Asia better off curbing food price surge than setting up rice cartel
05/07/2008 | 05:41 PM
MANILA, Philippines - Southeast Asia is better off curbing the
acceleration of food prices instead of establishing a rice cartel
which would only bring the grain=92s prices higher, an international
credit rating agency said.
US-based Moody=92s Investor Service said members of the Association of
Southeast Asian Nations (ASEAN) should take steps to contain inflation
caused by soaring grain prices, especially with the progress setting
up a foreign reserve pool with China, Japan, and South Korea.
=93The larger Asian nations are expected to make bigger contributions to
the reserve pool," said Moody=92s economist Sherman Chan. =93If ASEAN
members are keen to strengthen cooperation, a higher priority on their
agenda might be to contain food price inflation."
Chan noted that global supplies continue to be tight and the
Philippines=97the world=92s largest rice importer=97had to cancel a tender
to buy rice due to poor response.
As a result, Chan said the Philippines called for an emergency meeting
with its ASEAN peers and other large Asian nations to address the food
shortage issue.
=93In recent months, several nations have restricted exports of food
staples out of concern about domestic supply and prices," Chan said.
Although Thailand pledged not to ban rice exports, it has called for
the creation of a rice cartel with Vietnam, Cambodia, Myanmar and
Laos. In any event, given the vast number of rice farmers across the
region, this plan will be hard to carry out, Chan said.
Earlier, Deutsche Bank said that the Philippines may have triggered
the spike in the world prices of rice with its aggressive and pre-
announced buying into the market at a time when key suppliers were
cutting exports.
As the government frets over the rice crisis, Deutsche Bank said
runaway inflation was a more serious threat than the subprime shock
since it is expected to reduce the value of household budgets in an
economy with low savings.
The runaway inflation in the prices of basic goods fueled an 8.3-
percent surge in the April inflation rate, the highest level since
2005.
The April inflation rate fueled speculation that the central bank
could no longer hold back keeping its current rates especially since a
number of economists have already said that the inflation rate will
peak at 9 percent before leveling off.
The National Statistics Office (NSO) recently reported that the
increase in the prices of heavily-weighted food commodities led to the
dramatic rise in inflation rate compared with 6.4 percent in March and
2.3 percent in April last year.
The year-to-date average was also dramatically higher than the target
inflation rate for the whole year which the government pegged at 3 to
5 percent. - GMANews.TV
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