food insecurity & opportunities in oic countries

Food Security & Opportunities in OIC* Markets

By:

Rafi-uddin ShikohE: [email protected]: advisory.dinarstandard.com

Presented at:

April 5th, 2011, Kuala Lumpur

* OIC - Organization of Islamic Conference, 57 member countries

Towards a Halal Economy: The

Power of Values in Global Market

mailto:[email protected]

Intro/ OIC

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• Low-Income, food deficit countries - suffering most. 60-65% of income goes to

food; contrary to developed where it is 10-20%

• Many drivers-- and relevant to developed economies as well. OIC Countries

are some of most impacted.

• Ironically, OIC countries are some of the most agriculturally endowed!

Objective

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1. State of Global Food Insecurity

1. Current state, impact & drivers

2. Opportunity horizon:

1. OIC* Demographic

2. DinarStandard OIC-wide Industry Clustering

3. Opportunity Hotspots:

1. For industry companies

2. For Investments firms

3. For Major national/ multilateral/ Industry initiatives


Food security: exists when all people, at all times, have

physical, social and economic access to sufficient, safe

and nutritious food

Undernourishment: describes the status of persons

whose food intake regularly provides less than their

minimum energy requirements

Source: FAO - Food and Agriculture Organization of the United Nations

Some basic terms and definitions

Food Insecurity – Current State

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1. Global food prices continue to rise.

The last six months have seen sharp increases in the global prices of

wheat, maize, sugar and edible oils, with a relatively smaller increase

in rice prices.

The World Bank‟s food price index increased by 15% between

October 2010 and January 2011.

From March in 2010, Corn had increased 52%, sugar, 60%,

soybeans, 41%, and wheat 24 percent.

Feb 2011 WB – Food Price Watch

Food Insecurity – Current State

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Country Change

in price

(%)

Calorie

Share (%)

P

Kyrgyzstan 54 40

Bangladesh 45 6

Tajikistan 37 54

Mongolia 33 42

Sri Lanka 31 14

Azerbaijan 24 57

Afghanistan 19 ..

Sudan 16 15

Pakistan 16 37

Source: FAO, GIEWS.

Largest Movers in Domestic Prices, June to December 2010; Many OIC Countries.

Country Change

in price

(%)

Calorie

Share (%)

P

Vietnam 46 59

Burundi 41 3

Bangladesh 19 70

Pakistan 19 6

Indonesia 19 50

Mozambique 14 8

Cambodia -11 65

Mexico -9 2

WHEAT RICE

Food Insecurity - Impact


As a result of price rises since June 2010 there

is a estimate net increase in extreme

poverty of about 44 million people in

low- and middle-income countries.


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Almost 1 billion Undernourished in the world!Global hunger had been declining, but prices are going up again, and

overall still unacceptably high



Stress on developing economies supply as well.

Food Insecurity – 10 Key Drivers

11Copyright 2011 –DinarStandard Research & Advisory

Demand (Population growth, Affluence)

Bio-Energy

Rising Input prices

National subsidies

Lack of investments

Climate change

Loss of agricultural land

Rich & Poor divide

Gluttony/ Waste

Speculation

Agricultural production will have to

increase by 70% by 2050 to feed a

population of some 9 billion people.

-- World Bank

The Foresight Project, report warns

that in the next 40 years, agricultural

land will be lost to urbanization,

desertification, sea level rise and

increasingly salty water. About 24%

of 11.5 billion hectares of vegetated

land has already undergone human-

induced soil degradation.

Food Insecurity – Needed areas of focus

12Copyright 2011 –DinarStandard Research & Advisory

Demand (Population growth, Affluence)

Bio-Energy

Rising Input prices

National subsidies

Lack of investments

Climate change

Loss of agricultural land

Rich & Poor divide

Gluttony/ Waste

Speculation

Investments in: environmentally

sustainable agricultural productivity,

better risk-management tools, less

food intensive bio-fuel technologies,

and climate change adaptation

Values imperative? Social

entrepreneurship, responsible

marketing, compassion, community

service

Objective

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1. OIC* Demographic







OIC member countries

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57 mostly Muslim majority countries

Attractive young demographic

Growing economies

Inter-connected by:

Intra-OIC trade mandates

12%-20%

Muslim Lifestyle Market℠:US$ 2 trillion+ ‘Halal’ consumer market

Islamic Finance:US$ 1 trillion, 15-20% growth/year

How do you best identify opportunities

for growth?

