Tuesday, August 19, 2014

The New Economic Pillar -- Indoor Farming

A reported dated 3rd Aug 2014 on Electronics giant Panasonic wants Singaporeans to eat its veg might have caused little attention to most in Singapore but this piece of news could potentially turn into a new form of economic pillar for Singapore.

Singapore with its limited land space has basically heavily relied on import for its foods (vegetables and meats) despite there is still a small community of agriculture activity within the island but those locally produces are insufficient to support the whole population of Singapore.  Like what stated in the report, "Singapore produced nearly 22,000 tonnes of vegetables in 2013, compared with a little more than 17,000 tonnes in 2004, according to the Agri-Food and Veterinary Authority. Last year it imported 514,574 tonnes of vegetables."  That is to say almost 96% of the vegetable the population consumed was imported.  The downside of heavily relying on imported foods is none other than the relatively higher price a consumer has to pay (Hong Kong imported Chye Sim costs 50% more than what locally produced and costs slightly more than a can of coca cola).  This will result in elevated inflation nevertheless.  Though Singapore's policy to curb inflation is to strengthen the SGD but that could not be the most effective way either.  Should SGD strengthen too much it will mean foreign investment will find it more expensive to invest in Singapore as compared with regional nations.  The driving away foreign investments will do no good to Singapore economy as a whole too.  As such, accepting higher inflation is probably the current mean.  Should one income increment is not rising inline with rising inflation, that will not do any good either in the long run.  Think of why CPF minimum sum has to increased drastically every year ? One of the reason given was people live longer but as a nutshell, the rising inflation (to the future), the inability to get higher CPF return relative to inflation all played a part.

Should one recalled, Singapore was one of the first few nations that was sent into recession (deep one) in the 2008 global financial crisis.  The reason was the open economic model of Singapore, there isn't any defensively economic pillar in the model to cushion the crisis.  Agriculture sector is definitely one of those defensive pillar of any economic model.  During any economic crisis, the fundamental mean to get the economy back on track is none other than to spend.  The money circulating domestically involving agriculture will be the perfect solution to that.  For the case of Singapore, the lack of agriculture (domestically) will deprive Singapore one of the best solution to counter economy downturn.  In a way, the lack of agriculture is like missing an important pillar in the nation economic model.  Imagine if 96% of the vegetable was locally produced rather than imported, will Singapore still the first few nations that went into recession in 2008 ?

There are reasons why Singapore has to give up its agriculture, one of those was due to the limited land space.  Singapore has numerous offshore islands (Pulau Ubin, Pulau Tekong, etc) and ain't those islands which mostly unused (with some mainly used for military purpose) not be able to use for agriculture ?  Another reason was due to the industrialization in the 60s which pushing people to be educated so that they were able to take on skilled jobs causing most unwilling to be farmers (low skilled and labor intensive) anymore.  That sound like the very reason for the lack of agriculture in Singapore.  However, with what Panasonic has been doing in the article, using technology (vs the traditional method) to grow vegetable, thing will be different now.  Growing vegetable might not be seeing as lowly skilled, labor intensive anymore and could even be seen as "white-collar" job.  Another advantage of that is agriculture could bring stability to the job market.  The relying on foreign investments can lead to creation of jobs and also loss of jobs based on economic cycle; economy grows attracts foreign investments thereby creating jobs but when economy dips foreign investments withdraw will cause retrenchment of jobs.  Agriculture being defensive in nature (to economy) will always need the manpower regardless of good or bad economy cycle thereby supporting the job market.  There is a potential that Singapore can once again domestically produce majority of the agri-food and not heavily relying on import.  Singapore can think of regaining that defensive economic pillar that was lost.  Isn't that good for Singapore economy in the long run ? 

The prospect of indoor farming is bright but unfortunately there remains some downside to it.  Firstly, the setup and operation costs of indoor farming is never going to be cheap as compared to the traditional farming.  This will result in higher price of the vegetable being sold (could be still lower than those imported but definitely higher than those locally produced from traditional farming).  Secondly, the variation of the vegetable being produced is another concern.  Can the technology assisted indoor farming able to match what the tradition farming is capable of producing all the different kind of vegetable ?  For Singapore to wholly relied on the indoor farming to produce the amount of vegetable to serve the whole population might not be possible but using that to reduce reliance of imported (50% imported and 50% locally produced from indoor farming) could benefit the nation economy in certain perspective.

Overall, the idea and the technology might not be mature enough presently but that could change in the future when the technology get more mature.  This is an area that is worth monitored and studied and from investment perspective (investing in company that does indoor farming) that could be the next golden opportunity for Singapore.


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