South-east Asia's US$717b agri-food industry faces virus, structural hurdles: Report

SOUTH-EAST Asia's agri-food industry stayed resilient in 2019, with an economic contribution of more than US$717 billion, recent research has found.

A report commissioned by Food Industry Asia (FIA), with the study done by Oxford Economics, said the sector filled nearly half of all jobs in Indonesia, Vietnam, Thailand and the Philippines in 2019, or 127 million workers in all. It also contributed more than a quarter of tax revenues, at US$95.6 billion.

But, though the agri-food sector grew by 30 per cent from 2015 to 2019, it also faces short-term challenges from the Covid-19 pandemic, and longer-term structural risks. Supply-chain disruptions from outbreaks could push up agricultural commodity prices and raise input costs for food manufacturers and retailers.

Meanwhile, consumer demand could suffer from an economic slowdown and continued border closures, as households cut back on spending and tourist receipts take a dive.

The report's Economic Recovery Matrix said Indonesia faces the greatest risk to recovery. The Philippines and Thailand also showed important vulnerabilities due to their dependence on tourism to revive their food industries. Of the four markets, Vietnam ranks the lowest in terms of recovery risk.

Household food spending in South-east Asia is expected to slip by 0.8 per cent overall in 2021, Oxford Economics estimated, even as inbound travel to Asia may not return to pre-pandemic levels until 2024.

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The research outfit also identified an "urgent need for land and labour productivity improvements" in the long run, which will call for technological innovation such as mechanisation, skills development and supportive public policy and trade partnerships.

The report pointed to Europe's latest "farm-to-fork" strategy, which outlines the transition to a sustainable food system, as a possible blueprint for South-east Asia. "As incomes have risen and populations have grown, South-east Asian consumers are demanding more and better-quality food," it added.

The agri-food value chain comprises agricultural production, food and beverage (F&B) manufacturing and F&B distribution such as wholesale, retail and hospitality services, as defined in the report commissioned by trade group Food Industry Asia.

Said James Lambert, director of Asian economic consulting for Oxford Economics: "As the region looks to emerge from the pandemic stronger, it is important that policy-makers provide the most conducive conditions for the agri-food industry to successfully rebuild itself, and that fiscal policy is carefully planned, designed and communicated."