ASEAN BRIEFS Promoting Food Security in ASEAN Through Trade and Investment
Alexander C. Chandra, Fina Astriana, Agustha L. Tobing Special Volume / Vol.1 / September 2017 ASEAN Briefs is a regular publication about About The Habibie Center current developments on ASEAN regionalism, especially in the Political-Security, Economic The Habibie Center was founded by Bacharuddin as well as Socio - Cultural Pillars. Jusuf Habibie and family in 1999 as an independent, non-governmental, non-profit organisation. The vision of The Habibie Center is The Habibie Center - to create a structurally democratic society founded ASEAN Studies Program ASEAN Briefs on the morality and integrity of cultural and religious values. The mission of The Habibie Center are first, Project Supervisor: to establish a structurally and culturally democratic society that recognizes, respects, and promotes Rahimah Abdulrahim human rights by undertaking study and advocacy of (Executive Director) issues related to democratization and human rights, and second, to increase the effectiveness of the Head of ASEAN Studies Program/Editor: management of human resources and the spread of A. Ibrahim Almuttaqi technology.
Authors: Alexander C. Chandra About ASEAN Studies Program Fina Astriana Agustha L. Tobing The ASEAN Studies Program was established on February 24, 2010, to become a center of Finance and Administration: excellence on ASEAN related issues, which can Mila Oktaviani assist in the development of the ASEAN Community by 2015. The Habibie Center through its ASEAN Design and Publication: Studies Program, alongside other institutions working towards the same goal, hopes to contribute Rahma Simamora to the realization of a more people-oriented Tongki Ari Wibowo ASEAN that puts a high value on democracy and human rights. The objective of the ASEAN Studies Program is not merely only to conduct research and discussion within academic and government circles, but also to strengthen public awareness by forming a strong network of civil society in the region that will be able to help spread the ASEAN message. With the establishment of ASEAN Studies Program, The Habibie Center aims to play its part within our capabilities to the ASEAN regional development.
About Talking ASEAN
Talking ASEAN is a monthly public dialogue held at The Habibie Center in Jakarta. Covering a wide Check out our latest edition of array of issues related to ASEAN, Talking ASEAN ASEAN Briefs and download at addresses topics of: Economic Integration, Socio- cultural, & Democracy, human rights and regional http://thcasean.org/publication peace, among others. Featuring local and visiting experts, Talking ASEAN is one of a series of twelve dialogues regularly held each month and open to Cover Image: Food Security a target audience consisting of ASEAN officials, Blog Archive: Pak Food Magazine foreign ambassadors & diplomats, academics, university students, businesses, and the media.
This particular edition of policy brief is supported by the Embassy of the Kingdom of the Netherlands Introduction:
The link between trade and food security, which Countries (OPEC), which was seen by many ‘exists when all people, at all times, have physical and observers as a political threat that might hamper economic access to sufficient, safe and nutritious regional cooperation.6 Notwithstanding ASEAN’s food [that] enables them to meet their dietary needs vast achievement in agriculture, trade in the sector and food preferences for an active and healthy life’,1 today is often subject to non-tariff barriers, such as is well established. Although, due to the sensitivity of discretionary permits and quotas. the agricultural sector in general (agriculture is even treated separately in the then General Agreement on Tariff and Trade (GATT), the predecessor of the World Trade Organisation (WTO)) with measures such as Trade and food security nexus 2 subsidies and quantitative restrictions, agricultural Attempts to examine the nexus between international trade was already considered an important component trade and food security are not new. Whilst many of multilateral trade negotiations then. In fact, the studies have been dedicated to examine the difficulty for member states to reach an agreement implications of multilateral trade agreements on the on agriculture was the reason why the then GATT’s advancement of food security,7 others attempt to 3 Uruguay Round took so long to complete. Whilst look at the impacts of preferential trade agreements considered as a cornerstone of the present Doha on food security.8 Increasingly, however, the link 4 Development Round, agriculture remains a piece between the two variables is also being examined of the puzzle that continues to be a key stumbling in the context of global efforts to reduce poverty.9 block in the present multilateral agricultural trade Although international trade is only one of the factors negotiation. that affect food security, its absolute significance in Unfortunately, the present outlook of agricultural trade boosting countries’ efforts to attain their food security amongst the member countries of the Association objective is increasing, which is mostly due to the of Southeast Asian Nations (ASEAN) is not much rapid