TOKYO -- Agricultural funds formed by public and private partnerships are increasing investments that help farmers and partnering companies expand their business. The 65 projects supported as of mid-August are more than double the number from a year ago.
With the Trans-Pacific Partnership trade pact in the works, more farmers are using private-sector money and know-how to expand sales contacts and beef up product development. However, the overall convenience of the system will need to be improved to further help these enterprises realize their potential.
The Japanese government formed a public-private corporation in January 2013 to help farmers expand sales routes and develop new products. The government is contributing roughly 30 billion yen ($239 million) to the entity, which has created 53 agricultural funds nationwide in conjunction with regional banks and others. The funds, farmers and private businesses, such as retailers that support sales promotion, pool their money to establish companies. The framework serves to pour investment into farmers so they can expand operations. Farmers also learn to be better marketers through partnerships with private companies.
Nishi-Nippon City Bank began investing through an agricultural fund in September 2013. The bank's management plan lists farming as a major sector. The fund has invested in seven projects, including one that supports chicken-egg producers in Fukuoka Prefecture in southern Japan seeking to make progress in the restaurant industry. It is considering at least 10 other projects.
Roughly 10 financial institutions in Chiba Prefecture established a fund that supports companies selling bonsai and garden trees to Western countries, including those in South America.
Hokkaido-based Hikomabuta, a company involved in pig farming and pork processing, received money from a North Pacific Bank fund. "We also receive analysis on the causes of rising and falling sales, which has improved management," said Junichi Hiasa, Hikomabuta's representative.
A TPP trade deal will let farmers expand exports, but they also might see the domestic market flooded with cheap imports. Prime Minister Shinzo Abe's government outlined a plan in June 2013 to double the income of farmers within a decade. Cultivating more domestic and foreign sales contacts and establishing new operations will be essential to deal with a tougher business environment stemming from issues such as declining populations.
But total investment from these agricultural funds has been lackluster at around 4 billion yen, and only half of the funds have made investments. Private banks lacking experience in the field is seen as the main cause, as institutions such as the Norinchukin Bank have mainly provided agriculture-related funding.
Capital restrictions on private companies also are barriers. Laws require that the percentage of money provided by private companies falls below that coming from farmers. But farmers have weak financial bases, so "if we do not raise the percentage private companies can contribute, then we cannot expect to significantly expand operations," a source familiar with the matter said.