IFPRI Discussion Paper 01834

May 2019

Transformation and Sources of Growth in Southeast Asian Agriculture

Pratap S. Birthal

P. K. Joshi

Devesh Roy

Ghanshyam Pandey

South Asia Regional Office CGIAR Research Program on Agriculture for Nutrition and Health (A4NH)

INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE The International Food Policy Research Institute (IFPRI), established in 1975, provides research-based policy solutions to sustainably reduce poverty and end hunger and malnutrition. IFPRI’s strategic research aims to foster a climate-resilient and sustainable food supply; promote healthy diets and nutrition for all; build inclusive and efficient markets, trade systems, and food industries; transform agricultural and rural economies; and strengthen institutions and governance. Gender is integrated in all the Institute’s work. Partnerships, communications, capacity strengthening, and data and knowledge management are essential components to translate IFPRI’s research from action to impact. The Institute’s regional and country programs play a critical role in responding to demand for food policy research and in delivering holistic support for country-led development. IFPRI collaborates with partners around the world.

AUTHORS Pratap S. Birthal (ps.birthal@icar.gov.in) is a national professor at the ICAR-National Institute of Agricultural Economics and Policy Research (NIAP), New Delhi, India.

P.K. Joshi (p.joshi@cgiar.org) is the director of the South Asia Regional Office of the International Food Policy Research Institute (IFPRI), New Delhi, India.

Devesh Roy (d.roy@cgiar.org) is a senior research fellow in the CGIAR Research Program on Agriculture for Nutrition and Health (A4NH) of the International Food Policy Research Institute (IFPRI), New Delhi, India.

Ghanshyam Pandey (ghanshyampndy@yahoo.com) is a research associate at the ICAR-National Institute of Agricultural Economics and Policy Research (NIAP), New Delhi, India.

Notices

1 IFPRI Discussion Papers contain preliminary material and research results and are circulated in order to stimulate discussion and critical comment. They have not been subject to a formal external review via IFPRI’s Publications Review Committee. Any opinions stated herein are those of the author(s) and are not necessarily representative of or endorsed by IFPRI.

2 The boundaries and names shown and the designations used on the map(s) herein do not imply official endorsement or acceptance by the International Food Policy Research Institute (IFPRI) or its partners and contributors.

3 Copyright remains with the authors. The authors are free to proceed, without further IFPRI permission, to publish this paper, or any revised version of it, in outlets such as journals, books, and other publications.

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Contents

Abstract .......................................................................................................................................... iv

Acknowledgements ........................................................................................................................ v

1. Introduction .............................................................................................................................. 1

2. Data and Analytical Approach ................................................................................................ 2

2.1 Data sources ................................................................................................................................... 2 2.2 Method of decomposition of growth .............................................................................................. 3 3. Patterns of Agricultural Transformation ................................................................................ 4

4. Sources of Growth in Agriculture ........................................................................................... 8

4.1 Changes in crop composition ......................................................................................................... 9 4.2 Decomposition of growth by source ............................................................................................ 10 4.3 Decomposition of growth by crop ............................................................................................... 13 5. Determinants of sources of growth ....................................................................................... 16

5.1 Area expansion ............................................................................................................................. 16 5.2 Input use and land productivity .................................................................................................... 16 5.3 Total factor productivity .............................................................................................................. 19 5.4 Spending on agricultural R&D .................................................................................................... 19 5.5 Terms of trade .............................................................................................................................. 20 5.6 Changes in food basket ................................................................................................................ 20 5.7 International trade ........................................................................................................................ 21 6 Conclusions and Implications ............................................................................................... 22

References ..................................................................................................................................... 24

Appendix Tables ........................................................................................................................... 26

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List of Tables

Table 1. Level and growth in per capita income (US$ at 2010 prices) .................................... 5

Table 2. Annual growth in GDP and agricultural GDP (in percentage) ................................... 5

Table 3. Trends in share of agriculture in GDP and workforce ................................................ 6

Table 4. Trend in labor productivity in agriculture (US$ at 2010 prices) ................................ 8

Table 5. Incidence of poverty and undernourishment .............................................................. 8

Table 6. Contribution of different sources to output growth during 2000-2016

(in percentage) ......................................................................................................................... 11

Table 7. Share of crops in crop sector growth (in percentage) ............................................... 14

Table 8. Annual growth in the land used for crop production and forests, 2000-2016 (in

percentage) ............................................................................................................................... 16

Table 9. Annual TFP growth during 2000-2015 (in percentage)............................................ 19

Table 10. Spending on agricultural research........................................................................... 20

Table 11. Food consumption (kg/capita/annum) .................................................................... 21

Table 12. Net trade of major commodities in Southeast Asia (US$ million/annum) ............. 21

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List of Figures

Figure 1. Trends in share of agriculture in GDP and workforce ............................................... 6

Figure 2. Declining weight of agriculture in GDP and workforce ............................................ 7

Figure 3. Share of crops in gross cropped area; 2000-02 and 2014-16 (in percentage) ............ 9

Figure 4. Share of crops in the total value of output; 2000-02 and 2014-16 (in percentage) .. 10

Figure 5. Percent annual growth in real value of output of crop sector, 2000-2016 ............... 10

Figure 6. Contribution of different sources to growth 2000-2016 (in percentage) .................. 11

Figure 7. Year-on-year changes in sources of growth (in US$ million) .................................. 12

Figure 8. Share of crops in crop sector growth (in percentage) ............................................... 14

Figure 9. Share of crops in area-driven growth (in percentage) .............................................. 15

Figure 10. Trend in fertilizer use (NPK in kg/ha of crop land) ............................................... 17

Figure 11. Trend in yields of important crops (tons/ha) .......................................................... 18

Figure 12. Trend in land productivity, (US$/ha of gross cropped area) .................................. 18

Figure 13. TFP indices for Southeast Asian countries ............................................................. 19

Figure 14. Trend in terms of trade ........................................................................................... 20

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ABSTRACT Over the past few decades, the agricultural sector of Southeast Asia has experienced robust growth and undergone a structural transformation albeit differentially across the countries in the region. The main aims of this paper are to understand the process of transformation and sources of growth in agriculture in the broader context of economy-wide changes in domestic and international markets, and to suggest technological, institutional and policy measures for faster, efficient and sustainable growth. Our findings show faster growth in agriculture in comparatively low-income countries, with technological change, area expansion and diversification being the main drivers. On the other hand, agricultural growth in high-income countries has been relatively slow, and driven by price increases, mainly of the export-oriented commercial crops, such as oil-palm, rubber and coconut; and also, by area expansion. In view of the fixed supply of land and high volatility in global food prices, area and price driven growth is unlikely to sustain in the long-run. For efficient, sustainable and inclusive growth, the recourse has to be with exploiting potential of (i) existing and frontier technologies, by investing more in agricultural research and extension systems, and (ii) diversification of production portfolio towards higher-value food commodities by strengthening institutions that link farmers to remunerative markets; and investing in post-harvest infrastructure for food processing.

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ACKNOWLEDGEMENTS The authors acknowledge the International Fund for Agricultural Development (IFAD) for the financial support. This study is a part of the IFAD project on “Agricultural Transformation and Market Integration (ATMI) in ASEAN region: Responding to Food Security and Inclusiveness Concerns’. The authors would also like to thank their implementing partner, the Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA), and the participants in the national inception workshops and policy roundtables of Cambodia, Lao PDR, Myanmar, Vietnam, and the Philippines for their valuable inputs. This study also acknowledges the CGIAR Research Program on Policies, Institutions, and Markets (PIM) for its support. The opinions expressed here belong to the authors and do not necessarily reflect those of IFAD, IFPRI, or SEARCA.

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1. Introduction Rapid growth in agriculture is a necessary as well as a sufficient condition to kick-start the process of structural transformation, that eventually leads to a fall in agriculture’s share in gross domestic product (GDP) and workforce. The path and speed of structural transformation, however, may vary across regions and countries depending on their relative endowments of resources (i.e., land, labor and capital), technological capabilities, infrastructure, institutions and governance (Echevarria, 1997; Gollin et al., 2007; Bah 2011; Felipe et al., 2015; Sen, 2016). The Southeast Asian region has experienced robust economic growth in the recent past. During 2000-2015, driven by manufacturing and services sectors, the region’s GDP grew at an annual rate of more than 5 percent, making it one of the fastest growing regional economies in the world. However, the pace of structural transformation has not been as robust as in the developed countries. During this period, agricultural sector grew slowly, at an annual rate of about 3 percent, and experienced a decline in its share of GDP, from 15 percent in 2000 to 11 percent in 2015. However, the sector remains under strong employment pressure — its share in workforce during this period declined slowly from 49 percent to 38 percent. Needless to say, the pace of structural transformation has differed markedly across the countries in the region (Sen, 2016). This transformation of agriculture has been shaped by advancements in bio-chemical technologies, investments in irrigation and infrastructure, and innovations in information and communication technologies and financial systems (Sen, 2016). This led to a substantial increase in agricultural productivity, food supplies and rural wages (Dawe, 2015; Vos, 2018). Nonetheless, fostering rapid growth in agriculture and rural development remains a major concern in the region on account of several factors. First, despite the rapid increase in food production, some countries in the region are not self-sufficient in, mainly in cereals, and heavily depend on imports to meet their growing domestic demand. By 2050, Southeast Asia’s population is projected to increase to over 800 million — about 20 percent more than the current population. Therefore, the need to produce more food from the limited resources remains as urgent as in the past. Second, the agricultural sector in most of the countries in the region is dominated by small landholdings and is likely to remain under significant employment pressure, given the slow rate of labor absorption in non-agricultural sectors. Third, the rising per capita income, advances in urbanization typified by a burgeoning middle-income class, changing demographic profiles, growing health consciousness, increasing participation of women in workforce, and increasing globalization of agri-food markets have been causing rapid changes in consumer preferences in favor of high-value, nutrient-rich foods, such as fruits, vegetables, milk, meat, egg and fish (FAO, 2017). The factors shaping the consumer preferences have been quite robust in the recent past and are unlikely to subside in the near future, implying a faster growth in demand for these commodities in the future as well. This would have implications for agricultural markets, infrastructure and institutions. Being perishable, most high-value food commodities require different kinds of markets and post-harvest infrastructures than do the widely-grown cereals or other such crops. The agricultural markets in most countries in the region are underdeveloped, fragmented, imperfect, and dominated by intermediaries and the value chains for most high-value food commodities are in their infancy due to lack of post-harvest infrastructures and poor institutional arrangements to connect farmers to markets (Habito et al., 2016; Stillman and Rillo, 2015). Fourth, the climate change is posing a significant threat to sustainable development of agriculture and agriculture-based livelihoods (FAO, 2017). Most countries in the region, being located in the tropics and squeezed between the Indian Ocean and the Pacific Ocean, are highly exposed to frequent risks of cyclones, floods and droughts. The frequency of climate extremes is predicted to increase in the future,

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that will adversely affect performance of agriculture, and subsequently livelihoods of people dependent on agriculture and agro-based industries. Addressing these challenges is essential for achieving faster, efficient and sustainable growth of agriculture — a prerequisite for accelerating the pace of structural transformation, especially in low-income countries that depend heavily on agriculture and lack technological capabilities and financial resources to cope with the emerging challenges. The main aim of this paper is to understand paths to agricultural transformation in Southeast Asian countries and to identify factors underlying the transformation in a broader context of economy-wide changes in domestic and international markets. The paper tracks trajectories of agricultural growth and identifies factors for the differences in sources of growth within and across the countries. Towards this, we decompose growth and estimate relative contributions of four of its main components:

(i) technological change, (ii) area expansion, (iii) diversification, and (iv) price increases

In addition, we also identify crops or crop groups that can potentially influence the pace of agricultural transformation via their effects on agricultural growth. A comprehensive understanding of the past sources of growth is important for prioritizing efforts and investments to cope with challenges to future growth of agriculture and agriculture-based livelihoods. We expect that such an analysis will provide evidence-based feedback to policymakers, research managers, development organizations and financial institutions to design and implement technically-feasible, economically-viable and environmentally-sound strategies for faster, efficient, sustainable and inclusive growth of agriculture. Rest of the paper is organized as follows. Next section briefly discusses data sources and analytical approach used to assess the relative contributions of area expansion, price increases, crop diversification and technological change to agricultural growth. Section 3 discusses nature, extent and speed of agricultural transformation in Southeast Asian countries. The relative contributions of different sources of growth are analyzed and discussed in section 4; and section 5 discusses factors that explain differences in their contributions within and across the countries in the region. Conclusions and implications are discussed in the last section.

