The three mega global trends of population growth, demand created by the economic shift of Millions out of poverty and the volatility of the environment have set the stage for a new era in global food security. This is changing how companies and countries invest into food production. What affects will the Trans Pacific Partnership Agreement (TPPA) have on food production and Investment?
Extracts from a recent interview with Nordin Abdullah:
What is the “Changing Paradigm in the Global Supply Chain”?
Food based inflation has become a real issues for nations to manage, it is something that the population has to deal with on a daily basis so they really feel it at the end of the month. A hungry population is an angry population, we saw this in the Arab Spring. Food based inflation was the tipping point that kicked this off in Tunisia. The problem is that global corporations are the major players in the global supply chain, they are the largest investors and control much of market so it is increasingly difficult for governments of the world to have a positive impact which improves the supply to the point that it reduces food prices for consumers. Then take all of that and multiple it by climate change and we see the changing paradigm of food security.
How will the Trans Pacific Partnership Agreement or the TPPA affect Malaysia and ASEAN?
The Trans Pacific Partnership Agreement of the TPPA in the short term will have minimal effect on the Malaysian Economy, mostly due to the fact that it will take several years before most of items with regards to food and agriculture will come into affect. Likewise the size of companies that are currently in the agri-food space in Malaysia will be exempt from most of the conditions. Areas that Malaysia will need to strength will be intellectual property and packaging legislation. Halal has also been exempted.
What is changing in terms of food producers’ understanding of consumer’s needs and how does that affects the supply chain and the thinking about investments?
Along with population growth, we are witnessing in many parts of the world Millions of people being elevated from poverty and Millions entering the middle class, this has changed consumer’s behaviour. Now the demand for proteins and processed foods has grown rapidly, According to USDA’s baseline projections, developing countries will account for much of the increase in projected growth in global consumption of meats and crops in 2013-22 period. The developing-country shares of the projected growth include 81 percent for meat, 83 percent for grains and oilseeds. This has created an opportunity and the thinking around investment into that part of the global food supply chain.
What are some of the specific opportunities that this has created and what strategies will be successful?
I like to think about it on two levels, the first is what are countries doing to improve their domestic food production, no doubt most countries will be able to produce all their food requirements but improving levels of self-sufficiency is important. There are several countries which need to look at other strategies due to population or resources constraints, they will need to look at investing and controlling to the point of ensuring supply of strategic food resources for their population. Both will require increased investment and increased understanding of food production, technology, logistics and the various financial models of each crop. To understand the current gap, the FAO estimates that USD83 Billion per year of additional investments in food, agriculture and rural development are required for the world to feed its growing population in 2050
How successful can Malaysia be in this context, what can corporations expect?
In terms of food security Malaysia has achieved a lot, in the context of a country coming out of developing world they have created a strong base in terms of the Palm Oil Industry and its’ global supply chain. Malaysia currently accounts for 39 % of world palm oil production and 44% of world exports. If taken into account of other oils & fats produced in the country, Malaysia accounts for 12% and 27% of the world’s total production and exports of oils and fats, this with a population just under 30 Million people. Now Malaysia needs to replicate that success with other products.
Malaysia has for the past decade positioned itself as the Global Halal Hub, how successful has this project been?
The demand for food in the Muslim World is high because many Muslim majority countries have low levels of self-sufficiency, this is the market that Malaysia is aiming to conquer. This will not be done overnight as there are many barriers that need to be overcome both trade and technical, the key to success will be the amount of investment that the country will be able to attract to achieve its ambitions.
What is technology doing to improve food security?
Technology, Standards and understanding the energy equation will be the key for success for companies looking to play a leading role in this sector. While the ‘Cloud’ has made the world flat it has also increased the technology requirement for food producers. Global food retailers want to have traceability from farm to fork and a myriad of standard compliance on various levels for suppliers because the high-end consumers in Europe and America are demanding these standards, so suppliers need to understand the full requirements of a market not just the fact that they want a specific food item. There is a lot of things changing that is the opportunity and the risk.