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Spain: U.S. ag-tech company Agro.Club collaborates with Spanish neo-bank Crealsa to digitize financing in agriculture

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Spain: U.S. ag-tech company Agro.Club collaborates with Spanish neo-bank Crealsa to digitize financing in agriculture

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According to the surveys conducted among Spanish farmers, high production costs and low selling prices are the central problems for them. As the research states, more than 70% of Spanish farmers applied for financing in 2017, which is substantially higher than the EU-27 average of 30%. While purchase of machinery, equipment and facilities turned out to be the main purposes for bank loans, working capital financing is still an underserved need.

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Acequia, part of a network of thousands of kilometres of irrigation channels created by Muslim peasant farmers more than a thousand years ago.

The MemoLab project is restoring the region’s extraordinary hydrological network at a time when the climate crisis is exposing Spain to prolonged periods of drought and intensive farming is putting extreme pressure on water supplies.

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igh in la Alpujarra, on the slopes of the majestic Sierra Nevada in Andalucía, the silence is broken only by the sound of a stream trickling through the snow. Except it is not a stream but an acequia, part of a network of thousands of kilometres of irrigation channels created by Muslim peasant farmers more than a thousand years ago.

The channel begins at an altitude of 1,800 metres (5,900ft) and, fed by the melting snow, for centuries supplied water to the village of Cáñar and beyond until it fell into disuse in the 1980s through the gradual depopulation of the area.

The Islamic agricultural revolution was the first green revolution. They transformed the way water is used

José María Martín Civantos

Now, it is flowing again thanks to a project devised by the laboratory of biocultural archaeology at the University of Granada and backed by local and European funding. With the help of volunteers, the MemoLab project is restoring the region's extraordinary hydrological network at a time when the climate crisis is exposing Spain to prolonged periods of drought and intensive farming is putting extreme pressure on water supplies.

When Arabs and Berbers colonised Spain early in the eighth century, they brought techniques in water conservation acquired over centuries in the Middle East. "The Islamic agricultural revolution was the first green revolution. They brought together techniques and knowledge about water, soil, plants and also how snow behaves," says José María Martín Civantos, an archaeology professor at the university and the driving force behind the project. "They transformed the way water is used in the Mediterranean."

The irrigation channels control the flow of water, reducing runoff and allowing it to be absorbed and stored in the ground. Photograph: Sarah Davison

The techniques introduced by the Muslims allowed for more agricultural diversity, with crops such as sugar cane and citrus fruits introduced.

"Involving people in the creation of these irrigation systems was a way of assimilating the existing population, who could see the advantages," adds Civantos.

Rain comes to the Mediterranean in brief, torrential bursts, with the result that most of the water is lost as it runs off into rivers and the sea. The genius of the acequia system is that by controlling the flow of the water, whether from rain or snowmelt, it reduces runoff, while at the same time allowing water to be absorbed into the land to replenish the aquifers in what is literally a trickle-down effect.

Civantos describes this as "sowing water". Rather than diverting water towards specific crops, the idea is to "soak the mountain" so that water can be stored in aquifers to be used in times of drought.

"The basic requirement for the system to work is that the channel isn't too permeable and has a gradient that maintains the correct flow of water. Then you need a community of people to maintain it," says Sergio Martos-Rosillo, a geologist involved in the project.

A community of people helps to maintain the irrigation network. If the channels become blocked, water cannot reach lower areas. Photograph: MemoLab

"The system is efficient, the aquifers get replenished and no technology is required," he says, adding that the revival of similar techniques is being explored in several Latin American countries, including Peru, and there is also interest from California where modern irrigation techniques have become unsustainable.

The system in Spain "has been in use for over 1,000 years, proving its adaptability", Martos-Rosillo says. "It's much more manageable and adaptable than building a dam and much more resistant to climate change."

Cayetano Álvarez, president of the community of irrigators in Cáñar, is in no doubt about the impact the project has had on the village. "Everyone is obliged to maintain the channels on their land," he says. "This project has made a big difference, but there are abandoned acequias in many other villages nearby."

The teardrop spring at Alfacar is supplied from an aquifer and by using ancient acequia it supplied water to the medina of Granada, 8km away. Photograph: Sarah Davison

The system is integrated and if land is abandoned and channels left to clog up, the water cannot flow past the blockage. So every spring, the university and villages organise groups of volunteers to clear obstructions from the acequias.

"It is not just a matter of clearing away leaves and mud. We also consult with local people about how to lay the pieces of slate that line the acequias, " says José Antonio Palma García, who has been volunteering for five years.

"I feel good doing this work. I feel like I am giving something back to the earth. I also meet people I'd never normally meet - we're like a big family."

On the other side of the sierra lies the village of Alfacar, high above Granada, close to where it is widely believed fascists murdered the poet Federico García Lorca at the start of the civil war in 1936. It is also the site of a brick-walled pool of clear mountain water known as the teardrop spring.

"It's called that because of its shape," says Elena Correa Jiménez, a researcher on the project. "The spring is supplied from an aquifer and the acequia was created 1,100 years ago to supply water to Albaicín, the medina of Granada, 8km [five miles] away."

MemoLab has restored much of the acequia and, although it doesn't reach Albaicín, it now irrigates the university's gardens.

Civantos says one of the challenges of the project was trying to recover collective knowledge that was never written down. Due to the Catholic reconquest of Islamic Spain and the expulsion of the Muslim population early in the 17th century, much of this knowledge was lost.

"People don't think peasant farmers could devise anything this complex," Civantos says. "The Romans built aqueducts and other waterworks but it was always for the glory of the state. This work was done so ordinary people could survive.

"Recovering this system involves recognising an important part of our heritage. Muslim Spain was primarily an agrarian society.

"You can't understand the glory of Córdoba or Granada without understanding that what lay behind it was the wealth created by a form of agriculture that was much more advanced and productive than elsewhere in Europe."
Find more age of extinction coverage here, and follow biodiversity reporters Phoebe Weston and Patrick Greenfield on Twitter for all the latest news and features

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Spring time: why an ancient water system is being brought back to life in Spain

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igh in la Alpujarra, on the slopes of the majestic Sierra Nevada in Andalucía, the silence is broken only by the sound of a stream trickling through the snow. Except it is not a stream but an acequia, part of a network of thousands of kilometres of irrigation channels created by Muslim peasant farmers more than a thousand years ago.

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In Ethiopia, where agriculture accounts for one-third of its GDP and more than seven in 10 Ethiopians depend on income from agriculture, the authors speculate that disruptions from climate change could be devastating...

Notably, Ethiopia is the top coffee producer in Africa

and the 10th-largest in the world, and decreasing precipitation and rising temperatures may exacerbate the probability of a 25 percent or greater yield decline for Ethiopian coffee. Considering coffee is the country’s

most valuable export crop, deriving more than one-third of the country’s export earnings, McKinsey analysts conclude that the economic impacts of climate change on both wheat and coffee in Ethiopia will detrimentally affect smallholder farmers, downstream sectors (trade and food processing), and the broader economy.

