Development of Agribusiness Enterprises - Asian Productivity ...

salted products (30.2 per cent), beverages (37.8 percent) and hot pepper powder (46.8
percent).
Total sales value of processed food products is W= 127.6 billion, and has been increasing
since 1993. A 23-percent growth rate was recorded between 1994 and 1996. The insolvent
operation rate also decreased from 45 percent in 1995 to 36 percent in 1996. However, a
number of processing companies continue to suffer business difficulties. Major investment
has been made in beverage processing, but 60 percent of the factories are insolvent.
(b) Other Rural Food-processing Enterprises
Current rural food-processing enterprises are characterized by partnership operations
with farmers and fishermen in village units. Their main products are derived from traditional
food processing (Table 4).
Table 4. Current Situation of Rural Food-processing Enterprises
by Subject and Support Pattern
Category
Producer
Group
- 96 -
Village
Cooperation
Farm
Management
Cooperatives
Total
Traditional food enterprises 120 489 0 609
Rural food-processing enterprises 153 0 156 309
Special food complex - - - 477
Total - - - 1,395
Source: Ministry of Agriculture and Forests, 31 December 1998.
Table 5 summarizes the current state of rural food processing by product and operation.
There is a tendency to concentrate investments on certain commodities, such as salted
products (19.96 percent) and tea products (18.21 percent), because markets for those
commodities are easy to enter. Also, those products do not require specialized labor. In
terms of investment, enterprises with more than W= 1 billion account for only 6 percent of the
total. In contrast, enterprises with under W= 250 million and W= 100 million account for 58
percent and 20 percent, respectively, of total investment. Distribution of employees shows
that only 6.8 percent of the enterprises have more than 30 employees, while 71.7 percent and
49.9 percent of the enterprises have under 10 and 5 employees, respectively. Because most
enterprises are small-scale operations in terms of size and employment, problems exist that
are associated with the treatment of polluted water, product quality management and the
accounting process.
PROBLEMS ASSOCIATED WITH
RURAL FOOD-PROCESSING ENTERPRISES
Initial Problems
Sufficient examination is rarely made of a proposed business, although a feasibility
study of a new business is necessary to ensure a successful outcome. A major cause of
insolvency has been identified as the failure to undertake a feasibility study in the first stage
of setting up a new business. This fact implies that many processing enterprises have
launched their businesses with investment problems existing right from the start.