Thai agriculture needs a shake-up
Startups have succeeded in disrupting so many business sectors in Thailand. Why not in agriculture yet?
Thailand's outdated and unproductive agriculture definitely needs a shake-up. Despite the natural abundance, farmers remain poor amid rising investment costs and low prices. Droughts and floods from climate change have also increased their production risks, making farmers' lives much more difficult.
Can technology improve their lot?
The heart of startups is technological innovation to solve problems from the old ways of doing things and to build new business opportunities that old players cannot deliver. Startups benefit small players and consumers and their popularity often disrupts old businesses, prompting their readjustments that contribute to economic vitality and growth.
In the field of agriculture, AgTech, or the use of technology in agriculture, has played an important role in improving farm productivity, profits, and sustainability.
In the past decade, AgTech startups have been making inroads into Thai agriculture. The innovations are not limited only to modern agriculture equipment or machinery, many AgTech startup companies are introducing digital technology to improve farm management, soil quality, and productivity.
AgTech, for example, can help farmers set up and manage the schedules to water and fertilise crops accurately. They can also choose the timing for planting different crops following local weather conditions through digital technology.
AgTech companies offer a wide range of applications for modern farming. For example, the use of drones to give fertilisers or pesticides only in the targeted spots to reduce costs, the use of weather forecasts for planting management, and the use of sensors to accurately determine soil and weather moisture. Digital technologies help farmers to plan, execute, manage, and make decisions about their farms more efficiently.
AgTech helps farmers reduce the use of expensive farm chemicals and to cope with extreme weather, pestilence, and low productivity. Yet, few farmers have adopted AgTech to improve their farm management.
There are about 7.4 million agricultural households in Thailand. That is a huge market. Yet, according to a survey by National Innovation Agency (NIA) in 2020, there are only 53 AgTech startups in the country. Their services are also concentrated in high-value vegetables and fruits and in food processing businesses.
Despite their expertise in agriculture and digital technology, AgTech startups in Thailand are facing three major challenges.
First and foremost, the farmers' lack of interest. According to a survey by the Thailand Development Research Institute (TDRI) in 2021, the majority of farmers are not interested because they do not understand how AgTech startups' services can help them. Many do not even know that such services exist. Those who do tend to think that the AgTech startups' products and services are too expensive.
The government, therefore, must intervene. The majority of Thai farmers are clinging to old farming practices and are resistant to change. To encourage them to use modern farming technology, the government should make farm subsidies "conditional". Giving farmers financial help without any conditions destroys the incentives for farmers to readjust.
The government can also determine the direction of agricultural development by specifying what type of technology the farmers should adopt to get farm subsidies. For example, the technology to reduce harmful environmental impacts and cut the emissions of greenhouse gas. The period of subsidies should also be limited.
Other stakeholders in the supply chain such as wholesale buyers and food processing factories can also convince farmers to use modern technology by setting quality standards and prices with higher technological devices or providing cash support to use AgTech applications. The sugar and cassava industries have already adopted this strategy which has succeeded in making farmers adopt modern technology.
The second challenge is insufficient investment in AgTech startup companies. Since agricultural investment carries high risks and takes a long time to yield profits, private investors and venture capitalists tend to prefer investing in startups with high and quick returns such as those in finance, logistics, and insurance.
Also, most Thai startup companies have not upgraded to deep tech yet. This may be one of the reasons why Thailand is still not an investment target for foreign investors.
However, the government has taken steps to promote more investment in AgTech startups through tax exemption from capital gain tax. Under Royal Decree No.750 in 2022, startups, venture capitals, and trusts that are investing in 12 target industries, which include agriculture and biotechnology, are eligible for capital gains tax.
The third challenge is the lack of a startup ecosystem. The government, therefore, should work with the private sector and education institutions to create an innovation ecosystem to nurture startups so their creative ideas can materialise and grow to serve society at large.
Among the important components of a startup ecosystem include an open database on agriculture, human resources development to support investment in startups, and easy access to research and other technologies for startup companies to create new products.
The database on the agricultural sector is indispensable for AgTech startups' business operations. The government must hasten the process to build this database. Various state agencies must connect their information systems to build a central and easily accessible database.
Being open to external input is also crucial. The concerned state agencies must involve other stakeholders to jointly determine the types of data and the standards for the data-collecting process to support the interconnected Big Data in the future.
The support for AgTech startups has a clear goal: to increase the farmers' income and the agricultural sector's contribution to Thailand's gross domestic product. The increasing investment in agricultural technology will also upskill the agricultural workforce and attract the younger generations into the agricultural sector which is now dominated by ageing farmers.
Importantly, the use of modern digital technology will help farmers reduce investment costs and make their products more competitive in the global markets.
Thanks to modern agricultural technology, farming will not be as laborious. With more young people in agriculture and the older ones having to adapt to technology, the agricultural sector will not only be more productive and competitive, but it will also be sustainable.
If the government strengthens the startup ecosystem and encourages farmers to keep up with time, the Thai agricultural sector will be soon ready to enter a new world.
Urairat Jantarasiri is a senior researcher at Thailand development research Institute. Policy analyses from the Thailand Development Research Institute (TDRI) appear in the Bangkok Post on alternate Wednesdays.