Beneath the surface
Drives, drivers and diversification
Abdul Bayes
An international workshop on "Agricultural Diversifi-cation and Vertical Integra-tion in South Asia" was held in New Delhi from November 5 to 6. The workshop owes to the collaborative efforts of the Federation of the Indian Chamber of Commerce and Industry (FICCI), the International Food Policy Research Institute (IFPRI) and the International Crops Research Institute for Semi-Arid Tropics (ICRISAT). Presided over by an eminent economist, Isher Judge Ahlwalia, of the Maryland University, the inaugural session was also addressed by the union minister for agriculture Shri Rajnath Singh, FICCI president Y K Modi, chiefs of IFPRI and ICRISAT, Dr Joachim von Braun and William Dar, respectively, and by Dr Ashok Gulati, the man behind the overall management. I had the privilege of participating in that workshop and to say something on the institutional arrangements in Bangladesh that are seemingly driving at diversification in agriculture. It is true that diversification is not a new issue and farmers have long been doing that. But given the growing trend globalisation, the issue needs to be revisited to be tuned to time.A different demand pattern South Asia (SA) is likely to witness a different type of agriculture than what has hitherto been in evidence. For the last two decades, SA on average witnessed a growth rate of over 5 per cent per annum. Consumption and expenditure patterns changed, paripassu. Known as subsistence economies, many of farmers in SA including the smaller ones, are reportedly moving towards the markets both for perishable and non-perishable products. In India, for example, fruits and poultry witnessed the fastest growth. In Bangladesh, empirical evidences show that per capita consumption of High Value Crops (HVCs) between 1990/91 and 1999/2000 grew tremendously: fish 9 per cent, meat 49 per cent, poultry 120 per cent and milk 55 per cent. Projections of a 7 per cent growth rate and the consequent injections of demand for these products were done by Mahabub Hossain (IRRI) and Rushidan Rahman (BIDS). Their findings signaled to the need for a surge in supply to match the demand. There is, in records, cereal surpluses in SA countries especially in India and Bangladesh --thanks to the green revolution -- and the release of land is partly leading to diversification. Super markets! There is an avalanche of literature pointing to growing changes in the retail chain for agricultural products. Super markets in Asia took off 5-7 years behind Latin America but is registering a much faster growth. Share of super markets in sales of fresh and packaged foods is 50 per cent in Latin America, 30 per cent in Southeast Asia and 48 per cent in China. In India, the share is not as high but could swell soon. What about Bangladesh? My second year economics students informed me that there are 30 to 35 super markets in Dhaka city alone that deal directly in agricultural products. At the moments, these markets are marked for the relatively rich segment in per capita income scale but growingly luring the lower middle class too. The reasons are cleanliness, no hassles of haggling and comforts Agora, Meenabazar, Kenakata, Isles and others comprise the "super six" super markets controlling a larger part of the retail chains. Some of them have their own farms to feed the markets, some bank on agents to procure products, few on NGOs to supply them and few are attempting to buy directly from the growers. Thus, the traditional retail chain with the wholesale markets at Karwan Bazar and Shampur as focal point are giving rise to an alternative chain. My students also worked out that direct buying by Proshika -- an NGO involved in diversification -- of vegetables from farmers tend to provide a better margins for farmers compared to that by the vendors. By and large, the demand for organic vegetables is growing in super markets and so the farmers have to respond to the supply. The development in the communication sector -- especially the construction of the Bongabandhu Bridge (Jamuna Bridge) helped quick marketing of the perishable produce from the northern part of the country. Added to this, is the role of the mobile phones on generating information about supply and demand. Some of the growers in and around Dhaka city are having direct orders from the super markets and some also are going for contract growing. The changes are apparently looming large. In the face of a 4-5 years judgment, the scenario could be mere symbolic but if one foresees the future spanning over 10 to 15 years, one would have to recognise the fact that traditional cropping patterns and marketing managements are likely to change dramatically. If associated policy changes are not placed forth in due course, we might again fail to fuel diversification and provide a fair price to farmers. While 40 per cent or so of agricultural produce in Thailand is processed, in SA the share is only 2 per cent. The markets for HVCs in Thailand are more deregulated than in SA. Painfully, in SA economies, 25-30 per cent of the HVCs are lost in post harvest period due to the lack of storage, preservation and transport facilities. If the post harvest losses could be minimised, HVCs could cause a miracle in rural areas in SA. Points to ponder But all that glitters might not be gold. Joachim von Braun of IFPRI mentioned, diversification is a strategic issue and the context changes always. Diversification does not come through declarations but is driven by, inter alia, (a) market forces; (b) new technologies; (c) infrastructural investments; (d) changing consumer demand and (e) a panoply of policy changes e.g. setting taxes, land tenure security etc. The most important point to ponder over is that there could be too much diversification. What one should look for is optimal diversification that can be worked out through identifying strategic investment and policy issues. Private initiatives Allow me to recall the contribution of Pran -- a private sector initiative that, possibly, pioneered the agro processing in Bangladesh. All over the country, Pran group has 4-5 thousand contract farmers to feed the factories. Agricultural raw materials are being turned into manufactured items through higher levels of value addition. It is nice to note that Pran products are now being sold to northeast Indian markets legally (and also illegally). The markets for aromatic rice are on a rise. I personally believe that given proper policy planks, agro processing in Bangladesh has a bright future. Since majority of farmers in Bangladesh are small holders, the changes might benefit them as well. Of course, like the green revolution, the initial incentives could go more to the larger ones but with the passage of time, the small could catch up. Policies and perspectives But to live up to that expectation, the public sector has to do a lot of things. Internal and external transport facilities, investment on researches, export incentives etc -- all have to hover around agro processing activities. Mind that agro processing activities and agricultural exports tend to add more value to the domestic economy than others. It is the only sector, where the major inputs originate from the soil. The drives, the drivers and the diversification issues would, hopefully, find a berth in the mindset of the policy makers. Abdul Bayes is a Professor of Economics at Jahangirnagar University.
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