1. The Role of Public Sector in Promoting Value Chain in Agriculture
Surachai Koomsin
Senior Expert on Environmental Planning
National Economic and Social Development Board
8 December 2011
Mekong Institute, Khon Kaen

2. Presentation Outline 1 2 3 4 Value Chain in Agriculture in Thailand
National Policy on Value Chain in Agriculture 2
Case Study: Organic Agricultural Development 3
Direction to Promote Agricultural Value Chain 4
The Role of Public Sector in Promoting Value Chain in Agriculture

3. Value Chain in Agriculture in Thailand1

4. Thai Economy GDP has decreased due to domestic demand reduction
Domestic demand: in Q a slowdown from both private consumption and total investment with an expansion rate of 2.4% and 3.3% respectively, compared to 2.7% and 4.1% in Q2
External demand: net export of goods and services rose by 9.9% in Q3 compared to 1.9% in Q2.
Agricultural sector dropped by 0.9% in Q3 compared to an increase of 6.7% in Q2. Contraction was mainly from a fall of second paddy production (the government commenced a campaign for planting area reduction, esp. 2nd round planting) along with impact from an inundation

5. Importance of Agriculture in Thailand
Agriculture – the significant production base of Thailand
Cultivated area: 40 percent of total land area
Farm household: 6.9 million households (20.3 mil in total)
Agricultural value: >300,000 mil. Baht / 8.3% of GDP %
GDP by Sector
Source: NESDB, 2011
Value Chain in Agriculture in Thailand

6. Importance of Agriculture in Thailand
Value added of agriculture has been prominent
Agro-business sector: 8.6% of GDP in 2010
GDP Structure,
2005
2006
2007
2008
2009
2010
Agriculture
9.0
8.7
8.8
9.2
8.3
Agro-Business
9.5
9.6
9.1
8.6
Non-Agriculture
81.5
81.4
81.9
81.8
83.1
Share of Agro-business GDP in 2010 by type
Value Chain in Agriculture in Thailand
Source: NESDB, 2011

7. Importance of Agriculture in Thailand
Major exporter in the world food market, mostly in primary products
India
Pakistan
USA
Vietnam
Thailand
Indonesia
Malaysia EU
Brazil
China %
Export Product
World Rank
World Market Share
Pineapple 1
45%
Canned Tuna
20%
Source: OAE and National Food Institute, 2009
Value Chain in Agriculture in Thailand

8. Importance of Creative Economy
Creative industry has been creating greater value for Thailand
Cultural and natural heritage creates 300,000 mil Baht in 2010
Value of Thai creative industries,
Unit : Million baht
Source: NESDB, 2011
Cultural Heritage group includes… 1) Handicraft 2) Traditional Thai Medicines 3) Thai Food 4) Cultural/Biodiversity Tourism
Value Chain in Agriculture in Thailand

9. Importance of Creative Economy
Market Trend
Healthy
Convenient
Less environmental impact
Creative
Kimono produced from Thai silk
Organic Cotton
Value Chain in Agriculture in Thailand

10. Importance of Creative Economy
Examples of Thai Agricultural Creative Products
‘Kessara Bakery Shop’ has an idea to bring Pla Shaon, local fish in Singburi, as an important ingredient for cake and ice cream
Dried Som Tum “Thai Smile”– vacuumed and dried food – keeps the freshness of vegetables for Som Tum. Cooked in microwave oven for a few minutes, you can enjoy the authentic Thai Som Tum in terms of taste, sweetness, as well as preserved nutrition
‘Proud’ is the Thai sweet brand name. Its selling point is to package Thai traditional sweets and dried fruits in nice-looking forms. It is suited for gifts in every occasion.
Value Chain in Agriculture in Thailand

11. Thailand Agricultural Value Chain
High logistics cost – due mainly to transportation cost
Thailand has relatively high logistics cost, which is approximately17-19 % to GDP.
The logistics cost per GDP at nominal value has been decreasing from 19% in to 18.8% in 2007, 18.6% in 2008, and 16.8% in 2009.
The drastic decline of the ratio in 2009 was partly due to the economic decline from the subprime crisis in the US lowering consumption, export, production, then transportation and logistics activities. National Accounts data shows the negative inventory flow in Also, partly is the outcome of improvement in logistics management.
Thailand Logistics cost comprises of
Transportation Cost: %
Inventory Holding Cost: %
Administration Cost: 9%
Proportion of Logistics Costs to GDP at Current Prices,
ใส่เลขรวมด้านบน สีเขียว ขีดเส้นใต้จ๊ะ
19.6
18.1
17.7
17.3
18.3
19.0
18.6
18.8
16.8
17.9
Value Chain in Agriculture in Thailand

