Drivers of Competitiveness for Agribusiness in South Asia - Agribusiness Education and Research International

Drivers of Competitiveness for Agribusiness in South Asia

The growth of the agricultural sector in South Asia will depend on the ability of businesses to adopt new technologies and inclusive business models, build relationships with customers, and adapt to shifting consumer needs. The public sector should play a role in promoting the growth of agribusiness, according to lessons learned from leading companies. A key concern is how leading companies bring new technology, create new products, capitalize on existing research, and work with local communities to help the industry more broadly.

Lead companies are crucial in developing logistics and expanding markets. They inspire others, draw in and disseminate knowledge, and play a creative role in the field in which they operate, which is maybe most significant. Lead companies in the agro-food industry:

Farmers should be given access to markets, inputs, information, and money, and integration into the value chain should be encouraged.
both direct and indirect employment in support services such as packaging, distribution, and advertising
taxation and social assistance
create wholesome food
The bulk of the high-value agricultural exports come from
show what can be done in terms of innovation and productivity
may be important for addressing environmental problems
Share a common interest in the success of the value chain with their suppliers

Driving development throughout the supply chain

Smallholders, who produce the majority of the raw materials in the region, have forced leading companies in South Asia to forge connections with them. Joint ventures with smallholders, including contract farming in its most advanced form, have become more and more important to businesses. To connect a big number of small-scale producers to a more powerful agribusiness company, there are numerous additional, more adaptable options available. Even if these agreements have their difficulties, they can be effective ways to spread new technology, encourage diversification, increase farmer returns, guarantee timely deliveries of the proper quality for a processor or exporter, and finally boost productivity.

Facilitating smallholder access to markets

Small-scale producers in South Asia have a tough time reaching markets effectively due to a lack of market information and logistical issues. Delivering the correct product, in terms of quality or market expectations, at the right time and at the right price requires market information. The small-scale manufacturer is significantly disadvantaged without a thorough awareness of these requirements, ideally for more than one market. Another major barrier for small-scale farmers who might not have access to regular transportation is the distance to the market. Perishable product marketing is typically severely hindered by transport times to markets that exceed four hours. The logistics and financial requirements for exporting a product are typically out of reach for small-scale farmers. In any case, before export, additional processing might be required.

Smallholders could otherwise find it difficult, if not impossible, to access market possibilities and linkages without the help of links between producers and downstream agribusinesses. On the export front, small-scale farmers may access international markets thanks to rice processors. By guaranteeing that farmers produced the “correct” product for the international markets, the rice processor KRBL in the case of the basmati rice variety Pusa 1121 provided important market information to farmers. Desai F&V and its partners in the banana trade were aware of the logistical challenges involved in transporting perishable and easily damaged crops from the farms to the markets. Desai attained the ultimate achievement of exporting Grade “A” fruit by taking charge of the logistics and directing the process from fruit formation ahead. Desai was able to supply distant urban centers with high-quality bananas.

Links develop between middlemen and producers as well. Citrus, particularly mandarins, has become Bhutan’s main agricultural export, for instance. At flowering, the future crop is sold to contractors who will be in charge of growing it. The post-harvest logistics required to deliver a high-quality product to the exporter are maintained by these contractors, who also support farmers. Additionally, the contractors serve as assemblers for the exporters since they are unable to retain connections with a significant number of farmers. Since farmers could create marketing groups and have direct contact with exporters, the contractor’s position is precarious. The majority of the partnerships are unofficial and founded more on trust than on contracts.

Access to inputs

Extension services are increasingly being offered by lead companies, either alone or in collaboration with the government and development partners. Since 1988, when the government of Pakistan first started involving the private sector, the majority of major companies have joined. Another popular option is for traders and farmers to agree to a future crop in exchange for obtaining inputs on credit; this arrangement sometimes occurs without a documented contract. There are also more formal agreements made, for instance when the customer requires a specific kind. Menthol production in Uttar Pradesh, India, is one instance. Pepsi supplied thousands of small-holder farmers in India who supplied its processing plants with potato varieties appropriate for the production of potato chips.

Mountain Hazelnut Ventures (MHV) was founded in Bhutan in 2010 with the goal of growing and processing hazelnuts. Hazel tissue, cultured plantlets, and seed are all imported by the company from a related operation in China. In three years of operation, 2,000 ha have been planted, and 5,000 farmers have received training. These are delivered to farmers. In this year, commercial harvesting might start. Opportunities for implementing change and reaching distant markets are exceedingly few in a landlocked nation where the majority of the population relies primarily on subsistence farming. This connection between farmers and processors offers a unique chance to generate cash in a difficult situation.

