REPORT OF THE 6TH MEETING OF THE NATIONAL FOCAL POINT FOR ASEAN COCOA CLUB (ACC) ON ASEAN COOPERATION

AND JOINT APPROACHES IN AGRICULTURE AND FOREST PRODUCTS SCHEME 26-27 June 2003, Imperial Aryaduta Hotel, Makassar, Indonesia

INTRODUCTION 1. The Sixth Meeting of the ASEAN Cocoa Club on the ASEAN Cooperation and Joint Approaches in Agriculture and Forest Products Promotion Scheme was held on June 26-27, 2003 in Imperial Aryaduta Hotel, Makassar, Indonesia. 2. The Meeting was attended by delegates of the government and private sector from Indonesia, Malaysia, Philippines and Singapore. The list of the delegates is presented herewith as ANNEX 1. AGENDA ITEM 1: OPENING SESSION Opening Remarks by Chairman of ASEAN Cocoa Club 3. The Chairman of the ASEAN Cocoa Club (ACC) Dato' Dr. Azhar Ismail welcomed all delegates to the meeting. In his speech, he highlighted the situation of the global and ASEAN cocoa economy and stress the importance of producing countries to rationalize production to ensure reasonable price level of cocoa beans. There is also the need to address the issues of pest and disease infestations, cost competitiveness and quality of cocoa beans and cocoa products. The full text of his opening remarks appears as ANNEX 2. Opening Remarks by Director General of Estate Crop Production 4. Mr. Subagyono D., Director General of Estate Crop Production in his speech highlighted the importance of this meeting and that the sustainability of the cocoa industry is largely dependent on the supply of cocoa beans. At present cocoa plantations in Indonesia are facing with Cocoa Pod Borer (CPB) problems that have resulted in reduction in production of between 20% to 50%. The full text of his speech was read by Mr. Nogoseno, which appears as ANNEX 3.

Opening Address by Governor of South Sulawesi 5. His Excellency H.M. Amin Syam, Governor of South Sulawesi represented by the Second Assistant to the Governor declared open the Sixth Meeting of the National Focal Point of the ASEAN Cocoa Club on ASEAN Cooperation and Joint Approaches in Agriculture and Forest Products Promotion Scheme. In his opening address, H.E. Governor of South Sulawesi highlighted that South Sulawesi Province account for 70% of the total exports of cocoa beans and cocoa is one of the major economic activities in this province. Therefore it is timely and appropriate to have this Sixth Meeting of ACC in Makassar, Sulawesi. The full text of his speech was read by the Second Assistant to the Governor of Sulawesi, which appears as ANNEX 4. AGENDA ITEM 2: ELECTION OF CHAIRMAN AND VICE-CHAIRMAN 6. The meeting unanimously elected Dato' Dr. Azhar Ismail, Director-General of the Malaysian Cocoa Board and Chairman of the ASEAN Cocoa Club as Chairman and Ir. Zulhefi Sikumbang, Chairman of Asosiasi Kakao Indonesia (ASKINDO) as Vice-Chairman. AGENDA ITEM 3: ADOPTION OF AGENDA 7. The meeting adopted the Agenda as appears in ANNEX 5. AGENDA ITEM 4: BUSINESS ARRANGEMENTS 8. The meeting was held in plenary. AGENDA ITEM 5: MATTERS ARISING FROM THE 24th SOM-AMAF, 7-8 OCTOBER 2002, 2nd SOM-AMAF + 3 Meeting 9 October 2002; 24th AMAF, 10 October 2002 and 2nd AMAF + 3 Meeting, 11 October, 2002, Viantiane, LAO PDR 9. In the absence of the representative from ASEAN Secretariat, the meeting requested that the Secretariat of ACC request for a written report of the above-mentioned meetings from the ASEAN Secretariat. AGENDA ITEM 6: MATTERS ARISING FROM THE 9TH MEETING OF THE JOINT COMMITTEE ON ASEAN COOPERATION AND JOINT APPROACHES IN AGRICULTURE AND FOREST PRODUCTS PROMOTION SCHEME, 5-7 AUGUST 2002, PHNOM PENH, CAMBODIA 10. The meeting also took note of the matters arising in the 9th Meeting of the Joint Committee on ASEAN Cooperation and Joint Approaches in Agriculture as appears in ANNEX 6. 11. The meeting was informed that issues on discriminatory market access in EU, as well as high import tariffs in China and India have been raised in several ASEAN meetings. However, there is no progress yet in resolving the issues. Member countries were also fine tuning three research proposals pertaining to Cocoa Pod Borer Management, Improvement on Quality of Cocoa Beans and Trials on Selected Cocoa Progeny and Clones.

