Asean as Food Basket Bogor 05-10-1
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Transcript of Asean as Food Basket Bogor 05-10-1
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R. Dy, UA&P, March 2010R. Dy, UA&P, May 2010
Prof. Rolando T. Dy, Ph.D.Executive Director, Center for Food and Agri Business
Dean, School of ManagementUniversity of Asia and the Pacific
ASEAN AS A GLOBAL FOOD BASKET:
Challenges, Opportunities and Global Competitiveness
Bogor, IndonesiaMay 2010
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• Role of Agriculture and Agribusiness
• The Global Picture: Challenges and Opportunities
• The ASEAN Global Presence
• The ASEAN Strategic Advantage
• Competitiveness Guidelines
• Challenges
• Food for Thought
OUTLINE
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• Economic – contribution to GDP, food, raw materials for processing, and exports
• Linkages – user fertilizers, machinery, transport, storage, finance and trade
• Livelihood - jobs
• Environment - impact of water use, deforestation, coral reefs, climate change
Source: World Bank, World Development Report 2008; Author, 2010
STRATEGIC ROLE OF AGRICULTURE
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• Strong synergies between agriculture and economic development
• Dynamic and efficient agribusiness spurs agricultural growth
• Strong links between agribusiness and smallholders can reduce rural poverty
- WDR 2008
AGRIBUSINESS AND ECONOMIC GROWTH
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AGRICULTUREGrains, fiber, fruits,
vegetables, tree crops, fishery,
aquaculture
SERVICES-Banking
-Transport-Storage-Trade
-Consulting-Government
INDUSTRY-Processing- Fertilizers
- Machineries
Farm Inputs
Food &
Raw Materials
AGRIBUSINESS AND SECTORAL LINKAGES
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Agriculture as % of GDP
Agribusiness
as % of GDP Multiplier
Indonesia 20 33 1.6
Malaysia 13 36 2.8
Thailand 11 43 3.9
Argentina 5.6 32.2 5.8
Brazil 7.5 26.6 3.6
Chile 8.5 32.1 3.8
Costa Rica 12.8 32.5 2.5
Source: World Bank (2008), Guilhoto ( 2004 ), Jaffee (1999).
AGRIBUSINESS AND MULTIPLIERS
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THE SHARES OF AGRICULTURE AND AGRIBUSINESS IN GDP CHANGE AS INCOME
RISES(WDR 2009)
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THE RATIO OF FOOD PROCESSING TO AGRI. VALUE ADDED RISES WITH INCOME
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GLOBAL TRENDS
• Diversification toward high-value production - a demand-driven process in which the private sector plays a vital role
• Higher incomes, urbanization, and changing preferences cause domestic consumer demand for high-value products
• Food spending is shifting from grains and staples to vegetables, fruits, meat, dairy, and fish.
• Demand for ready-to-cook and ready-to-eat foods is also rising, particularly in urban areas.
- IFPRI, 2007
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THE GLOBAL CHALLENGES
Pressure on food supply
Rising energy costs
High fertilizer costs
Increasing land scarcity
Increasing water scarcity
Climate change
Stringent food standards
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Pressure on Food Supply
• Growing demand for food, feed, and biofuels
• Industrialization, urbanization and infrastructure reduce prime farm lands
• Less water for agriculture
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Rising Input Prices
Energy and fertilizer• Sustained demand for food and bio-
fuels production
• No/few new discoveries of large oil fields (peak oil?)
• Non-renewable supplies of natural gas (urea-N) phosphate (P) and potash (K)
• Sources limited to few countries
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Land and Water Scarcity
• Conversion of farm lands to many uses
• Competing water use: agriculture, industry, infrastructure, housing
Today: agriculture accounts for about 70% • Climate change
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Climate Change
• Increasing variability
• Rising intensities of droughts, floods, and typhoons.
• Impact on farm areas and yields
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Food Safety Standards
New non-tariff barriers
• New opportunities are stifled by rigorous safety and quality standards of countries, processors and retailers
• Traceability certifications can be costly for SMEs
• Many developing, agri-exporting countries are ill-prepared.
