The ability to get products to market where transport infrastructure is underdeveloped or unreliable is a major barrier to agricultural development. This is especially so in less developed countries.
There is a rapidly increasing demand for higher-value food products throughout Asia. But this does not necessarily translate to opportunities for local producers if they are unable to get their products to domestic and overseas markets in a timely and cost-efficient manner.
Enhancing connectivity is critical for countries and communities to efficiently access domestic and global markets.
We adapted a computer model developed in Australia[Link will open in a new window] – the Transport Network Strategic Investment Tool (TraNSIT)[Link will open in a new window] – to examine supply chains for some key agricultural commodities in Vietnam and Indonesia.
Firstly, we mapped the current logistics, and transport routes and costs.
We then tweaked the model to look at real-life 'what if' scenarios. This allowed us to see potential change in costs and routes. This information helps inform infrastructure investment and policy changes that can improve transport efficiency, reduce costs and increase resilience.
We then adapted the model to the specific crops, transport and logistics conditions in Vietnam and Indonesia. We did this by working with a range of stakeholders across the supply chains: from farmers to collectors, processors, transport and logistics operators. Our team also liaised closely with ministries, government agencies and industry to demonstrate the value of the model’s outputs in helping to plan for more resilient transport infrastructure.
A closer look at Indonesia’s transport routes for rice
In Indonesia, one of the country’s most important staple crops for domestic food consumption is rice.
A project goal was to demonstrate national-scale transport and logistics solutions for this commodity. This was a particular challenge given Indonesia’s unique geographic challenges – with more than 17,000 islands and lots of mountainous terrain – and the Indonesian Government’s aspiration to achieve price parity for food staples across the country.
We modelled 64.4 million tonnes of national annual rice production across 4,130 representative production locations (totalling 12.7 million hectares and approximately 15 million smallholder farms). The results from this modelling highlighted the heavy freight demand along the major road and sea toll routes, particularly from Java to Kalimantan, Sulawesi and Sumatra.
So what did we find?
There was heavy impact on road infrastructure in the regions where the rice is harvested and transported for milling and on to storage. These areas have twice the transport and logistics relative to enterprises at the downstream end of the supply chain and can therefore often be a bottleneck in the system. This can greatly impact the efficiency of the supply chain flows.
Through consultation with a range of stakeholders, the Semarang Coast region of Java (responsible for almost 60 per cent of the country’s rice production) was selected to develop a 'what if' scenario.
The impacts of sea level rise and coastal inundation are considered two of the most serious natural hazards across Indonesia. The Semarang Coast region is highly vulnerable to inundation, river flooding and tidal flooding. The scenario examined disruption of the major freight corridor east of Semarang due to bridge closures caused by flooding, forcing vehicles to take a major detour.
The 43km detour resulted in increased travel time and costs for trucks carrying rice – an increased travel time of 71 minutes and an average additional cost per rice truck of about AU$100. This equates to a daily cost of AU$210,000 for the 2,000 rice trucks using this part of the road network each day, and several million dollars per day across all freight.
Moving cassava, sugar, coffee and maize in Vietnam
Unlike the national-scale focus in Indonesia, in Vietnam, we focused on commodities and transport issues at smaller administrative scales of province, district and commune. Here, we looked at the main crops grown in the remote and hilly north-western province of Son La – cassava, sugar, coffee and maize. Many smallholder farmers depend on markets in the province and further afield in Hanoi or China, for sale of their produce.
For these commodities combined, 62 per cent of transport costs were associated with trucking crop products between farms and traders, and 26 per cent between traders and processing factories. Only 12 per cent of transport costs were incurred post-processing. These high upstream transport costs are typical of "first-mile" challenges of procuring agricultural products from scattered, smallholder farming systems in remote and upland areas.
One of the scenarios we ran evaluated the impacts of a proposed new 85km expressway linking the economic and political centre of Hanoi with Son La and surrounding provinces. At an expected cost of more than AU$1.32 billion, the expressway is planned to improve road connectivity while reducing the load on the current narrow, very steep, and mountainous stretch of National Highway 6 (referred to as QL6 in Vietnam), promoting the economic and social development of the north-western provinces.
We used TraNSIT to investigate how the proposed expressway would impact on agricultural transport flows and costs compared to the current QL6. Under the modelled assumptions, up to 400,000 tonnes of agricultural road freight was transferred from QL6 to the new expressway annually.
Annual reduction in total transport cost between farms, traders, factories and destination markets due to the expressway ranged from about AU$152,000 (from farm to trader) to AU$420,000 (trader to processor), with processors benefiting the most in relative terms - a 10 per cent reduction in transport costs from factories to destination markets. According to the model, the new expressway was predicted to save about 2½ hours of travel time between Hanoi and Moc Chau, which translates to a total transport cost and distance saving of up to 45% and US$87 per trip. For all freight using this route, this is a saving of several million dollars per year.
What are our next steps?
Analysing agricultural transport routes in Indonesia and Vietnam supports public and private sector institutions and planners to better evaluate options and allocate resources in ways that reduce transport and logistics costs. In turn, this improves connectivity for agricultural value chains, smallholder farmers and rural communities.
The project also developed an understanding of the links between infrastructure, relationships and institutional aspects of transport bottlenecks, and sought to determine and understand critical stakeholders and collaborators who can bring about changes in infrastructure. Ongoing work will seek to integrate TraNSIT and other spatial analytics in decision-making institutions and industry.
The authors would like to acknowledge Rodd Dyer (FocusGroupGo), John Ackermann (Mitra Asia Lestari), Department of Foreign Affairs and Trade[Link will open in a new window] (DFAT) and the Australian Centre for International Agricultural Research[Link will open in a new window] (ACIAR).