other
years, the limited records kept by the users were supplemented by their recollections.
Annual use varied from 640 to 696 hours in Mymensingh and from 1,144 to 1,432
hours in Munshigonj. Detailed analysis is based on 1979-80 only.
Various characteristics of tiller users in Mymensingh and Munshigonj are in
Table 7. In Mymensingh, only 38% of the owners provided custom services, com-
pared to 97% in Munshigorij. Custom services accounted for 9% and 59% of total
operations, respectively. Possible reasons for the lower level in custom services in
Mymensingh are fewer repair services and large landowner concern about loss of
status in the area.
Forty-eight percent of the owners in Munshigonj traveled 16-40 km, usually by
boat to provide custom services and another 11% traveled 8-10 km. Farmers with
Table 6. Problems in tiller use reported by owners.
Problem Mymensingh Munshigonj All areas
(%) (%) (%)
Unavailability of spare parts 94 76 86
Frequent breakdown 38 17 29
Lack of repair facilities 41 14 29
High price of spare parts 35 3 21
High price of fuel 35 7 22
Unavailability of pure diesel 15 31 22
High charge for mechanics 6 3 5
Lack of training facility 3 2
for repair work
Lack of efficient tiller
78 CONSEQUENCES OF SMALL-FARM MECHANIZATION
Table 7. Extent of tiller use in 1979-80.
Characteristics Farms (%) Hours/farm Farms (%) Hours/farm
Type of work
Tillage only 62 496 100 1192
Tillage and other tasks 38 1008 -
Area cultivated (ha)
Under 6.0 23 176 52 872
6.1-8.0 23 536 21 1448
8.1-10.0 15 864 14 1800
10.1-12.0 8 1864 3 1960
12.1 and over 31 824 10 1224
Type of family
Single 68 568 56 1088
Joint 32 976 44 1328
Past experience in machine use
Yes 53 864 27 1304
No 47 424 73 1152
Main income source
Farming 47 504 35 1352
Farming and business 44 752 62 1096
Farming and service 9 960 3 1400
inadequate, or no, draft animals bought tiller services. Twenty-four percent of the
owners reported charging lower custom rates in distant places, but still making a
profit because custom services were done after finishing their own work.
Tiller use increased with size of cultivated holdings up to 12 ha and then declined
sharply. This size effect was indirectly reflected through type of family because most
joint families had larger holdings.
Owners with experience in handling different types of machines used the tiller
longer than those without such experience. Experienced owners could do minor
repairs, getting more use from the tiller. In Mymensingh, owners who had income
from business or services as well as farming had better external contacts which
helped them locate mechanics, manage parts, and make quick repairs.
CONSEQUENCES OF TILLER USE
There are three approaches to measuring the effects of tiller use. First, tiller owners
and nonowners may be compared at a given time with differences attributed to tiller
use. The main problem with this approach is that owners and nonowners may differ
in respects unrelated to tiller ownership. The second approach involves before-and-
after comparison, with any differences attributed to the tiller. Here the main
problems are that other changes might have taken place simultaneously and "before"
data must be collected by recall, which is less reliable. The third possibility is to
combine the cross section and time series approaches (Binswanger 1978). All three
approaches were used in this study.