2. Data and Analytical Approach

2.1 Data sources

To examine the process of agricultural transformation we use data on GDP by sectors from the FAOSTAT (www.fao.org/faostat), and on workforce from the Asian Productivity Organization (APO) (http://www.apo-tokyo.org/wedo/measurement). Agricultural growth is an outcome of the change in cropped area or crop yields or real producer prices or land re-allocation among crops or all of these. Information on these variables has also been sourced from the FAOSTAT. However, a limitation of this data-set is that it lacks time-series on producer prices for all the commodities and for all the countries. But, this contains time series of the value of output of most crops. We divide value of output of each crop by its level of production to generate series of producer prices. We deflate the value of output by the GDP deflator (US$ at 2010 constant prices). The time-series on agricultural data, especially commodity prices, is often noisy or shows a random walk that can potentially bias estimates of growth and its components. Therefore, we smoothen the data

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series on area, production and value of output applying the Hodrick–Prescott (HP) filter1, and use the transformed series for analyzing sources of growth.

2.2 Method of decomposition of growth

To assess the relative contributions of different sources of agricultural growth, we decompose overall growth in agriculture following the “growth accounting” approach as in Minot et al. (2006) and Joshi et al. (2006). The growth or change in revenue from a single crop at two points of time or over a period of time can be decomposed into approximate effects of area expansion, yield improvements and price increases. Let Ai be the area of crop i, Yi its yield and Pi its real producer price, then the revenue Ri from crop i can be expressed as:

Ri = AiYiPi (1) Summing up revenues of n crops provides us the total revenue:

𝑅𝑅 = �𝐴𝐴𝑖𝑖𝑌𝑌𝑖𝑖𝑃𝑃𝑖𝑖

𝑛𝑛

𝑖𝑖=1

(2)

In the process of decomposition of the total revenue from n crops, there is one more source of change, namely the area re-allocation across crops or crop diversification. To account for this, we express area under crop i as its share in the total cropped area that is, 𝑎𝑎𝑖𝑖 = � 𝐴𝐴𝑖𝑖

∑ 𝐴𝐴𝑖𝑖𝑖𝑖�, and substitute this in Eq (2):

𝑅𝑅 = ��𝑎𝑎𝑖𝑖

𝑛𝑛

𝑖𝑖=1

𝑌𝑌𝑖𝑖𝑃𝑃𝑖𝑖��𝐴𝐴𝑖𝑖

𝑛𝑛

𝑖𝑖=1

(3)

Taking total derivative of both sides of Eq (3) provides us the absolute contribution of each component to the change in total revenue:

𝜕𝜕𝑅𝑅 ≅ ��𝑎𝑎𝑖𝑖

𝑛𝑛

𝑖𝑖=1

𝑌𝑌𝑖𝑖𝑃𝑃𝑖𝑖� 𝜕𝜕 ��𝐴𝐴𝑖𝑖

𝑛𝑛

𝑖𝑖=1

� + ��𝐴𝐴𝑖𝑖

𝑛𝑛

𝑖𝑖=1

� 𝜕𝜕 ��𝑎𝑎𝑖𝑖

𝑛𝑛

𝑖𝑖=1

𝑌𝑌𝑖𝑖𝑃𝑃𝑖𝑖� (4)

The second term on the right-hand side of Eq (4) can further be decomposed from a change in sums to the sum of changes, and can be written as:

𝜕𝜕𝑅𝑅 ≅ ��𝑎𝑎𝑖𝑖𝑌𝑌𝑖𝑖𝑃𝑃𝑖𝑖

𝑛𝑛

𝑖𝑖=1

� 𝜕𝜕 ��𝐴𝐴𝑖𝑖

𝑛𝑛

𝑖𝑖=1

� + �𝜕𝜕𝑛𝑛

𝑖𝑖=1

(𝑎𝑎𝑖𝑖𝑌𝑌𝑖𝑖𝑃𝑃𝑖𝑖) (5)

Further expansion of the second term in Eq (5) yields the following expression:

𝜕𝜕𝑅𝑅 ≅ ��𝑎𝑎𝑖𝑖𝑌𝑌𝑖𝑖𝑃𝑃𝑖𝑖

𝑛𝑛

𝑖𝑖

�𝜕𝜕�𝐴𝐴𝑖𝑖 + �𝐴𝐴𝑖𝑖�(𝑎𝑎𝑖𝑖𝑃𝑃𝑖𝑖𝜕𝜕𝑌𝑌𝑖𝑖) +�𝐴𝐴𝑖𝑖�(𝑎𝑎𝑖𝑖𝑌𝑌𝑖𝑖𝜕𝜕𝑃𝑃𝑖𝑖) + �𝐴𝐴𝑖𝑖

𝑛𝑛

𝑖𝑖=1

𝑛𝑛

𝑖𝑖=1

𝑛𝑛

𝑖𝑖=1

𝑛𝑛

𝑖𝑖=1

𝑛𝑛

𝑖𝑖=1

𝑛𝑛

𝑖𝑖=1

�(𝑃𝑃𝑖𝑖𝑌𝑌𝑖𝑖𝜕𝜕𝑎𝑎𝑖𝑖) (6)𝑛𝑛

𝑖𝑖=1

1 Hodrick–Prescott filter is a commonly used techniques to remove short-term fluctuations from the time series data. It generates a smoothed nonlinear representation of the series. The adjustment of the sensitivity of the trend to short-term fluctuations is done by applying a suitable adjustment factor. We have used adjustment factor of 100.

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Eq (6) provides the change in total revenue due to a change in (i) total cropped area, (ii) crop yields or technological change, (iii) real produce prices, and (iv) land re-allocation or diversification. The first term on the right-hand side of Eq (6) provides the change in gross revenue due to a change in the total cropped area or area expansion. The second term captures the effect of a change in the real prices of agricultural commodities on gross revenue. The third term measures the effect of a change in gross revenue due to a change in crop yields or technological change. The fourth term provides us the change in gross revenue due to re-allocation of land among crops or a change in crop composition. A positive value on the fourth term suggests a re-allocation of land from lower-value to higher-value crops. Eq (6) provides absolute contributions of different sources to the overall change in gross revenue. Dividing both sides of this equation by the overall change in gross revenue we get proportionate contribution of different sources or alternatively their shares in overall growth of agriculture. Note, the growth accounting method leaves a small unexplained residual term due to intractable interactions among these components, which has no ready explanation, so is ignored in the discussion.

3. Patterns of Agricultural Transformation The Southeast Asian region consists of eleven countries, namely Brunei, Cambodia, Lao PDR, Myanmar, Thailand, Timor-Leste, Vietnam, Indonesia, Malaysia, Philippines and Singapore. While, agriculture is almost non-existent in Singapore and Brunei, in terms of both its share in GDP as well as workforce, there is lack of agricultural data for Timor-Leste. Hence, we restrict our analysis to the following countries: Cambodia, Lao PDR, Myanmar, Thailand, Vietnam, Indonesia, Malaysia and Philippines where agriculture is an important in terms of its share in GDP and workforce. Most countries in the region are similar in several aspects. A striking similarity is that these are located in the tropics and face almost similar climatic conditions. The other notable similarity is that agriculture is pre-dominantly carried out by small landholders, and the agricultural production systems are dominated by rice, the main staple food of the population in the region. Nonetheless, there are marked differences in their economic structures, income levels, technological capabilities, infrastructures and institutions that define the path of agricultural transformation. These are discussed below: There are marked differences in income levels across countries: Malaysia has the highest per capita income of US$ 11032 (at 2010 prices) in the region (Table 1). While, the per capita incomes of Cambodia, Myanmar, Lao PDR and Vietnam are about 85 percent lower than that of Malaysia. Thailand, Indonesia and Philippines rank next to Malaysia in that order, but their per capita incomes are also much lower. The per capita income of Thailand, the second most economically advanced country in the region, for example is just about half of that of Malaysia. Per capita incomes have grown faster in comparatively low-income countries: Income levels although have improved in all the countries in the region, the these have improved faster in Cambodia, Myanmar, Lao PDR and Vietnam — the low-income countries. During 2001-2016, the per capita income increased at an annual rate of 9 percent in Myanmar, around 6 percent in Cambodia and Lao PDR, and 5 percent in Vietnam. On the other hand, the countries that rank higher in income hierarchy (Malaysia, Thailand, Indonesia and Philippines) have experienced slower growth of 3-4 percent per annum in their per capita incomes partly due to the base effect.

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Table 1. Level and growth in per capita income (US$ at 2010 prices)

Per capita income % annual growth 1991 2000 2016 1991-2000 2001-2016

Cambodia 329 437 1114 3.2 5.8 Myanmar 162 289 1176 6.0 9.2 Lao PDR 475 682 1684 4.2 6.1 Vietnam 440 748 1735 6.2 5.3 Philippines 1481 1607 2753 1.2 3.5 Indonesia 1762 2143 3974 2.1 4.2 Thailand 2639 3452 5692 2.5 3.3 Malaysia 4385 7010 11032 4.0 3.1

Source: Authors’ estimate using data from FAOSTAT. Economic growth is advancing towards convergence: Most countries in the region (except Thailand) have experienced robust economic growth (Table 2). During 2001-2016, the rate of growth has been faster in low-income countries — 6-10 percent per annum as compared to 4-6 percent per annum in the high-income countries. Further, except Vietnam and Malaysia, all other countries have experienced an accelerated rate of growth; the acceleration being higher in Philippines, Indonesia and Myanmar. These trends suggest a tendency of convergence in income levels in the region. Comparatively, agriculture has grown slowly but at an accelerated rate: Agricultural sector has witnessed an impressive growth, but it has grown faster in the low-income countries. During 2000-2016, the sector grew at an annual rate of 5.6 percent in Myanmar, 4.4 percent in Cambodia, and 3-4 percent in Vietnam, Lao PDR and Indonesia. On the other hand, the rate of growth has been relatively slower in Thailand (1.6%), Philippines (2.2%) and Malaysia (2.9%). Nonetheless, compared to its past trends (i.e., during 1991-2000), the agricultural growth has decelerated in Lao PDR, Vietnam and Thailand. Elsewhere, it has either sustained its past trend or grown at an accelerated rate. Table 2. Annual growth in GDP and agricultural GDP (in percentage)

Overall GDP Agricultural GDP 1991-2000 2001-2016 1991-2000 2001-2016

Cambodia 6.4 7.5 3.9 4.4 Myanmar 7.3 10.1 5.9 5.6 Lao PDR 6.5 7.7 5.1 3.4 Vietnam 7.9 6.4 4.5 3.2 Philippines 3.6 5.3 1.9 2.2 Indonesia 3.6 5.6 2.0 3.8 Thailand 3.6 3.9 3.1 1.6 Malaysia 6.6 5.0 0.2 2.9

Source: Authors’ estimate using data from FAOSTAT. Pace of structural transformation varies widely across the countries: Agriculture’s share in GDP has declined in all the countries in the region (Table 3, Figure 1a). In Cambodia and Myanmar, it fell to almost half to 30 percent in 2015 from about 60 percent in 1991; and in Vietnam to 15 percent from 32 percent. Its share also fell in high-income countries but from a high base. Currently, agriculture contributes around 10 percent to GDP in these countries. Further, the rate of decline in agriculture’s share in GDP has accelerated in region particularly in the low-income countries. In Malaysia, the rate of decline has slowed down considerably, from 6.3 percent per annum during 1991-2000 to 1.9 percent per annum during 2001-2016.