AGENDA ITEM 7: ENHANCEMENT OF INTERNATIONAL COMPETITIVENESS OF ASEAN FOOD AND AGRICULTURAL PRODUCTS/COMMODITIES Formulation of ASEAN Cocoa Contract 12. The Chairman informed members that the idea of having ASEAN Cocoa Contract was mooted during the Second Meeting of ACC in Jakarta. The draft contract was presented by Indonesia at the Third Meeting of ACC in Tawau and further discussed at the Fourth meeting in Manila. At the Fifth Meeting of ACC the meeting agreed upon the basic format for ASEAN cocoa contract as appears in ANNEX 7. 13. The meeting agreed to the formation of a working group comprising representatives of member countries to relook at the basic cocoa contract taking into consideration on the recent developments of the cocoa trade as well as to discuss the formation of an arbitration body and guidelines for arbitration. 14. ASEAN Cocoa Contract is a commercial agreement that need the backing of industry players as well as legal backing and an arbitration body. In view of the proposed formation of the Cocoa Association of Asia (CAA) where members comprised industry players and traders, the working group recommended that CAA handle the drafting of the contract and arbitration panel. 15. The meeting agreed to adopt the recommendation of the working group for CAA to handle the drafting of a uniform cocoa contract and formation of an arbitration panel to arbitrate in case of disputes. The uniform cocoa contract will be more acceptable as the industry players and traders are directly involve in the formulation of the uniform cocoa contract. The ACC will play more of a regulatory role. 16. The meeting took note the proposed formation of Cocoa Association of Asia (CAA) by the private sector that is in the process of getting approval from the registrar of society of Singapore. It was agreed that the CAA will be domicile in Singapore. Tariff and Non Tariff Barriers on Cocoa Beans and Cocoa Products. 17. The ACC Secretariat briefed members on the commitment of member countries on the reduction of tariffs for cocoa and cocoa products. The duties for cocoa and cocoa products have reduced to between 0 5 % effective 2003 except for the newer ASEAN members of Cambodia, Lao PDR, Myanmar and Vietnam. The matrix on the tariff rates of ASEAN member countries as appears in ANNEX 8. 18. The meeting was also informed that there was no progress made in resolving the issues of discriminatory tariff structure by EU and the high import tariff for cocoa and cocoa products imposed by Peoples Republic of China and India. The issue regarding the EU discriminatory tariff structure needs to be addressed at WTO forum. 19. The meeting was further informed that ASEAN has established the ASEANChina Free Trade Area (FTA), which was signed by the Head of Governments of the Parties of the 6th ASEAN-China summit held on 4 November 2002 in Phnom Penh, Cambodia. Under this agreement the liberalization for trade in goods can be implemented through three measures namely Early Harvest, Normal Track and Sensitive Track. Member countries can include cocoa and cocoa products in the early harvest package. The tariff rates in the early harvest package will have to be reduced to 0% by January 1, 2006 if the

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current MFN tariff rate is higher than 15%. If the current MFN tariff rate is between 5% and 15% the tariff rate will be reduced to 0% in January 1, 2005. For products with MFN tariff rates lower than 5% the tariff rates will be reduced to 0% on January 1, 2004. The meeting was also informed that at the ASEAN-India Summit in Cambodia, India has proposed that ASEAN and India strengthened economic cooperation possibly through a Free Trade Area in 10 years. The task force has met once in New Delhi, India from 20 22 December 2002. The approach being considered by the task force is along the lines of the Framework Agreement on ASEAN-China FTA Agreement. The meeting noted the development of the ASEAN-China FTA and ASEANIndia FTA and the need for member countries to ensure that cocoa and cocoa products are included in the early harvest package so as to enjoy the elimination of tariff for cocoa and cocoa products into China and India.

AGENDA ITEM 8: ENHANCEMENT OF ASEAN COOPERATION AND JOINT APPROACHES IN INTERNATIONAL AND REGIONAL ISSUES Codex Committee on Cocoa Products and Chocolate 22. The meeting was informed that the maximum level of lead remained at 0.5 mg/kg for cocoa butter and 2 mg/kg for cocoa powder and cocoa mass. The meeting recognized the need for member countries to gather scientific data and monitor closely the development as this issue may be raised again. AGENDA ITEM 9: DEVELOPMENT, ACCELERATION OF TRANSFER AND ADOPTION OF NEW TECHNOLOGIES Project on Cocoa Pod Borer Management by Using Biological Control Agents and Plant Resistant Materials 23. The meeting was informed that there are 3 components of the proposal that include survey on exotic parasite, evaluation of bio-control agent (cocoa black ants) and evaluation of potential resistant clones. 24. The working group recommended on the following: a) Survey on exotic parasite There is no need to undertake the survey on exotic parasite in Indonesia. Indonesia has recently conducted the survey and will share the information with member countries. b) Evaluation of bio-control agents (cocoa black ants) The working group recommended that Malaysia and Indonesia to continue their present respective research on Cocoa Black Ants (CBA). Research on CBA undertaken by Malaysia is more elaborated comprising of basic and applied while Indonesia is applied in nature. Both countries will share information on CBA research in workshops or seminars. c) Evaluation of potential resistant clones The working group recommended incorporating this sub-project in a clone trial as in item 9.3. Twenty common clones available in each country will be included in the trials. Five to ten common resistant clones will be evaluated. The working also suggested that the issue on exchange of clones to be discussed in SOM-AMAF Meetings. The working group also decided to adopt similar experimental design and data collection procedures.

