Connect with us

Economics

Thailand: Organic growth potential

Thailand’s state and private sector are joining forces in a bid to develop the country’s small organic agriculture sector into a major export earner. However, finding the right incentives to convince farmers to make the switch from traditional methods is proving difficult.

Published

on

Alex Gordy Oxford Business Group (OBG)

Thailand’s state and private sector are joining forces in a bid to develop the country’s small organic agriculture sector into a major export earner. However, finding the right incentives to convince farmers to make the switch from traditional methods is proving difficult.

Alex Gordy Oxford Business Group (OBG)

Alex Gordy is Thailand's Editorial Manager at Oxford Business Group (OBG)

Thailand made an early entry into organic agriculture, with its first plantings made in 1991 and national organic crop standards drafted just four years later. However, only a few Thai growers since have chosen pursue the segment, with most estimates putting the area under cultivation for organic products in Thailand at well under 1% of the country’s farmland.

The slow rise in the development of organic farming comes as the agriculture sector as a whole is undergoing a shift. As the base of the Thai economy has broadened over the years, the contribution of agriculture to gross domestic product (GDP) has fallen, easing back from more than 36% in 1960 to around 11.5% half a century later, according to World Bank data.

However, while there has been a steady decline in agriculture’s role in the economy, a number of Thais remain primarily dependent on agriculture for their livelihood. As political pressure has grown to improve the standards of living in rural regions, one avenue that has been touted is organic farm production.

There is a strong incentive for Thai farmers to adopt organic agriculture, with a growing increase in chemical and pesticide-free produce at home and among foreign visitors and an even greater demand for such products in overseas markets such as the US and EU.

The global market for organic produce estimated to be worth more than $100bn annually, with demand set to rise by 10-15% a year according to a European Commission study. However, Thailand was only able to register some $110m in exports of organic products last year, according to Commerce Ministry figures.

The state has put in place a number of measures to support the development of organic agriculture, one of the most recent being a part of the Industrial Technology Assistance Programme (ITAP). Under the project, farmers will be provided with training and advice on how to adapt their farms to organic production.

Phongchai Jittamai, the project’s manager, told the Bangkok Post that the project aims to assist small and medium-sized farm operators move away from conventional farming practices and take up organic agriculture as a way to improve yields and profits.

“We have seen small farm operators suffering for a long time, either from business losses or getting ill from overuse of chemicals and pesticides. They must turn to organic practices in doing business,” Phongchai told the newspaper on September 7. Though the programme is only looking to provide direct support to some 30 farms across the country this year, the scheme is expected to expand as more farmers see the benefit of going organic.

The Ministry of Commerce is another state agency involved in promoting the expansion of organic agriculture, providing training and access to funding those in the food chain – producers, processors, and exporters – to assist them take advantage of the growing demand for organic materials.

Though the over-the-counter price of organic produce is around 30% higher than similar conventional products, this does not seem to bother many consumers, with demand for organic farm goods standing at 10 times the current output, according to a recent report citing figures from the Bank of Thailand.

There are other financial benefits to adopting organic farming, with estimates putting the cost of importing agricultural chemicals and pesticides at some $975m a year in Thailand.

While currently the majority of organic products are basic unprocessed commodities such as rice, fresh fruits and vegetables, there is a trend towards intermediate processed products such as sugar, tapioca starch and palm oil. According to the International Foundation for Organic Agriculture Movements, Thailand has yet to produce sufficient quantities of raw organic material to feed a large-scale industry that could turn out finished processed organic products. Importers generally prefer to buy raw materials from Thailand for processing overseas.

With higher levels of investment in the organic segment and greater acceptance by farmers of green agriculture practices, the scale of the industry could be expanded to the point where end-product processing could develop and help drive up the levels of profitability.

Though organic farming is unlikely to challenge mainstream agriculture in Thailand in the immediate future, it has the potential to develop into a significant niche segment, both in the increasingly aware domestic market and for overseas trade.

Alex Gordy

Oxford Business Group (OBG)

Oxford Business Group (OBG) is a global publishing and consultancy company which produces original economic and business intelligence on markets in the Middle East, Africa, Asia, Eastern Europe and the Caribbean.

Click to comment

Leave a Reply

Ecommerce

Pakorn Peetathawatchai, President, The Stock Exchange of Thailand (SET)

Published

on

Pakorn Peetathawatchai, President, The Stock Exchange of Thailand (SET)

What measures has SET taken to support listed companies’ compliance with ESG standards?
PAKORN PEETATHAWATCHAI:

PAKORN: When we first began promoting ESG-compliant investments, we were met with little interest. We attributed this to a lack of clear data to showcase the economic benefits of ESG investment, and perhaps limited clarity as to what constitutes a sustainable or ESG-compliant investment. The launch of the THSI list and, subsequently, the SETTHSI Index, was designed to address this. Our most recent data, comparing returns for the SETTHSI Index with the broader SET and SET100 indices from April 2020 to April 2021, underscores the economic benefits of these investments: the group compliant with ESG standards outperformed the other two indices on every data point. 

As of May 2021 Thailand was home to CG and ESG assets under management totalling BT54.8bn ($1.7bn) across 50 funds – up from 23 funds in 2019. Meanwhile, of the BT187.1bn ($5.9bn) raised in green, social and sustainability bonds since 2018, BT136.4bn ($4.3bn) was raised in 2020 – 83% from the government and the remainder from development banks and private players. This rising demand, in a move to manage risk and generate returns, has been complemented by growing supply and promotion: supply from ESG-compliant businesses aiming for resiliency and sustainable growth, as well as promotion from regulators highlighting investment opportunities with good CG and SD practices. Indeed, the pandemic has been a catalyst in shifting the view of ESG compliance from a luxury to a requirement in the new normal.

In what ways can enhanced standard-setting and regulatory mechanisms overcome the remaining barriers to improved ESG performance?

PAKORN: A multi-stakeholder approach is crucial for enhanced ESG performance – not only in Thailand, but around much of the globe. This can also help to address the standout incumbent challenge: access to reliable, wide-ranging ESG data. For example, the 2020 update to the 56-1 One Report established clear ESG standards and triggered online and offline capacity-building programmes to support listed firms’ compliance. SET is developing an ESG data platform with a structured template to promote the availability of comparable data, maximise value added from corporate sustainability disclosures, and foster collaboration between the business value chain and stakeholders. This is expected to support Thai companies along their ESG journey in an economically sustainable way, result in a greater number of sustainability-focused products and services, drive sustainable investing in the Thai investment community and ultimately “make the capital market work for everyone”, as outlined in the SET’s vision.
 

 

Read More

Continue Reading

Economics

Youth unemployment hits new highs in Thailand due to COVID-19 restrictions

BANGKOK, Thailand (ILO news) – Joblessness among young men and women in Thailand has reached a level unseen in recent years due to the impact of the COVID-19 pandemic, according to a new brief from the International Labour Organization (ILO).

Published

on

Coronavirus disease 2019 (COVID-19) WHO Thailand Situation Report - 22 February 2021

The Thailand labour market update  found that youth employment fell by 7 per cent in the first quarter of 2021 (from the fourth quarter 2019). The youth unemployment rate increased by 3 percentage points for both men and women, reaching a high of 6 per cent and 8 per cent, respectively.

(more…)
Continue Reading

Recent

Most Read

Join 14,209 other subscribers