Asian bank unveils food aid plan

Emergency funding to help poor nations announced at annual meeting in Spain.

Haruhiko Kuroda, president of the Asian Development Bank — Kuroda is against Thailand's idea of creating an Opec-like rice cartel [AFP]

By News Agencies

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Kuroda said the bank does not approve of Thailand’s idea of creating a rice-exporting cartel along the lines of the Organisation of Petroleum Exporting Countries (Opec), saying it is better to let market forces operate freely.

He declined to give an overall figure for the expenditure, saying it would depend on requests of governments.

But he said the amount would be “sizable, but not enormous”.

David Cohen, director of Singapore-based Action Economics, told Al Jazeera that establishing a rice cartel is easier said than done.

Co-ordination problem

Cohen said people talk about cartels all the time, particularly when commodity prices rise.

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“But it is more difficult than expected to try and co-ordinate such an operation,” he said.

“Even Opec, when there are a much smaller number of oil-producing countries, they are reputed to have difficulty in policing the quotas of when prices go up.”

The Manila-based ADB was created in 1966 to fight poverty in the Asia-Pacific region. Nineteen of its member countries are outside the Asia region.

This year it picked Spain, which joined in 1986, to hold its annual meeting.

Vulnerable poor

Asia is home to two-thirds of the world’s poor, and nearly 1.7 billion people in the region live on $2 a day or less.

Global food crisis

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UN says soaring price of basic foods such as rice and cereals could affect around 100 million of world’s poorest people

Global rice stocks have halved since hitting a record high in 2001 while demand is continuing to rise

In Asia, rice prices have almost tripled this year alone

Financial speculators, rising populations, floods, droughts, increased demand from developing countries, and removing crops from the food chain to produce biofuels have been cited as factors

Price rises have led producing nations to enforce export restrictions, further putting the squeeze on supply, especially in countries relying on imports

Asia’s poor are particularly vulnerable to rising prices for staples such as rice because 60 per cent of their spending goes towards food, and the figure rises to 75 per cent if fuel costs are included, the bank said.

Kuroda said prices of rice, for instance, have nearly tripled in the past four months.

Higher food costs mean higher inflation, which will reduce consumption, savings and investment. If governments raise interest rates to control inflation, this could reduce demand and trigger an economic slowdown, the ADB said in a report.

It estimated a food price rise of 50 per cent could cut growth in Asian gross domestic product by 1.05 percentage points in 2008 and lower growth in 2009 as well.

Many countries in the region are grappling with the crisis by imposing price controls or bans on food exports, but the bank says this can backfire by discouraging farmers from planting, thus reducing supplies and raising prices.

“Food-specific aid is a better idea,” Kuroda said.

“We believe targeted interventions to protect food entitlements of the most vulnerable and poor are more effective to mitigate the immediate impact of rising food prices”.