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Key business models
1. Farmers advisory
2. Peer-to-peer lending
3. Traceability
4. Digital marketplaces
5. Mechanisation

To be adopted…
• Mobile / internet connectivity
• Artificial intelligence (AI)
• Machine learning (ML)
• Cloud computing
• Internet of Things (IoT)
• Blockchain / Distributed Ledger Technology (DLT)

The ecosystem…
• Digital infrastructure
○ Agricultural data
§ Farmer registries
§ Soil maps
§ Weather
§ Agronomy
§ Pest and disease surveillance
○ Digital hardware
§ Drone technology
§ Satellite / GIS
§ Sensors
§ Soil diagnostic tools
○ Digital software
§ Data capture tools
§ Field agent management tools
§ Blockchain platforms
○ Digital application areas
§ Advisory services
§ Market linkages
§ Financial access
§ Supply chain management
§ Macro agri-intelligence

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Food security is an important goal for Indonesia, and since the introduction of the Food Law of 2012, the country has made good progress in staple food production. However, a World Bank report pointed out that overall food security performance-i.e., the availability, affordability, and (nutritional) quality of food-is mixed. To date, food security policies have aimed at improving availability; going forward, the policy focus should shift to enhancing affordability and nutritional quality. The COVID-19 crisis has highlighted weaknesses of the agri-food system in the country, but it also brings an unprecedented opportunity to transform the system.

The traditional agriculture sector in emerging markets is being transformed by digital technologies and can be viewed from the lean startup lens-"think big, act fast, start small". I delved deeper into Indonesia in my chapter in the recent book Breakthrough: The Promise of Frontier Technology for Sustainable Development. "AgriTech" uses digital technology to improve agricultural yields and profitability for smallholder farmers.

Emerging markets such as Indonesia are developing a dynamic and vibrant AgriTech ecosystem in five key business models-farmers advisory, peer-to-peer lending, traceability, digital marketplaces, and mechanization. Increased investment in agriculture to modernize food systems and make them more efficient is key to improving the country's food production. This will also enable smallholder farmers to improve productivity and earn more income.

Facilitating and Promoting Agriculture Digital Transformation to Drive Food Security

Agriculture is the least digitized sector in Indonesia, and as a result, productivity gains and development opportunities are left untapped. The digital transformation of agriculture involves the adoption of digital technologies such as mobile/internet connectivity, artificial intelligence (AI), machine learning (ML), cloud computing, the Internet of Things (IoT), and blockchain/Distributed Ledger Technology (DLT) to enable new business models that can help improve agricultural yields, efficiency, incomes, and profitability. Moreover, it will require an innovation culture mindset shift to attract a new generation of farmers and entrepreneurs. To operationalize and take full advantage, a "digital agriculture ecosystem" must be developed, which includes:

Digital infrastructure, such as agriculture data (e.g., farmer registries, soil maps, weather, agronomy, pest and disease surveillance); digital hardware (e.g., drone technology, satellite/GIS, sensors, soil diagnostic tools); and digital software (e.g., data capture tools, field agent management tools, blockchain platforms)

Digital application areas, such as:

Advisory services: dissemination of information to improve farming techniques and promote new technology

Market linkages: facilitating sales between farmers and buyers

Financial access: provision of finance to increase farm productivity or profitability

Supply chain management: tracking and managing supply chains to improve profitability through certification and traceability

Macro agri-intelligence: generating and/or disseminating macro data to stakeholders

To develop the digital agriculture ecosystem, three critical factors are needed: data, innovation, and partnerships between multiple stakeholders in the public and private sectors. The agriculture digital transformation will leverage institutional innovation to foster crossfertilization of knowledge and productive partnerships, catalyzing data sharing, and the experimentation and testing of disruptive technologies. It will scale proven solutions through national-level engagements for an efficient, equitable, and environmentally sustainable food system.

The digital transformation of the agriculture sector in other emerging markets can provide key lessons that Indonesia can adapt to its local context. Traditional ways of bridging the yield gaps-for example, by applying more fertilizer and pesticides and teaching farmers good agricultural practices-are not sufficient. A transformation in agriculture is needed where data can lead to better, timely, and actionable knowledge. The influence of weather, soil, crop reaction to conditions, and small production plots make it difficult to develop universal solutions.

How Indonesia is Digitally Transforming the Agriculture Sector

Technology can be a driver of continuous growth. However, examples of digital agriculture public-private partnerships in Indonesia are still limited. Hence, building strategic partnerships with private businesses, in the form of an "Innovation Hub", can use data to unlock the full potential of technology-enabled transformation in agriculture.

There are four key characteristics of an Innovation Hub that would be essential to offer a positive environment for the development and growth of AgriTech startups and encourage the adoption of digital technologies across the agriculture value chain:

1. Cross-sector development: The linkage from AgriTech to FinTech platform by developing financing products that are well-suited for farmers' production cycle and by connecting AgriTech with commercial banks for additional sources of funding for lending to farmers.

2. Importance of strategic partnerships: AgriTech startups have expanded the network of farmers by engaging with new agribusiness partners such as government and business-to-business (B2B) relationships to work directly with farmers. They have also expanded last-mile connections to customers in the supply chain and logistics covering the first mile, mid mile, and last mile.

3. Building resilience post-COVID-19 to address risk and challenges: Strengthening the firm's risk management platform while helping smallholder farmers such as the contactless transaction and the use of technology such as using IoT sensors to measure crop yields.

4. Capacity Building and Innovation: Introducing climate-smart agriculture to smallholder farmers to encourage sustainable agricultural practices in growing more food at lower cost through innovative practices that produce higher quality crops at, and addressing high-cost items such as efficient use of fertilizers and irrigation for the types of soil.

Various AgriTech business models have emerged globally to address the main challenges smallholder farmers face. Indonesia is an example of what developing countries can hope to achieve. The AgriTech startups are already making inroads in shaping the agriculture value chain in Indonesia, much in the same way that Fintechs are transforming the financial services sector. Investing in Data and Innovation ecosystem s could attract more young innovators in agriculture.

Together with enabling regulations and increased investments in infrastructure, digital technologies will be the key enabler to address food security, reduction in food wastage, sustainable farming, and climate crisis. The establishment of the Innovation Hub in Indonesia could bring together multiple stakeholders in the agriculture value chain to share data, foster innovation, provide investment, mentoring, and capacity building for young startups. The hub's success will be dependent on building partnerships between the public and private sector and making sure that regulations can foster innovation while mitigating potential risks. More technological innovation in agriculture is needed today. This is a global challenge and the time to act is now. In the spirit of the lean startup mindset: Let's think big, start small and act fast.

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The digital transformation of agriculture in Indonesia

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Food security is an important goal for Indonesia, and since the introduction of the Food Law of 2012, the country has made good progress in staple food production. However, a World Bank report pointed out that overall food security performance-i.e., the availability, affordability, and (nutritional) quality of food-is mixed.

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United States: Indo-Pacific Economic Framework

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United States: Indo-Pacific Economic Framework

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https://www.csis.org/analysis/regional-perspectives-indo-pacific-economic-framework
"Some countries viewed food security and food systems resilience cooperation as promising but also saw agriculture as an area where the United States would inevitably try to eliminate sensitive import restrictions."

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April 11, 2022

The Issue

The proposed Indo-Pacific Economic Framework (IPEF) is the Biden administration's answer to questions about the United States' economic commitment to the vital Indo-Pacific region. For this initiative to succeed, it must address concerns among regional partners about the framework's form, function, benefits, inclusivity, and durability. Based on conversations with representatives from over a dozen regional governments, this brief summarizes Indo-Pacific perspectives on the IPEF. The U.S. government can bolster its chances of securing regional buy-in for the IPEF by:

Offering more meaningful incentives for countries to join the initiative and make binding commitments;

Aiming for inclusivity beyond close allies and partners to attract countries from South and Southeast Asia and across the Pacific;

Breaking out digital negotiations as a separate pillar of work to secure a high-standard regional digital economy agreement;

Demonstrating the framework's durability by seeking greater congressional support for the initiative and offering sustained capacity-building support in the region; and

Centralizing coordination through a single high-level coordinator, either a senior White House official or designated cabinet officer, and clarifying the role of key U.S. agencies.

