It is easy to whip up some hype and harp on about the market potential of Asia or upcoming food shortages and draw impressive graphs showing uptrending extrapolations of future income streams, even on Asia agricultural investment.

Economists and non-governmental organisations (NGOs) write about the merits of public private partnerships and sustainable development concepts, but are often not experienced in running large-scale commercial businesses and lack knowledge in the implementation and practical side of big enterprises. I choose to be a more conservative Asia market strategist.


I last wrote about Asian agri investment in January 2011 and much has happened since then. Floods have decimated much Australia and New Zealand’s sugar cane plantations, resulting in offshoring and a search for alternative plantations elsewhere in Asia.

Unpredictable adverse weather, such as floods and droughts, continues to play havoc on financial and investment feasibility studies, which demand a certain amount of predictable performance. This has led to uncertainty and doubts by investors, which in turn contributes to investment lag.

Government economic concession land in Asia is also being taken quickly. There are estimates that in some Asian countries there is only 5% of such concession land left and this supply will be gone by end of 2011. Also, it is difficult to identify landowners with holdings greater than 10 square kilometres because they do not always appear on official land registry records.

More than 80% of land plots held in Asian countries are small, between 5000 and 10,000 square metres. Economies of scale using modern farming machinery and methods can be achieved by creating bigger land units, but much legwork is needed to persuade landowners to sell their small land units.

Government deficits amid a weak investment climate continue to hamper upgrading and improvement of infrastructure, such as roads and ports.

Sudden changes in government zoning or land use regulations caused by either land reform or capricious officials can delay intended investments, whether greenfield or brownfield. Newly introduced government agri import stockpiling schemes and non-tariff barriers have also added to the complexity of agri investment in Asia. The infamous informal payments add about 20% to total costs and result in uncompetitive export selling prices when issued on top of import tariffs and other duties.

In some countries, a typical daily heavy truck delivery from the farming production plant to the nearest port can encounter as many as 20 illegal stops by policemen demanding ‘cargo clearance’ fees. Such fees are also demanded at the port or customs area by cargo clearance officials. This can delay cargo release anywhere from three days to two weeks.

Anti-corruption legislation, difficulties in proving corruption and repeated appeals to uphold good business ethics and morals will not be able to totally eradicate informal payments when the average rural monthly income in Asia can be as low as $30.

Appeals from well-meaning NGOs touting the merits of community-based schemes, such as contract farming, benefit the local farmers. But they cause huge implementation difficulties for investors, with limited manpower to deploy on the ground, limited financial resources and a lack of good local contacts.

Lawrence Yeo is CEO and principal consultant of AsiaBIZ Strategy, a Singapore-based consultancy that provides Asia market research and investment/trade promotion services. E-mail: