MARCHING TOWARD THE MARKET THE BUSINESS POTENTIAL FOR AGRICULTURAL BIOTECHNOLOGY IN TAIWAN

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Jocelin Gaines
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1 MARCHING TOWARD THE MARKET THE BUSINESS POTENTIAL FOR AGRICULTURAL BIOTECHNOLOGY IN TAIWAN Pan-Chi Liou Horticultural Division Agricultural Research Institute Council of Agriculture, Executive Yuan Taichung Hsien 41301, Taiwan ROC ABSTRACT Biotechnology has become one of the most important issues in the world, due to its high value of application in many different aspects. There is no doubt that this new science and technology will have a strong impact on the agricultural sector worldwide. In Taiwan, agricultural biotechnology has been included in the key areas of research funded by the government. Agricultural biotechnology, by its broad definition, includes plant tissue culture, applied microbiology, and applied molecular biology. The current situation of research, application, and commercialization of biotechnology in Taiwan is briefly introduced in this report. Also included is the profile of business strategy in agricultural biotechnology that the country is adopting. The main issues affecting this newly developed industry in Taiwan, as well as the challenges that the country may face in the near future, are also discussed. Keywords: Taiwan, agricultural biotechnology, marketing, business A REVIEW OF AGRICULTURAL BIOTECHNOLOGY IN TAIWAN Although the agricultural industry accounts for only less than 3 percent of the annual national revenue of Taiwan, it is very important in sustaining the growth and development of the country, prompting the need to continuously improve and develop this sector. For this reason, the application of biotechnology to agriculture has become a very critical issue. Based on the broad definition of biotechnology, its scope in agriculture includes tissue culture, applied microbiology, and applied molecular biology. Just like in many other countries, the research and commercial application of plant tissue culture and applied microbiology in Taiwan have a longer history compared to molecular biology. Research on molecular biology in the field of agriculture can be traced back to the early 1980s. At the very early stage, it was merely restricted to some basic applications, such as gene cloning, transformation, and genetic marker analysis in plants and animals. During that time, research on biotechnology was mostly funded by the government, mainly conducted in universities and public research institutes. Due to its high application potential, in 1982, biotechnology was included as one of the eight key areas of research by the government to accelerate the country's development. At the same time, many related education or training programs were initiated. In 1984, the Development Center for Biotechnology (DCB), the first autonomous and nonprofit organization specifically focused on biotechnology research, was established. After nearly one decade s effort, the research focus gradually shifted to new items that were more practical and important, including the development of transgenic plants and animals, DNA-based genotyping for breeding, and development of biopesticides, biofertilizer, and animal vaccines. With more private companies becoming involved in the projects, it

