Dairy Sector Paves the Way to Inclusive Growth and Nutrition in Emerging Markets

Abstract

This manuscript is an opinion editorial, which summarizes the presentation given at the Dairy Nutrition: An Engine for Economic Growth conference.

Malnutrition has huge costs—not just for individuals but also for families, communities, and nations. Childhood malnutrition leads to physical and cognitive stunting, making children much more susceptible to disease and less prepared to learn at school. Adults who are malnourished are less able to work, provide for their families, and contribute to their local economy. According to the Food and Agriculture Organization, the loss in productivity and health-care costs related to malnutrition are costing the global economy up to US$3.5 trillion per year.

Malnutrition is a complex beast that is not easily tamed. It is often the result of a mix of underlying problems such as poverty, lack of access to safe and healthy foods, poor dietary practices, inadequate agricultural productivity, and poor sanitation. Tackling malnutrition on a large scale therefore takes collaboration and creative thinking.

The dairy sector has a long history as being part of the solution. Much research has been done on the effectiveness of dairy products to treat malnutrition. For decades, milk has been used to supplement nutrition for vulnerable populations, including pregnant women and children, thus breaking the vicious cycle of malnutrition, sickness, and poverty. Recent innovations such as dairy-based therapeutic foods have already saved millions who suffer from severe malnutrition. Not only that, the dairy sector can in fact also help bring about more inclusive and sustainable economic growth.

The International Finance Corporation (IFC) has been helping its dairy clients do exactly that in emerging markets for over 60 years. As a development finance organization focused on the private sector, our mission is to help the private sector create positive economic and social impact in emerging markets through their products, services, and innovation. We help make that possible by providing investment services to companies—both local and international—that want to operate and expand their businesses in emerging markets. We also leverage our experience in emerging markets and global industry standards to provide them with advisory services to increase productivity and sustainability.

In Uganda, where the malnutrition remains stubbornly high, conditions for a successful dairy industry exist. Investments in Uganda’s milk industry can potentially improve household nutrition by making milk more readily available. Together with the Global Agriculture and Food Security Program Private Sector Window, IFC invested US$8 million in Pearl Dairy Farms, which has a new milk powder processing plant in the Mbarara District. Equipped with modern equipment, this plant has the capacity to process 240 000 liters of milk daily, making it Uganda’s second largest plant. The IFC’s 2014 loan has already helped Pearl Dairy increase Uganda’s local milk production capacity.

In addition, this loan also supported the establishment of a network of milk collection centers and cold storage infrastructure. This is especially significant because 27% of milk in Uganda is currently lost through spillage and spoilage during transport. This newly established network, combine with a modern high-capacity processing plant, will allow Pearl Dairy to build a more inclusive supply chain. Notably, this network also enables Pearl Dairy to supply more milk to Ugandan and regional consumers. Many smallholder milk farmers living in remote areas, who previously had no means to bring the milk from their farms to the market, will now be able to sell their milk to Pearl Dairy at collection centers near them. With better productivity and income, these farmers will then be able to enhance their families’ food security and access to nutritious foods.

Pearl Dairy has performed remarkably well. Indeed, it is now expanding its production from primarily milk powder and butter oils to include liquid UHT milk (processed with ultra-high temperature pasteurization). The use of modern processing technology has not only strengthened its productivity, it has also helped bring higher standards to Uganda’s milk industry. By introducing healthy competition in Uganda’s milk industry, Pearl Dairy is helping the industry make high-quality nutritious dairy products available to more Ugandans at a better price.

Like Uganda, Iraq also has a severe malnutrition problem. As a postconflict country where the dairy industry has been devastated, Iraq relies on imports from Saudi Arabia and elsewhere for its dairy needs. The IFC saw an opportunity to help Iraq rebuild its dairy industry, make affordable and high-quality dairy products available, and create employment opportunities at the same time. The IFC provided a US$18 million loan to Al Safi Danone (ASD), a manufacturer of dairy products, including yoghurt and UHT milk, which is more suitable for Iraq’s hot climate than fresh milk. This investment will fund the construction of a dairy plant that uses state-of-the-art processing and packaging equipment. In addition, it will also fund the expansion of ASD’s distribution infrastructure, such as refrigeration at small retailer stores. The result is better access for Iraqi consumers to high-quality and safe dairy products, but also less food waste along the supply chain. Such improvements will not only benefit Iraqi consumers, it will also allow ASD to set industry standards that other Iraqi producers can emulate.

The above are just two of many dairy projects in IFC’s US$350 million dairy portfolio. For every agribusiness investment, IFC tries to find innovative ways to create links between the domestic industry with local or global nutrition. Innovative solutions could be as simple as supporting conversion to UHT milk or increasing access to rural chilling stations. Another innovation could be targeting whey produced by the US dairy industry to improve the protein profile as a food ingredient to improve global nutrition. Clearly, private sector investments, when done right, can be a powerful engine for inclusive economic and social growth.

The global community has made huge strides toward improving nutrition and we are closer than ever to achieving the second sustainable development goal of ending hunger and improving nutrition for all of earth’s inhabitants, but our job is far from done. The global population is expected to reach over 9 billion by 2050. Climate change, rapid urbanization, and diminishing arable land and water resources will further test our ability to produce enough food to nourish the global population.

Now is the time to act. The dairy sector is well positioned to lead the way toward more inclusive growth and better nutrition, and we must be bold and think outside the box. Together, we must work together and develop more opportunities to create greater linkages between the domestic dairy industry and global nutrition.