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GLOBAL OPPORTUNITIES
• Rising incomes and wealth in Asia - China, India, ASEAN
• Supply chain transformation
• Bio-fuels boom
• Technology advances
(Life sciences + ICT)
• Liberalized trade
• Cross-border investments
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• Moving goods efficiently
• With faster turnaround
• Multi-points sourcing
• Lower final costs to consumers
Impact: Countries, regions and firms with better logistics have the competitive edge.
Supply Chain Transformation
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• Bio- ethanol
Raw materials: sugarcane,
cassava and sweet sorghum
• Bio-diesel
Raw materials: palm oil, palm kernel oil, coconut oil, jatropha(??)
Biofuels (Mandated In Many Countries)
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• GMO impact of increasing yield and shelf life, better nutrition, cost-effective plant architecture, nitrogen-fixing trait, and elimination/reduction of cost of farm chemicals use.
• ICT impact on connectivity: rapid transmission of market signals, market transactions, new technologies, and decision-making
Technology advances (Life sciences + ICT)
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Liberalized Trade
• AFTA
• China-AFTA
• Bilateral FTAs
• APEC
• WTO
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Cross-border investments
• FTAs enlarge markets, lift economies of scale, and attract foreign direct investments (FDI)
• Improving risk profile attracts attract foreign capital into emerging economies
• Simplified customs and quarantine• Lower barriers of nationalism
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Rising incomes and wealth in Asia - China, India, ASEAN
• Population size
• Rapid economic growth
• Fast-rising middle class
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Population Sizes, 2008
1,326 M
1,140 M 192 M142 M
128 M
228 M90 M
86 M
67 M
49 M
27 M
15 M
6 M5 M
0.4 M
ASEANASEAN
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• China: 1,326 M
• Ave. economic growth: 10% p.a.
• 300 M middle class (mostly in the coastal cities)
• Olympic and Expo dividends
China Market
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• "By 2025, China will have 221 cities with more than one million inhabitants – compared with 35 in Europe today – and 24 cities with more than five million people."
• "By 2030, 1 billion people will live in China's cities… 170 mass-transit systems could be built…40 billion of square meters of floor space will be built in five million buildings—50,000 of which could be skyscrapers.“
Source: Mckinsey Global Institute, June 2008
China in 15-20 Years
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• Mainland China has:
22 provinces
5 autonomous regions
4 municipalities.
• 20 provinces have population of over 30 million!
• Each province is a different country!!
China Market
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2004 2007 2008 (e)
Consumer Spending
$ billion
758 1,160 1,226
Food Spending
$ billion
276 295 405
China Consumer MarketLarge Size, High Growth
Shanghai GDP surpassed Hong Kong’s in 2009
Source: Euromonitor
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Key agriculture and food imports:
• Vegetable oils
• Fresh fruits
• Seafoods• Raw materials (rubber, hides, cotton,
etc.)
China Food Market
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China
• Since 1978, agriculture growth has exceeded the growth of population by nearly five times, transforming the country's food economy.
• But, with 240 million small farms (ave. < 0.6 ha), there are challenges in moving the system into a modern, vertically integrated and able to meet the nation's increasing demand for safe, traceable and reliable food.
Source: Huang, L.(2008) Regoverning Markets Programme http://www. [email protected]
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• Supermarkets and hypermarkets are expanding and packaged food is getting more common.
• From 2000 to 2008, the average real annual growth in retail sales of packaged food was 10.8% on the mainland, way above the average 4.2% in the Asian region as a whole.
- HKTDC (March 13, 2009)
China
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“Nowhere in the world is there a market like this – nowhere. To me, the 21st
century will be the Chinese century. China will change the economic
balance of the world.”
- Guy McLeod, President, Airbus China (China CEO: Voices of Experience by Fernandez and Underwood, John Wiley, 2006)
CEO Quotes
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• Population: 23 M
start of aging?
