Integration of ASEAN’s dairy industry: Multi-market modelling to guide policy and

investment choices

Signe Nelgen and Steve Staal

International Livestock Research Institute

Mainstreaming Livestock Value ChainsAccra, 5 November 2013

The presented work is based on a paper by Steve Staal, Richard Daite and Paul Ramirez (2013), which was presented at the Wold Milk Day Celebration in

Bangkok this year.

Key questions

• What is the task set confronting policy modellers leading up to the establishment of the AEC?

• What are the challenges for modellers arising from trends in and specific characteristics of SEA’s dairy production, consumption and trade?

Outline

SEA’s dairy industry

Elements of the AEC

Questions for consideration

Challenges for modelers

Dairy sector modeling attempts

Growing share of Asia in Milk Production

100

0

500

400

300

200

800

700

600

Oceania Africa AmericaEurope Asia

15.5% 37.0%1981 1991 2001 2011

Overview of SEA’s dairy industry

Source: FAOSTAT

Overview of SEA’s dairy industry

Whole milk production by SEA country, 1981-2011

Source: FAOSTAT

Overview of SEA’s dairy industry

Milk consumption per capita, 1981-2009

Source: FAOSTAT

Net Imports, milk equivalents

-20

-5

-10

-15

2000 2005 2010

15

10

5

01995

Americas Southeast Asia Oceania

Africa South Asia

East Asia Europe

Overview of SEA’s dairy industry

Source: FAOSTAT

Looking at and beyond market prices

1.5

1

0.5

0

2.5

2

Indonesia

India Thailand Vietnam China New Zealand

Malaysia Philippines

Vat

Processor share

Farm gate price

Overview of SEA’s dairy industry

Source: FAOSTAT

Core elements of the ASEAN Economic Community

• Single market and production base

• Competitive economic region

• Equitable economic development

• Integration into the global economy.

Elements of the AEC

• Regional integration

• ASEAN• ASEA N–

China, Korea, Japan, India, Australia & New Zealand

• Existing non-tariff barriers

• Technical barriers • Sanitary standards• Customs related measures• Quantitative restrictions

Elements of the AEC

• Is there a need to stimulate consumption? • Regional or national self-sufficiency in dairy as a

goal? • Smallholder production vs. larger scale production• What about trade barriers to protect domestic

industries?• Is equitable socio-economic development achievable?

Questions for consideration

Challenges for modellers: data

Trade flows

NTB

Wages in ag and non-ag sector

Processing costs

Consumption

Price margins

Regulations

Trade Policies

Domestic Policies

Asset ownership

Challenges for modellers: model specifications

Price responses

Non-tariff barriers

Investment reactions

Economies of scale

Small vs. large scale producers

Marketing and policies in specific countries and effects on consumption and nutrition

Self-sufficiency goals

Dairy sector modeling attempts

• J.H. Grant, T. Hertel, T.F. Rutherford (2009): Identification of the dairy specific challenges for the US dairy sector

• D. Vanzetti, N. R. Setyoko, R. Oktaviani (2013): Using GTAP to model Indonesian policy addressed to promote milk consumption: data problems, inconsistent IO tables in GTAP

• FAPRI International Dairy Model: data limitations for SEA region

 

Thank you for your attention!

• Mechanisms towards realizing that goal?

• Can SMEs comply with non-tariff requirements?

• Implications of resource scarcity and increasing price

Questions for consideration