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Roundtable Inclusive Agribusiness Southeast Asia

Ho Chi Mihn City | Viet Nam | 25 Sep 2015
Southeast Asia is one of the world’s fastest growing regions, where the agricultural sector is of key importance. Unlocking the economic power of Southeast Asia’s smallholder farmers and local agri-food entrepreneurs has become crucial to keep the development pace and secure food and nutrition to the region’s poor. Designed as a series of case-based and practice-oriented roundtable discussions, the Inclusive Asia Roundtable brings together senior business leaders, policy representatives, key development practitioners and research experts involved in the transformation of agricultural value chains in South East Asia. The focus of the discussions will be on unlocking the economic power of South East Asia’s smallholder farmers and local agri-food entrepreneurs to identify on-the-ground actions that will further sustainable agriculture.
The event is being jointly convened by the Global Donor Platform for Rural Development, World’s Economic Forum (WEF) Grow Asia Partnership, Australian’s Department of Foreign Affairs (DFAT), Centre for Development Innovation (CDI) Seas of Change Initiative and Australia’s Food Systems Innovation (FSI) Initiative. The Global Donor Platform is also part of the Steering committee and highly interested in how donors are engaging with the private sector, and together working with smallholder farmers to actually achieve food security. Background research on business cases, regional agribusiness policies and financing approaches gives workshop discussions up-to-date applied analysis to work will be presented alongside strategies to enhance effective peer to peer exchange of experience, to promote inclusive business models, to connect new markets, and to drive more sustainable supply chains.

Dr Paul Teng, Adjunct Senior Fellow in Food Security of the Centre for Non-Traditional Security (NTS) Studies, Nanyang Technological University, Singapore

The event will provide a crucial opportunity to identify successful inclusive business strategies that are already operational and strengthen the capacity of businesses, donors, policy makers and researchers to expand inclusive business activity in the ASEAN region.

Hot topics in the agenda

The Roundtable key topics include:

  • Insights from different approaches to inclusive business models and smallholder livelihood transformation;
  • How to work and reach large numbers of farmers?;
  • Integrating women within inclusive agri-business models;
  • Financing smallholders and inclusive agribusiness in the region;
  • How to get investment capital to innovations that help smallholder farmers;
  • Policies that provide direct or indirect incentives for more inclusive and sustainable agriculture;
  • Defining country specific opportunities and needs.

These topics will be discussed by different working groups to identify implications for policy, business and research. Detailed Business case studies of existing inclusive agribusiness models – from rice to coffee/tea to livestock and fruits and vegetables - from Myanmar, Vietnam, the Philippines and Indonesia will provide participants with valuable and practical up-to date information and are in the process of development.

Welcoming notes and panel

The roundtable was designed to introduce the newly established GrowAsia. Furthermore the organisers aimed at gathering feedback from the private sector and research to include it into its mandate and subsequently advocate for the adaptation of the regional policy approaches of the donor countries. The event served as a platform to connect farmers, private sector and researchers and urge them to agree on a common language and exchange ideas and views on best practices. Focus was set on connecting farmers and developing a practical support guide for the development of inclusive global value chains, while also aiming at promoting sustainable, shared value based investments from the private and public sectors.
The search for new strategies follows the changes in the development assistance framework, which is now focusing on ODA as a catalyzer for private and public investment, as catalyzer for partnerships, rather than stand-alone instrument to promote and support sustainable agriculture. The objective will remain to increase the income and improve the livelihood of farmers and to protect the environment, but the main financial resources will come from the private sector. The Roundtable and the further work of GrowAsia will aim at developing a business model that works across geographies and sectors to help farmers, especially in the course of rural transformation and make farming becomes more and more undesirable.
The panellists agreed that creating shared value should be beyond business strategies. With the changes in the post-2015 development a new generation of stakeholders are coming into the development work - from the private sector with diverse background that will change the processes and support the re-focus on the weak links in the inclusiveness paradigm – namely the farmers. There should be a stronger cooperation and intensified exchange of learning and practical experiences in order to increase the importance of farmers. The support from civil society organisations and research will play a pivotal role in changing the models and policy agendas, in institutionalising lessons learned, in creating pool of specialists and professionalising the field of partnership.
The assistance coming from government and private sector should aim at making systems resilient and sustainable – linking extension services to research and cooperatives. Programmes and projects based on a fixed implementation time schedule and expiration date cannot change the systems on the long run, especially in areas, where structural change is needed. Inclusive programmes enabling farmers to sustainably conduct their business and resiliently face shocks, are the strategies that will have the most profound impact on value chains and finally on sustainable development. Southeast Asia needs more businesses that work in agriculture, who are involved in inclusive models. Governments need to strengthen the structural environment to enable partnerships - with private sector, farmers, civil society, and bring the information and discourse down to the people most in need of it. The panellists seem to agree that GrowAsia needs to serve as a bridge between politics and disadvantaged people, a platform that filters through successful projects and partnerships and shares experiences with the business and governments.
There was also an agreement that at the moment there are no hard laws that will hold the private sector accountable on human rights, there are also no instruments to measure impact of the work and the impact of existing PPPs, there are no approaches getting beyond extension services that look into governance structure and community needs, resilience of farmers’ work remains neglected. Experience in the filed shows that scaling up is taking place and PPP models are working already especially in creating shared values like responsible farming and sourcing, responsible production responsible consumption. But private sector and business are still acting mostly without the institutional support of the local governments. Governmental support and regulation could support for example more directly women’s empowerment investment, which is vital to any inclusive business. All participants agreed that in order to achieve and establish inclusive business models farmers must be provided with global market access and focus should be set also on climate-smart agriculture. Such models bring also profit to businesses and help solve some of the sustainable development issues.