CAUSES AND CONSEQUENCES OF POWER TILLER UTILIZATION IN BANGLADESH 79
Effect on animal ownership
Tiller ownership was expected to have an immediate effects on work animal
ownership. Changes in the number of owned work animals and the number per
cultivated hectare are in Table 8. On the average, 2-2.5 animals were replaced by a
power tiller. The degree of substitution was much higher in Munshigonj where 53%
of tiller owners completely replaced their animals. Although only 3% of the farms in
Mymensingh replaced all their animals, some of the larger ones replaced 5 or 6, yet
still retained several because: 1) the tiller was not considered fully reliable, 2) the tiller
was not suitable for puddling in low-lying areas or for preparing dry hard soils in
summer, 3) land preparation with a tiller followed by laddering with animals gave
better results, 4) during short sowing or planting seasons some larger farmers needed
to supplement their tiller power with draft animals, 5) some farmers had increased
their operational holdings beyond the capacity of one tiller, and 6) animals were fed
mostly on crop by-products and could be retained for investment at little additional
Effect on land ownership and tenure
Those who bought tillers in both areas normally had larger forms than those who did
not (Table 9). By 1979-80, the farms in all categories were significantly larger, but the
relative differences between owners and nonowners remained similar. Indeed, a
substantial proportion of farmers had acquired additional land whether they had
tillers or not. Tenure status of tiller owners and nonowners in both areas changed
substantially. However, the impact of the tiller on and changes could not be
Table 8. Changes in work animal ownership on farms of tiller owners and
Owner Nonowner Owner Nonowner
Number of animals/farm
Before tiller purchase 7.3 6.4 3.6 3.1
1979-80 5.3 6.8 1.1 2.4
% change -27 +6 -70 -23
Number of animals per
Before tiller purchase 0.22 0.20 0.17 0.19
1979-80 0.11 0.19 0.05 0.13
% change -48 -8 -69 -33
Table 9. Changes in size of land ownership of tiller owners and nonowners.
Owner Nonowner Owner Nonowner
Year before tiller purchase (ha) 8.64 6.23 3.15 2.70
1979-80 (ha) 9.53 7.10 3.87 3.36
% change 10 14 23 25
80 CONSEQUENCES OF SMALL-FARM MECHANIZATION
Effect on cultivated area
There were negligible differences in the average size of cultivated holdings of tiller
owners and nonowners in both areas at time of purchase (Table 10). By 1979-80, the
average size of cultivated holdings of tiller owners and nonowners had increased in
both areas. The difference between the two groups increased in Mymensingh but not
Regardless of tiller ownership, most farmers increased their areas under cultiva-
tion, and the predominant mechanism was acquiring new land (Table 11). Tiller
owners in Mymensingh also increased their cultivated holdings by using land
previously rented out or left fallow. Previously rented out land was used by 81% of
tiller owners in Mymensingh, compared to only 33% in Munshigonj.
Effect on cropping pattern and intensity
Because farmers could not be expected to recall crop areas accurately over several
years, cropping pattern and cropping intensity differences of the two groups were
compared using average cropping patterns for 1978-79 and 1979-80. The propor-
tions of irrigated crop area and of area devoted to high-yielding varieties (HYV) were
similar for owners and nonowners in both areas. However, contrary to the findings
of Gill (1979, 1980), cropping intensity differed markedly between the two groups in
Munshigonj. It is likely that the increase in cultivated area in Mymensingh and in
cropping intensity in Munshigonj was the result of different initial sizes of holdings.
The increased cropping intensity in Mushigonj was accompanied by greater
diversification. A decrease in the paddy area on farms with tillers was accompanied
by increases in the areas for potato, jute, mustard, and wheat.
Table 10. Changes in sizes of cultivated holdings of tiller owners and nonowners.
Owner Nonowrer Owner Nonowner
Year before tiller purchase (ha) 4.75 4.80 2.92 2.63
1979-80 (ha) 7.59 5.95 3.61 3.11
% change 60 24 24 18
Table 11. Sources of additional cultivated land.
Additional cultivated land (ha)
Source of land Mymensingh Munshigonj
Owner Nonowner Owner Nonowner
New land acquired 0.89 0.87 0.72 0.66
Cultivation of previously 1.42 0.35 -0.08 -0.19
rented out land
Cultivation of previously 0.60 -0.06 -
Mortgaged land -0.03 -0.01 0.05
Total additional land 2.84 1.15 0.69 0.48
Table 12. Changes in regular hired labor employment by tiller owners.
