July 3, 2014

Philippe de Lapérouse Managing Director, HighQuest Partners Featured Speaker & Conference Chair, Global AgInvesting Asia 2014 Several speakers and ag experts from the upcoming Global AgInvesting Asia 2014 conference at the Marina Bay Sands in Singapore (September 23-25) are authoring articles for the group’s media partner, Singapore Business Review. The first in the series, “Singapore’s Leadership Role in Food Security,” by Philippe de Lapérouse can be seen below. Click here to see the original post on the Singapore Business Review website.

As food security becomes an increasing focus of concern among governments, multi-lateral lending institutions and impact investors globally, Singapore is well positioned to play a key role as a center for addressing Asian and global food security issues over the next decade and beyond due to its unique combination of assets and expertise.

Singapore’s government officials, policymakers, and academic institutions have long been attuned to the relevance of food security as a critical factor determining national interest due to the city’s reliance on imports to satisfy the increasing food demand for this fast-growing population.

Singapore’s history as a regional trading hub located at the nexus of Southern and Eastern Asia also makes it a convenient location for facilitating discussions among the various interested parties in the region to address ongoing financial, trade policy, and operational challenges for the food and agricultural sectors.

Many key companies in the food and agricultural industry, including major commodity trading firms such as Olam, Bunge, Noble, Wilmar, and Louis Dreyfus, already maintain corporate or regional headquarters in Singapore.

Another key factor is the unique melding of different food cultures from China, Malaysia, Indonesia, India, the Middle East, and Europe, reflected in the amazing variety of its cuisine found in Singapore. Food companies such as Kikkoman of Japan are leveraging the creative opportunities this provides to base their food technology initiatives in Singapore.

At the same time, Singapore’s world-class financial services center continues to attract capital from high net-worth individuals, family offices, and institutions from across the world seeking to invest in the technologies and companies of the future, with a particular focus on opportunities in Asia. These pools of capital can be allocated to investment projects that will lead to increased productivity in the food and agricultural sector.

Singapore’s sovereign wealth funds, GIC and Temasek, the eighth and ninth largest sovereign wealth funds in the world, respectively, are pursuing long-term investments across the agricultural/food value chain globally (ex. Temasek’s recent investment in China’s infant formula manufacturer Yashili).

Within Asia, the pace of Chinese investments in the food and beverage sectors has also picked up dramatically within the last 12 months, accounting for over 17% of total M&A in China compared with 20% for the energy and power sector in the country, typically the biggest source of transactions (as reported by the Financial Times on June 7/8, 2014).

Following Shuanghi International’s (recently renamed as WH Group) acquisition of Smithfield Foods for US$7 billion in 2013, the largest outbound acquisition to date by a Chinese company (according to Thomson Reuters), state-owned China National Cereals, Oils and Foodstuffs Corporation (COFCO) recently purchased controlling interests in Nidera (an international producer, trader and marketer of agricultural and bioenergy products and services with a strong presence in Europe and South America) and Noble’s agriculture division (with operations in Asia, the Middle East, South America, and Europe – a US$1.5 billion transaction).

At the same time, COFO has raised capital from financial investors, including KKR and Baring Private Equity Asia, for its domestic pork production business.

Other Chinese companies including Bright Foods are pursing foreign food companies which will give them access to established food brands with reputations for delivering quality products to consumers to meet increasing domestic demand for higher value and safer food products.

These deals represent the type of cross-border transactions that are likely to become more prevalent in the future and that could benefit by locating key strategic functions in Singapore.

While the underlying logic of such transactions is to support initiatives to ensure access to supplies of agricultural commodities crucial for China’s domestic animal protein sector, and to transfer and build consumer food brands specifically within China, Singapore offers a number of key advantages – policymakers attentive to the importance of food security issues, a pool of seasoned industry executives, and international capital seeking attractive investment opportunities – which cannot be duplicated elsewhere and have relevance for broader geographic application.

Furthermore, given its relatively small land mass, Singapore has focused its energies on developing more efficient ways of sourcing basic necessities such as foodstuffs and water to meet the needs of its population.

A decade ago, the concept of food security was primarily associated with initiatives undertaken by governments in developing economies to avoid shortages of key basic foodstuffs. Today, food security concerns a much broader constituency, including many developed countries in the northern hemisphere such as the U.S. where food security has recently been cited in national security briefings and is viewed as a key risk factor and driver of opportunity by strategic and financial investors allocating capital to the food and agricultural sector.

Singapore was selected as the location for the first Global AgInvesting Asia conference launched in in 2011 with the expectation that it would become a key center for policymaking and investment in the food and agricultural sectors due to the country’s leadership role in regional food security matters.

Attendance over the past three years by a growing and diverse group of industry executives, government officials and policymakers, representatives of multi-lateral lending agencies, and strategic and financial investors has justified this selection and confirms that Singapore will continue to play a leading role in addressing food security issues as well as attracting long-term capital seeking investment in the food and agricultural value chain.