By UOB FDI Advisory
- Agriculture is a key contributor to economic development and employment across ASEAN.
- Governments across the region have been investing in smart farming or agritech to uplift farm productivity and build onshore food security.
- The COVID-19 pandemic accelerated agritech adoption as export restrictions and global lockdowns affected the global food supply chain.
Agriculture has been a major economic force in ASEAN, contributing 23 per cent of the gross domestic product (GDP) in Cambodia and Myanmar, 15 per cent of the GDP in Vietnam and 14 per cent of the GDP in Indonesia. The sector is also a major source of employment from 29 per cent of the labour force in the Philippines to 72 per cent in Laos.
Agriculture, forestry, and fishing as a percentage of GDP across ASEAN. Source: World Bank
As food demand continues to increase with population growth and a rising middle class, governments across Southeast Asia are looking at ways to bolster domestic food security and boost local production.
The COVID-19 pandemic has also affected food supply chains and agricultural manpower all around the world. The impact has been keenly felt across Southeast Asia where farming is a critical part of many livelihoods.
The effects of travel bans, movement restrictions, delay in port clearances, and the shutdown of processing plants and ancillary businesses have rippled through the food supply chain up to agricultural production. Countries have also resorted to food protectionism and stockpiling over concerns of domestic sufficiency.
There has since been a ramp up on investment in agricultural technology (agritech) to increase farming efficiencies, quality, and sustainability. Governments across ASEAN took various approaches from improving efficiency of production and shortening supply chains to moving more production onshore.
Agritech for better crop management and yield enhancement
However, the Mekong Delta, which accounts for nearly half of the country’s rice production, is vulnerable to climate change and rising sea levels. By 2050, 60 to 75 per cent of provinces in the region may be affected, according to climate change projections by Vietnam’s Ministry of Natural Resources and Environment.
While much investment will need to be channelled towards infrastructure improvement projects, agritech can help address the pain points of farmers who do not have real-time data of the health conditions of their crops.
MimosaTEK, a Vietnamese start-up, is bringing precision agriculture to existing farming practices in a recent pilot project. It uses a cloud-based device with sensors, allowing farmers to monitor crop progress and drought alerts.
The Vietnamese Government has given the green light to pilot the programme and is scaling it throughout the Mekong Delta. This move will help small-scale farmers in the region as they only need access to smartphones, electricity, internet connectivity and irrigation equipment.
The Ministry of Agriculture and Rural Development in Vietnam has also signed several Memorandums of Understanding with countries such as Japan, Ireland, the Netherlands, and Australia to exchange agritech knowledge.
As climate change further strains Vietnam’s natural resources, the Government has taken more measures to encourage tech solutions in farming. Photo: Shutterstock
Over in Thailand, agritech has been identified as an area in the Thailand 4.0 strategic economic development plan to boost its food production. This means exemptions on corporate income tax and import duty of raw materials for both Thai and foreign investors. There are also additional tax exemptions for companies that invest in upgrading their production capabilities through agricultural innovation.
By 2028, the agri-food industry is expected to contribute seven per cent of GDP, up from six per cent currently. The country is also targeting a very ambitious seven-fold increase in average income of farmers from 56,450 baht (US$1,754) to 390,000 baht (US$12,119) by 2037.
Novel farm systems boost local production
The COVID-19 pandemic has highlighted the urgency for Singapore to ensure its food security. With limited farming land, Singapore currently imports over 90 per cent of its food. Urban farming and indoor aquaculture are a few ways the city-state plans to raise homegrown food production to 30 per cent by 2030, a goal more commonly known as ‘30 by 30’.
A ‘30x30 Express’ grant was offered to nine urban farms in 2020 to accelerate food production. In Budget 2021, a S$60 million Agri-Food Cluster Transformation Fund under the Singapore Food Agency was announced.
Such funds have helped farms like Eco-Ark improve their production capacity. Eco-Ark is an offshore high-tech aquaculture farm that can produce 20 times more fish compared to other coastal farms. Its closed containment system uses water drawn from the sea that is filtered with ozone technology and pumped back to the sea—in a space about the size of three basketball courts (1,400 sqm).