2 significantly promoted the marketing aspect of agricultural biotechnology. In 1997, the National Science and Technology Program for Agricultural Biotechnology (NSTP/AB) was initiated. This interagency program implemented and coordinated by the National Science Council (NSC), Council of Agriculture (COA), and the Academia Sinica, is a milestone event in Taiwan. The main scope of the NSTP/AG includes flowers and ornamental plants, plant bioprotection, aquaculture, livestock and animal vaccines, utilization of plant genomes, environmental biotechnology, and medicinal and health plants. From the late 1980s to the mid 1990s, certain important regulations or guidelines concerning biotechnology and biosafety were established by the government. The Experimental Rule of Recombinant DNA was issued by the NSC, as well as the guidelines for risk assessment in genetically modified (GM) plants and GM animals by COA. The amendment of the most important law in agriculture, the Plant Variety and Seed Act, was promulgated by COA in 2003, which by taking biotechnology into account has opened the door to a new era. The creation of some animal- and fish-related regulations and laws in this field has also been ongoing. Today, a framework for the management of biotechnology and biosafety in this country has been formed. During the past five years, more efforts, whether from the government or the society, have been made to promote biotechnology for the development of agriculture in Taiwan, including the setting up of several biotech science parks. In 2005, the total investment in biotechnology in the country has reached the amount of 150 billion NT (New Taiwan) dollars (USD 4.7 billion). All these efforts have laid a good groundwork for the further development and application of agricultural biotechnology in Taiwan. STATUS OF AGRICULTURAL BIOTECHNOLOGY PRODUCT BUSINESS Profile of agricultural biotechnology business which gives high potential of economic benefits. Biotechnology, a relatively new science born in the 1970s, is regarded as a highly promising profit maker in the world. However, the industry in Taiwan seemed to respond to it rather late, especially in the agricultural aspect. A study done by the Taiwan Institute of Economic Research showed that only 11.3 percent of companies related to agricultural biotechnology business existed before A few (16 percent) was established during (Figs. 1 and 2), while more than two-thirds (66.9 percent) were established after This indicates that, in Taiwan, the industry entered the era of agricultural biotechnology only about one decade ago. Most biotechnology companies (63.2 percent) are small in scale with less than 25 staff. Only 9.4 percent of them hire more than 100 employees. The turnover of most companies (54.7 percent) is below 50 million NT, and only 7.5 percent of them reach 500 million NT or more. In general, the main part of their income comes from the manufacture and sale of product. The top five categories of products are as follows: 1) disease and pest detection kits for plants or animals (28.8 percent); 2) functional foods (23.1 percent); 3) biofertilizers (14.1 percent); 4) aquatic nursery and its related products (12.2 percent); and 5) plant tissue culture (7.7 percent). In 2003, the agricultural biotechnology industry was classified into the following categories: plant tissue culture (39.8 percent); animal medicine (24.6 percent; aquaculture biotech (24.4%); biopesticides and biofertilizers (8.2 percent); and others (2.8 percent) (Fig. 3). Many companies still lack the capability to conduct active research by themselves. About half (47.2 percent) of the techniques and know-how used to build up the agricultural biotechnology business were obtained from within Taiwan, while 11.3 percent, 4.7 percent, and 9.4 percent were introduced from America, Europe, and Japan, respectively. This report briefly describes some current situation of the plant tissue culture, biopesticides, and biofertilizers business, as well as issues related to GM products. In the industrial circle, people are always highly interested in adopting new technology, 2

3 Environmental Biotech 8% Supporting Industry 18% Medical Biotech -Medicine 11% Medical Biotech -Material 3% 3% Biotech Chip Medical Biotech -Detection 16% Agricultural Biotech 16% 16% 17% Food Biotech Others 6% 6% Medical Biotech -Regeneration 2% 2% Fig. 1. Categories of biotechnolgy industry in Taiwan. (Source: ITIS Project of DCB, 2005) Time of Establishment After 2001 (33%) Before 1980 (12%) (2%) (7%) (8%) (38%) >25 years 12% years 17% <10 years 71% Fig. 2. Establishment of agricultural biotechnology companies. (Source: ITIER 2004) 3

4 Biopesticides & Biofertilizers 8.2% 8.2% Aquacultural Biotech 24.4% 24.4% Others 2.8% Animal medicine 24.6% 24.6% Plant tissue culture 39.8% 39.8% Total value in 2003: 1.54 billion NT (about 51 million USD) Fig. 3. Agricultural biotechnology industry in Taiwan, Plant tissue culture Plant tissue culture, which is the earliest form of biotechnology research in the country, is not only a mature technology now, but also has grown into a flourishing industry in Taiwan. Many tissue-culture products have been traded domestically and internationally for more than two decades. Since tissue culture is a powerful technique for mass production in many crops, and is also a useful method to produce healthy plants, it has become an important tool in the nursery industry. Many plants are now propagated by tissue culture in the world. In Taiwan, the orchid nursery has been relying much on tissue culture for the mass production of healthy young plant. The orchid industry had as much as 51 percent and 85 percent tissue culture products in 1998 and 2002, respectively. This is very much different from many other countries, where tissue culture is mainly used to propagate ornamental foliage plants. The main categories in orchid produced by tissue culture in Taiwan include Phalaenopsis, Oncidium, Cymbidium, Dendrobium, and Paphiopedilum. Another very important application of tissue culture technique is in the banana industry. The Fusarium wilt of banana, commonly known as Panama disease, has become a major limiting factor in the commercial production of Cavendish banana on this island since the late 1970s. In order to prevent the spread of this catastrophic disease by infected planting material, the Taiwan Banana Research Institute (TBRI) started using tissue culture to produce healthy plantlets for commercial planting in Since then, there were more than one million Cavendish banana plantlets produced by tissue culture each year. Today most of the bananas planted on this island are from tissue culture. The application of tissue culture accompanied with other strategies has successfully prevented the Taiwan banana industry from decline. Moreover, in 1984, a project was initiated at TBRI to screen tissue-cultured Cavendish plantlets for resistance to Fusarium wilt, based on somaclonal variation. As the search for resistant clones continued, the birth of some commercially acceptable resistant cultivars has been realized. The first resistant cultivar acceptable for commercial planting was obtained within only 6 years. This has demonstrated the feasibility of using tissue culture to generate variation for selection of commercially acceptable wilt resistant cultivars in banana. 4