12. Problems and Constraints
In Logistics Development in Thailand
Facilitation of Logistics Management
Lacking sufficient facilities that help to reduce transportation and warehousing costs such as Distribution Centers (DCs) and well developed ICT system.
Complexity in Rules and Regulations relating to import and export procedures.
Institutional Problems
Lacking of strong and capable agency to drive the strategic plan to operation effectively.
Lacking of holistic coordination among related agencies in implementing the plan to prevent duplication of operation or to fill up the necessary but missing operation.
Unclear roles of transportation and logistics agencies as to policy maker, regulator and operator such as Department of Land Transport acting as regulator and operator or Department of Customs who is regulator on import- export activities also acts as facilitator on NSW.
- SOEs that provide transport services still have financial and managerial problems, due to high cost of investment.
Logistics Personnel
Insufficient skilled personnel in both operational and management level.
Skill development programs at operation level have yet to be improved.
ICT system - Information and communications technology
NSW - National Single Window การเชื่อมโยงข้อมูลอิเล็กทรอนิกส์ เป็นการเชื่อมโยงข้อมูลทางอิเล็กทรอนิกส์แบบไร้เอกสาร ระหว่างหน่วยงานที่เกี่ยวข้องในกระบวนการ นำเข้า ส่งออกสินค้า เพื่ออำนวยความสะดวกให้แก่ผู้ประกอบการ ในการตรวจสอบใบอนุญาต และใบรับรองต่างๆ ทางอิเล็กทรอนิกส์ ก่อนการตรวจปล่อยสินค้า ระบบนี้ จะทำหน้าที่ ประสานกิจกรรมทางอิเล็กทรอนิกส์แบบครบวงจร ผู้ประกอบการสามารถรับส่งข้อมูลทางอิเล็กทรอนิกส์กับองค์กรที่เกี่ยวข้องได้ อัตโนมัติ ตลอด 24 ชั่วโมง โดยไม่ต้องเดินทางไปติดต่อกับหน่วยงานต่างๆ ด้วยตัวเอง
SOCs – System Operation Centers
Value Chain in Agriculture in Thailand

13. Thailand Agricultural Value Chain
Traditional VS Modern Supply Chain
Some agricultural products has changed from the traditional supply chain towards the modern supply chain, namely, chicken, organic vegetables and rice, sugar cane and sugar, milk and to a lesser extent cultured shrimp, while most products remain under the traditional system.
Value Chain in Agriculture in Thailand

14. Thailand Agricultural Value Chain
Traditional VS Modern Supply Chain
Traditional Supply Chain
Modern Supply Chain
Spot market transaction with neither long-term contracts nor information exchange
The farmers’ dependence on informal credit from the agricultural traders has been almost entirely substituted by the credit from BAAC
The farmers and the retailers (and consumers) do not have any direct contractual relations
The relationship between traders are linear
the farmers in the modern supply chain have access to the modern retail markets and export markets through the contracts with either the agri-business exporters, or to a lesser extent the supermarkets
Flows of goods, information and capital in the modern supply chain are circular flow directly linking the farmers with the retailers/exporters
Value Chain in Agriculture in Thailand

15. Productivity Improvement and Cost Reduction
Traditional VS Modern Supply Chain
Traditional
Modern
Public and private investment, public investment in agricultural research and extension.
..Millions of farm families benefit from the high yield varieties and new varieties that are disease resistant, drought tolerant, heat resistant, etc.
New agricultural technology and modern farm management (ex. private standards, central procurement of the supermarkets.)
Contractual arrangements .. Some agri-business firms also help invest in local public goods (such as monitoring of pollution), local infrastructure (e.g., collection centers) and logistical improvements in the handling and transportation.
Direction to Promote Agricultural Value Chain

