POSITION PAPER
INNOVATION AND TECHNOLOGIES IN THE AGRICULTURE VALUE-CHAIN:
HOW TO PROFITABLY SHARE KNOW-HOW AND MATCH COMPETENCES
High Level Dialogue on ASEAN Italy Economic Relations, Jakarta, May 15-16, 2017
This Position Paper addresses agribusiness sector, considering its relevance for the ASEAN area, the major challenges
ahead and the role of technology to successfully face them, together with main opportunities for cooperation between
Italy and ASEAN Countries in the extended agribusiness value chain.
As of today, ASEAN agriculture contributes to 14.2% of the area’s GDP and to 9% of global agriculture Value Added.
Moreover, population growth and urbanization will drive demand for agriculture products, while investments in the
sector are booming. Yet, to fully benefit from these opportunities, ASEAN countries have to overcome few structural
challenges including sub-optimal productivity levels, need for higher sustainability, and empowerment and inclusion
of smallholders.
A major contribution to succeed in these tasks can be provided by the adoption of new technologies currently
reshaping the sector’s DNA at global level. In this context, Italy, a major agriculture powerhouse in the EU, can
partner with ASEAN Countries to share best practices, provide support for agribusiness value chain extension and
back the distribution of ASEAN agriculture products in the EU.
ASEAN is a
powerhouse
global
agriculture
1. Agriculture is vital for economic growth and
competitiveness of the ASEAN area. The sector
supports a relevant share of households and families,
also providing an important source for revenues, an
increasing contribution to GDP and a competitive
base for export.
2.
In 2016, the sector generated $275.5 billion of
value added ($237 billion in 2010), contributing to
14.2% of ASEAN area total GDP, an amount equal
to 9% of global value added from the sector.1 The
sector is also pivotal for employment, 2 accounting
for almost 30% of the whole ASEAN workforce. Of
these, 40 million people are employed in Indonesia,
25 million in Vietnam, 13 million in Thailand and 12
million in the Philippines.3 Agriculture also attracts
4.1% of total FDI in the ASEAN area and provides
$24 billion in export value, accounting for almost
10% of global exports from the sector in 2015.4
1
Source: World Bank, “World Development Indicators”, 2017.
2
Source: Human Capital Outlook: Association of Southeast
Asian Nations (ASEAN), 2016.
Figure 1. Value added in the agriculture sector
(Index Year, 2000=100), 1995-2015
(Source: The European House -Ambrosetti elaboration
on FAO and World Bank data, 2017)
3. ASEAN area is home to the world’s top two
largest rice exporters (Thailand and Vietnam) and
hosts the top three exporting countries for
pineapples, bananas, mangoes, sugar crops, coffee,
cashew nuts and cassava. It is the top producer and
3
Source: ASEAN Secretariat General, “ASEAN Community in
Figures (ACIF) 2016”, 2017.
4
Source: ASEAN Secretariat General, “ASEAN Economic
Community Chartbook 2016”, 2017.
In collaboration with
exporter of palm oil, coconut and rubber (Thailand,
Indonesia and Malaysia together producing about
70% of the world’s natural rubber) and a major
producer and exporter of seafood.5
4. Beyond the overall picture, relevant
differences among ASEAN Countries exist:
- Lao and Myanmar have the most significant
agriculture sector considering the weight on GDP.
In these countries agriculture is the main source
of national income, while in urban areas such as
Singapore and Brunei it is basically irrelevant,
leading to heavy import dependence.
- Cambodia has doubled the yield in the past
decade and has significant potential for
production expansion together with great
demand for agriculture machinery.
- Vietnam is a major rice exporter and its
agriculture sector is growing thanks to improved
land usage, increased investment and
technology adoption.
- Indonesia is the regional leader for total value
added from the sector ($130 billion in 2015).6 It
has large public and private plantations focused
on export commodities (palm oil and rubber),
while small farmers are focused on production of
rice, soybeans, corn, fruits and vegetables.
- Thailand, affected by drought in recent years,
remains the world’s largest rubber exporter, the
largest single rice exporter, and the secondlargest sugar exporter.
- The Philippines is reliant on small farmers, with
81% of agricultural land covered by the agrarian
reform program.7
- Malaysia remains a net agriculture importer,
with national production dominated by palm oil
plantations (accounting for 36% of national
agricultural GDP) followed by rubber (8%),
livestock (12%), and vegetables, fruits and food
crops (18%).
ASEAN Countries agriculture needs
structural improvements to make
the most of future opportunities
5. ASEAN Countries might benefit from
significant opportunities in the years ahead.
- With global population growth (estimated to
reach 9.7 billion people by 2050, with greatest
increase in Asia and Africa), food demand will
5
Four out of the ten largest fish producers are from ASEAN.
6
Source: The European House - Ambrosetti calculations on
World Bank and FAO data, 2017.