Introduction

In October 2021, President Biden proposed an "Indo-Pacific economic framework" as the centerpiece of his administration's economic strategy toward the critical region. Over the following several months, administration officials have worked to flesh out the contents of the initiative and to consult widely with regional allies and partners as well as domestic stakeholders and experts.

Public details remain scarce, but the administration has now made clear that the IPEF will consist of four "pillars" of work: (1) fair and resilient trade (encompassing seven subtopics, including labor, environmental, and digital standards); (2) supply chain resilience; (3) infrastructure, clean energy, and decarbonization; and (4) tax and anti-corruption. Work on the first pillar will be led by the Office of the U.S. Trade Representative (USTR), while the other three pillars will be overseen by the Department of Commerce. The administration reportedly intends to launch the initiative with interested countries later this spring, with negotiations on the respective pillars to begin some months later and agreements to be made within 18 months-possibly ahead of the U.S.-hosted Asia-Pacific Economic Cooperation (APEC) Leaders' Meeting in November 2023.

In January of this year, the CSIS Economics Program and the CSIS Scholl Chair in International Business issued a report entitled Filling In the Indo-Pacific Economic Framework, offering constructive ideas on how to make the IPEF credible, durable, and supportive of U.S. commercial and strategic interests in the region. One of the central arguments of that paper was that a successful framework would require a balance between ambition (i.e., winning binding commitments to U.S.-preferred rules and standards) and inclusivity (i.e., persuading a wide range of partners in the region that the initiative will generate tangible benefits for them).

To achieve that balance, the Biden administration will need to listen and be responsive to the views of allies and partners in the Indo-Pacific region. That is the purpose of this brief. Between January and March 2022, the CSIS Economics Program consulted with a broad array of Indo-Pacific governments to hear their views about the IPEF and what they considered to be the necessary elements of a successful initiative.

Recurring Themes

During this study, the authors conducted individual and group interviews with representatives from over a dozen regional embassies in Washington, D.C., covering a wide range of advanced and developing countries from East, Southeast, and South Asia as well as Oceania. The authors also consulted with government representatives in regional capitals; U.S. diplomats in the region; and current and former U.S. government officials from the National Security Council staff, Departments of State and Commerce, and USTR. From those conversations, several key themes emerged:

U.S. Engagement Welcome

Regional partners unanimously welcomed the announcement of the IPEF as a sign of renewed U.S. economic engagement in the Indo-Pacific region, after several years on the sidelines. In the words of a government official from an advanced economy in the region:
We have benefitted from U.S. engagement in Asia since World War II. We welcome the IPEF and its inclusion in the Indo-Pacific Strategy. We see this as an opportunity for the United States to lay out an affirmative economic strategy that complements its security presence in the region.
Representatives from all countries interviewed expressed their support for the overall content of the framework and their government's interest in most or all of the topics initially outlined. However, many countries, especially members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), characterized the IPEF as a second-best option to the United States joining the CPTPP or a similar comprehensive, high-standard regional trade agreement. While supportive of the IPEF as a standalone initiative, several countries expressed hope that it would be a first step toward the United States eventually rejoining such an agreement.

Regional partners unanimously welcomed the announcement of the IPEF as a sign of renewed U.S. economic engagement in the Indo-Pacific region, after several years on the sidelines.

A Preference for Inclusivity

There is broad consensus from regional governments that the IPEF should be as inclusive as possible. Each country from the region interviewed for this project noted that a successful IPEF would need to include a diverse set of countries-geographically, economically, and developmentally. Some countries consulted said that they did not want to see the IPEF become an "insiders' club." In the words of an embassy official from one Southeast Asian country:
In order for the framework to be successful, it should be inclusive. . . . It is better to reach out to all Indo-Pacific countries rather than singling some out. This could defeat the [framework's] purpose by being too choosy.
It is widely expected that close U.S. partners, such as Japan, the Republic of Korea (ROK), Australia, New Zealand, and Singapore, will be included in the IPEF. These countries have already indicated a public willingness to join, and their alignment with the United States on rules, standards, norms, and economic policies makes these partners most likely to fulfill commitments under this new framework. However, even among this group of advanced economies, interviewees repeatedly and forcefully noted that a successful IPEF cannot only be made up of "the usual suspects." These partners view the success of the IPEF as hinging on the extent to which the United States can attract developing countries from Southeast Asia, South Asia, and the Pacific.

Interviews with officials from governments of the 10-country Association of Southeast Asian Nations (ASEAN) revealed a clear preference for the United States to invite all ASEAN countries to join the IPEF. At the same time, there was realism about the likelihood of this happening. All recognized that political and human rights concerns rule out the United States inviting Myanmar under current conditions. The Biden administration has signaled little interest in inviting the three smallest ASEAN economies-Laos, Cambodia, and Brunei-while offering no clear rationale for why these three countries are not eligible. ASEAN interviewers seemed resigned to the likelihood that the administration would invite, at most, only the six largest ASEAN economies. Privately, administration officials initially signaled a focus on just four of these-Indonesia, Vietnam, Malaysia, and Singapore-again with no clear explanation as to why Thailand and the Philippines were less worthy of inclusion.

Partners view the success of the IPEF as hinging on the extent to which the United States can attract developing countries from Southeast Asia, South Asia, and the Pacific.

India, the largest country in the Indo-Pacific considered for inclusion in the IPEF, is studying the benefits of participation but appears to have a preference for bilateral economic forums with the United States, as well as for smaller plurilateral arrangements, such as the Quadrilateral Security Dialogue ("the Quad"). Some East and Southeast Asian countries may feel reluctant about India's inclusion in the IPEF given lingering frustrations over India's withdrawal from the Regional Comprehensive Economic Partnership (RCEP) negotiations, after slow-walking negotiations over nearly eight years. Japan and Australia, however, see value in India's inclusion for strategic reasons-the same reasons that those two nations are enthusiastic members of the Quad. Although India may not be an ideal participant under current conditions, its exclusion from the IPEF would raise questions about how "Indo" the Indo-Pacific Economic Framework truly is.

The IPEF's inclusion in the United States' broader Indo-Pacific Strategy might theoretically allow countries not typically included in past multilateral economic negotiations in Asia to now participate. However, as of late March, there was no indication that the Biden administration had approached countries such as Bangladesh, Nepal, Papua New Guinea, or Timor-Leste, nor any Pacific Island nations, about possible IPEF membership. Moreover, the administration continued to signal-again, without explanation-that it had no plans to invite Pacific-facing countries in the Americas-Canada, Mexico, Peru, and Chile-although all are CPTPP and APEC members and have been constructive participants in regional economic affairs.

Interviews with regional partners revealed one caveat to the desire for broad inclusivity. Most Southeast Asian countries are worried about the optics of China being excluded from the IPEF while simultaneously understanding the political and economic policy reasons for that exclusion. But under the assumption that the United States will not invite China to join the framework, several countries in both East and Southeast Asia expressed discomfort about Taiwan's possible participation. Despite recognition that Taiwan might be eligible on economic merit, there is clear concern that its inclusion would further politicize the framework and heighten China's opposition to the effort, thus forcing an unwelcome choice for regional partners between respecting either Washington or Beijing imperatives.

