Session 1a Agri-Business and Competitive Agro-Industries (1)

7/30/2019 Session 1a Agri-Business and Competitive Agro-Industries (1)

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AGRIBUSINESS & COMPETITIVE

AGRO-INDUSTRIES

David K. Hitchcock

Senior Agribusiness & Infrastructure Officer

FAO - Bangkok


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MY PRESENTATION

Real differences

Sector trends & impacts

Priority policy reforms & institution strengthening

Strategies & interventions for promoting agro-

industries & value chains

Effects of industry standards and qualityrequirements

Challenges ahead


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Risk-averse.

Limited internalresources.

Poor access to externalresources.

Shock-sensitive low threshold.

Poor or non-existentbusiness skills.

Risk-takers.

Adequate internalresources.

Able to access externalresources.

Shock-proof - buffersystems in place.

Proven survivalbusiness skills.

Real Differences

SMALL HOLDERS AGRI-BUSINESSMEN


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Real DifferencesSMALL HOLDERS AGRI-BUSINESSMEN

Inaccessible markets.

Independent decision-makers household.

Planning flexibilitylimited to < 1 week.

Reluctant tocooperate.

Input supply, landtenure, food security.

On their doorstep.

Corporate decision-making.

Extended planningtime 6 12 months.

Require cooperationand organization.


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SECTOR TRENDS & IMPACTS


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General:

Emphasis on market-driven systems;

Role of private sector important;

Smallholders becoming commercialized; &

Agribusiness & agro-industry policy reforms &

investment accelerating pace of AAdevelopment.


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Agrifood Systems:

Soaring food prices - primary production more viable

Higher incomes demand for high value commodities

Technological changes - value addition

Trade liberalization - cross border demand

Urbanization -product quality & delivery standards

Changing diets - more meat, fish & fruits

More women earning - processed or pre-prepared

Global manufacturing - value addition


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Organizational & Institutional Changes:

Growing concentrations - retail & processing

Larger agribusiness enterprises - economies of scale

Increasing private sector standardsfood quality &safety

Food transactions - increasing use of contracts Retailers/manufacturers - rely on specialized

procurement/dedicated wholesalers

Sale of food - supermarkets replacing local markets


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Positive effects:

Increases value addition opportunities.

Agro-processing stimulates demand & market

size.

Exporters/agro-processors provide crucial inputs

& services. Agro-industries stimulate innovation.

Encourages productivity & improves quality.


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Negative effects:

Standards and contracts difficult for small-

holders.

Small-scale agro-processors unable to compete

with large scale manufacturers.

Traders in local markets squeezed out byspecialized procurement practices & certified

products.


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Agribusiness Development is context-specific

& dependent on:

The product sector & market requirements;

Development stage of the country;

Ag sector policies, institutions & services;

Government action to promote A&A

(If agribusiness is to play a key role in reducing poverty, Government needs to

create enabling conditions, while monitoring & taking steps to protect &

enhance farmers & others most likely to be affected by agri-business)


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POLICY REFORM &INSTITUTIONAL STRENGTHENING


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POLICY REFORM &

INSTITUTIONAL STRENGTHENING

The business environment is an importantdriver for domestic & export agro-

enterprises, but it is not very conducive toA&A. Many countries have:

Complex laws & regulations governing business,

Ineffective intellectual property rights; Inadequate commercial services;

Lack of infrastructure;

Ineffective local governments; &

Weak information & communication systems


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POLICY REFORM &


Policy environment requires:

Legal & regulatory frameworks that define rules &determine rights with respect to resources and businessoperations;

Strengthen public sector cooperation with the privatesector;

Commodity, regional industrial & professional basedassociations inc producer ass & cooperatives;

Trade-offs between pace & nature of agro-industrialdevelopment & poverty; and

Institutional mandates for influencing, regulating &

supporting PS investment in AA.


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POLICY REFORM &


Legal & Regulatory Frameworks:

Covers rules, rights & obligations for resources,assets & business operations.

Level of protection of intellectual property rights.

Legal or procedural preferences favoringgovernment owned/assisted enterprises.

Employment/contractual conditions & distribution

of benefits from agri-business development.


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POLICY REFORM &


P-P-P Cooperation:

Requires communication/cooperation between

public and private sector; Public investment support of private sector

innovation/product development mobilizesassets, knowledge & capacities of A&A;

Policy attracts foreign investments & access totechnologies; &

Enhances effectiveness of regulatory framework& PS compliance.


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POLICY REFORM &


Institutional Support:

Commodity, regional, industrial & professionally-based associations, including producerorganizations & cooperatives play a key role in:

Connecting producers and clients;

Vocalizing view points;

Taking collective actions;

Networking & facilitating linkages;

Providing training, technology & legal support.


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POLICY REFORM &


Trade-Offs include:

Rapid agro-industrial development can displacesmall farmers, processors, stores and traders.