growth of global food trade. Generally speaking, different than that seen at the global level. Whilst the however, agricultural trade affects food security to the achievement of food security and the promotion of extent that it: (1) increases economic growth, creates open trade make up important components of the employment prospects, and increases the income Association’s integration initiatives, the attainment of earning capacity of the poor; (2) increases domestic food supplies to meet consumption needs; and (3) food security objective in the region is often pursued 10 at the expense of trade openness.5 When faced with reduces overall food supply variability. the 2007/08 global food crisis, rice producing nations When it comes to trade and trade policies, food in the region chose to seek economic gain from the security is usually defined in terms of either food self- rise of international food prices rather than fulfilling sufficiency or food self-reliance. Whereas the former the food security needs of other ASEAN Member emphasises the production of various food items States (AMS). Even worse was the idea amongst by domestic producers, and rules out imports as a these countries to set up the so-called ‘Organisation major of domestic food supplies, the latter focuses for Rice Exporting Countries (OREC), an agricultural on the availability of various food items for domestic cartel like the Organisation of Petroleum Exporting
Promoting Food Security in ASEAN Through Trade and Investment 2 Table 1. Key features, policies, and impacts of food self-sufficiency and food self-reliance
Features Policies Impacts
• All food consumed is • The banning of food Local crops tend to be produced within the exports and imports plentiful and cheap, borders of a country while other food items Food self- • The development • Advocates diets that are harder to obtain in sufficiency of small-scale are simple and natural the domestic market enterprises to boost that can be produced local food production domestically
International trade as a A wide variety of food Food is bought wherever key component of food is available, but local cheapest, using the Food self- security policy (food is crops can be more international markets to reliance freely exported and / or expensive than those supplement domestic imported on international obtained from the food supplies markets) international markets
Source: Chandra and Lontoh (2010: 2).
consumption, and generally considers international produced foods, which would, in turn, undermine the trade as an essential component of a country’s market access of the poor and vulnerable. food security strategy.11 Countries that are keen to adopt the latter food security principle usually The state of food (in)security and support market liberalisation and export oriented agricultural trade pattern in ASEAN agriculture founded on a strong local market through ASEAN has been relatively successful in facilitating improvements in physical infrastructure and credit food security in the region. Over the past 20 facilities. years, robust economic growth, along with rising Neither food self-sufficiency nor food self-reliance, agricultural productivity, output, and agricultural however, are capable of generating equal benefits incomes, has increased the prominence of the 14 for everyone. Whilst food self-sufficiency tends region in global agro-food trade. Earlier, the Food to benefit the weak and poor, food self-reliance and Agriculture Organisation (FAO) of the United benefits the rich and powerful.12 It is for this reason Nations also reported in its 2015 publication that that, at the multilateral level, the latter is generally the number of undernourished people in the region the food security stance adopted by rich and had been steadily declining, from 137.5 million in the powerful nations, whereas a food self-sufficient early 1990s to around 60.5 million more recently, a 56 policy, often associated with the concept of food percent reduction overall. Moreover, the prevalence sovereignty,13 is the common food security position of undernourishment has shrunk from 30.6 percent in of weaker and poorer nations. Many developing and the early 1990s to less than 10 percent recently, or a least developed countries often argue that such 68.5 percent drop. At the time when the report was a food self-sufficiency strategy would allow their published, AMS were reportedly making significant countries to keep control of certain policy spaces, progress towards international food security targets, which would not be the case if they were to rely fully such as the World Food Summit and the Millennium on the international marketplace. At the same time, Development Goals (target 1c). Some AMS, such as the limited food options available in the domestic Brunei Darussalam and Malaysia, even managed to market could also lead to price hikes for domestically reduce their prevalence of undernourishment rate to
3 ASEAN BRIEFS Figure 1. Number of undernourished people by region, 2014 - 2016 (in millions)
Source: FAO (2015: 10).
below the five percent threshold, indicating that they component in improving food availability, and the were close to having eradicated hunger.15 overall food security of a region.
