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State of food security across the 57 member OIC countries; Key drivers of food crisis; A unique OIC-wide food and agriculture cluster approach that identifies opportunities for sustainable growth and investments.
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Food Security & Opportunities in OIC* Markets
By:
Rafi-uddin ShikohE: [email protected]: advisory.dinarstandard.com
Presented at:
April 5th, 2011, Kuala Lumpur
* OIC - Organization of Islamic Conference, 57 member countries
Towards a Halal Economy: The
Power of Values in Global Market
Intro/ OIC
2
• Low-Income, food deficit countries - suffering most. 60-65% of income goes to
food; contrary to developed where it is 10-20%
• Many drivers-- and relevant to developed economies as well. OIC Countries
are some of most impacted.
• Ironically, OIC countries are some of the most agriculturally endowed!
Objective
4
1. State of Global Food Insecurity
1. Current state, impact & drivers
2. Opportunity horizon:
1. OIC* Demographic
2. DinarStandard OIC-wide Industry Clustering
3. Opportunity Hotspots:
1. For industry companies
2. For Investments firms
3. For Major national/ multilateral/ Industry initiatives
* OIC - Organization of Islamic Conference, 57 member countries
Food security: exists when all people, at all times, have
physical, social and economic access to sufficient, safe
and nutritious food
Undernourishment: describes the status of persons
whose food intake regularly provides less than their
minimum energy requirements
Source: FAO - Food and Agriculture Organization of the United Nations
Some basic terms and definitions
Food Insecurity – Current State
6
1. Global food prices continue to rise.
The last six months have seen sharp increases in the global prices of
wheat, maize, sugar and edible oils, with a relatively smaller increase
in rice prices.
The World Bank‟s food price index increased by 15% between
October 2010 and January 2011.
From March in 2010, Corn had increased 52%, sugar, 60%,
soybeans, 41%, and wheat 24 percent.
Feb 2011 WB – Food Price Watch
Food Insecurity – Current State
7
Country Change
in price
(%)
Calorie
Share (%)
P
Kyrgyzstan 54 40
Bangladesh 45 6
Tajikistan 37 54
Mongolia 33 42
Sri Lanka 31 14
Azerbaijan 24 57
Afghanistan 19 ..
Sudan 16 15
Pakistan 16 37
Source: FAO, GIEWS.
Largest Movers in Domestic Prices, June to December 2010; Many OIC Countries.
Country Change
in price
(%)
Calorie
Share (%)
P
Vietnam 46 59
Burundi 41 3
Bangladesh 19 70
Pakistan 19 6
Indonesia 19 50
Mozambique 14 8
Cambodia -11 65
Mexico -9 2
WHEAT RICE
Food Insecurity - Impact
Feb 2011 WB – Food Price Watch
As a result of price rises since June 2010 there
is a estimate net increase in extreme
poverty of about 44 million people in
low- and middle-income countries.
Food Insecurity - Impact
9
Almost 1 billion Undernourished in the world!Global hunger had been declining, but prices are going up again, and
overall still unacceptably high
Feb 2011 WB – Food Price Watch
Food Insecurity - Impact
Stress on developing economies supply as well.
Food Insecurity – 10 Key Drivers
11Copyright 2011 –DinarStandard Research & Advisory
Demand (Population growth, Affluence)
Bio-Energy
Rising Input prices
National subsidies
Lack of investments
Climate change
Loss of agricultural land
Rich & Poor divide
Gluttony/ Waste
Speculation
Agricultural production will have to
increase by 70% by 2050 to feed a
population of some 9 billion people.
-- World Bank
The Foresight Project, report warns
that in the next 40 years, agricultural
land will be lost to urbanization,
desertification, sea level rise and
increasingly salty water. About 24%
of 11.5 billion hectares of vegetated
land has already undergone human-
induced soil degradation.