5 During the past decade, the tissue culture business keeps growing steadily, and recently the trading activity is quite prosperous both in local and international markets. In 2003, its total export value reached billion NT, which is 27 percent more than that of 2002 (Table 1). About 95 percent of the export value came from orchids, especially Phalaenopsis. However, a very large amount (72 percent) of Phalaenopsis is for domestic consumption. For export, the major trading partners come from the USA (30.1 percent), Japan (28.8 percent), South Korea (13.4 percent), Netherlands (7.4 percent), and China (4.0 percent). The number of nursery companies engaged in tissue culture ranges from 100 to 120 during the past decade. The investigation showed that about 94 percent of these nurseries are located in the western part of Taiwan, while only 6 percent are in the eastern part. In the western part, more than half (54 percent) of them are in the central region (Fig. 4). This is also the most important agricultural area on this island. The investigation also revealed that there were some significant changes in the scale of nursery companies during the past several years. In 1998, more than 50 percent of the companies (58 percent) were considered small producers, i.e., with a yearly production of less than 500 thousand plantlets, and only 12 percent with a yearly production of 5000 thousands plantlets or more. However, in 2002, 25 percent of the companies had the capacity to produce yearly up to 1-5 million plantlets, and 17 percent of companies produced even more than 5 million plantlets yearly. Many nurseries had expanded as a result of severe competition. It was estimated that, during the past several years, percent of small nurseries had either discontinued their business or merged with other partners, and percent simply expanded the business themselves. There were also 15 new large nurseries established recently. Beside the expansion in scale, recently the specialization of the production has also become a new characteristic in the tissue culture industry. This change will be beneficial for future competition. Biopesticide and biofertilizer In the area of aphid microbiology, biopesticides and biofertilizers are two major concerns. Due Table 1. Value of TC plantlets exported in 2002 and 2003 Export value Item Phalaenopsis Orchids plantlets in bottle Cymbidium Oncidium Dendrobium Others Total Million NT Order Million NT Order w 0 w Billion NT Billion NT (about 10 million USD) (about 6.7 million USD) 5

Eastern Taiwan ª F³ a 6% Ï 6% Southern Taiwan 23% «n³ a Ï 23% a Ï 54% Central Taiwan _³ 17% Northern Taiwan 17% Fig. 4. Location of plant tissue companies in Taiwan.

