September 22, 2015

'Asean's integrated economy bodes well for food and meat sectors'

An integrated economy of 10 Southeast Asian nations that is shaping up promises a great opportunity for the food and agriculture (F&A) sectors, a report recently released by agricultural lender Rabobank said.

The report, entitled "AEC: One Large Non-Homogeneous Market", predicted that packaged food would grow by 5% yearly to exceed 52 million tonnes by 2020 and meat by 4% to 20 million tonnes in the 10 countries of the Association of Southeast Asian Nations, or Asean. The growth rates are faster than the global rates of 3% for packaged food and 2% for meat annually. Under a timetable, the Asean countries of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar (formerly Burma), the Philippines, Singapore, Thailand and Vietnam will integrate their economies by the end of this year to form the Asean Economic Community, or AEC.

The Asean region's 625 million population is a predominantly young whose purchasing power is rising and shifting away from carbohydrate to protein, boosting meat and dairy producers, the report noted.

The region has the world's seventh-largest gross domestic product (GDP), which is expected to grow to US$3.6 trillion in 2020.

Regional businesses are expected to be the biggest winners from the AEC, but they will need a regional strategy to compete with multinational companies. According to a survey by the Economist Intelligence, only 55% of regional firms have an Asean strategy, compared with 81% for non-Asean companies.

Established F&A companies and Asean-based firms that have better access to funds and management expertise that would enable them to expand their regional footprint have the winning edge. These firms have also been advised to streamline their operations and diversify revenue streams in order to stay relevant and efficient.

Intra-Asean competition is also expected as each country has to hurdle challenges and problems that are unique to it. Indonesia, for example, would need to build production efficiencies and infrastructure across its F&A sectors to be able to compete with Thailand and others with better infrastructure and logistics.

Rabobank concluded that overall the AEC was a step in the right direction for the F&A industry, adding that economic integration would help countries focus on productivity improvements in agriculture.