Food industry has big role to play in Asean single market
Last night, the Asean Food and Beverage Alliance (AFBA) held its official launch in Singapore—clearly indicating the industry’s confidence and commitment to meeting the 2015 deadline. The new organisation, made up of national industry associations from all 10 member states of Asean, aims to help harmonise food policy and standards to enhance the trade of safe, high-quality food across the region.
The impact of harmonised, integrated food standards in Asean and the benefit this will bring to overall economic growth and prosperity in the region, should not be underestimated.
In many Asean markets, food and agriculture is the economy. Agriculture’s contribution to gross domestic product across the region is significant, reaching 50% in Myanmar and 33.4% in Cambodia for example. According to one 2010 study, food processing and manufacturing GDP contributions in Asean range from between 3.5% in Indonesia and 13.5% in the Philippines. Together, the food and beverage industry in Asean employs more than 4m people.
Despite the considerable focus on food production and manufacturing, and a growing demand for food fueled by rising populations across Southeast Asia, Asean food and agricultural exports remain surprisingly low. The bloc’s food exports account for only 3.6% of Asean’s total trade and despite strong economic ties only 15% of these food exports are intra-Asean trade.
So what is holding back the trade potential of an industry that could transform emerging economies in Asean and help deliver a thriving economic community?
Today, the lack of harmonisation in food standards between countries poses a significant technical barrier to trade. Different approaches to standards, such as food labelling, product registration and authorisation of food ingredients, have become a significant obstacle to food trade in the region. They increase the cost of production for manufacturers, reduce the appetite for export and investment in new markets and can confuse consumers across the region. To develop the potential of the industry, and the impact it can have on Asean economies, there needs to be a common approach to food regulations and standards.
The benefit of such an approach has already been realised in Europe, where harmonised food standards have had a positive impact on intra-EU trade. Estimates from a European Commission review in 1997 suggest that intra-EU manufacturing trade was boosted by 20-30%, which includes food. The move towards a single European market over the last 50 years has built the food industry into a US$1.2tn market , accounting for 16% of total industrial output and employing 4m people (a notable parallel with Asean). Importantly, 99% of this industry in Europe is made up of SMEs who are benefiting from harmonised standards.
The EU Single Market approach eliminated red tape for food trade, standardised ingredients and reduced the costs associated with creating special labels for each individual European market. AFBA aims to encourage similar outcomes in Asean.
AFBA will work with the Asean secretariat to help reduce unnecessary trade barriers so small, medium and large food companies can easily export products, enter new markets and grow their trade potential. This is not only beneficial to business, but also to consumers who can enjoy a wider choice of affordable, high-quality goods and services, a common understanding of labelling and quick access to new and innovative products at a competitive price.
It was never going to be an easy goal to transform a region of 604m people into a single market by 2015. However the food industry, through the formation of AFBA, is committed to making a meaningful contribution to a single market approach, which is good news for our policy markers, business community and consumers in the region.