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Institutional and Governance Innovation in Thailand’s Food System: The Role of the Private Sector in Food Safety

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Institutional and Governance Innovation in Thailand’s Food System: The Role of the Private Sector in Food Safety by Kamphol Pantakua and Natthida Wiwatwicha, TDRI. Presented at the ReSAKSS-Asia - MIID conference "Evolving Agrifood Systems in Asia: Achieving food and nutrition security by 2030" on Oct 30-31, 2019 in Yangon, Myanmar.

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Institutional and Governance Innovation in Thailand’s Food System: The Role of the Private Sector in Food Safety

  1. 1. Institutional and Governance Innovations in Food Safety The Role of Private Sector in Thailand’s Food System Kamphol Pantakua Natthida Wiwatwicha ReSAKSS-Asia October 30-31, 2019
  2. 2. Overview  In Thailand, food safety directly relates to modernization of FVCs, driven by the private sector  Protein value chains: Industrialization  Vegetable and Fruit VCs: New patterns of inter- and intra- sector management • Increasing production sources that supply both modern and traditional markets
  3. 3. Questions & Method  What are the factors for successful food safety in Thailand’s market-driven food environment? • The components of food safety ecosystem • Government’s supportive role  Method: historiography of FVC development  Literature review  Field work interviews
  4. 4. Factors Governing Food Safety  Consumer demand • Growth of Modern Trade • NGO’s  Economy of scale • Mechanization • Increasing farm size • Formations of groups  Coordination and Management • Inter-intra sector • Between functions • Between independent producers  Government Support – Private sector initiative • Standards / Regulations • Institutions / Partnerships • Hardware
  5. 5. Brief Historical Development  Early development • NGO’s contribution • Private Sector Contribution (Modernization)  NGO’s contribution to food safety through various objectives • Religion group: Buddhist temples/Monks  Goal: self-sufficiency economy and health concerns • Local NGO: Biothai  Goal: Security and sovereignty • Inter NGO: IFOAM  Goal: Food quality and ecology • Inter org: WTO & FAO  WTO : agricultural commodity standards 1997  Thailand joined WTO 1994 and restructured food safety related bodies in 2002  FAO – Good Agricultural Practice
  6. 6. Key Events for Modernization  1970’s – 1980’s Labor shortage results in transformation [Farmers]  1980’s Introduction of contract farming [Local and international large agribusiness firms for plants and tomatoes]  1997-8 Nitrofuran residue found in export product, triggering widespread closed-farming system for chicken and shrimp [Govt and Private Sector Cooperation]  Air and water pollution conflict with the public (residents in suburbia) triggered transformation of swine production industry [Govt and Private Sector Cooperation]  1998 Thai Government announced GAP - Good Agricultural Practices (plant-based food); GMP – Good Manufacturing Practices (meat) • Only recently created regulation for certification in 2004
  7. 7. Private sector: Modernization  Livestock and aquaculture: • large firms and contract farming • Industrialization • Vertical integration  Fruits and Vegetables: fragmented farmers • Unlikely to undergo industrialization • At present, still continued to be limited by small volume of export and lack of industrial scale production (more labor-intensive)  Small independent producers, uncoordinated and depends largely on suppliers  Clear division of producer for export and domestic
  8. 8. Livestock VC  Advanced facility and management of vertically integrated meat production Source: CPF
  9. 9. Vegetables VC Source:kapook,khaosod2019
  10. 10. 0 50 100 150 Billionsinter.$ Top20ofAgriculturalexport value2017 Overview of Thailand agricultural situation in food safety: fruits and vegetables 0 10 20 30 Billionsinter.$ Top20ofFruitsandVegetablesexport value2017 Source:FAOSTAT. 12th 14th
  11. 11. The rate of pesticide use per area and per value in Thailand is not high compared with other food producer countries. 0 5 10 15 20 1990 1995 2000 2005 2010 2015 2016 Kg./Ha Totalpesticidesconsumptionperhectare China, mainland France Germany Italy Netherlands Spain Thailand United States of America Viet Nam Source:FAOSTAT. 0 1 1 2 2 3 3 4 4 1990 1995 2000 2005 2010 2015 2016 Kg./1000I$ pervalue ofagriculturalproduct
  12. 12. In the past, the rate of pesticide use of Thai farmers tends to be sensitive on the product price. 0 0.5 1 1.5 2 2.5 0 20 40 60 80 100 120 1990 1995 2000 2005 2010 2015 2016 Total pesticides correlation with product value Grains real price index Total pesticides: Thailand (Kg./1000 I$) Source:FAOSTATandTheWorldBankCommodityPriceData.