Location, Total no./culti-
time period Annual Seasonal Other annual labor Tiller Tenant Total vated ha
plowman plowman Male Female driver farmer
Before tiller purchase (no.) 2.15 0.79 3.90a 0.90a 7.00 14.74 3.11
1979-80 (no.) 1.68 0.38 3.60a 1.00" 0.20 3.00 9.86 1.31
% change -22 -41 -8 +11 + -57 -33 -58
Before tiller purchase (no.) 0.66 0.31 0.90 0.30 2.00 4.17 1.43
1979-80 (no.) 0.28 0.14 0.60 0.30 0.86 2.00 4.18 1.14
% change -59 -55 -33 + -21
aAbout 20% below 14 years old.
82 CONSEQUENCES OFSMALL-FARM MECHANIZATION
Effect on employment
Although the introduction of tillers may have various effects on employment, the
only one measured was the effect on regular hired labor. This was done using a
before-and-after comparison (Table 12). In Mymensingh, there was a negative,
aggregate impact on regular employment per farm; in Munshigonj, employment per
farm remained constant. In both areas, however, use of regular labor per hectare
Most of the evicted plowmen were working as casual laborers on the same farms
or elsewhere, and some got plowing jobs elsewhere. About 60% of the evicted
tenants in Mymensingh were cultivating their own small holdings, or renting. Others
became day laborers.
Tiller use has changed the pattern of family labor participation in farming. For
example, the number of families having members working as plow drivers declined
from 12% to 3% in Mymensingh and from 45% to 21% in Munshigonj following
tiller introduction. On the other hand, 54% of the families had members working as
tiller drivers in 1979-80. Other changes included increases in the number of family
members participating in farm activities, hours worked per person, and increase in
Effect on machine orientation
After purchasing tillers, owners wanted to buy more equipment. However, lack of
money and available machinery limited additional purchases. Although most
desired machines are labor displacing, some have potential for indirect employment
Machine use is being encouraged by distorting market prices in a situation where
animals are in short supply, but labor remains quite cheap. Such policies may be
justified if tiller use increases output, but there is little supporting evidence. The large
scale introduction of tillers appears likely to benefit the rich farmers, at the expense
of small and marginal ones, through employment, tenancy, land accumulation, and
machine orientation. Detailed studies, incorporating mechanization of other farm
operations, are required if there are to be sound farm mechanization policies.
Binswanger, H. P. 1978. The economics of tractor in South Asia. Agricultural Development
Council, Inc., New York, and International Crops Research Institute for the Semi-Arid
Tropics, Hyderabad. 96 p.
Gill, J. 1979. Appropriate technology: mechanized land preparation. The ADAB News
Gill, J. 1980. Appropriate technology: mechanized land preparation. The ADAB News
CAUSES AND CONSEQUENCES OF POWER TILI.ER UTILIZATION IN BANGLADESH 83
GOP (Government of Pakistan). 1970. Farm mechanization in East Pakistan: report of the
Farm Mechanization Committee. Islamabad, Pakistan. 225 p.
Jabbar, M. A. 1977. Relative productive efficiency of different tenure classes in selected areas
of Bangladesh. Bangladesh Dev. Stud. 5(1):17-50.
Jabbar, M. A. 1980. Draft power shortage and mechanization of tillage in Bangladesh.
Bangladesh J. Agric. Econ. 3(1):1-26.
Lawrence, R. 1970. Some economic aspects of farm mechanization in Pakistan. 61 p.
Mian, M., and M. K. Hussain. 1975. A comparative study of the economics of cultivation by
bullock and power tiller in the production of transplanted aman paddy in some selected
areas of Bangladesh. Prod. Econ. and Farm Manage. Res. Rep. 1. Department of
Agricultural Economics, Bangladesh Agricultural University, Mymensingh. 62 p.
