The Pitfall of Climate Change on South East Asia's Agriculture Market
Authors: Shaun Ng and Darren Goh Zong Xian
Region Head: Bharat (Dan) Gangwani
Editor: Sasthaa GB (Uday)
A bulk of the global population probably understands that global warming is a pressing issue in today’s world. However, not many are aware of the unfavorable effects climate change can have on the economy. This research paper aims to tap on to the agriculture market in the ASEAN region because it is the industry that is highly sensitive to climate risk, and majority of the countries in ASEAN are reliant on the agriculture sector for economic growth. Furthermore, this research paper highlights the economic impacts of climate change on South East Asia, potentially disrupting global trade with countries outside of the ASEAN region. Though countries are increasing efforts to combat climate change, ASEAN countries in particular, must invest in climate change solutions with the agriculture sector being largely at risk to global warming.
The infections of COVID-19 appear to be slowing down worldwide, with the gradual reopening of economic activities, and increasing hopes of a return to leisure travel in the second half of 2021. However, climate change is still a prevalent problem, and it is only worsening everyday. Out of all economic sectors, agriculture is the most susceptible to climate risk. Though some regions and crops might benefit from climate change, the majority of world agriculture will not. While an increase in atmospheric CO2 is projected to stimulate plant growth, severe climate impacts, especially heat waves, droughts, and flooding, will likely diminish the potential of crop yields. Unfortunately, the majority of ASEAN countries are heavily dependent on the agricultural sector for economic development. For this reason, climate change can drive ASEAN countries to a dangerous breaking point, where the effects could potentially be irreversible if global warming trends continue to accelerate.
Value of Agriculture in ASEAN
Almost everywhere in the world, agriculture is a source of livelihood, particularly for developing economies. ASEAN countries are substantially reliant on the agrarian sector and its production, where 8 out of 10 countries turn to agriculture for economic growth. The sector accounts for more than 25% of the GDP for countries like Myanmar and Laos. Moreover, the agricultural sector provides more than 40% of total employment for Myanmar (ASEAN Investment, 2021).
Rice is by far the most important crop throughout Asia, where 90% of the world’s production and consumption occurs within this region. Rice crops dominate the food production systems in Cambodia, Lao PDR, Thailand, Vietnam, and a sizable portion in Indonesia and Philippines. ASEAN agriculture remains an epicentre for the global production and supply of important food items, with Thailand and Vietnam being the world’s top two largest rice exporters (Venzon, 2020).
During this 2000-2015 period, the farming sector climbed steadily, at an annual rate of about 3%, and experienced a decline in its share of GDP, from 15 percent in 2000 to 11 percent in 2015. The agricultural sector has displayed impressive growth, but it has developed a lot quicker in low-income countries. During 2000-2016, the sector grew at an annual rate of 5.6 percent in Myanmar, 4.4 percent in Cambodia, and 3-4 percent in Vietnam, Lao PDR, and Indonesia. On the other hand, the rate of growth has slowed down in Thailand (1.6%), the Philippines (2.2%), and Malaysia (2.9%) (Birthal et al., 2019). Nonetheless, the agricultural sector provides affirmation of food accessibility to locals for staple and nonstaple food items, and it is a source of employment directly and through agriculture-related, value-adding activities. Consequently, this manifests the importance of the agriculture market in ASEAN countries
Effects of Climate Change on ASEAN
There are many negative impacts that climate change has laid upon us, and agriculture is taking the brunt of it. In an article published by the United States Environmental Protection Agency, they named a few global impacts, namely “projected increases in temperatures, changes in precipitation patterns, changes in extreme weather events, and reductions in water availability”, all of which depleting the global agricultural productivity (US EPA). What this means for ASEAN is more intense periods of heavy rain, and longer dry periods. The volatile hydrologic cycle and high temperatures now has more frequent and intense droughts and floods in many agricultural regions, damaging our beloved crops.
On February 8, 2021, Indonesia was faced with heavy rain, floods and power outages, forcing people to evacuate their homes. This ordeal was worsened by the La Nina weather pattern and is expected to continue until March or April 2021 (Straits Times, 2021). In the Philippines, authorities had to evacuate dozens of people from near Taal volcano, a tourist attraction 65km south of the capital after it recorded increased seismic activities (Straits Times, 2021). There have been a worrisome 27 total disasters affecting the asia region in the first week of 2021. But these visible effects are only the tip of the iceberg of ASEAN’s predicament.
Deleterious Effects on Global Trade
In our increasingly globalized world, the economy in ASEAN is highly vulnerable to major losses. Southeast Asia is eminently exposed to climate change as a large proportion of the population and economic activity is concentrated along waterfronts; level of dependence on natural resources and forestry, and that of extreme destitution remains significant (ASEAN Cooperation on Climate Change, 2012). The IPCC predicts that, if efforts to reduce greenhouse gas emissions do not improve, global average temperature is likely to rise by a further 1.8 to 4.0 degrees celsius this century (ASEAN Cooperation on Climate Change, 2012) - 2021 reports evidence of this.
Southeast Asia, in particular, stands to lose the most compared to other regions in the world. Climate change can trim 11% off the region’s GDP by the end of the century, with key sectors affected being agriculture, tourism and fishing. The rice yields in Indonesia, Philippines, Thailand, and Vietnam could plunge by as much as 50% by 2100 from 1990 levels. The US-ASEAN ties are also at stake, as the need for energy will surge with power generation methods becoming less dependable, and water supplies become stressed. In the past, low agricultural productivity growth has significantly slowed economic development for countries like the Philippines and Myanmar, with agriculture remaining a key sector - accounting for one-third of the employment (Research Institute, 2016).
