Potential Roles of Trade and Investment in Promoting Food Security in ASEAN

Discussion Report Special Talking ASEAN: The Business Series

April 2016

Fina Astriana (Researcher, The Habibie Center).

The objectives of this event was to: (a) discuss the current state of food security in ASEAN; (b) identify ways in which economic openness, especially through trade and investment, can contribute to food security in ASEAN; (c) explore available business opportunities in ASEAN’s agriculture and food industries; (d) generate relevant policy recommendations to facilitate further reforms and economic openness in ASEAN’s agricultural sector; (e) provide a networking platform for agriculture-related businesses and other relevant stakeholders; and (f) officially launch “Agriculture in ASEAN: A Trade and Investment Guidebook”

This discussion report summarizes the key points of each speaker as well as the question and answer session that followed.

Jakarta — On Tuesday, 11 April 2017, The Habibie Center in collaboration with the Coordinating Ministry of Economic Affairs of the Republic of Indonesia, BINUS University International, Indonesia Services Dialogue, and the AEC Center of the Ministry of Trade of the Republic of Indonesia, organized a Special Talking ASEAN: The Business Series on “Potential Roles of Trade and Investment in Promoting Food Security in ASEAN” at Le Meridien Hotel Jakarta, with the kind support of the Embassy of the Kingdom of the Netherlands. This event also served as a launching event for the Agriculture in ASEAN: Trade and Investment Guidebook.

The forum featured opening remarks from Ms. Rahimah Abdulrahim (Executive Director, The Habibie Center) and Mr. Ferdinand Lahnstein (Deputy Head of Mission/Minister Plenipotentiary, the Embassy of the Kingdom of the Netherlands), a presentation on the “Agriculture in ASEAN: Trade and Investment Guidebook” by Mr. Agustha Lumban Tobing (Researcher, The Habibie Center) as well as a discussion featuring Dr. Suthad Setboonsarg (Member of Board of Trustees of International Rice Research Institute), Dr. Alexander C. Chandra (Associate Fellow, The Habibie Center), Mr. Thomas Darmawan (Chairman of the Permanent Committee of Food Industries at the Chamber of Commerce and Industry (KADIN)), and Mr. Siem Dwiatmoko Setiono (Committee of Membership Organization and Regional Relations, the Indonesian Food and Beverages Association (GAPMMI)), that was moderated by Ms.

INTRODUCTION

Introduction - Discussion Report Talking ASEAN2

Ms. Rahimah AbdulrahimExecutive Director,The Habibie Center

OPENINGREMARKS

Trade and Investment in Promoting Food Security in ASEAN” as well as published the “Agriculture in ASEAN: Trade and Investment Guidebook”.

Through the dialogue and the publication, Ms. Abdulrahim hoped that The Habibie Center is able to play its part in ensuring greater participation of the business sector in the ASEAN Economic Community. She expressed her hope that the guidebook would contribute positively to trade and investment – especially in the area of agriculture – between ASEAN and the Netherlands and the EU.

Ms. Abdulrahim began her opening remarks by highlighting the increasing challenges within ASEAN’s regional integration as a result of the rapid changes in the global landscape. The very basic challenges that requires high priority in ASEAN is to ensure food security in the region by improving the agriculture sector. Furthermore, this responsibility should not be dominated by ASEAN policy makers only. The private sectors, both from ASEAN and non-ASEAN should indeed play a bigger role in further expanding the sector.

She also emphasized that the private sector’s participation can only be beneficial if they are fully aware of how to make the best use of the ASEAN Economic Community. Therefore, providing sufficient information to the private sectors about the opportunities and challenges in agriculture sector is deemed important. It is against this background that The Habibie Center, with the kind support of the Kingdom of the Netherlands, initiated the special edition of Talking ASEAN: The Business Series on the “Potential Roles of

OPENING REMARKS

Opening Remarks - Discussion Report Talking ASEAN4

Mr. Ferdinand LahnsteinDeputy Head of Mission/Minister Plenipotentiary, the Embassy of the Kingdom of the Netherlands

OPENINGREMARKS

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sufficiency, ASEAN can also perform its role as a supply base for its larger neighbours. According to Mr. Lahnstein, this is the very interesting part for potential investors and agriculture players to choose which sector in which country to invest and or trade with.

