Following the launch of the ASEAN Food and Beverage Alliance (AFBA) on 18 April, FIA had the opportunity to speak to Mr Peter Ter Kulve, Executive Vice President for Southeast Asia and Australasia (SEAA) at Unilever.
Mr Ter Kulve shared his views on the importance of intra and extra regional trade in making high quality, safe food more available for the region’s fast growing population and how the newly formed AFBA can help accelerate this conversation between the industry and its ASEAN stakeholders.
FIA: Why is free trade so important to the food industry in ASEAN?
Free trade helps to create a vibrant and competitive food industry. With free trade, food companies are given the opportunity to enter new markets and export their products to other countries, helping to ensure that a sustainable supply of safe, high quality food is readily available for the region’s fast-growing population at competitive prices thus stimulating economic growth across the region. This is not only good for the rapidly growing economies of ASEAN but also important for consumers who benefit from competitively priced high quality food products.
In ASEAN, the lack of harmonisation in food standards between countries poses a significant technical barrier to trade (TBT). Different approaches to standards such as food labelling, product registration, import quotas and authorisation of food ingredients have become a major obstacle to the growth of the industry.
This is reflected in the region’s overall food and agricultural exports which, despite considerable focus on food production and manufacturing, remain low. The region’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. With the food industry making a significant contribution to Gross Domestic Product (GDP) across the region, reaching 50% in Myanmar and 33.4% in Cambodia, the lack of food trade has a negative impact on the price of basic food products available to lower income consumers and is a barrier to overall economic growth as well.
The benefits of encouraging free trade have already been realised in Europe, where harmonised food standards have had a positive impact on intra-EU trade and the food industry – the move towards a single European market over the last 50 years has built the food industry into a US$1.2 trillion market.
FIA: How does free trade benefit the consumers in ASEAN?
The region is seeing a rise of the middle class. It is expected that over the next 15 years, half of the 604 million consumers in the region will be made up of consumers in this category. This growing affluence will drive a change in the consumption patterns in all markets.
Free trade allows for consumers in the region to be presented with a greater variety of good, competitively priced food choices, and improves the stability of food supply for consumers, especially for those in countries that are unable to produce their own commodities due to geographical and climatic factors.
The removal of import tariffs and technical barriers to free trade also stimulates innovation and fair competition. With improved access to export markets, there is greater competition leading to a much wider range of high quality products available at competitive prices, which meets the highest international food safety standards. Strengthening quality and food safety systems then becomes a priority, which is important in helping to ensure that consumers have ready access to safe and high quality food.
FIA: How does the launch of AFBA help facilitate free trade in the region?
AFBA is governed by representatives from recognised industry associations from all 10 ASEAN member states. Together, they represent tens of thousands of small, medium and large companies and they are committed to achieving the region’s economic goal of creating a single common market by 2015. Through collaboration with FIA, the ASEAN Secretariat and other key stakeholders, AFBA will work to harmonise and promote food policy and standards across the region.
The creation of these harmonised standards will help reduce unnecessary technical barriers to trade (TBTs) such as inconsistent food labelling standards and differing authorisation procedures of food ingredients to allow for a freer movement of food products across the region.