6 Eastern Taiwan ª F³ a 6% Ï 6% Southern Taiwan 23% «n³ a Ï 23% a Ï 54% Central Taiwan _³ 17% Northern Taiwan 17% Fig. 4. Location of plant tissue companies in Taiwan. (Source: Chen & Liau 2005) to environmental and ecological safety considerations, farmers and consumers have become more and more aware of biological control. Research on biopesticides began early at public institutes and universities, and some important results have been obtained in different laboratories. The fungi Trichoderma spp. can be used to control many pathogens, including Rhizoctonia solani, Sclerotium rolfsii, Sclerotinia sclerotium, and Pythium aphanidermatum. They can also reduce the damage caused by Botrytis cinerea, Pseuperonospora cubensis, Sclerotinia sclerotinia, and Sphaerotheca fusca, and therefore are valuable for protecting the crop. These well-studied biocontrol agents have become an ideal subject of commercialization. Other well-studied antagonistic microorganisms include Bacillus bustilis and Streptomyces. Further studies have showed that these natural resources are easy to use in agricultural practice. The Taiwan Agricultural Research Institute (TARI) has made some important contribution in this aspect, including the effort for commercialization and marketing. To date, several big companies, such as the Yuen- Foongyu Paper Co., Tai-En Co., and Biontech Inc., have started to produce and merchandise these products by using their own brands (Table 2). Although at present, the total value of this new industry is only about percent of the traditional pesticides, it is growing by the rate of percent yearly. Recently, a brand called Biowork (Bacillus bustilis) has just been introduced in the market in Japan, and some products of Streptomyces have created a yearly value of million NT in the domestic market. As potted plants become popular in modern horticultural industry, the use of biofertilizers has also become more acceptable to growers. The use of the culture medium made of vermiculite, peat moss, and pearlite, is quite suitable for the application of 6

7 Table 2. Biopesticides produced in Taiwan Company Sinon Corporation ( ) Yuen Foong YuBio-Tech Co.( ) King Car Food Industry Co. ( ) Taiyen Biotech Factory ( ) Gene Agri-Aqua Ecosystem Biotech Co. ( ) Huikwang Cporporation ( ) Syngen Biotech Co. ( ) Bion Tech Inc. ( ) Main Products Bacillus Streptomyces Bacillus Streptomyces Bacillus Streptomyces Trichoderma Bacillus Streptomyces Biopestides (NPV) Bacillus Technique Source COA/NCHU ( ) COA/NCHU NCHU COA/NCHU COA/NCHU Analytica Therapeutics DCB /Guang-Hua Co.( ) Taiwan Biological Corporation ( ) Bacillus Streptomyces COA/NCHU / Taiwan Fertilizer Co. ( ) ( ) Nantex Industry Co. ( ) BT BT BT DCB ( ) NCHU NTHU ( ) COA biofertilizers, since it requires fewer amounts of microorganisms and gives better plant growth. Several fungi and bacteria have been studied for use as biofertilizer, including species of Pseudomonas, Bacillus, Thiobacillus, Penicillium, and Aspergillus, etc. There have been some good products marketed by different companies, which are quite well accepted by farmers. Based on long-term experiments, TARI has also transferred some of their know-how in this aspect to different companies. Now they are being marketed in different names, such as Dr. Root (Vesiculararbuscular mycorrhizal fungi, VAMF) by Tai-En Co.; Mycovam (VAMF) by the Taiwan Biological Research Co.; Ai-gen-how in Chinese) (VAMF) by the Lei-ju Co., and Agroguard (Bacillus) by the Taiwan Biological Research Co. At present, the yearly value of the biofertilizer industry is estimated as being slightly less than the biopesticides. GMOs and other products Other categories in agricultural biotechnology with high marketing potential will come from applied molecular biology, also known as genetic engineering. Its products include genetically modified organisms (GMO) for producing specific bioproducts, detection kits derived from recombinant DNA technique, transgenic plants and animals, etc. It is believed that applied molecular biology will create much higher value than ever before to the agricultural industries. In Taiwan, much effort has been made to promote the development in this field of research, and many researches are going quite well. Using recombinant DNA technique to produce highly sensitive and accurate detection kits for disease diagnosis is one of the important achievements in TARI. This kind of product started to be used in the nursery several years ago, and has been proven very helpful for the quality control of tissue culture plants. The transgenic papaya resistant to papaya ringspot virus was developed by the National Chung-Hsing University about 10 years ago, and has passed the environmental risk assessment in It still needs to go through the food safety assessment before marketing. Several transgenic crops, including 7

