A much ignored strategy for reducing poverty?

MANILA, Philippines –  Tree-crops have played a key role in the development of agriculture and poverty reduction in many ASEAN countries. (I can attest to this as an agricultural project economist in Malaysia in the late 1970s and early 1980s).

Let’s compare the achievements of these countries in the past three decades in tree crop development. Specifically, this involves area harvested, production and export. Let’s also discuss the possible impact on poverty reduction and the key success factors.

The ASEAN countries are key players in the global market for tree-crops: palm oil, rubber, coffee, cacao, coconut, and cashew.

• Indonesia, Malaysia and Thailand in that order are the world’s largest producers of palm oil; the first two control some 90 percent of the world’s exports.

• Thailand, Indonesia, Malaysia and Vietnam control most of the rubber exports.

• Vietnam ranks second in the world in coffee production and exports. Indonesia is fourth.

• Indonesia is among the top cocoa exporters.

• Indonesia and the Philippines are the top producers of coconut while the latter is the top exporter of coconut oil.

• Vietnam is the world’s leading cashew exporter.

Area expansion

Tree-crops harvested areas in Indonesia expanded 3.1-fold to 13.1 million hectares during 1980-2008, Malaysia 1.9 times, Thailand 1.7 times, and Vietnam 9.7 times. By contrast, the Philippines had its areas expanded less than 1.1 times.

Production expanded faster because of an increase in productivity, particularly oil palm in Indonesia, rubber in Thailand, and coffee and cashew in Vietnam. The Philippines was heavily dragged down by lack of progress in coconut replanting and fertilization.

Exports

Total exports expanded 13-fold in Indonesia to $22.8 billion in 2008, five in Malaysia to $17.2 billion, 12 in Thailand to $7.3 billion, and 74 in Vietnam to $2.4 billion from 1980. Meanwhile, Philippine exports moved up only 1.6 times to $1.1 billion.

During the past three decades from 1980, the ASEAN countries – particularly Indonesia, Malaysia, Thailand and Vietnam – were game changers in the world of tree-crops. They collectively captured market shares from the rest of the world to ASEAN.

In 1980, ASEAN controlled 63 percent of the world exports of palm oil and this jumped to 87 percent in 2008. For coffee, market shares rose from seven percent to 24 percent while cacao beans from three percent to 14 percent. For cashew, ASEAN market share dramatically expanded from two percent to 20 percent.

These successes can be attributed to four countries: Indonesia, Malaysia, Thailand and Vietnam.

Country analysis

Indonesia. The tree-crop drivers were: palm oil, rubber, and cocoa. It is now the world’s leading palm oil producer/exporter, and the world’s second largest rubber producer after Thailand. The main achievements were:

• Oil palm harvested areas skyrocketed to five million hectares in 2008 from only 204,000 hectares in 1980. In fact, if immature areas were counted, there were seven million hectares planted in 2008.

• Rubber areas rose to 2.9 million hectares from 1.6 million hectares in the same period.

• Cocoa areas shot up to 990,000 hectares from 19,000 hectares.

• Coffee areas increased to 977,000 hectares from 498,000 hectares.

Malaysia has been a tree-crops country for many years. It was the world’s largest palm oil producer until it was surpassed by Indonesia in 2005. In a similar vein, it was also the world’s largest natural rubber producer until overtaken by Thailand in 1985. The shift from rubber to oil palm was due to higher labor costs and better farm profits while the slowdown in oil palm expansion was limited by land. Thus, Malaysian firms, like Sime Darby, expanded into Indonesia.

• Harvested areas of oil palm grew to 3.9 million hectares in 2008 from 777,000 hectares in 1980. A large part of these are in Sabah and Sarawak.

• By contrast, rubber areas declined to 1.2 million hectares from 1.6 million hectares in the same period.

Thailand. The main drivers of growth were palm oil and rubber. Thailand is the third largest palm oil producer after Indonesia and Malaysia, and the biggest producer/exporter of natural rubber.

• Oil palm harvested areas rose to 462,000 hectares in 2008 from only 11,000 hectares in 1980.

• Rubber areas expanded to 1.8 million hectares from 1.2 million hectares. The high production was driven by higher farm yield.

Vietnam provides an outstanding example of tree-crop development. From negligible exports in 1980, it expanded to $2.4 billion in 2008. The leading drivers were coffee, cashew and rubber. The country posted dramatic changes since the end of the Vietnam War in 1975. Among the highlights are:

• Expansion of rubber harvested areas to 632,000 hectares in 2008 from only 88,000 hectares in 1908.

• Massive increases in areas to 531,000 hectares from 33,000 hectares during the same period

• Explosive growth of cashew areas to 403,000 hectares from 8,000 hectares in the same period.

Philippines. Where is the Philippines in the picture? It failed in many respects. Despite its natural endowments for tree-crops, the country has less than 300,000 hectares over 30 years as compared to millions of hectares by its more dynamic neighbors.

• Oil palm harvested areas grew to only 22,000 hectares in 2008 from 6,000 hectares in 1980, despite large potentials in Mindanao and Palawan.

• Rubber areas expanded to 123,000 hectares from 54,000 hectares in the same period (although the author doubts the figures). Compare this with experts’ estimate of the potential of at least 500,000 hectares.

• Coffee areas grew to123,000 hectares from 102,000 hectares in the same period. While the areas grew, many are senile and unproductive.

• Coconut areas, the largest of all, increased to 3.4 million hectares in 2008 from 3.2 million hectares in 1980, or a gain of only 144,000 hectares! Given that over one million hectares are senile, this is not a major movement.  

(Source: http://www.philstar.com/Article.aspx?articleId=648446&publicationSubCategoryId=77)