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 October 23 2014

Q & A with Professor Honma

The Japanese Professor, Dr. Masayoshi Honma delivered his lecture on “Trans-Pacific Partnership (TPP) Under the Abe Administration” twice. One at Taiwan’s Council of Agriculture (COA) and the other at the National Taiwan University’s (NTU) Department of Agricultural Economics. Both lectures were attended by agriculturists, scholars, researchers, faculty members and students—many of whom asked relevant questions to the distinguished Professor during the discussion portion.

Dr. Honma is a Professor of the graduate school of agricultural sciences, University of Tokyo, Japan and is a consultant of Prime Minister Shinzo Abe, especially on matters concerning agriculture and economic trade.

The following are excerpts from the Question and Answer portion during Professor Honma’s two lectures at COA and NTU.

Q: Regarding Japan and America, will the bargaining counters become more flexible if the reform of the National Federation of Agricultural Cooperative Associations (JA) be finished as soon as possible? When will the gap decrease or be eliminated? As long as Taiwan focuses on GDP variation conservatively, the issues of Japan’s economic and agriculture policies are relatively important to our concerns.

A: The reform of JA is indeed related to political issues, so the current progress is far from my expectations. The difference from the former administration is that the reform of the Abe administration was headed by the Prime Minister and consisted of most of the cabinet members which resulted in the depth and speed of discussions for reform. The former administrations, Fukuda and Koizumi, also discussed about agricultural reform, but it failed to deliver because they lacked particular comprehension of the agriculture situation. This time, the Prime Minsiter’s Secretary, Mr. Suga, has a comprehensive understanding of the whole agriculture situation. Besides, the Minister of Agriculture, Forestry and Fisheries (MAFF) has changed their attitude towards policy reform. On the other hand, the reform of the JA structure, including sales of agricultural products, purchase of producing materials, bank and insurance business has led to a lot of disagreements. In fact, JA is subordinate to the national chamber. How to incorporate the three major parts of JA into independent units is a new approach and is also a model of Japan’s experience. It is not easy to achieve. What Taiwan can learn from the experience is the re-organization of the agriculture association and the policies.

Q: I am interested about agriculture products export. It says the export will increase to double capacity before 2020. Did the increase in capacity focus on average quality products or high quality products? Take rice for example, the production cost is still very high even in 15 acres paddy fields, so where is the potential market? Also, japonica rice is a sticky variety thus the export market will be limited. How will the R&D manage its processing?

A: About the export of rice, I know one farmer from Niigata, whose rice exported to Taiwan is used in a restaurant for lunch of 20,000 yen. But I believe that it is a special case. The average quality products can also be sold at a reasonable price to the appropriate market. On a short-term basis, Japan’s rice can be exported to Asian countries. On a long-term basis, when the cultivated field reaches up  to 200-400 hectares in operation, it is possible to cultivate the Indica variety, so it is not just limited to the Japonica variety. In that kind of big scale management, the cost can be decreased. Thus the market can be expanded to Europe and America. The premise is big scale management and decrease of cost per unit.

Q: Japan hopes to stimulate China by abiding the international common rules and join the TPP, but China also plays a leading role in RCEP negotiations. If TPP and RCEP are not consistent, how will Japan restrain China to follow the TPP rules?

A: TPP and RCEP are the biggest economic cooperations in Asia. In my opinion, both of them have their own values. The differences are the level of requirements. For China and Asean+6, RCEP is much more flexible than TPP. To be frank, Japan indeed has that kind of defense tactic against China, to resist them from taking all of the control.

Q: There are a lot of voices blaming the procrastination of the negotiations, saying it is because of the disagreements between Japan and America. Even the National Pork Producers Council (NPPC) also appealed to the American government to discard Japan and end up the TPP negotiations. Recently, Australia, Canada, Mexico and Chili also pushed it unitedly. What is your opinion about these?

A: The progression of TPP is not smooth, there have been some alarms saying that TPP should discard Japan and make contract with the other 11 countries. Obviously, there are some sensitive products, though they have gone through lots of discussions and compromises. But they still cannot achieve agreements on both sides, like pork, which became involved in political problems. The other 11 countries claim to forsake Japan to achieve the agreement. Also some voices claim to forsake America as well. Take food safety problem for example, some countries didn’t agree to the standards of America. However, it is not good for TPP to forsake any country. In current situation, Japan hopes to exclude rice, wheat, and sugar at least.

Q: You have mentioned about taking the Food Valley, which was a new concept of agriculture policy in Netherlands, as models. Did Japan government provide any rewards or facilities to this policy?

About the Food Valley, Japan is very keen to provide that work, but the central government does not support it financially. Some prefectural governments take advantage of  the national strategic specialized economic zones. For example, Nigata-shi and Yabu-shi, which have provided deregulated means for local policies.

Q: Regarding the outline of farm strategy of Japan, Japanese rice exporters sell products to Singapore, Thailand, and other Southeast Asian countries, does it have anything to do with JA? Will the strategy be mentioned in the future?