• High income: ~$20,000 per person
• Food importer: over $3 B a year
Wheat, soybeans, corn
Processed foods
Source: http://www.cepd.gov.tw/
Taiwan
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2004 2007 2008 (e)
Consumer Spending $ billion
195 222 226
Food Spending
$ billion
42 50 51
TaiwanDeveloped Country Lifestyle
Source: Euromonitor
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• Population: 128 M
• High income market
• Aging and declining population
• Large tourists base
JapanRich but Aging
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JapanQuality-conscious but stagnant market
2004 2007 2008(e)
Consumer Spending
$ billion
2,546 2,394 2,391
Food Spending
$ billion
363 330 325
Source: Euromonitor
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Food importer: $60 B a year
• Grains for feeds; some rice
• Meat
• Fruits, vegetables
• Seafood
• Quality and food safety concerns
Japan
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• Consumer Market: 49 M
• High income markets
• Aging population
• Home to Samsung,LG, Hyundai and Kia
South Korea
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2004 2007 2008(e)
Consumer Spending
$ billion
337 492 504
Food Spending
$ billion
50 72 73
South KoreaDeveloped Country, High Density
Source: Euromonitor
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Food import: over $12 B a year
• Grains except rice
• Fruits and vegetables
• Seafood
• Quality and food safety concerns
South Korea
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Rising incomes and wealth
• Global corporations are transforming opportunities for small agricultural producers.
• Transactions along the corporate food chain have increased. Between 2004 and 2006, global food spending grew by 16 percent from US$5.5 trillion to 6.4 trillion (Planet Retail 2007).
- IFPRI, December 2007
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The ASEAN
• Nearly 600 M consumer market• Indonesia 228 M, Philippines 90 M,
Vietnam 86 M, Thailand 67 M, Malaysia 27 M
• Over 150 M middle class• Diverse cultures and markets• Heavy food importer: wheat, meat, fish,
fishmeal, temperate fruits, but a global exporter.
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THE ASEAN
• In the whirlwind of opportunities.
• A global agri-food player: over US$90 B in exports
• Rich resources: land, seas, and people.
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ASEAN COUNTRIES ARE GLOBAL FOOD PLAYERS
Global Rank 1 2 3
Rice Thailand Vietnam India
Palm oil Indonesia Malaysia Thailand
Coconut oil Philippines Indonesia India
Chicken meat Brazil EU Thailand
Coffee, robusta Vietnam Indonesia Brazil
Sugar Brazil Thailand Australia
Banana, fresh Ecuador Philippines Costa Rica
Pineapple, canned
Thailand Philippines Indonesia
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ASEAN COUNTRIES ARE GLOBAL FOOD PLAYERS
Global Rank 1 2 3
Shrimps China Thailand Vietnam
Catfish Vietnam China USA
Canned tuna USA Thailand Spain
Tapioca starch
Thailand Vietnam Indonesia
Pepper Vietnam India Brazil
Cashew Vietnam Nigeria India
Cacao Ivory Coast Ghana Indonesia
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ASEAN Presence in World Food Trade (‘000 tons)
ProductASEAN
Export
World Export
% Share
ASEAN
Remarks
Rice 14,600 28,670 51 2008/09: Thailand, Vietnam, Cambodia
Palm oil 32,223 35,480 91 2008-09: Indonesia, Malaysia, Thailand, USDA
Coconut oil 1,401 1,516 92 2008/09: Philippines, Indonesia
Coffee 1,380 5,376 26 2008/09: Vietnam, Indonesia
USDA
Chicken meat 385 8,183 5 2006: Thailand. USDA
Sugar 6,000 48,180 12.5 2008/09:Thailand, Philippines
USDA
Banana, fresh 1,856 17,666 10.5 2007: Philippines. FAO
Pineapple, canned
896 1,173 76 2007: Thailand, Philippines, Indonesia
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ProductASEAN
Export
World Export
% Share
ASEAN Remarks
Total FisheryProducts
13,582 93,520 14.5 2007: All fishery and aquaculture, FAO (US$ million)
Shrimps 901 3,691 24 2006: FAO
Catfish ~500 ~600 > 80 2008: Vietnam
Canned tuna 480 1,026 47 2004: Thailand, Philippines, Indonesia (Globefish)
Cassava, dried
6,086 6,897 88 2007: Thailand, Vietnam Indonesia.
