1.

Major challenge on agricultural value chain in Indonesia

❑ Main challenge

• The number of people at risk of hunger represented a significant improvement over the 42 million people
(20% of the total population) in 2000, additional effort is needed to further reduce hunger.
(Policies to Support Investment Requirements of Indonesia’s Food and Agriculture Development during 2020-2045, 2019)

• Indonesia government has implemented program to increase availability, accessibility and quality of food
with priority given to ;
(1) Increasing productivity and sustainability of agricultural natural resources, including digitalization
(2) Improving national food systems and food governance with strengthening the food logistics system
(RPJMN 2020-2024 Food and Agriculture policy)

• New strategies are required to respond to (1) external conditions such as ‘climate change and the COVID-
19 pandemic’ as well as (2) the continued inefficiency of production and distribution.

• It can be one alternative to explore Korea's policy experience in terms of

(1) Strengthening the roles of key actors in the value chain
(2) Developing the agricultural value chain through ICT application, eco-friendly agriculture application.
1. Major challenges on agricultural value chain in Indonesia

❑ Food Production & Distribution status in Indonesia

(Source: MoA & BPS Indonesia)

180,000,000

160,000,000

140,000,000

120,000,000

100,000,000
Ton/year

80,000,000

60,000,000

40,000,000

20,000,000

0
Plantattion Griain (Non
Rice Vegetable Fruit Meat Poultry
Crops Rice)
2017 46,680,506 162,297,234 51,167,510 21,825,139 21,938,927 961,787 4,595,808
Axis Title
2. Digitalization of agriculture in Korea

❑ (Background) Need to devise policies that promote digitalization of agriculture to address labor shortage
and aging population issues in rural areas
* Ratio of farming population: (1970) 44.7% -> (2019) 4.3 ** Population aged 65 or over: (1970) 4.9% -> (2019) 46.6

❑ (Policy direction) Accelerates the digital transformation in the entire agro-food sector, such as production,
distribution and export to secure the growth engine of agriculture in the post COVID-19 era

① Expand the smart farming ② Promote the digital innovation ③ Strengthen the support for
by the smart farm in the distribution of the export of agro-food
innovation valleys agricultural products products
* Innovation Valleys consists of the training
by activating an online through overseas local
centers, rental greenhouses, and empirical wholesale transaction online distribution platform
complex to proactively nurture young
farmers and support the advancement of
smart farm technology

❑ (Policy scope) It expands to smart rural areas covering (1) rural development as well as (2) agricultural
industry based on ICT and innovation
2. Digitalization of agriculture in Korea

Case #1: Saebom Farm (agricultural corporation)

- Jointly invested by local government and agricultural
corporation on the production area

▪ Characteristics: Produce snack tomatoes with 4 core values (Less

energy, Less water, Less chemical, Less waste)

▪ Solution:
(1) Integrated control equipment automatically implementing optimal
environmental conditions such as preset temperature and humidity
and CO2 concentration
(2) An eco-friendly cooling and heating system utilizing geothermal heat
(3) Rainwater reuse system minimizing the use of groundwater

▪ Accomplishment: Snack tomatoes without crown were exported to

Japan in the amount of 1.5 million dollars in 2019.
2. Digitalization of agriculture in Korea

Case #2: Online wholesale transaction

- Jointly developed by the Ministry of Agriculture and cooperative
Nonghyup to advance the agricultural distribution system

▪ Characteristics: Reduce distribution stages based on an

innovative contactless technology

▪ Solution: Nonghyup and Agriculture Products Processing Center

in production areas supplies products to the exchange.
Large-scale consumers such as large marts and food ingredients
companies make purchases through mobile devices etc.

▪ Accomplishment: saved time and money for producers and

distributors as well as consumers.

* cost savings of 3 to 15 percent of onion prices

2. Digitalization of agriculture in Korea

Case #3: The GiGA Island Project by Korean telecom firm

- Includes rural development as well as agriculture, implemented by
cooperation between private enterprise and government

▪ Characteristics: example of rural communication by connecting islands to

the mainland through advanced networks, ICT solutions.
▪ Target: Imja-Island, one of islands surrounding the Korean Peninsula
▪ Solution:
(1) Education: Children can enjoy exchanges with foreign teachers in Seoul
350km away via a video conferencing system
(2) Culture: Residents can listen via a direct link-up to cultural lectures from a
culture center 66km away in Mokpo
(3) Healthcare: The elderly can receive health check-ups via mobile devices
and send the results to medical institutions
(4) Farming: Farmers can check on their crops’ condition in real-time from
outside the island and control their facilities.
3. Green value chain development in Korea
❑ Background

• With the spread of intensive farming, the agricultural sector’s environmental burden has steadily increased
• Carbon neutrality and adaptation to climate change are also requested in agriculture and farming area
* Agricultural Greenhouse Gas: 20.4 million tons which accounts for 2.9% of the entire nation

❑ Main policies
① [Environment-friendly agriculture] Enacted the ② [Climate change response] Minimize occurrence of
Environment-Friendly Agriculture Promotion Act (‘97), greenhouse gas and implement conversion to renewable
has formulated every five years plans to promote it energy