A: The rice export is my personal idea. But not just me, many Japanese economic specialists have the same opinions on how to make constructive agriculture industry. Take exporting rice of Vietnam for example. Though the cost is much cheaper than in Japan, the facilities and techniques are still far behind. For higher quality production, made in Japan still stands on high competition. It is expected that the cost will reduced in big scale management.

Q: Abe officer mentioned about the farmland consolidation organization, which hopes to promote land renting and trade. First, as we know, the similar organization has been existing. What’s the difference between the former and the latter organizations? Second, besides media’s role, will government provide any rewards to promote media organization as they interact with farmers?

A: The intermediate organization you mentioned is called Farmland Bank. The policy was addressed by the national government, and is operated by prefectural governments. The operating status depends on the members of agricultural cooperatives and local situations of prefectural governments, thus the operating status would be different from place to place. In the past, the engagements of farmland in leasing were negotiated by person-to-person, it’s not proper. Now we are focusing on Farmland Bank, and we will see how it can work.

Q: The major differences of the Farmland Bank from the conventional system are the open recruitment of tenants, not only for the local farmers. In fact, private enterprises can also join the recruitment. Is this principle currently being discussed?

A: As you mentioned, the tenants of farmlands are open to the private enterprises, and allow them to manage the farmlands, but the problems are for those companies who want to deal with the long-term investment in farmlands. In fact, the huge retailers, like convenient stores, they started to invest farmlands. To make them more proactive, not only the qualification of tenant but also the possibilities of farmland ownership should be considered.

Q: Related to the policy of Made by Japan, could you please illustrate the way how Japan government deals with processing? Is this policy still ongoing? On the other hand, what is the meaning of Made by Japan as it relates to the agriculture industry?

A: The worrisome problem of selling the products back to Japan is a negative result of the policy, it’s like a boomerang affection. I used to spread this idea with several specialists, as the manufacturing industry shifted factories abroad to save on costs. Agricultural production is considered the same. I know lots of examples in the production of bananas, fruits and vegetables in Southeast Asia countries by Japanese and there also are some examples of Australian government finding livestock producers from Japan. The Australian government is willing to provide any kinds of resources. The talents and know-how of Japanese farmers can make benefits for economies of whole world, the policy should not just be seen in a negative way,  but should be considered and seen in various aspects.

Q: The total output value of Japan’s agriculture was 11.5 trillion yen in 1990, which was reduced to 8.5 trillion yen in current time. Every indicator, including output value, degree of food self-support, are presented on a decreasing trend. According to the MAFF, the GDP will be reduced by 3 trillion yen. Since the reform has expected the export value multiplied from 500 billion yen to one trillion yen, will it achieve the goal of Abenomics of increasing farmer’s income? 

A: Thank you for your strict questions. About the increasing of farmers’ incomes, it is not initially on the discussion of the TPP yet. There are lots of opinions about the farmers’ income which might be reduced after Japan joins the TPP. After the TPP discussion and agriculture reform, those farmers who can survive the onslaught of agricultural reform and also increase their competitions should get higher incomes. In addition, those farmers who survive will encourage their colleagues and competitors thus their businesses will run in a professional manner, not in  part- time farming. Those farmers will play leading roles in professionalizing the development of agriculture in Japan.

Comment: I try to organize what information I learned from your speech. The Abe administration illustrates a very revolutionized and keen agricultural reform. He has also set a very tough goal, but it is no use to achieve this goal through conventional system, thus he tries to find the extra powers of private enterprises, to replace the conventional powers of agricultural association which takes care of small farmers. To excite the competition, the domestic agricultural market is made to compete with private enterprises and other conventional system. The policy arranges enterprise into the Farmland Bank, and takes the facilities of agricultural associations to a specific corporation.

A: You are 100% right, this is what I want to express this morning.

NTU Q&A

Q: As we know, Japanese has a small-farming culture. And Japan has a lot of aging farmers. In 2003, South Korea, the government spent around 100 billion dollars in 10 years to relocate the farmers and revitalize the farms. What is the plan of the Abe administration along this line? What is the budget and time allotted for this by the Abe administration?

A: Eighty percent of the farmland in Japan is supposed to be into large-scale farming and the government hopes that this will  reduce the cost of production after the structural reforms. Implicitly, the government considers many of the elder people retired, doing other things or dying in maybe 10 or 20 years from now. Then automatically, the number of workers engaged in agriculture would be reduced. But the important thing is the process of reducing the number of small farmers. The enlargement of the farming operation is now encouraged. However, we should be very careful because elder people want to stay in agriculture regardless of the reward or profit. I know several cases in which large farm operations are created,  like one in Kumamoto Prefecture, where there used to be 280 farmers there, which were integrated in one agricultural production corporation. The  farmers were in around 20 agricultural production cooperatives. But they were just integrated into one company. All the 280 farmers still remain in the company. Main activities like planting and harvesting are done by operators   but there are other miscellaneous jobs like cutting of weeds which are handled by elder people. The payment does not matter. The important thing is to give them a role to stay there.  A payment is necessary, so efficiency is somewhat sacrificed. But in the future, this kind of activities would be done after the transition treatment to the elders ends. This kind of compromise is important.

