Changing Global Supply Chains: Prospects, Impacts and Response Strategies in Agriculture Sector: The ASEAN Way

Changing Global Supply Chains: Prospects, Impacts and Response Strategies in Agriculture Sector: The ASEAN Way

Published: 2023.05.11
Accepted: 2023.05.11
118
Associate/Lecturer
Singapore University of Social Sciences (SUSS)

ABSTRACT

The COVID-19 coronavirus pandemic and the Russia–Ukraine war disrupted ASEAN food supply chains. The COVID-19 coronavirus pandemic, for example, has affected the availability of migrant laborers operating in the agricultural sector, coupled with rapid urbanization resulting in a decrease in the agricultural work force exacerbated by aging farmers without youths to succeed their work. Moreover, the Russia-Ukraine war is limiting global supply of wheat and fertilizers. Outside manmade factors, climate change's unpredictable temperatures/precipitation changes add another layer of complexity to food supply chains. Despite these challenges, the ASEAN remained united to tackle these problems, expressed through the ASEAN Ministers on Agriculture and Forestry (AMAF)’s Joint Statement to show their collective commitment to maintain regional food security, food safety and nutrition during the early days of the pandemic. Advanced technologies are very much needed to resolve these challenges ranging from low-tech solutions to innovations like drones and sensors. The use of advanced technologies can impress upon young people that the industry is not a dirty, dangerous and difficult job. In developing new technologies, research and development (R&D) in targeted areas are crucial to mitigate the factors that have impacted on food supply in recent years. This includes developing crop varieties tolerant of uncertain climate and extreme weather. Scaling up cooperation with external partners can help.

Keywords: crisis, ASEAN, COVID-19, technology, food

INTRODUCTION: NO BEGGAR-THY-NEIGHBOUR POLICIES

The twin crises of COVID-19 coronavirus pandemic and the Russia–Ukraine war disrupted food supply chains. The confluence of negative factors impacting on the Southeast Asian agricultural sector has created a perfect storm that impacts on food supply. The COVID-19 coronavirus pandemic has hurt the flow of migrant laborers operating in the agricultural sector and the Russia-Ukraine war limited global supply of wheat and fertilizers (Tan, Satur and Le, 2023). Simultaneously, climate change affects food production with erratic temperatures/precipitation, and rapid and creeping urbanization resulted in a proportionate manpower decrease of the agricultural labor force due to aging farmers and the lack of youths to replace them (Tan, Satur and Le, 2023). Despite immense challenges from the multitude of problems, the ASEAN remained united in their approach to tackling the COVID-19 coronavirus pandemic. One of the earliest indications of ASEAN cooperation occurred near the start of the pandemic on 15 April 2020 at Jakarta when the ASEAN Ministers on Agriculture and Forestry (AMAF) released a Joint Statement to show their collective commitment to ensure regional food security, food safety and nutrition was not disrupted regionally (The ASEAN Secretariat, 2020).

From the start of the pandemic, AMAF declarants cooperated to make sure that markets are open, transportation of agricultural/food products are unimpeded, excessive price volatility are avoided, price spikes mitigated, emergency food reserves are provided and accurate/well-timed market information is provided (The ASEAN Secretariat, 2020). The AMAF emphasized social protection programmes for small-scale farmers and Micro, Small and Medium Enterprises (MSMEs) and emphasized ramping up food production in the interest of regional food security (The ASEAN Secretariat, 2020).

These commitments were reflected in the comments of the AMAF chair himself. The then ASEAN Ministers on Agriculture and Forestry (AMAF) Chairperson Dato Ali Apong, Minister of Primary Resources and Tourism of Brunei Darussalam, affirmed that ASEAN will continue to “ensure sustainable supply of sufficient, safe and nutritious food that meet the dietary requirement of ASEAN populations during and after the outbreak of the COVID-19” (The ASEAN Secretariat, 2020). Therefore, right from the early stages of the pandemic, the ASEAN ministers told the ASEAN Member States (AMS) to put in place measures, projects and programs at the national level to ensure the immediate food needs of their populations are met, with special attention given to the vulnerable groups in their society (The ASEAN Secretariat, 2020). Because of the political will expressed through collective voices in such ASEAN meetings, ASEAN member states are still prioritising open and operational food supply chains for the region even in the advanced stages of the pandemic that is slowly morphing into an endemic (Tan, Satur and Le, 2023).