This worsening agricultural burden poses an issue for all ASEAN countries. Most countries in the ASEAN region, positioned in the equator, between Indian Ocean and Pacific Ocean, are highly vulnerable to frequent risks of cyclones, floods, and droughts. And as the prevalence of climate extremes is projected to rise in the future, livelihoods of people dependent on agribusiness and agro-based industries are in jeopardy. Additional pressures pressed on agrarian economies due to climate change will also increase salinization in river deltas and lakes, further reducing water availability. Asia’s production of irrigated wheat and rice will be 14% and 11% lower respectively, in 2050, compared to 2000 (Bambawale et al.) Furthermore, ASEAN member countries encompass those that are dependent on agri-food imports, such as Singapore and Brunei. Climate change will not only directly affect agrarian economies, but also adversely affect countries dependent on their imports.
Our Fight for Climate Action
The silver lining to ASEAN’s agricultural demise, lies in technology. Some large yield gaps in several of the groups observed are due to constraints faced in adopting technology; boosting agricultural growth will require technological reforms and crop diversification favoring higher-valued crops (Birthal et. al., 2019). In an IFPRI Discussion Paper published on May 2019, titled “Transformation and Sources of Growth in Southeast Asian Agriculture” by Pratap S. Birthal, Birthal concluded that “agriculture research agenda needs to be revisited and prioritized keeping in view the emerging challenges of climate change, rising prices of agricultural commodities and energy inputs, increasing cost of production, labor shortages, and degradation of natural resources, and also changing demand patterns”. Both China and Japan are leading countries in technology, from electric vehicles to renewable energy, necessary technological innovations to help the world adapt and mitigate climate change (Woetzel et al., 2020). This particular strategy can be invested by ASEAN countries, primarily, economies that are reliant on their agriculture sector for economic stability.
Critically, ASEAN Cooperation to tackle climate change will facilitate the region out of this rabbit hole. The ASEAN Member States, evidently, are not the main source of any significant emission of greenhouse gases, but many have stated voluntary mitigation targets. A few noteworthy examples of ASEAN Cooperation includes: ASEAN Socio-Cultural Community (ASCC) Blueprint, the Yogyakarta City Greenhouse Gases (GHG) Emissions and HEAT, the ASEAN Action Plan on Joint Response to Climate Change, and the ASEAN Ministerial Meeting on Environment. These efforts by the ASEAN Member States do not guarantee agricultural stability, but it does pilot the region towards effectively mitigating effects of climate change.
International Cooperation Needed
The ASEAN region is becoming increasingly volatile economically. The adverse effects of climate change may seem frightening today, but the impacts can become apocalyptic in a few decades' time. Agrarian countries must start taking proactive measures to mitigate the consequences of climate change, such as reducing carbon emissions with a transition to electric vehicles. Though countries that depend on the agricultural sector are at greater risk, predominantly in ASEAN, climate change could be the death knell for the entire world as well. Unfortunately, the planet looks like it has to get a lot warmer first before we can capture the world’s attention.
1. ASEAN Cooperation on Climate Change. (2012, July 10). ASEAN Cooperation on Environment. https://environment.asean.org/asean-working-group-on-climate-change/
2. Asean CSR - Food Security & Sustainable Agriculture. (2020). Asean-Csr-Network.org. https://www.asean-csr-network.org/c/programs/sustainable-agriculture#:~:text=Agriculture%20is%20a%20way%20of,more%20than%2040%25%20of%20GDP.
3. ASEAN Weekly Disaster Update Week 1, 04 - 10 Jan 2021 - Indonesia. (2021, January 11). ReliefWeb. https://reliefweb.int/report/indonesia/asean-weekly-disaster-update-week-1-04-10-jan-2021
4. Birthal, P., Joshi, P., Roy, D., & Pandey, G. (2019). Transformation and Sources of Growth in Southeast Asian Agriculture. http://www.indiaenvironmentportal.org.in/files/file/Transformation%20and%20sources%20of%20growth%20in%20Southeast%20Asian%20agriculture.pdf
5. Climate Change and Agriculture. (2021). Union of Concerned Scientists. https://www.ucsusa.org/resources/climate-change-and-agriculture#:~:text=Climate%20change%20impacts&text=Sea%20level%20rise%20is%20also,%2C%20schools%2C%20and%20other%20infrastructure.
6. Research Institute (IFPRI), I. F. P. (2016). The economywide impacts of climate change on Philippine agriculture. https://doi.org/10.2499/9780896292451
7. S T R O N G E R E C O N O M I E S I N A S E A N PRIVATE SECTOR PERSPECTIVES FOR POLICY MAKERS. (n.d.). https://www.aprilasia.com/images/pdf_files/BCSD/BCSD_white_paper.pdf
8. The Impact of Climate Change in Southeast Asia – IMF Finance & Development Magazine | September 2018. (2018). Imf.org. https://www.imf.org/external/pubs/ft/fandd/2018/09/southeast-asia-climate-change-and-greenhouse-gas-emissions-prakash.htm
9. The Straits Times. (2021, February 17). Philippines evacuates dozens as Taal volcano rumbles anew. https://www.straitstimes.com/asia/se-asia/philippines-evacuates-dozens-as-taal-volcano-rumbles-anew
10. The Straits Times. (2021, February 8). Floods trigger power outages, evacuations in Jakarta. https://www.straitstimes.com/asia/se-asia/floods-trigger-power-outages-evacuations-in-jakarta
11. Woetzel, J., Tonby, O., Mekala Krishnan, Yuito Yamada, Suvojoy Sengupta, Dickon Pinner, Ruslan Fakhrutdinov, & Tetsu Watanabe. (2020, November 24). Climate risk and response in Asia. McKinsey & Company; McKinsey & Company. https://www.mckinsey.com/business-functions/sustainability/our-insights/climate-risk-and-response-in-asia