by Dr Chris Carter, Senior Economist
Upholding its supply reputation for safe and healthy grains, Australia could help South East Asian governments combat their emerging dietary problems.
Obesity is an emerging serious health issue in some South East Asian countries. Obesity contributes to an increased risk of heart disease, diabetes, some musculoskeletal issues, and a range of cancers.
Obesity has been on the rise in developed countries since the 1970s. However, in developing countries such as Indonesia, it is a more recent phenomenon, mostly strongly emerging since the 2000s (Figure 1).
Figure 1: Per cent of the population in Indonesia classed as overweight;1993 to 2014. Source: Oddo (2019)
Of concern to governments is the direct economic cost of obesity. According to the Asian Development Bank, “…the total macroeconomic loss due to overweight and obesity [in Indonesia] in 2016 was 3.04% of GDP”. This equates to an eye-watering USD$28.4 billion.
Recent research from Australia’s Grains & Legumes Nutrition Council showed that Australia could save AUD$1.4 billion in healthcare costs if whole grain consumption increased. Indonesia has a population 10 times the size of Australia’s, so it’s not difficult to see how significant the potential economic benefits of healthier diets would be for Indonesia.
The Indonesian government is acting to curb the cost of obesity. Their first remediation policy was introduced in 2007, although there were lags in identifying the best policy instruments to address the problem. There are now several approaches in play to influence food environments, personal behaviours, and healthcare remedies.
To slow or reverse obesity requires the involvement of food companies to support government objectives. For example, growth in consumption of processed foods is growing as is the increased market share of multinational food companies. Figure 2 shows that in 2018, processed food contributed 25% of the protein and energy consumed by Indonesians, up from 15% in 2010. Comparing the trends in Figure 1 and Figure 2 suggests positive correlation between consumption of processed food and obesity, with some researchers suggesting strong causation.
Figure 2: Percentage of daily intake of processed food (BPS 2020)
The challenge for governments is that food companies mostly respond to commercial incentives rather than public health incentives. Substituting healthier ingredients into known products, and making required changes to branding, both affect costs. So, those costs must be offset through a higher price or volume. In economies with a population living at or near subsistence, the willingness to pay for more than basic food is very limited. Accordingly, in these countries, the healthier options of basic foods are generally smaller product lines that appeal to wealthier consumers. New healthy products must also compete with the inertia embedded within existing product lines, that are profitable, though possibly unhealthy.
This creates opposing tensions in responding to health trends. For governments facing the economic cost of trends like obesity, there is strong incentive to undertake remedial action. For food companies, their rational actions are more often to wait until there is adequate consumer demand for health attributes, before exercising the option to include them in major product lines; or to wait until food regulation requires changes to their product formulations.
In Indonesia, and more generally in South East Asia, the middle class population with higher disposable incomes is rapidly increasing, as is their awareness of health and environmental issues. These changing demographics and sentiments inevitably lead to commercial opportunity and encourage further action by governments.
There is plenty of speculation within the Australian industry on how to best capitalise on the South East Asian demand for healthy, safe and environmentally-friendly food. Quickly establishing a positive reputation gives a food supplier first-mover advantages. Also, developing value chains that incentivise growers and that are difficult to replicate may delay competitors’ attempts to ‘free ride’ on those advantages. A first step for capturing this emerging opportunity is learning about what food characteristics consumers and governments most value.
Australia, with its reputation as a clean and green grain exporter, is well-placed to support a transition into greater consumption of healthier foods. Australia could position itself as a preferred supplier of healthy grains.
AEGIC has projects underway to examine the scope for healthy grains in South East Asia; including whole grains, barley and oats.
Image: AEGIC’s 100% whole grain oat noodles could be an opportunity in South East Asia
ADB (2018) The Economic Burden of Overweight and Obesity Reaches 3% of GDP in Indonesia, Asian Development Bank, https://www.asiapathways-adbi.org/2018/02/the-economic-burden-of-overweight-and-obesity-in-indonesia/
BPS (2020) Badan Pusat Statistik, https://www.bps.go.id/
Oddo VM, Maehara M, Rah JH. (2019) Overweight in Indonesia: an observational study of trends and risk factors among adults and children. BMJ Open 2019
Pontororing, G. J. (2017), Indonesia’s policy action to tackle obesity among adults: The Opportunities and Future Challenges, Masters Thesis, KIT (Royal Tropical Institute) Health Education/ Vrije Universiteit Amsterdam
HORIZONS: the AEGIC Economics and Market Insights blog
Expert grains industry analysis and commentary from AEGIC’s Economics and Market Insight Team on a range of big-picture topics that affect Australia’s export grains sector.