Measuring Agro-Industry and Agribusiness in East Asia

Home , Agribusiness

Patrick Labaste, FAO/AGS

FAO-UNIDO Expert Group Meeting on Agro-industry Measurement (AIM)

23-24 November 2015, Rome, Italy 2

Overview

• What we were trying to do and key hypothesis to be tested

• Sources of information, methodology and issues

• Main findings

• Unresolved questions and next steps

Measuring agribusiness in East Asia 1. What were we trying to do? • Regional study on farmgate to market in East Asia (2013) ▫ Qualify and quantify the changes taking place in the AFS ▫ Historical and comparative analysis ▫ Context of agriculture transformation in East Asian countries ▫ Drivers of change: economic growth, urbanization, dietary changes ▫ What do we need to know or know better? • Research questions: ▫ Place and role of agribusiness over time and between countries ▫ What patterns can we observe? What are the paths and trajectories? ▫ Role of private sector investment in agro-industry and agribusiness ▫ What are the policy implications of the changes taking place?

Measuring agribusiness in East Asia 1. Key assumptions

• Contextualization: how does the agriculture transformation process apply to EA countries? ▫ Analytical framework of the WDR 2008 ▫ Typology of the Agriculture Transformation Matrix (ATM) ▫ Specific patterns in EA countries? • The share of agribusiness increases as GDP/capita increases • Agriculture + agribusiness goes up even though agriculture declines and until GDP/cap reaches a certain treshold • Private sector investment in “value adding agro-enterprises” can be measured and will also inform on agribusiness activity • Value addition is higher in ag export oriented economies for similar GDP/cap level

1. The WDR 2008 framework: Measuring agribusiness in East Asia the three worlds of agriculture 6

1. The Agricultural Transformation Matrix (ATM) Country segmentation based on agriculture’s role in the national economy (provides insights into the transformation of the agro-industry)

70%

60% Agri-Based

50%

40%

30% Urbanising Transition

25.0% Agriculture VA as % of GDPof % AgricultureasVA

20% Developed Pre-Transition

10%

0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Economically Active in Ag as % of Total Economically Active Population 7

Measuring agribusiness in East Asia 8

Measuring agribusiness in East Asia

Share and Size of Agribusiness in National GDP, Selected Countries (2000)

Country Agriculture’s Share of GDP Agribusiness’ Share of GDP* Combined Agriculture and Agribusiness GDP Agribusiness Share of GDP ($ Billion)**

South Africa 4 16 20 15 Nigeria 42 16 58 6 Uganda 41 23 64 3 Kenya 26 23 49 2 Zimbabwe 18 21 39 2 Ghana 44 19 63 1 All SSA 32 21 53 67.0 For Comparison United States 1 13 14 1007 Brazil 8 30 38 236 Argentina 11 29 40 94 Mexico 9 27 36 91 Indonesia 20 33 53 71 Thailand 11 43 54 68 Chile 9 34 43 25 * Combines the value added for agro-related industries and that of agricultural trade and distribution services. Based on WB, FAO, and UNIDO databases. ** Agribusiness only. Does not include the GDP of primary agriculture. Sources: Jaffee (1999a); Pryor and Holt (1998) 9

Measuring agribusiness in East Asia 1. Growth in agro-industry according to ATM typology

Source: WB/BBA Project (2014) 2. Main data sources and indicators Source Indicators World Bank (WDI) Population, GDP, agriculture value added, food and merchandise exports, Gini coefficients

FAO Stat Agriculture production, value added, trade

GTAP Value added of (i) agriculture, (ii) processed agriculture and (iii) other

UNIDO FBT manufacturing and overall manufacturing output, value added, gross fixed capital formation (GFCF), enterprises, employees GFCF, reported in UNIDO Indstat, best proxy found for investment Comtrade Exports (world)

ITC FDI inflows, foreign affiliates USDA FBT and Food & Fiber, ERS time series 11

Measuring agribusiness in East Asia 2. Sources of information and methodology

• ATM data source: GTAP (Global Trade Analysis Project), Purdue University ▫ Input-Output tables (I/O matrices) for 130 countries, version 9.0 ▫ Based on Pryor and Holt (1999) methodology ▫ 57 sectoral categories at the disaggregated level, grouped into (i) agriculture, (ii) processed agriculture and (iii) other sectors ▫ Data extracted for 2004, 2007, 2011

• UNIDO: Indstat ▫ Relevant parts of manufacturing identified by ISIC code (FBT) ▫ Estimation of agribusiness value added using UNIDO/Indstat data for manufacturing, and prorating wholesale, retail and trade value added data from national accounts

INPUT-OUTPUT TABLE TO CALCULATE THE SIZE AND COMPONENTS OF AGRIBUSINESS: Ghana 2011, in Millions of Dollars Domestic Agriculture Processed Agriculture Other (Non-Ag) Intermediate Demand Investment Consumption Government Exports Final Demand Demand AGRICULTURE Domestic Demand at Market Prices 1190.5 1904.1 172.9 3267.5 3040.8 8941.0 0.002 2818.9 14800.7 Import Demand at Market Prices 24.4 75.2 4.2 103.8 229.4 0.005 229.4 All Intermediate Agriculture 1214.9 1979.3 177.2 3371.3 3040.8 9170.4 0.0 2818.9 15030.1 12211.2

