Asean governments must prioritise discussions on providing facilities for farmers to adopt digital technology and enhance their livelihood. — The Jakarta Post
THE Asean Economic Community (AEC) officially kicked off multilateral negotiations for a regional Digital Economy Framework Agreement (Defa) early this month.
Defa will be Asean’s new free trade agreement that focuses on enhancing digital economic cooperation among member states through the adoption and entrenchment of digital commerce, eCommerce and innovation.
Expected to conclude in 2025, the Defa negotiations not only mark a new era for Asean regional economic cooperation, but are also expected to produce a framework that binds all member states.
Such a concerted effort is a breakthrough for the 10-nation bloc, whose members still seek political and economic independence.
A Boston Consulting Group study forecasts that Asean’s digital economy will organically triple from US$300bil in 2021 to US$1 trillion by 2030, potentially reaching US$2 trillion with the Defa in place.
This economic expansion would partly result from the Defa helping companies to achieve lower operating as well as compliance costs, allowing them to comply with only one set of regulations instead of those of 10 individual Asean markets.
Such enablement is expected to spur increased foreign direct investment (FDI) in the region.
While the private sector in Asean begins to offer its ideas and perspectives to the AEC’s Negotiations Committee on an effective Defa, it is also imperative to consider the potential impact of the agreement on key sectors like agriculture.
The agriculture sector, while instrumental to Asean economies, lags in adopting advanced technology, such as automated machinery, leaving workers vulnerable to a digital shift.
A 2018 study by Cisco and Oxford Economics projected that by 2028, technology would replace 28 million workers in Asean-six, grouping the bloc’s six largest economies – Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
Of this figure, 13% of all displacements would hit the agriculture and mining sectors.
Meanwhile, data from Statistics Indonesia’s 2023 agriculture census, released this month, showed the country had 28.2 million farmers, representing more than 28% of Asean’s 100 million farmers.
The BPS data on agricultural businesses by types and groups show that more than 21.6 million (76.5%) Indonesian farmers are smallholders operating on less than one ha of land, of whom around 15 million (53.2%) do not use digital technology and/or modern equipment in their work.
Therefore, to ensure that smallholders benefit equally from the Defa, Asean governments must prioritise discussions on providing facilities for farmers to adopt digital technology and enhance their livelihood.
Indonesia, where agriculture contributes roughly 12.4% of its gross domestic product (GDP), is poised to champion this cause and keep smallholder farmers contributing to a productive, consistent and sustainable food source, both domestically and across the region.
To bridge the digital divide for farmers, particularly smallholders, the government could introduce digital and agritechnology (agritech) upskilling programmes. This would give them access to relevant knowledge banks, including on agronomic practices, as well as tools such as weather forecasts, nutrient calculators and soil conditions.
With these, farmers would be able to improve soil health and productivity, leading to larger and more sustainable yields.
Agritech, like digital value chain solutions, can also connect smallholders to the broader supply chain, providing timely information on nutrients, their use and success stories.
It can also foster awareness of the latest commercial offerings and campaigns to optimise their farms and introduce new business models.
The foundation for agritech’s success hinges on a ready network infrastructure.
In many remote areas across Asean, the lack of such infrastructure inhibits smallholders from leveraging agritech to connect with fellow farmers, agronomists, retailers and offtakers.
This connection is crucial for optimising production sustainably, fostering potential partnerships and exploring new business models.
Digital value chain
Defa is crucial for establishing a network infrastructure to create a farm-to-fork digital value chain for smallholders in Indonesia and the region.
In cases where a member state lacks funding, Defa’s FDI-friendly provisions should facilitate attracting investor capital and forming partnerships with infrastructure-focused regional development banks, such as the Asian Development Bank.
Defa must also have at its core a focus on the de-risking and financial enablement of smallholders, most of whom are unbanked.
Provisions to eliminate restrictions on intra-Asean, cross-border financial flows and support for financial technology payments, which are increasingly used by smallholders in Indonesia and across Asean, are essential components of the agreement.
A key aspect of this de-risking effort centres around farmers’ inability to be considered for risk mitigation protection.
Such insurance could protect their livelihood in the event of crop failure due to natural or man-made disasters.
In Indonesia, for example, only state-owned Asuransi Jasa Indonesia offers agriculture insurance.
Without the adoption of digital technologies, smallholders will struggle to raise their productivity and incomes.
Asean governments must ensure that Defa provides the facilities for farmers to adopt digital technologies so that they can enjoy the benefits of this cooperation.
Indonesia, whose economy still relies on agriculture, should lead Asean and join hands with the private sector to start thinking about how to safeguard farmers and, in turn, protect Indonesia’s long-term food security and its nature-positive food future. — The Jakarta Post/ANN
Fikri Zaki Muhammadi is government relations and public affairs manager for Indonesia at Yara International, a Norwegian sustainable agricultural and farmer livelihood-enhancement company. The views expressed here are the writer’s own.