FAO
Pepper 156 258 53 2007: Vietnam, Indonesia, Malaysia, FAO
Cashew 165 345 47 2007:Vietnam, FAO
Cacao beans >356 2,535 >14 2007/08
Indonesia, ICO
ASEAN Presence in World Food Trade (‘000 tons)
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ASEAN AGRI-FOOD PLAYERS (Revenues of US$1,000 million and over in 2008)
• Wilmar International (Singapore)
• CP Group (Thailand)• Sime Darby (Malaysia)• Olam International (Singapore)• Felda Holdings (Malaysia)
• IOI (Malaysia)• Indofood (Indonesia)• San Miguel (Philippines)• Thai Union Frozen Seafoods
(Thailand)• RGM (Singapore)
• Golden Agri Resources (Indonesia)
• KLK (Malaysia)• SMART (Indonesia)• Musim Mas (Indonesia)• Asia Pacific Breweries Ltd
(Singapore)• Kulim (Malaysia)• F&NHB (Malaysia)• Universal Robina Corp
(Philippines)• Vinafood 2 (Vietnam)
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ASEAN AGRI-FOOD PLAYERS (Revenues of US$300-US$1,000 million in 2008)
• Astra Agro Lestari (Indonesia)• Petra Foods (Singapore)• Thai Vegetable Oil (Thailand)• Halil Karsa (Indonesia)• QAF Holdings (Singapore)• Saigon Beer Alcohol Beverage
(Vietnam)• Liwayway Group (Philippines)• Vietnam Dairy Products (Vietnam)• Mayorah Indah (Indonesia)• Tunas Baru Lampung (Indonesia)
• Ha Hai Company (Vietnam)• Del Monte Pacific
(Philippines)• Top Glove (Malaysia)• Monde Nissin (Philippines)• Khon Kaen Sugar Industry
(Thailand)• Guiness Anchor (Malaysia)• United Plantations
(Malaysia)• Genting Plantations
(Malaysia)• Bakrie Sumatera Plantation
(Indonesia)
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ASEAN Food Retailers
• SM Investments (Philippines)
• Matahari (Indonesia)
• The Store (Malaysia)
• Central Food Retail (Thailand)
• NTUC Fair Price (Singapore)
• Jollibee (Philippines)
• Minor Food (Thailand)
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Selected ASEAN agriculture exports
Values in 2007
Exports($ B)
Imports($ B)
Balance($ B)
Export/Farm Area ($)
Indonesia 23.4 10.5 +12.9 710
Malaysia 20.5 10.6 +9.9 2,710
Thailand 25.0 8.4 +16.6 1,420
Vietnam 11.7 6.1 +5.6 1,500
Source of basic data: WTO, CIA
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COMPARATIVE AGRICULTURE AND FISHERIES RECORD (Revealed Comparative Advantage)
Export Value in$ B INDON MALAY THAI VIET
Fish, etc. 1.6 2.3 2.5
Veggies 0.7 0.2
Fruits and nuts 0.5
Coffee 0.9 1.6
Cocoa and prep 0.9 0.6
Cereals & prep 2.7 0.9
Vegetable oils 6.1 7.0
Seafood prep 0.3 4.0 0.6
Rubber prod 5.5 4.8 8.9 0.9
All products 15.8 12.4 22.8 7.3Products Revealed Comparative Advantage (RCA) >1 (2006)Source: ITC
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INDONESIA as ASEAN Anchor
• Feed Indonesia, then feed the world, was the recent call by President SBY.
• Between 2010 and 2030, Indonesia expects to become one of the world's biggest producers of rice, maize, sugar, coffee, shrimp, meats and palm oil, senior agriculture ministry official Hilman Manan said.
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INDONESIA as ASEAN Anchor• The first area targeted for development is 1.6
million hectares in Papua - the Merauke Integrated Food and Energy Estate.