OIC Industry Clusters: (Innovative

methodology - to identify Industry

hotspots for growth and investments)

Region-wide Industry Clusters Model

Growing global innovation best practice: Complementary business operations no

longer need to be in close proximity to each other. Rather, a complimentary set of

competencies within various regions combine to deliver a more robust Cluster.

Traditional Close Proximity

Linked Cluster

•Infrastructure

•Testing

•Talent

•Services

•R&D

•Distribution

NEW - Multiple Region Linked

Industry Cluster

Region A

•Manufacture

Region A

Region B

Region C Region F

Region D

Region E

Region G

Region H

Region I

Hub Node

• Eczacibasi, Turkey

• PT Kalbe Farma, Indonesia

• Hikma Pharma., Jordan

Source: DinarStandard OIC Clustering Model, *Diagram illustrative

DinarStandard (DS) OIC-wide Industry Clusters

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Within the OIC member countries, different strengths in the value-chain of an Industry

exist within a set of OIC wide special economic zones/ regions.

E.g. OIC-wide Pharmaceutical Cluster

TURKEY

Dubai

INDONESIA

Malaysia

Amman

Saudi Arabia

Syria

Karachi

Palestine

Cairo

• Zuellig Pharma Bhd, Malaysia

• Tabuk Pharmaceutical, Saudi Arabia

• Egyptian Int. Pharma. Ind. Co., Egypt

Construction Srvcs.

Auto Manufacturing

Travel/ Logistics

Iran

Select Corporations:

Telecom/IT, Education,

Textile, Defense, Food..

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DS OIC-wide Food & Agriculture Cluster

TURKEY

INDONESIA

MALAYSIA

Morocco Pakistan

KSA

Iran

Kazakhstan

Nigeria

UgandaIvory

Coast

Egypt

Tunisia

UAE

Source: DinarStandard OIC Clustering Model Analysis - 2011

Jordan

COUNTRY EXPORTS

Indonesia $19,856,280

Malaysia $16,967,888

Turkey $10,701,261

Côte d'Ivoire $4,853,966

UAE $3,276,778

Morocco $3,213,572

Pakistan $3,067,587

Egypt $2,819,462

COUNTRY EXPORTS

Nigeria $2,430,160

Kazakhstan $1,642,431

Tunisia $1,370,454

Uganda $1,364,879

Iran $1,297,363

Cameroon $1,123,178

Jordan $1,035,505

Saudi Arabia $1,017,534


Savola Group, Saudi Arabia

Indofood, Indonesia

Felda Hold., Malaysia (Priv.)

KL Kepong Berhad, Malaysia

Turkiye Seker, Turkey (Govt.)

PPB Group, Malaysia

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DS OIC-wide Food & Agriculture Cluster

TURKEY

INDONESIA

MALAYSIA

Morocco Pakistan

KSA

Iran

Kazakhstan

Nigeria

UgandaIvory

Coast

Egypt

Tunisia

UAE

Source: DinarStandard OIC Clustering Model Analysis - 2011

Jordan


Koc Group, Turkey (Congl.)

Group ONA, Morocco, (Congl.)

Sime Darby, Malaysia

Astra Intl, Indonesia (Congl)

Ulker, Turkey

IOI Group, Malaysia

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Food & Agriculture Ecosystem - Sub-Sectors

Animal & Animal Products (OIC 4% of Global exports)*

Vegetable Products(OIC 13% of Global exports)

Food processing/manufacturing(OIC 7% of Global exports)

Live animals Live trees, plants; bulbs, roots… Preparations of meat, of fish…

Meat and edible meat offal Edible vegetables… Sugars and sugar confectionery

Fish… Edible fruit, nuts… Cocoa and cocoa preparations

Dairy produce; birds' eggs; honey… Coffee, tea, maté… Prep.s of cereals, flour, milk…

Other Products of animal origin... Cereals Prep. of vegetables, fruit, nuts...