7
The country is one of the top rice producers, but due to national
consumption it exports mainly coconut oil, bananas, pineapples,
mangoes and tuna.
soar and the agriculture sector worldwide will be
required to double current production.
- Urbanization will also bring increased demand
for meat, fruits, vegetables and sugar, requiring
the extension of the agribusiness value chain
towards production and activities with higher
value added.
- Investment in the sector is booming, with a
compound annual growth rate of 2% in high
income Countries and 4% elsewhere in the past
10 years. R&D investment in particular is
especially growing, with an increase of 20% in
the past decade.
6. To benefit from these opportunities, current
structural challenges have to be overcome. The
decreasing weight of the sector on the total
economy in almost every ASEAN Country reflects
the growth in urban population and the decreasing
attractiveness of the sector for the younger
population.
World
3.9
5.2
14.2
ASEAN (avg.)
21.1
17.0
22.7
Vietnam
9.1
8.5
10.3
14.0
Thailand
Philippines
26.7
Myanmar
8.5
8.6
Malaysia
27.4
Lao PDR
13.5
15.6
Indonesia
Cambodia
Brunei D.
Singapore
57.2
28.2
45.2
37.8
1.1
1.0
0.0
0.1
2015
2000
Figure 2. Agriculture Value Added as share of GDP (%),
2000 vs 2015 (Source: The European House -Ambrosetti
elaboration on World Bank data, 2017)
7. This issue must be addressed, also considering
the suboptimal productivity of the sector. Even if
decreasing agriculture yield is a global trend, 8
ASEAN farmers are rarely able to achieve more than
70% of potential yields due to a range of agronomic
and economic constraints. Irrigation issues and
progressive soil degradation adds to outdated
techniques and low-quality inputs. This leads
farmers to over-cultivate their lands, depleting the
8
Global aggregate yield growth of grains and oilseeds averaged
2%/year between 1970-1990. It declined to 1.1% between
1990-2007. Over the next ten years it will be lower than 1%/year.
In collaboration with
130
127
126
125
25
24
21
20
2050
Tech innovations that reshape the
DNA of the sector could be the key to
winning these challenges
2045
9. Finally, the smallholder farmers issue has to be
addressed. Today over 85% of farmlands are below
1 hectare. 12 Smallholders empowerment and
inclusion in the national and regional agribusiness
value chain is key to increasing productivity, meeting
growing demand, providing food security to the
region and attracting young people.
14. Drones and satellites are also expected to
have a major impact on the sector allowing field
monitoring. The global value of drones in agriculture
is today close to $700 million and it is expected to
reach $3 billion in the next 5 years.13 They provide a
low-altitude view, allowing farmers to analyze crop
health and conduct topographic surveys, while also
promising to increase productivity and quality at an
affordable cost. Satellite technologies also allow
precision farming practices through observing,
measuring and responding to inter- and intra-field
variability in crops in real time.
2040
8. In this context, urbanization and increasing
population will lead to growing demand that pose
sustainability challenges. 9 Food security is
already an issue with almost 65 million hungry
people in the ASEAN area, projected to grow due to
decreasing yields and farmers. Moreover, forests in
the ASEAN area are decreasing by 1.2%/year, while
all ASEAN Members are listed in the top 20% of
those Countries most exposed to climate changes.10
Climate changes are expected to put an additional
49 million people at risk of hunger in the Asia Pacific
Region by 2020.11
conditions, seed pricing and quality, cultivation
techniques and dosage guidance. They provide for
the best possible yield/cost combination and
support strategic decisions about timing and way of
farming. Online marketplaces can lower the cost of
goods, provide access to a wider variety of seeds
and appliances understanding market sentiment,
extend farmer trading networks, and lower money
transaction costs. For ASEAN Countries the
opportunity is great, with over 300 million unique
mobile internet subscribers in 2015.
2035
already scarce water resources and lowering soil
productivity as a result, thus feeding a vicious circle
that has to be broken.
80
10. High-tech solutions and digitalization
(AGtech) are revolutionizing agriculture. The
potential for value creation and productivity boost is
unprecedented as smart and precision farming is
taking hold globally. AGtech adoption in agriculture
is growing fast: smart and connected device usage
in the sector is expected to double by 2020, reaching
75 million smart and connected devices at global
level.
40
Spraying
12. Field observation, continuous monitoring,
collection of key parameters and real-time reaction
to challenges are also crucial to match increasing
ASEAN demand for agriculture products, reduce use
of herbicides, decrease soil consumption and
increase resilience of cultivations.
13. Among the others, mobile technologies and
appliances allow information sharing on weather
9
ASEAN population will increase by almost 100 million people
by 2030. Its middle class will double reaching 400 million people.
10
Source: BCSD Singapore, PBE, Indonesia BCSD and Vietnam
BCSD, “Efficient Agriculture, Stronger Economies in ASEAN.