Q: Since Japan and Taiwan have similar agricultural environment, so I think the experience of Japan will lend a good reference to our policy reform. My first question is that we all know that there’s a big change in Japanese agricultural policy and among them, the rice policy is the most prominent one. And this year fixed payment has been cut into 50%. How do you deal with the interest groups and make them take the proposal? My second question is: In Taiwan, the price for programs has been implemented for nearly 50 years. Just last year, the government spent 12 billion NT dollars in this policy. So the voices of policy reform have been loud recently. In your opinion, which way will be better for us? Especially for rice reforms, do you have any suggestions? My last question is related to farmland consolidation bank. In 2008, you said Japanese farms should be 25 hectares to be competitive. Has this changed? I’d like to know your ideas on this.

A: Thank you very much for your good questions. First on the direct payment, it tends to stop because it’s introduced by DPJ. Now the current ruling party is LDP—Liberal Democratic Party. So the direct payment, particularly for rice, covered all the farmers. That was a strategy for election for the Democratic  Party of Japan. The ruling party has been changed, so that the policies introduced by the former administration have been denied. That is the political position. But from the economic viewpoint, which was introduced by the DPJ—it was very bad  because it is a price policy. They call it direct payment but it’s not really direct payment. It depends on the price. We considered that policy 30 years back—the very old-age administration. The support for the individual farmers would not change. I always tell the farmers not to consider this your permanent income but consider it a bonus. I said, “You should not depend on that subsidy. So from the economic viewpoint, it is better to eliminate the DPJ’s direct payment. It’s not direct payment but just a pricing policy.

The second question is about the price support program. Japan, they tried to eliminate or stop the pricing policy. One trait of agricultural policy is to introduce direct payment. In implementing this, the design is very important because the direct payment is fixed. How to allocate is important. My suggestion is just to stop the pricing subsidy and change to real direct payment—not the Japanese style.

Your last question about the land consolidation bank, you know it’s still in the process of implementation, so it’s hard to say if it’s successful or not. Each prefecture has the bank and operations depend on the policy of the prefecture level. But we expect the abandoned land to be shifted to the bank. If it is not really good use for the farmland, the bank would consolidate or invest for infrastructure as well. That is at the cost of the taxpayers. Anyway, the bank has a responsibility to make the infrastructure better. To attract abundant land to the consolidation bank is okay. The problem is how to allocate the amount of the land and to whom? That’s the problem. The local communities have special plan—so called the human agricultural land plan. That was introduced before the consolidation bank. In the human agricultural land plan, the community should select some core farmers to whom the collected land by bank shall be allocated. If the outside people want to utilize the land collected by the bank,  it may be excluded. We recommend that the allocation of the farmland collected by the bank should be on auction. Some core farmers or some companies should be treated equally. But it is still under consideration.

Q: My question is on the rice production cost graph. You said the largest scale of farmers is 15 hectares more. Frontier farmers’ production cost is very low. I checked the Japanese rice production cost a day before yesterday. This graph shows the economies of scale but the Japanese rice production data shows the portion of agricultural machinery is much higher than in Korea. I mentioned that because the economies of scale come from using the machineries because it is a fixed cost. The portion is only 20% but how come the production cost becomes half or 50% cut?

My second question…About 30 years ago, there was this serious problem about the aging Japanese farmers. At that time, many agricultural economists of Japan said we will find some enlarging farm-scale because many aging people will die in 20 years, but it was bot so and some scholars analyzed why. Because city dwellers, like retired persons returned to agriculture or the so-called U-turn. So what’s the difference between 30 years ago and now?

A: If you try to search the data, there is no data published on the individual details. Only the data for the national level and the local district level are available. Even the prefecture level data are not published. Of course the purpose of the production cost is to show the average cost. In general, the data is not available. What we have here are the frontier production estimates. Their machineries are utilized very efficiently, with low maintenance cost. The 20%, you said, is too much. That’s only average, and indeed, and the machineries are over-invested. Even if the farmers only have 0.5 hectares, they have own the machineries. For the efficient farmers, sometimes they share their machineries which are utilizing for some other activities as well. So, the total cost of the machineries is much less than the average.

The other question: The U-turn phenomenon wherein some aged farmers return to their hometown—that happens, but not so many. They go back to their hometown to do some farming but they are already rich. They don’t need to make money after retirement. It’s just a hobby and maintenance of their assets. The other aged farmers who have large farmlands have their own operators, and they expect their operators to manage their farmlands. Once they trust their operators, the farmlands they operate are enlarged.

  

In a welcome dinner held in his honor, Professor Masayoshi Honma (middle) shares a light moment with FFTC Director Yu-Tsai Huang (right)  and Dr. Jen Eau Tin (left) Director of the Graduate Institute of Southeast Asian studies in Tamkang University.