Unclear Form and Function

Partners in the region remain perplexed over what the IPEF is and what it seeks to do. The U.S. government is signaling to governments in the region that the framework is intended to be an affirmative partnership to promote shared economic interests. However, the Biden administration has portrayed the IPEF to domestic stakeholders as an initiative that will allow the United States to better compete with China in the region. As a result, some regional partners expressed concern that the IPEF is primarily a political endeavor meant to counter China, rather than a sincere and thoughtful economic policy integration initiative. This perception of an anti-China bent has a chilling effect on enthusiasm among certain prospective South and Southeast Asian participants who are aiming to deepen economic relationships with both the United States and China.

Uncertainty over function also extends to uncertainty over form. The U.S. government has explicitly stated that the IPEF will not be a multilateral trade agreement akin to the CPTPP. The question that follows from many regional capitals is: If the IPEF is not a trade agreement, what is it? Since it is presented as a multilateral initiative with multiple workstreams leading to concrete outcomes, this suggests that there could be parallel negotiations among up to a dozen regional governments over the 18 months envisaged for the process, with several agreements emerging along the way. This negotiating complexity is exacerbated by the fact that the IPEF is being co-led by two different agencies-USTR and the Department of Commerce-with additional agencies such as the Departments of State, Treasury, and Agriculture, not visibly involved in IPEF deliberations to date, potentially involved with specific pillars. Regional capitals feel the need to match this complex interagency dynamic on their end as well, adding negotiating and coordinating costs. In the words of an embassy representative from one Southeast Asian developing country:
We are unsure how the IPEF will be a value-add beyond existing regional architectures and bilateral engagement with the United States. The added costs of engaging multilaterally on the IPEF should be taken seriously, especially given the relative ease of addressing these issues in our bilateral channels with the United States.
Several countries also feel that their input is not respected by the U.S. government at present. Foreign and trade ministries in the region have familiarity with the process of negotiating trade agreements where their interests are explicitly and frequently sought in advance of and during negotiations. But officials in Washington, embassies, and Indo-Pacific capitals are unsure how, when, and with whom in the U.S. government they should engage on the IPEF. In absence of clear two-way communication, these countries see a "take it or leave it" offer to join the IPEF at launch rather than a "negotiation" mindset where the framework is cocreated among participants. The U.S. government has responded to that assertion by stating that countries can choose to join one or more pillars and will have agency in shaping each, even if they are not present at the IPEF's anticipated launch in the second quarter of 2022. But doubts remain.

Regional governments also have many outstanding questions about the way forward on the IPEF. What kind of negotiating process and timeline will the framework follow? What will be the defined outcomes? How will progress be measured? More details will inevitably emerge in the coming months, but these questions lingered among regional partners nearly half a year after the initiative was announced.

Many Asks, Few Offers-and Other Regional Options

In a typical trade negotiation, parties prepare "offers" and "requests." During a negotiation, offers, such as for greater market access, incentivize target countries to agree to requests, such as binding commitments to lower trade barriers or raise standards. Opposing interests are eventually resolved, and the compromise agreement that is negotiated balances what regional partners perceive they are giving up with what they perceive they are receiving. Although the design of the IPEF is not that of a traditional trade negotiation, this model for multilateral economic engagement nevertheless colors the views of regional partners, particularly if there is any intention of reaching enforceable and concrete outcomes. As a result, regional governments see the IPEF as a proposal with many U.S. requests, few U.S. offers, and a variety of credible regional alternatives to the framework that could provide more tangible benefits.

To most regional governments, the IPEF has many challenging asks. For example:

The seven issues under the "fair and resilient trade" pillar-labor, environment and climate, digital economy, agriculture, transparency and good regulatory practices, competition policy, and trade facilitation-are perceived by many regional governments as a laundry list of U.S. trade policy requests. Many partners worry that in some of these areas, particularly labor and digital issues, U.S. requests in the IPEF will go beyond or run contrary to partners' existing policies or force difficult political decisions at home.

Some countries are concerned that policies under discussion for the "supply chain resilience" pillar may include challenging requests to tighten policies on export controls and technology transfer, particularly toward China, or to relinquish the ability to maintain sovereign control over supply chains.

U.S. expectations for more ambitious carbon-reduction commitments under the "infrastructure, clean energy, and decarbonization" pillar worry some countries in the region that do not have sufficient financial and technical resources to achieve these more ambitious commitments on their own.

Many partners see the likely requests under the "tax and anti-corruption" pillar commitments as going beyond those already made under the United Nations Convention against Corruption (UNCAC) and other international arrangements.

Regional governments see the IPEF as a proposal with many U.S. requests, few U.S. offers, and a variety of credible regional alternatives to the framework that could provide more tangible benefits.

To practically all regional governments interviewed, prospective U.S. offers under the IPEF are not commensurate with these expected U.S. requests. Many Indo-Pacific governments remain particularly frustrated by the U.S. government's unwillingness to offer greater market access in the United States, a position that U.S. officials have reiterated again and again. In traditional trade negotiations, market access offers are usually the most attractive incentive for countries to accept U.S. requests for higher standards. While regional governments acknowledge that other incentives could theoretically be offered in place of market access-for example, increased official financing for infrastructure or decarbonization initiatives-they view current offers as limited or nonexistent. In the words of an embassy representative from another major Southeast Asian developing country:
The first thing we look for [in an agreement like this] is incentives and market access. This framework offers neither in its current form. We do not think there are offers in any of the pillars.
Several embassy representatives also noted the difficulty of ratifying economic agreements in their capitals given domestic political issues. While the United States intends the IPEF to take the form of an executive agreement (or agreements) not requiring congressional approval, other countries in the region may need to go through legislative approval processes to implement commitments made in the IPEF. Malaysia, in particular, is experiencing an uphill battle to ratify the CPTPP. In other cases, trade itself has become a hot-button electoral issue. Just as in the United States, credibly outlining the benefits of trade and multilateral economic engagement to domestic audiences in all partner countries will be essential for the IPEF to succeed. In the words of an embassy representative from a major Southeast Asian developing country:
For domestic constituents, we need "ammo" to convince stakeholders why our country would want to support this. Right now, the "ammo" isn't there.
Without meaningful offers that suggest tangible benefits for countries in the region, the United States has little more to offer prospective IPEF participants than a political commitment to improving its economic presence in the region. That might have been enough a decade ago, but today China is asserting itself as the economic center of gravity in the Indo-Pacific. New regional trade agreements such as the RCEP and financing mechanisms such as China's Belt and Road Initiative (BRI) offer Indo-Pacific countries a variety of options for their trade, supply chain, infrastructure, clean energy, and economic integration needs (see Figure 1).

Unlike a decade ago when the United States was negotiating the original breakthrough Trans-Pacific Partnership (TPP), regional governments assert that it is not enough for the United States merely to be economically engaged in the Indo-Pacific through an initiative such as the IPEF; rather, it must be engaged in a way that offers an attractive alternative commensurate with existing arrangements such as the CPTPP, RCEP, and BRI. From what they are seeing so far in the IPEF, partners are not convinced.

Doubts about Durability

In the words of an embassy representative from a close U.S. partner in the region:
The hardest challenge for the IPEF will be making it durable.
Regional partners are concerned about the IPEF's staying power given the volatility of U.S. domestic politics. The memory of strong U.S. leadership on the TPP, followed by an abrupt withdrawal from the agreement after presidential candidates Hillary Clinton and Donald Trump distanced themselves from it for domestic political purposes, still haunts many regional partners, as do the Trump administration's tariffs and general mercantilist stance. Although the Biden administration has softened U.S. trade rhetoric, many remain concerned over the continuation of some protectionist Trump-era trade policies. The Biden administration will need to create and sustain strong bipartisan support for the IPEF to insulate progress made on this agreement from potential electoral swings in 2022 and 2024.

