Agribusiness value chain in Southeast Asia

Agribusiness value chain in Southeast Asia
Agribusiness value chain in Southeast Asia

Agribusiness value chain in South East Asia

The agribusiness value chain is extensive and offers significant room for expansion. The agribusiness value chain in Southeast Asia, which includes agriculture, food processing, and services related to food (such as food retail and restaurants), is responsible for over a third of South Asia’s GDP. Future growth will be fuelled by urbanization, rapid income growth, and population increase, which will shift demand to higher-value goods (such as branded premium rice, horticulture, and livestock), as well as higher processing and food-related services. By 2030, South Asia’s demand for agro-food goods and services is anticipated to nearly treble, hitting $1.5 trillion.

Since post-farm operations like shipping, processing, and retail account for around 55% of the sector’s total worldwide value, the growth of the agribusiness sector drives economic activity far beyond the farm. Investments in the agro-food processing sector have the highest input and income multipliers of any sector, and their employment impact is roughly 2.5 times greater. For reasons of flavor, convenience, and a preference for fresh food over frozen, the agricultural industry in every country continues to be domestic in nature despite increased commerce in food items. In certain countries, like Afghanistan, 90 percent of manufacturing jobs are in the food processing sector.

Global experience demonstrates the critical role that the growth of agro-food value chains plays in reducing rural poverty and generating off-farm employment, particularly for women. The productivity and revenue of underprivileged farmers are frequently improved by the rising demand for higher-value agricultural products and contacts with increasingly affluent consumers (e.g. through backward linkages as discussed below). Furthermore, women may benefit disproportionately from some of the agricultural goods with the greatest growth potential, such as dairy.

To take advantage of this potential, there are three major obstacles to overcome:

The competitiveness/productivity challenge:

While downstream activities are still small and informal, resulting in low productivity, upstream components of the value chain continue to be plagued by low agricultural production and high waste. Diversification to more productive systems is hampered by outmoded support regimes (support prices for cereals, agriculture input subsidies, etc.). Trade rules that are distorted also impede competition, isolating the sector and restricting growth.

The small-holder challenge:

Because most agricultural production takes place on a small scale, it is difficult for processors to provide a consistent supply of high-quality goods at competitive prices. Some governments have implemented counterproductive measures as a result of worries that large processors will take advantage of smallholders by integrating vertically with intermediaries/aggregators or by importing the products.

The natural resources challenge:

A significant portion of the agricultural growth in the area has been expensive in terms of natural resources. Particularly, significant direct subsidies (e.g., irrigation costs in Pakistan barely cover 10% of the cost) and indirect subsidies (e.g., free power allows farmers in Punjab, India, to pump beyond sustainable levels) are to blame for the excessive use of water. Rapid income growth, urbanization, and climate change all put additional strain on available land and water resources. The food business also experiences supply disruptions and unstable prices as a result of climate change.

Approach for Agribusiness value chain:

This section focuses on how the South East Asian agribusiness sector can be made more competitive within the context of agricultural growth, taking into account the interface between agriculture and agro-processing. The main objectives are to-

  • Based on global benchmarking of productivity, output (including trade), and consumption along the key value chains, evaluate the potential of agribusiness in Southeast Asia;
  • Talk about the major obstacles that prevent this potential from being realized (mostly for agribusinesses but also for primary agriculture, given the interlinkages).
  • Provide ways to overcome these obstacles while promoting sustainable agriculture methods and encouraging beneficial reciprocal relationships between processors and smallholders.

The South Asian Association for Regional Cooperation’s eight members is all included in the analysis’s discussion on agriculture (SAARC). All for-profit endeavors that link the agricultural value chain, from farm inputs to retail, dining, and lodging, are referred to as agribusiness. A variety of value chains (rice, meat, dairy, poultry, aquaculture, and horticulture) are taken into account to give a comprehensive perspective of domestic and international competitiveness. A variety of papers and research on the other nations are coupled with data from enterprise surveys, governmental sources, and trade databases, as well as first-hand interviews and field trips to Afghanistan, India, Pakistan, and Sri Lanka. 36 lead firms were interviewed about their history, factors contributing to their success, challenges they faced along the road (especially in regards to policy-related concerns), and an outline of their future plans for investment in growth or diversification. To determine how the relationship can help producers, the degree of any backward links to suppliers was investigated. The impact and response to direct purchase bans were also looked at.

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Md. Masudul Hassan
CEO & Chairman of this Portal. Md. Masudul Hassan is an entrepreneur as well researcher. Member of Agrilinks is part of the U.S. Government's Feed the Future initiative. He Performed Numerous Research Regarding Agribusiness.