Access to finance

Links to producers further downstream can increase farmers’ access to capital. This is done directly through a number of contract farming agreements, where inputs are given in exchange for subsequent sales of the output. Indirect advantages include banks being more inclined to lend to farmers who have a contract with a processor. For instance, Godrej Agrovet (GAVL) is a diversified agribusiness firm with holdings in oil palm plantations, agricultural inputs, and poultry. 54,000 acres of smallholder output for the oil palm plantation industry are scattered throughout eight states. The farmers are the owners of the land, and GAVL helps them convert to oil palm. Purchased fruits are crushed by GAVL to create crude palm oil (with the potential to reduce the crippling dependence on imported vegetable oils). Banks have been motivated to lend to farmers as a result of GAVL’s involvement, particularly the guaranteed pricing agreements. With the help of the banks, GAVL has created a uniform financing scheme for the farmers. ABT, for instance, offers insurance to their dairy farmers because South Asia’s agriculture insurance market is underdeveloped.

The crucial transition between production systems and consumption is provided by the agriculture industry. This complex industry includes unstable production systems, domestic and international supply chains with various regulatory frameworks, quality regimes, trade access, and subsidies, as well as unpredictably affecting employment and income. However, the agro-industry can have a significant impact on shared prosperity. Therefore, the main recommendation is to make agro-industry policies a key component of the plan for national and regional development.

The urgent need for a new paradigm

The development of South Asia might be significantly impacted by removing the barriers preventing the growth of a competitive agriculture sector while failing to do so could have fatal consequences given the growing problems of water resource depletion and climate change. To promote the removal of the broad rules and subsidies that impede strong, sustainable agribusiness expansion in South Asia, new approaches to assisting the underprivileged and ensuring food security are imperative. Farmers do not have to lose out as a result of the growth of large, influential agribusiness enterprises; instead, many prosperous businesses have built relationships with farmers that have benefited the entire agriculture industry. However, allowing large-scale agriculture to flourish would not benefit all small farmers and may even make many of them more vulnerable. In order to increase agricultural productivity, it is necessary to combine supply-side changes, public support, and more targeted support for the poorest farmers.

A country’s agricultural policies typically change as it transitions from an agricultural-based to an urbanized society. Instead of being production-oriented and emphasizing social protection, agricultural policies now tend to support a more specialized, knowledge-intensive sector made up of larger entities that are receptive to market demands. The sector’s poorest and most vulnerable individuals should be protected at the same time by autonomous social safety net measures. A number of South Asian nations are now transitioning into a new era, as rising agricultural production has freed up labor for other industries and increased consumer demand outside of food. However, agricultural policies must encourage sustainable agribusiness development that is responsive to consumer wants if the domestic agribusiness sector is to realize its promise of increasing incomes and jobs.

Strong leadership and data for the new paradigm

Strong, high-level leadership has been necessary for successful agribusiness sectors to define and implement the agenda, which frequently affects the interests of powerful organizations. Implementing subsidy programs is simpler than modifying them, and fostering a supportive climate for agribusiness inevitably necessitates collaboration across various ministries (such as agriculture, trade/commerce, industry, and occasionally health, infrastructure, and environment). In many nations, it has proven difficult to establish a thorough and universally recognized food safety regulatory framework because SPS laws are often the responsibility of the Ministry of Agriculture while food safety is frequently under the Ministry of Health. Any such reform program in a number of South Asian nations will also include close coordination with the Ministry in charge of social protection in order to protect vulnerable populations who could be at risk during this transformation.

Malaysia created an elite transformation team with the responsibility of coordinating between ministries and advancing a cross-sector agribusiness agenda. The team was made up of highly qualified public sector and international professionals. Such initiatives require constant communication with the private sector to be successful. Establishing steering groups, preferably led by the private sector, with representatives from the various value chain components—including various-sized farms, companies that offer logistical services, and processors—as well as relevant public institutions is a good strategy. These groups can then meet regularly with the government-led agribusiness team to provide advice on how to overcome the subsector’s challenges. The poultry associations in India and Pakistan, for example, are well-organized industry groups in South Asia, but they do not represent the entire value chain and do not play the same official role in policymaking as these value chain steering committees do.

A strategy should consider inputs, logistics, processing, and retail in addition to the farm gate. Additionally, it ought to clearly outline the roles of the public and private sectors while acknowledging that these positions might alter as the industry changes. For instance, it may be justified for the public sector to offer time-limited support to so-called first movers, whether local or international, in regions with limited agribusiness growth.

Knowledge, skills, and market connections are all positive externalities that can be produced by effective first movers. The substantial launch costs and hazards involved in creating new agriculture value chains can be used to defend this initial support. The high transaction costs of connecting investors to smallholders at the initial phase might also be significantly reduced with the help of the state.

Understanding the industry is essential for effective and adaptive policymaking, not the least of which is to guarantee the transparent and efficient use of tax dollars. As goals are met and the agro-food industry develops, policy creation is a continuous process that requires ongoing evaluation and revision. Impact assessments are important in part because policies may have different effects in different areas. For instance, trade policies could hinder goals for economic development and dietary goals. Information is crucially vital for both private actors and policymakers, and institutions like market information systems and extension services play a significant part in this. Registers for farms, livestock, and land can also be used to administer agricultural support programs. Integrated institutions must also keep an eye on how sector policies affect water and soils. It is crucial that the organizations in charge of creating agricultural policies be kept apart from those in charge of payments and regulations.