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There is tremendous potential for agricultural cooperation between China and the Association of Southeast Asian Nations (ASEAN) both in the short and longer term, said an article entitled "Prospects of Cooperation between China and ASEAN in Agricultural Industry" in the Beijing-based Outlook Weekly.
Thanks to the complementary nature of both sides' farming sectors, especially in terms of grain exports and imports and farming machinery, China and ASEAN have great potential for cooperation and such cooperation will be mutually beneficial.
Take grain exports and imports as an example. To reduce the overwhelming reliance on United States, Canada and Australia for grain imports, it is of critical importance that China beefs up its agricultural cooperation with ASEAN countries, which have now become world's major grain-exporting base.
It is estimated that ASEAN countries could export up to 20 million tons of grain annually in the near future and become capable of serving as a major import source for China. For ASEAN nations, such an arrangement would guarantee them a stable source of foreign exchange, thus creating a win-win situation, the article said.
The annual trade volume of agricultural produce between China and ASEAN now exceeds US$5 billion. If farming machinery is included, the figure becomes much higher.
Under agreements signed by the two sides in November 2002, the tariffs on 600 products, most of which are farming produce, will be eliminated in a phased-out manner between 2004 and 2006. This move is expected to further boost their agricultural trade.
Though China and ASEAN are not yet each other's major trade or investment partner, their complementary resources and demand in the field of agriculture indicates that their cooperation in this regard is destined for a bumper harvest, the article predicted.
The geographic location of China and the ASEAN countries and their complementary nature in agriculture have combined to play an important part in facilitating agricultural cooperation between them.
However, if such cooperation is to be carried out effectively and in a way that maximizes the benefit to all, it must be conducted in a manner that is in accordance with both sides' specific conditions, especially in line with their agricultural development and allocation of natural resources, the article stressed.
ASEAN countries can be divided into three groups according to their level of agricultural development. The first group comprises Brunei and Singapore, which boast strong consumer power but lack agricultural resources; the second consists of Indonesia, Malaysia, the Philippines and Thailand whose economies are recovering; and the third group brings together the economically less well-off countries Cambodia, Laos, Myanmar and Viet Nam.
Methods of cooperation should be devised based on such a classification.
China could seek to expand its exports of farming produce to Singapore and Brunei, which could in turn establish farming product processing firms in China by availing themselves of the capital and technological advantages of Brunei and Singapore.
As for the second group, both sides should direct investment and cooperation into sectors where they enjoy comparative advantages in order to maximize the benefit to all.
Although European, Japanese and United States companies have long had a role in the Southeast Asian market for farming machinery, pesticides and fertilizers and commanded the biggest market share, China could still expand its exports to Southeast Asia in these sectors because it enjoys competitive advantages in transportation and manufacturing costs compared with its rivals.
Countries in the second group could significantly increase their exports of farming produce to China. For example, Thailand, Indonesia and Malaysia - the world's three leading rubber producers - could export more rubber to China. Thailand could also boost its rice exports, while Indonesia and Malaysia could export more palm oil to China.
For the economically less well-off countries, China could export more farming technology and machinery to these countries, while they could export more raw farming produce to China.
The manufacturing sector only accounts for about 10 percent of the total gross domestic product in Cambodia, Laos and Myanmar. Those countries are in dire need of importing advanced technology and equipment to upgrade their industrial sector and develop their farming machinery industry. This situation provides a rare opportunity for numerous farming machinery firms in China, which are plagued by redundant production capacity.
Meanwhile, China could serve as a stable export destination for the farm produce of those countries.
The agricultural sector has witnessed robust growth in Southeast Asia and some countries which have made agricultural investment a priority for government support. These are all encouraging signs that could facilitate agricultural cooperation between China and ASEAN, the article concluded.
(China Daily May 12, 2003)
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