Ep 39 | Khalil Hegarty on the ASEAN Food Systems Sustainability Report

In another episode of Asia's Farm to Fork: 5 Good Questions Podcast, we speak to Khalil Manaf Hegarty, Director of Oxley Hegarty and author of the ASEAN Food Systems Sustainability report to get a different perspective as a trade expert on the landscape of the food systems. In the interview, he speaks about the diversity of food systems, culture and regions, making the idea of "one-size-fits-all" a faulty concept. He also provides context about the EU Green Deal for the food and agriculture industry.

Transcript

[00:04] Duke Hipp: Hi Everybody, I'm Duke Hipp, host of Asia’s Farm to Fork: 5 Good Questions podcast. We have another great guest with us today talking about a new report that's been issued, the ASEAN Food Systems Sustainability Report. We have with us today Khalil Manaf Hegarty.

Hi Khalil, how are you?

[00:34] Khalil Hegarty: I'm very well, Duke. Thanks for having me on the 5 Good Questions Podcast today. I really appreciate it.

[00:42] Duke: Excellent. Well, in the spirit of the 5 Good Questions, we'll jump right in, if that's okay. The first few lines of this report, the ASEAN Food System Sustainability Report, as the author of the report, you note that sustainability across the larger food and agriculture sectors is not a one-size-fits-all proposition. 

For our listeners today, can you elaborate a little bit on what that means and help share the context, if you could, with respect to ASEAN?

[01:07] Khalil: Well, I think one of the things that really needs to be underlined, and I think sometimes it's very easy for anyone outside of the agricultural space to…it's easy to forget, is that, you know, agriculture is different everywhere you go. Whether it's at a sort of a national level, regional level, or a sub national level, farming systems really, really look different pretty much everywhere. 

Like, say, even my home country, Australia, we have temperate climates, we have subtropical and tropical climates, and the farming systems in each of those situations is really, really quite different. Now, I think when you add on top of that, just different farming practices and different approaches to farming, which also defined by a socioeconomic context. So, some of that can be cultural practices, it could be technological. 

One example that I will often use is talking about slash and burn agriculture. Now, that's, in today's context, not considered sustainable at all and it's something that people are trying to move away from for a number of reasons, particularly greenhouse gas emissions. But at the same time, that has had its place as a piece of practice or part of an agricultural practice that really worked for smallholder farmers in situations where they needed to get rid of what was on the land and get carbon back into the soil. 

Now, if you think about that and then think about trying to map this idea of sustainability over the top of all of those different practices, you can quite easily see that if you have one approach on sustainability that comes from a wealthy country in a temperate climate, and try and map that to a developing country in a tropical climate, it's really not going to meet up. 

And then alongside that as well, you have this idea of sustainability and what that actually means. Now in the west, in wealthy countries, you can pretty much take the economic piece and the food security piece as a given. And so for that reason had a lot more emphasis on the environmental piece. 

In developing countries, you can't take the food security or economic paths as a given and you really have to emphasize those as well. So this idea of one-size-fits-all, it's just not going to work. And the idea of imposing one set of rules in one context is fine, but moving that across to another context requires just a very different and more flexible approach.

[04:13] Duke: Thanks for that. Very insightful. And one thing I failed to mention at the beginning here, this report is really based on a workshop that was connected in the fourth quarter of last year, this ASEAN Food Systems Sustainability workshop, which was held in Jakarta in November and brought members of the ASEAN sector of working group on crops, livestock, as well as far as management. 

So it's important to note that, I guess, in the context of what this report's all about, tight. But as the report's concerned, one of the topics that came up in that discussion and one of the topics that's also in the report is the EU Green deal. And particularly two provisions that were discussed at the workshop that are in the report are farm to fork strategy, as well as the EU deforestation regulation, EUDR as it's referred to, based on the analysis and perspectives that were shared at the workshop back in November and what has transpired since then, because some time is fast and lots have happened, certainly, what do you think that agricultural policymakers in Southeast Asia need to know about these policies, or really anybody else need to know about these policies?

[05:12] Khalil: Well, I think it’s really important to contextualise both of those pieces. So in the background to all of this, you have beside the EU Green deal, which was primarily sort of a holistic approach to the environment from the EU, which is mainly about reducing greenhouse emissions.

But there are several components to that. One of them is the EU deforestation regulation and the other one is the farm to fork policy. I'll start with the EUDR because that's sort of, it's very much a live conversation that is happening right now, not just in the region, but also in Europe as well. 

Basically what it requires exporters of commodities to do is one, ensure that their products aren't produced on land that was deforested at the end of 2020, and also include a certain amount of information that shows where those particular products were harvested. 

Now, for the region, really the important products there, these are listed in the EU deforestation regulation - palm oil, coffee, rubber, cocoa and timber products as well. And so for each of those exporters, really what they're going to face or the exporters of those commodities are going to face going into the EU is really a quite complex additional layer of compliance.