• We chose Merauke because it's the ideal place for food crop cultivation, such as rice, corn, soybean and sugar cane. Merauke district has 4.5 million hectares of land; 2.5 million hectares are ideal for cultivation,
• The area is flat and has a good climate. Its soil is appropriate for those crops. Sumatra is already congested with other plantations, such as palm oil, and Kalimantan is already full of mining areas and many plantation areas also. - by Hilman Manan (AFP Report, Feb 21, 2010)
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Factor endowmentDifference in productivity
and costsDynamic economies of scale
Source: Colliers and Venable (2007), Eifert, Gelb and Ramachandran (2005), and Wood and Mayer (2001) as quoted in the World Development Report 2008
SOURCES OF COMPETITIVE ADVANTAGE
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Factor endowment Natural resources
Land, Water, Sea Human capital
Quantity and Quality
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Business climate Infrastructure Institutions
Productivity and Cost Drivers
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On Business Climate
Good macroeconomic fundamentals Reasonable fiscal and external
balances, realistic exchange rate, low inflation and interest rates, competitive markets
Social and political stability. - ADB (2005) Philippines: Moving Towards a Good Investment Climate.
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Infrastructure availability and quality of roads and ports, telecommunications, power and water supply.
Maintenance of assets
- ADB (2005) Philippines: Moving Towards a Good Investment Climate.
On Business Climate
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Governance and institutions: Transparency and efficiency in regulation,
taxation, and legal system Strong and well-functioning financial
sector, labor market flexibility Skilled labor force.
- ADB (2005) Philippines: Moving Towards a Good Investment Climate.
On Business Climate
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Economies of Scale
Size matters Critical mass of raw materials Early movers have an
advantage
ECONOMIES OF SCOPE Supplier industries and
services in the cluster Support institutions
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• Near Large Markets (China, Japan, Korea)
• Large Internal Market• Natural Endowments (Land, Water,
Seas)• Skilled Manpower• Entrepreneurship• Logistics Hub (Singapore/Malaysia)
ASEAN Strategic Advantage
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IMPORT
• Domestic Price < Border (CIF) Price
EXPORT
• Domestic Price < Border (FOB) Price
GLOBAL COMPETITIVENESS
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PROCESSORSINPUT
SUPPLIERSGROWERS/
PRODUCERSCONSUMERSDISTRIBUTORS RETAILERS
Seed supplierSeed supplierBreederBreederResearcherResearcher
Propagator, etcPropagator, etc..
AbbatoirAbbatoirCanneryCanneryMill, etc.Mill, etc.
FarmerFarmerGrowerGrowerGrazierGrazierPastoralistPastoralist
WholesalerWholesalerImporterImporterExporterExporterTransport company, etcTransport company, etc..
You and meYou and me
RestaurantRestaurantSupermarketSupermarketHotel, etc.Hotel, etc.
SOURCE: New Industrial Development Program (NIDP) – MADE IN AUSTRALIA, Number 1, Series 3, AFFA (2003).
THE SUPPLY CHAIN
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AT THE FRONT OF THE SUPPLY/ VALUE CHAIN:
• The cost, availability, and reliability of raw materials delivered to the processors
DETERMINANTS OF GLOBAL COMPETITIVENESS
Source: AFFA
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ALONG THE SUPPLY/VALUE CHAIN:
• The relative efficiency in value adding
• Importance of financing, manufacturing, packaging, branding, marketing and distribution.
DETERMINANTS OF GLOBAL COMPETITIVENESS
Source: AFFA
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When raw materials are priced below world prices:
Processors are able to compete in price-sensitive markets provided supply chains are efficient.
Source: AFFA
AGRO-INDUSTRIAL COMPETITIVENESS
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• Inter-connectivity of roads to ports
• Land consolidation
for large scale raw materials
• Supply chain efficiencies
IMPLICATIONS
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Where raw materials are priced at near world prices: good marketing innovative product development a sound understanding of
consumers are keys to compete
in value –sensitive markets
Source: AFFA
AGRO-INDUSTRIAL COMPETITIVENESS
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• Investing in marketing and export development
• Investing in product R&D
• Investing in market research and intelligence
IMPLICATIONS
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Where the prices of raw materials are higher than those of competitors:
it would be tough to develop products for the export.