  13. 13. Pesticide Residues 0 200 400 600 Number of pesticide residues notifications on fruits, vegetab spicesinEUbyselectedcountries2010-2019 alert border rejection information for attention information for follow-up Source:RASFFandMarket sharebyTrademap 6.7% 10.4% 13.7% 4.9% 2.0% 2.0% 3.2% 0.6% 0.4% 1.4% Market share
  14. 14. Bangkok found over MRL rate more than other region 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 0.0 1.0 2.0 3.0 4.0 5.0 %ofSampling Chemicalscreentesting:Whole Kingdom Sampling Over MRL Note:*First yearofpesticideresiduetest with4group[Organophosphate,Pyrethroid,Carbamate,Organochlorine] OthertestingareBorax,Formaldehyde,SalicylicAcid,SodiumHydrosulfite,Salbutamol,Aflatoxins,pH Source:FDA2019. 4.8 2.97 0 2.04 19.84 0 41.02 11.07 29.47 0 5 10 15 20 25 30 35 40 45 Bangkokarea:OverMRL(%ofsampling)
  15. 15. Consumer monitor program by NGO  Increased sample size -> Decreasing trend of over-MRL  In GAP and Organic certified found a high rate of over-MRL  Modern trade products not safer than traditional market Source: Thai-PAN. 0% 10% 20% 30% 40% 50% 0 100 200 300 vegetables fruits vegetables fruits vegetables fruits 2016 2017 2019 Total Over MRL Sampling Share of Over MRL 0% 20% 40% 60% 80% 0 5 10 15 20 GAP GMP Organic GAP GMP Organic 2017 2019 By standards type Over MRL Sampling Share of Over MRL 0% 20% 40% 60% 80% 0 50 100 150 200 Modern trade Traditional Modern trade Traditional Modern trade Traditional 2016 2017 2019 By markets Over MRL Sampling Share of Over MRL
  16. 16. Agricultural Technology Timeline Source:Niponet al.2010,edit 2019. 1904 2019 Govt. University Private
  17. 17. New Development in Modern Food Value Chain  Change in consumer behavior • Consumer expects safety and traceability  High pressure from NGO’s  Modern trade needs to stabilize standard and quantity of supply • Shortening of FVC through direct contract with farmers 53.8% 46.2%
  18. 18. Modernized Value Chain
  19. 19. Institutions: Vegetables and Fruits  Emerging practice: Export and domestic Modern Trade institution engages directly with groups of coordinated farmers or independent farmers • Farmers adapted by forming groups, co- op’s, CE’s • Modern Trade buyers work with third party facilitators (governmental agencies/universities) on site with farmers
  20. 20. Modernized Fresh Food Value Chain Model  Engagement between a group of coordinated farmers (100+ independent farmers) from the same area, and export/domestic modern trade  Contract for multiple types of vegetables (example: contract is renewed every 3 months, 3 months in advanced) • but not 100% of produced volume; farmers to establish trade relations with other local suppliers or local traditional markets  Better financing from agricultural bank for building a local packaging center  An on-site manager (rep. from a modern trade brand) work with farmers’ group leader on management, planning, quality control, logistic coordination, and provide accurate market information  An on-site packaging center • Contamination Test 1. once on site (every lot) and 2. at the DC (sampling)  Variations of management delegation and technology and knowledge provision between the farmers, government agency, and modern traders
  21. 21. Incentives  Modern trader perspective: • Cheaper cost for better quality, safer vegetable products  Farmers perspective: • pre-arranged/negotiated price, and stable pre-arranged demand volume (for advanced planning)
  22. 22. MFVC Institutions: Farmers Organizations  Cooperatives  SMCE (small/micro community enterprise)  Farmers Group • Decreasing degree of oversight by government agency • Third party facilitator (government/universities)  For matching with markets and training
  23. 23. Farmers Organization • Benefits of coordination  For collective distribution of crop rotation and polyculture o Simultaneously solves price conflict issue and suppresses pest cycles o not exceed quantity demanded o Regular meetings and social media (mobile messaging application) • Benefits of group formation  Legally recognized entity for doing business and better financing from Bank of Agri. and Agri. Cooperatives (BAAC)  Lowering cost (ie: buying/making fertilizers)  Transmissions of knowledge and techniques (in-out) o From group to group  Better for interaction with other agencies o Can register as a Farmers Group but adopt management and contracts of a Cooperative