Now with a very simple product like, say, coffee beans. Having one shipment of coffee beans traced to a particular plot of land as it goes from, say, Vietnam to the European Union - that's relatively simple. Now, where it gets problematic, and this is particularly the case in Vietnam. 

When you start mixing all your batches and you've got a lot of processed products like, say, for example, instant coffee, then you have sort of large combinations of different geographical areas. Now all of that information has to go into that batch as it gets exported to the European Union. 

Now consider also the idea of like, say you've got storage for a liquid like palm oil. Now it's got one batch in it, you half empty it and you ship it, then you introduce another batch which fills up the rest of the tank. Now what information do you include in that? So it does become very complex. 

One of the implications for policymakers there is just to think about how they're going to actually manage that compliance going forward. In some countries in Southeast Asia, they have very well-developed traceability systems for some of those commodities, particularly timber, as well as palm oil. 

But for others, it's quite a novel process and it's really crept up on some of those governments and exporting countries because honestly, they haven't really had the capacity to deal with it up until this point. 

Now with the farm to fork. Now, farm to fork is sort of holistic agricultural policy that's part of the Green deal. This has a range of sort of targets that it wants to achieve. Some of them are things like increasing the amount of land that's devoted to organic farming, some of them much more contentious in this side of the world, which is just reducing the amount of pesticide and chemicals that get used within that in you. 

Now, that would be fine, but the way some of those regulations were originally written was that it required basically, it had a sort of zero tolerance for chemical residues in some of those imported goods as well. So say, for example, again, I'll just use coffee as a convenient example, if you'd used a particular pesticide around that coffee and then had a very small trace element of that which would be within the bounds for human health and health consumption would go to the EU. Previously, that would have been fine. Now, the idea on the EU side was to use those residue levels for an environmental purpose and basically take them down to zero, which would mean that some of those exports from the region would basically be blocked at the border. 

Now, there were so many objections to some of these elements of the Green Deal and the farm to fork policy in particular, that you actually ended up having quite large protests from European farmers. Now, it didn't quite get to the stage where it was creating trade roadblocks from the region, but certainly these issues were raised by many exporting countries in trade forums such as the WTO as well. 

So really, the implication there is, on one side, compliance for exporters, but also the broader trade piece and how exporting countries deal with the European Union and how they consult with the European Union as well. Because the EU isn't right at consulting with partner countries, they have a tendency to regulate first and deal with their trading partners later.

[10:46] Duke: Very insightful, thorough answer for that. Thank you. Thank you for that. EU Green Deal, again, was a big topic of discussion there at the workshop and in the report as well now. But there's one, there's a case study that's also in the report, again, based on the discussions that were held at that event in November, I’d like to pivot to that, if it's okay, that one case study is on Japan's Midori strategy workshop. That presentation came from a representative of Japan's Ministry of Agriculture, Forestry and Fisheries on the strategic national approach they're undertaking to develop more sustainable food systems. And it's similar to the Green Deal and setting up specific KPI goals for the future. But at the same time, there are also some stark differences as well. Can you tell us a little bit about that?

[11:27] Khalil: Yeah, it's a really interesting example because, like you said, some of the goals in the policy are actually very similar. One of those is increasing the amount of land for organic farming and also reducing chemical use. But the way they've sort of approached that is rather than to say, “all right, well, we want to reduce this chemical use, let's ban it,” instead they've said, “let's reduce the amount that's in the environment to zero.” Why don't we instead just use that existing technology in a much more innovative way? 

So some of the examples that Midori is looking at and promoting is the idea of precision agriculture and using technology in terms of the application of chemicals. So, basically less chemicals get used because you've been much more precise with how you apply those things. 

And this allows the maintenance of the high productivity or even improving productivity and output in the agricultural sector, but also maintaining those environmental objectives as well. The other piece of Midori is how they're actually treating the importance sourcing of raw materials. And obviously that's very important for Japan as their population ages and you do have a lot of folks not wanting to be part of the agricultural sector there, and moving towards the city, as well as a population decline as well. 

So they're aware that they're going to be continuing to source imported agricultural goods and commodities from all over the world. So, when it comes to regulating those environmentally, what they're doing is working with those exporter countries. So working with those exporter countries to see what sort of sustainability certifications they have in place, and how they might meet Japan's objectives for sustainable materials within Japan. 

So it's much more of a collaborative approach and a much more of a cooperative approach rather than a sort of top down, “we're banning this chemical,” much more sort of, “well, how can you reduce your chemical use as well?” And again, in a way that's suitable for your agricultural contexts.

[14:00] Duke: That makes sense. Thanks for that. Well, we'll move on to the next question, and this is one I think will be right in your wheelhouse as a trade expert. One of the topical common threads throughout the workshop was around regional food, agricultural trade and Southeast Asian competitiveness, particularly in relation to balancing the goals with driving more sustainable food systems at the same time. So resiliency, trade, sustainability all at the same time. 