SOCIAL ASPECTS OF
AND USE IN SOUTH
J. Hafsah and R. H. Bernsten
Minitractors have been introduced into the relatively sparsely
populated province of South Sulawesi to provide additional land
preparation'power. To better understand the impact of this pro-
gram, 50 individuals in Sidrap and Pinrang Districts were inter-
viewed. Ten of them bought minitractors in 1975-79. Information
about socioeconomic characteristics and various aspects of tractor
operations was collected. Analysis showed that tractor ownership
was not economically viable because of breakdowns and a shorter
than expected useful life. Utilization of new tractors during the first
year has declined each year since 1975. This suggests that increases
in the tractor population have made it more difficult for owners to
cover variable and fixed costs.
Because rice is the staple food of Indonesia, government policy has focused on
increasing production to achieve self-sufficiency. During the first five-year develop-
ment plans (Pelita I 1969-74, and Pelita II 1974-79), rice output increased 4.7 and
3.8%/year, respectively. Yet, with population growing at 2.5%/year and incomes
rising, demand still exceeds domestic supply (B. P. S. 1980).
Minitractors have been introduced into several places in the less densely popu-
lated outer islands in an effort to increase production and to remedy apparent
shortages of human and animal labor. These shortages constrain area expansion,
crop intensification, and synchronized rice planting.
In the first tractor feasibility study in South Sulawesi, Parussengi (1972) con-
cluded there was a need for small tractors, because of a labor shortage. Follow-up
studies by Gadjah Mada University and the Agricultural Equipment Office evalu-
ated tractor needs in 18 of the 23 districts in South Sulawesi (Gadjah Mada
University 1976, Directorate of Food Crops 1975, Agricultural Extension Service
1976, Directorate for Technical Agriculture 1979). Based on these studies, four-
wheel minitractors were introduced to several districts beginning in the mid-1970s.
By 1980, almost 1,300 minitractors had been sold throughout the province (Agricul-
tural Extension Service 1980).
South Sulawesi Extension Service and Central Research Institute for Food Crops/IRRI Cooperative
Program, Bogor, Indonesia.
86 CONSEQUENCES OF SMALL-FARM MECHANIZATION
Farmers in Sidrap and Pinrang first purchased minitractors in 1969. In 1975, a
major government-sponsored program, aimed at increasing productivity, provided
for considerably more tractors. An understanding of the successes and weaknesses
of this effort should provide guidance for planning and implementing future tractor
This study focuses on:
the characteristics of minitractor owners and their reasons for purchasing;
problems encountered in ownership, operation, and maintenance;
financial arrangements and credit characteristics;
the characteristics of tractor operators; and
the profitability of tractor ownership.
Sidrap and Pinrang Districts are about 180 km north of Ujung Pandang, the
provincial capital of South Sulawesi. This is a highly productive agricultural area
and has a population density of 93 persons/km2 (B. P. S. 1980). Seventy percent of
the 92,581 ha of lowland is irrigated, mostly by a modern technical system receiving
water from the Saddang diversion dam (Agricultural Extension Service 1980).
Typically, two irrigated crops are grown with farmers using the latest varieties along
with fertilizer and insecticides.
Sidrap and Pinrang were chosen as the study area because these districts have the
most minitractors. Four villages with the largest number were selected from each
district. Of the 508 minitractors in the two districts in 1979, 108 were owned by
residents of these eight villages. A few adopters bought units before 1976; however,
most purchases (40%) were made in 1979 when Presidential Aid (BANPRES) was
extended through the small investment credit system (KIK). Before the BANPRES
program almost all purchases were Kubota, but in 1979 Iseki and Sateh captured
64% of the market.
Ten tractor owners, who purchased units in each of the previous five years, were
randomly selected and interviewed once during each of the 1979 wet and 1979-80 dry
Characteristics of the sample farmers
Some characteristics of the 50 minitractor owners are shown in Table 1. Over 60%
were between 31 and 50 years old and only 26% had education beyond primary
school. Their principal occupation was farming (56%). Their average assets were 7.2
ha of riceland, valued at $17,120, and 3.1 cows and 0.7 buffalo, together valued at
$520. The average value of all assets, excluding house and tractor, was $22,080.