Business Case Livestock

During day 1 at the Roundtable, insights from different inclusive business models were presented, including presentations and discussions about detailed case studies on inclusive business practices, experience sharing, finding of innovative solutions and scaling up procedure. Cases from the coffee, rice, tea, agricultural inputs, livestock, fruits and vegetables were presented and discussed by small groups of practitioners from the different sectors.

Livestock

During the case studies sessions several inclusive business models in different commodity markets were shared with groups of participants. Most of the cases, representing a successful implementation and sustainability, shared one common feature – there were all in some way supported by the government – through targeted support in the planning, in the initial investment or with a broader enabling environment for investments and private sector involvement. This support was based on the shared view that inclusiveness of the farmers is good for the rural economies and therefore a long-term positive strategy to influence and change the food supply and security issues arising with the population growth and rural transformation.
Many of the projects focused on providing extension services such as education and training, but also providing micro finance. Capacity building was identified as the main instrument to help farmers establish themselves on the business side. Throughout the groups and case examples the participants agreed that competitiveness on the market gives farmers leverage and that organized farmers groups are easier target for investment and private sector involvement. Nevertheless the choice criteria for the investment was pre-existing farmers organization and production tools/assets.
The groups identified two common problems, namely the different interpretations of inclusiveness and the difficulties in the establishment of inclusive partnerships/relations arising from the former problem, especially in convincing the private sector to engage and invest. Another barrier to inclusive agribusiness models to flourish is the missing finance provision system that supports farmers. Commercial banks are reluctant to invest in small-scale agriculture; private sector is willing, but lacking on implementation side. Especially in regard to finance the relation between private sector, donors and public engagement remains difficult. Donors do not know how and where exactly to engage with public investments, due to missing local knowledge, while private sector is not looking forward to working with public investment, because of the reporting requirements. Private sector financing is bound to quality of product and in some cases offers the basic risk insurance. Important factor remains the strong leadership from on the farmers’ side that drives the projects and organizes the support from the local authorities.
The problems in the area of livestock are mostly related to farmers’ dependencies on private sector and their openness to risks. Solving these problems goes through more targeted support for the active private sector firms. Farmers need to also be enabled to take control of their market presense and win-win partnerships should be stimulated more openly. Cooperatives have better connection to local government and are an easier business partner. Aquaculture is a special case with regard to land rights. Aquaculturalists are mostly landless and do not qualify for credits.
In summary – corporations learn to do things more sustainably after direct interaction and with the support of the government. Local businesses are therefore more capable in developing and implementing successfully inclusive business models. If designed right, such models will serve as a push factor for farmers to chose agriculture and participate actively on the sector’s development. In the sight of the post-2015 agenda, the donors’ support and ODA should be tailored to the needs of the local farmers and businesses. Best if the support stimulates competitiveness, flexibility and inclusiveness along the value chains.

Business Case Rice

All four countries are major agricultural producers of staple crops, primarily rice with Vietnam as major rice exporter. Two inclusive business models in Vietnam were presented. Cuong Tan Limited Company, as a business specialised in production and distribution of hybrid rice seeds and Cong Binh, a private company specialising in the production, processing and exporting of various types of rice. Initially Cong Binh was just a producer of rice for domestic consumption, but has been significantly expanding, after modernising their technology. Currently the company exports rice to many Asian countries. Cong Binh uses a linkage system with farmers, with input from local governments.

