There is one sector that contributes up to a third of gross domestic product, and is an important source of foreign currency, in many of Asia’s developing countries. It could be deployed to achieve the Sustainable Development Goals.
Is there a silver bullet to help countries meet all their development challenges? Unfortunately, no. The first Sustainable Development Goal (SDG) to eliminate poverty, for example, is a gigantic task that demands a vast array of interventions on multiple fronts.
But there is one sector which, despite its huge size and importance, struggles for recognition of its potential to make serious inroads into nearly all the SDGs. Agriculture still accounts for more than half the workforce in most developing countries. And yet still there isn’t enough food for everyone. The Asia and Pacific region needs to invest $120 billion every year until 2050 to meet a growing demand for food.
Most of this money must come from the private sector. The only way for that to happen is to develop agribusiness. The agribusiness value chain comprises agriculture, manufacturing, and services companies and starts the moment a seed is produced, ending when the product is bought at a supermarket. Agribusiness boosts agricultural productivity and quality, while helping farmers sell their produce by connecting them with markets and consumers.
Agribusiness contributes up to a third of gross domestic product in most of ADB’s developing member countries. It is also a critical source of foreign currency through exports and foreign direct investments.
Even so, it’s still largely undeveloped and fragmented. Of the world’s 500 million smallholder farmers, 400 million are in Asia. Most lack financing and use low-tech, labor-intensive techniques and equipment. Half of the agricultural land in Asia is degraded mostly due to overuse of chemical fertilizers and outdated farming practices. Moreover, the region’s developing countries are likely to face the biggest reductions in agricultural potential in the world due to climate change.
The good news is that tackling these problems through agribusiness can yield benefits that ripple powerfully through nearly all the SDGs. ADB has seen this first-hand in its agribusiness projects:
SDG 1, No Poverty: Our support for contract farming models between agribusiness companies and smallholder farmers has helped farmers double their income and lifted them sustainably out of poverty. We have observed this with cassava farmers in Bangladesh, chili farmers in India, flower farmers in Viet Nam, and poultry farmers in People’s Republic of China (PRC). We expect the same results from other financing efforts for hazelnut farmers in Bhutan, potato farmers in Bangladesh, and coffee farmers in Timor-Leste and Papua New Guinea.
SDG 2, Zero Hunger: By financing a dairy farming company in the PRC, food security and food safety was improved for millions of consumers.
SDG 5, Gender Equality: Hasfarm, a flower business in Viet Nam, has increased the share of women workers and managers to two-thirds the total workforce after receiving ADB financing. We have agreed to similar gender action plans with most of our borrowers.
SDG 8, Decent Work: Our support for agribusiness companies has created thousands of well-paid manufacturing and services jobs, with social security benefits.
SDG 12, Responsible Consumption and Production: We are working with leading global agribusiness Olam to support sustainable and ethical production and consumption of coffee and help 20,000 of its contract coffee farmers to improve productivity and crop quality.
SDG 13, Climate Action: An investment in a Bhutan company has enabled 15,000 farmers to plant 10 million hazelnut trees on degraded mountain slopes, reducing carbon dioxide emissions and enhancing climate resilience through land rehabilitation.
Clearly, there is potential for agribusiness to make a massive difference, if scaled up.
But only if it’s done properly. Poet-farmer Wendell Berry has written that “a good solution solves more than one problem, and it does not make new problems”. Interventions can have positive and negative impacts, and in agribusiness these can have a domino effect given the nexus between farming, the environment, water, and energy. Interventions should maximize benefits and minimize the risk of harm.
There are three areas where this is particularly important. First is fertilizer. It can be hugely damaging if used improperly, contaminating soil and water. Ecologically-friendly compound fertilizer, which includes the right mix of nitrogen, phosphorus, and potassium and is released slowly into plants, mitigates these risks. Notably, fertilizer companies in India and the PRC are promoting these innovative products.
A second core concern is irrigation. Flood irrigation is common in Asia, but it is inefficient and can have environmental impacts including erosion and salinization. Drip irrigation is more effective and in controlled settings like greenhouses can boost productivity and quality, as we’ve observed in ADB-supported vegetable and flower investments in Armenia, Indonesia, the PRC, and Viet Nam.
A third key aspect is livestock. Farm animals are often a poor household’s main asset. But livestock can severely pollute soil and water if their waste is not handled properly. Livestock also produce methane which is a greenhouse gas, so simply breeding more of them can have harmful climate impacts. These issues can be mitigated by supporting companies that recycle livestock waste into organic fertilizer and biogas to produce clean energy. Livestock health and welfare is also important, and ADB partners with the region’s leading livestock companies to promote higher animal health and welfare standards.
To help achieve SDGs, agribusiness needs sustainable levels of investment. Long-term investment is also an effective way to bring stakeholders together, because it creates trust. When farmers see that an agribusiness has invested millions of dollars in a processing plant near their fields, they know that the investors are there for the long-haul. Farmers will then themselves invest and governments will also be more willing to support. Consumers are also better off when quality food is produced locally.
Development finance organizations like ADB have a critical role to play in unlocking long-term investment in agribusiness. This is how we can scale up agribusiness, so it can help to deliver the SDGs.