Asia fears unrest from food price shock

from The Peninsula On Line

Soaring food prices may throw millions of Asians back into poverty, undo a decade of gains and stoke civil unrest, regional leaders said yesterday as they urged a boost to agricultural production to meet rising demand.

Asia — home to two thirds of the world’s poor — risks rising social tension as a doubling of wheat and rice prices in the last year has slammed people who spend more than half their income on food, Japanese Finance Minister Fukushiro Nukaga said during the Asian Development Bank’s annual meeting. If food prices rise 20 percent, 100 million poor people across Asia could be forced back into extreme poverty, warned Indian Finance Secretary D. Subba Rao.

“In many countries that will mean the undoing of gains in poverty reduction achieved in the past decade of growth,” Rao told the ADB’s meeting in Madrid. The ADB estimates that about 20 percent of people in Asia are presently living on less than $1 a day — the international definition of extreme poverty — compared to more than 60 percent who did so in the mid-1960s.

A 43 percent rise in global food prices in the year to March sparked violent protests in Cameroon and Burkina Faso as well as rallies in Indonesia following reports of starvation deaths. Many governments have introduced food subsidies or export restrictions to counter rising costs, but they have only exacerbated price rises on global markets, Nukaga said.

“Those hardest hit are the poorest segments of the population, especially the urban poor,” Nukaga told delegates. “It will have a negative impact on their living standards and their nutrition, a situation that may lead to social unrest and distrust,” he added.

The ADB estimates the very poorest people in the Asia Pacific region spend 60 percent of their income on food and a further 15 percent on fuel — the key basic commodities of life which have seen their prices rise relentlessly in the last year. Japan is one of 67 ADB member economies gathered in Spain to discuss measures to counter severe weather and rising demand that have ended decades of cheap food in developing nations.

The Asia-Pacific has three times the population of Europe — around 1.5 billion people — living on less than $2 a day. Rice is a staple food in most Asian nations and any shortage threatens instability, making governments extremely sensitive to its price. But the steadily rising cost of providing fuel and food subsidies harms budget finances, puts at risk the macroeconomic stability international investors demand in return for buying government bonds and, in some cases, curbs the access nations have to global financial markets.

Indonesia, for example, has pledged to reduce its budget deficit by cutting fuel subsidies ahead of planned global bond sales this year worth around $12bn. “We have to reduce the budget deficit for investor confidence,” Anggito Abimanyu, a senior Indonesian fiscal policy official told ADB delegates yesterday, saying that fuel and electricity subsidies of $20.5bn this year hampered efforts to raise money on international capital markets.