Some external powers are also stepping in to help with ASEAN needs. Japan for example is working with ASEAN to provide financial access for micro, small and medium enterprises in rural areas of Cambodia in terms of Private Sector Investment and Finance through JICA’s Initiative on Overseas Loan and Investment for ASEAN funding (MOFA, 2022). This is a crucial initiative since 90% of the Cambodian rural population is under the poverty line and job creation is much needed in those areas (MOFA, 2022). JICA became a signature to a US$50 million loan agreement with a Cambodian deposit-taking microfinance institution to issue funds to MSMEs in rural Cambodia to lessen poverty and regional inequalities while promoting sustainable economic growth (MOFA, 2022). The Japanese private sector is also involved in providing such financing assistance. As part of the Loan for Rural Area Agricultural Sector Supporting Project in Cambodia, JICA utilized finances from JICA’s Initiative on Overseas Loan and Investment for ASEAN and Sumitomo Mitsui Banking Corporation (SMBC) to provide Cambodia’s ACLEDA Bank Plc. (ACLEDA Bank) with private sector investment finances of up to US$85 million in May 2022 (MOFA, 2022).

A CAUTIOUS POST-COVID-19 OUTLOOK

Due to ASEAN’s enlightened policies in place and a helping hand from its traditional partners, ASEAN weathered the COVID-19 coronavirus pandemic relatively well. Yet they remain cautious even in the post-COVID-19 context about the food supply situation. Two detailed expert statements articulated in a major ASEAN intellectual event is instructive of continuing challenges faced by ASEAN countries. In Indonesia, Indonesian Food and Beverage Association (GAPMMI) Chairperson Adhi Lukman expressed some concerns for the industry despite near-unprecedented 2023 growth in most product categories, articulating such anxieties at the ASEAN F&B Industry Outlook from 2022 to 2024:

Indonesia saw growth across basically all the food and beverage categories this year with the exception of palm oil, with indulgent food products taking the lead followed by beverages. This further highlighted the crucial role that the food industry plays in Indonesia’s economy and economical growth, with the positive growth it showed even during the COVID-19 pandemic helping to bolster overall local trade.​ This is supposed to be very positive news for the sector, but although it is, there are several concerns overshadowing this, most prominently the fact that Indonesia has had to face many major crises in the past few years from the pandemic to the Russia-Ukraine war, all of which have had severe impacts on us as a producer country.​ The state of the global economy has resulted in rising costs which has affected Indonesia’s profit margins, not to mention various export restriction policies being implemented that have caused a lot of challenges for food trade in areas such as wheat, beef, rice and more.​ Taking wheat for example, when the war broke out in February, prices skyrocketed and India banned exports which wreaked further havoc on prices – this eventually stabilized, but the concern over food insecurity rose in many markets including Indonesia, as we still have a negative trade balance despite many food exports due to a strong reliance on imports. The food sector needs to make sure that food is not just available, but also affordable and well-received by consumers – no easy task amidst all the ongoing issues from geopolitics to trade wars. Every one of these issues has an effect on us, as let’s say if China and Taiwan argue, the raw materials from there then don’t enter Indonesia, which affects local stock and inventory, causing food insecurity (Neo, 2023). ​

While there appears to be positive signs of recovery in the Indonesian case, Chairperson Adhi emphasized that there are more anticipated challenges in the near future in fulfilling consumer demands due to extensive continuing instability in the region and the globe. In certain commodities, regional powers have come to assist and contribute to vulnerable ASEAN countries. In accordance with the ASEAN+3 Emergency Rice Reserve (APTERR) Agreement, Japan in 2022 dispensed 620 metric tons of pre-positioned stockpiled rice assistance and 40,000 meals of stockpiled pre-cooked rice to Cambodia and Myanmar as part of pre-positioned rice stockpiles for emergencies (MOFA, 2022). This package includes 20 tons of rice assistance as part of the “School Distribution Program” to assist school-going kids and/or children studying in classrooms in vulnerable areas.

