An international food agency has urged the government to carry out a structural reform and pour investments in farm research and development, labor-intensive manufacturing and services and land distribution in order for rural economies to grow.
The International Food Policy Research Institute (IFPRI) which is co-implementing a $2.5-million Asean program by the Southeast Asian Regional Center for Graduate Study & Research in Agriculture (SEARCA) said policy transformation like those adopted by China will play a huge role in rapidly lifting rural areas into progress.
SEARCA is a co-implementor of the said project financed by the International Fund for Agricultural Development (IFAD) called Asean Transformation & Market Integration (ATMI).
"The design and implementation of institutions, policies and investments (in countries) have influenced the path and speed of rural transformation and ... poverty reduction. Land reform, rural investments and sectoral policies have been decisive," said Kevin Chen, IFAD senior research fellow at the SEARCA ATMI program.
The group noted China's rural development success may be attributed to the land redistribution in 1982, market reform, trade liberalization as well as huge investment in infrastructure among others.
IFPRI said rapid structural transformation such as investments in manufacturing and services through decentralization, foreign direct investment and regional competition were likewise a factor.
ATMI aims to integrate small farmers into bigger business systems to form a value chain which does a series of business activities from farming to processing, marketing, and distribution. It will make them competitive as numerous small farmers' productions are consolidated into one bigger supply bulk.
Chen said agricultural transformation involves the simultaneous development of the processing industry including food processing and services sectors such as logistics and marketing.
He said stages of transformation should be first seen on the wholesale and logistics segment as public and private sectors and foreign institutions pour investments followed by processing booms.
He added small and medium enterprises will thrive from grain mills and dairy, meat, fish and produce processing and large scale plants also develop from consolidation due to improved policies.
Chen also said the process, more private retailers will shoot up especially in light of electronic commerce.
However, the group said development should also be implemented properly in order to avoid a situation where a developing country shifts from labor surplus to rural hollowing.
Rural hollowing happens when the labor force migrates or moves to cities—leaving the provinces with no people who want to tend farms.
IFPRI warned t if the latter happens, the country will be shifting from comparative advantage to import dependence for food products.
The agency said with proper rural transformation, poverty in Asean's developing countries has been successfully reduced from 71 percent in 1981 to 15 percent in 2011 based on purchasing power. It cited that based on $1.25 a day poverty yardstick, poverty rate in Asean was cut from 91 percent in 1981 to 40 percent in 201.