Local government's tailored industrial policies have made a significant shift in one of China's poorest regions. Anding District has become China's "potato capital". Potato cultivation now accounts for more than 60% of the cultivated area in the whole region, and 60% of farmers' income comes from potato production.
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Potato is the fourth most important crop in the world, after wheat, rice and corn. However, in human food sequences, potatoes are not a high-end product. After more than five centuries of history, it has been transformed into a major crop that can be grown on all continents and an important table staple.
However, its reputation is still "popular" or "second-rate", perhaps because it was originally a "famine-resistant food." As Messer (2000) puts it, the potato “contributed to the acceleration of the industrial revolution in Europe in the 18th century. However, the Irish famine in the mid-19th century was blamed on it... [it] is still in the cuisine of Europe and even countries. A key and unique element."
After the Second World War, as the taste of food became more and more global, multinational companies such as McDonald's developed and produced a variety of standardized production of French fries, potato chips and other frozen and processed convenience foods, and potatoes opened up new markets.
In the early 1990s, China's authorities determined that “potato†(potato) was a potential source of income and encouraged and supported its industry, but few people agreed with it.
Even in the Anding area of ​​Gansu Province (Dingding District, Dingxi City, Gansu Province, which is known as the Chinese potato industry, the potato planting here has been around for a long time), it is still regarded as a market risk. Crops are needed, especially when compared to wheat, because the government’s purchase price for wheat is guaranteed.
In addition, farmers have the right to use the land. This is a change brought about by rural reforms in China in the 1980s. Farmers can make their own planting decisions. The state cannot force them to switch crop varieties from wheat to potatoes.
In order to convince farmers that potatoes are a comparative advantage in the region and can bring good income prospects, local officials first mobilized village cadres to experiment with large-scale planting of potatoes on their land.
Although the price of the entry is very low (because higher potato production largely offsets the lower price), the first potato producers still receive a large amount of income compared to growing wheat (Zhang and Hu, 2011).
The benefits are really good: from growing wheat to growing potatoes, even if the price per kilogram of potatoes is lower, the total income is doubled. In addition to the higher economic returns from growing potatoes themselves, the government also provides funding to enable many farmers to buy quality potato seeds.
Gansu Anding Potato Base
The harsh natural environment in Anding is self-evident, but it is still suitable for potato cultivation: the dry climate reduces the need for pesticides, and the availability of irrigation facilities can improve the quality of the land.
The increase in potato production has attracted many businessmen who are quick and profitable, and they can't wait to take advantage of the asymmetry of price information to make a profit. Poor peasants know nothing about the price information of urban wholesale markets, and they have not even gone to big cities that have determined the prices of their agricultural products.
There are too many middlemen between the final consumer and the farmer – from agents to foreign vendors, wholesalers and retailers, the asymmetry of information that allows these people to get most of the profits, which leads some farmers to At the beginning of the 21st century, I went back to continue the production and cultivation of wheat.
The stability government's analysis of the supply chain found that the main reason for the low income of farmers planting potato crops is that they lack market information and their collective bargaining power is weak. The government helped them establish farmers' associations, train local farmers, and make them also capable of bargaining merchants.
The School of Economics and Management of Lanzhou University even provided one month of marketing training to farmers with few educational foundations, which ultimately improved their bargaining power in the industry. When farmers' potatoes get a higher price, they produce more potatoes.
Due to the rapid increase in the market share of potatoes, industry associations have established a wholesale market for potatoes in the Anding region through public-private partnership financing, so that commodity prices can be obtained in a more economical, timely and accurate manner without the need to go to various parts of China. Wholesale market for information collection.
Taking into account the seasonality of potato production, government agencies work with farmers to help them develop new and better product varieties, provide subsidies, build storage facilities, and spur the creation of potato processing manufacturing.
In order to support the development of value-added processing industries, the local government also joined hands with banks to provide loans to investors to help them solve the remaining low-quality potatoes in the consumer market and set a guaranteed price.
This has brought additional income to the farmers and increased the government's tax revenue. This support for farmers allows farmers to store potatoes for longer periods of time, to supply them smoothly throughout the year, and to sell them at favorable prices.
In general, local government's tailored industrial policies have made a significant shift in one of China's poorest regions. Anding District has become China's "potato capital". Potato planting now accounts for more than 60% of the cultivated area in the entire region. More than 30% of the rural population participates in potato-related production, marketing, and processing activities. Moreover, 60% of farmers' income comes from potato production.
However, when potatoes were identified as an important potential source of income and employment in the region, many experts expressed disdain that they were simply a failed government-led industrial policy. They stressed that China's business environment is poor, skills are short, and the geographical location does not seem to be suitable for growing potatoes.
In this regard, Zhang Xiaobo and Hu Dingzhen once retorted: “The harsh natural environment in Anding District is more than that of many sub-Saharan African countries. However, in the past 30 years, land and labor productivity in Anding District have been Significant improvement. Therefore, the success of agricultural transformation in Anding District can provide some useful experience for other countries at the same stage of development.†(Zhang and Hu, 2011, p. 5)
Such a successful story can also be seen as a pure anecdote, and skeptics will also regard it as another legend that “only China can succeed†because for an ordinary, still poor, (maybe) For countries that do not have strong organizational capabilities, this seems to be “too complicatedâ€.
If you draw such a conclusion from this story, it will be incorrect. In fact, in addition to following common sense and drawing lessons from economic analysis, Chinese institutions have not done anything extraordinary in building potato production clusters.
Like the Israelites in the desert, the industries they choose with farmers and investors are an industry that matches the potential comparative advantages of the local economy. They designed and implemented a simple policy program that helped eliminate barriers to production and sales and quickly shared the results widely.
In order to promote the establishment of clusters, they studied industrial competitiveness, conducted value chain analysis, diagnosed major development bottlenecks, and provided incentives to investors (providing land, electricity and water supply for construction of factories at preferential prices). Infrastructure), all of which gave every stakeholder a surprising result.
Mali Mango: The journey from the inland to the distant ocean
Even in low-income African countries where the business environment is extremely harsh, high-speed growth like Israel and China can be achieved in specific industries and sectors. Chuhan-Pole and Angwafo (2011) describe one of the stories about the success of African economies, telling the export of mangoes in Mali.
In this unusual story, there is a bright spot: in the poor landlocked country of Mali in the Sahel, between 1996 and 2006, mangoes exported to the EU increased sixfold and reached 38 million tons in 2014. Increased the income of millions of farmers and improved their lives.
This change began in the 1990s, when the country's business environment was very unsatisfactory – even in 2014, Mali's business environment rating was still low, and the World Bank rated its business index around the world. Ranked 155th among the economies.
In 1990, Mali’s agricultural output accounted for 46% of GDP, and the agricultural workforce accounted for 80% of the total workforce. However, due to the lack of necessary infrastructure, Mali is unable to spread the benefits of export earnings to the vast agricultural areas. Only 11% of the roads are laid across the country (up to 25% in 2011).
The peak year for the export of Mali mangoes to the European Union was in 2006. Even in this year, fixed-line and mobile phone owners accounted for only 13% of the national population, which is lower than the average of low-income countries in the world by 17%. Less than 10% of farms have bank credit lines.
Government governance ratings are also very low. The World Bank's Global Governance Index is the most commonly used measure of government efficiency. In 1996, Mali scored only a modest 9.3 (value range 0-100, the higher the value, the better the results). Even today, Mali’s business and governance indicators remain low.
However, the Malian government still decided to focus its national development strategy on its own comparative advantage. Due to the better geographical and climatic conditions in the south, they chose labor-intensive agriculture as an industry with high growth potential. Several cultivated crops were selected as possible target crops to diversify their economic products, including cashews, tomatoes, shallots and mangoes.
Among them, mango is preferred because Buguni and Sikasso in the south have excellent climatic conditions for mango growth, and the demand for mango in the European market is growing rapidly (Sangho, Labaste and Ravry, 2011). Not only that, the private sector has identified mango as a competitive crop, and small farmers are extremely dependent on mango as an important source of income.
Despite the high quality of fruits and vegetables in Mali, the lack of national infrastructure, high air freight costs, lack of market research and other extended service capabilities, and inadequate storage facilities have all severely limited their sales and export capabilities. As a result, a large number of Mali mangoes were wasted because they could not be saved, or were bought by Côte d’Ivoire merchants, so that Mali lost the opportunity to create more added value.
In 1992, the Government of Mali drafted the National Agricultural Development Strategy, the National Agricultural Development Guidelines (SDDR), emphasizing commercial agriculture, export incentives and high added value, and began to direct resources to these goals. With the help of a number of aid organizations (especially from the World Bank and the United States Agency for International Development), the Malian government also established the Agricultural Products Trading and Processing Pilot Project (PAVCOPA) in 1996 to encourage agribusiness and exports.
It allows stakeholders to find more effective ways to increase product sales, while innovation in transportation and logistics systems enables growers and exporters to achieve economies of scale.
The government has also played a role in market research, value chain cost analysis, benchmarking, and industry-restricted assessment. It also provides technical support and training in plant quarantine.
The Mali government’s agricultural development plan will be a beneficiary. The picture shows the country women in Mali.
These policy initiatives have led to a virtuous cycle of positive externalities, and the average quality of fruit exported from Mali has also increased significantly (for example, the probability of a sea container with fruit being rejected as a result of fruit flies is significantly reduced).
Moreover, with the win-win trading, the relationship between exporters and growers is further strengthened, and the reverse relationship at the product level has already taken shape. Mali can also find a solid foothold in the reciprocal trade segment.
The start of the growth of mango exports has led to the transformation of the relevant sub-sectors and increased the benefits of the private sector. This further exemplifies the following view by example: as long as the government and the private sector work closely together to identify the most competitive industries – consistent with economic comparative advantages – and design a manageable, targeted reform Plan to eliminate the most serious bottlenecks that limit development, then the story of economic success can happen in the most unlikely places.
In order to ensure the long-term stability of the vibrant Mali mango industry and to create a strong national agricultural economic strategy pillar, there is still much to be done (for example, building and sustaining capacity through skills and workforce development plans, and strengthening the necessary infrastructure) And logistics systems, implement a viable industry and technology upgrade strategy, strengthen links with international value chains to improve business and learning practices, and ensure stable financial channels).
However, in such a country where international business success conditions are not complete, the emergence of the mango industry confirms the effectiveness of development plans based on potential comparative advantages.
(The author of this article: famous economist, honorary president of Peking University National Development Research Institute.)
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