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Publication | 29 June 2021

Agricultural transformation in Asia: Policy and institutional experiences

Global Food and Nutrition Security

Agricultural transformation may be broadly defined as the process over time by which the agrifood system evolves from subsistence oriented and farm centred into more commercialised, productive and off-farm centred. Transformation is said to be inclusive if the results lead to food security and poverty alleviation and reach the socially and economically disadvantaged, in particular women, minorities, the disabled and the elderly.

The main purpose of this study is to take stock of public sector experiences in facilitating and enabling agricultural transformation in selected countries in Asia. The study focuses on key public sector interventions, in particular policies, legislation and institutional innovations.

The review of experiences in Asia confirms the critical role played by the public sector in facilitating and guiding agricultural transformation. The public sector has also been responsible for misguided policies and interventions, which inhibited agricultural transformation. The role of the public sector during earlier stages of transformation was more prominent and heavily interventionist. In later stages, the state’s role has diminished and has been limited to facilitating an enabling environment, including the efficient functioning of markets and trade, and promoting inclusive development. The private sector has tended to increasingly crowd-out the public sector in various functions, with successful transformation from one stage to the next.

A high share of agriculture in GDP and employment are associated with earlier stages of agricultural transformation. The share of agriculture in GDP and employment declined over time with successive stages of transformation. However, in Thailand and South Asia, despite some success in agricultural transformation, agriculture continues to be an important source of employment. This points to the inability of other sectors to attract rural labour as well as the inability of the agriculture sector to shed excess labour.

Employment in agrifood systems beyond the farm-gate has increased with successive stages of agricultural transformation. New production, processing and marketing technologies, including digital agriculture and product differentiation for more health- and environmentally conscience consumers, are slowly attracting dynamic and young groups of entrepreneurs to the agrifood system. Growth in total factor productivity (TFP) has underpinned agricultural transformation in Asia. The early and successful transformers, Japan, Korea and Malaysia, were able to significantly increase TFP in agriculture while other countries, particularly in South and Southeast Asia, lagged until the 1970s. Over the past decade, TFP growth in agriculture and the industrial sector in Thailand have been very low or negative, which are considered key factors in stalled agricultural transformation. South Asia and some countries in Southeast Asia are showing similar signs of low TFP growth, which has hindered agricultural transformation. The Green Revolution, despite some criticism, facilitated productivity growth throughout Asia. The emergence of the supermarket revolution and, increasingly, digital agriculture have underpinned current and recent transformations in agriculture.

High levels of undernutrition are generally associated with earlier stages of agricultural transformation. However, a skewed and non-inclusive agricultural transformation, even if successful, leaves large pockets of malnourished people even in the later stages. Overweight and obesity at later stages of transformation have been a key concern for policy-makers in the region.

The Asian experience confirms that institutions capable of adapting, guiding and facilitating change in a fluid environment are key to successful transformation. In countries with unequal land distribution, land reforms and facilitating access to land for the landless have been critical to transformation. Japan, the Republic of Korea, Thailand, India and Afghanistan have all implemented land reforms with various degrees of success. Japan, Korea and Thailand - the latter, however, only during the first three stages of transformation - were successful in reducing rural poverty and facilitating agricultural transformation. The land reforms in these countries were coupled with incentives and policies to support capabilities to improve production and marketing among the new landowners. The unsuccessful land reform in India in the 1970s was attributed to a lack of incentives and support to the new landowners. Land fragmentation and financially unviable farm sizes are the new challenges facing policy makers throughout Asia.

Almost all countries in Asia have, at some point, adopted trade and price policies with anti-agriculture bias in support of affordable food supplies for the benefit of urban consumers and the non-agricultural sector. Faced with rising rural poverty, declining investments and faltering TFP growth in agriculture, as well as unreliable and declining food supplies, most governments have reversed the bias. Rice, as the main staple in the region, is protected, and farmers in some countries, including Japan, Korea, Malaysia and Thailand, receive heavy subsidies. Input subsidies, in particular for fertilizers, and trade management policies – quantitative measures, tariffs and duties – are policy instruments used to support some agricultural commodities. In general, such price and trade policies have distorted market signals, reduced incentives to invest efficiently and stalled agricultural transformation.

Public investment in rural infrastructure has been, without exception, beneficial to agriculture and rural transformation. This includes rural roads, irrigation, rural electrification, agriculture research, extension and education. The public sector has also had a significant role in farm mechanization and provision of affordable and farm-specific credit, especially during the early stages of agricultural transformation.

Today’s agriculture presents a new set of challenges and opportunities. The agriculture sector is threatened by climate change, soil erosion and degradation, water pollution, the projected rise in temperatures and sea levels, increasing threats from animal and plant diseases, and increasing demand for land and other natural resources. The agriculture sector is also expected to supply more nutritious and diversified food for a rising population. Urbanization in Asia is accelerating, generating demand for more diversified and processed food. At the same time, agricultural labour in Asia is increasingly greying while decreasing numbers of youths are attracted to agriculture.

New and improved technologies in the agrifood systems present new opportunities where labour productivity is on par with or exceeds that in other sectors. Digital agriculture, improved production technologies, such as hydroponics and protected agriculture, as well as product differentiation and digital marketing, are opportunities with significant potential to meet the current and emerging challenges. While not all policy and institutional experiences of the past are relevant to the challenges and opportunities of today, lessons from the past are still key to meeting emerging challenges.

Communications technology and increasing interconnectedness allow policy-makers and international partners to share policy experiences and innovative approaches to address specific impediments to transformation. Similarly to the situation until the 1970s, when farm mechanization, new agricultural inputs (fertilizers, seeds, plant protection and farming techniques), trade and agricultural finance required state intervention and new institutions, the emerging challenges and technologies may require a set of interventions and institutions.