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Table 3. Trends in share of agriculture in GDP and workforce

% share in GDP % annual growth % share in workforce % annual growth 1991 2000 2016 1991-

2000 2001-2016

1991 2000 2015 1991-2000

2001-2016

Cambodia 59.9 44.7 24.6 -2.3 -2.7 79.2 70.0 43.1 -1.0 -2.7 Myanmar 58.9 46.2 27.3 -2.4 -3.2 69.1 62.8 53.0 -1.0 -1.1 Lao PDR 35.7 30.6 16.7 -1.5 -3.7

82.7 70.8 -2.2

Vietnam 32.4 24.3 15.1 -3.2 -2.9 71.0 63.1 44.0 -0.9 -2.2 Philippines 16.2 14.3 9.4 -1.3 -2.7 40.0 33.0 28.1 -1.9 -0.7 Indonesia 18.4 16.2 12.4 -1.9 -1.8 54.0 45.2 33.4 -2.7 -2.3 Thailand 13.2 12.5 9.0 -0.9 -2.0 56.2 42.7 33.5 -3.4 -1.6 Malaysia 20.0 11.2 8.5 -6.3 -1.9 23.8 16.8 11.8 -3.7 -2.1

Source: Authors’ estimate: GDP data from FAOSTAT, and workforce from APO The falling share of agriculture in GDP has been accompanied by a decline in its share in the labor force, but unevenly across the countries (Table 3, Figure 1b). In low-income countries, despite the rapid decline in agriculture’s share in GDP, the pace of labor exit from it has been slower keeping the sector under high employment pressure. Agriculture still engages as high as 71 percent of the workforce in Lao PDR, 53 percent in Myanmar, 44 percent in Vietnam and 43 percent in Cambodia. Interestingly, the pace of labor exit from agriculture in these countries, especially in Cambodia and Vietnam, has accelerated in recent years. In other countries, the sector engages around one-third of the total workforce, except Malaysia where only about 12 percent of the workforce is dependent on agriculture. In these countries, the rate of decline in agriculture’s share in workforce too has decelerated considerably. Figure 1. Trends in share of agriculture in GDP and workforce

(a) % share in GDP (b) % share in workforce

Source: As for Table 3 Figure 2 plots trends in agriculture’s share in GDP (solid lines) against the difference between agriculture’s share in GDP and its share in employment (dashed lines) for different countries. The falling and converging agricultural GDP and workforce shares indicate that productivity growth in agriculture pushes structural transformation (Vos, 2018). As expected, the shares of agriculture in GDP as well as workforce have fallen faster in high-income countries that suggest comparatively faster pace of structural transformation there. The structural transformation is at an advanced stage in Malaysia, followed by Philippines, Thailand and Indonesia. On the other hand, the pace of structural transformation is not as robust in the low-income countries. These differences in the paths of agricultural transformation across countries could arise due to differences in their resource endowments, technological capabilities and human capital among other factors.

0

10

20

30

40

50

60

70

Cambodia Lao PDR Viet NamPhilippines Indonesia ThailandMalaysia

0

10

20

30

40

50

60

70

80

Cambodia Viet Nam Philippines

Indonesia Thailand Malaysia

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Figure 2. Declining weight of agriculture in GDP and workforce

Source: As for Figure 1 Structural transformation has led to an improvement in labor productivity in agriculture: Labor productivity, measured as agricultural GDP (AgGDP) per agricultural worker though has improved everywhere (Table 4), yet at any point of time it has been smaller in low-income countries; the lowest being in Lao PDR (US$893 in 2015), and followed by Vietnam, Cambodia and Myanmar. Malaysia has the highest labor productivity (US $18470) with Indonesia, Thailand and Philippines in that order. Nonetheless, there has been an acceleration in growth in labor productivity in the region. Myanmar has recorded the highest productivity growth — 6.4 percent per annum during 1990s and 5.7 percent per annum during 2000-2016. In Cambodia, the growth in labor productivity accelerated considerably from 1.3 percent per annum in 1990s to 4.4 percent per annum during 2001-2016. It also accelerated in Vietnam (from 3% to 3.2%) and Indonesia (from 3% to 4.1%). On the other hand, the labor productivity growth decelerated considerably in Thailand to 2.5 percent per annum during 2001-2016 from 6.1 percent per annum during 1990s; and it has been extremely slow in Philippines and Malaysia.

-50

-40

-30

-20

-10

0

10

20

30

40

50

60

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Ag. Share Cambodia Ag. Share Lao PDR Ag. Share Viet NamAg. Share Philippines Ag. Share Indonesia Ag. Share ThailandAg. Share Malaysia Diff. Cambodia Diff. Viet NamDiff. Philippines Diff. Indonesia Diff. Thailand

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Table 4. Trend in labor productivity in agriculture (US$ at 2010 prices)

AgGDP per worker Growth in AgGDP per worker (%) 1993 2000 2015 1993-2000 2001-2016

Cambodia 502 563 1080 1.3 4.4 Myanmar 270 616 1597 6.4 5.7 Lao PDR NA 598 893 NA 2.8 Vietnam 444 607 1059 3.0 3.2 Philippines 1544 1822 2364 1.7 1.9 Indonesia 1413 1842 3357 3.0 4.1 Thailand 1025 1935 3170 6.1 2.5 Malaysia 10290 12419 18470 0.7 2.1

Source: As for Table 3 Growth in labor productivity has impacted poverty and nutrition: Improvements in labor productivity have been associated with reduction in poverty and improvement in nutritional status of populations in the region (Table 5). In Vietnam, the head-count poverty fell drastically, from 52.9 percent in 1991 to 2 percent in 2016; and the proportion of undernourished population from 45.6 percent to 11 percent. Indonesia also witnessed a significant fall in the head-count poverty by 20 percentage points and in the share of undernourished population by 12 percentage points. The incidence of poverty and undernourishment remains high in Lao PDR despite the rapid economic as well as agricultural growth. Table 5. Incidence of poverty and undernourishment

Head-count poverty (% at US$1.9 at 2011PPP)

Undernourished population (%)2

1991 2000 2016 1991 2000 2016 Cambodia 8.9 16.4 4.5 32.1 32.0 14.2 Myanmar - - 6.4 62.6 52.4 14.2 Lao PDR 32.2 33.8 22.7 42.8 39.2 18.5 Vietnam 52.9 38.0 2.0 45.6 28.1 11.0 Philippines - - - 29.9 20.7 20.2 Indonesia 58.8 39.3 6.5 19.7 17.2 7.6 Thailand 9.4 2.5 0.0 34.6 19.0 7.4 Malaysia 1.3 0.4 0.0 5.1 5.0 5.0

Source: (i) Poverty from World Development Indicators: (https://data.worldbank.org/indicator/SI.POV.DDAY) (ii) Undernourished population from: http://www.fao.org/faostat/en/#country Note: Figures do not strictly relate to the years against indicated in the table

4. Sources of Growth in Agriculture3 The regional differences in labor productivity and its social impacts can be attributed to differences in technological capabilities (agricultural research and extension), production systems, wages, output prices, degree of commercialization of agriculture, agri-infrastructure and institutions across the countries. In this section, focusing on crop sub-sector, that account for bulk of the value of agricultural

2 As per FAO, undernourishment refers to the proportion of the population whose dietary energy consumption is less than a pre-determined threshold. 3 We could not analyze sources of growth for Myanmar agriculture due to lack of data.

9

output in the region4, we examine changes in agricultural production systems and components of output growth so as to comprehend their potential toward improving efficiency, equity and sustainability of the systems.

4.1 Changes in crop composition

Rice dominates food production systems: Rice, being staple food, dominates cropping systems in the region, more so in the low-income countries (Figure 3, Table A1 in the appendix). It occupies as high as three-fourths of the total cropped area in Cambodia, 50-56 percent in Lao PDR, Thailand and Vietnam; and around one-third in Indonesia and Philippines. Furthermore, it has lost its area share in all countries, except Philippines. In Malaysia, rice is not an important crop its share in the total cropped area is just 10 percent. Nevertheless, the area under rice cultivation has increased throughout the region, but at a slower rate compared to several other crops (see Table A2 in the appendix). Maize is emerging as an important crop: Maize is the second most important cereal crop after rice, but is more prominent in Philippines, Lao PDR and Indonesia where it occupies 18 percent, 15 percent and 10 percent of the total cropped area, respectively. In Vietnam and Thailand, it is cultivated in 6-8 percent of the area. And, unlike rice, it has consolidated its area share in all the countries (except Thailand and Malaysia) probably on account of its growing demand as feed in the livestock industry. Horticulture has consolidated its area share: Horticultural crops, i.e., vegetables, roots, tubers, fruits and spices, together occupy 15-20 percent of the gross cropped area in most countries, except Malaysia (2.4%) and Indonesia (9.3%). Amongst horticultural crops, roots & tubers (mainly cassava) are more important in Cambodia (10%) and Thailand (7%); vegetables in Lao PDR (10%) and Vietnam (7%); and fruits in Philippines (9%), Thailand (6%) and Vietnam (4%). Over time, the roots & tubers have gained in their area share in Cambodia and Thailand; vegetables in Vietnam; and fruits in Philippines, Vietnam and Lao PDR. Figure 3. Share of crops in gross cropped area; 2000-02 and 2014-16 (in percentage)

Source: Authors’ estimates using data from FAOSTAT. Plantation crops are more important in high-income countries: Oil-palm occupies 72 percent of the total cropped area in Malaysia, and it has been consolidating its area share. Rubber with an area share of 15 percent remains the second most important crop in the country, despite a decline in its share over the past two decades. In Indonesia as well, the oil-palm and rubber are next important crops after rice, being cultivated on 20 percent and 9 percent of the total cropped area, respectively. Over time, while oil-palm has consolidated its position, rubber has not. In both the countries, cultivation of oil palm has 4 In terms of monetary contribution, crops comprise the largest sub-sector of Southeast Asian agriculture. The value of crop production is more than three-times the value of livestock production.

8475 71

56 61 55

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Rice Maize Coconuts Oil palm Roots & tubers Vegetables Fruits Spices Coffee & tea Rubber Others

32 33 37 33

56 51

11 9

20 18 119

66

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9

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10

grown displacing less profitable cereals and other crops (see Table A2 in the appendix). Coffee is also cultivated in Indonesia (7%), Vietnam (5%) and Lao (4%). Value shares of crops closely corresponds to their area shares: Except in Indonesia and Philippines, the share of rice in total value of output of crops has been less than its share in total cropped area (Figure 4; also see Table A3 in the appendix). Horticultural and plantation crops, that generate higher returns per unit of land compared to widely-grown cereals or other such crops, have relatively larger shares in the value of output than in the cropped area. Except in Cambodia and Vietnam, the horticulture has lost their value share but marginally. In Cambodia, Lao PDR and Thailand, the roots & tubers have gained considerably in their value shares, but vegetables have lost. There is also a decline in the value share of fruits in these countries. Coffee has gained in its value share in Vietnam and in Lao PDR, oil-palm in Malaysia and rubber in Thailand. Figure 4. Share of crops in the total value of output; 2000-02 and 2014-16 (in percentage)

Source: Authors’ estimates using data from FAOSTAT.