Regional partners also have domestic politics that complicate prospects for the IPEF. Many countries face general elections over the next two years. First up is the Philippines, in early May, which could significantly shift the country's approach to engagement with the United States. This will be followed by general elections in Australia later in May, India in July, Malaysia in July 2023, and Bangladesh in December 2023. There is one upside opportunity: Yoon Suk-yeol's victory in the March 2022 ROK presidential election will likely make Seoul more willing to closely cooperate with the United States economically, though this could be tempered by opposition party control of the National Assembly.

Regional governments also seek sustained senior White House support for the IPEF initiative. There is concern among regional partners that the United States will repeat a familiar pattern of rolling out new regional initiatives but not following through over time. This concern is heightened by the fact that there is no single senior official in the Biden administration clearly identified as leading the framework. For the administration to make regional partners enthusiastic about the framework, it will need to address these various political and organizational questions about durability.

Perspectives on the Four Pillars

In surveying officials from Indo-Pacific governments, the authors also asked for perspectives on each of the IPEF's four pillars. To varying degrees, regional partners said that the four pillars and the topics within them are broadly aligned with the priorities of their respective governments, but with important caveats. Perspectives on each pillar are summarized below.

Fair and Resilient Trade

The trade pillar was revealed to be the most difficult for regional partners to digest. As noted, this pillar will encompass a wide range of topics, including labor, environmental, digital, agricultural, regulatory, competition, and trade facilitation issues. USTR, the lead agency for this portion of the framework, has made clear that it expects countries that sign up for participation in this pillar to be prepared to make commitments in all seven areas. USTR has also said that it expects all commitments agreed upon under this pillar to be binding under international law. However, without an offer of U.S. market access, many regional partners see this pillar as a laundry list of challenging U.S. requests with little tangible benefit for them.

Digital economy issues are an especially important component of the IPEF for many countries in the region. Advanced economies, such as Singapore, New Zealand, the ROK, Australia, and Japan, are highly incentivized to join the IPEF because of the digital component. An embassy official from one of these countries noted:
Digital cooperation is [our country's] top interest. We want the digital economy to be the centerpiece of the IPEF.
For these countries, the digital component presents an opportunity for the United States to align data, privacy, intellectual property, digital tax, and technology policies to foster a more open and interoperable market for advanced digital economies. Existing agreements in the region-such as the Digital Economy Partnership Agreement, the U.S.-Japan Digital Trade Agreement (USJDTA), the Singapore-Australia Digital Economy Agreement, and the Korea-Singapore Digital Partnership Agreement -all present models for what an IPEF digital economy agreement could look like, while also addressing emerging artificial intelligence, competition, and talent issues in the digital economy not covered by existing agreements.

However, to many less-developed countries in South and Southeast Asia, digital issues in the trade pillar may represent less of an offer and more of a request from the United States. Although all countries consulted for this project expressed interest in having digital issues included in the IPEF, some developing countries saw digital economy issues as a capacity-intensive area where they are reluctant to dive into detailed negotiations. As one official noted:
The digital economy in [our country] is growing but still very small. Our government has limited capacity for further commitments on tech regulation.
Many other countries were hesitant about making binding commitments on certain U.S. priorities embedded in other trade agreements such as the TPP and USJDTA. These include a prohibition on data localization requirements or a commitment to free cross-border data flows, which may run contrary to existing national policies and require changes to local laws. Below are some of the comments from these developing countries:
Our government is keen on improving the digital transformation. However, there are different standards in different countries in the region for the digital economy. A framework that would impose certain standards would not be helpful if they were standards not in [our country's] interest. There needs to be some real look at where current standards are in the region. We know what the United States wants [on digital standards]. There have been talks on this for a while. But those [digital] issues look different among Indo-Pacific countries. Digital is a slightly tricky issue [for our country]. . . . The way that the United States has framed cross-border data flows may not be suitable for [our country] per se. We would rather discuss bilaterally. We are not sure how much one could achieve with 7-8 countries talking digital. There are too many moving parts. Yes, the digital economy is a major priority for [our country]. But we need more of an explanation on privacy issues. Data privacy in Asia and data privacy in the United States may not be aligned. If [the IPEF digital discussion] is binding, [our country] needs to be worried. If [the IPEF digital discussion] is "building blocks," then we can engage further.
It was implicit that several of these South and Southeast Asian countries were concerned about digital standards being a roadblock to participation in the broader trade pillar. For these countries, the prospect of making binding commitments to adopt high U.S. digital standards without the promise of digital market access for e-commerce expansion was unappealing. However, many South and Southeast Asian countries were more open to being invited to discuss and shape nonbinding principles for the digital economy in exchange for capacity building, talent investment, and foreign direct investment assistance.

Most other issues under the trade pillar-labor and environmental standards, agriculture measures, regulatory practices, and competition policy-are also perceived by many Indo-Pacific countries as U.S. requests, not offers. There are also different levels of enthusiasm toward each. Some countries were very willing to work with the United States on labor-related issues, while others were distinctly not. Most countries felt positively about working with the United States on environmental issues, though the discussion often veered toward questions about what additional emissions-reduction requests the United States would make under the infrastructure, clean energy, and decarbonization pillar. Some countries viewed food security and food systems resilience cooperation as promising but also saw agriculture as an area where the United States would inevitably try to eliminate sensitive import restrictions.

When asked about potential tangible benefits under this pillar, many regional representatives cited trade facilitation. In particular, regional partners were interested in opportunities to improve access to the global markets for small and medium-sized enterprises (SMEs). But there were questions about what tangible actions the United States would offer in this area, and no country consulted saw any potential incentives that would make up for the lack of a market access component to the IPEF.

Supply Chain Resilience

The supply chain resilience pillar was frequently cited as appealing to potential IPEF participants but also as an area where many questions remained. The pillar meant something different to each country consulted. To some, supply chain resilience means a chance to bolster domestic manufacturing capabilities and jobs. To others, it is an opportunity to fix bottlenecks in healthcare, pharmaceutical, and other essential products prompted by Covid-19. To still others, this pillar offers an opportunity to partner on securing critical resources. And as mentioned earlier, there were questions about whether the U.S. intention was to align export-control and investment-screening regimes to prevent transfer of critical dual-use technologies to strategic competitors such as China.

For the United States, resilience has become synonymous with reshoring or "friend-shoring." As the U.S. government continues to encourage U.S. firms to rely less heavily on China in their supply chains, many developing Indo-Pacific countries see this as an opportunity. Several South and Southeast Asian developing countries expressed interest in working with the United States under the supply chain resilience pillar to leverage these trends and shift production to their countries. Advanced technologies, electric vehicles, and batteries were mentioned as promising targets for this cooperation. Exactly how the U.S. government would incentivize private companies to shift production to partner countries remains an open question.

For other countries interviewed, bolstering manufacturing capability is not the only draw of this pillar. In the words of an embassy official from a Southeast Asian country:
In the past, [our country's] adoption of supply chains has been a result of problems between the United States and China. However, the new challenge for us is supply chain disruptions from pandemics and global conflict. We want to promote resiliency. We want protections from disruptions.
The focus on sheltering supply chains from pandemics and geopolitics-induced disruptions was shared by several other South and Southeast Asian countries attempting to position themselves in a deglobalizing world. This would seem to create an opportunity for success in this pillar through efforts focused on emergency stockpiling, improving supply chain transparency for key items, agreeing not to withhold exports to IPEF members during times of shortage, and encouraging redundant investment in important industrial capacities (if ways can be found to make that economically feasible).

