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Innovative Institutions to Accelerate Agroindustry Development in Asia

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Innovative Institutions to Accelerate Agroindustry Development in Asia Innovative Institutions to Accelerate Agroindustry Development in Asia The Asian Productivity Organization (APO) is an intergovernmental organization committed to improving productivity in the Asia- Pacific region. Established in 1961, the APO contributes to the sustainable socioeconomic development of the region through policy advisory services, acting as a think tank, and undertaking smart initiatives in the industry, agriculture, service, and public sectors. The APO is shaping the future of the region by assisting member economies in formulating national strategies for enhanced productivity and through a range of institutional capacity- building efforts, including research and centers of excellence in member countries. APO members Bangladesh, Cambodia, Republic of China, Fiji, Hong Kong, India, Indonesia, Islamic Republic of Iran, Japan, Republic of Korea, Lao PDR, Malaysia, Mongolia, Nepal, Pakistan, Philippines, Singapore, Sri Lanka, Thailand, Turkey, and Vietnam. INNOVATIVE INSTITUTIONS TO ACCELERATE AGROINDUSTRY DEVELOPMENT IN ASIA DECEMBER 2020 | ASIAN PRODUCTIVITY ORGANIZATION Innovative Institutions to Accelerate Agroindustry Development in Asia Ralph D. Christy and Lin Fu wrote this publication.. First edition published in Japan by the Asian Productivity Organization 1-24-1 Hongo, Bunkyo-ku Tokyo 113-0033, Japan www.apo-tokyo.org © 2020 Asian Productivity Organization The views expressed in this publication do not necessarily reflect the official views of the Asian Productivity Organization (APO) or any APO member. All rights reserved. None of the contents of this publication may be used, reproduced, stored, or transferred in any form or by any means for commercial purposes without prior written permission from the APO. ISBN: 978-92-833-2498-0 Designed by BM Nxt CONTENTS FOREWORD VII INTRODUCTION 1 Context and Rationale 1 Objectives 1 CONCEPTUAL UNDERPINNINGS 3 Institutions and Economic Development 3 Institutional Voids 4 Innovative Institutions 5 Upgrading, Branding, and Innovation 8 MEGATRENDS SHAPING AGROINDUSTRY IN ASIA 9 Urbanization 9 Climate Change 10 Technological Innovations 10 INNOVATIVE INITIATIVES TO SUPPORT AGROINDUSTRY IN ASIA 13 Business Development Services 13 Branding and Consumer Value 13 Taiwan Agricultural Technology Research Center 14 Incubators and Science and Technology Parks 16 Clustering, Networking, and Innovation 16 Thailand Science and Technology Park 16 Malaysia’s Publicly Funded Agribusiness Incubators 18 Technology for Value-chain Integration 19 Blockchain for Food Safety, Supply-chain Management, and Value-chain Integration 19 Pilot Programs 21 CONCLUSION 23 REFERENCES 25 APPENDIX A 30 Bangladesh 30 References 35 Cambodia 38 References 43 Republic of China 46 References 51 Fiji 53 References 55 India 57 References 62 CONTENTS Indonesia 65 References 68 IR Iran 71 References 73 Japan 75 References 81 Republic of Korea 84 References 102 Lao PDR 108 References 115 Malaysia 118 References 138 Mongolia 147 References 156 Nepal 160 References 169 Pakistan 172 References 173 Philippines 175 References 192 Singapore 199 References 199 Sri Lanka 200 References 201 Thailand 203 References 213 Vietnam 217 References 223 DOMESTIC CHOCOLATE INDUSTRY IN INDONESIA 227 Introduction 227 Cacao Production in Indonesia 227 Value Addition to Cacao 229 Cultivation of Cacao 229 Harvesting and Fermentation 229 The Cacao Bean Market, Chocolate Processing, and Production 230 The Dominant Model 230 The Emerging Model 231 The Production Process 231 Chocolate Manufacturers in Indonesia 232 Cau Chocolates 232 Pod Chocolate 233 Monggo Chocolates 233 nDalem Chocolates 233 Porter’s Five Forces Model 234 The Suppliers 235 The Buyers 236 IV | INNOVATIVE INSTITUTIONS TO ACCELERATE AGROINDUSTRY DEVELOPMENT IN ASIA CONTENTS Threat from Substitutes 236 Potential New Entrants 237 Competitors 238 Conclusion 238 References 238 ABBREVIATIONS AND ACRONYMS 241 GLOSSARY OF TERMS 242 LIST OF TABLES 244 LIST OF FIGURES 244 INNOVATIVE INSTITUTIONS TO ACCELERATE AGROINDUSTRY DEVELOPMENT IN ASIA | V VI | INNOVATIVE INSTITUTIONS TO ACCELERATE AGROINDUSTRY DEVELOPMENT IN ASIA FOREWORD gribusiness has huge economic, social, and environmental impacts on the overall Aagriculture sector. Opportunities in agribusiness are expanding substantially in the Asia-Pacific due to increasing populations, growing economies, and globalizing of trade. Disruptive agricultural technologies could raise productivity even under difficult conditions, and innovative business management strategies could help meet total food demand. In order to encourage innovations in the sector, different models should be examined by institutions offering specialized