Despite this impressive performance, the challenges Notwithstanding its status as one of the most that ASEAN faced in relation to food insecurity cannot productive agricultural baskets of the world, ASEAN be underestimated. Indeed, between 2014 and 2016, has yet to reach its full agricultural potential. The up to 60 million people across the region remained sector has been traditionally treated with great undernourished. This, coupled with the high poverty sensitivity by the majority of AMS, particularly since rate and the persistent inability of the agricultural and a third of employment in the region is in agriculture. fisheries sectors to meet future demand for food, Unlike trade liberalisation under the WTO that typically which is currently hampered by land ownership rules involves market access, domestic support, and export and unsustainable practices that have degraded subsidies, various ASEAN-led Free Trade Agreements the rural environment and marine ecosystems of (FTAs) usually only deal with market access issue the region,16 continues to present significant food whose implementation is often accompanied with insecurity challenge for the region in the future. In extended timelines for market liberalisation to take fact, one in ten in ASEAN is still hungry! place in the sector.18For example, in ASEAN’s 2004 Priority Integration Sectors (PIS) initiative, where Although the FAO recently argues that policy natural resource-based sectors, such as agriculture, objectives, especially those concerning rice, should be fisheries, rubber, and wood-based products were shifted from the maximisation of production through included, the coverage of agricultural products trade policies geared towards self-sufficiency to was relatively narrow, covering a small number greater emphasis on higher productivity, adaptation to of vegetables, fruits and nuts, a range of oilseeds, climate change, cost-effective rice price stabilisation, and a small number of grains and flour.19 Non-tariff sustainable intensification of production, and the measures, especially sanitary and phytosanitary, are use of rice as a vehicle to improve nutrition through also rampant in these sectors.20 biofortification,17 international trade remains a key
Promoting Food Security in ASEAN Through Trade and Investment 4 Table 2. Average agricultural exports and imports of ASEAN, 1984-2014 (in USD million)
Country Export/Import 1984-89 (1) 1990-99 2000-09 2010-14 (2) % change
Brunei Export 9 5 4 18.6 106.6 Import 139 229 260 510.8 266.9 Cambodia Export n.a. n.a. 70 489.4 n.a. Import n.a. n.a. 250 559 n.a. Indonesia Export 3,678 6,702 15,882 43,167.6 1,073.6 Import 1,521 4,454 7,786 20,538.6 1,250.3 Lao PDR Export n.a. n.a. n.a. n.a. n.a. Import n.a. n.a. n.a. n.a. n.a. Malaysia Export 6,617 9,353 14,714 32,371.2 389.2 Import 1,821 3,882 7,863 19,750.2 984.5 Myanmar Export n.a. 376 2,477 2,755.4 n.a. Import n.a 91 n.a. 701.2 n.a. The Philippines Export 1,692 2,030 2,684 5,598.8 230.8 Import 918 2,544 4,134 7,382.8 704.2 Singapore Export 3,447 4,852 4,739 10,119.2 193.5 Import 3,774 5,734 6,620 13,501.8 257.7 Thailand Export 5,526 11,207 19,290 40,973.2 641.4 Import 1,491 4,391 7,036 15,383 931.7 Vietnam Export n.a. 3,202 8,029 22,461 n.a. Import n.a. 654 3,956 13,836.6 n.a. ASEAN Total Export 20,968 37,727 67,890 157,954.4 653.3 Import 9,895 21,979 37,905 92,164 831.4 ASEAN Average Export 3,494.6 4,715.9 7,543.3 17,550.5 402.1 Import 1,649.2 2,747.4 4,738.1 10,240.4 520.9 World Total Export 326,852 511,728 861,703 8,181,330 2,403.1 Import 353,489 545,593 906,604 8,480,053 2,298.9 ASEAN/World Export 6.42% 7.37% 7.88% 1.9% Import 2.80% 4.03% 4.18% 1.1%
Source: WTO Statistics Database (n.d.).