Infrastructure, Clean Energy, and Decarbonization

This is another potentially enticing pillar for regional partners. All three of the pillar's headline issues are perceived by most partners as aligning with their existing national priorities, and the first two are seen by many as offering potential tangible benefits. Several developing countries in South and Southeast Asia highlighted clean energy as a key item of interest in the IPEF. In the words of an embassy official from a Southeast Asian country:
Cheap clean energy is the most attractive offer. If this is to be realized, we will need a lot of climate funding and new technology and investment.
While renewable energy is now cheaper than fossil fuels in many cases, the start-up costs of increasing renewable energy production in a country are higher than relying on existing infrastructure, where carbon-intensive energy generation remains dominant. Regional partners would like to see the United States help close the gap through climate financing and expertise sharing. Several countries also welcome U.S. financial support in phasing out their coal sectors. Many would appreciate support in transitioning to electric vehicle-oriented transportation systems.

Infrastructure is another area in which U.S. support is welcome. U.S. financing, technical assistance, workforce development, and private-sector partnerships were mentioned by several countries as areas where the United States could support regional infrastructure development. Regional governments have been following U.S. involvement in the G7 Build Back Better World (B3W) initiative closely. Some see B3W and the Blue Dot Network as promising platforms for the United States to support high-quality infrastructure investment in the Indo-Pacific region, though skepticism remains about the funding and execution of these initiatives. The extent to which the United States can mobilize further capital, expertise, and labor from other donor countries in the region, such as Japan, Australia, New Zealand, and India, is also an issue that developing countries see as a test of U.S. economic leadership in the Indo-Pacific.

Governments in the region anticipate that the main request from U.S. negotiators in this pillar will be for countries to increase the ambition of their decarbonization commitments under the Paris Agreement, either in terms of scale or speed. While affirming their commitment to decarbonizing by mid-century, some developing country officials said that more funding and technical assistance from the United States is needed to achieve these results. A representative from one Southeast Asian country summed this up as follows:
To reach zero emissions by 2050, we will first need financial assistance. Second, we will need technological assistance. Third, we will need experiences to be shared from other countries. In an integrated world, the experiences from advanced countries will be important for us to tackle climate change [in our country].
Tax and Anti-corruption

Of the four IPEF pillars, the tax and anti-corruption one remains the least clear-and least attractive-to regional partners. Not included in the original White House announcement of the IPEF, this pillar was added in subsequent materials used to brief regional countries and domestic stakeholders. Details remain scarce about what exactly the focus of this pillar will be. One source of confusion is that the pillar will be led by the Department of Commerce, with no visible role for the Treasury or State Departments, which have traditionally taken the lead on tax and anti-corruption issues, respectively. While tax and anti-corruption issues resonate with most countries consulted, many view this pillar as likely to contain challenging requests and few offers.

When discussing this pillar, most countries interviewed first highlighted their support for the global minimum corporate tax agreement (GMCT) from the Organization for Economic Cooperation and Development (OECD). All IPEF target countries, apart from Sri Lanka, are parties to this agreement. Regional partners are confused as to what more the United States would like interested IPEF participants to do on corporate taxation beyond implementing the GMCT. With work on this initiative coordinated through the OECD in Paris, prospective IPEF participants see additional work on corporate tax issues within the IPEF as unnecessarily duplicative.

Anti-corruption issues present a greater challenge to regional governments. Target countries in the Indo-Pacific have Transparency International Corruption Perceptions Index scores ranging from "very clean" in the case of some advanced economy partners to "highly corrupt" in the case of some developing country partners in South and Southeast Asia. Of the latter, representatives from these countries candidly acknowledged that anti-corruption issues would either not be welcome in negotiations or would be challenging to discuss. Some representatives suggested encouraging their governments to move beyond UNCAC to embrace the principles and practices of the OECD Anti-Bribery Convention. In the words of an embassy official from one country in the region:
Anti-corruption is a place of discomfort for our country, particularly among our government officials after recent [U.S. actions].
Regional partners do not see any clear offers in the tax and anti-corruption pillar. Some officials speculated that this pillar might be of interest if the agenda covered bilateral taxation treaties, which mitigate double taxation of income. Currently, only 8 of the 24 countries in the Indo-Pacific region examined in this report have bilateral tax treaties with the United States; key U.S. targets for the IPEF, such as Malaysia, Singapore, and Vietnam, do not.

Finally, one Southeast Asian embassy noted that, of all the IPEF topics, anti-corruption was the one of least interest to their capital, but added that the poor optics of participating in all IPEF pillars except this one made them question participation in the overall initiative. Among the broader group of countries, a diverse range of advanced and developing countries expressed concern that the tax and anti-corruption pillar could threaten broader IPEF inclusivity.

Recommendations

The Biden administration has an opportunity to develop the IPEF into a credible and durable framework that reasserts U.S. economic leadership in the Indo-Pacific region and advances U.S. economic and strategic interests there. But the survey of regional views conducted for this report makes clear that this can only happen if partners believe there is something in it for them and that the United States is committed to long-term engagement in the region. The following steps are recommended to favorably shape regional perceptions, expand participation, and increase the IPEF's prospects for success:

1. Offer more meaningful incentives. The unwillingness to offer greater access into the U.S. market is a serious impediment to securing binding commitments from Indo-Pacific countries to the higher standards that the Biden administration is rightly seeking through the IPEF. The U.S. government must make other meaningful offers to partners within each of the four pillars. The areas of greatest interest to less-developed countries in the region appear to be enhanced trade facilitation, greater access to the digital ecosystem for SMEs, tangible development of more resilient supply chains, financial and technical assistance for the clean-energy transition, and increased investment in infrastructure. Relevant U.S. government bodies and facilities that support these areas financially or technically-including the U.S. Development Finance Corporation, U.S. Agency for International Development, and U.S. Trade and Development Agency-should be given the resources and mandate to make these offers credible. The Biden administration should work with other advanced partners in the region, such as Japan and Australia, to coordinate their offers in these areas.

2. Aim for inclusivity. As currently structured, the IPEF seems unlikely to appeal to many countries in the region beyond close allies and partners such as Japan, the ROK, Australia, New Zealand, and Singapore. The framework will be considered a failure if it cannot draw in at least two to three of the larger ASEAN emerging economies-Indonesia, Thailand, Vietnam, Malaysia, and the Philippines. The goal should be to attract an even wider group of countries from South and Southeast Asia and the Pacific (including Pacific-facing countries in the Americas). Rather than insisting that countries sign on to a predetermined agenda as a condition of joining the framework, the Biden administration should consider recharacterizing the four pillars as indicative of U.S. interests and invite countries to join a broader launch event-at which all participants are offered a chance to comment on and shape the agenda. Smaller groups of countries interested in more ambitious negotiations on parts of the agreed agenda could then break off into separate tracks or subtracks that need not be tightly organized by the four pillars. The broader group could share best practices and seek agreement on refined principles that would lay the groundwork for more targeted rulemaking and standard-setting efforts down the road.