By comparison, nonmechanized respondents in the same area had a similar age
and education, but only 1.34 ha of riceland (Consequences Team 1981).
Respondents gave several reasons for purchasing a tractor (Table 2). Because
most were large landowners, the most common answer was expected to be "to
ECONOMIC, TECHNICAL, AND SOCIAL ASPECTS OF TRACTOR OPERATION IN INDONESIA 87
Table 1. Characteristics of 50 minitractor owner respondents.
< 30 0
> 50 14
Primary school 23
Junior/senior high school 7
Government employee 7
Table 2. Reasons given by 50 minitractor owners for purchasing a tractor.
To cultivate their land 71
To rent to neighbors 40
To experiment 12
Social prestige 9
Available credit 26
aSome respondents gave more than one answer.
cultivate their own land." However, 25% expected to earn money renting the tractor
to neighboring farmers, especially when pressed to meet repayments.
The respondents perceived several benefits from owning a minitractor (Table 3).
Most important was the potential for timely planting, whereas only 10% mentioned
increased yields and 8% reduced drudgery.
All the minitractors surveyed were rated at 12-15 hp and had diesel engines. Their
costs which increased significantly over the period, averaged $5,513 (Table 4). These
dollar prices understate the real rate of increase. With the 50% devaluation of the
rupiah in November 1978, the price of a tractor to the Indonesian farmer in 1979 was
32% higher than in 1978.
In both wet and dry seasons, complete land preparation involved rototilling the
field twice. However, some farmers hired the minitractor for only one rototilling
then harrowed the field using animal or human power. Consequently, data on land
preparation were converted into two rototilling equivalents. The hectares prepared
each season since tractor purchase are shown in Table 5. For each purchase year,
utilization was highest in the first year and declined in each successive year. At the
88 CONSEQUENCES OF SMALL-FARM MECHANIZATION
Table 3. Minitractor owners' perceptions of benefits associated with tractor
Reason Farmers (no.)
Timely planting 45
Better land preparation 39
Reduced need to hire labor 39
Increased yields 15
Reduced drudgery 12
Table 4. Purchase price of sample tractors by year of purchase.
Purchase year Purchase price ($) Price index
1975 4471 100
1976 4941 111
1977 5647 126
1978 6588 147
1979 5920a 132
aDollar price affected by devaluation from $1 = Rp425 to $1 = Rp625.
Table 5. Hectares plowed each season, by year of tractor purchase.a
Year, seArea plowed (ha)
1975 1976 1977 1978 1979
Wet 55.5 -
Wet 30.5 34.9 43.6
Dry 25.7 34.3 29.8
56.2 69.2 73.4
Wet 25.4 35.3 39.6 43.6
Dry 15.8 22.0 16.2 37.7
41.2 57.3 55.8 81.3
Wet 10.3 20.8 20.5 24.6 33.9
Dry 3.9 7.8 10.8 16.5 23.3
14.2 28.6 31.3 41.1 57.2
Average 55.9 63.8 53.5 61.2 57.2
aAverage of hectares plowed by all units operating in respective seasons.
ECONOMIC. TECHNICAL. AND SOCIAL ASPECTS OF TRACTOR OPERATION IN INDONESIA 89
same time, it is clear that late adopters were unable to achieve the same use in the first
year as early adopters, suggesting the tractor population may be reaching saturation.
The hectares prepared each year were distributed evenly between seasons, with
55-60% of the area plowed in the wet season, when tractors are used on both rainfed
and irrigated land.
The relationship between tractor age and number of seasons it was broken is
shown in Table 6. Reasons for not repairing the tractor were spare part unavailabil-
ity, repair expense, or the repair cost equaling that of a new unit. Of 10 tractors
Table 6. Number of seasons during which minitractors operated.