Meanwhile, Singapore Poultry Hub has set up the first smart and green factory for the poultry industry in Singapore, backed by a S$40 million loan from UOB. The factory uses smart technologies such as robotics, automation and industrial Internet of Things—aimed at improving productivity by 26 per cent and capacity by 70 per cent.
With land constraints and limited natural resources, Singapore places an emphasis on agritech solutions for farming. Photo: Shutterstock
Value chain enablers unlock agritech opportunity for farmers
A common hurdle smallholder farmers face is that agritech solutions are not exactly cheap. A single drone to monitor field conditions can cost around US$1,000. And tapping on value chain enablers like artificial intelligence, integrated solution platforms or blockchain technology to ensure better traceability throughout the farm-to-fork journey, may seem out of reach.
Thankfully, this is changing.
“Technological providers are becoming more aware of the issues that smaller players face in terms of affordability and various models have emerged to help address this. One model is through a lease or rental model, thus reducing heavy upfront payments,” says Ernest Tan, Head of Agribusiness and Animal Protein at UOB.
“Another model could be co-sharing, where some small players co-share technological solutions or investments. Larger players within the value chain may also step in to support smaller players by onboarding them onto their supply chain management systems,” adds Tan.
Indonesia’s agritech startup, TaniHub Group, is streamlining the fragmented agricultural market by building an end-to-end agriculture ecosystem. TaniHub connects its 45,000 farmers with 350,000 buyers from hotels, restaurants, grocery stores and the like. It also has a logistics platform, TaniSupply and TaniFund, a FinTech platform that provides loans which farmers can pay off by selling on TaniHub.
Technological providers are becoming more aware of the issues that smaller players face in terms of affordability and various models have emerged to help address this. One model is through a lease or rental model, thus reducing heavy upfront payments.
Ernest Tan, Head of Agribusiness and Animal Protein, UOB
And demand for its services is growing. In 2020, revenue increased 600 per cent year-on-year, as demand for online groceries grew. Recently in May, the company raised a US$65.5 million Series B round, which it plans to use to build the upstream and midstream parts of its supply chain.
In Malaysia, the Malaysia Digital Economy Corporation has rolled out a pilot project, eLadang, to transform ‘traditional farming into a high-income digital economy profession’. eLadang connects smallholder farmers to online marketplaces like HappyFresh, smart farming solution providers, smart warehousing facilities and last-mile delivery providers like Lalamove.
Building the next generation of agritech talent
There are also efforts to raise a new generation of digitally inclined farmers.
In Singapore, a new tertiary course on Urban Agricultural Technology has been introduced. The diploma course covers agricultural technologies like vertical farming systems and involves local farms – giving young farmers on-the-job training and internships.
The Malaysian Government has also been encouraging those under 40 years old to get into farming through the Agroprenuer Muda (Young Agroprenuer) programme. Since 2016, more than 6,000 participants have received grants of RM20,000 each (S$6,414).
Local companies like Fefifo Malaysia are also empowering smallholder farmers by offering farmspace-as-a-service with a proprietary tech platform and predictive analytics. Fefifo has engaged with the Malaysian National Farmers’ Authority to tap into the latter’s database of around 190,000 registered farmers between the ages of 20 to 40 years old.
Feeding the nutritional needs of ASEAN
Although Southeast Asia is home to eight per cent of the global population, it only has three per cent of the world’s agricultural land. This creates an urgent need to address food security for the region.
Partnerships or collaborations between government bodies and startups offer a unique approach to addressing food security needs in the region. There is a huge market potential to get a slice of the agritech pie and grow the food of the future in ASEAN.
UOB FDI Advisory provides a one-stop shop for businesses that are keen to invest into Southeast Asia. Through the unit, businesses receive guidance on their market entry strategies, including how to navigate local customs and the regulatory landscape. The unit also connects companies with ecosystem partners such as government agencies, trade associations and professional service providers. In doing so, companies are able to make the necessary connections right from the start, instead of having to spend valuable time and resources finding partners that can enable and accelerate their growth.
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