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Proposed Collaboration on the Improvement of Quality of Cocoa Beans through Fermentation and Drying Technologies for Smallholders in Indonesia Sufficient information on fermentation technology is available in Indonesia and therefore the working group recommended that there is no need for further collaboration. Proposed Trials on Selected Cocoa Progeny in Selected ASEAN Region The working group recommended implementing the progeny trial. Malaysia and Indonesia will provide list of progenies to be included in the trial. Parental clones used in the trial will be those with high yield and tolerant to major pests and diseases. There will be 20 progenies in the trial; each country will provide 10 progenies. Exchange of hand pollinated progenies seeds will be undertaken. The working group also decided to adopt similar experimental design and data collection procedures. Malaysia will prepare proposed implementation schedule of the agreed projects within two weeks of the meeting. Indonesia will respond accordingly. Each country will carry out these trials separately using their own funding. Information on the agreed projects will be shared in workshops or seminars. The meeting agreed to adopt the recommendations made by the research working group.

AGENDA ITEM 10: ENHANCEMENT OF PRIVATE SECTOR INVOLVEMENT 29. The meeting was informed that BIMP-EAGA has formed a business council, which was effective in promoting private sector cooperation and investment. ASEAN Cocoa Club could adopt a similar model by forming an ASEAN Cocoa Business Council. 30. The meeting noted the formation of Cocoa Association of Asia (CAA) that was private sector driven. The objectives of CAA are to promote sustainable cocoa economy and formulate a uniform cocoa contract that is acceptable by member countries (refer para 14) AGENDA ITEM 11: REVIEW OF MOU ON ASEAN COOPERATION AND JOINT APPROACHES IN AGRICULTURE AND FOREST PRODUCTS PROMOTION SCHEME-ASEAN COCOA CLUB 31. The meeting was informed that the MOU on ASEAN Cooperation and Joint Approaches in Agriculture and Forest Products Promotion Schemes would expire in October 2004 and need ASEAN consensus to continue beyond October, 2004. 32. Members of ACC unanimously agreed that the MOU should be extended and that ACC should continue its activities. ACC provide a good platform for the private sector and government to interact and discuss specific and common issues for the enhancement of ASEAN cocoa industry. However, ACC activities need to be more focused and has a clear plan of action. Members need to be more committed in order to meet the datelines that have been set for the implementation of the activities. 33. The meeting agreed to form two working groups to increase the effectiveness in the implementation of ACC action plans: a) Food Safety b) Quality 34. The working group on food safety met and recommended the following:

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a) Member Countries to identify food safety issues imposed by the various countries. b) Quality Assurance to study the issues and provide recommendations c) Products to include cocoa and cocoa products including chocolate d) Focus on Lead and Cadmium issues e) Working group to draft the questionnaire and send to members by end of July The working group on quality met and recommended the following: a) Measure Quality Performance Monthly performance reports backdated to April 2003. Parameters to include Bean count, Moisture content, Waste, Mouldiness, Slatiness and Insect infestations. Working group to draft a standardized format for reporting of the performance. Reports to be send to ACC secretariat for compilation and circulated to members of the committee. b) Review of Standards and Methods If there is a variation in standards and methodology, the Quality Assurance will look into harmonization of the methodologies and standards.

AGENDA ITEM 12: OTHER MATTERS 36. Indonesia proposed that in order to have more effective and efficient meetings and interactions, the Industry Clubs/NFPWG on Commodities meetings should be held concurrently and back to back with the Joint Committee Meeting as these groups share many common issues and problems. DATE AND VENUE OF THE NEXT MEETING 37. The meeting agreed to propose the Seventh Meeting of the ASEAN Cocoa Club on the ASEAN Cooperation and Joint Approaches in Agriculture and Forest Products Promotion Scheme to be held in Malaysia. ADOPTION OF THE REPORT 38. The meeting unanimously adopted the report of the Sixth Meeting of the ASEAN Cocoa Club on the ASEAN Cooperation and Joint Approaches in Agriculture and Forest Products Promotion Scheme held in Makassar, Indonesia on 26 27 June, 2003. ACKNOWLEDGEMENT 39. The Chairman of the ASEAN Cocoa Club (ACC) expressed his gratitude and thanks to all delegates for their active participation in the meeting. 40. The delegation of Malaysia, Philippines and Singapore expressed their sincere appreciation to the government of Indonesia and government of South Sulawesi in particular ASKINDO for their warm hospitality accorded to them and the excellent arrangements made for the meeting. 41. The meeting was held in the traditional spirit of ASEAN cordiality and solidarity.