The Netherlands also shares the same rich agricultural background as the second largest agricultural producer worldwide, exporting EUR 65 billion worth of vegetables, fruits, flowers, meat and dairy products each year. Accounting for 10% of the Dutch economy and employment, the agricultural and horticultural sectors play a crucial role in the Netherlands. Mr. Lahnstein added that the country is now aiming to stimulate the development of new, sustainable technology through

Mr. Lahnstein believed that ASEAN has made tremendous social, economic, and political achievements in the last decades. With the growing middle class in all ASEAN countries, the demand and consumption levels of different agriculture products has increased significantly and will continue to do so in the years to come. This situation brings these states to both compete and compliment each other in the effort of ensuring food security and self-sufficiency in the region.

With the diverse range of food and agriculture in ASEAN, Mr. Lahnstein shared the same perspective that the development of the agriculture sector remains one of the most important areas under ASEAN cooperation within the region and intra-regions. In addition to self-

OPENING REMARKS

Opening Remarks - Discussion Report Talking ASEAN 7

Finally, Mr. Lahnestein emphasized that the achievement of the Netherlands in these ambitious agricultural developments was an outcome of the close cooperation between the main players in the sector. Therefore the Netherlands and EU is a very suitable partner for ASEAN in working together to achieve agriculture objectives and wider food security.

a collaboration program between the government, the Horticulture Product Board and the Dutch Confederation of Agriculture and Horticulture.

Meanwhile, the European Union (EU) also considers farming and food production as the essential element of the EU economy and society. However, Mr. Lahnstein highlighted a number of challenges such as ensuring sufficient food production for the world’s population and maintaining sustainable management of natural resources. Considering its exceptional agricultural resources, the EU could and should play a key role in ensuring food security of the world at large, including ASEAN countries.

Launching of “Agriculture in ASEAN: Trade

and Investment Guidebook”:

A Short Presentation from The Habibie

Center

Short Presentation - Discussion Report Talking ASEAN 9

agreements in the region. Following the first chapter, the Guidebook covers each of the ASEAN member states’ country brief and agriculture sector profile, land policies, tax regulations, a step-by-step guide to exporting goods to or from the country, miscellaneous trade regulations, a step-by-step guide to setting up a business, and a description of the existing infrastructure network. Finally, it also provides information on the country’s employment regulations, along with its social security systems.

As one of the co-authors for the “Agriculture in ASEAN: Trade and Investment Guidebook”, Mr. Agustha Lumban Tobing explained the rationale behind the recent publication.

The team chose agriculture as the main focus of the Guidebook because it contributes significantly to ASEAN’s economic growth, in terms of GDP, FDI, employment and exports. Moreover, Mr. Lumban Tobing added, most ASEAN governments now prioritize food security. Focusing on agriculture will enable millions of people to get reliable access to food.

He further explained that the Guidebook format serves as an easy-to-digest guide of all relevant information for trade and investment in ASEAN’s agriculture sector. The first chapter offers an overview of the sector in the region, the areas of cooperation between nations concerning agriculture, and the region’s state of agricultural trade and investment. It also explains the key trade and investment

SHORT PRESENTATION

PRESENTATIONFROM THEPANELIST

Presentation - Discussion Report Talking ASEAN 11

as a national security issue. As for the implication, the national government will share this food security domain with the industry, allowing private sectors to have more roles.

To conclude his presentation, Dr. Setboonsarng emphasized the importance of the Good Governance principle in managing food security. First, there needs to be a clear allocation of the role and responsibility between the public and private sector to avoid conflicts of interest. Second, each party should be accountable for their own roles and functions. In order to manage the potential risk, utilizing digital instrument is crucial to provide further information and analysis. Lastly, this process and the information produced should be made available to the general public.

