Nine days’ ago the Philippines launched its chairmanship of the Association of South East Asian Nations for 2017, a milestone year as it marks the 50th year of the regional bloc.
With its 10 member-states, Asean has a combined GDP of more than US$2.8 trillion and a market of around 630 million consumers. As a single economy, it would rank the sixth largest in the world behind the United States, China, Japan, Germany and the United Kingdom.
This market clout was a prime incentive for the 10 member-states to band together into the Asean Economic Community. Getting there entailed various policy reforms to permit the free flow of goods, services, skilled labour and capital across the region. Many of these reforms have not been easy for governments to undertake, as nationalistic sentiments tend to run at odds with the regionalism that Asean and regional blocs elsewhere foster. Nonetheless, and as is often the case, the private sector has moved faster than governments insofar as treating Asean as a common market and production base; all it needed was for the latter to open the door.
Proactive firms in countries around the region have moved Asean economic integration forward much faster than their governments can, via strategic cross-border investments and partnerships. These ventures have established national and regional networks, leveraging on global and regional value chains that have come about in the past two decades at the heels of freer trade across national borders worldwide. The manufacture of various consumer products has seen the proliferation of such cross-border value chains, with multiple countries now typically contributing to the production of specific products. The tag “Made in [a specific country]” is no longer appropriate in this context, where “Made in Asean” or “Made in the World” may more aptly reflect the nature of most products we know, ranging from aircraft all the way down to the food we eat.
What has been happening in the area of agriculture and agribusiness is particularly instructive, especially as this sector is commonly seen to be most sensitive, hence most resistant, to more open trade. And yet companies like Charoen Pokphand (CP) and Betagro in Thailand, Leong Hup and QL Resources in Malaysia, and Oishi (Liwayway) and Jollibee in the Philippines have long cashed in on tapping tremendous cross-border opportunities. For example, the investments in poultry (broilers and layers) by CP into Malaysia, Myanmar and Indonesia; Leong Hup and QL into Indonesia, Vietnam and the Philippines; and in pork by Betagro into Cambodia and Laos all help supply the growing local markets of the host countries, with little or no trade impact from competing finished products. But these firms supply inputs like day-old chicks, feed components, vaccines, and others from their home companies or subsidiaries elsewhere, exemplifying the cross-border value chains seen more prominently in non-farm-manufactured goods.
Even in rice, regional integration of value chains has already begun with significant cross-border investments in mills and processing plants, thereby fast transforming upstream and downstream segments of the rice supply/value chains. There are investments in input supply, various forms of contract farming and provision of agri-support services, and in modern distribution channels (supermarkets, food retail shops) – all enhancing productivity and international trade. Filipino agribusiness firms would do well to shed their traditional inward-looking and defensive postures, and tap regional cross-border opportunities to produce more rice for Filipinos, and more. SL Agritech, a Filipino firm proudly exporting quality Philippine rice, is already showing the way, oblivious of the debate over restrictions on rice imports, and helping our rice farmers raise productivity.
Indeed, the private sector can show us how Asean can work to our best advantage. Governments just need to get out of its way.