16. Productivity Improvement and Cost Reduction
Modern Supply Chain
Farm-gate prices of organic rice and vegetables are 10-20% higher than the regular products.
Farmers under the contract farming arrangements have higher net income in return for more dedicated work.
Agribusiness firms are able to sell the safety products a % of the prices of regular products.
Thai consumers are willing to pay additional price premium of at least 42%.
Source: NESDB, 2011
Direction to Promote Agricultural Value Chain

17. National Policy on Value Chain in Agriculture2

18. 11th National Economic and Social Development Plan (2012 – 2016)
External Changes
Assessment of
Country’s Potential
Mission: “Prosperity with Justice, Equitability and Resiliency”
- Recovery of the World Economy
Use Strength to Create Opportunity by connecting with emerging economic super powers & neighbors on trade & investment.
Key Objectives
Balanced, Strong, Self-reliant Economy
Improved Competitiveness
Social Safety Net Available for All
Peaceful Society under Good Governance
- New Global Rules
- Multi-polar economic power and Asia Century
- Ageing Society
Use Opportunity to Reduce Weakness by cooperating with other countries in creating value for goods & services, using Climate Change trends to create Green Economy & using democracy & human rights concepts to urge further reform in society
- Global warming
- Food and fuel security
- Advance in technology
Development Strategy
Promote just society
Promote lifelong learning society
Strengthen agricultural sector, food and energy security
Restructure the economy towards quality growth and sustainability
Create regional connectivity for social and economic stability
Manage natural resources and environment towards sustainability
Internal Changes
Monetary Stability, Budget Deficit, High Cost in Agriculture, Limited Land & Labor, Import-dependent industry, Opportunities in Services & Tourism
Use Strength to Create Resiliency by using Agriculture, Services & Creative Economy to create strong production base, strengthening financial sector & using Sufficiency Economy to ensure balanced development
Increasingly Individualistic Society, Globalized Culture, Improved Health & Education, but IQ, EQ, Labor Productivity & Care for elderly still inadequate.
Reduce Weakness & Avoid Threats by improving education, expanding investment in R&D, reforming rules & regulation, reducing public debt, strengthening capital of natural resources & environment
Degradation of natural resources & environment, Climate Change Effects on Agriculture, Poverty, Migration, Forest Encroachment, Import-dependence on Energy
National Policy on Value Chain in Agriculture

19. Value Chain Development Strategies
Strengthen agricultural sector, food and energy security
Create value added to agricultural commodities through the supply chains
Promote local production and services which create high values to farm produce including food products and energy
Encourage collaboration between local educational institutions and private sectors on value creation, including supporting farmers and entrepreneurs to apply knowledge, innovations and technology related to an environmental friendly method to create values
Develop quality and standards of food and farm products including their production systems to meet the international standardization
Encourage the future markets and central markets of agricultural commodities gathering
Increase the role of private sector, community organizations and agricultural institutions in commodity and food management system in order to improve the efficiency of logistics management in agricultural sector
National Policy on Value Chain in Agriculture

20. Value Chain Development Strategies
Restructure the economy towards quality growth and sustainability
Utilize science, technology, innovation and creativity as important drivers of restructuring the economy towards quality growth and sustainability
Increase productivity in agriculture sector and elevating its value-added through the utilization of appropriate technology and environmentally-friendly production process
Create regional connectivity for social and economic stability
Develop connectivity in transport and logistics system under relevant regional cooperation frameworks
Develop an efficient and international-standard transport and logistics services, improvement of relevant rules and regulation on transportation of goods and people, human resources development in transport and logistics businesses, economic connectivity along the border areas/economic zones, as well as connectivity with the domestic production base
National Policy on Value Chain in Agriculture

