Food Insecurity & Opportunities in OIC Countries

Food Security & Opportunities in OIC* MarketsPresented at: By: Rafi-uddin Shikoh Towards a Halal Economy: The Power of Values in Global Market E: rafishikoh@dinarstandard.com W: advisory.dinarstandard.com April 5th, 2011, Kuala Lumpur* OIC - Organization of Islamic Conference, 57 member countries

Intro/ OIC2

• Low-Income, food deficit countries - suffering most. 60-65% of income goes to food; contrary to developed where it is 10-20%• Many drivers-- and relevant to developed economies as well. OIC Countries are some of most impacted.• Ironically, OIC countries are some of the most agriculturally endowed!

Objective 1. State of Global Food Insecurity 1. Current state, impact & drivers 2. Opportunity horizon: 1. OIC* Demographic 2. DinarStandard OIC-wide Industry Clustering 3. Opportunity Hotspots: 1. For industry companies 2. For Investments firms 3. For Major national/ multilateral/ Industry initiatives* OIC - Organization of Islamic Conference, 57 member countries 4

Some basic terms and definitions Food security: exists when all people, at all times, have physical, social and economic access to sufficient, safe and nutritious food Undernourishment: describes the status of persons whose food intake regularly provides less than their minimum energy requirements Source: FAO - Food and Agriculture Organization of the United Nations

Food Insecurity – Current State1. Global food prices continue to rise.  The last six months have seen sharp increases in the global prices of wheat, maize, sugar and edible oils, with a relatively smaller increase in rice prices.  The World Bank‟s food price index increased by 15% between October 2010 and January 2011.  From March in 2010, Corn had increased 52%, sugar, 60%, soybeans, 41%, and wheat 24 percent. Feb 2011 WB – Food Price Watch 6

Food Insecurity – Current StateLargest Movers in Domestic Prices, June to December 2010; Many OIC Countries. WHEAT RICE Country Change Calorie Country Change Calorie in price Share (%) in price Share (%) (%) P (%) P Kyrgyzstan 54 40 Vietnam 46 59 Bangladesh 45 6 Burundi 41 3 Tajikistan 37 54 Bangladesh 19 70 Mongolia 33 42 Pakistan 19 6 Sri Lanka 31 14 Indonesia 19 50 Azerbaijan 24 57 Mozambique 14 8 Afghanistan 19 .. Cambodia -11 65 Sudan 16 15 Mexico -9 2 Pakistan 16 37Source: FAO, GIEWS. 7

Food Insecurity - Impact As a result of price rises since June 2010 there is a estimate net increase in extreme poverty of about 44 million people in low- and middle-income countries.Feb 2011 WB – Food Price Watch

Food Insecurity - Impact Almost 1 billion Undernourished in the world! Global hunger had been declining, but prices are going up again, and overall still unacceptably high 9 Feb 2011 WB – Food Price Watch

Food Insecurity - ImpactStress on developing economies supply as well.

Food Insecurity – 10 Key Drivers Demand (Population growth, Affluence) Agricultural production will have to Bio-Energy increase by 70% by 2050 to feed a population of some 9 billion people. Rising Input prices -- World Bank National subsidies Lack of investments The Foresight Project, report warns Climate change that in the next 40 years, agricultural land will be lost to urbanization, Loss of agricultural land desertification, sea level rise and increasingly salty water. About 24% Rich & Poor divide of 11.5 billion hectares of vegetated land has already undergone human- Gluttony/ Waste induced soil degradation. Speculation 11Copyright 2011 –DinarStandard Research & Advisory

Food Insecurity – Needed areas of focus Demand (Population growth, Affluence) Bio-Energy Investments in: environmentally sustainable agricultural productivity, Rising Input prices better risk-management tools, less National subsidies food intensive bio-fuel technologies, and climate change adaptation Lack of investments Climate change Loss of agricultural land Values imperative? Social Rich & Poor divide entrepreneurship, responsible Gluttony/ Waste marketing, compassion, community Speculation service 12Copyright 2011 –DinarStandard Research & Advisory

