March 21, 2010

Growing Our Own


Strategic Framework

for Change Coordinating Office

Fiji Sun - 21 March 2010

Historically, Fiji's economy has been heavily reliant on the Agricultural sector. Agriculture including subsistence farming continues to play an integral part in the overall development of the economy as it provides foreign exchange earnings, food security, income and basic infrastructure for rural communities.

However, due to structural changes in other sectors of the economy, the agricultural sector's contribution to growth has fluctuated marginally, from 10.9 per cent in 2001 to 11.6 per cent per cent in 2007 and is slightly down to 10.5 per cent in 2008. Productivity in this sector has been constrained by many factors such as land tenure, inadequate infrastructure, poor husbandry and farming practices, high production and transportation costs and inability to access to key markets. Furthermore, frequent occurrences of natural disasters continue to affect overall sector performance.

Sugar

Despite recent poor industry performances and the erosion of EU preferential prices, sugar continues to remain an important agri-business in Fiji, contributing approximately 6 per cent of total GDP, 25 per cent of total domestic exports, and employs about 40,500 people.

Export volume has decreased from 217,000 metric tonnes (mt) in 2007 to 208,000 mt in 2008 with the value of $201 million in 2007, and $204 million in 2008. While Fiji has experienced a decline in sugar export volume, the corresponding value has relatively increased due to the preferential prices provided by the European Union.

The phasing out of EU preferential treatment and in particular, lower price per tonne paid to growers, milling efficiency (input of cane per tonne of sugar 8.9 in 2003 to 11.2 in 2008) is forcing many cane farms to diversify into alternative cash crops or exit the industry.

Non-Sugar

The non-sugar agriculture sector is largely dominated by small farms (less than 5 ha), with only 19 per cent being classed as medium-sized or larger. Given the large number of smallholder farms, it is vital that enabling environment is provided to encourage commercialization and diversification.

Government investment in agriculture rose from $20 million in 2007 to $31 million in 2009, aimed at increasing exports and reducing imports through demand driven projects.

Import Substitution Programme (ISP Programme)

Agriculture has the potential to induce growth in the economy and its necessary restructure into a commercially viable, efficient and sustainable industry is a priority. In this regard, the 2010 Budget provides specific provisions towards import substitution and export promotion programmes. Moreover, Government will continue to monitor the effectiveness of the various tax incentives for agriculture, which were introduced in the 2009 Budget.

Food imports have significantly increased over the years, from $355.5 million in 2005 to $520 million in 2008. Government has allocated $3 million in 2010 for agricultural projects aimed at reducing Fiji's growing reliance on imports, particularly rice, livestock products, fruits and vegetables. This is also expected to improve current trade imbalances by saving and likewise bringing in much needed foreign exchange earnings.

Government's objective is to increase production of import substitution commodities by 30 per cent and its progressive targets for 2010 to 201 is to increase major agricultural Import Substitution commodities by 10 per cent. Some of the commodities government is prioritizing include rice, potatoes, fruits & vegetables, dairy, beef and sheep for which lump sums of money and depleted in acquiring from overseas.

In this respect, Government will ensure greater cohesion and effective implementation of import substitution programs to increase self reliance and reduce imports.

A demand driven approach for boosting exports and import substitution has been adopted by the Ministry of Primary Industry. This approach strives to address the following critical areas: intensifying farm commercialization; strengthening agri-business networks; promotion of young farmer training; identifying industries priorities based on market demand assets; securing export market protocols; and boosting support towards medium sized entrepreneurs.

Government's revenue measures are targeted to continue and strengthen policies that promote exports and import substitution. The Ministry of Agriculture is spearheading government's program which is intended to achieving:

n Quick economic recovery

n Food and Income Security

n Poverty Alleviation

n Sustainable management of natural resources

Current status and the Way Forward

The import substitution policy focuses on growing local food to meet local demand and at the same time, to directly replace products that were mostly imported including rice, beef, dairy, poultry and feed grains. Greater emphasis will be placed on product development during 2010 and there will be a drive to create analogues of imported products using locally obtainable raw materials. Greater links will be forged between the Department and Food Processors Ltd (FPL) to increase the appeal of local products.

In view of the deregulation policies, the current trade policy regime is liberal with generally low tariff on food and agriculture products. All licensing and quotas have been removed. As for Fiji's obligations under the World Trade Organization (WTO), Fiji made a commitment to set its agricultural tariff at a ceiling of 40 percent (rice and milk powder were bound at 60 percent, to be reduced to 46 percent). For all practical purposes, tariffs have been removed from most imported food items. While this is a challenge for local producers, increasing world food prices have increased returns to farmers driven higher by high-priced imported items.

With the seasonal nature of agricultural farming practice in Fiji, the usual consequence is the lack of consistent production of commodities throughout the year. Overproduction of a commodity in-season is a common occurrence annually leading to wastage as markets reach saturation. Likewise, the other extreme of the lack of certain commodities in the off-season pushes up prices in the local market. These challenges will be addressed through processing and product development activity at FPL, which will be centred upon increasing shelf life and value addition.

The tourism market has been essentially ignored by the Department over the years and despite many reports the food service industry continues to be practically insignificant. During 2010, a full round table forum will be conducted, in which commitment will be sought from producers, processors, distributors and the tourism operators to work towards a significant reduction in items to be imported for the sector. The target for the coming year will be to increase the attractiveness of locally produced items by;

n Improving packaging,

n Improved post harvest handling,

n Processing to in-build traits known to attract local buyers, and

n Heed the requirements of the tourist operators.

To address these constraints, the MPI recently launched the Demand and Market Driven Approach (DDA) as a new mechanism to fund and implement the Ministry's programmes. The Northern Development Project (NDP) and the Rural Outer Island (ROI) programme have adopted the DDA. Needless to say all projects sponsored under this programme will be vetted and monitored as described.

Challenges

The major challenge is to overcome traditional attitudes and demonstrate that significant income can be generated from farming. This challenge requires increasing the awareness of modern profitable agriculture techniques, including post-harvest handling and marketing. Related to this is the need to mitigate the lack of awareness in business management techniques as it relates to farming at all levels. These awareness campaigns are very much part of the Ministry of Primary Industry's immediate strategies.

Inadequate infrastructure support, whether by land through access roads, or by sea through shipping services and suitable ports, has been a disincentive to expansion in the more remote areas of the sector. The high costs involved in delivering produce to the market are a huge burden to rural farmers. In the past, Government attempted to address these marketing gaps through initiating collection centres and marketing authorities, but these initiatives were unsustainable and failed. Lets grow our own food which is healthier and cheaper.

No comments: