Agribusiness Review - Vol. 4 - 1996

Publication Reviews
ISSN 1442-6951

Research Reviews

1. (A) Feeding the Dragon - Processed Asian Food Opportunities in China and Hong Kong, by K Fahley, RJRDC Research Report No. 95/]8. ISBN 0-642-21271-6.
2. (B) Agri-food Case Study: Micro Reform - Impacts on Firms, by Bureau of Industry Economics Report 96/11, AGPS, Canberra, 1996.
3. (C) Australia Through the Eyes of Asia: Adding Innovation, by Marketing Australia, Department of Foreign Affairs and Trade, AGPS, Canberra, 1995.

Book Reviews

4. (A) Markets, The State and The Environment - towards integration, edited by Robyn Eckersley. Macmillan Education Australia, South Melbourne, Victoria, Australia, 1995, pp 316. ISBN 0 7329 3096 0. RRP $33.00.

Research Reviews

Feeding the Dragon - Processed Asian Food Opportunities in China and Hong Kong

K Fahley, RJRDC Research Report No. 95/18.
ISBN 0-642-21271-6.

This report provides basic information on the Chinese and Hong Kong markets for imported traditional Asian and Western food. Contents of the report include an outline of the processed food market and industry of both countries, suggestions on product groups that have potential for export success, basic statistics of food market indicators, and a directory of major processed food retailers in China and Hong Kong.

China's processed food market was estimated at A$63 billion in 1992/93; about one-third of the total food market. The local processed food industry is cost competitive with the more product progressive and technologically advanced food operations among the most competitive in the world. Low labour costs, transfer pricing of materials and often profit minimisation on export sales contributes to this cost competitiveness. Local production satisfies almost all-domestic demand of processed food, and 15 per cent of production is exported.

However, opportunities for niche marketing exist. Imports are increasing and exceeded A$ 1 billion during 1993. Chinese consumers are shifting from fresh towards processed foods, and from traditional Chinese style foods to Westernised or generic processed food. At present, much of the processed food sales consist of processed meats, and fruits and vegetables; with relatively small volumes of elaborately prepared items and frozen foods. Lack of refrigeration and microwave appliances in households affects the types of processed food purchased. The more affluent urban areas of the eastern coast of China have the highest propensity to purchase imported processed food.

State-owned trading corporations dominate the Chinese import and wholesale distribution systems. Whilst there has been a massive growth of privately owned retail outlets and food service sites over the past decades, there is a lack of private and foreign participation in wholesale distribution activities.

Hong Kong, in contrast to China, is an affluent and mature market attuned to processed food consumption. Around 70 per cent of retail sales of foodstuffs are semi-processed or processed. In 1993, local production supplied about 40 per cent of processed food demand, with another 25 per cent supplied by China. During the same year, other non-Chinese source imports totalled around A$3.1 billion. Consumers are increasingly favouring Westernised food varieties with sales volumes of traditional Asian food varieties plateauing. Local production is characterised by small firms (10 to 15 workers) producing mostly westernised or ethnically generic food products such as confectionary and reconstituted milk. Almost all ingredients are imported. The import and distribution systems operate under a free enterprise system similar to Australia.

The report suggests specific Chinese and Hong Kong Asian Style food products that have potential market opportunities for Australian food interests. Examples are semi-processed beef, chicken and pork, frozen stir fry rolls, frozen ready-made meals, and processed vegetables and fruits that are microwaveable. Commercial strategies in these markets are recommended. For example, to increase international competitiveness, firms should consider export pricing to allow for more attractive distributor margins. The appropriate design of packaging materials is important. China should not be taken as a homogeneous market; instead market focus should be on key urban areas. Hong Kong has long-term potential as a marketing base, not only to China but also to other East Asian markets.

Agri-food Case Study: Micro Reform - Impacts on Firms, : Micro Reform - Impacts on Firms

Bureau of Industry Economics Report 96/11, AGPS, Canberra, 1996.

Although the microeconomic reform process in Australia is generally accepted as beneficial to the economy as a whole, its impact on specific industry is not well understood. The overall objective of this research is to assess the impact of micro reforms on firms in agri-food and related industries. Specifically, the research aims to provide information on:

• firms' views on the adequacy of recent reform initiatives and the need for further reforms;
• firms' assessments on the relative importance of different reforms and of other influences to their operations;
• the main impact of micro reforms across the activities of firms, and key drivers of the differences in the experiences of firms; and
• the significance of the dynamic effects of micro reforms on firms

The main data used in the study were collected with a mail-out survey of about 1 500 firms in the agri-food sector and related industries, of which 640 firms responded.

Face to-face and telephone interviews, follow up telephone surveys, consultation with key industry bodies and related interest groups, and secondary data from various sources supplemented the survey data.

Micro reforms can influence firms' costs of production and/or revenues and thus can positively or negatively impact on competitiveness. Firms ranked the following four reforms as most beneficial in improving their own competitiveness since 1989:

• telecommunications,
• industrial relations,
• food standards and regulations, and
• road freight.

The following four were considered as detrimental to their own competitiveness:

• changes to input taxes and on-costs,
• tariff reductions,
• environmental regulations, and
• industrial relations.

Concerning the pace of the reforms, some 29 per cent judged the pace as satisfactory, and 4, 17, and 8 per cent respectively responded that the pace was too fast, too slow, and going backwards.

Concerning the level of domestic competition faced by firms, 48 and 26 per cent of firms respectively judged that the level has increased substantially or marginally; 25 per cent thought the level had not changed; and only 1 per cent responded that the level had decreased.

The uptake of workspace reforms was found to be surprisingly slow with only less than half of the case study firms implementing at least one of these measures. Many firms that had not implemented an enterprise agreement indicated they were happy with their existing arrangements. Some of these firms considered the enterprise agreement process to be too complex or costly.

The report found that micro reforms have contributed to increased competition; causing many agri-food firms to become more productive and dynamic since 1989. Firms facing increased competition are more likely to seek out new export markets and to increase productivity. These positive outcomes were particularly apparent for firms in industries facing a substantial amount of international competition.

Four areas of micro-reform were judged by the respondents as vital to the future of agro-food firms. They are, in order of importance, industrial relations, input taxes and on-costs, food standards and related regulations, and Australia's program of tariff reduction.

Australia Through the Eyes of Asia: Adding Innovation,

Marketing Australia, Department of Foreign Affairs and Trade, AGPS, Canberra, 1995.

This report summarises research addressing Australia's low image as a supplier of sophisticated goods and services, especially in East Asia. The research focused on seven East Asian markets: Hong Kong, the Guangdong province of China, South Korea, the Kyushu region of Japan, Indonesia, Thailand, and Vietnam. The research was based on qualitative interviews of a selected sample of senior business people and other opinion leaders in each of the seven East Asian markets, plus Australian exporters. Local nationals conducted interviews in foreign markets.

Although views concerning Australia vaned among the seven markets, some consistencies emerge. Unlike Australian competitors such as the US, Germany, and Japan, Australia lacks a high-tech image and is seldom seriously considered by the East Asian business community as a potential supplier of high value manufactured products. This image is often deduced from other more fundamental images, some of which might have been due to marketing campaigns, by our tourist industry. Australia has the image of a large landmass. The land is bountiful, rich in natural resources and includes extensive tracts of fertile farmland. Therefore, the East Asian business community concludes that Australia's comparative advantage must be in primary produce, natural resources and possibly harvesting technology for these two sectors; but not in manufacturing. Australia is a developed and wealthy country, with a small population and a Western culture, and without a peasant class. Australia's small population is viewed as too feeble a domestic market for sustaining a significant manufacturing sector, let alone one that can produce sophisticated manufactures for export. Many East Asians also associate a wealthy, developed Western country, especially one with a small population, with scarce and expensive labour. Thus, in their views, Australia must not be capable of producing and exporting products and services at competitive prices.

Views of Australian business concerning Australia's image in this region are also explored. Most Australians see their own personal qualities, eg openness, honesty, straightforwardness, willingness to listen, and a relaxed and informal style, as strengths. While largely confirming this personal profile, the East Asian target market does not always see the qualities concerned as those representative of commercial strength. For example, some East Asians consider the typical US business less personable but more confident and commercially astute. Australia's lack of teamwork in presenting itself abroad is considered a major weakness. State and federal agencies appear to be competing with each other instead of cooperating to present a coherent, integrated picture of Australia. Our relative proximity to the target markets is a strength but only as long as the other elements are satisfactory.

An interesting feature of this report is the individual market analysis of the seven markets. Each consists of a brief discussion of the following: political and economic context; government-level relationship; commercial relations; mood in the market place; image of Australia; significant events; the competition; education; and summary: angles and opportunities.

The report contains a brief description of the main features of the 'Market Australia' campaign and discussion on how the campaign relates to findings from the research.

Book Reviews

Markets , The State and The Environment - towards integration

edited by Robyn Eckersley. Macmillan Education Australia, South Melbourne, Victoria, Australia, 1995, pp 316. ISBN 0 7329 3096 0. RRP $33.00.

The acceptance of the need for sustainable development was the end result of well over two decades of quite often-bitter debate and confrontation between the environmental movement and industrialists worldwide.

This acceptance has been formalised by governments and the international community in the recommendations of the United Nations Conference on the Environment and Development - the so-called 'Earth Summit'. Acceptance of the need for sustainable development is one thing, achieving it is another.

Markets, The State and The Environment examines the options available to governments in their quest to implement policies which enhance sustainable development. Options which range from the traditional regulatory approach which incorporate prescribed standards, to those which are more market based such as carbon taxes and tradeable pollution quotas. Such market based policy options revolve around the 'polluter pays principle'.

The book is based on papers presented at a one day workshop on 'Bureaucracy, Markets and the Environment' held at Monash University in late 1994. The twelve chapters are presented in five parts, which progressively examine the shift in environmental policy over the past 25 years.

Part 1 Anchoring the Debate, provides the framework for the book through an examination of the shortcomings of the regulatory approach and the yet unrealised potential of market-based instruments in attaining environmental goals.

Part 2: Market-based Instruments versus Regulation, continues this examination with a more in-depth appraisal of market-based instruments and their apparent superiority over command and control' policies in both compliance and efficiency. However a series of case studies in Chapter 4 indicate that there is a role for government intervention in this free market approach to ensure that the interests of the wider community (other than the private interests of firms) are acknowledged.

Part 3: New Environmental Policy Instruments in Practice, examines the evolution of the use of market-based policy instruments, such as tradeable rights, in Britain, the USA, and Europe, where their use is more widespread and in Australia where use is more limited.

Part 4: Competition and Environmental Performance, introduces into the debate the differences which exist in the environmental policies of various countries and how these differences may affect international trade flows. The importance of this issue can be gauged by the actions of the World Trade Organisation in setting up a Standing Committee, which has oversight of the potential use of environmental standards as de facto barriers to trade.

Part 5: Environmental Compliance, Justice and Democracy, concentrates on examining the problems associated with devising and implementing environmental policy in a social justice context. This section is a timely reminder of what sustainable development is all about and clearly demonstrates why progress towards it is often slow.

Markets, The State and The Environment provides an excellent coverage of the evolution of environmental policy - policy which is impacting on all aspects of the agribusiness sector. The individual chapters are well researched and woven together into a well developed theme.

However, the book is not easy to read because of its academic style, and this will limit its readership among managers in industry, which is a pity. Similarly, the balance of the coverage suffers from the lack of any contribution, in the way of authorship, from the private sector.