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description Research paper public Center for Indonesian Policy Studies

Promoting Constructive Agriculture and Food Investment in ASEAN

Azizah Nazzala Fauzi, Nisrina Nuraini Nafisah
Published 8 Декабрь 2021

Abstract

Food security is an urgent issue in Southeast Asia, with its growing population, high malnutrition rate, and decreasing agricultural productivity. COVID-19 pandemic restrictions have exacerbated the situation, making food less available and less affordable, especially for vulnerable communities.

The Association of South-East Asian Nations (ASEAN) pursues food security through the ASEAN Integrated Food Security framework and Strategic Plan of Action (AIFS-SPA FS). Established following the 2009 financial crisis, this voluntary framework promotes sustainable food production by improving agricultural infrastructure and adopting new technologies. It recognizes the importance of equal participation by all stakeholders and of limited resources in the public sector. AIFS-SPA FS thus encourages investments through public-private partnerships (PPP).

In addition to greater private sector involvement, foreign direct investment (FDI) may benefitfarmers as well as contribute to ASEAN food security. Generally, FDI in agriculture has improved food production quality, capacity, access to quality food, and encouraged an efficient and transparent food supply chain. However, FDI inflow in agriculture to ASEAN has been declining since 2015. Average annual FDI inflow to ASEAN agriculture from 2016–2019 was 26.89% lower than in 2015. In 2019, agriculture constituted less than 10% of total FDI inflows to the region (ASEAN Statistics, 2021a). By comparison, FDI inflows in manufacturing and financial and insurance activities represented 35% and 32%, respectively (ASEAN Secretariat, 2020b). The dominance of state-owned enterprises (SOEs) and similar agencies, as well as investment restrictions have reduced ASEAN attractiveness to foreign investors. ASEAN scores 0.20 on the OECD FDI regulatory restrictiveness index, higher than both the OECD average (0.07) and non- OECD average (0.13), indicating more restrictions (OECD, 2021).

Investment in agriculture can be risky and vulnerable to practices such as land grabbing or corruption. ASEAN has prepared a guide for both public and private actors to ensure profitable and sustainable investments. AIFS-SPA FS refers to the ASEAN Guidelines on Promoting Responsible Investment in Food, Agriculture, and Forestry (ASEAN-RAI) for investment criteria. It promotes information transparency and inclusivity for stakeholders, including small scale farmers and the indigenous community, to ensure investments are beneficial for sustainable agriculture.

ASEAN should encourage harmonization between ASEAN Member States on commitment to FDI, encourage greater private sector participation, and address the domination of SOEs in the ASEAN agri-food sector through AIFS-SPA FS. The roadmap and information on the progress of AIFS-SPA FS implementation and investment projects must be accessible to the public in the spirit of ASEAN-RAI’s principles of transparency and accountability. Following the improvements on AIFS-SPA FS, ASEAN Member States should create a forum of exchange of knowledge and practices to address the governance and capacity gap and encourage an environment conducive to private sector participation.

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