Asian Development Bank promises food relief

Channel NewsAsia 3 Apr 08;

MADRID - The Asian Development Bank on Saturday promised financial help for nations fighting the global food price crisis and attacked plans for a rice cartel.

Loans will help countries subsidise the price of food staples for the poor, ADB president Haruhiko Kuroda said on the first day of the banks four-day annual general meeting in Madrid.

"The amount depends on the requests from the affected countries," he told a news conference. "Possible total lending could be sizeable but not enormous."

The multinational lender will also provide two billion dollars (1.3 billion euros) in loans in 2008 and 2009 to finance agriculture infrastructure projects such as rural roads and irrigation systems to help boost farm output.

"Asia has a huge population with limited land for farming and a limited water supply so agriculture yields must be increased over time," Kuroda said.

Prices for the benchmark Thai variety of rice, a food stable across much of Asia, are at about 1,000 dollars a tonne, up threefold from the last ADB annual meeting in Japan one year ago.

The jump in food prices is fuelling inflation globally and the ADB predicted it would hit 5.1 percent across Asia this year, its highest level since the Asian financial crisis a decade ago and is raising concerns of popular unrest.

Asian nations will see their fiscal deficits worsen because of the need to provide subsidies to offset rising food and energy costs for the poor, the ADB said in a report issued at the gathering.

The problem will be more severe in countries that already have a large deficit like Bangladesh, India, Pakistan and Sri Lanka, it said.

Global food prices have nearly doubled in three years, sparking riots last month in Egypt and Haiti, protests in other countries and restrictions on food exports in Brazil, Vietnam, India and Egypt.

Rising use of biofuels, trade restrictions, increased demand from Asia to serve changing diets, poor harvests and increasing transport costs have all been blamed for the price rise.

World Bank President Robert Zoellick has estimated that high food prices affect some two billion people across the world and threaten to push 100 million poor people further into poverty.

Karuda said the jump in prices for staples like rice was leading people to hoard food items, causing a vicious circle that leads to even higher prices.

"There is a kind of panic buying," he said.

Some major Asian rice exporters, such as India and Vietnam, have imposed restrictions on exports in a bid to secure domestic supplies which "affects prices elsewhere", he added.

Kuroda criticised plans by Thailand, Myanmar, Laos, Vietnam and Cambodia to set up an OPEC-style rice cartel.

"Agricultural markets should be market oriented. It would not be good for exporters and it certainly would not be good for importers," the ADB president said.

"What is most important is that we increase agricultural productivity in the medium and long term," he added.

Thailand's Prime Minister Samak Sundaravej said Wednesday the five countries had agreed in principle to form a rice price-fixing group which would be called the Organisation of Rice Exporting Countries (OREC).

On the eve of the meeting, donors pledged 11.3 billion dollars to the bank's Asian Development Fund, its key poverty alleviation mechanism, for the 2009-2012, a 60 percent increase over the last four-year period.

Last year entire ADB approved 10.1 billion dollars in loans.

Pakistan was the largest recipient of ADB aid last year followed by Vietnam, India, China and Indonesia.

Established in 1966, the ADB is owned by its 67 member countries -- 48 from the Asia-Pacific region, and 19 from elsewhere around the world.

Some 3,000 people -- business and government leaders, academics and representatives of non-governmental organisations -- are taking part in the ADB's annual meeting. - AFP/ir

Food security a major concern at ADB meet
Participants warn of hunger risks to large numbers in Asia
Anthony Rowley, Business Times 5 May 08;

THE Asian Development Bank was urged yesterday to make food security a top priority in order to prevent what Indian finance minister Palaniappan Chidam- baram said was the danger of 'one hundred million people in Asia being forced back into poverty' by the current crisis in supplies and prices.

Food security was the major issue dominating a governors' seminar where the ADB's new long-term strategic framework was presented at the bank's annual meeting in Madrid

ADB president Haruhiko Kuroda acknowledged that food and agriculture issues were not specifically-stated priorities in the bank's new strategic plan for the next 12 years. But he claimed that the ADB would address these issues through provision of rural infrastructure provision and via various forms of financial assistance.

Unctad secretary general Supatchai Panitchpakdi, head of an eminent persons group whose report guided the ADB's new Strategy 2020, said the bank would tackle food issues through its mandate to bring about 'inclusive growth' in Asia. 'We are trying to re-engage the Green Revolution in Asia,' he said, while calling for stepped up investment in agriculture.

China's vice-finance minister Li Yong called agriculture a 'top priority' for China. 'We have to think of how to feed 1.3 billion people,' he said. There is 'deep concern' about food security and what is happening to agriculture in Asia, said Rajendara Pachauri, chairman of the inter-governmental panel on climate change. Climate change is damaging grain production, adding to other problems that create food shortages, he added.