Food Insecurity – Needed areas of focus
12Copyright 2011 –DinarStandard Research & Advisory
Demand (Population growth, Affluence)
Bio-Energy
Rising Input prices
National subsidies
Lack of investments
Climate change
Loss of agricultural land
Rich & Poor divide
Gluttony/ Waste
Speculation
Investments in: environmentally
sustainable agricultural productivity,
better risk-management tools, less
food intensive bio-fuel technologies,
and climate change adaptation
Values imperative? Social
entrepreneurship, responsible
marketing, compassion, community
service
Objective
13
1. State of Global Food Insecurity
1. Current state, impact & drivers
2. Opportunity horizon:
1. OIC* Demographic
2. DinarStandard OIC-wide Industry Clustering
3. Opportunity Hotspots:
1. For industry companies
2. For Investments firms
3. For Major national/ multilateral/ Industry initiatives
* OIC - Organization of Islamic Conference, 57 member countries
OIC member countries
14
57 mostly Muslim majority countries
Attractive young demographic
Growing economies
Inter-connected by:
Intra-OIC trade mandates
12%-20%
Muslim Lifestyle Market℠:US$ 2 trillion+ ‘Halal’ consumer market
Islamic Finance:US$ 1 trillion, 15-20% growth/year
How do you best identify opportunities
for growth?
OIC Industry Clusters: (Innovative
methodology - to identify Industry
hotspots for growth and investments)
Region-wide Industry Clusters Model
Growing global innovation best practice: Complementary business operations no
longer need to be in close proximity to each other. Rather, a complimentary set of
competencies within various regions combine to deliver a more robust Cluster.
Traditional Close Proximity
Linked Cluster
•Infrastructure
•Testing
•Talent
•Services
•R&D
•Distribution
NEW - Multiple Region Linked
Industry Cluster
Region A
•Manufacture
Region A
Region B
Region C Region F
Region D
Region E
Region G
Region H
Region I
Hub Node
• Eczacibasi, Turkey
• PT Kalbe Farma, Indonesia
• Hikma Pharma., Jordan
Source: DinarStandard OIC Clustering Model, *Diagram illustrative
DinarStandard (DS) OIC-wide Industry Clusters
16
Within the OIC member countries, different strengths in the value-chain of an Industry
exist within a set of OIC wide special economic zones/ regions.
E.g. OIC-wide Pharmaceutical Cluster
TURKEY
Dubai
INDONESIA
Malaysia
Amman
Saudi Arabia
Syria
Karachi
Palestine
Cairo
• Zuellig Pharma Bhd, Malaysia
• Tabuk Pharmaceutical, Saudi Arabia
• Egyptian Int. Pharma. Ind. Co., Egypt
Construction Srvcs.
Auto Manufacturing
Travel/ Logistics
Iran
Select Corporations:
Telecom/IT, Education,
Textile, Defense, Food..
17
DS OIC-wide Food & Agriculture Cluster
TURKEY
INDONESIA
MALAYSIA
Morocco Pakistan
KSA
Iran
Kazakhstan
Nigeria
UgandaIvory
Coast
Egypt
Tunisia
UAE
Source: DinarStandard OIC Clustering Model Analysis - 2011
Jordan
COUNTRY EXPORTS
Indonesia $19,856,280
Malaysia $16,967,888
Turkey $10,701,261
Côte d'Ivoire $4,853,966
UAE $3,276,778
Morocco $3,213,572
Pakistan $3,067,587
Egypt $2,819,462
COUNTRY EXPORTS
Nigeria $2,430,160
Kazakhstan $1,642,431
Tunisia $1,370,454
Uganda $1,364,879
Iran $1,297,363
Cameroon $1,123,178
Jordan $1,035,505
Saudi Arabia $1,017,534
Select Corporations:
Savola Group, Saudi Arabia
Indofood, Indonesia
Felda Hold., Malaysia (Priv.)
KL Kepong Berhad, Malaysia
Turkiye Seker, Turkey (Govt.)
PPB Group, Malaysia
18
DS OIC-wide Food & Agriculture Cluster
TURKEY
INDONESIA
MALAYSIA
Morocco Pakistan
KSA
Iran
Kazakhstan
Nigeria
UgandaIvory
Coast
Egypt
Tunisia
UAE
Source: DinarStandard OIC Clustering Model Analysis - 2011
Jordan
Select Corporations:
Koc Group, Turkey (Congl.)
Group ONA, Morocco, (Congl.)
Sime Darby, Malaysia
Astra Intl, Indonesia (Congl)
Ulker, Turkey
IOI Group, Malaysia
19
Food & Agriculture Ecosystem - Sub-Sectors
Animal & Animal Products (OIC 4% of Global exports)*
Vegetable Products(OIC 13% of Global exports)
Food processing/manufacturing(OIC 7% of Global exports)
Live animals Live trees, plants; bulbs, roots… Preparations of meat, of fish…
Meat and edible meat offal Edible vegetables… Sugars and sugar confectionery
Fish… Edible fruit, nuts… Cocoa and cocoa preparations
Dairy produce; birds' eggs; honey… Coffee, tea, maté… Prep.s of cereals, flour, milk…
Other Products of animal origin... Cereals Prep. of vegetables, fruit, nuts...
Oil seeds and oleaginous fruits… Miscellaneous edible preparations
Lac; gums, resins… Beverages
Vegetable plaiting materials… Residues and food industry waste
Vegetable fats and oils…Service Side
Food service & catering (restaurants, cafes and hotels, hospitals, etc)
Food retailing & wholesale (supermarket, etc)
Food logistics
R & D, Marketing, Financial services, Regulation, Education
* 2009 ITC – World Bank Exports Data
20* OIC - Organization of Islamic Conference, 57 member countries
And the earth hath He appointed for His creatures
Wherein are fruit and sheathed palm trees,
Husked grain and scented herb. Which is it of these
favors of your Lord that ye deny?
Qur'an 55:10-13
OIC Industry Cluster – Value Chain
21
OIC Industry ClustersIndustry Sub-sectors
Sub-Sector Value Chain
Halal Value Chain
Alliances
Raw
Inputs
Marketing DistributionEnd
CustomerProduction/
Operation
New Growth
Markets
Investment
Opportunities
Objective
22
1. State of Global Food Insecurity
1. Current state, impact & drivers
2. Opportunity horizon:
1. OIC* Demographic
2. DinarStandard OIC-wide Industry Clustering
3. Opportunity Hotspots:
1. For industry companies
2. For Investments firms
3. For Major national/ multilateral/ Industry initiatives
* OIC - Organization of Islamic Conference, 57 member countries
Opportunity: Food & Agriculture Companies
1. Look at OIC markets in your sector for:
Growth opportunities.
Halal food value chain
2. Cluster based M&A, technology transfer,
and J/V opportunities
3. Evaluate opportunities at the “Bottom of
the pyramid,” everybody else is doing it.
4. Increased productivity & global
competitiveness
Innovations & Technology - Solving problems/
needs..
Branding & Marketing (German automotive;
Grameen)
OIC Food & Agri Industry Cluster
Opportunity: Investment Firms
1. Food Sector Market Investments - SAMI
Index
2. OIC Food & Agri Cluster - Investment
pipeline
3. Private Equity/ Venture Capital: Majority of
industry players are not on the Public
markets. Private conglomerates, SME‟s.
4. Sharia Compliant PE Funds: Eg.US$1.3bn
Shari‟ah-compliant fund by UK-based
investment company cru Investment
Management, which focuses on commercial
agriculture in Africa. These investments by cru
expect not only strong returns for investors, but
also some much-needed investments in
agriculture in Sub-Saharan Africa.
OIC Industry Clusters
Opportunity: Investment Firms
• Islamic capital needs to
look at the „Halal‟ food
sectors, with long-term (5-
10yr) investment horizon to
build sustainable brands
(5x-15x returns/ 25-50%
IRR in food industry)
• Investors need to do
homework and due
diligence (visit plants/
operations) and have
industry specialist on team.
Mergers/ Acquisitions
Corporate Investments
Angel/VC
Opportunity: Major Initiatives
26
1. OIC Food & Agri Clusters Initiative (as corporate
alliances; multi-lateral initiatives; industry body
initiatives)
Optimizing Halal food value chain of players
Incubation centers (by sub-segments) around
strength // Formal & informal linkages with OIC
cluster of opportunities// develop global successes
Consumer awareness campaigns
Partnering with global values based certification
organization; Fair-trade, organic, going green, etc..
Summary
1. State of Global Food Insecurity
1. Needs: Investment, Productivity, Values
2. Opportunity horizon:
1. DinarStandard OIC-wide Industry Clustering
3. Opportunity Hotspots:
1. Market expansion
2. OIC food & agri cluster investments
3. Major initiatives
He said: “The son of Adam does not fill any vessel worse
than his stomach. It is sufficient for the son of Adam to eat a
few mouthfuls, to keep him going. If he must do that (fill his
stomach), then let him fill one third with food, one third with
drink and one third with air.”
Narrated by al-Tirmidhi (1381), Ibn Maajah (3349); classed
as saheeh by al-Albaani in al-Silsilah al-Saheehah (2265).
29
Business Plan Summary
CONFIDENTIAL
Business Media Research Advisory
Muslim Lifestyle
Market
Islamic
Finance
OIC
Industries
Growth Strategies for
Emerging Muslim
Markets
W: advisory.dinarstandard.com