  24. 24. Modern FVC: Interactive Management  Injection of Modern Trade representative into production site • Allows farmers to coordinate with accurate information  Market/Buyer demand - Risk assessment  IPM: volume and type coordination • Quality control • Volume control  Secondary market for excess product volume  Injection of modern tools from modern marketing and governmental agency • Management, accounting  Modern trade representative provides business management programs • Food processing techniques and protocols compatible with consumer’s preference • Chemical residue test kit
  25. 25. Food Safety Government Policy  Past: Top down Food Safety Policy • GAP, GMP, Organic Certification • Knowledge training • Evaluation through NGO survey result  Random sampling showed outdated and unsuccessful  Present: Bottom up Food Safety Policy • Focus on creating knowledge and business support network partnership between group of farmers, traders, and other private sector actors (sponsors) • Facilitates food safety improvement driven by private sector and NGO’s  Such as providing facilities, chemical test kit, access to information, opportunities for business matching
  26. 26. Food Safety Government Policy  Present: Bottom Up Food Safety Policy (continue) • Assisting modern trade buyer to meet farmers with food safety production and business capacity  vegetables: Khon Khaen, Ayuttaya, Suratthani, Kampangpetch, Ratchaburi, Supanburi, Chacheongsao • Event-based platform for modern trade buyer to meet small/individual farmers who are interested in selling/informal contract with modern trade  fruits: Suratthani (Farmers: Suratthani, Ranong, Chumpon, Pattalung)
  27. 27. Food Safety Ecosystem Software  NGO’s monitoring and programs  Facilitation and Partnerships  Training/knowledge (ie: IPM, safe chemical use)  Financing  Institutional formations  Contractual relationship  Quality Control  Logistics + Traceability  Standards (GAP, GMP)  Regulations and policy  Consumer behavior Hardware  Farm facility (ie: Closed-system, Open- system)  Processing facility  Temp control Transportation  In-FVC and end of FVC evaluation/testing tools  Communication tools
  28. 28. Conclusion  Recent modern food value chain development in Thailand is driven by consumer awareness, NGO pressure, and multi- sector shared-governance • Decreasing intermediate supplier between source and markets for better quality control and utility • Inter-sector and intra-sector coordination, sharing of information, technology, and shared-management  The government’s supportive role ranges from issuing standard certification, facilitation of farmers group formation and connecting small holders to modernized marketing chains • Move toward supporting random testing by the private sector/NGO as means of Good Agricultural/Manufacturing Practice standard enforcement
  29. 29. Implications  Private sector’s impact on food safety is incentivized by direct benefit (profit) • But the extension excludes low-value crops such as rice, maize, cassava  Formal contract may not be necessary for a working relationship from complementary incentive between farmer groups and modern traders • But farmers group would still be at disadvantage from informal contract in some cases  Increased food standard increases market opportunity  In the case of formal contract, policy makers may investigate regulatory or contract innovation  Going Forward • How to create triggers for self-organized formations of coordinated farmers?  Increase research and development and extension of virtually large-scale farming pilot projects  Analysis of management and facilitation process  Systematizing a flexible platform for facilitation to expand the modern food value chain • The design or identification of food safety ‘regulator’ (ie: random testing) to be done by trusted parties (ie: needs a market for testing, more samples, redundancy etc.) • Safety Sample Testing in institutional buyers  Hospitals: recently regulated (public hospitals)  Schools: none
  30. 30. Thank you for your kind attention kamphol@tdri.or.th natthida@tdri.or.th

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