Private Sector Perspectives for Policy Makers”, 2016.
Remote sensing
Figure 3. Agribusiness drones in activity by function
in Europe (1,000 units), 2015-2050 forecast
(Source: The European House -Ambrosetti elaboration
on SESAR data, 2017)
11. Smart metering, unmanned and automated
machines and tractors, robots, big data and
visualization tools will help farmers save precious
resources, contributing to the increase in yield and
quality of crops, reducing costs, simplifying crop
cycle management and achieving overall
sustainability of the sector.
2020
2015
2
1
4
2025
5
13
2030
18
15. Together
with
these
appliances,
biotechnology is widespread in the agriculture
sector. The market value of agriculture biotech is
foreseen to reach $46.8 billion globally in 2019,
almost $20 billion more compared to 2014 levels.
This increases yield and sustainability, thanks to
more resilient crops.
16. Finally, ASEAN Countries will benefit
greatly by climate-smart agriculture, involving
management techniques aimed to reduce GHG
emissions and the environmental footprint from
agriculture.
11
Source: IFAD, 2014.
Source: FAO, 2017.
13
Source: The European House - Ambrosetti elaboration on
AGFunder data, 2017.
12
In collaboration with
ASEAN Countries and Italy can
partner to win current challenges
and benefit from opportunities
ahead
17. Italian agribusiness players are well positioned
to cooperate with their ASEAN counterparts to
develop the agriculture extended value chain and
implement the innovations characterizing the sector.
18. Italy is a productive hub for agriculture
renewed at a global level: with €32.2 billion in 2015,
it is #1 in the EU for value added in this sector. It
registered a growth of 5.6% compared to the
previous year, while the value of production
increased by 2.3% to €54.9 billion in 2015 (second
highest value in Europe).14
19. Italian agriculture is also #1 in Europe in
terms of productivity, with value added per
hectare three times higher than the United Kingdom,
twice the EU-28, Spanish, and German averages,
and 70% higher than the French.
20. Italy also has key excellences in the fastest
growing niches. It has the largest biological
agriculture sector in Europe, with over 50,000
companies covering 11.6 million hectares in 2015.
Currently, 61.8% of Italian municipalities have at
least one biological farm. Moreover, diversity is
remarkable, with the highest number of recognized
traditional products: over 5,000.
21. Italian organic production is also relevant.
It employs 55,433 workers involved in all the phases
of production and distribution of organic food and
beverages.
22. Italy stands out in the production of certified
food and wine, since 33% of these products globally
come from Italian farms. Finally, Italy is first in
Europe for safety of products since farmers use the
lowest degree of chemicals among all the European
Countries (0.2% in Italy compared to the European
average of 1.9%).15
23. In terms of sustainability, Italy shows
remarkable performance with a steady decrease in
GHG emissions from the sector (-8.4% since 2005)
and values far lower compared to its main
competitors. Moreover, young people in Italy are
increasingly finding the agriculture sector attractive:
the country is witnessing the highest number of
14
15
Source: ISTAT, “Andamento dell’economia agricola”, 2017.
Source: ISPRA, 2016.
agribusiness companies led by individuals under-35
in the EU: 7,560 in 2015.
78,869.4
66,069.8
44,555.9
37,405.9
30,337.6
France
Germany
UK
Spain
Italy
Figure 4. GHG emissions from agriculture sector
(1,000 tonnes), 2014 (Source: The European House Ambrosetti elaboration on Eurostat data, 2017)
24. Italy can team up with ASEAN Countries also
on the supply side and extended agribusiness value
chain, with a turnover of food processing and
packaging industry equal to €38 billion in 2015 and
Italian packaging machinery exceeding 25% of
global market share.16
25. Italy can also provide experience in
smallholder farmer inclusion and management,
since it boasts one of the most effective
cooperative systems in the agri-food sector on an
international level. The cooperative model is an
effective tool in aggregating suppliers and
increasing efficiency in processing and trade phases
on domestic and foreign markets. Proof of this is the
Italian experience, where the cooperative system
generates €34.8 billion, 23% of Italy’s food industry
turnover.
26. ASEAN countries could also profit from Italian
experience and success stories in marketing of
agriculture products and brand creation. As of
today, Made in Italy brands have an estimated value
of $1,500 billion, while Italian sounding products
exceeded €54 billion in 2015.17
27. Finally, Italy can provide ASEAN Countries
technical competences in order to comply with EU
customs requirements (e.g., sanitary and
phytosanitary standards, etc.) which currently pose
a non-tariff obstacle to ASEAN Country trade, while
also providing an export and distribution hub for
ASEAN products throughout all of Europe.
16
17
Source: Centro Studi UCIMA, 2016.
Source: AssocamereEstero, 2017.
In collaboration with