  • The company emphasised many factors of their success:
  • A well-organised work force with high capacity of finding overseas markets for rice products;
  • A good working linkage model to understand partners better;
  • Group leaders and sub-leaders are reputable persons and are one of the most important links within the company;
  • Very capable, enthusiastic, and ethical business.

Discussion after the presentation circulated mainly around the finance of scaled up models and how we ensure that inclusivity goes beyond farmers simply being suppliers. Understanding the enabling role of governments interventions across Asian nations, but still ensure that businesses are in the driving seat is a crucial point and need to be discussed during the thematic group sessions focussing on Policy Innovations for inclusive Agribusiness at scale.

Enabling policies for inclusive business models

Agricultural production in the region is growing and will play even bigger role in the world with time. It is expected that the surplus on production will make Southeast Asian countries important agricultural trade exporter and therefore the local businesses globally interconnected. The countries in the region have different political approaches towards trade and agriculture. There are trade barriers, regulations of exports, constraints for direct foreign investment, all of which affect the ability of small-holder farmers to connect to the global market, international value chains and concentrate profits in the hands of small number of big producers. But policies not only affect the economic development in the region, it also negatively influences the resilience of the sector, which remains unprotected which exposed to natural events and volatile financial markets.
With the growing population and the process of urbanization, arable land will reduce, but the demand for food and agricultural products will continue to grow. In the face of this rural transformation process undergoing in many of the countries in the region and learning from the experiences that other countries have gone through, investments in agriculture and fighting income disparity will also support the economic growth.
The participants agreed that there is the need for innovations, for improvement of infrastructure, for more investments in specific needs of the business, in facilitating access to credit and land. And the region underperforms on regulatory level in comparison to other countries in South America and Africa. This of course also opens a window of opportunity to shift focus – from current patterns of spending in agriculture to re-direct investments towards infrastructure and credit markets, where most of the issues lay. Altogether policies should be enabling investments, domestic and foreign, should promote farmers inclusion in global markets and should be coordinated on a regional level. The knowledge and connections are available on local implementation level, taping into the resources of local governments and knowledge of farmers should be the first and fundamental step of every project and political initiative.
The group agreed also that one of the most pressing problems in the region is the missing common market. There are different rules and regulations, tariffs; there is no free market, which interrupts the supply chains. A common ASEAN market infrastructure and policy on common natural resources should be the political goal of the future. Innovation in production is inevitable, initial slow down by the government is to be expected, but there should be political will and private sector engagement to support new technology, innovations and R&D. Another action that seems to be widely supported by the participants of the Roundtable was the need to build a knowledge expert network that advises, informs and support the stakeholders across sectors, countries, models and commodities on policy developments and promotion of successful instruments of conducting inclusive business. The policy strategies should promote transparent value chains that aim at positioning farmers better in the value chains and giving leverage in negations. Special attention should be paid to youth, young entrepreneurs and to extracting knowledge from the elders. As the value chain and agriculture productivity are cross-sectorial issues (economic, gender, land, education, trade) a common less beauroucratic policy approach towards them is required. Research organisations should serve as information providers of concrete steps, solutions and strategies. GrowAsia was seen by all, as a platform that can bring bottom-up messages from research organisations and farmers to policy and private sector, that will filter and disseminate positive experiences and contacts, advocate and advise with more credibility.

Integrating women in inclusive business

“Just giving women the same access as men to agricultural resources could increase production on women's farms in developing countries by 20 to 30 percent”, cited Julie Delworth (DFAT) in her introduction to that session. The FAO report Women in agriculture - Closing the gender gap for development showed that women comprise, on average, 43 percent of the agricultural labour force in developing countries. However, women in agriculture and rural areas have less access than men to productive resources and opportunities.
Women’s participation in rural labour markets varies considerably across regions, but invariably women are over represented in unpaid, seasonal and part-time work, and the available evidence suggests that women are often paid less than men, for the same work. It is widely acknowledged that women present new market opportunities and business need to understand why it is good for them to integrate women. With an absence of a gender lens in business strategies, market actors build inefficient market opportunities. When men and women are included in the production, the business becomes more productive. It was widely supported by the participants of the Roundtable that women are underrepresented in Leadership need to be included in policy making and planning.
The group agreed that to make women visible in agribusiness also cultural barriers that make women voiceless need to be addressed and gender awareness with using appropriate frameworks needs to be created. Advocating and campaigning is key and should also involve consumer education. Consumers need to be aware how women farmers are treated in the production country.
However questions on how to find the appropriate gender framework and if we need parameter on how to define Inclusive Agribusiness remained. It is not just about inclusion of women, but to understand their role. There is much diversity in women’s roles and women can only be made visible through affirmative action in policy environment and business inclusion. Helping companies develop strategies necessary to create a more inclusive work environment is key to include women agribusiness.

