Development of Agribusiness Enterprises - Asian Productivity ...

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Financing/Credit High cost of money capital Lack of equity capital Marketing Uneven production and distribution High cost of promotion Poor market information and dissemination network Poor bargaining power of farmers FIELD STUDIES - 12 - Provision of subsidized interest rate Establishment of guarantee fund Provision of consultants for SMEs Provision of agribusiness terminal markets with complete facilities Establishment of database Promotion of agricultural products (e.g., through brochures and other media) and sponsoring of SMEs’ participation in agricultural shows Installation of telecommunication facilities down to farm level Establishment of marketing board Linking of producers to buyers (e.g., through contract growing, marketing arrangement and joint ventures) For their field studies, the participants visited the PT Tuwuh Agung and PT Sari Husada agribusiness firms in Yogyakarta. The highlights of the visits are presented below. PT Tuwuh Agung PT Tuwuh Agung was a holding company which was established in 1986 to produce straw mushrooms (volvariela volacea) for domestic consumption and export. The product was processed and packaged at the company’s factory (PT Margo Redjo) in Yogyakarta. The production company comprised some 1,300 employees, 900 of whom worked in the plantation and about 400 in the factory. The plantation’s main operation included two composting plants, 300 greenhouses and several warehouses for storage of the raw material. It was located on 40 ha, some 25 km from the factory. The company, which was the first and currently the biggest producer of straw mushrooms in the country, was growing its own mushrooms in order to control the quality and quantity of the product. The factory had a monthly operating capacity of 400-450 mt of fresh straw mushrooms, which was only 60 percent of the rated capacity. Because the mushrooms were freshly packed on the same day that they were harvested, they had a better taste than similar repacked products from other countries. The company’s products, which came in the form of whole peeled, whole unpeeled and broken, were being exported to the U.S.A. (60 percent of total production), the U.K. (10 percent), Australia (7 percent), Hong Kong (6 percent), Singapore (3 percent), Canada (5 percent), Taiwan (1 percent) and others (4 percent) as well as marketed in the domestic market (4 percent). The participants had an opportunity to observe the operations and facilities of the factory. PT Sari Husada PT Sari Husada, a medium-sized agribusiness enterprise that was manufacturing nutritious food and beverages for infants, children and adults in Indonesia, was established in 1954 as a state-owned enterprise by the United Nations Children’s Fund (UNICEF) and
the State Industrial Bank of Indonesia. The objective until 1972 was to develop the health and intellect of the Indonesian people by providing them with nutritious foods. Then the government entered into a joint venture with a private company. In 1983, it became a public company when its shares were offered to the public. During its long history, the company had changed its name several times in accordance with the changes in ownership. Currently, the company was the largest producer of formula milk in the country. In addition to infant formula milk, it also produced follow-on formula milk, growing-up formula milk, low lactose milk, baby cereals, milk for pregnant and lactating mothers, full cream milk powder as well as a number of milk products under license by Morinaga (Japan). In order to compete successfully and promote consumer confidence in its products, the company had installed quality assurance in all stages of the manufacturing process. It sourced its fresh milk requirements from local dairy farmers whose village unit cooperative undertook the collection and transportation of milk to the factory where it was combined with other raw materials, most of which were imported from abroad, to produce the various processed milk products. Most of the company’s production was sold in the domestic market, with a small amount being exported to Pakistan. The participants were given a short tour of some facilities of the factory. CONCLUSION Various views were expressed at the seminar on how the development of agribusiness, particularly SMEs, could be enhanced in the participating countries. With agribusiness becoming a major thrust in the region in recent years, opportunities for strengthening the links between agriculture and industry, and creating more value addition had multiplied, resulting in the expansion of the rural economy in many of the countries. While many of the agribusiness SMEs were facing a number of problems such as unreliable supplies of raw materials in terms of quantity and quality, a lack of infrastructure and poor managerial skills, different strategies had been adopted at the macro level and enterprise level to overcome the obstacles. In that connection, the seminar highlighted the possible larger role that farmers’ organizations or cooperatives could play in further promoting agribusiness activities. It was pointed out, however, that while those organizations were potentially capable of taking over some of the processes in the value-added chain, such as processing and marketing, they would first need to be strengthened, particularly with regard to their management capability. In addition, strategies such as partnering with large companies or seeking joint ventures could be helpful in sustaining the operations of SMEs. Finally, it became evident from the discussions that achieving any success in the promotion of SMEs would depend very much on the effectiveness of government policies and support programs. Such policies and programs have become more critical considerations in the establishment and survival of those enterprises in the face of the increasingly competitive market environment for agribusiness products. The seminar provided the participants with an opportunity to review the current situation of agribusiness development in their respective countries. It also gave them a chance to learn in greater detail the experience of the host country through the presentation of relevant papers and visits to two local agribusiness enterprises. The discussions, in particular, raised a number of important issues and at the same time suggested a number of specific strategies/measures that could be adopted to further promote SMEs in the APO - 13 -
Page 1 and 2: From: Development of Agribusiness E
Page 3 and 4: Report of the APO Seminar on Develo
Page 5 and 6: FOREWORD Modern agricultural techno
Page 7 and 8: SUMMARY OF FINDINGS INTRODUCTION Th