4.2 Decomposition of growth by source

Agriculture has experienced robust growth in the region: During 2000-2016, the value of output of crops (in real terms) has grown at an annual rate of over 12 percent in Cambodia; around 7 percent in Lao PDR and Indonesia, 5.5 percent in Malaysia and about 4 percent in Vietnam, Philippines and Thailand (Figure 5). Figure 5. Percent annual growth in real value of output of crop sector, 2000-2016

Source: Authors’ estimates using data from FAOSTAT.

3.9

4

4.3

5.45

6.7

7.7

12.5

0 2 4 6 8 10 12 14

Philippines

Vietnam

Thailand

Malaysia

Lao PDR

Indonesia

Cambodia

4834 34 29

4840

2

3 16

3

5

021

18

56

16 540 28

78

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30 33 31

47

3324

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11

Output growth in low-income countries has been driven by area expansion and technological change: In Lao PDR, area expansion and yield improvements have contributed more to the output growth than any other source of growth (Table 6 & Figure 6). Diversification or land re-allocation from lower-value to higher-value crops accounts for only one-tenth of the output growth. Similarly, more than half of the growth in Vietnamese agriculture has come from technological change, followed by area expansion (30%) and diversification (11%). On the other hand, growth sources in Cambodian agriculture are diverse with land re-allocation being the leading source (31%), followed by area expansion (26%) and yield improvements (20%). Prices are not a significant factor in output growth in any of these countries. In contrast, growth in high-income countries has been driven by prices: More than half of the output growth in Malaysia, Philippines and Indonesia, and 44 percent in Thailand has come from an increase in real producer prices. Area expansion is the second largest source of output growth in these countries — approximately one-third of the growth in Indonesia, one-fourth in Philippines and one-fifth in Thailand and Malaysia have resulted from additional area brought under cultivation. Except in Thailand, diversification has not been an important source of output growth in these countries. The contribution of technological change to output growth is also small, being less than 20 percent. Table 6. Contribution of different sources to output growth during 2000-2016 (in percentage)

Area Yield Price Diversification Interaction Total

Cambodia 26.0 20.5 12.5 30.7 10.3 100.0 Lao PDR 60.8 51.1 -20.5 9.6 -1.0 100.0 Vietnam 30.4 52.9 5.5 10.7 0.6 100.0 Philippines 26.6 15.6 53.5 3.7 0.6 100.0 Indonesia 32.7 17.7 50.6 0.5 -1.5 100.0 Thailand 22.2 13.4 44.0 20.2 0.1 100.0 Malaysia 20.9 8.3 56.3 3.9 11.5 100.0

Source: Authors’ estimates using data from FAOSTAT. Note: The growth accounting method leaves a small unexplained residual term due to intractable interactions among growth components, which is termed as interaction effect. It has no ready explanation, so is ignored in the discussion. Figure 6. Contribution of different sources to growth 2000-2016 (in percentage)

Source: As for Table 6. Figures 7a to g (also see Table A4 in the appendix) show year-on-year changes in growth sources for each country and these provide important insights related to the effectiveness of various growth strategies. o Annual changes in the total value of output in Cambodia do not exhibit any discernable trend,

suggesting that agriculture there has grown consistently. However, at any point of time, the growth has been driven by diversification. The contribution of technological change is comparatively small, but it has remained a sustainable over time. Of late, the contribution of area expansion has slowed down. On the other hand, price effect has been extremely small.

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o Spurred by area expansion, and supplemented by technological change, agriculture has been

growing at an accelerated rate in Lao PDR. In recent years, diversification has also emerged as an important source of growth in Lao PDR. On the other hand, prices had not impacted the output growth much.

Figure 7. Year-on-year changes in sources of growth (in US$ million)

(7a) Cambodia (7b) Lao PDR

(7c) Vietnam (7d) Philippines

o Growth in Vietnamese agriculture although remains robust but has been showing signs of fatigue

despite the technological change being a sustainable source of growth there. The contribution of area expansion has risen, possibly due to intensification of the existing crop land through double cropping or even triple cropping. The contribution of diversification is not large but has remained consistent throughout. Prices had contributed to output growth until 2010, but their effect vanished later on.

o Output growth in Philippines has been decelerating since 2008 on account of the diminishing effect

of technological change and lack of diversification in fact these sources have ceased to impact the output growth. The growth has been driven by price increases and area expansion.

o In Thailand and Malaysia too, agriculture growth has decelerated drastically after 2008, mainly due

to the declining price effect, the main driver of growth there. The contribution of area expansion has also fallen drastically in both the countries. However, diversification has consolidated its share of growth in Thailand.

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(7e) Thailand (7f) Malaysia

o Growth in Indonesian agriculture, driven by producer prices and area expansion, had accelerated until 2011 but remained muted afterwards. The contribution of technological change although small remained consistent throughout.

(7g) Indonesia

These findings lead us to conclude that technological change and crop diversification are likely to be key to the future growth of agriculture in Southeast Asia. Prices although incentivize agricultural growth, however, in the long-run, given the increasing volatility in global commodity prices and changes in production and trade policies, the price-driven growth is unlikely to sustain, especially in the countries that specialize in production of export-oriented commercial crops. Likewise, the prospects for area-driven growth will be constrained by the fixed supply of land with competing uses for non-agricultural activities and the concerns for conservation of natural resources, i.e. land, forests and water.

4.3 Decomposition of growth by crop

The other way to analyze the prospects for agricultural growth is to see the relative contributions of crops or crop groups to the overall output growth. Table 7 and Figure 8 show the contributions of crops or crop groups to the overall growth of agriculture in Southeast Asian countries. There are marked regional differences in their contributions possibly due to the differences in production systems, technological capabilities, and producer prices. The important conclusions are as follows: o Rice, because of its domineering position in the agricultural production systems (except in

Malaysia), is the main contributor to output growth in Indonesia, Cambodia and Philippines. In Indonesia, it accounts for more than half of the overall growth; and about one-third in Cambodia

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and Philippines. In Vietnam and Lao PDR, about one-fourth of the growth has come from rice production, while its share is about one-tenth in Thailand, and almost negligible in Malaysia.

Table 7. Share of crops in crop sector growth (in percentage)

Cambodia Lao PDR Vietnam Philippines Indonesia Thailand Malaysia Rice 33.8 24.5 27.7 36.7 56.1 10.9 0.5 Other cereals 2.5 8.3 7.7 11.4 4.9 0.2 0.0 Pulses 1.3 0.2 1.6 0.3 0.0 0.0 0.0 Oil palm 0.0 0.0 0.0 0.3 20.3 12.2 95.4 Other oil crops 2.6 3.4 3.1 13.8 0.8 -0.4 0.1 Roots & tubers 20.6 15.3 9.2 3.2 4.7 10.2 0.1 Sugarcane 33.0 10.0 -2.0 3.5 0.3 9.9 -10.2 Vegetables 3.1 19.4 10.5 10.3 8.7 -0.5 6.1 Fruits 2.5 11.7 11.0 16.9 3.6 13.8 1.7 Coffee and tea 0.0 2.2 11.4 -0.1 -0.1 1.7 -0.9 Rubber -0.1 0.0 6.7 2.2 0.9 35.6 6.7 Other crops 0.5 5.0 13.0 1.5 -0.2 6.4 0.5 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Source: Source: As for Table 6. o In low-income countries, horticultural crops comprise a more important source of output growth

than any other crop. Close to half of the growth in Lao PDR comes from horticulture vegetables 19 percent, roots & tubers 15 percent and fruits 12 percent. In Vietnam, horticulture accounts for nearly 40 percent of the output growth, shared almost equally by fruits, vegetables and roots & tubers. Horticulture is also an important contributor to output growth (25%) in Cambodia, but most of it has come from roots & tubers (that contribute to more than one-fifth to the overall growth). In Philippines, the contribution of horticulture to the overall growth is next to rice. Fruits and vegetables (including roots & tubers), respectively, share 17 and 13 percent of the horticulture-driven growth.

o In high-income countries, the growth in agriculture has been fuelled by oil-palm and rubber. In

Malaysia, oil-palm has disproportionate effect on growth 95 percent of it has come from oil-palm. In Thailand too, nearly half of the growth has come from rubber (36%) and oil-palm (12%). Horticulture also makes a sizable contribution to overall growth (27%) of Thai agriculture. In Indonesia as well, the oil-palm, with a share of about one-fifth, is the second largest contributor to output growth after rice.

Figure 8. Share of crops in crop sector growth (in percentage)

Source: As for Figure 6.

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15

An interrelated issue is about the contributions of area expansion, yield improvements, price increases and land re-allocation to output growth of a specific crop. Understanding the sources of growth for a crop is important to formulate crop-specific strategies for balanced allocation of resources essential to improving the efficiency and sustainability of the production systems. From Figure 9 (also Table A4 in the appendix) that presents crop-specific sources of growth we derive the following conclusions: o Rice has benefitted most from area expansion in most countries 30-45 percent of the area-driven

growth is due to additional area brought under its cultivation. In Cambodia and Lao PDR, although rice has acquired a larger share of the total area-driven growth, but it has also lost some of its area to other crops. Rice’s share in the area-driven growth in Philippines, Indonesia and Cambodia is estimated to be 22-35 percent, and it has not lost much of the area to other crops in the process of land re-allocation. Technological change has been another important source of growth in rice production, especially in Vietnam (80%), Cambodia (40%) and Philippines (30%). Price effect on rice production growth varies markedly across countries 71 percent in Indonesia, 53 percent in Thailand and 45 percent in Philippines. Price effect on output growth, however, is negligible in Vietnam and Lao PDR.

Figure 9. Share of crops in area-driven growth (in percentage)

Source: As for Figure 8. Besides rice, horticulture has also benefited from area expansion. Together horticultural crops account for more than half of the area-driven growth in Lao PDR, 37 percent in Philippines and 25-30 percent in other countries, except Malaysia where most of the additional area brought under cultivation has been allocated to oil-palm (68%) and rubber (15%). In Cambodia, the area under fruits and roots & tubers has increased considerably, mostly replacing other crops. Interestingly, the price effect on growth is negative for roots & tubers, and positive for fruits. Output growth in vegetables has resulted from area expansion as well as price increases. In Lao PDR, the growth in case of fruits as well as vegetables has come from area expansion, diversification and yield improvements. In Vietnam, most of the growth in horticulture has come from technological change, followed by diversification and area expansion. In Philippines, price increases and area expansion have been the main sources of growth in horticulture, and technological change and price increases in the case of roots & tubers. Horticultural growth in Thailand and Indonesia has been driven by price increases and technological change. For export-oriented oil-palm and rubber, the growth has been driven by price increases and land re-allocation from less remunerative crops.

4032

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16

5. Determinants of sources of growth

The observed regional variation in the transformation and sources of growth in agriculture could be on account of several socio-cultural, economic, institutional and policy factors that influence demand as well as supply of food and other agricultural commodities, directly or indirectly. Laborde et al. (2018) explain variation in agricultural transformation across developing country-regions and over different periods of time through differences in agricultural price incentives, public spending and priorities for investment in R&D, infrastructure, education, health and institutional reforms. In this section, we discuss some of these factors that are contemplated to have impacted the sources of output growth, within and across the countries in Southeast Asia.

