Thursday, December 2, 2021
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No country can get rich from agriculture alone

Lots of people in certain countries think that agriculture should be developed in order for them to be rich. This is a misguided opinion.


Picture of a Rice field in South Aceh, Indonesia, taken from the author’s personal files.

Thailand is a good example of the fact that when it generated a per capita income of close to USD 3,000 about 18 years ago, it faced obstacles to increase this income. Main reasons: 1. Agriculture produces food, and people consume it to a certain amount, not more; 2. Agricultural products are commodities, so their prices are sensitive to supply and demand. For example, if supply exceeds demand by a mere 5%, product prices can go down by 20%.

So, from about 2002, Thailand has been aggressively developing its manufacturing sector so that the country now is the largest automobile manufacturer and exporter in ASEAN.

Source: www.statista.com

Another reason: the contributions of agriculture to the GDPs of developed nations such as the US and Japan range between 1% and 1.3% only.

Like Japan and most other developed countries, the US got rich because of its manufacturing might. The US generated around 40% of the world’s GDP from 1960 to 1968 (https://www.forbes.com/sites/mikepatton/2016/02/29/u-s-role-in-global-economy-declines-nearly-50/?sh=5ce3afcc5e9e). The ratio of its GDP to the world’s began to decline from 1969. This ratio now stands at about 15.9% only (https://www.statista.com/statistics/270267/united-states-share-of-global-gross-domestic-product-gdp/).

Capture
Source: www.forbes.com

About the Composition of Japan’s GDP today

Source: www.statista.com

China is the most recent example of how a developing country can get rich: from investment in productive physical assets, manufacturing and exports of finished products.

Wuxi, Jiangsu province, a third tier city and the fourth richest city in terms of per capita GDP, not total GDP, after Hong Kong, Macau, and Karamay (in Xinjiang), based on the 2020 census in China.
Ningbo, the 18th-ranked richest city by per capita GDP in China. Ningbo, also the capital of Zhejiang province, has just been upgraded from a second tier city to a first tier city together with 14 others, including Wuhan, Shenyang, Qingdao; only Shanghai, Beijing, Shenzhen and Guangzhou were originally ranked as first tier cities. Source: www.chinadaily.com.cn- June 7, 2021: 15 new first tier cities. So, today there are 19 first tier cities in China.

CAVEAT: Certain individuals and businesses have got so wealthy from large-scale, or commercial, or cash crop, agriculture. For example, Robert Kuok, owner of Shangri-la hotels, sugar & oil palm plantation king & the richest person in Malaysia and the 53rd wealthiest in the world in 2020; Martua Sitorus, one of Indonesia’s oil palm plantation kings & the county’s 12th wealthiest; the big commodity traders: Archer Daniels Midland (ADM), Bunge, Cargill & Louis Dreyfus, known as the ABCD of global grain trading, of the US. They play central roles in the global agri-food system (https://www.reuters.com/article/us-global-grains-traders-idUSKCN1MZ2E8).

(TST)

Tjan Sie Tekhttp://www.tjansietek.com/translation.html
A former licensed stock market analyst and investment advisor with 20+ years experience with M.Sc. in Finance from Leicester University; now a Chinese, US and Indonesian macroeconomic and financial analyst, CEO of Center for New Indonesia (CEFNI).

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