Break out digital negotiations. Reaching agreement on U.S.-preferred rules for the digital economy is arguably the highest substantive priority for the United States in the Indo-Pacific region and for many of its partners there. The current inclusion of digital issues as just one portion of the broad "fair and resilient trade" pillar runs the risk that this critical part of the agenda gets bogged down and that partners do not see the clear trade-offs that exist in the digital space alone. There appears to be a broad appetite in the region (and among some U.S. congressional members) for a digital economy negotiation led by the United States and key partners such as Japan and Singapore. The Biden administration should prioritize this area by making it a separate pillar of the IPEF.

Demonstrate the framework's durability. As this survey of regional views confirmed, most Indo-Pacific partners are skeptical that the IPEF will enjoy the bipartisan support or staying power of a more formal trade agreement that ultimately wins congressional approval. To help counter these impressions, the Biden administration could seek a bipartisan resolution in Congress in support of the IPEF. It could also launch a series of events and workshops on specific topics under the framework, such as supply chains, infrastructure, and corruption, that draw in both government officials and the private sector from the United States and partner countries. But these and similar efforts will not offer the same sense of durability that an agreement approved by Congress would provide.

Centralize coordination. Indo-Pacific partners clearly remain confused about the complex architecture of the IPEF and the division of responsibilities for it in the U.S. government. As argued in CSIS's related January paper, "For the framework to be sustained and effectively implemented, there will need to be a single high-level coordinator, either a senior White House official or a designated cabinet officer." This paper reiterates that recommendation here. In addition, the White House should clarify the role of U.S. agencies that are critical to a successful economic strategy in the Indo-Pacific but have not been mentioned explicitly in the Biden administration's presentation of the IPEF to date-notably the Treasury and State Departments but also the U.S. government's development finance and development assistance operations. The president will also need to be personally involved in the effort to bring partners to the IPEF table.

Conclusion

There is a pressing need for affirmative U.S. economic engagement in the Indo-Pacific region. The Biden administration's Indo-Pacific Economic Framework is a good first step in that direction. However, a number of substantive and organizational questions will need to be addressed before the framework is seen as credible and durable by its intended audiences. This project's conversations with regional partners revealed that they are interested and invested in developing a successful IPEF with the U.S. government. If U.S. policymakers can address regional questions and critiques related to inclusivity, form, function, benefits, and durability, then the IPEF has a real chance at securing buy-in from the region and advancing U.S. economic and strategic interests in the world's most critical economic region.

Addressing regional concerns will be difficult, take time, and require U.S. policymakers to be responsive to requests from other partners. But failure of this framework is not an option. U.S. strategic and economic success in the region, as well as the mutual prosperity of all regional partners involved, will be worth the effort of building consensus behind this framework.
Matthew P. Goodman is senior vice president for economics at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Aidan Arasasingham is a program coordinator and research assistant with the CSIS Economics Program. Julianne Fittipaldi, CSIS Economics Program research intern, provided valuable research support. The authors would like to thank representatives from the wide range of countries across the Indo-Pacific region who generously offered us their time and insights. CSIS scholars also received valuable input from several current and former U.S. government policymakers and other experts, and we thank them for their counsel. The analysis and views in this brief are solely those of the authors. This brief is made possible through the generous support of the Japan External Trade Organization (JETRO).CSIS Briefs© 2022 by the Center for Strategic and International Studies. All rights reserved. are produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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Regional Perspectives on the Indo-Pacific Economic Framework

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Download the Brief The Issue The proposed Indo-Pacific Economic Framework (IPEF) is the Biden administration's answer to questions about the United States' economic commitment to the vital Indo-Pacific region. For this initiative to succeed, it must address concerns among regional partners about the framework's form, function, benefits, inclusivity, and durability.

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Uber-like platform for small-hold farmers to connect with tractor owners and owners of other expensive tools

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Hello Tractor is revolutionizing farming in Africa by connecting farmers to essential resources

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Hello Tractor CEO Jehiel Oliver is on a mission to the break the cycle of poverty faced by farmers in Africa by connecting them with those who own tractors and other fundamental farming tools.

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Context: livestock and commodity prices, drought, mouse plagues, floods; ag industry dominated by banks and government-backed schemes; additional element of risk
-DelayPay: loans for stock, machinery and feed, approved within 24 hours, 6 months to repay
-AgPay: aimed at cropping farmers, $50,000~$1 million approved within 48 hours, 6~12 months to repay
*Approvals made through AI and other systems on the basis of primary producer's balance sheets, cropping plans and history

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The buy now, pay later (BNPL) revolution has arrived for the agriculture industry, but opinions are split over the benefits of buying sheep or hay with deferred payments.

Buy now, pay later schemes have been advertised to farmers on social media

The industry says it's an alternative to capital for cash-strapped producers

Farmers are warned to seek independent advice before signing up

Australian Securities and Investments Commission (ASIC) research in 2020 found one in five customers were missing payments.

Social media advertisements by one company, DelayPay, promise easy money to purchase "sheep, lambs, or stud stock" for agribusinesses that are "cashflow tight".

The website of another company, AgPay, says it brings together agricultural skills with "deep expertise in finance".

AgPay managing director Ben Edney said the business was aimed at cropping farmers, with capital between $50,000 and $1 million approved within 48 hours.

BNPL arrangements allow consumers to buy and receive goods immediately from a merchant and repay the financial provider, such as AgPay, over six to 12 months.

"Banks are bureaucratic beasts. It takes a very long time to get approvals from banks, particularly regarding agricultural working capital," Mr Edney said.

"Our goal is to provide easy access for farmers to gain approvals to credit."

The loans are generally short term to allow for the purchase of inputs and must be paid back within 12 months.

BNPL schemes have been blamed for sending some Australians into a debt spiral.

But Mr Edney said his service did not put unknowing farmers at risk.

"We have no desire to create problems, in fact quite the contrary," he said.

"There are a number of applications we've had to decline because [they did not have] what we view as reasonable credit requirements."

Through artificial intelligence and other systems, approvals are made on the basis of the primary producer's balance sheets and their cropping plans and history.

DelayPay can approve loans for stock, machinery, and feed within 24 hours, which must be repaid in six months.

The ABC contacted DelayPay for comment.

Rising industry

David Galloway is the executive officer of the NSW Rural Financial Counselling Service, which covers central, western, and northern parts of the state.

With livestock prices sky high and commodities surging, he said some farmers and small businesses were struggling to re-enter the market following years of drought and other disasters like the mouse plague and floods.

He described BNPL as a new player in the agriculture industry, which is dominated by banks and government-backed schemes like the Regional Investment Corporation and NSW Rural Assistance Authority.

"It's relatively new but it's coming up. We're seeing more and more instances of it," Mr Galloway said.

The financial counselling service already has clients who have been caught out by BNPL.

An economist says BNPL short-term loans become riskier in the face of climate change.(ABC Rural: Melanie Groves )

While debt was common for agricultural enterprises, he cautioned producers before diving headfirst into the BNPL revolution, especially for assets such as stockfeed or animals.

"It adds another element of risk," he said.

"You're not only dealing with interest rates, penalty payments, you're then also hoping the livestock price holds.

"Really make sure you're going into it with your eyes open and are understanding of all the risks as well as the benefits."

Increased risk

RMIT economist Angel Zhong said, like any service, there appeared to be pros and cons.

The pros included "getting rid of a lot of paperwork and making the receipt of these payments seamless" but Dr Zhong said, "We do need to have some regulation in place to protect the farmers".

Dr Angel Zhong said there were pros and cons to BNPL.(ABC News: Peter Drought )

She warned these forms of loans could become riskier in the face of climate change.

"It is likely if you subscribe to BNPL services in agriculture you may not be able to pay these instalments on time and as a result you're charged penalty payments," Dr Zhong said.