5.1 Area expansion

Area expansion has surfaced one of the leading sources of agricultural growth in most Southeast Asian countries. The additional area brought under cultivation might have come from (i) an increase in the cropping intensity, (ii) utilization of hitherto waste and fallow lands, and (iii) diversion of land from non-agricultural activities, e.g. forests or (iv) all of the these. Quantifying their exact shares in the additional area brought under cultivation is out of scope of this paper, we, however, conjecture their likely contributions by comparing the changes in land use for agriculture vis-à-vis forest land (Table 8). Table 8. Annual growth in the land used for crop production and forests, 2000-2016 (in percentage)

Gross cropped area Crop land Arable land Forest land Cambodia 3.71 2.39 0.23 -1.30 Lao PDR 3.80 3.61 3.30 0.91 Vietnam 1.13 1.91 0.39 1.49 Philippines 1.02 0.96 0.91 0.81 Indonesia 2.36 1.59 0.85 -0.62 Thailand 0.97 0.97 0.66 -0.13 Malaysia 1.08 1.36 -0.71 0.35

Source: Authors’ estimates based on data from FAOSTAT. There is a significant positive trend in the gross cropped area in all the countries. During 2000-2016, it increased at an annual rate of close to 4 percent in Cambodia and Lao PDR, 3 percent in Indonesia, and around 1 percent in rest of the countries. Crop land also shows similar trends for most countries. A part of the additional area brought under cultivation in Cambodia, Indonesia and Thailand has probably come from clearing forests, as is indicated by the negative growth in forested land in these countries. In addition, the spread of cultivation on marginal lands, and intensification of existing crop land might have also contributed to area expansion. De Koninck and Rousseau (2013) have observed double cropping and occasionally triple cropping, mainly of rice, as the primary source of area expansion in several of the countries in the region. This is confirmed by a slower rate of growth in arable land (Table 8). De Koninck and Rousseau (2013) also report that in some countries (e.g., Malaysia and Indonesia) the marginal lands have been increasingly brought under cultivation of commercial crops, oil-palm and rubber.

5.2 Input use and land productivity

Seed, water and fertilizer are key to productivity growth in agriculture. In most Southeast Asian countries, irrigation is limited to less than one-fifth of the crop land, except in Vietnam and Thailand where 35-40 percent of the crop land is irrigated. Nevertheless, the irrigated area has been rising, facilitating greater use of plant nutrients, i.e. chemical fertilizers (Figure 10). Fertilizer consumption per hectare of crop land is the highest in Vietnam, followed by Malaysia; and the lowest in Cambodia.

17

Figure 10. Trend in fertilizer use (NPK in kg/ha of crop land)

Source: As for Table 8. The best of the potential of high-yielding varieties, especially of rice, seems to have been exploited in most Southeast Asian countries. In the late 1990s, the modern varieties of rice had occupied 75 percent of the total area under rice in Southeast Asian countries, except Lao PDR and Cambodia (Mutert and Fairhurst, 2002). Of late, there has been a significant progress in agricultural mechanization (Kottmeyer et al., 2016). Dawe (2015) also reports a significant decline in labor use in rice cultivation, and an increase in uptake of machine use in several of the countries in the region. Inter alia, the increasing use of inputs and machines has led to significant improvements in crop yields. During 2000-2016, rice yield grew at an annual rate of 3.8 percent in Cambodia, 2 percent in Lao PDR and Vietnam and 1.3 percent in Philippines and Indonesia ((Figure 11, also see Table A5 in the appendix). In Thailand and Malaysia, rice yield seems to have plateaued. Maize yield has risen very significantly and the same holds for some of the horticultural crops. For example, the average yield of roots & tuber crops (mainly cassava) has grown at an annual rate of 18 percent in Lao PDR, 8 percent in Cambodia, and over 3 percent in Vietnam, Indonesia and Philippines. The average yield of vegetables too has improved but in Malaysia (3.7%) and Lao PDR (2.7%). The trends in yield of fruits are mixed —an increase in Lao PDR, Cambodia and Indonesia, no significant change in Vietnam and Thailand and a declining trend in Malaysia. The yield of oil-palm improved in Malaysia and Thailand, but slowly. Rubber yield has increased at around 2 percent in Indonesia and Vietnam.

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Figure 11. Trend in yields of important crops (tons/ha)

(11a)Rice (11b) Maize

(11c) Cassava (11d) Oil-palm

Source: As for Figure 10, Notwithstanding the differences in yield trends of different crops, the overall productivity of land, measured as the value of output per hectare of gross cropped area, has increased considerably everywhere in the region (Figure 12). Malaysia and Indonesia have higher land productivity compared to other countries primarily because of the dominance of export-oriented commercial crops oil-palm and rubber. Land productivity in both these countries, however, has started declining of late. On the other hand, driven by technological change and diversification, the land productivity in low-income countries has been increasing continuously. Figure 12. Trend in land productivity, (US$/ha of gross cropped area)

Source: As for Figure 11.

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5.3 Total factor productivity

Some studies (e.g., Fuglie, 2010; 2015) have attributed rapid growth in Southeast Asian agriculture to improvements in total factor productivity (TFP). The TFP indices and their rates of growth presented in Figure 13 and Table 9, respectively, confirm this. During 2000-2015, TFP grew at an annual rate of 4 percent in Cambodia and over 2 percent in Vietnam, Indonesia, Thailand and Malaysia, and less than 2 percent in Lao PDR and Philippines. In fact, TFP accounted for more than half of the output growth in most countries the region. Table 9. Annual TFP growth during 2000-2015 (in percentage)

Output growth TFP growth Cambodia 7.2 4.0 Lao PDR 6.2 1.6 Vietnam 4.1 2.3 Philippines 2.3 1.4 Indonesia 4.3 2.5 Thailand 2.4 2.1 Malaysia 3.1 2.6

Source: USDA (2018) Figure 13. TFP indices for Southeast Asian countries

Source : As for Table 9.

5.4 Spending on agricultural R&D

Agricultural research is a high pay-off activity (Fan et al., 2007); it boosts agricultural growth and also reduces poverty. In Table 10 we show trends in public spending on agricultural research. Spending on agricultural research has improved in most countries, except Lao PDR. The intensity of research spending, measured in US$ per hectare of crop land, has also improved. Nonetheless, there are marked differences in R&D spending across countries. Malaysia spends more on agricultural R&D US$81.3 per hectare and 0.99 percent of the agricultural GDP. Indonesia and Thailand rank next in terms of spending per hectare. Lao PDR spends 0.42 percent of the agricultural GDP on R&D, followed by Philippines, Thailand, Indonesia, Cambodia and Vietnam.

70

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Cambodia Indonesia Lao PDR MalaysiaPhilippines Thailand Viet Nam

20

Table 10. Spending on agricultural research

Spending (Million US$ 2011 PPP constant)

Expenditure (US$/ha of crop land)

Expenditure as % of AgGDP

2000 2005 2010 2000 2005 2010 2010 Cambodia 17.7 19.8 22.4 4.6 5.1 5.7 0.18 Lao PDR 37.2 21.4 16.2 37.2 17.3 10.6 0.42 Vietnam 61.6 108.9 136.0 7.6 11.6 13.4 0.18 Philippines 198.4

20.4

0.33

Indonesia 579.6 914.7 1067.7 16.1 22.4 23.9 0.31 Thailand 327 278 439.5 17.2 14.8 21.7 0.32 Malaysia 494.6 556.6 592.3 74.3 81.3 83.4 0.99

Source: Stads (2016)

5.5 Terms of trade

The differential effect of prices on output growth across countries could be on account of the degree of protection accorded to agriculture through price policy. To see this, in Figure 14 we show terms of trade for agriculture, measured as ratio of the deflator for agricultural GDP to the deflator of manufacturing GDP. Until 2011, in most countries (except Lao PDR) the terms of trade did not favor agriculture but have been improving continuously. In Malaysia and Indonesia, relatively faster increase in real prices of export-oriented oil-palm and rubber explain their higher share in agricultural growth (see Table A4 in the appendix). Indonesia is a net importer of rice (see Table 12), and perhaps could not insulate its domestic rice market from the global price hikes. Likewise, a faster increase in the prices of export-oriented commodities (coconut, fruits and vegetables) have turned the terms of trade in favor of agriculture in Thailand and Philippines. Thus, the price effect on output growth appears to be related to the degree of commercialization of agriculture and exposure to global agri-food markets. Figure 14. Trend in terms of trade

Source: FAOSTAT

5.6 Changes in food basket

Food consumption patterns in Southeast Asia have been undergoing a shift in favor of high-value commodities (Table 11). The changes are more revealing for low-income countries. Between 2000 and 2013, there has been a substantial increase in consumption of fruits and vegetables in Lao PDR and Vietnam. The consumption of starchy roots too has increased. On the other hand, the consumption of cereals in most countries has stagnated.

0.40

0.60

0.80

1.00

1.20

1.40

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Cambodia Indonesia Lao PDR Malysia

Philipines Thailand Vietnam

21

Table 11. Food consumption (kg/capita/annum)

Cambodia Lao PDR Vietnam Philippines Indonesia Thailand Malaysia 2000 2013 2000 2013 2000 2013 2000 2013 2000 2013 2000 2013 2000 2013

Cereals 177.1 174.7 176.4 176.7 164.2 164.8 139.5 163.1 176.0 195.5 131.3 135.7 147.4 150.1 Starchy roots

14.9 31.2 33.5 42.7 11.0 16.9 30.8 31.5 55.3 60.2 20.5 23.2 10.3 14.9

Sugar 8.4 18.8 4.4 7.2 13.0 10.0 28.7 23.6 16.2 17.0 29.1 39.9 41.8 44.1 Pulses 1.2 4.9 2.5 3.0 2.7 3.0 1.6 1.5 1.3 1.1 3.3 3.4 2.6 3.1 Edible oils 2.0 2.8 1.3 2.0 2.7 2.9 5.4 4.8 6.4 10.2 5.8 7.6 15.7 16.6 Vegetables 37.7 37.4 111.6 210.4 72.0 147.5 62.2 63.7 31.7 40.4 53.8 51.6 36.0 70.4 Fruits 25.0 26.3 33.9 82.4 51.7 68.1 91.1 105.7 36.1 58.4 130.2 103.1 54.1 45.3 Meat 16.4 13.2 13.7 21.1 23.6 55.2 28.8 35.1 8.4 13.6 26.7 29.3 44.7 56.3 Eggs 1.1 1.4 1.7 2.0 2.1 3.8 3.3 4.0 3.1 4.9 9.8 12.4 12.0 16.6 Milk 2.9 3.5 3.1 2.9 8.2 16.4 22.0 15.7 7.6 14.8 23.1 29.4 50.5 25.3 Fish 20.7 41.4 14.1 19.8 19.9 32.7 28.8 31.6 20.6 28.2 29.4 24.8 62.4 59.0 % urban population

18.7 21.4 22.2 43.1 24.6 34.7 47.7 44.4 41.5 54.6 31.1 51.6 62.6 75.8

Source: FAOSTAT These changes in food basket are demand-driven. The rapid increases in per capita income and advancements in urbanization have been the main factors behind the growing demand for high-value food commodities , especially in low-income countries. As discussed earlier, the per capita income as well as labor productivity have increased at a faster rate in low-income countries than in high-income countries in the region. Urbanization although is low in low-income countries, it has advanced rapidly there, except in Cambodia. The share of urban population in total population almost doubled in Lao PDR from 22 percent in 2000 to 43 percent in 2016. In Vietnam, it increased from 25 percent to 35 percent. On the other hand, Malaysia, Thailand, Indonesia and Philippines are already at an advanced stage of urbanization. In Malaysia, the share of urban population has surpassed 75 percent. In Thailand too, there has been a rapid increase in urban population, from 31 percent in 2000 to 52 percent in 2016. The trends in income and urbanization are quite robust and are unlikely to subside in the near future, which mean a faster growth in demand for high-value food commodities, that in turn will fuel changes in crop portfolio.

