Food Market Transformation and Food Security in Asia: Emerging Trade and

Value Chain Linkages with Special Reference to Dragon and Elephant

Kevin Chen International Food Policy Research Institute

Food Security - a dinner table with 4

inter-dependent legs

a) Leg 1 is “availability” from raising farm production/productivity

b) Leg 2 is “access” from raising household incomes to buy food

c) Leg 3 is “access” to food by raising efficiency of market supply chains to deliver food to consumers

d) Leg 4 is raising “utility” of food by raising food safety/quality/nutrition

Source: Reardon and Chen 2011

Food Security - a dinner with two important courses

a) Course 1 – Rice • About 50% of consumer

calories • Only about 10% of

consumer spending on food

• Rice/Agriculture (1980-2008): East Asia: 19%8%; South Asia: 20% 15%; Southeast Asia: 40% 32%

Per capita rice consumption growth negative or trending negative

b) Course 2 - Food-beyond-rice such as vegetables, meat, and fish

• About 50% of consumer calories

• About 90% of their protein & vitamins

• About 92% of agriculture in East Asia, 85% in South Asia, and 68% in Southeast Asia.

• About 4 times more income/ha to farmers than rice

Source: Reardon and Chen 2011

Rapid Transformation on Asian Agri-Food Sectors: Driving Forces • Rapid economic growth • Increasing urbanization • New Technologies • Accelerated integration into the

world market

Urban Population in ASEAN 2009-2050

Urban population(thousand) Percentage urban

country 2009 2050 2009 2050

Brunei 301 573 75.2 87.2

Cambodia 2,934 10,430 19.8 43.8

Indonesia 101182 190,007 44.0 65.9

Lao PDR. 2,024 7,310 32.0 68.0

Malaysia 19,696 34,846 71.3 87.9

Myanmar 16,495 39,841 33.0 62.9

Philippines 44,784 101,371 48.7 69.4

Singapore 4,737 5,221 100.0 100.0

Thailand 22,761 43, 984 33.6 60.0

Viet Nam 26 ,204 65 ,867 29.8 59.0

China 620,480 1,037,695 46.1 73.2

Japan 84,731 81,403 66.6 80.1

Republic of Korea 39,948 40,037 82.7 90.8

Brazil 166 ,44 204,464 86.1 93.6

Source: WUP 2009

Extremely Rapid Urbanization

• 50% in urban areas by 2011, rising fast • South Korea did in 2 decades (1970-1990)

what US did in 9 decades • 75% of the ASEAN food economy in urban

areas that market is growing 5-7 times faster than OECD food markets

big opportunity for income growth (thus food security from market access) for farmers

Rising Importance of Post-farmgate Segments of Agrifood Supply Chain

• Post-farmgate have developed to become 50-80% of the formation of the food price. Yet the debate focuses mainly on farm productivity.

• In Asia, wholesale/logistics, processing and food retail have VERY quickly transformed in the past 10-20 years – the fastest in the world, in history

increases in efficiency of wholesale/logistics, processing, and retail would have as much impact on food security

Food Processing and Distribution • Huge investment by domestic and foreign, following FDI

liberalization in 1990s/2000s. – Example: Thailand’s CP creates largest shrimp

farm/processing in world in Indonesia • “Supermarket revolution” in ASEAN & China, also

starting India – For just top 47 chains in China, 13 billion USD in 2001,

92 billion USD in 2009 • Rapid concentration & multi-nationalization of food

processing and retail – integration of the Asian food economy

FDI Inflows - Asia

Source: UNCTAD

• In 2010, FDI inflows to

South, East and South-East

Asia rose 24 percent, to $300

billion

• In 2010, FDI to East Asia

rose to $188 billion, due to

growing inflows to Hong Kong

(32%) and mainland China

(11%)

FDI Outflows - Asia • FDI outflows from South, East and South East Asia rose by 20 percent to about $230 billion in 2010, driven by increased outflows from China, Hong Kong, Malaysia, etc. • Hong Kong and China are the two largest FDI outflows sources -increased by more than $10 billion each and reached historic highs of $76 billion and $68 billion, respectively.

Source: UNCTAD

Regional Distribution of China’s ODI (%)

Year 2003 2004 2005 2006 2007 2008 2009

Asia 53 54.57 35.68 43.46 62.60 77.89 71.48

Africa 3 5.77 3.19 2.95 5.94 9.82 2.55

EU 5 3.11 4.12 3.39 5.81 1.57 5.93

Latin

America

36 32.06 52.74 48.03 18.50 6.58 12.96

North

America

2 2.30 2.62 1.46 4.25 0.65 2.69

Pacific 1 2.19 1.65 0.72 2.91 3.49 4.39

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Source: MOFCOM 2011

Sectoral Distribution of China’s ODI (%)

Sector Year 2003 2004 2005 2006 2007 2008 2009

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Agriculture 2.850 5.250 0.859 0.874 1.025 0.307 0.606

Mining 48.295 32.743 13.663 40.349 15.328 10.416 23.604

Manufacturing 21.860 13.742 18.599 4.284 8.023 3.159 3.964

Energy 0.769 1.428 0.062 0.561 0.571 2.349 0.828

FDI in China and India

Data source: World Bank

0

1

2

3

4

5

6

7

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

%

FDI inflow (% of GDP)

China

India

-0.2

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

%

FDI outflow (% of GDP)

