Strategic alliances key to reviving agriculture sector

Ruby Ying, The China Post

Given Taiwan’s flagging agricultural industry and the severe impact that the island’s entry into the World Trade Organization (WTO) will have on the industry, the government has been actively promoting strategic alliances within the agricultural industry, a move touted as the best remedy for the ills of Taiwan’s agricultural sector. Chairman of the Cabinet-level Council for Agriculture Chen Hsi-huang suggested that strategic alliances within the agricultural industry would help push through vertical and horizontal integration of agricultural businesses, including food production, food distribution, food processing, and agricultural tourism, with an aim to provide added value to agricultural products. To remain competitive after the island’s agricultural market is liberalized, Taiwan’s food producers need to compete in the global market by focusing on food processing, said Chen. Strategic alliances would help small business owners acquire the technology and resources they need to compete globally.

However, the campaign has not generated desirable results so far, since industry leaders have failed to incorporate the concepts of “knowledge” and “innovation” into alliances.

According to the vice chairman of the COA, Lee Jen-chyuan, the spirit of strategic alliances in the agricultural industry is to incorporate competitive advantages of difference sectors within the industry to create an integrated production-distribution-sales system. However, Lee has found that what has been going on in the industry is just the coalition of grass-root agricultural organizations that used to be independent of one another, such as farmers’ associations. The still growing trend of mergers of farmers’ associations indicated that leaders in Taiwan’s agriculture industry have not yet realized the quintessence of agricultural strategic alliance. According to COA chairman Chen Hsi-hung, Taiwan’s agricultural sector will have the most to lose after the nation’s accession into the WTO. “WTO accession will pose a stern test to our economy,” Chen said. Taiwan’s entry into the global trade body — which Premier Chang Chun-hsiung predicted would be in November this year — could cost the agricultural sector up to 100,000 jobs in the first four years following accession, Chen said.

In addition, the impact of loosened trade will compound agricultural losses. The farm industry could suffer losses of more than NT$50 billion over the next four years, as foreign grains and other produce make inroads into the domestic market.

The actual number is expected to go beyond the original estimate, and that if the situation continues, Taiwan’s agricultural sector could face unprecedented challenges in four or five years.

Facing the mounting problems associated with Taiwan’s accession to the WTO, strategic alliances within the agricultural industry has been advocated by the government with the belief that strategic partnerships would help integrate the niche of farmers, food manufactures and distributors to achieve the transformation of the agricultural industry. The “strategic alliance for industry transformation” notion is brought up by COA Chairman Chen according to sociologist Daniel Bell’s theory of “post-industrialized society.” Bell believes that, thanks to modern technology, the agricultural and manufacturing sectors in a post-industrialized society would undergo a revolution which promises a more efficient production procedure while prompting an outflow of labors to the service sector. New technologies would help farmers mass produce and diversify their products in accordance with consumers’ changing demand. Therefore, a post-industrialized society is one that is based on knowledge and innovative values. Even in the agricultural sector, the ability to make creative use of knowledge and technology has become a must for farmers and food manufacturers to survive.

As the island has seen its agricultural and manufacturing industries encounter the drastic changes of structural unemployment and weakening competitiveness in the course of developing a post-industrialized society, the COA’s policy of encouraging agricultural strategic alliances was intended to find a way out for the traditional sector in the midst of the burgeoning development of a knowledge-based economy. However, to realize its goal of establishing a knowledge-based agricultural economy, the COA needs to put more emphasis on the education of agriculture professionals and reformation of the agriculture subsidy system. After all, “high-quality human resources and modernized systems are the base of knowledge economy,” said president of Taiwan Academy of Banking and Finance Schive Chi.