AA policies unlikely to address food insecurity

and poverty by themselves.


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POLICY REFORM &


Institutional Mandates:

Very few government department mandatescover all issues that enable/inhibit AA.

Mechanisms are required to strengthen linkagesamong public agencies responsible for policies,institutions and services impacting on AA


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AGRO-INDUSTRY & VALUE CHAINS

PROGRAMS


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AGRO-INDUSTRY & VALUE CHAINS

PROGRAMS

An increasing need for value chain programs that:

Improve delivery of services;

Create value addition for small farmers; &

Help farmers respond to changing markets and

consumer requirements.

These programs should complement AA policy

reforms and institutional strengthening.


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AGRO-INDUSTRY & VALUE CHAIN

PROGRAMS

The programs should be designed tocomplement AA policy reforms andinstitutional strengthening through:

Business linkages;

Reducing transaction costs;

Aligning capacities of farms & firms;

Ensuring fair governance within chains;

Improving market practices, strengtheningproducer organizations; &

Upgrading technologies.


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PROGRAMS

Key lessons Strategies & Interventions:

PPP must ensure that specialized PS management skills& technical expertise is directed at benefiting smallfarmers & processors.

Entrepreneurial capacities of small farmers must bestrengthened to understand/meet timing, quality & safetyrequirements of the supply chain. Capacity building mustaddress start-up, financing & development of

small/medium agro-processing enterprises. Value chain programs should facilitate and support FBO

& producer organizations they provide economies ofscale & platform for small farmers to do business. Butthey must be profitable & business management &

governance very important.


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PROGRAMS

Key lessons Strategies & Interventions:

Financial & business services to small farmers &processors important reduces costs and expandsoperations, especially where transaction costs-to-outputhigh. Contractual arrangements critical.

Reduce vulnerabilities by building capacities of chainparticipants to innovate, diversify or exit as marketschange.

Comparative advantage & investment appraisals beforeimplementation & monitoring of impacts & benefitsessential to reduce vulnerabilities.

Public-Private sector engagement ensure AA are rules-based & non-discriminatory & committed to good

governance, development & poverty reduction.


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INDUSTRY STANDARDS & QUALITYREQUIREMENTS


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INDUSTRY STANDARDS & QUALITY

REQUIREMENTS

Industry standards:

Manage risks relating to product safety & quality;

Enable comparisons of prices between suppliers,

Reduce transaction costs; &

Strengthen consumer confidence & loyalty.

Branding & labels can differentiate products.

Certification informs consumers about supply chainpractices.

Standards ensures consumer protection & provides bothincentives and sanctions for improvement of productquality & safety.


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INDUSTRY STANDARDS & QUALITY

REQUIREMENTS

Unlikely poorer countries can keep up & benefit fromadvances in product specification & certificationrequirements, without access to sophisticatedtechnologies, efficient & low-cost communication &information systems, adequate infrastructure &

supportive institutions & services. Need to initiate dialogon standards between P&P on:

Strengthen compliance & certification & reduce costs;

Reform of institutions & legal frameworks;

Investments in physical facilities, labs, equipment, infra;

Support institutions responsible for food safety, control offraud, animal & plant health;

Technical assistance to establish PPP


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RESPONDNG TO CHALLENGES


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RESPONDING TO CHALLENGES

Information & Analysis:

Analysis of trends, changes & factors affecting

transformation of agri-food systems;

Characterization & appraisal of structure of agro-industries and value chains;

Analysis & benchmarking to identify strategies for

agro-industry &value chain development; and

Development of information & knowledge managementsystems for A&A as well as small-scale producers and

processors.


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Enabling Policies, Institutions & Services: Strategies for improving AA policies, legal and regulatory

frameworks, institutions & services;

Incorporation of AA strategies and actions into country-level

program frameworks & strategic plans for agricultural

development;

Reinforce communication & cooperation with PS firms,

foundations and NGOs active in AA development;

Reinforce compliance & certification systems for food safety

standards and industry quality requirements;

Reinforce market information services & financial institutions &

services for market-oriented farmers and agro-enterprises; and

Provide basic infrastructure to improve market access and reduce

business costs.


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Support to Agro-Industries & Value Chains: Appraise market & agribusiness opportunities & develop sound

methods for prioritizing agro-industries & value chains;

Facilitate innovative arrangements linking smallholder farmerswith commercial farmers, exporters or agro-processing firms inlong-term relationships

Identify innovative micro-financing products that facilitate theparticipation of small farmers in agribusiness ventures;

Design & implement initiatives that improve entrepreneurialcapacities of smallholder farmers and small agro-enterprises to

participate in value chains for high-value products, includingbranded and certified products; and

Identify & use innovative mechanisms to link public funding withprivate sector resources.


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Thank you and enjoy the

workshop!

Documents

Session 1a Agri-Business and Competitive Agro-Industries (1)