Food security is considered as a challenge that requires high government intervention. Dr. Seetbonsarng argued that it remains unresolved because this endeavor also requires the participation of the private sector. The general consensus believes that food scarcity and security is the government’s responsibility. However, he believed that a reallocation of roles between the government and the private sector is needed to solve the problem by regulating trade and investment.

Within ASEAN itself, food security becomes a priority, considering that ASEAN has both food surplus and food deficit countries. Most of these countries are pursuing a self-sufficiency policy to address the food security issue by subsidizing production, controlling import, and limiting foreign investment. The cooperation on food security started in 1979 with the ASEAN Food Security Reserve Agreement. Later in 2003, it was expanded to include China, Japan and the Republic of Korea to form the East Asian Emergency Rice Reserve (EAERR). The 12th ASEAN Plus Three Summit in 2009 endorsed the ASEAN Plus Three Comprehensive Strategy on Food Security and Bioenergy which gives rise to the establishment of ASEAN Plus Three Emergency Rice Reserve Agreement (APTERR) in 2011.

To determine the ways forward, Dr. Setboonsarng highlighted that ASEAN needs to consider some dynamics, such as the changing international market and the changing behavior of global players. It is also crucial to consider food security

Dr. Suthad Setboonsarng

Food security is considered as a challenge that requires high government intervention.

Presentation - Discussion Report Talking ASEAN12

weather and climate change, demand on agricultural products, stock levels, resources, energy price, trade restrictions, exchange rates and growing speculation.

In his presentation, Mr. Darmawan pointed out a number of challenges, opportunities and solutions for food production, processing and distribution. First, at the food production level, urbanization, where the next generation is migrating to urban cities, has become a challenge for the sustainability of food production. Not to mention the number of educated farmers to be able to adapt with new technologies and come up with innovation. At the same time, it requires capacity and vocational training as well as investment in farming technology in order to overcome the production challenges.

At the processing level, there is limited financial support that contributes to the increasing cost of processing technology. Dr. Darmawan argued that this will then push us to import cheaper goods, which will turn as competitors. To solve this issue, there needs to be an efficient policy to increase competitiveness. Finally, at the distribution level, poor infrastructure has become a major challenge on the inefficiency of food production. Mr. Darmawan suggested that we need to advance distribution technology for cost efficiency.

As the second panelist, Mr. Darmawan put special emphasis on Indonesia’s situation. Although the country’s food security index ranking has increased to number 71 out of 109 countries, Mr. Darmawan still considered that Indonesia depends heavily on other sources for its food security.

Indonesia sits at number five among ASEAN countries for its global competitiveness. As of 2030, it is predicted to be the 7th largest economy in the world. In this context, there are a number of potentials that Indonesia bears. First, there will be a significant increase in the consuming class segment, which will also contribute to the increase in consumption of animal-based food products and food processing. In order to meet such domestic demand, the agriculture and fisheries sector is required to increase their productivity by at least 60%. This would also increase the revenue potential in agriculture and fisheries by 6% a year. Other points to consider arethe demographic of Indonesia and the population’s increasing income that will contribute significantly in the food and beverages industry. Spending on processed food and beverage toward total spending on food in Indonesia has reached 26%.

Mr. Darmawan also highlighted the risk of price volatility that can have extensive negative impacts on the agriculture sector, food security and the wider economy in both developed and developing countries. Some of the factors that contribute to this situation are

Mr. Thomas Darmawan

Presentation - Discussion Report Talking ASEAN 13

Furthermore, reforms in the service sector helps tranform the global food economy, production and maketing decisions.

Finally, he emphasized that trade in services serves as an important component in the promotion of food security. ASEAN needs to encourage more investment to better understand the linkage between the services sector and food security. Despite the necessity to have reforms in the services sector, Dr. Chandra also reminded the negative consequences that will rise from it. Moreover, the role of European Union in supporting ASEAN’s endeavor also needs to be taken into consideration.