Despite this, ASEAN’s agricultural trade performance rose 831.4 percent from USD 9.9 billion between has been showing an upward trend. The average value 1984 and 1989 to USD 92.2 billion between 2010 of the grouping’s agriculture exports, for instance, and 2014. Indonesia, where trade in agricultural grew 653.3 percent from USD 20.7 billion between products is often subject to discretionary permits 1984 and 1989 to nearly USD 158 billion between or implicit quotas, also saw significant growth in 2010 and 2014. The same goes for the average its agricultural export and import over the same value of the Association’s agricultural imports, which period. Despite the relative decline of the share of
5 ASEAN BRIEFS ASEAN’s agricultural exports and imports against the global trade and investment, the role of logistics world’s total, as well as persistent protectionism in services in the promotion of food security has the sector, ASEAN’s agricultural sector remains open often been overlooked. The linkages between for business. the two variables are probably best understood in the context of the food supply chain. An early study that recognised the linkages between food distribution and food security maintains that the The deepening of services trade reform for improvement of food supplies in rural areas and the greater food security lowering of marketing costs are important aspects 23 Despite its well established connection, the bulk of of rural development. Elsewhere in the Caribbean studies that assess the linkages between international Community, the liberalisation of logistics stimulates trade and food security are usually focused on the development of small- and medium-sized trade in food and agricultural commodities. There food related enterprises, strengthens food supply is now emerging interests amongst scholars and chains, and encourages the development of local observers to examine the role played by services food production. trade in strengthening food security. The connections East Africa offers an interesting case study. Here, between the two variables are well worth examining the increased internationalisation of distribution providing that the production and distribution of food services had a significant impact on the retail is often dependent on a range of services, which, in environment, bringing middle-class consumers in turn, impact on the cost and availability of food. This Kenya, Tanzania, and Uganda a greater variety of is not to mention that farmers, including small-holding goods at cheaper prices than had been offered ones, are increasingly integrated to global food supply previously.24 In fact, studies on the procurement and chains that strongly influence their production and marketing of fresh fruits and vegetables in these marketing decision. These economic actors are also countries have also found a positive correlation becoming more dependent on services – ranging from between reforms in the distribution services (and financial, logistics, information and communication the resultant reorganisation of food supply chains) technologies – that allow them to participate in food and the transformation of food systems for farmers, supply chains.21 increased food security, and declines in rural 25 Two areas of services sector are worth exploring poverty. in this regard, and these include the financial and Whilst not specifically linked to food security, logistics sector. To start with, financial services, all these studies suggest that logistics services such as credit, deposit, payment, insurance, and reform can have a positive outcome for farmers other risk management services, are increasingly and consumers. In addition to improving the becoming integral to the development of the availability, quality, safety, convenience, pricing, agricultural sector. Despite the exponential growth and variety of choice of food products, effective of the financial industry globally, access to finance food logistics services can shorten food supply is not distributed equally, with the rural poor often chains, and support new, healthy, and sustainable lacking opportunities to take advantage of financial consumption patterns and habits of consumers facilities. Poor smallholder farmers, whose income (e.g. the consumption of less-processed food is often irregular and tied to the agricultural season, and the changing of food production trends).26 for example, would be better equipped to cope with ore importantly, effective logistics can also create various challenges if they are provided with better better links between food-deficient and food- access to financial services. Moreover, to meet the surplus areas. demands of increasingly internationalised markets, farmers are also confronted with the challenge of producing food commodities that meet international standards and quality, all of which require appropriate Conclusion: Opportunities, agricultural financial services, such as credit, to assist challenges, and ways forward farmers to make the necessary adjustments in their production processes.22 There is little doubt that ASEAN offers vast market potential. Agriculture remains an important Meanwhile, though considered a major determining component of ASEAN’s economy. Despite factor of the competitiveness of an economy in its extensive use throughout history, much of
