Agricultural innovation: Prescription for salvation of developing countries

Published 31.08.2018 00:00
Updated 31.08.2018 15:56

Agriculture and medium-sized industrial production are two key elements of economic development and macroeconomics. Unlike financial economics, every state built on basic income has successfully emerged from scarcity, recession and global economic contractions, and has strengthened its capital assets that constitute the substructure of its heavy industry. In today's fraudulent, disruptive economic game theories time series and even algorithmic operations are not as valuable or qualitative as they used to be.

It is not hard to see the benefits of turning back to basic economics in a world where the steps taken are getting harsher and more radical with each passing day. The fact that fluctuations in the commodity markets are not even mentioned in the Netherlands and the fact that the U.S. is still the world's largest agricultural exporter, despite growing tensions with China, must be underlined. Developing economies, forgetting how they grew healthier in every period of the world's monetary expansion, are today experiencing difficulty because they have disregarded Maslow's hierarchy of needs, a motivational theory in psychology comprising a five-tier model of human needs.

The underlying cause for this difficulty is the temporary illusion caused by increasing your income by selling "what you need," which is the basic paradox of import and export balance. While the economic development choices of countries determine the fate of inflation in the long run, they also draw the course of consumption habits. As much as talking about agriculture without innovation is a backward approach, trying to grow by pouring every source into the service sector and heavy industry is also a dangerous venture.

The Netherlands' take

When taking a look at the income acquired from agriculture through planning and innovation, the prescription of salvation for emerging economies starts to take shape, even if just a little. Let us look at what happens when educated and conscious farmers team up with human power. The Netherlands is the second-largest agriculture exporter in the world after the U.S. According to National Geographic's 2018 study, the Netherlands exported 92 billion euros ($107.6 billion) worth of agricultural products in 2017. The U.S. is the leader in this field with $140.5 billion. We must mention an important point about the Dutch here. The Netherlands did not reach this export rate by producing every product in the country and then selling it.

Of this figure, 25.5 billion euros come from other countries as seeds, fruit, vegetables, livestock and garden products and then gets exported to other countries after being processed in the country. In other words, it sells products that are not available in the country by making them more productive with the support provided by research and development (R&D) at universities and reselling them.With an area of approximately 34,000 square kilometers, which is 206 times smaller than Brazil, the Netherlands conducts agricultural farming using advanced technology in greenhouses in a large part of the country. The also use 90 percent less water than average. Again, this demonstrates the country's high technological efficiency. Likewise, the R&D centers of 12 out of the 40 leading companies in the food and drink sector are also in the Netherlands.

By effectively using the information they have obtained from these centers in their agricultural lands, they become involved in the future of the export market from the seed. Countries with low populations and a critical need for human power need to transfer or develop high-level automation technologies such as machines, soft fruit-picking robots and automatic meat separators. When we think that information is an export product in itself, offering other countries consulting services by using the information obtained from these processes will surely become another income element.Besides all of these, the combination of a strong logistics network, efficient port management, a strong infrastructure to support trade and an advanced food processing industry are keys to becoming a global player. When we examine the Organisation for Economic Co-operation and Development's (OECD) 2018 global agriculture reports, the strongest point of the countries that have been successful in this area is their market specialization.

American, French, Italian and Dutch producers specialize in greenhouses and mostly a single product. They also transfer the know-how they have acquired in this area to the agricultural machinery industry, generating an average of 9.1 billion euros.

The point of competition

How do these countries remain so strong in a world where there are more than 140 other competitor countries? The fact that emerging economies are taking up import-based agricultural policies is, of course, also indicative of some obligations. There are also many who think that agricultural production has lost its appeal due to high input costs. High diesel prices, in particular, are a general problem for all farmers from America to Asia and Africa. Likewise, items such as fertilizers, pesticides and seeds are the most important factors keeping profitability low, and even causing all production to stop, making them turn to imports.To avoid sharing their revenues with emerging economies, G8 countries cause inflation in global prices with strategies such as high taxation, restricting the production demands of states and if necessary, causing economic damage with excess production. Naturally, low-income farmers in countries such as Mexico, Argentina and Poland lose time when they compete against subsidized production, and developing countries face malnutrition, food insecurity and negative consequences for rural development.

Of course, this will not continue forever. Countries such as Brazil and China, which have heavy industry experience and have started to introduce innovation to the country as a whole and as a result, have reached the point of difference. These countries, which have acquired reputations across the world in agriculture and have incorporated information technology into their fields, are now one step ahead in their own geographies. Brazil, which has differentiated from Central America and Argentina where agricultural lands reach gigantic proportions, will be one of the countries with the greatest agricultural income in the future. Likewise, China, which has the lion's share of agricultural research expenditures in Asia, is again distinguishing itself as a serious competitor in this field. Although India, Pakistan and Indonesia are closely following China, low investment levels, widespread poverty, rapid population growth, climate change and environmental degradation remain the biggest hurdles for these countries.

To sum up briefly, between 2015 and 2017, world food prices rose above 28 percent on average. Countries investing in agriculture and agricultural technologies are thought to have subsidized these costs in a very short time. The most critical nuances in exports will be the measures states take by raising the awareness of farmers and producers and giving them a field of expertise, going beyond just financial support for farmers.

However, the OECD updating its food shortage warning and raising the threat every year is important in terms of eliminating future threats. When considering that the world's population is estimated to exceed 10 billion by 2050, the value of agricultural land will become even more pronounced. At this point, problems such as agricultural productivity, including crop yield per unit area, and the areas where water is used – even though they do not seem to be serious problems for us today – will become serious problems for future generations. Perhaps countries need to realize that agriculture is indeed a sign of independence.

* Ph.D. researcher in Private Company Economic Research Department MENA at Swiss Business School

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