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The opportunity of ICT in the agri business sector in Southeast Asia

by: Johnny Pan, SPI

Why should I read this document?

This document gives an overview of the ICT development in Southeast Asia, and describes the opportunity of ICT in the agri-business sector and the key practices of applying ICT in the agri-business in Southeast Asia.

 

Overview of regional development in Southeast Asia 

In 2016, the GDP of the ASEAN region amounted to over USD 2.5 trillion. Indonesia leads the SEA region, with a GDP of over USD 1 trillion, followed by Thailand and Singapore. Regarding GDP per capita, Singapore was highest, followed by Brunei Darussalam, Malaysia, Thailand, Indonesia and Philippines. 

Although the economic levels are quite different among the countries, SEA has maintained high economic growth in recent years. The region grew substantially in 2017 compared to the previous year, with a real GDP growth rate of 5.3% versus a 4.8% growth rate in 2016. Eight of the ten economies managed to accelerate their growth (Table 1).

 

Table 1: Real GDP growth in SEA

 

Further, over the past decades, ASEAN and other Asian economies have experienced a major surge in the diffusion and use of a wide range of ICTs. The adoption of new technologies has, however, been uneven between countries.  

According to Bain & Company, in 2018 the digital economy accounted for 7% of GDP, which is around USD 50 million, in the ASEAN region. 

 

The increased digital economy potential is driven by three factors:

  1. improving offline sectors enabled by digital adoption, such as productivity improvements in the manufacturing sector from the adoption of Industry 4.0; 

  2. expanding digital markets enabled by digital integration, such as access to new markets through e-commerce or financial inclusion through digital financial services; 

  3. growth of enabling sectors that lay the foundation for digital integration, such as growth in ICT or logistics sectors that will support digital integration

 

According to McKinsey, given the increased attention to the digital economy and Industry 4.0-related developments in SEA, Industry 4.0 is expected to drive productivity increases. The economy from ASEAN countries it has the potential to capture productivity gains worth USD 216 billion to USD 627 billion by 2025. 

 

Overview of the digital economy in Southeast Asia

The digital economy has already helped to drive a shift in the world’s centre of economic gravity towards Southeast Asia. The spread and adoption of digital technology has an impact on growth and competitiveness in all sectors.

Southeast Asia has among the highest rates of Internet usage in the world, with an average of 3.6 hours spent on mobile Internet every day. At the end of 2017, there were around 286.4 million of the approximately 647.5 million people in the SEA region using the Internet, around 44% of the population, a steep increase from just over 12% of the region’s population at the end of 2007.

Social media is widely used to advertise goods, either for sale by business to consumers (B2C) or directly between consumers (C2C). One study found that 78 % of consumers in Asia get information about products and services on social media, and 68 % share that brand-related information on social channels.

Southeast Asia’s e-commerce platforms reached USD 50 billion in 2017 in market size and are expected to exceed USD 200 billion by 2025. The majority of recent e-commerce investments in the region went to companies based in Singapore and Indonesia. For instance, the e-commerce market in Indonesia is expected to represent more than 8% of the total retail market by 2025.

Digital technology is also impacting the agricultural sector, ranging from relatively simple applications like the use of mobile phones by farmers to access price, meteorological, or transportation information, through to the use of drones as part of the farming process

 

Promoting the adoption of digital services and applications in Southeast Asia

SMEs in Southeast Asia are making the digital transformation through enhancing their access to information and communication technologies, as well as enhancing the uptake and use of digital applications and services. These improvements can foster the digital transformation within economies and societies that are needed to turn the use of digital services and applications into concrete opportunities in SEA.

 

The benefits of promoting digital services and applications are in line with opening new markets for all sizes of businesses. For instance, broadband access and related ICTs can be used to connect businesses to digitally manage global value chains, and offer an important platform for selling goods and services locally or worldwide. In some cases, some regions of Southeast Asia have transformed into the hub of digital growth and innovation since the improved broadband connectivity and smartphone adoption.


On Level 2 you can find information about the current trend of ICT in the agri-business sector, while Level 3 will tell you more about best practices of how to apply ICT in the agri-business in Southeast Asia.

This page will provide the information on the trend of ICT in the agri-business sector and opportunity of ICT in agribusiness.

 

The current trend of ICT in the agri-business sector

According to a recent report by AgFunder, Agri-tech is considered to be the next big opportunity in SEA, making it as relevant as in sectors such as fintech and cleantech.

Agri-tech can be applied in a wide range of business process, covering a set of companies directly involved with cultivating plants and other living organisms necessary to make food, biofuels, chemicals, medicines, and other materials. It also includes companies on other parts of the agriculture value chain, such as processing, transportation, and retail services.

Southeast Asia has more than 80 million smallholder farmers, which make up about 80% of the total number of agriculture entities. These farming businesses typically face a range of challenges in accessing credit, advice and market, high transport costs, lack of access to financing and market information. Digital integration can help solve many of these problems. The opportunities for ICT in agriculture business include the following:

 

  • Opportunity for Information Exchange

Increasing use of mobile phones for information exchange is now common practice, such as disease surveillance and pest tracking. Linking knowledge to innovation is also one of the key factors to address the information and knowledge gaps in the agriculture sector. In this regard, ICT provides self-reliance for farm management, farming technology, risk management and effective information for knowledge transfer. ICTs can also play a very important role in exchanging the information and bridging information gaps.

 

  • Reducing the logistic costs

Transportation costs in Southeast Asia tend to be higher in rural than in urban areas. Using e-commerce can have benefits for reducing individual trade costs and providing efficient domestic logistics. E-commerce helps maximize the impact of connecting people in remote, rural areas to market opportunities. 