Promoting Food Security in ASEAN Through Trade and Investment 6 agricultural potential in the region remains untapped. security standing. Whilst both food security and open The following are some key potential of the region’s trade make up important components of ASEAN’s agricultural sector that are worth highlighting: integration initiatives, the attainment of food security objective in the region is often pursued at the expense • ASEAN’s vast market potential needs to be of trade openness. In view of these challenges, we better exploited and explored propose the following policy recommendations: While on the one hand, the huge population of • Economic openness is a key to the attainment ASEANof approximately 625 million peoplecreates significant challenges for the Association to meet of food security in ASEAN the region’s food security requirements, it does, Given the sensitivity of the agricultural sector in on the other hand, provide a vast enough platform most AMS, the full internationalisation of the sector forinvestment andtrade in the agricultural sector, may not be a feasible policy option to pursue. It be it from the region and beyond. is important to note, however, that the region is increasingly dependent upon intra- and inter- • ASEAN needs more investment in agricultural regional trade to improve its food security status. research and development (R&D) Through effective agricultural policies, some AMS, Although data for agricultural research and such as Thailand and Vietnam, have over the years development (R&D)spending is lacking in the turned themselves into major agricultural exporters region, ASEAN agricultural R&D spending in the world. Of immediate importance is the effort should be paid attention to. Currently, ASEAN’s to reduce unnecessary non-tariff measures, which average agricultural R&D spending stands at still heavily affects trade in agriculture. As one around 0.32 percent of the region’s agricultural recent study suggests, sanitary and phytosanitary GDP, which is lower than neighbouring China measures alone make up 33.2 percent of total non- with an average R&D spending of about 0.62 tariff measures in ASEAN, with products such as percent of its agricultural GDP. However, it is foodstuffs and animal products to be amongst the also important to note that there is significant most heavily regulated.27 diversity in agricultural R&D spending in ASEAN Member States. Whereas countries like Malaysia • The need to revisit financial services sector spend nearly 1 percent of its agricultural GDP for liberalisation research and development, others spend much less, ranging from 0.1 to 0.4 percent. Moreover, Financial services sector has the potential to most agricultural R&D investment is government- contribute to the promotion of food security in led. Accordingly, there is still a wide opportunity ASEAN. Liberalisation alone, however, does not for private sector-led agricultural R&D to grow in seem enough to overcome the challenges that make the region. financial institutions keen to establish themselves in poorer, rural areas. With various existing literature • ASEAN needs more investment in agricultural on the subject showing the difficulty faced by technology the banking sector when considering smallholder farmers as clients for their business operations, Due to lack of investment, agricultural technology ASEAN could study and develop an appropriate has not yet been well-developed in the region policy that would facilitate the contribution of the despite the recognition given to itin boosting financial services sector to rural farming activities. agricultural productivity. The limited adoption of In the context of Southeast Asia, such a role has agricultural technology in the region, since most of long been taken by local, normally state-owned, farmers in ASEAN are small producers and small- banks. Amid the liberalization in the financial sector micro enterprises, has led to low productivity and since the financial crisis of the late 1990s, the inefficiency.In order to develop better agricultural operation of foreign banks remains limited in terms technology, ASEAN will need a lot of investment of scope and coverage. Consequently, a more in- from both the region and beyond. depth assessment is required to estimate the role of foreign banks could play in addressing rural The challenge of enhancing food security requires financial requirements, and, subsequently, food a comprehensive and comprehensive approach. security. Economic and trade openness can complement ASEAN’s existing efforts to improve the region’s food
7 ASEAN BRIEFS • Explore further the potential of logistic services need to be aware of the food product’s safety, to promote and strengthen food security status of quality and nutrition. AMS
Logistics services also have significant potential to promote and strengthen the food security status of Endnotes ASEAN. As in many other developing regions in the world, the issue of logistics development is becoming 1. World Food Summit (1996), World Food Sum- more significant in Southeast Asia. Aside from its mit Plan of Action, Rome: FAO, retrieved from st potential to reduce costs and improve business (accessed 1 August 2017):
• Implement national food security policies that are 3. Ibid. in line with the spirit of ASEAN regionalism 4. European Commission (n.d.), ‘Agriculture in the st As illustrated during the last global food crisis, crises Doha Round’, retrieved from (accessed 1 Au- could result in national policies that run counter gust 2017):
Promoting Food Security in ASEAN Through Trade and Investment 8 ments’, Pacific Review, Vol. 18, No. 4, pp. 541- the Seeds of Regional Liberalization in Asia, New 566. York and Bangkok: UNESCAP, pp. 75-130. 9. See, for example, L. A. Jackson (2009), ‘Agricul- 19. ASEAN Secretariat (2015), ASEAN Integration Re- ture and Trade Solutions for Rural Poverty’, in A. port 2015, Jakarta: ASEAN Secretariat, pp. 116- L. Stoler, et al., Trade and Poverty Reduction in 117. the Asia-Pacific Region, Cambridge: Cambridge 20. Ibid., pp. 16-17. University Press, pp. 195-226. 21. A. C. Chandra and H. Kinasih (2013), Services 10. Matthews, 2003, p. 60. Trade Liberalization and Food Security: Exploring 11. Chandra and Lontoh, 2010, p. 2. the Links in the Association of Southeast Asian Nations (ASEAN), Winnipeg: IISD. 12. G. Kent (2002), ‘Africa’s Food Security under Glo- balization’, African Journal of Food, Agriculture, 22. E. Coffey (1998), Agriculture Finance: Getting the Nutrition and Development, Vol. 2, No. 1, pp. 22- Policies Right, Rome: FAO and GTZ, retrieved 29. from (accessed 2nd August 2017):
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