Expected good harvests for rice in Asia could send prices tumbling later this year and shift policy-makers' attention away from the current crisis, ADB chief economist Ifzal Ali said in an interview. But that would be a mistake, he emphasised, because the underlying problem of high food prices 'is here to stay and we had better learn to live with it', he said.

The food price issue, as a humanitarian problem and a major factor behind the high inflation now plaguing Asian countries, dominated debate at the annual meeting. What is riveting policymakers' attention is the dramatic - in some cases 100 per cent - surge in prices so far this year, but that is only the 'cyclical' side of the story, said Mr Ali.

Good harvests can take care of at least part of that but unless the underlying structural problems are dealt with, there will be recurring crises, Mr Ali warned. The ADB published a special report in the weekend (Food Prices and Inflation in Developing Asia) explaining the long and short-term factors involved.

In the case of rice, 'my expectation is that a new crop will be harvested in Indonesia over the next two months, and the prognosis is good,' said Mr Ali. 'In Vietnam the prognosis is also good. If the monsoon is normal in South Asia we will have a good supply response. Under this scenario, by September, the food price situation will improve considerably.'

But he added, 'Even if by September things really ease in terms of rice prices dropping back from their peaks of US$1000 (per metric tonne) they will not go back to US$200 but will stay at US$400 to US$500. This is an issue that has to be tackled over the next five to ten years. If not, we will have periodic episodes of this kind of volatility.'

The recent spike in food prices 'and the short-sighted policy responses that accentuate volatility in prices threaten to push large numbers of people back below the poverty line', the ADB special report said. 'Structural forces augmented by adverse cyclical events have put food prices on an upward trajectory that will not end soon.'

Asia fears rising poverty, social unrest from soaring food prices
Channel NewsAsia 5 May 08;


MADRID : Soaring food prices could push millions of people in Asia back into poverty and lead to social unrest, regional leaders warned Sunday at the Asian Development Bank's annual meeting in Spain.

"The recent hike in the price of rice will hit Asian countries particularly hard. The ones who are most affected are the poorest segment of the population including the urban poor," Japanese Finance Minister Fukushiro Nukaga said.

"It will have a negative impact on the living standards and also affect their nutrition. Such a situation may lead to social distrust and unrest and therefore safety nets addressing the immediate needs of the poorest are needed," he added.

Prices for the benchmark Thai variety of rice, a food stable across much of Asia, are at about 1,000 dollars a tonne, up threefold from the last ADB annual meeting held in Japan one year ago.

Meat prices have risen by 60 percent in Bangladesh in the year ending in March, and by 45 percent in Cambodia and 30 percent in the Philippines, according to a report issued Saturday by the ADB.

The rise in global food prices has sparked riots last month in Egypt and Haiti, protests in other countries and restrictions on food exports in Brazil, Vietnam, India and Egypt.

Indian Finance Secretary Subba Rao said a 20 percent rise in food prices could force 100 million people into extreme poverty.

"In many countries, including in Asia, that will mean the undoing of gains in poverty reduction achieved during the past years of growth," he said.

The Indian government, which is facing a general election by May 2009, has implemented a raft of measures, such as banning the export of staple foods like rice and lentils and cutting customs duties on other items, to try to ease price pressures.

It spends the equivalent of about 2.0 percent of gross domestic product per year on subsidies for food, fertilizer and energy to help offset the impact of rising prices on the poor, Rao said.

But Nukaga warned that export restrictions lead to higher prices while food subsidies to help the poor deal with surging prices could place a tremendous burden on state budgets.

"Export restrictions will not only distort the proper functioning of markets in price formation but further exacerbate the price hikes in international markets," he said.

"Subsidies that are intended to keep food prices under control have the risk of becoming a significant burden to budgets and are not sustainable over time," he added.

Food subsidies in Bangladesh, one of the poorest nations in Asia, are estimated to double in the current fiscal year and reach over 1.5 billion dollars (973 million euros) in the current fiscal year.

The ADB estimates one billion people in Asia are seriously affected by soaring food prices.

It announced Saturday on the opening day of its four-day annual meeting in Madrid that it would provide a sizeable amount in soft loans to help Asian countries subsidise the price of food staples for the poor.

It will also provide two billion dollars in 2008 and 2009 in loans to finance agriculture infrastructure projects such as irrigation systems and rural roads aimed at boosting farm output in the region.

Rising use of biofuels, trade restrictions, increased demand from Asia to serve changing diets, poor harvests and increasing transport costs have all been blamed for the price rise.

- AFP /ls