 

  • Improving market access

ICTs can bring significant benefits via exchanging better information on markets. Prices signal opportunities to producers, consumers, and traders, such as when excess demand is creating more profitable opportunities to sell or when excess supply leads to cheaper deals. This can reflect the variable consumption patterns and contain information that can be used by farmers when they decide what and how much to produce. 

With increased access to mobile phones, farmers can better plan production and investments, based on supply-and-demand fundamentals, thus increasing market efficiency. On the other hand, e-commerce applications provide matching services, commodity exchanges, virtual trading floors and trading services that help the typically larger upstream and downstream firms,

This page will showcase case studies of the application of ICT in agri-business in Southeast Asia. 

The following provides five case studies of ICT applications in agri-business from companies in Southeast Asia. 

 

Tani Group - e-commerce platform connecting farmers with individual customers

Founded in 2016, Tani Group is a tech start-up engaged in two main enterprises: TaniHub and TaniFund. 

TaniHub is an e-commerce platform that connects farmers with individual customers as well as supermarkets, hypermarkets, hotels, and restaurants. TaniFund gives farmers the chance to manage crowdfunding campaigns. 

The mission of Tani Group is to simplify farmers’ supply chains and provide access to markets and finance. It connects them with buyers and introduces new markets to farmers. This helps farmers can earn more, while buyers can identify cheaper prices. When farmers are relatively certain that their products can be sold, it is estimated they can increase their production by up to 30%. The company also focuses on improving farmers’ production through the supply of seeds, fertilizers, and technology, so they can produce the best commodities for corporate buyers.

 

UMITRON - Developer of AI and IoT based aquaculture solution for farms

Umitron is a Singapore-based company founded in 2016. It develops smart aquaculture solutions for farms to optimize their feeding practices / aiming to lower their costs and prevent waste and damage to the environment. The company is specialised in IoT devices, including a solar-powered IoT device - UmiGarden that is deployed on aquaculture farms in the ocean to film fishes and measure patterns in their behaviour. 

Through machine learning algorithms the solution can detect when fishes are hungry, and automatically release feed for them. It also leverages satellite imagery to augment these insights by providing information about the temperature of the sea. The company claims that the devices process the data using edge computing and compress them on-site to enable the transfer of data back to the shore with limited bandwidth. Additionally, it determines how much power it will be able to collect from solar energy based on weather forecasts.

 

Ricult - nexus of Fintech and Agtech.

Founded in 2016, Ricult is an award-winning social enterprise founded by MIT alums that develop AI/Tech/Financial-based digital solutions for the agricultural ecosystem, focusing on smallholder farmers in developing countries. 

Combining the Agri-tech sector with fintech, Ricult offers small loans and easy payment schedules tied in with the farmer’s crop rotation to help with expansion or diversification. It provides farmers with best practices, helps banks provide loans, and assists optimize supply chains.

 

Sero – data analytics for crop production

Sero is a crop intelligence company based in VietNam that optimizes rice production with full-cycle data analytics. Founded in 2016, the company collects in-field data throughout the entire growth stage with images and sensors to provide preventive recommendations via computer vision technology, and production insights via partnerships with farmers and exporters.

Using images taken by farmers with smartphones, sensors and its mobile app, Sero assists rice growers to collect in-field data throughout the entire growth cycle to provide preventative recommendations via their Computer Vision technology. The company also provides production insights to farmers, agribusinesses, government extension workers and importers.

 

AgromeIQ - agriculture business intelligence and data analytics platform

Founded in 2016, AgromeIQ is a Brunei-based agriculture business intelligence and data analytics platform for farmers, providing agricultural business intelligence and analytics to growers by supporting in their decision-making processes. With AgromeIQ’s web and mobile platforms, farmers can input their farm data and access best farming practices, attempting to improve decision/making to and productivity. Though the adoption is still low, agriculture SMEs that use farming apps on average can see a 5%-15% improvement in crop yield.

 

Future of agriculture

It has become a trend that farmers use smartphone apps to access market information and are able to access more relevant information, such as weather forecasts, market price information for crops and crop management techniques to help them better manage their production. More technologies are linked to sensors and smart irrigation to automate operations, reduce waste and enhance yields. 

In addition, digital financial services allow farmers to take out loans to scale operations and transact more efficiently, and more seamless logistics will provide farmers with easier access to the market. 

From the policy level, governments can enhance the adoption of appropriate ICTs, bringing opportunities to improve both productivity and sustainability of natural resource use in agriculture. The application of ICTs in agriculture can be linked to the design of agri-environmental policies that provide incentives for farmers to adopt practices that are considered to be beneficial for the environment and better address the environmental outcomes. 


 

Sources:

Southeast Asia Going Digital: Connecting SMEs, OECD 2019

Digital Transformation and Industry 4.0 in Southeast Asia

Embracing Innovation and Economic Development: A Policy Perspective for the Asia-Pacific Region

The Digital Economy in Southeast Asia: Strengthening the Foundations for Future Growth, World Bank 2019

https://www.techinasia.com/agriculture-tech-big-opportunity-southeast-asia 

Information and Communication Technologies for Agriculture And Rural Development, FAO, 2017

https://kr-asia.com/tani-group-is-disrupting-agriculture-one-of-indonesias-key-economic-sectors-startup-stories 

https://umitron.com/

https://www.ricult.com/

https://www.crunchbase.com/organization/sero 

https://www.agromeiq.com/

Last updated: 13.04.2021 - 14:47
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