Page 9 and 10: Policies and Programs for Promoting
Page 11 and 12: Governments should not be undertaki
Page 13 and 14: crops (i.e., non-traditional crops/
Page 15: Financing/Credit Inadequacy of fina
Page 19 and 20: 1. AGRIBUSINESS DEVELOPMENT IN ASIA
Page 21 and 22: US$ million 8,000 Percent 100 7,000
Page 23 and 24: Introduction of high-yielding varie
Page 25 and 26: 2. Agriculture and Agro-industry Th
Page 27 and 28: 60 50 40 30 20 10 0 60 50 40 30 20
Page 29 and 30: (27,213) (119,378) Japan U.S.A. (57
Page 31 and 32: supply balance, conserve resources,
Page 33 and 34: 2. POLICIES AND PROGRAMS FOR PROMOT
Page 35 and 36: Table 1. World Markets for Agricult
Page 37 and 38: Japan requires that imported agricu
Page 39 and 40: High Transportation Costs Shipping
Page 41 and 42: competitive markets, improving and
Page 43 and 44: terminals in some cities, which wil
Page 45 and 46: 3. REQUISITES FOR INITIATING AGRIBU
Page 47 and 48: Diversification of production will
Page 49 and 50: Those manufacturers who use substan
Page 51 and 52: STRATEGY FOR AGRIBUSINESS VENTURES
Page 53 and 54: 4. MARKETING PROMOTION OF AGRIBUSIN
Page 55 and 56: of inefficiency. Coordinating the f
Page 57 and 58: such an undertaken can be a very us
Page 59 and 60: Improving Productivity/Management o
Page 61 and 62: Tools for a Purpose Simplistically
Page 63 and 64: 4. Know Who You Are and Who You are
Page 65 and 66: 5. Falling in Love with Technology
Page 67 and 68:
ensure a pool of leaders for future
Page 69 and 70:
1. BANGLADESH INTRODUCTION - 69 - A
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sector before any imports are allow
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C An inadequacy of appropriate tech
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now constitute 88 percent of frozen
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Second, the contribution of agricul
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During 1995-99, some commodities in
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Indonesia imported only a few commo
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Product Quality This issue has beco
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agribusiness sector attempts to rec
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3. ISLAMIC REPUBLIC OF IRAN INTRODU
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Food Processing Plants Food process
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denied. That creates economic imbal
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construction (11.6 percent), and th
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2. Operational Conditions This sect
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- 97 - Table 5. Present Situation o
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(b) When recommended by manufacture
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2. Supporting Production Automation
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Kang, S. K., 1994. “The State and
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5. MALAYSIA INTRODUCTION - 105 - Ab
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ROLES OF THE FARMERS’ ORGANIZATIO
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(e) warehousing facilities to assis
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land leased out by farmers to FOs.
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Cooperation between the government
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Department of Agriculture, 1994. Cr
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6. MONGOLIA INTRODUCTION - 117 - En
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Agricultural extension differs from
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C streamline the mechanism of long-
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7. NEPAL INTRODUCTION - 123 - Arjun
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usiness orientation to the agricult
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* First eight months only. AGRIBUSI
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C directly to wholesale markets or
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dalmoth/chips, ketchup/squash/jam,
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Inadequate Infrastructure Storage f
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Technical and credit support is bei
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8. PAKISTAN INTRODUCTION - 137 - Ma
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C sugar industry - 78 sugar mills C
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- 141 - Table 1. Ongoing Agreements
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9. PHILIPPINES INTRODUCTION - 143 -
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Continuation Item 1995 1996 1997 19
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Seventh was seaweed and carrageenan
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Development of Irrigation Systems O
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Trade and Investment Missions An in
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Executive Order 133 (Tariff Exempti
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Table 1. Contribution of Difference
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Table 5. Overall Export Performance
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The number of registered agro-indus
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extrusion cooked products. This typ
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technical transfer loans to enable
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C The formation of an organization
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Table 1. Cultivated Area, Yield, Pr
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substitution, export requirements a
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and prepare for global climate chan
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Major Factors Contributing to the S
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12. VIETNAM - 175 - Nguyen Thi Thuy
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The equipment used in processing te
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percent of the raw materials are su
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Strategic Solutions for Achieving S
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APO Seminar on Development of Agrib
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Vietnam Ms. Nguyen Thi Thuy Senior
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Asian Productivity Organization Hir
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