• Direct payment : compensate for an initial income

reduction and an increase in production costs for farmers • Key technology introduction: Intermittent irrigation, the
engaging in environment-friendly farming creation of new renewable energy from livestock waste

• Direct Trading project: supports facilities for environment- • Institutional measures: low-carbon agricultural products
friendly agro-food specialty store opening certification and the greenhouse gas reduction project

• Environment conservation program: encourage farmers to

participate in agricultural environment improvement and
conservation activities by revitalizing rural communities
3. Green value chain development in Korea

Case #1: Low Carbon Agricultural Certification System

- Supported with 100% state subsidy, and implemented by public institution
(Foundation of Agri, Tech, Commercialization & Transfer)

▪ Characteristics: Issues low carbon certification to agricultural and livestock goods

that have reduced greenhouse gas emissions throughout production
by using low carbon agricultural tech

▪ Supports: Certification costs, education and consulting for drafting

greenhouse gas calculation report, connection to Green Card, distribution etc.
* Accumulate up to 9% as points when a consumer purchases low carbon agricultural
goods using Green Card.

▪ Accomplishment: Since system introduction in 2015, a total of 51 items

(food crops 6, special crops 9, vegetables 24, fruits 12) have been certified
and 4,700 farms and 5657ha have been certified (Dec. 2020)
4. Agricultural Cooperatives as key value chain actors in Korea

❑ (Overview) Korea’s agricultural cooperatives consist of two categories following the related Acts.

Categories Related Acts Status

• Members: about 2.1 million

• Nonghyup • Act on Agricultural • Structure: Primary cooperatives (1,122) +
(established in 1958) Cooperatives National Agricultural Cooperatives Federation (NACF)
-> independent but strong collaborations between them

• The Framework Act on

• Other cooperatives • As of August 2020, 1,678 cooperatives registered
Cooperatives
4. Agricultural Cooperatives as key value chain actors in Korea

❑ (Function of Nonghyup) It effectively implements policy programs on behalf of the government through business and
financial services because most of farmers are its members

Education Business service Financial service

• Primary • Include non-profit • Businesses in • Mutual finance for the primary cooperative’s
cooperatives activities for its production areas members
members and
employees’
• National education/training, • Distribution and • ‘Nonghyup Financial Group’ managing insurance,
Federation and research marketing by securities, investment businesses
subsidiaries of the
(NACF) • ‘NH bank’, a subsidiary of the Nonghyup
‘Nonghyup
Financial Group targeting general customers
Marketing Holding
Company’ * It’s the biggest in the Korea in terms of the number
* ‘Nonghyup of branches and assets, it functions as a channel for the
Marketing government’s concessionary loans
Company’, ‘Financial
group’ are 100%
invested by NACF
4. Agricultural Cooperatives as key value chain actors in Korea

Case #1: Yongjin Local Food Direct Store

- “Local Government - Local Agricultural Cooperatives(Yongjin
Nonghyup) Connection Type” Model of the direct store for one-day
distribution

▪ Characteristics: Locates on an important traffic hub connecting the

areas of Wanju and Jeonju, a neighboring big city, improved
accessibility of consumers

▪ Project history: Opened on Apr. 27, 2012, Total Project Cost was
KRW 500 mil (Wanju County: 50%, Yongjin Nonghyup: 50%)

▪ Accomplishment: No. of participating farms is around 560. No. of

visitors per day is 1,000. No. of items with real producer name
system is about 600
5. Main implication from Korean experience
❑ Digitalization of agriculture
• Subsidize initial investment funds and provide
customized support for individual farm
households by government
• Establish a launching system that collectively
handles many administrative procedure
required when farmers intend to adopt smart
farming
• Cultivate human resources that make smart
farming possible and activate the private
investment while installing and operating
testbeds
❑ Eco-friendly agriculture
• Prepare for effective system to evaluate the
performance of environment-friendly agriculture and
set goals and directions
• Subsidize livestock manure treatment facilities to
raise farmers’ awareness of environment-friendly
livestock
• Push forward such policies as spreading reduction
technology, revitalizing private participation, and
raising the awareness of producers and consumer
- Need incentives such as certification cost subsidy and
education support, purchases of certified
greenhouse gas reduction from farmers
5. Main implication from Korean experience

❑ The role of agricultural cooperatives (Nonghyup)

• It has been a pipeline to supply funds to farmers when private financial institutions
were reluctant to provide funds due to low profitability and high risks;
- mobilizing savings resources in rural communities and investing funds raised in cities
- delivering the government’s policy funds to promote investments in agriculture

• It has improved agricultural productivity by supplying materials, such as fertilizers,

chemicals, and machines.
- helping to increase farmers’ income and modernize product distribution platforms

• It has functioned as a center for rural communities, where residents received education
and gained information
6. ADB’s role in developing agricultural value Chain in INO

❑ ADB will prepare for Indonesia-specific recommendation for agricultural value chain development

• Already finished the first output, ‘Fruit and vegetable value chain analysis in Indonesia’
- Presented findings through the analysis of the post-harvest loss, farmer’s profitability
and the availability of services like cold storage facilities etc.

* Conducted National policy forum jointed by the Ministry of Agriculture and BAPPENAS with this result (3, March)

• Next, will formulate country-specific, detailed recommendations based on Korea experiences about rural and
agricultural development (Q4, 2021)