Vietnam, a major ASEAN food producer, has similar concerns as Ho Chi Minh City University of Food Industry (HUFI) Faculty of Food Science and Technology Dean Associate Professor Le Nguyen Doan Duy revealed at the same seminar:

Vietnam’s food and beverage sector has also been going strong and seeing growth even through the pandemic. In both urban cities and rural villages, products in the hybrid drinks, canned foods and pasta categories were the fastest growing, but urban consumers bought more of processed items such as instant noodles and mayonnaise whereas rural consumers were purchasing more ingredients such as sugar.​ There was a growth of over 10% for many of these categories, which did boost industry confidence – but there is no doubt that food prices are rising due to inflation, and this is very concerning to both food companies and consumers.​ Local research has shown that discretionary spending is expected to take a dip in the next two years due to these concerns – food will of course remain a priority as a basic item, but value purchases will be a great draw.​ Vietnam wants to develop our domestic support for the various food industries to overcome dependence on imported materials and attain self-sufficiency in the food supply chain. Locally the availability of various raw ingredients is high as a producer country, but processing capacity is still low, so this is an area that will be seeing more development moving forward.​ It has also been discussed that many local food industries are currently being dominated by global brands e.g. in the beverage sector, and the hope is that moving forward more can be done to help local brands grow and flourish (Neo, 2023).

In the area of processed food mentioned above, an ASEAN-JICA Food Value Chain Development Project is managed by JICA to alleviate such deficiencies. The project is based on the Japan-ASEAN Technical Cooperation Agreement which focuses on training programs, coordinated food production and enhanced food manufacturing activities by upgrading production efficiency and value-adding to existing ASEAN agricultural products in the interests of economic development and food security (MOFA, 2022).

CONCLUDING REMARKS: FUTURE SOLUTIONS AND DIRECTIONS

In 2020, an International Food Policy Research Institute report noted that ASEAN member states underinvested in agricultural R&D and ASEAN budgets in this area as a component of agricultural gross domestic product has steadily declined between 2000–2017 as the agricultural sector mainly consists of smallholders who cannot invest in R&D substantially (Tan, Satur and Le, 2023). Research and development (R&D) in targeted areas are crucial to mitigate the factors that impeded food supply in recent years, including climate-related research to develop crop varieties tolerant of uncertain climate and extreme weather (Tan, Satur and Le, 2023). Moreover, ASEAN agricultural R&D efforts are still rudimentary and centred around knowledge exchanges among member states, so there is potential for ASEAN to scale up cooperation with external partners and coordinate its member states’ research and policies with them, e.g. ASEAN’s successful cooperation with Japan in public health surveillance (Tan, Satur and Le, 2023).

In 2021, Japan initiated the MeaDRI (Measures for Achievement of Decarbonization and Resilience with Innovation) to bump up food production in ways that are compatible with enhanced sustainability through tech innovations in the food, agriculture, forestry, and fishery sectors (MOFA, 2022). Japan and Asia-Monsoon countries share some common climatic features and agricultural practices so new Japanese technologies (e.g. Biological nitrification inhibition or BNI-enabled crops, Alternate Wetting and Drying or AWD in the Asia-Monsoon region, etc.) can be implemented through Japanese agricultural research networks/institutes in these countries. (MOFA, 2022). The Japan International Research and Development Agency (JIRCAS) established the International Center for Strategy “MeaDRI” networking hub in 2022 for the collection, analysis and transmission of innovative technologies and scientific info to ASEAN nations under advisory of leading scientists in the Scientific Advisory Board for Strategy “MeaDRI” (MOFA, 2022). These scientists have intense local agricultural knowledge and are drawn from Indonesia, Malaysia and Thailand and International Organizations (IOs) to sit in the Board from October 2022 to work on cooperative research activities (MOFA, 2022).