China

India

Food Trade • Only about 5% of the food economy of ASEAN is

traded, similar or less in South Asia and China • Trade is only 10-20% as important as the

modernizing food market inside ASEAN urban areas

• But the fastest growth (and the future) is INTRA-ASIAN trade and competition

Big opportunity, but also competition i.e. 30% of vegetables and 70% of fruit in Indonesian

supermarkets from Thailand and China

TRADE - China and Asia Agri-food exports in China, 2010 Agri-food imports in China, 2010

Asia 60%

Africa 4%

Europe 18%

South America

3%

North America

13%

Australia 2%

Asia 23%

Africa 2%

Europe 9%

South America

27%

North America

30%

Australia 9%

other 0%

Source: monthly statistical report for China's agricultural trade

•Asia is the main agri-food export ing region for China; the export value amounts to $29 billion in 2010 •Asia is also one of the main agri-food importing sources; the imports value is $16 billion in 2010.

TRADE - China and Asia China: Top ten agri-food importing countries in 2009 Rank Partner Value

[1000 USD]

1 United States of America 18,490,823

2 Brazil 10,536,133

3 Thailand 4,280,160

4 Malaysia 4,058,506

5 Argentina 3,618,632

6 Australia 3,453,585

7 Indonesia 3,412,152

8 Canada 3,055,984

9 France 1,942,384

10 New Zealand 1,773,926

China: Top ten agri-food exporting countries in 2009 Rank Partner Value [1000

USD] 1 Japan 5,366,526

2 United States of America 2,949,603

3 Viet Nam 1,892,698

4 Republic of Korea 1,822,761

5 Malaysia 1,043,889

6 Germany 1,013,488

7 Indonesia 954,919

8 Russian Federation 826,445

9 Netherlands 780,702

10 Thailand 772,803

Source: FAO

TRADE - India & Asia

2

4

6

8

10

12

14

16

18

20

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

%

India's Merchandise trade to developing economies in East Asia & Pacific (% of total merchandise exports/imports)

export

import

Data source: World Bank

TRADE - India & Asia India: Top ten agri-food importing countries in 2009

Partner Value [1000 USD]

1 Indonesia 3,752,373

2 Brazil 1,208,171

3 Malaysia 907,158

4 Myanmar 864,335

5 United States of America 756,124

6 Canada 582,098

7 Argentina 573,649

8 China 491,071

9 Ukraine 425,897

10 Australia 395,366

India: Top ten agri-food exporting countries in 2009

Partner Value [1000 USD]

1 China 1,684,585

2 United Arab Emirates 1,401,087

3 Saudi Arabia 1,044,091

4 Viet Nam 1,002,577

5 United States of America 953,821

6 Bangladesh 862,814

7 Malaysia 644,004

8 Iran (Islamic Republic of) 578,978

9 Pakistan 473,014

10 Indonesia 402,229

China and India: Some Facts on Food Security

Source: Gulati, Chen, and Shreedhar (2010)

Indicator Year China India Economic Statistics Ag, value added as % of GDP 2008 11.3 17.4 Real GDP Growth (%) 2004-08 10.8 8.5 Real GDPA Growth (%) 2004-08 5.2 3.4 Merchandise Trade as a % of GDP 2008 59.2 40.6 For-Ex Reserves (USD billion, current) 2009 2,416 265 Agricultural & Resource Statistics % Share of Arable Land to world 2007 10 11.2 Average Holding Size (ha) 2002/03 0.5 1.06 Annual Freshwater Withdrawals for Ag. (% of total) 2007 67.7 86.5 % Share of Renewable Internal Freshwater Resources flow to world 2007 6.5 2.9 Fertilizer Consumption (kg/ha of arable land) 2007 331.1 142.3 Demographic & Social Population (billions) 2008 (2030) 1.3 (1.5) 1.1 (1.6) % Share of world population 2008 19.9 17.5 International Poverty rate (<1.25 USD/day, PPP) 2004/05 15.9 41.6 % Share of World's Poor (Int.) 2004/05 15.1 33.1 National Poverty Rate 2004/05 2.8 27.5 Rural Poverty Rate (National) 2004/05 2.5 28.3 % of Stunted Children under 5 years C: 2002, I: 2006 21.8 47.9

GDP Growth Rates in China and India

-4

-2

0

2

4

6

8

10

12

14

16

%

GDP growth rate (annual %)

China

India

World

Rice Yields in China & India & Share of Hybrid rice in China’s rice area

Source: Gulati, Chen, and Shreedhar 2010 & Li, Xin & Yuan (2009)

Proportion and Number of People Living below $1.25 a day in Emerging Economies

0

20

40

60

80

100

%

China India Brazil835 million

420 million

21 million

456 million

15 million

208 million

Source: Fan (2010)

Issue and Challenge

• The future of China, India, Asia and the World economy: Fierce Competition or shared growth?

• Accelerated growth in China and India may create opportunities for some and threaten others and the outcomes may differ depending on the reform on the way

• Opportunity for mutual learning

Who will Feed the D&E in the Future?

• Will the D&E able to feed themselves in 2030 or 2050 in the face of rising population, rapid urbanization and limited land and water resources? In the face of Climate change?

• Will Brazil be in a position to feed the D&E? Will Africa be?

The approach of Indian and China is as inexorable as ever – they are intertwining with the West quietly and quickly. The rest of the world cannot avoid the changes they will bring. The only thing to do is face them, and adjust. - Robyn Meredith in 2007