Cambodia leader allays fears of Asia rice cartel

Phnom Penh—Cambodian Prime Minister Hun Sen Monday said that a proposed OPEC-style rice cartel in Southeast Asia would ensure global food security, rejecting concerns that such an economic bloc would aggravate hunger and poverty.

Thai Prime Minister Samak Sundaravej last week said that his country had agreed in principle to the formation of a rice price-fixing cartel with Burma (Myanmar), Laos, Vietnam and Cambodia as the price of the staple grain continued to skyrocket.

The grouping of the five nations along the Mekong River would be similar to the Organization of Petroleum Exporting Countries (OPEC) and would be called the Organization of Rice Exporting Countries (OREC).

During a university graduation ceremony in Phnom Penh on Monday, Hun Sen said that the proposed rice cartel would not try to manipulate markets but would guarantee the adequate supply of the staple.

“We will not only ensure food security in each of our own countries, but will help solve the entire problem of (food) shortages across the region and the world,” he said.

“When there are shortages, we will not stockpile the rice or increase prices . . . We really want to help ensure food security,” he added.

The Asian Development Bank (ADB) has come out against the planned cartel while Philippine officials have blasted the proposed cartel as “antipoor,” saying it would only exacerbate hunger and poverty.

Hun Sen urged other Southeast Asian nations, including the Philippines, not to worry about the cartel.

“The formation of the organization is not meant to strangle the throats of countries that do not have rice,” he said.

Back into poverty

The five proposed members of the cartel, which plans to export up to 15 million tons of rice a year, will discuss the formation of the economic bloc at regional talks in October, Hun Sen said.

Hun Sen sought to allay fears of a rice cartel after Asian leaders warned at the ADB annual meeting in Madrid that soaring food prices could push millions of people in Asia back into poverty and spark social unrest.

Japanese Finance Minister Fukushiro Nukaga said the surge in rice prices would hit Asian countries hard and cited the need for safety nets for the poorest segment of the population.

Prices for the benchmark Thai variety of rice, a food stable across much of Asia, have tripled to $1,000 a ton the past four months.

Meat prices have also risen by 60 percent in Bangladesh in the year ending in March, and by 45 percent in Cambodia and 30 percent in the Philippines, according to an ADB report issued on Saturday.

The rise in global food prices has sparked riots last month in Egypt and Haiti, protests in other countries and restrictions on food exports in Brazil, Vietnam, India and Egypt.

Indian Finance Secretary Subba Rao said a 20-percent rise in food prices could force 100 million people into extreme poverty.

“In many countries, including in Asia, that will mean the undoing of gains in poverty reduction achieved during the past years of growth,” he said.

The Indian government, which is facing a general election by May 2009, has banned the export of staple foods like rice and lentils and cut customs duties on other items in a bid to ease price pressures.

Rao said his government was spending the equivalent of about 2.0 percent of gross domestic product per year on subsidies for food, fertilizer and energy to help offset the impact of rising prices on the poor.

Burden on state budgets

But Nukaga warned that export restrictions could lead to higher prices while food subsidies to help the poor deal with surging prices could place a tremendous burden on state budgets.

“Export restrictions will not only distort the proper functioning of markets in price formation but further exacerbate the price hikes in international markets,” he said.

“Subsidies that are intended to keep food prices under control have the risk of becoming a significant burden to budgets and are not sustainable over time.”

Food subsidies in Bangladesh, one of the poorest nations in Asia, are estimated to double in the current fiscal year and reach over $1.5 billion in the current fiscal year.

The ADB, which estimates one billion people in Asia are seriously affected by soaring food prices, announced on the opening day of its four-day annual meeting in Madrid that it would provide a sizeable amount in soft loans to help Asian countries subsidize the price of food staples for the poor.

The ADB also announced it would provide $2 billion in loans in 2008 and 2009 to finance agriculture infrastructure projects such as irrigation systems and rural roads aimed at boosting farm output in the region.

Rising use of biofuels, trade restrictions, increased demand from Asia to serve changing diets, poor harvests and increasing transport costs have all been blamed for skyrocketing food prices. AFP