And there's a section I know in the report titled “Shifting Supply Chains and Price Shocks.” Can you shed some light on this topic? W’hats the takeaway from that balance again, but again, trying to balance those two objectives and even more than that, and what does the current landscape look like now?

[14:39] Khalil: Well, yeah, I think just to sort of contextualize it, when we look at ASEAN, I think has something like 9% of the worlds agricultural trade and within the region a lot of those markets are quite liberalized. Obviously, ASEAN is really trying to move to having some sort of free trade region and they have been moving towards that for a while as part of the ASEAN economic community blueprint. 

But on top of that, ASEAN has been quite liberal in its approach to trade with some of the larger partners in the region, whether it's the agreements with China and Japan and Korea, which are all either going through an upgrade right now or on the edge of being part of an upgrade. Also agreement with Australia and New Zealand, which are also very large agricultural exporters as well. And sort of behind that you have an agreement like RCEP, which for the trade wonks out there, isn't as liberal, but as a framework it really sort of connects all of the ASEAN’s major trading partners in the region. 

Most ASEAN members are sort of pursuing bilateral deals or are part of multilateral trade agreements such as CPTPP. So, there's very much a movement towards more open markets, which is in the current political context a little bit unusual given that there's a bit of analogy towards free trade right now amongst the larger economic powers in the world. 

So that's sort of the backdrop, but at the same time, outside of the region a lot of ASEAN countries don't have great agricultural or trade access. So there's still a real potential for ASEAN countries to really improve their output and improve their ability to export as well as feed their growing populations and feed their populations under the broader banner of growing incomes and a growing middle class. 

But to address that and to make that really work, there's still productivity and competitiveness questions that need to be addressed. This is kind of the time when maintaining or improving access to innovations, to technology becomes really important. 

Now that can range from some of the things that we've talked about in terms of sustainability, but it can just be really basic stuff as well. Whether it's agricultural extension services, for example, and that can happen at the policy and budgetary and fiscal level, but also some of the more interesting technical innovations that are happening around genetic modification technology, other sorts of improvements using automation and things like that as well. 

So I think it's really important that within that sort of greater context, the idea is that you really do improve that competitiveness and that productivity and that should theoretically protect you to some extent from global supply shocks and price shocks, which are very acute right now. I'm not sure if you saw the increase in the price of orange juice, it has gone through the roof over the past few months because of a low crop in Brazil and in the United States. 

So these things are ongoing and it's very important that a country like, or sorry, a region like ASEAN is in a position to protect itself, to some extent.

[18:23] Duke: Yeah, it's all interconnected, I think that's the takeaway. And you mentioned the role of innovation, that's something we hear on this podcast time and again. That it's what in this case with respect to trade, but it's generally, innovation has such a big role to play in this region.

[18:38] Khalil: Yeah. And it's vital that access to those kinds of things is maintained, whether it's, like I said, improved techniques for chemical application or genetic modification or any of those things that can really just ensure the economic sustainability, in particular, of the region.

[18:59] Duke: Makes sense. Well, we come to the last, the fifth and final question in the interview. This is the time-honored tradition. The fifth question is a little bit of a different type of question. It's not policy. We've had a lot of discussions here - tough, tough topics and interesting, all relevant for Southeast Asia in particular, this report. 

But I want to change it up a little bit and ask you again the toughest question of all. We live in a part of the world where there's a lot of good choices with food. And I wanted to ask you, do you have a favorite, your favorite asian cuisine? I guess since we're talking about Southeast Asia. Maybe Southeast Asian cuisine.

[19:35] Khalil: Well, I'm sort of going to cheat because I'm really a big fan of nasi Padang, so, or just, you know, Padang food for a whole bunch of reasons. I mean, just the way it's served across Indonesia in particular, and the choice you get at the table. So it's quite diverse. So I'm not putting all my eggs into one particular basket. 

So, you know, anything, anything within the sort of nasi padang gamut. I do also have a personal connection. My grandfather's family originally was from Padang, so originally Minangkabau people before they moved to Malaysia. So, you know, it's got a place in my heart as well as my stomach, though I don't like eating the heart. You know when you get, occasionally you'll get like sort of lung or whatever. And it's just, you know, it's not my favorite.

[20:31] Duke: Okay, that's fair. It's fair. It's an honest answer and it's a great answer. I don't think we've had that yet, so it might be the first one, too. Well, with that, you are officially off the 5 Good Questions hot seat. 

And I forgot to mention, beginning of the podcast, I'll mention now again, Khalil Manaf Hegarty, he is the director at Oxley Hegarty. If you haven't picked it up yet by now, just reminding you that he's an expert in trade policy in Southeast Asia. And we're again, thankful that he had joined us today. And yeah, look forward to reading the new report on ASEAN Food Systems Sustainability.