Purchase Av season operating per tractor Tractors (no.) Av area b
year Potentiala Actual Seasons broken operating in plowed in 1979
(no.) (no.) (%) 1979-80 (ha)
1975 9.1 7.3 20 3 14.2
1976 7.3 6.6 10 5 28.6
1977 5.9 5.5 7 7 31.3
1978 3.0 2.9 3 10 41.1
1979 1.9 1.9 0 10 57.2
aThe potential number of seasons the tractor could be used takes into consideration that some
tractors were purchased after the beginning of a season and not used that season. By units still
operating in 1979.
Table 7. Damage requiring spare parts, reported by 50 tractor owners.
Part repaired or replaced Unis
M9 CONSEQUENCES OF SMALL-FARM MECHANIZATION
purchased in 1975, only 3 were still operating in 1979 and they averaged only 14.2 ha.
The data in Table 6 suggest that minitractors are relatively free from major problems
for the first 2 years, but thereafter use is reduced significantly. It appears that the
maximum useful life of minitractors is 5 years. As shown in Table 7, breakdowns
were most frequently associated with the transmission (43%). The parts requiring
replacement most often were the piston (23%) and associated components. Trans-
mission damage was probably aggravated by erratic stopping and starting, engine
damage from late oil changes, and continuous operating beyond the recommended
hours per day. These explanations are consistent with the owners' observations
(Table 8). Breakdowns might be greatly reduced through better driver training and
Respondents felt that spare parts were expensive and 43% reported they were not
always available when needed. Other reasons for delays in repairs are in Table 9.
Financial arrangements and credit characteristics
Ninety-four percent of the minitractors were purchased on credit 74% from
banks, and 20% from dealers. Credit purchases were made easier by the BANPRES
program, extending the payback period to 72 months, providing a low interest rate
of 10.5%/year, and reducing the land required for collateral from 5 to 2.5 ha (Team
on Selective Mechanization 1979). Sole owners accounted for 81% of the tractor
Arrears on minitractor loans varied by year of purchase. At the end of the 1979
dry season, loan defaults were 0% for 1975 purchases, 12% for 1976, 5.4% for 1977,
15% for 1978, and 4% for 1979. The most important reasons for difficulties in
meeting loan payments are in Table 10.
Table 8. Perceptions of 50 owners as to causes of damage to their units.
Reason Respondentsa (no.)
Poor maintenance 32
Improper driving 19
Driver turnover 18
Distance from workshop 8
Low quality equipment 7
Poor quality workshop service 4
aSome respondents gave more than one answer.
Table 9. Reasons for delays in repairing broken units.
Reason Respondents (%)
Spare parts not available 43
Distance from workshop 24
No time to bring minitractor to workshop 20
No money to pay for repairs 13
ECONOMIC. TECHNICAL AND SOCIAL ASPECTS OF TRACTOR OPERATION IN INDONESIA 91
Because the tractor operator is a key to the length of service life, the 70 operators
were interviewed. Generally, operators were younger and more educated than the
owners (Table 11). About 59% were sons of the owners, 37% relatives, and only 14%
from outside the family. Slightly more than 50% of the operators had no other
occupation. Of those with second jobs, 88% operated their own farm. Most opera-
tors had very little driving experience and training appeared to be inadequate (Table
11). The few organized training courses had been sponsored by dealers (63%), the
government (25%), and jointly (12%). Of the 12 operators who had attended a
course, 5 were taught only driving, 3 only maintenance, and 4 both. Although
dealers agreed to provide training for new owners, few owners operated the units
themselves and they had insufficient knowledge for training the actual operators.
Table 10. Reasons given by 50 minitractor owners for having difficulties in
repaying their tractor loans.
Reason Respondents? (no.)
Minitractor damaged 45
Cannot plow enough area 30
Crop failure 12
Renters do not pay 9
Used for other purposes 6
aSome owners gave more than one reason.
Table 11. Characteristics of 70 minitractor operators.