Oil seeds and oleaginous fruits… Miscellaneous edible preparations

Lac; gums, resins… Beverages

Vegetable plaiting materials… Residues and food industry waste

Vegetable fats and oils…Service Side

Food service & catering (restaurants, cafes and hotels, hospitals, etc)

Food retailing & wholesale (supermarket, etc)

Food logistics

R & D, Marketing, Financial services, Regulation, Education

* 2009 ITC – World Bank Exports Data

20* OIC - Organization of Islamic Conference, 57 member countries

And the earth hath He appointed for His creatures

Wherein are fruit and sheathed palm trees,

Husked grain and scented herb. Which is it of these

favors of your Lord that ye deny?

Qur'an 55:10-13

OIC Industry Cluster – Value Chain

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OIC Industry ClustersIndustry Sub-sectors

Sub-Sector Value Chain

Halal Value Chain

Alliances

Raw

Inputs

Marketing DistributionEnd

CustomerProduction/

Operation

New Growth

Markets

Investment

Opportunities

Objective

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1. OIC* Demographic







Opportunity: Food & Agriculture Companies

1. Look at OIC markets in your sector for:

Growth opportunities.

Halal food value chain

2. Cluster based M&A, technology transfer,

and J/V opportunities

3. Evaluate opportunities at the “Bottom of

the pyramid,” everybody else is doing it.

4. Increased productivity & global

competitiveness

Innovations & Technology - Solving problems/

needs..

Branding & Marketing (German automotive;

Grameen)

OIC Food & Agri Industry Cluster

Opportunity: Investment Firms

1. Food Sector Market Investments - SAMI

Index

2. OIC Food & Agri Cluster - Investment

pipeline

3. Private Equity/ Venture Capital: Majority of

industry players are not on the Public

markets. Private conglomerates, SME‟s.

4. Sharia Compliant PE Funds: Eg.US$1.3bn

Shari‟ah-compliant fund by UK-based

investment company cru Investment

Management, which focuses on commercial

agriculture in Africa. These investments by cru

expect not only strong returns for investors, but

also some much-needed investments in

agriculture in Sub-Saharan Africa.

OIC Industry Clusters

Opportunity: Investment Firms

• Islamic capital needs to

look at the „Halal‟ food

sectors, with long-term (5-

10yr) investment horizon to

build sustainable brands

(5x-15x returns/ 25-50%

IRR in food industry)

• Investors need to do

homework and due

diligence (visit plants/

operations) and have

industry specialist on team.

Mergers/ Acquisitions

Corporate Investments

Angel/VC

Opportunity: Major Initiatives

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1. OIC Food & Agri Clusters Initiative (as corporate

alliances; multi-lateral initiatives; industry body

initiatives)

Optimizing Halal food value chain of players

Incubation centers (by sub-segments) around

strength // Formal & informal linkages with OIC

cluster of opportunities// develop global successes

Consumer awareness campaigns

Partnering with global values based certification

organization; Fair-trade, organic, going green, etc..

Summary


1. Needs: Investment, Productivity, Values




1. Market expansion

2. OIC food & agri cluster investments

3. Major initiatives

He said: “The son of Adam does not fill any vessel worse

than his stomach. It is sufficient for the son of Adam to eat a

few mouthfuls, to keep him going. If he must do that (fill his

stomach), then let him fill one third with food, one third with

drink and one third with air.”

Narrated by al-Tirmidhi (1381), Ibn Maajah (3349); classed

as saheeh by al-Albaani in al-Silsilah al-Saheehah (2265).

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Business Plan Summary

CONFIDENTIAL

Business Media Research Advisory

Muslim Lifestyle

Market

Islamic

Finance

OIC

Industries

Growth Strategies for

Emerging Muslim

Markets

W: advisory.dinarstandard.com

http://www.dinarstandard.com/