8 rice, broccoli, potato, and tomato, are now under the process of environmental risk assessment performed at TARI and AVRDC (Asian Vegetable Research and Development Center), but has yet to go through food safety assessment. Another important GM plant is the transgenic eucalyptus, which is created by the Forest Research Institute and now under field evaluation according to the guideline. In animals, the transgenic ornamental fish containing fluorescent gene developed by a private company, and the duplicated goats deriving from somatic cell cloning, developed by the Livestock Research Institute and the National Taiwan University, are two examples of outstanding achievements. Although many of these genetic engineering products are ready for application, so far none of them has been commercialized or marketed. POTENTIAL OBSTACLES IN THE COMMERCIALIZATION OF AGRICULTURAL BIOTECHNOLOGY PRODUCTS Taiwan is one of the countries, which has taken the development of biotechnology as an important policy. Today, the plant tissue culture business has been well established, and commercialization in some microbiological products has been well achieved. However, the business of agricultural biotechnology in Taiwan is still far from mature, especially in the area of applied molecular biology. Although in the area of GMO, some good progress in research have been acquired during the past decade, the products have yet to be marketed. There are many factors which may affect the development of this industry. However, the following six issues may become the main potential obstacles in the future: 1) The framework of law and regulation system has not yet been completed. Although much work has been done, the legislation of some laws and regulations, such as that for transgenic animal and fish, has yet to be completed. 2) There is a need for stronger connection between laboratories and factories. Since more than one decade ago, the NSC and COA have been working very hard to build a strong linkage between the researchers and producers, in order to speed up commercialization and marketing in this field. However, the connection seems to be not strong enough so far. 3) Most of the companies are small and medium enterprises (SMEs), thus may have limited competition ability due to the relatively higher production cost and low R&D budget. 4) There is a strong need for more public communication and education. Some surveys have revealed that many people do not understand biotechnology and its products correctly. This may hinder the commercialization and marketing of agricultural biotechnology products in this country. 5) There is a need for more traditional nursery companies to join the GMO business. Many companies with nursery business still do not show their interest in transgenic technology and GMO products. Perhaps this is due to their concern of customers' response. However, their experience in marketing will be very helpful and needed in the development of GMO business. 6) There is a need for more international cooperation. This is one of the weakest points in Taiwan s agricultural biotechnology. There is a strong need to increase international cooperation either in research or business aspects. FUTURE CHALLENGES There are two important factors that will strongly determine Taiwan's future development. The first is joining the World Trade Organization (WTO) as a member, and the second is its readiness to face the challenges of the 21 st century, which is considered as the "century of biotechnology." Biotechnology will be a very important factor in the international trade. For this reason, Taiwan is must face daunting challenges, must do its best to overcome several obstacles. There are at least four issues that the country has to deal with: 1) To increase R&D ability both in basic research and manufacture procedure. 2) To build a complete system for 8

9 managing biotechnology. It should take into account all related factors, such as laws and regulations, risk assessment, and product monitoring. Although most of these issues are now being addressed, efforts must be intensified to establish these systems and mechanisms. 3) An ideal environment must be created for the SMEs to become more competitive. For this purpose, the strengthening of cooperation in research and the establishment of biotech science parks as future production basis are very crucial. 4) There is a need to strengthen public communication and education in order to get support form the society either for research or commercial business. 9

[ 2 ] [ 3 ] WHAT IS BIOTECHNOLOGY? HOW IS BIOTECHNOLOGY DIFFERENT FROM THE TRADITIONAL WAY OF IMPROVING CROPS?

[ 2 ] [ 3 ] WHAT IS BIOTECHNOLOGY? HOW IS BIOTECHNOLOGY DIFFERENT FROM THE TRADITIONAL WAY OF IMPROVING CROPS? WHAT IS BIOTECHNOLOGY? Biotechnology is a modern technology that makes use of organisms (or parts thereof) to make or modify products; improve and develop microorganisms, plants or animals; or develop