5.7 International trade

In spite of the increases in agricultural productivity and food supplies, there are countries in Southeast Asian region (except Thailand, Vietnam and Cambodia), that import staple foods (mainly rice) to meet their domestic requirements (Table 12). Indonesia, Malaysia and Philippines spend large amounts on rice imports. On the other hand, Thailand and Vietnam are surplus in rice. Except Thailand and Lao PDR, all other countries in the region are deficit in maize also. Table 12. Net trade of major commodities in Southeast Asia (US$ million/annum)

Year Rice Maize Fruits &

vegetables Coffee Edible oils Rubber

Cambodia 2000-02 -53 -0.1 -4 0.0 -8 18 2014-16 408 -1 0 -1 10 153

Lao PDR 2000-02 -21 0 0 4

2014-16 -105 43 37 206

72 Vietnam 2000-02 3468 -21 261 401 -164 220

2014-16 6178 -1403 -1961 2618 -544 878 Philippines 2000-02 -883 -46 551 -12 379 14

2014-16 -872 -193 1305 -46 1047 46 Indonesia 2000-02 -1253 -134 23 237 1823 893

2014-16 -995 -554 -466 1040 18193 3898 Thailand 2000-02 7043 15 1109 24 41 1525

2014-16 10185 162 3434 -104 132 5131 Malaysia 2000-02 -538 -242 170

3143 312

2014-16 -887 -810 -1351

10203 -317 Source: FAOSTAT

22

Thailand and Philippines are net exporters of fruits and vegetables (e.g., banana, pineapple and cassava). Of late, Vietnam, Malaysia and Indonesia have seen an upsurge in imports of fruits and vegetables. Coffee has emerged as an important export commodity of Vietnam and Indonesia. As expected, all countries in the region (except Vietnam) remain net exporters of edible oils and rubber. Palm oil is the flagship export of Indonesia and Malaysia, and coconut oil of Philippines. Thailand and Indonesia have trade surplus in rubber. Relating these patterns trade and sources of output growth, we find that price effect on output growth being confined to high-income countries that are deficit in staple foods (mainly rice), but surplus in export-oriented commodities, such as edible oils and rubber.

6 Conclusions and Implications In the past few two decades, agriculture in Southeast Asian region has undergone a transformation but at a differential pace across the countries. The share of agriculture in GDP has declined considerably, but agriculture remains excessively burdened with workforce, especially in low-income countries like Cambodia, Lao PDR and Vietnam. Agriculture in the region is dominated by smallholdings, with rice as the main crop except in Malaysia. In Malaysia, Thailand and Indonesia, export-oriented oil-palm, rubber and coconut occupy a prominent place in their production systems. The agricultural sector has experienced fairly a robust growth in the region, but more so in the low-income countries, where the growth has been propelled by area expansion, technological change and diversification in favor of high-value crops. On the other hand, in the high-income countries that specialize in production of export-oriented commercial crops, the growth has largely been driven by increases in producer prices and to an extent area expansion. These findings have some important implications for future growth of agriculture in the region. These are discussed below. o A considerable proportion of the output growth has come from area expansion — clearing forests,

bringing marginal land under cultivation and raising cropping intensity. While, the supply of land is fixed, the competition for land has become intense owing to its increasing demand for non-agricultural activities. Deforestation is not desirable from the perspective of ecosystem services. Hence, the area-driven growth is unlikely to sustain in the long run. The recourse, therefore, has to be with raising cropping intensity an at the same time maintaining the health of natural resources, i.e. land and water.

o Prices had a mixed effect on output growth across countries — smaller in low-income countries

that specialize in production of cereals for their domestic food security; and larger in high-income countries where export-oriented commercial crops like oil-palm, rubber and coconut dominate the production systems. This implies a need for price incentives for greater uptake of technologies and inputs but with due recognition to their negative externalities to natural resources, environment and income disparities.

o There exists a large yield gap in several of the crops in most countries perhaps due to the constraints to adoption of improved technologies and use of modern inputs. Bridging the gap requires addressing the socio-economic, infrastructural and institutional constraints on farmers’ access to inputs, technologies, information, credit and extension services.

o Domestic prices of export-oriented commercial commodities are predisposed to changes in global markets that have shown high volatile in the recent past, adversely affecting agricultural growth in the countries that specialize in cultivation of export-oriented crops. Further, the prices are also influenced by the trade and domestic policies of the importing countries. Thus, the price-driven growth is likely to be more volatile, distorting price signals to producers and other stakeholders. Note, the countries heavily engaged in cultivation of export-oriented are net-importers of staple

23

food grains. Hence, there is a need for balancing the production portfolio in such a way that does not adversely affect food security and health of the natural resources.

o To boost agricultural growth, the recourse has to be with technological change and crop

diversification in favour of high-value crops. While, the contribution of technological change to output growth is small in high-income countries, its effect has started diminishing in low-income countries. This is a matter of concern. The small contribution of technologies or deceleration in their gains could be on account of inadequate investment in agricultural research, inefficiency of agricultural research, poor linkages between research and extension systems and lack of investment in agri-infrastructure essential to harness the potential gains from investment in agricultural research. All these have implications for agricultural research and development. The investment in agricultural research is far from adequate in most countries in Southeast Asian region, and it needs to be enhanced to move the yield frontiers up and to reduce cost of production for efficient and sustainable growth of agriculture. Another implication is that agricultural research agenda needs to be revisited and prioritized keeping in view the emerging challenges of climate change, rising prices of agricultural commodities and energy inputs, increasing cost of production, labor shortages and degradation of natural resources, and also changing demand patterns. The focus of agricultural research is likely to remain on breeding for higher yields ostensibly for food security, the significance of research for management of biotic and abiotic stresses cannot be overemphasized. Research on horticultural crops merits special attention, that have realized fewer yield gains. Finally, to benefit from the investment in research there is a need to invest in information systems and complementary infrastructures, such as irrigation and electricity.

o Diversification sustains agricultural growth, and also creates opportunities for smallholders to

enhance their incomes and escape poverty. The demand for high-value food commodities is likely to increase at an accelerated rate owing to sustained rise in per capita incomes and fast-growing urban population. Harnessing the growth potential of diversification would require (i) an increase in investment in public infrastructure (roads, electricity, and communication) that reduces transportation and transaction costs, and attracts private investment in agro-processing, cold storages, refrigerated transportation, and retail chains; (ii) a greater access of farmers to technology, credit, inputs, information, and extension services; and (iii) appropriate policies that facilitate institutional arrangements, like contract farming, producers’ organizations, and cooperatives that provide farmers an easy access to markets, reduce marketing and transaction costs and mitigate market price risks.

24

References Bah, E.M. 2011. Structural transformation paths across countries. Emerging Markets, Finance & Trade 47(2): 5-19. Dawe, D. (2015). Agricultural Transformation of Middle-income Asian Economies: Diversification, Farm Size and Mechanization. ESA Working Paper 15-04. Rome: Food and Agriculture Organization of the United Nations. De Koninck, R. and J.F. Rousseau. 2013. Southeast Asian agricultures: Why such rapid growth? LEspace geographique 42: 143-164. Echevarria, C. 1997. Changes in sectoral composition associated with economic growth. International Economic Review 38 (2): 431–452. Fan, S., A. Gulati, and S. Thorat. 2007. Investment, Subsidies, and Pro-poor Growth in Rural India. Discussion Paper 00716. Washington, DC: International Food Policy Research Institute. FAO. 2017. The Future of Food and Agriculture: Trends and Challenges. Rome: Food and Agriculture Organization. Felipe J., A. Mehta, and C. Rhee. 2015. The Declining Share of Agricultural Employment in the People’s Republic of China. ADB Economics Working Paper Series No. 419. Asian Development Bank, Manila. Fuglie, K.O. (2012). ‘Productivity Growth and Technology Capital in the Global Agricultural Economy’. In: K.O. Fuglie, S.L. Wang, and V.E. Ball (eds.), Productivity Growth in Agriculture: An International Perspective. Oxfordshire, UK: CAB International. Fuglie, K.O. (2015). Accounting for growth in global agriculture. Bio-based and Applied Economics 4(3): 221–54. Gollin, D., S.L. Parente, and R. Rogerson. 2007. The food problem and the evolution of international income levels. Journal of Monetary Economics 54(4): 1230–125. Habito, C., D. Capistrano, and G. Saguiguit (eds). 2016. Farms, Food and Futures- Towards Inclusive and Sustainable Agricultural and Rural Development in Southeast Asia. Los Banos, Philippines: SEARCA. Joshi, P. K., P. S. Birthal, and N. Minot. 2006. Sources of Agricultural Growth in India: Role of Diversification Toward High-Value Crops. MTID Discussion Paper No. 85. Washington, DC: International Food Policy Research Institute Kottmeyer, L. W. Fulginiti, and E. Lilyan E. 2016. The Association of Southeast Asian Nations’ Agricultural Total Factor Productivity, 1961-2011. University of Nebraska, Lincoln, Nebraska. Laborde, D., T. Lallemant, K. McDougall, C. Smaller, and F. Traoré .2018. Transforming Agriculture in Africa and Asia. The Role of Policies and Public Investment. Washington D.C. and Geneva: IFPRI and IISD Minot, N., M. Epprecht, T. T. Tram Anh, and L. Q. Trung. 2006. Income Diversification and Poverty in Northern Uplands of Vietnam. Research Report 145. Washington, DC: International Food Policy Research Institute. Mutert , E., and T.H. Fairhurst. 2002. Developments in rice production in Southeast Asia. Better Crops International 15(May): 12-17)

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Sen, Kunal. 2016. The Determinants of Structural Transformation in Asia: A Review of the Literature. ADB Economics Working Paper Series No. 478. Manila: Asian Development Bank Stads, Gert-Jan. 2016. A Snapshot of Agricultural Research Investment and Capacity in Asia. Available at: https://www.asti.cgiar.org/sites/default/files/pdf/APAARI-HLPD-Synthesis.pdf Stillman, G. and A. Rillo (eds). 2015. Boosting Agriculture in the Lower Mekong. Asian Development Bank Institute (ADBI). Tokyo: ADBI. USDA – ERS (United States Department of Agriculture – Economic Research Service). 2014. Data Products – International Agricultural Productivity. (retrieved December 2, 2018) (available at: http://www.ers.usda.gov/data-products/international-agricultural-productivity.aspx#.UzJQRKiSw40). Vos, R. 2018. Agricultural and Rural Transformations in Asian Development: Past Trends and Future Challenges: Past trends and future challenges. WIDER Working Paper 2018/87. United Nations University World Institute for Development Economics Research.