21. Logistics Development Plan of Thailand (2007-2011)
(Approved by the Cabinet on 27 February 2007)
Vision
To have a world-class logistics system to support being a center
of business and trade in the Indochina Region
Objectives
To enhance trade facilitation with an aim to increase cost efficiency, customers’ responsiveness and reliability and security
To create value-added for the logistics and other supporting industries
Strategic Agendas
Business Logistics Improvement
Transport and Logistics Network Optimization
Logistics Service Internationali-zation
Trade Facilitation Enhancement
Capacity Building 1 2 3 4 5
ระดับเป้าหมาย - มุ่งยกระดับการบริหารจัดการโลจิสติกส์ไปสู่ระดับ World Class Logistics Management
ระดับยุทธศาสตร์ - มีจุดเน้นไปที่การยกระดับขีดความสามารถในการแข่งขันของอุตสาหกรรมเป้าหมายหลักของประเทศ
ระดับปฏิบัติ - การปรับเปลี่ยนในระดับปฏิบัติ (Change Management) ต้องยึดความต้องการของผู้ใช้บริการเป็นที่ตั้ง
หลักการขับเคลื่อนยุทธศาสตร์
National Policy on Value Chain in Agriculture

22. Driving Mechanism of the National Logistics Development
National Logistics Development Committee
National Logistics Development Plan
Policy Level
Business Logistics Improvement
Transport and Logistics Network Optimization
Logistics Service Internationalization
Trade Facilitation Enhancement
Capacity Building 1 2 3 4 5
Operational Level
Responsible
Agencies
MOE/ M.Labor/ NESDB
MOI/ MOAC
MOT
MOC
MOF
Industrial Logistics Sub-committee
Agricultural Logistics Sub-committee
Infrastructure Development on Western Economic Region Connectivity Sub-committee
Data Harmonization and Data Integration for Imports, Exports and Logistics Sub-committee
Sub-committees
Working Committee
National Logistics Development Plan 2012 – 2016 Working Committee
National Policy on Value Chain in Agriculture

23. Case Study: Organic Agricultural Development3

24. Organic Agricultural Development
Background: Why organic?
The organic export of Thailand valued US$ 100 mil. in 2009 (rice, fruit, vegetable)  growing market for OA 1
Thailand has broad variety of indigenous plants suitable environment. 2
Thailand has intensive local wisdom and knowledge in agriculture: OA involved with self-sufficiency and local content 3
Good cooperation and networking between entrepreneur and farmer 4
OA – less environmental impact Consistent with climate change concern and healthy/safety food 5
Case Study: Organic Agricultural Development

25. Organic Agricultural Development
Driving Mechanism
The Cabinet approved the proposal by MoST to establish the National Committee on Organic Agricultural Development (NCOAD)
16 Oct.07
The Cabinet approved Thailand’s Organic Agriculture Strategies
 Upgrade quality of life of both farmers and consumers and bring about food security
22 Jan.08
The Cabinet approved Action Plan on National Organic Agriculture Strategies
6 May 08
Case Study: Organic Agricultural Development

26. Organic Agricultural Development
National Committee
Representatives:
Chairman: Deputy Prime Minister
Secretaries: NESDB, Ministry of Agriculture and Cooperatives (MoAC), Ministry of Commerce (MoC), Ministry of Science and Technology (MoST)
Committee: Government agencies, universities, private sector, local philosophers
NCOAD: responsible for ..
ensuring that all related agencies put into practice the country's action plan on organic agriculture
supervising the operations in accordance with the action plan and conduct evaluations
Case Study: Organic Agricultural Development

27. Organic Agricultural Development
SWOT Analysis
Strengths
Suitable environment/ broad variety of indigenous plants
Knowledge creation and knowledge management, farmer networking
Involvement of local wisdom: self-sufficiency
Good cooperation and networking between entrepreneur and farmer
Weaknesses
Little knowledge, R&D, innovation, and supporting data
Limited organic raw material
Small domestic market
Little specialized staffs on OA
Low quality of product – CB, AB : international standard
Opportunities
Sustainable agricultural policy, food safety, consumer health - promoting OA
Growing market for OA and fair-trade
Growing concern of healthy food
Supporting climate change concern
Increased chemical fertilizer’s price
Threats
Higher competition on the market, FTA
Customers lack of knowledge on organic
Rise of fuel prices
Case Study: Organic Agricultural Development

28. Development of National Organic Agriculture 2008-2011
Strategy and Policy Framework
Objective: Aim to..
Upgrade the quality of life of both farmers and consumers
Bring about food security
Increase competitiveness
Reduce poverty
Sustainable development
Focus on..
People-centered approach
Sufficiency Economy philosophy: advocated by His Majesty the King
Public participation
Case Study: Organic Agricultural Development

29. Development of National Organic Agriculture 2008-2011
4 Main Strategies
Knowledge Management and Innovation
Support R&D/ Innovation
Initiative public awareness campaigns to stimulate demand and promote consumption
Establish national organic information database
Development of OA based on Folk Wisdom
Support local networks strength
Extend local markets
Develop marketing knowledge
Potential for Commercial Basis
Support supply chain networking
Develop OA standard
New OA export markets
Effective Management
Form effective OA development mechanism
Case Study: Organic Agricultural Development

30. Strategic Issues
Thailand’s Organic Agricultural Development
Knowledge Base Creation to Enhance Organic Agricultural Development
Develop applicable technology: emphasis on adding value to organic products
Holistic: from upstream to downstream
Initiate public awareness and correct understanding in every sector
Enhancement of Production and Marketing System
Create farmer’s networks and institutions along the entire supply chain
Support cooperatives setting up among local communities to coordinate with private sector in production and distribution of organic products
Develop effective market system - domestic and export
Case Study: Organic Agricultural Development

31. Strategic Issues (con.)
Thailand’s Organic Agricultural Development
Standard Development
Well-manage domestic certification providing system and organic standard benchmark to gain acceptance domestically and internationally
Organic Agriculture Administration and Development
Efficiently manage working mechanism and budget capable for integrating and coordinating all relevant sectors to monitor and develop organic agriculture systematically
Rectify Organic Agricultural Development Strategies and Action Plans for global and domestic changes
Case Study: Organic Agricultural Development

32. Direction to Promote Agricultural Value Chain4

33. Problems of Thailand Supply Chain
From Upstream to Downstream Stages
Upstream
Mid-stream
Downstream
Water shortage scarcity/flooding
Shortage of labor (young people leaving farms)  larger farm size
Degradation of natural resources
Higher risk of plant- hopper outbreaks due to intensive farming with no crop diversification
Limited successful farmer groups accessing in new agricultural markets
High labor cost of handling
Transportation being too dependable on truck transport
Inefficient rail-road system
No standards for paddy bought and sold in the market  difficult to create value added
Food exports are subject to Sanitary and Phytosanitary Measures (SPS) / Trade protection
Delay in the issuance of safety documents (for SME)
Inadequate cooling facilities for the export of fresh fruits, vegetable at the airport
Lack of hedging facilities for SME to hedge against price risks (i.e., futures market) and currency risks
Case Study: Organic Agricultural Development

34. 5 Major Strategies
To promote the development of value chain
Improvement and development of modern wholesale agricultural market in selected provinces which will allow farmers to have access to the modern marketing channels.
1. Linking the small holders and traders with the high valued agricultural product markets.
Establishment of agricultural hubs or parks, and agricultural collection stations in the rural community.
Investment in local infrastructure and logistics that will allow farmers to produce and market high valued and fresh agricultural products.
New ways of agricultural extension for farmers with the cooperation of the agri-business and local government.
Investment in the collective prevention of natural hazards, such as the establishment of early warning system, and critical institutions that will enable farmers and firms to efficiently manage risk.
Case Study: Organic Agricultural Development

35. 5 Major Strategies 2. Promotion of farmer groups
To promote the development of value chain
The innovative ways of organizing cooperatives and farmer groups are needed, e.g., they must be for-profit groups so that they are able to survive the competitive pressure.
The membership should be restricted and the profit sharing may be based on stock ownership or business volume of each members.
2. Promotion of farmer groups
Creating the brand name for the products.
The farmer groups should be encouraged to build capability in the investment of social assets for the group, such as the extension services, capability to monitor and tackle local pollution problems.
Case Study: Organic Agricultural Development

36. 5 Major Strategies 3 4 5 To promote the development of value chain
The safe domestic kitchen: Since a large percentage of agricultural products are consumed domestically, there is a need to ensure that the domestic foods are safe. This requires more effort and more budget for the Food and Drug Administration and the consumer protection organization. 3 4
Stepping up research, development and marketing research to increase the share of domestic and international trade of high valued agricultural products. 5
One stop service promotion of the value chain for high valued agricultural products. The measures include the performance-base incentive/privileges for the investors, the establishment of the high-level promotion committee and the need for the data and information on supply chain for policy formulation and promotional purposes.
Case Study: Organic Agricultural Development

37. Thank You