In his presentation, Dr. Chandra focused on how the service sector will significantly improve the attainment of food security. He recognized that the current state of food security is improving, but at the same time, undernourishment is still considered as a major problem in some parts of the region.

As an association, ASEAN has established some mechanisms in the area of food security and stability, food handling and food safety. For example in 1970, ASEAN came up with the Agreement on ASEAN Food Security Reserves that paved the way for the establishment of an ASEAN Emergency Rice Reserve. In 1995, ASEAN agreed on the ASEAN Framework Agreement on Services (AFAS). The 2009, 2015, and 2025 blueprints also provided an accumulative effort for ASEAN to move towards the ASEAN Trade in Services Agreement (ATISA) as the legal instrument for further integration of services sectors in the region.

Dr. Chandra went on to explain the linkages between service trade and food security. Reforms in the services sector will further provide efficient provision of services. For example, financial service reforms will provide access to a sound investment in the agriculture sector, therefore facilitating further expansion. This will also contribute in equipping farmers with risk management abilities. Meanwhile, reform in logistic sector will enable consumers to gain easier food access by stimulating MSMEs development, strengthening food supply chain and improving farmers’ livelihood.

Dr. Alexander Chandra

ASEAN needs to encourage more investment to better understand the linkage between the services sector and food security.

Presentation - Discussion Report Talking ASEAN14

government itself has set up a series of deregulation policies as part of its initiative to support food industry and business.

According to Mr. Setiono there are four main actors who are important in determining the state of food safety. They are the government, the private sector or industry, consumers and academia. The government is crucial in setting up the regulatory framework, strengthening food control and moreover in providing better infrastructure. Meanwhile, the private sector, together with multi national companies (MNCs), domestic enterprises, small medium enterprises (SMEs) are important to explore food diversification and provide informative knowledge regarding food safety. Academic are responsible to come up with innovation and technical assistance, while the consumers also need to have the awareness of the food product’s safety, quality and nutrition.

Mr. Setiono as the representative of the Indonesian Food and Beverages Association (GAPMMI)) explained the importance of the global value chain. Citing the UNCTAD 2013 World Report, he mentioned that the global value chain has a direct economic impact on value added, jobs and income. When discussing the global value chain it was important to consider the availability, continuity and sustainability of raw materials. From the government’s perspective, the regulation and policy has to be sustainable.

He continued by highlighting a number of opportunities in this era of free trade agreements, especially with the ASEAN Economic Community. The industry of food and beverages in Indonesia is quite optimistic with the development of this economic regime. At the regional level, ASEAN’s combined population will make up a huge market for the industry. There is also an increasing trend whereby food and beverages growth has shifted to Asia. The stable commodity price also contributes to this optimism.

On the other side, Mr. Setiono also added that this endeavor was met with a number of challenges. Some of them are the increasing demand to have nutritious and healthier food choices that attain to certain standard and regulation of government policy. There is also the issue of limited resources that requires further innovation from the industry. Innovation is also needed in terms of distribution and logistics management to ensure that food is delivered at its best state. The Indonesian

Mr. Siem Dwiatmoko Setiono

QUESTIONAND

ANSWER

Q&A - Discussion Report Talking ASEAN16

SESSION #1

Comment No. 1: The problem with hunger and malnutrition is not about the unavailability of the food, but also how people could gain access to food. How do ASEAN countries work together to address this issue?

Comment No. 2: It is very important for the service sector and the food sector to engage in cooperation, so that Indonesia could reform.

Comment No. 3: To maintain food sustainability, we currently rely so much on Genetically Modified Organism (GMO). How do you balance any health concern and by making sure at the same time that people do not starve?

Comment No. 4: Would you please elaborate more on the impact of climate change on food availability? Is it possible to explore food resources from the sea as the impact of climate change? How does the issue of sovereignty and nationalism fit in this ASEAN framework of food security?