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Appendix Tables

Table A1. Share of crops in gross cropped area (in percentage)

Cambodia Lao PDR Vietnam Philippines Indonesia Thailand Malaysia 2000-02

2014-16

2000-02

2014-16

2000-02

2014-16

2000-02

2014-16

2000-02

2014-16

2000-02

2014-16

2000-02

2014-16

Rice 83.9 74.9 71.3 55.6 61.3 54.7 32.1 32.7 36.7 32.6 55.5 51.1 11.3 9.4 Maize 2.7 3.5 4.0 14.8 6.6 8.3 19.8 17.8 10.6 9.0 6.5 5.6 0.4 0.1 Other cereals

- - - - - - 0.0 0.0 - - 0.8 1.1 - -

Total cereals 86.5 78.3 75.3 70.4 67.9 62.9 51.9 50.5 47.4 41.6 62.5 57.6 11.7 9.5 Pulses 1.3 1.8 1.6 1.2 2.8 2.2 0.6 0.5 1.1 0.5 1.8 1.0 - - Soybean 1.8 2.6 0.5 0.6 1.3 0.8 0.0 0.0 2.1 1.4 1.0 0.1 - - Groundnut 0.5 0.5 1.2 1.5 2.1 1.4 0.2 0.2 2.2 1.1 0.4 0.1 0.0 0.0 Coconut 0.5 0.3 - - 1.1 1.0 25.3 24.9 8.5 7.1 1.7 0.9 3.1 1.2 Oil palm - - - - - - 0.1 0.2 7.2 19.6 1.3 3.2 58.2 71.9 Other Oilseeds

1.3 1.0 0.9 0.9 0.4 0.4 0.2 0.1 0.1 0.0 0.8 0.3

Total oilseeds

4.0 4.3 2.7 3.0 4.8 3.6 25.8 25.6 20.1 29.2 5.2 4.7 61.3 73.0

Nuts 0.1 0.1 - - 1.4 2.2 0.2 0.2 2.5 1.7 0.3 0.2 0.1 0.1 Fibres 0.0 0.1 0.1 0.0 0.1 0.0 0.9 0.7 0.0 0.0 0.4 0.1 - - Roots & tubers

0.1 9.9 2.1 4.5 4.7 5.1 2.9 2.4 5.2 2.9 5.9 7.1 0.2 0.1

Sugarcane 0.3 0.7 0.6 1.8 2.5 2.0 3.0 3.0 1.4 1.3 5.3 6.6 0.3 0.0 Vegetables 3.2 2.2 10.4 10.2 4.7 6.8 4.7 5.0 2.5 2.3 3.2 1.7 0.5 0.8 Banana 1.4 0.8 0.6 1.4 0.8 0.8 3.1 3.2 0.2 0.3 0.8 0.2 0.4 0.4 Mangoes 0.1 0.1 0.0 0.0 0.4 0.6 1.2 1.4 0.5 0.5 1.4 2.0 0.1 0.2 Pineapple 0.1 0.1 0.4 0.2 0.3 0.2 0.4 0.4 0.0 0.0 0.5 0.4 0.1 0.2 Citrus fruits 0.4 0.3 0.6 0.4 0.5 0.3 0.1 0.1 0.2 0.1 0.6 0.2 0.1 0.1 Other fruits 0.4 0.3 1.1 1.2 2.0 2.5 3.1 4.3 1.1 0.9 2.6 2.8 0.4 0.4 Total fruits 2.4 1.6 2.7 3.3 4.1 4.4 7.9 9.4 2.0 1.8 6.0 5.7 1.1 1.3 Spices 0.4 0.4 0.9 0.7 0.7 1.6 0.1 0.1 2.0 2.3 0.6 0.5 0.3 0.3 Coffee & tea 0.0 0.0 3.2 4.4 4.5 5.0 1.2 0.9 7.1 7.3 0.5 0.3 1.4 0.3 Drugs & narcotics

0.3 0.2 0.5 0.4 0.2 0.1 0.3 0.2 0.7 0.5 0.2 0.1 0.2 0.0

Rubber 1.3 0.5 - - 1.9 4.1 0.6 1.5 8.1 8.5 8.1 14.3 22.9 14.7 Total 100 100 100.0 100 100 100 100 100 100 100 100 100 100 100

Source: Authors’ estimates using data from FAOSTAT.

27

Table A2. Annual growth in cropped area of major crops, 2000-2016 (in percentage)

Cambodia Lao PDR Vietnam Philippines Indonesia Thailand Malaysia Rice 2.8 2.0 0.3 1.1 1.5 0.4 0.3 Maize 5.7 13.7 2.7 0.2 1.2 0.0 -7.9 Other cereals - - - -4.3 - 3.4 - Total cereals 2.9 3.3 0.6 0.8 1.4 0.4 -0.4 Total pulses 5.4 1.8 -0.3 0.4 -2.8 -3.2 - Soybean 6.1 4.5 -2.3 -3.1 -0.4 -12.3 - Groundnut 2.9 5.2 -1.6 -0.6 -2.9 -7.8 -8.4 Coconuts 0.4 - 0.7 0.9 1.0 -3.1 -5.8 Oil palm - - - 9.5 7.9 7.5 2.6 Others Oilseeds 1.6 3.3 1.8 -3.3 -4.4 -4.8 - Total oilseeds 3.9 4.4 -0.9 0.9 5.1 0.3 2.3 Nuts 1.0 - 4.4 0.2 -0.2 -1.4 -0.8 Fibers -2.2 1.3 15.9 0.0 -1.5 -6.7 - Roots & tubers 28.7 9.8 1.6 -0.4 -1.6 2.3 -2.6 Sugarcane 11.5 13.5 -0.4 0.9 2.0 2.4 -23.6 Vegetables 1.2 3.8 3.8 1.5 4.2 -3.5 4.7 Banana -0.1 10.8 1.5 1.0 1.6 -7.8 0.9 Mangoes 2.3 3.8 4.1 2.0 3.5 3.4 7.8 Pineapple 2.8 -0.8 -0.5 2.6 0.4 -0.9 2.7 Citrus fruits 0.8 0.6 -2.6 -0.8 0.9 -5.2 0.1 Other fruits 1.8 4.4 2.4 3.5 1.6 1.2 1.6 Total fruits 0.6 5.2 1.7 2.2 1.6 0.4 2.0 Spices 2.1 2.2 7.1 -2.2 3.2 0.6 0.1 Coffee & tea 1.6 6.2 -0.6 -1.0 2.6 -3.0 -10.9 Drug & narcotics 0.5 1.6 -0.6 -1.2 0.2 -3.0 -22.5 Rubber -3.4 - 6.8 8.2 2.6 5.1 -2.3 Total 3.7 3.8 1.1 1.0 2.3 0.9 1.1

Source: Authors’ estimates using data from FAOSTAT.

28

Table A3. Share of crops in the total value of output of crop sub-sector (in percentage) Cambodia Lao Vietnam Philippines Indonesia Thailand Malaysia

2000-02

2014-16

2000-02

2014-16

2000-02

2014-16

2000-02

2014-16

2000-02

2014-16

2000-02

2014-16

2000-02

2014-16

Rice 47.8 34.1 34.2 28.8 48.4 40.0 30.1 32.9 31.2 47.1 33.1 23.9 7.0 3.5 Maize 1.8 2.5 0.9 6.0 3.4 5.3 8.5 9.8 6.2 5.5 4.0 3.3 0.1 0.1 Other cereals - - - - - - 0.0 0.0 - - 0.2 0.2 - - Total cereals 49.6 36.6 35.2 34.8 51.8 45.2 38.6 42.7 37.5 52.5 37.2 27.4 7.1 3.5 Total pulses 1.0 1.2 0.5 0.4 0.8 1.1 0.3 0.3 0.2 0.1 0.8 0.5 - - Soybean 1.5 1.5 0.2 0.4 0.7 0.4 0.0 0.0 1.3 0.5 0.6 0.1 - - Groundnut 0.6 0.7 0.4 1.6 1.8 1.4 0.1 0.1 2.6 0.6 0.3 0.1 0.0 0.0 Coconuts 2.9 0.5 - - 1.5 1.6 8.2 10.4 5.3 2.7 1.1 0.7 1.8 0.9 Oil palm - - - - - - 0.1 0.2 5.4 14.8 1.2 6.2 68.3 78.3 Other Oilseeds 1.7 0.5 0.6 0.6 0.2 0.2 0.0 0.0 0.0 0.0 0.4 0.1 Total oilseeds 6.7 3.1 1.2 2.6 4.2 3.7 8.6 10.7 14.6 18.6 3.7 7.3 70.0 79.2 Nuts 0.0 0.0 - - 3.1 4.0 0.9 0.8 0.2 0.1 0.5 0.4 0.3 0.2 Fibers 0.0 0.0 0.1 0.1 0.1 0.0 0.4 0.3 0.0 0.0 0.1 0.0 - - Roots & tubers 0.0 21.1 1.2 8.4 4.6 6.5 2.9 3.0 6.6 5.5 3.5 6.5 0.3 0.2 Sugarcane 13.2 28.1 2.3 7.0 5.6 2.4 9.4 7.0 2.4 1.1 5.4 7.5 0.9 0.1 Vegetables 15.7 4.9 40.4 27.8 6.8 8.3 11.0 10.6 8.0 8.4 7.7 4.3 2.2 3.9 Banana 1.9 0.8 2.7 6.0 1.5 1.8 6.2 8.5 5.6 3.4 2.2 1.1 1.7 0.7 Mangoes 0.9 0.3 0.2 0.0 1.4 1.6 3.8 1.7 2.9 1.2 6.2 7.3 0.1 0.5 Pineapple 0.5 0.1 2.1 0.6 0.5 0.6 2.0 2.1 0.3 0.5 1.4 1.4 1.4 0.7 Citrus fruits 6.3 1.9 3.4 2.1 0.5 0.3 0.2 0.0 2.2 1.0 4.9 2.5 0.3 0.1 Other fruits 2.4 0.6 5.1 3.6 2.0 2.5 12.6 9.2 6.4 2.5 5.7 4.4 0.9 0.7 Total fruits 12.0 3.8 13.5 12.3 13.8 12.4 24.9 21.6 17.4 8.6 20.2 16.4 4.3 2.8 Spices 1.1 0.2 1.1 1.2 2.0 4.1 0.5 0.3 3.4 1.1 3.5 3.4 1.5 1.1 Coffee & tea 0.1 0.0 1.2 1.8 3.8 7.1 1.1 0.6 5.8 2.0 1.3 1.4 1.5 0.3 Drug & narcotics 0.1 0.5 3.2 3.6 0.4 0.3 0.6 0.6 1.0 0.3 0.1 0.1 0.7 0.0 Rubber 1.0 0.1 - - 3.1 4.8 0.9 1.5 3.0 1.7 16.0 24.8 11.1 8.8 Total 100 100 100 100 100 100 100 100 100 100 100 100 100 100

Source: Authors’ estimates using data from FAOSTAT.