education, mentorship, and financing options to agribusinesses. The Asian Productivity Organization (APO) resource paper Innovative Institutions to Accelerate Agroindustry Development in Asia draws from the institutional approach to economic development to analyze existing innovation institutions supporting Asian agroindustries. Robust institutions undergird entrepreneurial opportunity and activities and are therefore vital to economic development. This paper provides an inventory of innovative institutions operating in APO member countries compiled from publicly available material; considers holistic approaches to agroindustry which are competitive, sustainable, and inclusive; and offers a starting point for discussion among experts, policymakers, and thought leaders on how to promote sustainability in the sector in Asia. Completed in August 2019, this paper continues the eight-year collaboration between the APO and Cornell University’s Emerging Markets Program. Both institutions recognize the need to support agribusinesses and agroindustry in the Asia-Pacific region through tailored research and education. During 2012–2019, the collaboration resulted 10 workshops involving agribusiness representatives and policymakers in discussions on the major forces shaping the supply of, demand for, and distribution of food. The role of private-sector actors in the global economy is indispensable in meeting national food security and safety policy objectives. The mission of the APO and Cornell University is to contribute to greater efficiency, higher productivity, enhanced food safety, and a more environment-friendly approach to sustainable agriculture and agribusiness. Portions of this resource paper were previewed during two agribusiness-focused workshops organized by the APO and Cornell in Indonesia, where they sparked interesting, thoughtful debate. It is my hope that the release of the full paper to a wider audience will facilitate discussions on the transformations occurring in terms of value addition, mega trends, and enabling environment among Asian agroindustries. I would like to thank Ralph D. Christy, Lin Fu, and their team at The Dyson School of Applied Economics and Management, Cornell College of Business for developing this report and the Secretariat staff who worked with them on this project. Dr. AKP Mochtan Secretary-General INNOVATIVE INSTITUTIONS TO ACCELERATE AGROINDUSTRY DEVELOPMENT IN ASIA | VII VIII | INNOVATIVE INSTITUTIONS TO ACCELERATE AGROINDUSTRY DEVELOPMENT IN ASIA INTRODUCTION Context and Rationale Agroindustries have the potential to be major drivers of economic development. However, fulfilling this potential requires a fundamental break from the history of agricultural development policies that focus solely on subsistence farming and smallholder farmers to the exclusion of other forms of agricultural activity, e.g., commercial farming and agroindustries. Agroindustries are uniquely situated between raw and natural sources of supply, and food and fiber demand. As such, development of agroenterprises can lead to positive impacts on employment in both rural and urban areas; offer market access to smallholder farmers; create business linkages with small and medium enterprises (SMEs); and enhance food security by reducing post-harvest losses. From the perspective of national governments in Asia, the combined effects of employment gains and food security through improved agroindustry competitiveness can be an important strategy for reducing overall poverty. Given rising incomes and population dynamics in Asia, the region’s agribusinesses must position themselves for demographic shifts, consumer lifestyle and preference changes, and other megatrends to meet the growing urban demand for food and food services. Megatrends, i.e., the global forces that have profound impacts on and implications for the economy and the society, provide both the context and the rationale for an examination of innovative institutions supporting agroindustry development. Like agribusiness owners, policymakers and institutions charged with supporting agroindustry development, must position themselves to adapt and respond to megatrends that will impact all agribusinesses in the coming years. Developing an understanding of the forces that drive change is critical to the formation of successful public policies and private strategies. Underpinned by an institutional approach to economic development, and relatedly, to agroindustry development, this resource paper provides an overview of existing institutions in support of agroindustry development in the Asia-Pacific region. It also examines selected innovative institutions that are at the forefront of accelerating agroindustry development in the light of industry-relevant megatrends. This paper’s focus on agroindustry marks a departure from the traditional foci of past development
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