Formal education (yr)
Driving experience (yr)
92 CONSEQUENCES OF SMALL-FARM MECHANIZATION
The most frequent reasons individuals chose tractor driving were increased
prestige, supplemental income, and job satisfaction (Table 12). Abbas (1977) noted
that operators regarded driving a tractor similar to driving a car, in that they can
listen to the radio while working and it gives them "style."
Operators earn a high income generally 15-20% of the plowing rate. In addition,
the landowner provides snacks and cigarettes to encourage good work. If 30 ha are
cultivated, at $40/ha, the operator's share would be $180-240 for the 60-day land
preparation season. This is a daily wage of $3-4 with meals, compared to a bricklay-
er's or carpenter's $1.20-2.40/day without meals.
The land preparation charge is established jointly by the tractor owners and the
Extension Service each year, although some owners charge less than the agreed rates
to increase demand. The average annual increase in custom rates between 1975 and
1979 has been 33%. About 86% of the area plowed has been custom work for local
farmers but some owners traveled as far as 50 km.
Data collected from each minitractor owner were costs and returns for each season
he operated the tractor.
In November 1978 the Indonesian rupiah was devalued from Rp 425 to Rp 625
to the dollar. To simplify interpretation, all results are presented in dollars using the
current exchange rate of $1 = Rp 625.
Table 12. Economic analysis of minitractors by year of purchase.
Item 1975 1976 1977 1978 1979
Av area plowed (ha/yr) 58.9 63.8 53.5 61.2 57.2
Capital investment ($) 3040 3360 3840 4640 5920
Average fixed costs
Depreciation ($) 547 605 691 828 1066
Interest ($) 219 282 369 497 710
Total ($) 766 887 1060 1325 1776
Average variable costs $/ha 7.56 7.96 9.89 10.72 11.57
Average gross revenue $/ha 19.24 23.27 26.66 31.02 38.35
Break-even area (ha/yr) 65.6 57.9 63.2 65.3 66.3
Annual cash flows ($)a
1974 -3040 -
1975 860 -3360 -
1976 758 1289 -3840 -
1977 761 -1051 1097 -4640 -
1978, 595 961 936 1463 -5920
1979 595 1547 2425 3991 6386
Benefit-cost ratiob 0.91 1.06 0.92 0.98 0.97
Net present value ($)b -412 296 -388 -109 -218
aFor computational purposes, capital investments are assumed to be made at the end of year 0,
that is the year before the tractor was actually purchased. Estimated using a discount rate of
ECONOMIC. TECHNICAL. AND SOCIAL ASPECTS OF TRACTOR OPERATION IN INDONESIA 93
For breakeven point analysis, annual fixed costs were computed as depreciation
plus interest. Annual depreciation was calculated as initial cost less salvage value
divided by the useful life of 5 years. Salvage value was assumed to be 10% of the
initial cash price. Interest was calculated at 12%/year on the declining unpaid
balance and averaged over the 5-year life. Because the price of minitractors increased
each year, total fixed costs have also risen for tractors bought each successive year.
Variable costs included all expenditures on fuel, oil, repair and maintenance, and
the driver's salary. These costs increased each year for all tractors, partly due to
increases in the price of inputs and increases in the repair and maintenance compo-
nent as tractors aged. In 1979, the variable costs per hectare for new tractors were
30% less than for tractors purchased in 1975.
Gross revenue was estimated as the custom operation rate multiplied by the total
area plowed (custom work and own land). This formula assumes that the shadow
price of own land preparation is the same as the cost for custom operation. Although
gross revenue per hectare increased each year as the contract rate rose, gross revenue
per season declined due to falling utilization as the tractor aged. Gross revenue and
variable costs were converted to a per-hectare basis by dividing the total value over
the years of use by the total area prepared. With these data, it was possible to
compute the average break-even area to be prepared per annum over tractor life and
compare this with actual tractor performance. Benefit-cost (B:C) ratios for each
purchase year could also be estimated by discounting the cash flows.
