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Agri-food industry contributes over US$ 717 billion to Southeast Asian economy: Oxford Economics
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Thursday, 25 March, 2021, 08 : 00 AM [IST]
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Singapore
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Southeast Asia’s agri-food remains critical to the region’s economy and plays a pivotal role in its future economic development, having demonstrated its resilience in challenging circumstances in 2020. The sector can be a key driver of the region’s economic recovery, but supply and demand risks, fiscal policy risks and a drawn-out pandemic could disrupt post Covid-19 recovery, according to a report by Oxford Economics.
Commissioned by Food Industry Asia (FIA) to better understand the challenges and economic impact of the agri-food sector faced in 2020, The Economic Impact of the Agri-Food Sector in South East Asia report highlighted that the agri-food sector’s role in driving Southeast Asia’s economic recovery, creating employment and putting food on the table at stable prices, is pivotal.
Findings from the report show that in 2019, the agri-food sector made a GDP contribution of US$717 billion across Indonesia, Thailand, the Philippines, and Vietnam, and marked a 30 per cent increase from 2015. The sector is also responsible for almost half (48 per cent) of the entire workforce with 127 million jobs, and contributed a total of US$95.6 billion in tax revenues across the region.
The report investigated the sector’s economic impact across four Southeast Asian countries – Indonesia, Thailand, the Philippines, and Vietnam. Reviewing five years of economic activity, it presents key insights on where and how the sector adds value to these economies, its future trajectory, and challenges faced going forward.
The report also found that while the agri-food sector remained resilient in the face of Covid-19, the pandemic’s lingering impact has left a mixed outlook for the sector. According to the report’s Economic Recovery Matrix, Indonesia faces the greatest risk to recovery, while the Philippines and Thailand also showed important vulnerabilities due to their dependence on tourism to revive their food industries. Out of the four markets, Vietnam ranks the lowest in terms of recovery risk.
Commenting on the findings, FIA executive director, Matt Kovac, said the report showed that the agri-food sector holds an unparalleled position in the region’s economy and plays a pivotal role in its future economic development.
“The agri-food sector’s performance is critical to household wellbeing and it is an economic powerhouse, responsible for millions of jobs and a major contribution to total economic output and government tax receipts,” said Kovac.
He added that with strong headwinds projected for 2021, it is imperative for Southeast Asian governments to remain mindful that any fiscal adjustments, whether it is reducing public expenditure or raising tax revenues, can pose a risk to the recovery of Southeast Asia’s agri-food sector, and subsequently the wider national economy.
James Lambert, director, economic consulting Asia, for Oxford Economics, said, “As the region looks to emerge from the pandemic stronger, it is important that policymakers provide the most conducive conditions for the agri-food industry to successfully rebuild itself, and that fiscal policy is carefully planned, designed, and communicated. That will allow the industry to continue to provide the economic benefits it has delivered over recent decades.”
The report’s Fiscal Risk Assessment Framework also found that all four countries assessed are amongst the most at risk in Asia from post-Covid-19 fiscal adjustments. Their scores are higher than China, India, and other higher-income Asia economies. Poorly crafted fiscal responses can have the potential of harming the agri-food sector’s recovery, impacting food security, income and employment, and economic opportunities as a whole.
The report recommends that for governments to develop successful fiscal responses that do not inhibit the recovery of the agri-food industry, three conditions need to be met: using education to influence behaviour; favouring regulatory standards over taxes; and maintaining a constant conversation with the industry.
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