In the case of AgPay, those penalty interest rates are anything up to 8 per cent.

The transparency of those figures has come under fire by Dr Zhong, who wants the BNPL industry better regulated by ASIC.

Providers are generally considered not to be regulated under the federal law that ASIC administers to set out obligations for responsible lending.

Many banks do not currently include BNPL obligations when approving loans "so you can easily increase your liability", Dr Zhong said.

Mr Edney supported the call for greater consumer protection.

Get the latest rural news

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The buy now, pay later industry moves in to target farmers

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The buy now, pay later (BNPL) revolution has arrived for the agriculture industry, but opinions are split over the benefits of buying sheep or hay with deferred payments.

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Trade and travel barriers impacting the import of raw goods and agricultural products.
-Rice: Myanmar, Vietnam (>50% of China's rice imports in 2020)

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April 2020, President Rajapaksa implemented a nationwide ban on the importation and use of synthetic fertilisers and pesticides on the nation's 2 million farmers. Yields suffered and the policy was ultimately reversed, with $US200M in financial compensation to those farmers negatively impacted by the ban.
-Domestic rice production -20% in the first 6 months; long self-sufficient but forced to import $450M worth of rice; domestic prices +50%
-Domestic tea production fell, the nation's primary export and source of foreign exchange

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Sri Lanka to pay $200m compensation for failed organic farm drive

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Farmers whose crops failed under scheme to establish world’s first 100-percent organic farming nation to be compensated.

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Wheat imports from UKR, RUSS
US economic sanctions: limited cash to purchase essentials including food
Cause: Russia’s ban on food and fertilizer exports to stabilize supply and prices at home during the war with Ukraine.

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-Logistics: transporting supply in a time of conflict; sanctions  and export bans on Russia
-Supply: Russia and Ukraine as key producers of fertilisers
-Gas prices: a key input in the production of nitrogen fertilisers
* Breakeven ratio: calculation between the cost of fertilisers and the value of crop production, linked to farm profitability
<Higher production costs = less fertiliser used = lower quality / yield >

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What happens now? lenina11only

We are currently witnessing the beginning of a global food crisis, driven by the knock-on effects of a pandemic and more recently the rise in fuel prices and the conflict in Ukraine. There were already clear logistical issues with moving grain and food around the globe, which will now be considerably worse as a result of the war. But a more subtle relationship sits with the link to the nutrients needed to drive high crop yields and quality worldwide.

Crops are the basis of our food system, whether feeding us or animals, and without secured supply in terms of volume and quality, our food system is bankrupt. Crops rely on a good supply of nutrients to deliver high yields and quality (as well as water, sunlight and a healthy soil), which in modern farming systems come from manufactured fertilisers. As you sit and read this article, the air you breath contains 78% nitrogen gas - this is the same source of nitrogen used in the production of most manufactured nitrogen fertilisers.

However, to take this gas from the air and into a bag of fertiliser takes a huge amount of energy. The Haber-Bosch process, which converts nitrogen and hydrogen into ammonia as a crucial step in creating fertilisers, uses between 1% and 2% of all energy generated globally by some estimates. Consequently, the cost of producing nitrogen fertiliser is directly linked to the cost of fuel. This is why the UK price of ammonium nitrate has climbed as high as £1,000 per tonne at the time of writing, compared to £650 a week ago.

Fertiliser inputs to farming systems represent one of the largest single variable costs of producing a crop. When investing in fertiliser, a farmer must balance the return on this investment through the price they receive at harvest. Adding more fertiliser, for a small improvement in yield, might not pay for itself at harvest.

This calculation between the cost of fertiliser and the value of the crop produced - the "breakeven ratio" - is typically around six for a cereal crop (6kg of grain needed to pay for 1kg of nitrogen fertiliser), but with the rise in fertiliser prices it is currently around ten. To remain profitable, farmers will need to keep a particularly close eye on production costs, and potentially use less fertiliser. However using less fertiliser will reduce yields and quality, adding to pressure on the food system as a whole.

The bigger picture

The global food system was already under pressure. During the pandemic, as many economies emerged from lockdowns and recovered, the rapid rise in activity increased demand on energy. The spike in gas prices triggered a pause in the production of fertilisers at some UK facilities in 2021, causing a rise in prices.

Since many farmers buy fertiliser in advance, some may have escaped this rise and so it was unlikely to impact immediately on the food supply and prices. But while fertiliser production restarted, global fuel prices have not recovered and continue to climb.

This brings us to the current conflict in Ukraine. The latest sharp rise in fuel prices is directly impacting on the prices of fertilisers, which helps to explain why the United Nations Food and Agriculture Organization (FAO) food price index reached its highest ever value in February - and is rising at the highest rate since the 2008 financial crisis.

Even then, the February data only partly reflected the effects of the invasion, since it happened late in the month and some price rises will be delayed: higher fertiliser prices are going to force farmers to either make an equivalent rise in crop prices at harvest or use less fertiliser. Higher prices for grain at harvest will exacerbate inflationary pressures in the economy, since the supply chain will eventually transfer the costs to the consumer in the form of higher food prices.

Russia and Ukraine are also major producers and suppliers of fertilisers and their raw materials. For example, Norwegian group Yara, the biggest producer and supplier of fertilisers in Europe, makes much of its product in Ukraine. Reducing western trade with Russia, and the disrupted supply lines in Ukraine, will therefore add another layer of pressure to the production and supply of fertilisers.

Russia is responsible for nearly a tenth of global nitrogen fertiliser production. Russia also has a comparable share of phosphate fertilisers and together with Belarus around a third of potash production, though in many cases these are not applied to soil every year and have much lower energy costs, so will have less of an immediate impact on yields and food production.

Vladimir Putin has explicitly been connecting the disruption to the trade in fertilisers with a coming surge in food prices. The Russians have just announced a suspension in fertiliser exports to the west. With major markets in Brazil, China and the US for Russian fertilisers, these global suppliers of grains to the world will be impacted.

Ukraine is also a huge agricultural producer in its own right, supplying significant quantities of cereals and oil crops to global markets ( 12% of the world's wheat and the world's largest supplier of sunflower oil). So at a time when many crops in Ukraine are due to be sown or those already in the ground are expecting fertilisers and pesticides, disruptions will put further pressure on this year's harvest and lead to higher food prices. At particular risk from reductions in Ukrainian and Russian grain supplies are Egypt, Turkey and Bangladesh.

Food security

When you couple this situation with the impact of the pandemic and climate change (including extreme weather), it all adds up to a growing threat to food security. Even in 2019, before the pandemic, the FAO estimated that 690 million people or 9% of the world's population, were facing food insecurity and going hungry. Since then, the food price index has gone up 39%.

In this context, calling for an immediate government intervention to the market is therefore the natural thing to do. Yet government budgets are severely stretched after COVID, leaving little room for direct monetary support and contribution. In view of the recent promises to remove all Russian oil and gas from our imports, there will be some tough decisions ahead for governments, farmers and consumers alike.

In the medium term, it highlights the need to transform our food system, using more green energy. We should also be encouraging more sustainable diets, which contain fewer grain fed animal products; and regenerative agricultural practices, which improve soil health and the efficiency of nutrient use by the crop.

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Ukraine: how the global fertiliser shortage is going to affect food

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We are currently witnessing the beginning of a global food crisis, driven by the knock-on effects of a pandemic and more recently the rise in fuel prices and the conflict in Ukraine. There were already clear logistical issues with moving grain and food around the globe, which will now be considerably worse as a result of the war.