Also, download this story from the electronic issue here
The rubber sector is highlighted in the AEC programme as a priority sector, yet how it is going to be integrated and its future seems to remain a grey area, says Angelica Buan.
The ASEAN Economic Community (AEC) integration will be due at the end of the year, yet the readiness gap remains a major concern for most of the ASEAN member nations. The AEC will launch the ASEAN region as a single market and production base with free flow of goods and capital, services, investment, and skilled labour.
To fast track the implementation, 11 priority sectors have been identified, namely, electronics, e-ASEAN, healthcare, wood-based products, automotive, rubberbased products, textiles and apparels, agro-based products, fisheries, air travel and tourism. These sectors were selected on the basis of comparative advantage in natural resource endowments, labour skills and cost competitiveness, and value-added contribution to ASEAN’s economy.
A few of these named priority sectors have a firmer footing. An example is the electronics sector, which shows steady demand from emerging economies due to rising disposable incomes and comparatively lower penetration of many consumer electronic goods, according to a newly released report by global business intelligence leader IBISWorld.
The automotive industry, which is an engine of growth for a few of ASEAN members, and the textile industry, which has been receiving attention since the region is poised to rival China, currently hold the fort yet are muscled against rising labour costs and other manufacturing challenges.
On the other hand, in the wake of the AEC implementation by 31 December, Southeast Asia is placing its bets on the vast potential of the rubber sector to propel its economy further and encourage flow of trade and investments. Whereas for now, it is going through its normal cyclical rhythm in demand, supply and prices.
Changing policies equals vulnerability to risk
The agro-based products sector may benefit from a push, but its basis, the agricultural sector, may be facing a shaky future during the AEC crossover.
The mutable fate of the sector is often attributed to certain variables such as climate, output, demand/ supply, world market prices and government programmes.
Citing a fact sheet released by the University of Kentucky (UK), College of Agriculture, “the industry is extremely vulnerable to risk and uncertainty amid macroeconomic policy changes, which is often overlooked by growers and producers when assessing variables for profits.” According to the UK College of Agriculture report, macroeconomic policy changes often dramatically impact the agricultural economy. Although policymakers try to design policies to improve the national economy, the report said that these policies often have unintended and harmful effects on the agricultural economy.
Thus, the AEC, while maintaining each of the member nation’s sovereignties in formulating its respective macroeconomic policies also influences how these policies have to be changed or to fit into the targets set for the integration.
Reaping the benefits
Cross border issues remain untouched Discordant and low implementation of policies involving agroforestry, forestry and agriculture were also pointed out by a speaker during a regional conference held in June this year. According to Dr Delia Catacutan, Country Coordinator of World Agroforestry Centre, speaking at the ASEAN Social Forestry Conference held in Myanmar, one glaring risk of the integration is that infrastructure developments may come at the cost of habitat loss and fragmentation, and settlement and conversion of agricultural land.
On the other hand, Catacutan acknowledged that these infrastructure developments – road widening and road network expansions – could boost forest and agricultural revenues by cutting transport costs and reducing post-harvest losses, against the back of ecological impact weighing in.
The AEC has yet to firm up in resolving transborder issues such as forest fires and illegal trade of forest products, according to another conference presenter, Ramos Razal from the University of the Philippines Los Baños (UPLB) and the Manila-based Non-Timber Forest Products Exchange Programme.
Meanwhile, this weak component of the AEC to address cross border issues may exacerbate the continuing conversion of forest tracts into rubber plantations.
With the AEC, rubber demand could exceed the 12.9 million tonnes global consumption by 2016, reaching up to 16.5 million tonnes in 2023, according to a projection of the Singapore-based International Rubber Study Group (IRSG). To meet the demand, production will have to be increased.
Deforestation, a big problem
Southeast Asia has been inundated with deforestation. And reports also hold expanding rubber plantations culpable for this phenomenon.
In a new study published in Global Environmental Change, rubber plantations in the region have increased by over 50% since 2000. Expansion continues at the expense of protected forest areas, specifically in Southeast Asia, says the report. Based on findings, 61% of the rubber plantation expansions were in protected areas and 70% were in key biodiversity areas. In the near term, the estimated coverage of the expansion will run up to 13,310 sq km of forest and 8,952 sq km of key biodiversity areas.
Meanwhile, an unregulated number of rubber plantations also gives rise to a substandard quality of rubber product, an issue that still plagues the region’s sector.
In a rubber products case study from the 2013 report by the Geneva-based World Economic Forum, in collaboration with the World Bank and Bain & Company, the region, a top global rubber producer, was stated as an “unreliable supply chain for finished goods”, attributed to poor quality control along with factors such as substandard infrastructure and long lead times.
Influx of unskilled labour
The AEC is expected to stimulate mobility of skilled labour to address labour shortages, provide higher work pay, and better job opportunities. However, observers say this could backfire to industries where unskilled labour is rampant.
Given that demand for rubber will increase further as a result of the integration, shortage of skilled labour in rubber plantations, as well as the risk of unemployment amongst rubber workers, is listed as a potential glitch.
Thailand, the largest rubber producer, is a model case for labour market problems, given its imbalanced market structure.
In a 2014 research article authored by Preecha Nobnorb and Wanno Fongsuwan, and published in the Research Journal of Business Management, it was stated that the impact of trade liberalisation “does not cause a positive impact” on rubber industry workers. In fact, the report says that it causes “instability issues in the occupations of unskilled labour”, as well as widens income and the welfare gaps between workers with different skill levels who are coming from different industries. Too, unemployment may increase, especially amongst unskilled workers and those who are over 40 years of age.
What may put the rest of unskilled rubber plantation workers off the employment circuit is when qualification standards are being instituted.
The Thailand Professional Qualification Institute is rounding out occupational standards for workers in the agriculture sector to increase the country’s competitiveness for AEC. The workforce professional qualification system covers 48 sectors and up to 600 occupations.
Malaysia is reported to have come up with its own occupational standards. The country has its rubber tappers and smallholders reeling in low output, amid the falling domestic rubber prices.
With the country almost frequently facing low output levels, the Malaysian Rubber Board says this is due to the use of unskilled tappers who do not engage in good agricultural practices, as well as the lack of know-how in latex harvesting and technologies. This situation of unskilled domestic labour has opened up employment opportunities for migrant workers in the agricultural sector in Malaysia.
With the AEC’s thrust to open the gates of employment opportunities to non-nationals, and the country’s own initiative to scale up the aptitude of its workforce, it may become a double-edged sword for rubber workers.