Q&A - Discussion Report Talking ASEAN 17

Mr. Thomas Darmawan: There were two main proposals that Mr. Darmawan laid out in order to achieve food security in the region. First, setting up food companies, not only in the capital city, but also other parts of the region to provide wider accessibility. He suggested that this system should be implemented at the ASEAN level. Secondly, providing easier access for people by developing easy sachet or individual food packs.

Mr. Siem Dwiatmoko Setiono: Mr. Setiono was very much aware that climate change contributes to crop failure. Therefore, technology is important to assure food safety and availability for consumer.

Dr. Suthad Setboonsarng: On the issue of sovereignty and nationalism, Dr. Setboonsarng admitted that every country has their phobias. Each one of them aspire to rely on their capability of achieving food security independently. However, he argued that we need to react as a response to the current development. At the end of the day, we want to keep everybody alive by having enough food to consume. Dr. Setboonsarng believed that this should be prioritized rather than sovereignty concerns.

In response to the question regarding GMO, he encouraged the public to realize that we will not be able to achieve the advancement in food security without the development in science. We also need to understand that in the future, there will not be enough land or resources to cater the population. Maintaining the status quo is quite a challenge already. The very existence of GMO is enabling the possibility to explore further from what we have now.

Dr. Alexander Chandra: Dr. Chandra acknowledged that there has been a lot of opening up in the food security-related sectors, through a more relaxed barrier in the logistic or service sectors. However, it is also hard to talk about liberalization because of a very limited support. He argued that at the national level, it is hard to discuss the subject of food security, since it always becomes distorted by politics. Therefore, we need to consider new and innovative ways, such as promoting a made in ASEAN product.

SESSION #1

technology is important to assure food safety and availability for consumer.

Q&A - Discussion Report Talking ASEAN18

SESSION #2

Comment No. 4: What is the role of digital data reform in ensuring that we stay informed of the current state of the region’s food security?

Comment No. 5: We need to define the role of the private sector. How do they bring potential trade and investment opportunity for ASEAN commodities? How far are we in ASEAN in terms of food waste management?

Q&A - Discussion Report Talking ASEAN 19

Dr. Suthad Setboonsarng: Dr. Setboon-sarng saw that the current information on production of food, particularly rice, is not very sufficient. He argued that this was caused by the issue of na-tional security, which makes the gov-ernment reluctant to share relevant data or information. On the other side, the private sector uses satellite data to translate production information.

On the question of food waste man-agement, there is already a Working Group addressing the problem in food chain, from production to consump-tion.

Dr. Alexander Chandra: There has been a talk among ASEAN Leaders, one was from the former Thailand Prime Minister on the discussion of Organisation of Rice Exporting Coun-tries (OREC). This could be one way to make sure the cooperation at the re-gional level stays consistent.

SESSION #2

PROJECT SUPERVISOR: Rahimah Abdulrahim (Executive Director) & Hadi Kuntjara (Deputy Director for Operations) | HEAD OF ASEAN STUDIES PROGRAM: A. Ibrahim Almuttaqi | RESEARCHERS: Fina Astriana, Muhamad Arif, Askabea Fadhilla, Agustha Lumban Tobing, Hana Hanifah, Vierna Tasya Wensatama | FINANCE & ADMINISTRATION: Mila Oktaviani | LAYOUT & DESIGN: Rahma Simamora, Tongki Ari Wibowo

ABOUT ASEAN STUDIES PROGRAM

The ASEAN Studies Program was established on February 24, 2010, to become a center of excellence on ASEAN related issues, which can assist in the development of the ASEAN Community by 2015. The Habibie Center through its ASEAN Studies Program, alongside other institutions working towards the same goal, hopes to contribute to the realization of a more people-oriented 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 array of issues related to ASEAN, Talking ASEAN addresses topics of: Economic Integration, Socio-cultural, & Democracy, human rights and regional 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 a target audience consisting of ASEAN officials, foreign ambassadors & diplomats, academics, university students, businesses, and the media.

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