PROCESSED AGRICULTURE Domestic Demand at Market Prices 9.1 660.0 321.4 990.5 1451.1 5448.3 0.003 1260.2 8159.6 Import Demand at Market Prices 26.3 433.5 157.8 617.5 3804.9 0.121 3805.0 All Intermediate Processed Ag 35.4 1093.5 479.2 1608.0 1451.1 9253.2 0.1 1260.2 11964.6 10704.5

OTHER SECTORS (Non-Ag) Domestic Demand at Market Prices 2307.0 1073.7 11300.5 14681.2 7579.2 5450.8 7660.127 4017.5 24707.6 Import Demand at Market Prices 851.7 178.9 5567.6 6598.2 4083.1 185.345 4268.5 All Intermediate Other Sectors 3158.7 1252.6 16868.0 21279.4 7579.2 9533.9 7845.5 4017.5 28976.1

ALL SECTORS Domestic Demand at Market Prices 3506.5 3637.8 11794.8 18939.2 12071.2 19840.1 7660.1 8096.5 47668.0 Import Demand at Market Prices 902.4 687.6 5729.6 7319.6 8117.4 185.5 8302.9 Intermediate Use 4409.0 4325.4 17524.4 26258.8 12071.2 27957.5 7845.6 8096.5 55970.9 16406.6Imports Land 1140.1 15.3 0.0 1155.4 39564.0GDP Unskilled Labor 188.5 222.6 2794.0 3205.0 Exports Structure at Market Prices Skill Labor 7246.3 2054.3 12544.3 21845.0 Ag 2721.549 34.8% Capital 1648.9 622.4 7089.7 9361.0 Ag Proc 1216.635 15.6% Natural Resources 285.0 0.0 35.5 320.5 Non Ag 3878.712 49.6% Value Added (L+K+N) 10223.8 2914.6 22428.0 35886.9 7816.896 Taxes 3677.1 GDP 39564.0

Total Costs Domestic Demand 13730.4 6552.4 34222.8 54505.6 Share of total cost as % total cost (Domestic) 25.2% 12.0% 62.8% Source: Agribusiness as an engine of growth in developing countries, Pryor and Holt (1999) 13

Measuring agribusiness in East Asia 2. Issues encountered

• Definitions ▫ Agro-industry, agribusiness vs. agriculture/primary production

• Categorization • ISIC • GTAP: I/O approach, agriculture vs. processed agriculture, select categories, extraction to get time series

• Quality and reliability of data ▫ Consistency over time and across countries ▫ Formal/informal sectors

Measuring agribusiness in East Asia 3. Main findings • Findings: ▫ Agriculture transformation  Has been taking place in most countries, at an accelerated pace in middle-income countries (China, Vietnam, Indonesia) ▫ Agribusiness (or “agro value addition”) has grown as part of the transformation process ▫ Different country trajectories can be observed

• Policy Implications: ▫ Upstream/farm level  Facilitate transformation process: (i) land consolidation, (ii) mechanization, and (iii) diversification of farming systems ▫ Downstream/farm-to-market  Improve: (i) VC logistics efficiency/VC modernization, (ii) farmer inclusion, (iii) food safety, and (iv) flexible and undistortive trade policies

Measuring agribusiness in East Asia

3. Agriculture Transformation Matrix (ATM), 1980

Measuring agribusiness in East Asia

3. Agriculture Transformation Matrix (ATM), 2012

Measuring agribusiness in East Asia

3. Visualization of agricultural transformation in selected East Asian countries (1980 – 2012)

Measuring agribusiness in East Asia

3. Ratio of the value of processed agriculture to agriculture selected countries (2004, 2007 and 2011)

4,50

4,00

3,50

3,00

2,50 2004 2007 2,00 2011

1,50

1,00

0,50

- 4 chn 6 jpn 7 kor 11 khm 12 idn 13 lao 14 mys 15 phl 17 tha 18 vnm 3. Policy Implications from the ATM and related analysis

70,0%

Urban Demand Growth – Need for basic Agribusiness growth – 60,0% infrastructure, roads, market linkages, contract farming, PPP, mkt IQ, productivity e.g. access to seed, larger more professional fertilizer, finance , etc. Expanding50,0% Export Markets – farms, mechanization Ag-Based food safety, international standards,40,0% processed foods Continued Urban Demand Growth – early stages of 30,0% agribusiness development, 25.0% product differentiation, quality 20,0% and post-harvest Pre-Transition Urbanising 10,0% Transition Developed 0,0% 0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% 70,0% 80,0% 90,0% 100,0% 20 3. Summary of results of quantitative measurements of agribusiness activity across EA countries Hypothesis Quantitative evidence Comment 1 Agriculture transformation Partly Ag employment data to be refined

Agribusiness share increases as 2 A Partly Time series incomplete GDP/cap increases

Different trajectories can be Benchmarking of agribusiness size and 2 B To some extent identified between countries performance still difficult

3 Agric + agribusiness increases No Not well documented Private sector investment in No aggregate and cross-country data 4 agribusiness related to No available agribusiness activity Ag. export-led economies 5 Yes transform more rapidly 21

Measuring agribusiness in East Asia

4. Unresolved questions and next steps

. Right now, still difficult to measure and monitor agro-industry over time and across countries, therefore to properly inform policies . Need more robust, easy to measure and universally applied definitions of agribusiness, agro-industry, agro-enterprise . Esp. at country level and across countries . Continue to work on - and improve – definitions, classifications, harmonization, data collection and quality control

• Could the AIM Project help and how?

Measuring agribusiness in East Asia

Thank you !