Values used for estimation and results of the break-even and B:R analyses are
shown in Table 12. In only one case (tractors purchased in 1976) was the average
annual use larger than the break-even use. Similarly, 1976 was the only year of
purchase for which (using a discount rate of 12%) the B:C was greater than unity and
the net present value (NPV) was positive. Increasing the discount rate to 15% did not
alter these conclusions. However, in each of the other years, the B:C was close to
When estimating these results, all capital investments were assumed to be made at
the end of the year before operation started. Although this makes no difference if the
tractor was actually purchased at the beginning of the wet season, it will underesti-
mate the B:C and NPV for later purchases. Computations were based on cost and
return data for all tractors operating during the respective years. Yet, 1978 tractors
did not operate in 3% of the season following purchase, 1977 models in 7%, 1976
models in 10%, and 1975 models in 20% (Table 6). Consequently, if seasons during
which tractors were inoperable were taken into consideration, the B:C and NPV
would be lower than in Table 12. In addition, the computation of B:C and NPV was
influenced by the fact that only those tractors purchased in 1975 had been fully
depreciated. The salvage values used for tractors purchased in other years were the
Minitractors have been used in Sidrap and Pinrang Districts for several years.
Evaluation of data collected from 10 owners who purchased minitractors from 1975
through 1979 showed that, even when purchased with subsidized credit, these
94 CONSEQUENCES OF SMALL-FARM MECHANIZATION
tractors were not economically viable. Two problems appeared responsible for this
situation. First, breakdowns reduced the available working time during the season
and the useful life to less than the 6 years assumed in the loan repayment schedule.
Second, as the number of tractors introduced increased use declined.
The low man-to-land ratio suggests a shortage of labor (human and animal) for
land preparation in Sidrap and Pinrang. And because minitractors did not displace
hired labor (Bernsten 1981) there were no negative social welfare impacts. Yet, unless
the life of the tractors can be extended to at least 5 full years, and their number held
down to a level allowing for sufficient use of each, tractors will not be an economi-
cally feasible alternative to existing techniques.
Abbas, S. 1977. Perspective of agricultural mechanization in Indonesia and South Sulawesi.
Agricultural Extension Service. 1980. Internal data on tractor sales in the province. Ujung
Pandang, South Sulawesi.
Agricultural Extension Service and Association of Devotees of Agricultural Mechanization
in Indonesia. 1976. Feasibility study of tractor development in Barru, Enrekang, and
Tona Toraja Districts, South Sulawesi. Ujung Pandang.
Bernsten, R. H. 1981. Effect of minitractor mechanization on employment and labor use
intensity, Sidrap and Pinrang Districts, South Sulawesi, Indonesia. The Consequences
of Small Rice Farm Mechanization Project Working Paper 32. Los Bafios, Laguna.
B. P. S. (Biro Pusat Statistik). 1980. Statistical handbook of Indonesia. Jakarta.
Consequences Team. 1981. Consequences of land preparation mechanization in Indonesia:
South Sulawesi and West Java. Paper presented at the Regional Seminar on Appro-
priate Mechanization for Rural Development, Jakarta, Indonesia.
Directorate for Technical Agriculture. 1979. Survey for the possibility of using small tractors
in Sidrap and Pinrang Districts, South Sulawesi. Jakarta.
Directorate of Food Crops. 1975. Tractor development study in Gowa, Maros, Pangkep,
Polmas, and Soppeng Districts, South Sulawesi. Jakarta.
Gadjah Mada University. 1976. Survey for agricultural tractor development at Bantaeng,
Bulukumba, Sinjai, Wajo, Bone-Bone, Tekalar, Luwu Districts, South Sulawesi.
Faculty of Agriculture, Yogyakarta.
Parusengi, D. 1972. Possibility of using small tractor for people's farming in South Sulawesi.
Fatometa IPB, Bogor, Indonesia.
Team on Selective Mechanization. 1979. Owning and operating a tractor in South Sulawesi
(manual). Ujung Pandang.