As fear of rising food prices continues to haunt the region, the 10 ASEAN countries plus China, Japan and South Korea have decided to establish a rice reserve to tame volatile movement in commodity prices while keeping an eye on the impact of the Middle East crisis on oil prices.
Trade ministers of the Association of Southeast Asian Nations (ASEAN) convening in Vientiane, Laos, for two-day talks closed their meeting with a commitment to help each other building a rice reserve and stabilizing the rice prices without making sudden and demonstrative procurements that can trigger panic among trade members.
Indonesian Trade Minister Mari Elka Pangestu, who chaired the meeting in the Laotian capital, said during a joint press conference on Sunday (27/02) that the ASEAN governments have agreed to sign the ASEAN-plus-three rice reserve agreement in early October. “Our agriculture ministers have agreed with the establishment of the reserve, and ASEAN countries will sign it during our chairmanship this year,” she said.
ASEAN and the three East Asian giants have earmarked 787,000 metric tons for the rice reserve, with all ASEAN members contributing a total of 87,000 metric tons, Japan 250,000 metric tons, China 300,000 metric tons and South Korea 150,000 metric tons. Indonesia will contribute 25,000 metric tons to the reserve.
The latest UN Food and Agriculture Organization (FAO) food price index averaged 231 points in January, up 3.4 percent from December and its highest level since it started in 1990. Another measure, the World Bank’s food price index, rose by 15 percent between October 2010 and January 2011 and is now only 3 percent below its 2008 peak. Whichever measure is used, the result is the same: 44 million more people thrown into extreme poverty.
Record-high food prices are putting pressure on the United Nations World Food Programme (WFP) that helps feed nearly 100 million of the world’s poorest people, with officials warning of a potential “perfect storm” combination of soaring costs, weather emergencies and political instability. Rising demand from rapidly developing economies like China, droughts, floods and fires and the diversion of food crops to the production of bio-fuels have all had an impact as has the export ban imposed by some countries in the face of shortages.
Mari warned ASEAN countries not to repeat the 2008 experience when, due to the increase of rice prices, they panicked and disrupted normal business, with Vietnam suddenly limiting its rice export and the Philippines buying rice demonstratively. “We should refrain from steps that cause panic and disruption,” she said.
ASEAN trade ministers also discussed the issue of increasing energy prices, including the possible inflationary impact of political crises in the Middle East, especially Libya.
ASEAN Secretary-General Surin Pitsuwan said the Middle East crisis and its impact on oil and gas prices deserved ASEAN’s serious attention. “We have discussed these, and we will discuss them further among ourselves or with our dialogue partners,” he said. Pitsuwan was hopeful that the Middle East crisis would not claim more casualties. “We hope we can get through this problem without too much loss or too many casualties,” he said.