05/05/2008, 00.00
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Food Crisis: emergency aid but also rethinking development in Asia

Food crisis is “structural” as many urge greater investments in agriculture. For years industry and services were privileged at the expense of farming. Thai proposal to set up a rice cartel to manage rice prices is criticised.

Manila (AsiaNews/Agencies) – The Asian Development Bank (ADB) has announced emergency funding to help nearly 1.7 billion people in Asia who are living on US$ 2 a day or less and are the main victims of the current food crisis. However, the bank has also come in for criticism because of its continued failure to direct adequate investments into agriculture.

The four-day meeting of the ADB's board in Madrid began today bringing together some 3,000 delegates, including government officials, academics, business people and members of international organisations,

ADB President Haruhiko Kuroda warned that “the cheap-food era may be over. [. . .] Combined, 75 per cent of expenditure of the poor would be affected by [food and fuel] price inflation.”  He said that “higher food costs mean higher inflation, which will reduce consumption, savings, and investment,” adding that the bank's financial aid would be “sizable, but not enormous.” He declined however to give an amount, saying it will depend on requests from poor countries.

Asia has been experiencing rapid economic expansion, which reached 8.7 per cent last year. ADB forecasts growth at a still-robust 7.6 percent in 2008, excluding Japan, but it expects inflation to hit 5.1 per cent across Asia. Many countries are expected to spend heavily to ensure food for the poor and energy at prices people can afford.

At the Madrid conference the ADB warns that price controls or restrictions on food exports to secure domestic supplies might backfire by discouraging farmers from planting, thus reducing supplies and raising prices.

For Kuroda “targeted interventions” are needed to protect food entitlements of the most vulnerable and poor, urging developed countries to stop paying subsidies for the production of biofuels.

Many of the delegates at the meeting criticised the ADB because in 40 years it paid little attention to agriculture. The bank’s annual lending to the farming sector has averaged 11 per cent. Even its ambitious ‘Strategy 2020’ plan to eliminate poverty by that date neglects farming. Kuroda however insisted that the ADB support of infrastructure and roads helps agriculture as well.

Still in 2007, the total loans and grants for development in agriculture and natural resources amounted to US$ 510 million, a substantial drop from US$ 930 million committed in 2006. By contrast the transportation and communication sectors received US$ 4.2 billion in 2007 and 1.5 billion dollars the year before.

In the end the “food crisis cannot be remedied through emergency measures,” said Supachai Panitchpakdi, secretary general of the United Nations Conference on Trade and Development (UNCTAD), comments echoed by a ranking finance official from Bangladesh, who said that “the food problem is not a cyclical problem but a structural problem.”

Indeed “I don’t think Asia will be able to mount the impending crisis unless we bring about change in agriculture,” said Rajendra Pachauri, Nobel Peace laureate.

In the meantime in Bali economic ministers from the Association of South-East Asian Nations (ASEAN) have agreed to work together to keep a lid on rice prices. They also rejected Thailand’s proposal to set up a producers’ cartel to set prices.

Critics argue that it is not possible to control farmers’ output the way OPEC does with oil and that such an oligopoly would be against the three billion people who consume rice and lead to higher prices.

Kuroda also said that it was better to let market forces operate freely. (PB)

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