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Food Price Hike Worsens Poverty in Asia by Marwaan Macan-Markar

An annual meeting of Asian finance ministers and central bank governors in Hanoi is set to address the fate of 64 million people in the region on the brink of extreme poverty. They are the worst affected by soaring food prices, which have hit record highs in the first two months of this year.

"The issue of food price inflation and food security will indeed be one of the key topics of discussion at the Asian Development Bank’s 44th annual meeting," says Xianbin Yao, director general of the regional and sustainable development department at the Manila-based international financial institution. "(We hope) to focus our discussions on the long term structural adjustments that are needed to secure food supplies.

"If left unchecked, the food crisis will badly undermine the recent gains in poverty reduction made in Asia," he said in an interview to IPS. "We estimate that a 10 percent rise in domestic food prices in developing Asia could push an additional 64 million people into poverty, based on the 1.25 (dollar) a day poverty line."

In a report released ahead of the annual meeting in the Vietnamese capital, to be held May 3-6, the Asian Development Bank (AsDB) warned that this ascent of prices among many Asian food staples is "likely to continue" a threat to the continent’s nearly two billion people who live on less than two dollars a day.

The region is home to two-thirds of the world’s poor, some 600 million people, who live on less than 1.25 dollars a day. That number stemmed from the rise of those living in absolute poverty before 2008, when it was 555 million people. The 2008 global financial crisis and the food crisis of that year combined to undermine the food security of Asia’s most vulnerable.

The rising food prices since mid-2010 hit the region that is home to 3.3 billion of the world’s population because poor families in developing Asia spend over 60 percent of their income on food, reveals the AsDB report, ‘Global Food Price Inflation and developing Asia’. In developed countries, by contrast, families spend about 10 percent of their income on food.

While the soaring price of rice was the root to the 2008 food crisis, this time around it is a different basket of commodities, including cereals like wheat and corn, dairy, meat, oils and fats and sugar. Countries like Indonesia have had to grapple with rise in chili prices, China has seen the price of garlic double, India endured price rises in onions, and South Korea faced similar price inflation for cabbage, an important ingredient for kimchi, the country’s best known national dish.

The consumers most affected have been "net buyers of food, who are pretty much all urban consumers, especially the urban poor," says Purushottam Mudbhary, coordinator of the economic, social and policy assistance group at the Asian regional office of the Food and Agriculture Organisation (FAO). "But more importantly, it also includes rural landless workers and small farmers."

The current rise in the price of crude oil, which hit a 31-month high in March, has been one among a range of factors that has combined towards this upward spiral of Asian food, since diesel is needed for pumps in the irrigation systems, and the extensive use of fertiliser depends on petrochemicals. High fuel costs have also added to the pre- and post-harvest transport costs.

Research by the Rome-based U.N. food agency has further singled out extreme weather over the past year, ranging from the summer drought that swept through the wheat fields of Russia and Central Asia, the winter drought in China and the floods in Australia.

The global race to produce bio-fuel from sugar cane and palm oil has also left its mark on the food supply chain, Mudbhary said in an interview. "There is a competition for bio-fuel crops and food crops in Malaysia, Thailand and Indonesia."

For its part, the AsDB identified the "structural and cyclical factors that were at play during the 2007 and 2008 crisis" to have played a part this time, too, including "rising demand for food from more populous and wealthier developing countries", shrinking available agricultural land and stagnant or declining crop yields.

"It is important for policy makers in the region to focus attention on strengthening the entire food systems from farm production, processing, retail and distribution to consumption," says the Manila- based bank’s Yao. "A major concern is efficiency of using scarce resources such as land, water and energy particularly in large countries such as China and India."

But some of the AsDB’s critics are far from impressed at other measures the international lender has identified as pivotal to help the region overcome the emerging food crisis, ranging from a need to increase investments in agriculture infrastructure and stronger market integration plans to long-term research through international and national agriculture centres.

"The Bank itself must evaluate its operations in agriculture and natural resources in general and in wealthier countries in particular," says Avilash Raoul, executive director of the NGO Forum on ADB, a Manila-based umbrella group of non-governmental organisations (NGOs) that monitor the bank. "Does ADB have a comprehensive strategy let alone policy on agriculture which can guide its operation to addressing the food crisis in Asia? It doesn’t have.

"Substantial number of the poor and the vulnerable impacted by food price inflation are located in areas of rain-fed agriculture having difficulty access to irrigation," he said in an interview. "NGO Forum is demanding a coherent agriculture policy that should be immediately developed with the participation by a large number of farmers, especially by small farmers in the most vulnerable areas."