OIC member countries 57 mostly Muslim majority countries Attractive young demographic Growing economies Inter-connected by: Islamic Finance: US$ 1 trillion, 15-20% growth/year  How do you best identify opportunities Muslim Lifestyle Market℠: for growth? US$ 2 trillion+ ‘Halal’ consumer market  OIC Industry Clusters: (Innovative Intra-OIC trade mandates 12%-20% methodology - to identify Industry hotspots for growth and investments)14

Region-wide Industry Clusters Model Growing global innovation best practice: Complementary business operations no longer need to be in close proximity to each other. Rather, a complimentary set of competencies within various regions combine to deliver a more robust Cluster. Traditional Close Proximity NEW - Multiple Region Linked Linked Cluster Industry Cluster Region A Region D Region A Region I Region G •Services •Infrastructure •R&D Region E •Talent Region B Region H •Distribution •Manufacture Region C Region F •Testing Hub Node

DinarStandard (DS) OIC-wide Industry Clusters Within the OIC member countries, different strengths in the value-chain of an Industry exist within a set of OIC wide special economic zones/ regions. E.g. OIC-wide Pharmaceutical Cluster Construction Srvcs. Syria TURKEY Palestine Amman Karachi Iran Auto Manufacturing INDONESIA Cairo Dubai Saudi Arabia Malaysia Travel/ Logistics Select Corporations: • Eczacibasi, Turkey • Zuellig Pharma Bhd, Malaysia • PT Kalbe Farma, Indonesia • Tabuk Pharmaceutical, Saudi Arabia • Hikma Pharma., Jordan • Egyptian Int. Pharma. Ind. Co., Egypt Telecom/IT, Education, Source: DinarStandard OIC Clustering Model, *Diagram illustrative Textile, Defense, Food.. 16

DS OIC-wide Food & Agriculture Cluster TURKEY Kazakhstan Iran Morocco Jordan Pakistan Tunisia Egypt KSA UAE INDONESIA Ivory Uganda MALAYSIA Coast NigeriaCOUNTRY EXPORTS COUNTRY EXPORTSIndonesia $19,856,280 Nigeria $2,430,160Malaysia $16,967,888 Kazakhstan $1,642,431Turkey $10,701,261 Tunisia $1,370,454Côte dIvoire $4,853,966 Uganda $1,364,879UAE $3,276,778 Iran $1,297,363Morocco $3,213,572 Cameroon $1,123,178Pakistan $3,067,587 Jordan $1,035,505Egypt 17 $2,819,462 Saudi Arabia $1,017,534Source: DinarStandard OIC Clustering Model Analysis - 2011

DS OIC-wide Food & Agriculture Cluster TURKEY Kazakhstan Iran Morocco Jordan Pakistan Tunisia Egypt KSA UAE INDONESIA Ivory Uganda MALAYSIA Coast Nigeria Select Corporations: Select Corporations:  Koc Group, Turkey (Congl.)  Savola Group, Saudi Arabia  Group ONA, Morocco, (Congl.)  Indofood, Indonesia  Sime Darby, Malaysia  Felda Hold., Malaysia (Priv.)  Astra Intl, Indonesia (Congl)  KL Kepong Berhad, Malaysia  Ulker, Turkey Turkiye Seker, Turkey (Govt.)  IOI Group, Malaysia  PPB Group, MalaysiaSource: DinarStandard OIC Clustering Model Analysis - 2011 18

Food & Agriculture Ecosystem - Sub-SectorsAnimal & Animal Products Vegetable Products Food processing/manufacturing(OIC 4% of Global exports)* (OIC 13% of Global exports) (OIC 7% of Global exports) Live animals Live trees, plants; bulbs, roots… Preparations of meat, of fish… Meat and edible meat offal Edible vegetables… Sugars and sugar confectionery Fish… Edible fruit, nuts… Cocoa and cocoa preparations Dairy produce; birds eggs; honey… Coffee, tea, maté… Prep.s of cereals, flour, milk… Other Products of animal origin... Cereals Prep. of vegetables, fruit, nuts... Oil seeds and oleaginous fruits… Miscellaneous edible preparations Lac; gums, resins… Beverages Vegetable plaiting materials… Residues and food industry waste Vegetable fats and oils… Service Side Food service & catering (restaurants, cafes and hotels, hospitals, etc) Food retailing & wholesale (supermarket, etc) Food logistics R & D, Marketing, Financial services, Regulation, Education* 2009 ITC – World Bank Exports Data 19

And the earth hath He appointed for His creatures Wherein are fruit and sheathed palm trees, Husked grain and scented herb. Which is it of these favors of your Lord that ye deny? Quran 55:10-13* OIC - Organization of Islamic Conference, 57 member countries 20

OIC Industry Cluster – Value ChainIndustry Sub-sectors OIC Industry Clusters Halal Value Chain New Growth Investment Alliances Markets OpportunitiesSub-Sector Value Chain Raw Marketing Distribution End Production/ Customer Inputs Operation21

Opportunity: Food & Agriculture Companies OIC Food & Agri Industry Cluster1. Look at OIC markets in your sector for:  Growth opportunities.  Halal food value chain2. Cluster based M&A, technology transfer, and J/V opportunities3. Evaluate opportunities at the “Bottom of the pyramid,” everybody else is doing it.4. Increased productivity & global competitiveness  Innovations & Technology - Solving problems/ needs..  Branding & Marketing (German automotive; Grameen)

Opportunity: Investment Firms1. Food Sector Market Investments - SAMI OIC Industry Clusters Index2. OIC Food & Agri Cluster - Investment pipeline3. Private Equity/ Venture Capital: Majority of industry players are not on the Public markets. Private conglomerates, SME‟s.4. Sharia Compliant PE Funds: Eg.US$1.3bn Shari‟ah-compliant fund by UK-based investment company cru Investment Management, which focuses on commercial agriculture in Africa. These investments by cru expect not only strong returns for investors, but also some much-needed investments in agriculture in Sub-Saharan Africa.

Opportunity: Investment Firms• Islamic capital needs to Mergers/ Acquisitions look at the „Halal‟ food sectors, with long-term (5- 10yr) investment horizon to build sustainable brands (5x-15x returns/ 25-50% Corporate Investments IRR in food industry)• Investors need to do homework and due diligence (visit plants/ operations) and have Angel/VC industry specialist on team.

Opportunity: Major Initiatives1. OIC Food & Agri Clusters Initiative (as corporate alliances; multi-lateral initiatives; industry body initiatives)  Optimizing Halal food value chain of players  Incubation centers (by sub-segments) around strength // Formal & informal linkages with OIC cluster of opportunities// develop global successes  Consumer awareness campaigns  Partnering with global values based certification organization; Fair-trade, organic, going green, etc.. 26

Summary1. State of Global Food Insecurity 1. Needs: Investment, Productivity, Values2. Opportunity horizon: 1. DinarStandard OIC-wide Industry Clustering3. Opportunity Hotspots: 1. Market expansion 2. OIC food & agri cluster investments 3. Major initiatives

He said: “The son of Adam does not fill any vessel worsethan his stomach. It is sufficient for the son of Adam to eat afew mouthfuls, to keep him going. If he must do that (fill hisstomach), then let him fill one third with food, one third withdrink and one third with air.”Narrated by al-Tirmidhi (1381), Ibn Maajah (3349); classedas saheeh by al-Albaani in al-Silsilah al-Saheehah (2265).

IslamicFinance Business Media  Research  AdvisoryMuslim LifestyleMarket Growth Strategies for Emerging Muslim Business Plan Summary Markets CONFIDENTIALOICIndustries W: advisory.dinarstandard.com 29

Food Insecurity & Opportunities in OIC Countries

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