Govt policies partly to blame for rising food prices, say business leaders

KUALA LUMPUR, June 16 — Government policies are partly to blame for the rising food prices, business leaders said today amid warnings that the global food and fuel crisis could lead to social unrest and protectionism.

The twin troubles plaguing countries around the world, especially in Asia and Africa, dominated discussion at the two-day World Economic Forum on East Asia, an annual gathering of businessmen, politicians, policy-makers and analysts.

Separately, Japanese Prime Minister Yasuo Fukuda told the forum in a video-taped message that countries must step up agriculture production to ease the global crisis over rising food prices.

“It is imperative that issues such as water and food do not become impediment to Asia’s development,” he said.

Peter Brabeck-Letmathe, the chairman of the Swiss-based multinational food company Nestle, attributed two-third of the food price hikes to government decisions.

He said only about 10 percent of the food price increase is due to spiralling cost of fuel while another 10 percent is due to changing lifestyle, an apparent reference to China and India where millions of people are emerging from poverty and eating more food than before.

About one-third of the price increase he blamed on governments promoting increased bio-fuel production.

Another third is due “to political decisions to stop exports”, he told a panel discussion, referring to countries such as Argentina, Kazakhstan and Ukraine to curb food exports. The remaining 10 percent hike is due to speculators, he said.

Fuel and food, especially rice, prices have reached historic highs in most parts of the world. The price of rice, the staple food of 2.5 billion people in Asia, had at one point tripled in Thailand since the start of the year while diesel has risen over 36 percent in Vietnam, where inflation touched 25 percent recently.

Panelists said other factors driving up food prices include inadequate investment in infrastructure, resulting in higher logistical costs.

Musa Hitam, the chairman of Malaysia’s Sime Darby, the world’s largest palm oil company, also blamed the rising prices on “political inability (and) lack of political will”.

“At the government level, they have to get their act together,” he said.

He also said the conglomerate will venture into rice cultivation, planting rice on at least 7,000 hectares of land in Malaysia’s eastern Sarawak state on Borneo island.

Musa said the rice could be used for “local consumption, but it must be viable, profitable and of quality to contribute to the food shortage in the country”.

The soaring cost of living has led to unrest in many countries in Africa and Asia, including Indonesia.

Indonesian Trade Minister Mari Pangestu urged countries not to “panic” in responding to the crisis. “When you panic you may not undertake the appropriate policies”.

She said the rise in prices is already leading to protectionism although it hasn’t led to actual sanctions.

She did not name any country but Michael Roux, chairman of an Australian investment bank Roux International, blamed the United States, Europe and some Asian countries.

“Protectionism has a receptive audience,” he said. “Increased protectionism is one of the most dangerous outcome if it is not dealt with properly.”

Ahn Ho-Young, South Korea’s deputy trade minister, urged Asian governments to maintain their commitment to free trade, even though economic problems could cause an “anti-globalisation feeling to spread”. — AP – MalaysiaInsider

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