29

Table A4. Average annual change in the contribution of sources of growth (US$ million)

Cambodia Lao PDR Vietnam A Y P D Total A Y P D Total A Y P D Total Rice 42.5 49.4 39.9 -9.5 122.2 26.3 13.6 5.4 -11.4 33.8 108.4 175.7 9.5 -74.2 219.4 Maize 3.3 3.3 4.1 -1.8 9.0 4.1 4.3 -1.6 4.6 11.4 11.3 27.8 11.6 10.2 60.9 Other cereals - - - - - - - - - - - - - - - Total cereals 45.8 52.7 44.0 -11.3 131.2 30.4 17.8 3.9 -6.8 45.3 119.8 203.5 21.0 -64.0 280.2 Total pulses 1.3 1.5 1.5 0.5 4.8 0.3 0.1 0.1 -0.2 0.3 2.3 3.8 10.4 -3.6 12.9 Soybean 1.8 1.1 1.6 1.1 5.6 0.3 0.3 0.0 0.0 0.6 1.4 1.6 1.4 -4.4 0.0 Groundnuts 0.8 0.7 1.4 -0.3 2.6 1.1 1.3 0.9 0.0 3.2 3.8 9.2 4.0 -9.5 7.5 Coconuts 1.2 -0.1 0.0 -1.0 0.1 - - - - - 3.4 7.8 4.1 -0.7 14.6 Oil palm - - - - - - - - - - - - - - - Other oilseeds 1.2 -0.1 0.9 -0.8 1.2 0.4 0.3 0.3 -0.3 0.8 0.4 1.7 0.3 0.3 2.7 Total oilseeds 5.0 1.6 3.8 -0.9 9.5 1.8 1.9 1.2 -0.3 4.6 9.0 20.3 9.8 -14.3 24.8 Nuts 0.0 0.0 0.0 0.0 0.0 - - - - - 9.6 23.2 -8.2 20.6 45.1 Fibers 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 -0.1 0.1 0.1 0.2 0.1 -0.9 -0.6 Roots & tubers 14.6 27.0 -54.4 87.2 74.4 4.7 13.5 -4.7 7.7 21.2 13.8 33.8 24.6 0.3 72.6 Sugarcane 20.9 -1.9 40.1 60.1 119.2 3.6 3.5 -1.0 7.6 13.8 7.8 12.0 -24.6 -11.2 -16.0 Vegetables 8.7 0.4 7.8 -5.5 11.3 27.1 18.0 -20.6 2.3 26.8 16.0 19.0 1.1 46.9 82.9 Banana 1.3 0.0 2.4 -1.3 2.4 3.7 7.0 -4.5 5.8 11.9 3.8 7.1 4.3 1.9 17.1 Mangoes 0.5 0.3 0.3 -0.2 0.9 0.1 0.0 -0.1 0.0 0.0 3.3 18.5 -12.4 7.7 17.2 Pineapple 0.3 0.0 0.0 -0.1 0.2 0.8 0.8 -1.3 -0.9 -0.6 1.3 4.8 2.4 -1.9 6.6 Citrus fruits 3.4 -0.6 4.0 -2.5 4.4 2.3 0.6 0.3 -1.7 1.6 4.4 18.2 -3.7 -14.5 4.4 Other fruits 1.2 0.1 0.6 -0.6 1.2 3.3 0.5 -1.3 0.8 3.3 16.7 5.0 3.7 16.6 42.0 Total fruits 6.7 -0.3 7.3 -4.6 9.2 10.2 9.0 -6.9 3.9 16.2 29.5 53.7 -5.7 9.7 87.3 Spices 0.5 0.0 0.2 -0.3 0.3 1.1 0.2 0.4 0.0 1.7 6.0 -5.0 24.0 32.9 57.9 Drink (coffee) 0.1 0.0 0.0 0.0 0.1 1.1 2.2 -1.0 0.7 3.0 14.1 34.3 29.2 12.8 90.3 Drug narcotics 0.9 1.5 -0.1 -0.8 1.5 2.7 3.5 0.6 -1.7 5.1 0.8 2.8 -1.9 -1.6 0.1 Rubber 0.3 -0.1 0.1 -0.7 -0.2 - - - - - 12.5 18.9 -35.5 57.3 53.2 Total 104.9 82.5 50.3 123.6 361.3 83.0 69.8 -28.0 13.1 137.9 241.4 420.4 44.1 84.8 790.7

Source: Authors’ estimates using data from FAOSTAT. Note: A: Area expansion; Y: Yield; P: Price; D: Diversification

30

Table A4. Cont. Philippines Indonesia Thailand Malaysia

A Y P D Total A Y P D Total A Y P D

Total A Y P D

Total

Rice 47.3 63.8 92.7 5.9 209.7 715.9

421.1

2256.2

-220.3

3172.9 70.9 36.8 57.1

-57.7

107.0 6.2 1.2 3.3 -7.5 3.2

Maize 14.6 50.1 12.2 -11.9 65.1 107.3

191.9 45.9

-66.3

278.7 7.3 8.5 16.1 -7.3 24.6 0.1 0.8 0.0 -0.8 0.0

Other cereals 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.2 0.6 0.6 1.7 - - - - -

Total cereals 61.9 113.9

104.9 -6.0 274.8

823.2

613.0

2302.1

-286.7

3451.6 78.5 45.4 73.8

-64.4

133.3 6.3 2.0 3.3 -8.4 3.3

Total pulses 0.4 0.3 1.2 -0.3 1.7 2.3 1.9 1.7 -5.4 0.4 1.2 0.4 3.3 -5.0 -0.2 - - - - -

Soybean 0.0 0.0 0.0 0.0 0.0 13.8 9.7 -0.7 -17.6 5.1 0.8 0.4 1.1 -8.6 -6.3 - - - - -

Groundnuts 0.2 0.2 0.3 -0.3 0.4 23.6 -24.8 24.3

-53.9 -30.8 0.4 0.1 2.7 -3.8 -0.6 0.0 0.0 0.0 -0.1 0.0

Coconuts 15.0 -7.5 73.0 -2.2 78.4 69.9 -6.7 47.7 -39.4 71.4 2.0 -6.7 17.8 -9.3 3.8 1.5 6.1 2.2 -9.4 0.3

Oil palm 0.3 -2.0 0.6 2.8 1.7 243.0

-43.1

290.6

655.8

1146.3 6.9 11.6 42.8 58.2

119.5

103.5

65.9

266.1

142.8

578.3

Others Oilseeds 0.0 0.1 0.0 -0.3 -0.2 0.0 0.0 0.0 -0.1 -0.1 0.5 -0.2 1.4 -2.8 -1.2 - - - - -

Total oilseeds 15.6 -9.2 74.0 -0.1 80.3 350.3

-64.9

361.9

544.8

1192.1 10.5 5.2 65.8 33.7

115.3

105.0

71.9

268.3

133.3

578.6

Nuts 1.1 4.4 -1.0 -0.5 4.0 2.5 1.5 5.2 -3.0 6.3 1.0 0.0 4.0 -2.4 2.6 0.3 0.3 0.7 -0.9 0.5

Fibers 0.6 -0.3 1.8 -0.6 1.5 0.0 -0.1 0.0 -0.1 -0.1 0.1 -0.1 -0.2 -1.2 -1.3 - - - - -

Roots & tubers 4.4 11.8 7.6 -5.5 18.3 112.3

179.0

187.1

-212.4

265.9 9.5 15.2 51.0 24.1 99.8 0.3 0.3 1.0 -0.6 0.9

Sugarcane 11.8 -5.3 14.5 -0.7 20.3 26.0 -17.8 11.4 -4.3 15.2 12.1 24.2 28.8 31.9 97.0 0.6

-19.1 1.3

-44.8

-61.9

Vegetables 16.3 5.6 30.1 6.9 58.8 153.8

153.4

195.2

-13.4

489.0 11.9 19.7 29.0

-65.4 -4.8 3.9

12.1 6.0 14.7 36.7

Banana 12.6 2.5 50.8 -1.0 64.9 69.0 -3.4 -9.9 65.2 120.9 3.4 18.7 13.0

-34.2 0.8 1.3 -6.1 4.7 -0.2 -0.3

Mangoes 3.8 -10.8 -3.9 4.5 -6.4 33.1 41.7 -50.0

-10.7 14.1 10.6 25.8 10.0 39.1 85.5 0.3 1.8 1.5 2.5 6.2

Pineapple 2.9 2.7 2.7 4.7 12.9 9.5 19.4 8.4 -1.8 35.5 2.5 1.7 17.9 -7.1 15.1 1.2 -1.2 -1.6 2.1 0.5

Citrus fruits 0.1 -0.3 -0.7 -0.3 -1.1 28.9 44.0 -36.3 -20.1 16.4 6.8 5.2 29.7

-40.8 0.9 0.3 0.1 -0.4 -0.3 -0.3

Other fruits 16.1 -11.5 16.1 5.8 26.5 68.0 43.5 -54.0

-39.4 18.1 9.2 1.9 14.9 6.5 32.4 1.0 0.1 2.3 0.9 4.2

Total fruits 35.5 -17.3 64.9 13.6 96.6

208.5

145.2

-141.8 -6.8

205.0 32.5 53.2 85.6

-36.4

134.8 4.0 -5.2 6.5 5.0 10.4

Spices 0.5 -0.3 1.4 -1.7 -0.1 27.9 -12.2 -28.4 1.1 -11.5 6.0 23.8 7.8 -1.7 35.8 1.4 2.4 3.3 -1.3 5.7

Coffee & tea 1.3 -2.2 3.1 -2.6 -0.5 57.6 -57.2 -26.8 19.6 -6.7 3.2 12.7 14.4

-13.2 17.1 1.2 2.7 3.4

-12.6 -5.3

Drug & narcotics 0.8 2.0 1.8 -1.5 3.1 8.3 1.6 -10.0 -8.4 -8.4 0.1 0.8 1.0 -0.9 1.0 0.5 1.2 0.2 -5.0 -3.0

Rubber 2.8 -13.8 3.4 20.2 12.6 46.8 42.1 -41.2 5.3 52.9 51.2

-69.1 67.5

299.4

349.0 18.0

-12.3 87.5

-52.9 40.3

Total 153.0 89.5

307.6 21.3 571.4

1819.7

985.3

2816.6 30.2

5651.8

217.8

131.3

431.8

198.5

979.4

141.6

56.3

381.6 26.6

606.1

Source: Authors’ estimates using data from FAOSTAT. Note: A: Area expansion; Y: Yield; P: Price; D: Diversification

31

Table A5. Annual growth in yield of major crops, 2000-2016 (in percentage)

Cambodia Lao PDR Vietnam Philippines Indonesia Thailand Malaysia Rice 3.8 2.0 1.9 1.3 1.3 0.5 0.3 Maize 3.6 6.1 2.9 3.5 4.3 1.0 8.3 Other cereals - - - 11.4 - 0.2 - Total cereals 3.8 2.8 1.9 2.0 1.9 0.5 0.4 Pulses 3.9 0.5 1.8 0.6 1.8 1.1 - Soybean 2.4 4.7 1.1 -0.2 1.6 0.3 - Groundnuts 3.1 6.4 2.7 1.2 -2.4 0.1 0.6 Coconuts -0.1 - 2.7 -0.2 -0.1 -2.9 4.5 Oil palm - - - -5.5 -0.5 1.4 0.7 Others oilseeds -0.2 -0.7 3.7 1.1 -2.3 -1.2 - Total oilseeds 0.7 6.6 3.5 -0.2 2.1 5.3 0.9 Nuts 0.2 - 2.6 3.6 1.6 0.1 1.1 Fibers -3.1 1.8 1.0 -0.4 -3.5 1.6 - Roots & tubers 8.2 18.4 4.0 3.1 3.8 1.5 1.1 Sugarcane 0.0 5.8 1.6 -0.4 -1.6 1.8 -2.8 Vegetables 0.1 2.7 1.7 0.2 1.8 1.5 3.7 Banana 0.2 8.3 2.3 1.3 0.1 4.4 -5.2 Mangoes 1.6 0.2 6.4 -2.8 2.8 2.0 5.4 Pineapple 0.4 3.8 4.6 0.8 5.3 0.4 -1.1 Citrus fruits -0.5 1.2 4.4 -2.7 3.1 1.5 0.0 Other fruits 0.1 2.8 0.7 -2.6 1.4 -1.6 0.5 Total fruits 0.5 8.8 3.1 -0.4 2.9 0.5 -2.0 Spices -0.5 2.6 -1.9 1.4 -1.0 2.8 2.2 Coffee & tea -0.1 7.8 2.9 -1.6 -1.9 1.7 -8.5 Drug & narcotics 5.5 4.6 3.8 2.2 0.7 2.6 0.6 Rubber -0.7 - 2.2 -4.2 2.1 -0.8 0.0

Source: Authors’ estimates using data from FAOSTAT.

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