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Rebuilding resilient agri-food value chains fit for a post-COVID world

Bandar M. H. Hajjar
By Bandar M. H. Hajjar

President of the Islamic Development Bank. Former minister of Hajj and acting minister of culture and information in the Kingdom of Saudi Arabia. Founder and president of the first Human Rights Society in Saudi Arabia. He has a Ph.D. in economics from Loughborough University.

Posted on Friday, 10 July 2020 11:13

Mideast Burden Of Subsidies
Rida Ibrahim, a 62-year-old Egyptian farmer, harvests wheat on his farm, in Qalubiyah, North Cairo, Egypt. (AP Photo/Hassan Ammar, File)

Policymakers are no exception, for whom the pandemics' uncontrollable nature has placed them in a difficult situation; the choice between the health of the nation and the economy. The impact of the lockdown has affected the supply and demand on a global scale not seen in our lifetime resulting in our first global depression. The effect will inevitably lead to an increase in inequalities and poverty, and the world may record its first increase in poverty since 1998. 

During these critical times, actions taken by countries will determine their long term success. It is therefore important that we look at the core industries in which certain states offer distinct competitive advantages.

By leveraging the unique position of countries’ global value chains, not only will our member states be able to tackle their short and medium-term issues, but also have the potential to increase their market share in the global economy in the long run.

Core industry: Agriculture

Agriculture is one of the core industries in which our member countries have a competitive advantage. These states have an immense potential to be global leaders in cereal, horticulture, and meat production and processing.

Agriculture is recognized as a pathway for national transformation through socioeconomic development and as a crucial engine for growth. However, the real value from agriculture in these countries lies largely untapped as most states concentrate on production.

This has resulted in nascent primary and secondary processing in the region, and IsDB member countries missing are out on opportunities for higher value creation.

Agri-food sector in years to come

There are many trends and challenges that will profoundly impact the agri-food sector over the next decade. From the impact of the coronavirus pandemic, resulting in more transparent and diversified value chains, to the shift in consumer preferences, nutritional habits, and the emergence of new consumer groups.

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At the same time, analysing the looming megatrends of a global population with an expected growth of 800 million in the next decade, will undoubtedly lead to increased demands for food.

Additionally, investigating the fundamental changes in the agriculture landscape after years of unsustainable farming, climate change, and resource-depleting agricultural practices that limit output and putting food security at risk is needed now more than ever.

“Structural weakness in food processing”

Currently, IsDB countries are copious agricultural producers, but many show a structural weakness in food processing, causing them to miss out on the most lucrative segments of the agri-food value chains.

Innovation and private sector involvement are crucial to improving the future competitive position of IsDB countries.

Consequently, shrinking economic opportunities within the industry will continue to fuel a steady rural exodus in many countries, thereby planting the seed that will cripple agriculture production in the future.

Reversing rural exodus should be tackled by the creation of skilled jobs in the sector by encouraging mechanization, workforce education, and improved infrastructure.

The use of genetic engineering, automation, digitalization, precision farming; the current agri-food industry has become a technology-driven business in most developed economies.

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However, member countries remain heavily dependent on manual labour; this in turn has made developed countries more competitive. With technology becoming cheaper and more applicable to any farm size, as well as the use of affordable, low-tech innovations, producers have a chance to catch up with their more developed competitors.

Failing to do so may significantly widen the productivity gap even further between the advanced economies and the developing and least developed ones.

Complex value chains

The pandemic and ensuing lockdowns have exposed how the agri-food industry, like many other industries, is interdependent in the complex value chains.

The risks posed along the value chain, from input to output, requires countries and policymakers to take action in building a resilient agri-food value chain to prevent any prolonged and sustained negative effects. Such negative outcome may threaten the future prospects of both supplying and consuming countries.

Understanding the different stages and complexity of the value chains and an innovative, collaborative approach is required to ensure the building of resilient value chains.

In the highly volatile agriculture landscape we live in today, IsDB countries can create industry coalitions and partnerships to unlock their potential by leveraging their combined agri-food market of $650bn.

Innovation and private sector involvement are crucial to improving the future competitive position of IsDB countries. The agri-food sectors in our member countries can attract private investors with fair risk-sharing and smarter allocations of capital, which in turn can foster innovation.

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As the IsDB shifts towards this new business model, we set clear goals to catalyse private and public investment and enhance the competitiveness in our member countries’ agriculture sector.

In doing so, we will deepen and widen value chains domestically, explore synergies between member countries, facilitate connectivity to the global markets, invest in science, technology and innovation, and ultimately build resilience for the future of our agricultural industry.

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