Despite relatively less developed infrastructure, these countries are gearing up for improving crop productivity and modernizing agriculture sector. This paper examines the agriculture sector as well as the macro trend in CLMV countries, reveals growth opportunities for crop science companies, and recommends strategies to seize the market potential.
Urbanisation is rapidly taking place around the world. The global urban population grew from 3.3 billion in 2008 to more than 4.0 billion in 2016, an increase of about 21%. The pace of urban growth is forecast to accelerate further.
Asia and Africa, where the urban population is set to double from 2000 to 2030, will lead the trend. Cambodia, Lao PDR, Myanmar and Vietnam, also known as the CLMV countries, accounted for 32% the Association of Southeast Asian Nations’ (ASEAN) geographical area and 26% of its population in 2015.
Despite the slowdown in ASEAN’s overall economy, CLMV still has strong potential as a leading crop-producing region. CLMV faces a number of supply-side challenges in keeping up with significant changes in global and regional consumption trends, despite the impressive growth of its agribusiness sector in recent years.
Rapid urbanisation across ASEAN and CLMV countries will be the major driver of growth in fertilisers and crop protection products due to growing demand for higher crop productivity. Progressive implementation of the ASEAN Economic Community (AEC) will increase opportunities for various agribusinesses to manufacture in any ASEAN country and easily export to other markets. Key stakeholders — policymakers, agribusinesses, retailers and farmers — will need to develop a robust, collaborative strategy to leverage such opportunities.
In this paper, Ipsos Business Consulting reveals the market potential for crop science products in CLMV countries by examining the agriculture sector and macro-level trends of each individual market.
Strategic levers for successful market entry are presented to advise crop science companies on their next go-to-market challenges.
Cambodia is emerging as one of ASEAN’s growth in rising economic stars, achieving average annual gross domestic product of 9.9% for the five years following the 2008 global financial crisis.
The expanding industrial and service sectors were the two highest contributors to the nation’s economic growth, while the 2014–16 El Niño hindered agricultural productivity.
Despite unfavourable weather conditions, agriculture remains the main income source for most Cambodians, accounting for 59% of the nation’s workforce in 2015. Most Cambodian farmers are smallholders with less than two hectares per household.
Cambodia’s government in 2014 announced the Rectangular Strategy Phase III and National Strategic Development Plan 2014–18 for the agricultural sector, which aims to sustain annual growth of the agricultural sector at 4%.
The vision is to modernise agriculture by applying new technologies, expanding mechanisation and increasing funding for agricultural research to increase crop yields and quality.
The government also plans to promote the commercialisation of agricultural products and enhance partnerships between farmers and traders, as well as between large-scale agro-industries and smallholders.
Agriculture is a key component of the Lao economy, accounting for 24% of gross domestic product and 66% of its workforce in 2015.
Farming remains a subsistence activity for most people in this landlocked country, where mountains and forests account for 70% of its territory.
The government has launched several initiatives to commercialise agricultural production in recent years. However, these medium-term plans were hampered by the government’s budget deficit.
Current policy is focused on attracting foreign investment to support developments in education, health and infrastructure, such as roads and hydropower plants, all of which will create firmer foundations for the industrial and service sectors with the agricultural sector likely to develop at a slower pace.
Agricultural infrastructure — including irrigation, reservoirs and water pumping stations, which are being gradually developed — is still insufficient to support longer-term development and agricultural productivity.
As a result, Lao agricultural production remains overly reliant on natural resources which results in lower yields. Insufficient irrigation coverage substantially affects local farming practice.
As farmers are unable to cultivate rice during dry season they shift to crops that require less water. This limits Lao PDR’s potential to become a major rice exporter.
Myanmar’s agricultural sector accounts for 29% of the economy and more than 60% of workforce in 2015.
From the start of the country’s political and economic reforms in 2012, agriculture became an area of key focus especially with growing concerns over national food security and the government’s desire for the country to regain its long lost position as the world’s leading rice exporter.
The public and private sectors have cooperated to improve productivity and quality for rice farmers by increasing access to agricultural machinery rental and building rice mills across the country.
The sector remains underdeveloped despite its abundant agricultural resources mainly due to long-term underinvestment and inefficient farming practices.
Many policies, such as foreign ownership of land, land security improvement and development of infrastructure, have been adjusted to attract more foreign direct investment in the sector.
Other reforms, such as financing systems and value chain structure, are needed to enhance Myanmar’s potential as an exporter.
Combined, it is hoped these initiatives shift traditional farming practices towards market-based production with higher use of agricultural machinery and inputs to help build the agricultural sector into a sustainable mainstay of Myanmar’s economy.
Vietnam has become one of the region’s most attractive markets for foreign investors, a trend which is expected to persist in the coming years.
Strong annual economic growth, which averaged 10.8% from 2010–15, is forecast to continue until 2020 when the overall economy is expected to reach US$300 billion.
Vietnam over the past decade has transformed itself from an agricultural- to an industrial and service-based economy. Expansion of manufacturing and construction increased the industrial sector’s overall performance, which in 2015 posted growth of 9.6%, its strongest since 2012.
This bullish long-term outlook is underpinned by on-going government policies to privatise state-owned enterprises, an influx of foreign investment, proliferation of trade and investment agreements, forthcoming participation in the AEC, and rising private consumption.
Vietnam’s so-called golden demographic bonus, which couples its youthful population with positive business sentiments, further enhances the country’s position as an especially lucrative business environment when compared with its ASEAN peers.
Agriculture remains an important sector for Vietnam’s economy and it currently accounts for about half of the country’s workforce.
This composition is expected to change as a result of on-going industrialisation and modernisation and the corresponding employment trend where people are increasingly shifting from agriculture to the industry and service sectors.
Other factors are also in play, such as severe drought resulting from El Niño which impeded crop output while falling global food prices further undermined the growth of the agricultural sector.
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