Another widely agreed solution to regional (and indeed global food supply chain problems) is the utilization of advanced technologies to solve current and near-future challenges. Technological solutions include low-tech methodologies like surface mulching and building micro-catchments to cutting-edge innovations like drones and sensors (Tan, Satur and Le, 2023). One spin-off benefit from technological modernisation of the agricultural sector is reversing the negative perception among young people that the industry is ‘dirty, dangerous and difficult’ (a so-called 3D job) (Tan, Satur and Le, 2023).

In the field of technology, The Joint Statement on Sustainable Agricultural Production and Food Systems July 2021 is an important feature of Japan-ASEAN cooperation. It highlights the importance of sustainable agricultural production and food systems in ASEAN countries with their own regional particularities and Japanese support is predicated on international collaboration to introduce innovative and sustainable agricultural practices and technologies (e.g. digital tools, machineries and pest control tools) with the funding support of MAFF of Japan, JICA and JAIF (MOFA, 2022). Under this strategic plan, Japan launched 29 resilient and sustainable agriculture and food system initiative projects for ASEAN countries during the SOM-AMAF+3 meeting (MOFA, 2022).

ASEAN’s existing agricultural R&D technological gap means that there is a great potential for advanced high-tech partners to work with them, e.g. the European Union (EU) under the rubric of EU–ASEAN strategic partnership centered around green growth and capacity building (Tan, Satur and Le, 2023). The sharing and learning process goes both ways. The European Union (EU) can study the collective experience of smallholder farmers in ASEAN while ASEAN can strengthen developing its research capacity and farmer education with the help of the EU (Tan, Satur and Le, 2023). The EU can learn how Southeast Asian farmers implement farming techniques that can lessen the pressure for constantly expanding land spaces for agricultural production (Tan, Satur and Le, 2023). The EU has economic incentives to be involved in ASEAN food security. This is because Indonesia, Vietnam and Malaysia are major sources of agri-food imports for the European Union (Tan, Satur and Le, 2023). The EU can also tap into the repository of collective knowledge and wisdom on sustainable farming practiced by smallholder farmers who can churn out more output per unit of land than large-scale farms (Tan, Satur and Le, 2023).

Outside landed farms, the ASEAN is also busy working with the islandic nation of Japan in the area of sea-based food supply. Japan has been a strong partner of ASEAN in the food supply businesses throughout the years and consistently considered ASEAN’s most trustable regional power. In the area of seafood, Japan is working with ASEAN in the “Third Country Training Program for ASEAN-JICA Capacity Building Project” on IUU Fishing Countermeasures in Southeast Asia implemented by JICA under the rubric of the Japan-ASEAN Technical Cooperation Agreement (MOFA, 2022). Together with Southeast Asian Fisheries Development Center (SEAFDEC) in Thailand, Japan International Cooperation Agency (JICA) conducts training workshops (December 2022 to December 2025) on the topic of illegal, unreported and unregulated (IUU) fishing in 2022 (MOFA, 2022). They do this to support sustainable fishery and sustainable development of fishery communities by managing IUU fishing’s impact on the fish ecosystem that is supporting a major ASEAN industry (MOFA, 2022).

REFERENCES

Japan Ministry of Foreign Affairs (MOFA). Progress Report on Japan’s Cooperation for the ASEAN Outlook on the Indo-Pacific. Japan Ministry of Foreign Affairs (MOFA). 1 November 2022. Retrieved from https://www.mofa.go.jp/files/100420036.pdf

Neo, Pearly. ASEAN food sector outlook 2023: Post-COVID-19 growth in Indonesia, Vietnam dampened by food security and inflation woes. FoodNavigator Asia. 11 Jan 2023. Retrieved from https://www.foodnavigator-asia.com/Article/2023/01/11/asean-food-sector-...

Tan, Daryl, Luzile Satur and Mirjam Le. Sowing the seeds of EU–ASEAN agricultural research cooperation. East Asia Forum. 21 February 2023. Retrieved from https://www.eastasiaforum.org/2023/02/21/sowing-the-seeds-of-eu-asean-ag...

The ASEAN Secretariat. ASEAN pledges to ensure food security during COVID-19 outbreak. The ASEAN Secretariat website. 17 April 2020. Retrieved from https://asean.org/asean-pledges-to-ensure-food-security-during-covid-19-...

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