Key messages and way forward:

  • We need a structure approach to identify gender specific opportunities within sectors/communities
  • When men and women are included in the production of food, business becomes more productive.
  • Within each Grow Asia partnership identify 2-3 key points to empower women.
  • Identifying the role of women in key value chains that are an opportunity/constraint to develop business models.
  • Do business have the resources to have details on who is involved in production and value chain of food?
  • Where is the entry point, since women are also included in the post production of food?
Myanmar

Myanmar is the biggest country in Southeast Asia and just recently opened up its doors to trade. Its agricultural sector‘s GDP contribution is with 36, 9 % the highest compared to Vietnam, Indonesia and Philippines. Myanmar is a major agricultural producer of staple crops and the world’s biggest supplier of pulses and oil seeds. Currently the country produces about 20 billion USD of agricultural outputs.
Participants of this country session included NGOs, donors, businesses, research institutes, Asian Farmers’ Organisation and was chaired by Nestlé. Nestlé stated that it does not directly produce anything in Myanmar yet but would like to develop strong rural economies to improve the quantity and quality of sustainably produced raw materials which will allow Nestlé to produce higher quality food products. The company will invest $25million for coffee production in Myanmar. Challenges concerning inclusive business models in Myanmar were raised by participants and included difficulties to find counterparts with local companies and language barriers. It takes time to develop inclusive business projects and most local companies do not have staff, time or the band width to dedicate this. Pro-active ways and better information sharing among farmers associations and private sector actors are needed. Additionally the Myanmar Action Network (MAN), which was established in 2014 and convenes representing corporations, NGOs, and social enterprises needs to be more local business friendly. Participants need to understand the importance of MAN to provide an opportunity for members to network, build partnerships, and educate one another about priorities, work underway, and challenges. It was supported by most of the participants that local companies and local associations need to be better engaged. Ideas about action areas reached from identifying local companies to chair new commodity working groups to finding a clearer value proposition from MAN for different national actors and identification of appropriate varieties/technologies for different local conditions.
Inclusive economic growth in Myanmar is an opportunity for the country having trade borders to China, India and ASEAN Region. However company driven initiatives need to be avoided and the focus should be on how to support the agricultural sector in Myanmar. Participants agreed to focus the discussion on points of convergence rather than differences and to not politicize the forum. There is a lot to do to get to the level of development in Myanmar as it is seen in Vietnam or Indonesia.

Viet Nam

The participants agreed that the most important problem for implementing an inclusive business models is the missing finance resources. At the moment there is no interest from the banks to invest and provide loans for the farmers. The most plausible reason being that the farmers often don’t own the land they use and cannot provide any warranty for the loan. As another problem the participants in the country group identified the administrative costs for establishing such models – transportation, communication with authorities are unaffordable for small holder farmers. The middle man plays a rather positive role in these cases, when it provides finance in an unstructured way. Government and donor programmes need to find a way to integrate them in the commodities value chains. The government of Vietnam has already experience in this – formalizing the role of middle men and establishing channels of communication between farmers and banks. Most of the participants agreed that micro-financing might be the solution, but it is a source that is still not quite recognized in the region. Involving local banks, providing insurances for risk management and access to mobile technology could be the first steps to take.
Another important action was seen in the process of strengthening the positions of local companies. Organising farmers in coops, building small enterprises is of more interest also to the banks. The government must work on promoting domestic businesses and creating enabling legal framework to facilitate the finance in agriculture. Organising farmers in coops gives them more leverage, positions them better in negotiations and gives them easier access to technology, knowledge and other capacities. Professional coops are also a better target for funding. A suggestion was made to develop a framework to identify successful models that will be used as best practices examples to lure in investments also from private sector. GrowAsia confirmed that such framework is currently being developed and will be shared with all country partnerships once finished. CIAT is also working on a monitoring framework to analyse the inclusiveness of value chains. One data has been gathered it will contribute to better understanding of the impact of such models and will explain the profits for businesses and value creation.
Next to the issues of finance, promotion of local companies and research, the participants identified the role of donors in risk mitigation and education, as well as the role of governments in providing infrastructure for companies to communicate with farmers as indispensable in the region.

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