Source: AFFA
AGRO-INDUSTRIAL COMPETITIVENESS
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Address longer term issues of:
• productivity
• plant efficiencies
• logistics
• scale
IMPLICATIONS
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• Increase Increase farm productivity farm productivity
• ExpandExpand market-led diversification market-led diversification
• Promote Promote non-farm and off-farm non-farm and off-farm jobsjobs through supply/value chain through supply/value chain linkageslinkages
RESPONSE TO THECHALLENGES AND OPPORTUNITIES
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AGRICULTURE pathways out of poverty
Increase productivity in food sectorConnect smallholders to rapidly
expanding high-value horticulture, poultry, aquaculture, as well as dairy markets
Generate jobs in the rural nonfarm economy.
Source: World Bank, WDR 2008
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RESPONSE TO THE CHALLENGES
Rising energy costs: ENERGY FROM BIO-MASS AND BIO-FUELS?
High fertilizer costs: GOING ORGANIC?
Increasing water scarcity: R&D into less water intensive crops and dryland crops
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RESPONSE TO THE CHALLENGES
Climate change: mitigation, preparedness, and R&D
Stringent food standards: Laboratory facilities, trainings in GMP and HACCP
Strategic Alliances: supply chain, global marketing, and R&D
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R & D is a major catalyst of agriculture growth in competitor countries.
Education and roads are next.
RANKING OF PUBLIC INVESTMENT EFFECTS ON SECTORS
(INTERNATIONAL EXPERIENCE)
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Item China India Thailand Vietnam Ranking of Returns in Agriculture Production
Agriculture R & D 1 1 1 1 Education 2 3 3 3 Roads 3 2 4 4 Telecommunications 4 - - 2 Irrigation 5 4 5 5 Electricity 6 8 2 - Soil and water conservation
- 6 - -
Item China India Thailand Vietnam Ranking of Returns in Poverty Reduction
Agriculture R &D 2 2 2 2 Roads 3 1 3 4 Education 1 3 4 3 Telecommunication - - - 1 Electricity 4 8 1 - Irrigation 6 7 5 5
Source: Shenggen Fan (2005). The Role of Agriculture in Poverty Reduction: Evidence from Asia. IFPRI
RANKING OF PUBLIC INVESTMENT EFFECTS ON SECTORS(INTERNATIONAL EXPERIENCE)
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FACTORS IN AGRI DEVELOPMENTFACTORS IN AGRI DEVELOPMENT
MACRO ECONOMIC POLICIESPUBLIC
INVESTMENT
INFRASTRUCTURE AND R &
D
INSTITUTIONS
(Bureaucracy)
LAND MARKETS AND LAND
LAWS
PRIVATE INVESTMEN
TS
(INVESTMENT
CLIMATE)
HUMAN CAPITAL
AND EDUCATION
POLITICS, ELECTIONS
CONTINUITY
AGRICULTURE
DEVELOPMENT
ACCESS TO NATIONAL
AND GLOBAL MARKETS
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FOOD FOR THOUGHT
Know your enemy, know yourself, and you can fight a hundred battles with no danger of defeat. When you are ignorant of the enemy but you know yourself, your chances of winning and losing are equal. If you don’t know your enemy or yourself, you are bound to perish in all battles.
- Sun Tzu, The Art of War as cited by Ghemawat,Strategy and the Business
Landscape, 2006
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FOOD FOR THOUGHT
Globalization is about
producing where it is most cost effective, sourcing capital from
where it’s cheapest and selling it
where it is most profitable. - N.R. Narayana Murthy, Infosys, 2003 as cited by Ghemawat, Redefining
Global Strategy, Harvard Business School, 2007.
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FOOD FOR THOUGHT
Innovation has become a primary force in determining industry growth and performance.
Unfortunately, a wide gap exists between aspirations to innovate, and the ability to execute.
- Paraphasing The McKinsey Quarterly 2007
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TERIMA KASIH!
MARAMING SALAMAT!
THANK YOU!