Introduction
The global rise in food prices is felt acutely in the Asia-Pacific region, with greater impact on net food importing countries. Food prices have increased sharply since 2005 but have surged dramatically since 2007, led by the dairy sector registering an 80% price hike, followed by oil at 50% and grains 42%. In more recent months the price spikes have been more pronounced in grains and oil. In the Philippines, rice price rose to 72% since January this year, while in Pakistan wheat price rose to 66% since January 2007, and the price of rice basmati rose from Rupees 60/kilo in June 2007 to Rs 110/kilogram in May 2008
In Indonesia, the price of cooking oil doubled from 6,000 to 12,000 rupiah per kilogram and tofu price increased by 50%. In India, the price of milk increased 11% more than last year and edible oil prices soared to 40% over the same period.
With as much as 40% to 75% of the population in these countries subsisting on less than US$ 2 per day, the upward spiral in food prices has meant huge reduction in the poor's welfare and exacerbated food insecurity of a growing proportion of their population. Moreover, as evidenced by the sporadic protests induced by the rising food prices, the situation may yet lead to greater social and political instabilities in many countries in the region.
Food Crisis and Trade Liberalization
Many analysts have pointed to the sluggish growth in global food production, vis-à-vis the rapid population growth, compounded by crop failures due to extreme weather-related and climate variability as one of the main reasons for the rise in food prices. Moreover, food production shortfalls have been linked to competing use of land, labor and water, driven by demands from the export market as well as investment priorities particularly in the extractive industries and more recently in the agrofuels market. At the demand side, policy analysts have cited the changing consumption patterns in emerging economies like China and India which saw dramatic increases in consumption of livestock and dairy products that in turn led to the rapid increases of price in feedgrains.
However, what has been missing so far in the analysis of many international institutions such as FAO that have registered their growing concern over the problem are the policies that have contributed to the spiralling prices of food and made developing countries very much vulnerable to global price and supply shocks.
The policies of trade liberalization, privatization and deregulation in agriculture imposed upon developing countries via the structural adjustment policy (SAP) package of the IMF-World Bank and entrenched further through the WTO Agreement on Agriculture have definitely reduced the capacity of these countries to feed their increasing population. In the last two decades or more, most developing countries have abandoned their policy of food self-sufficiency in favor of market-oriented food security and the promotion of agribusiness for exports. This has made them ever more dependent on the international market to meet their domestic food consumption, with serious impacts on their long-term food security and food sovereignty.
As a result of these policies, many Asian countries face the following:
1. Declining grains stocks- current stocks are at the lowest since 1988
The Philippines is the number one rice importer in the world. In the last six years, it has been importing an average of more than 1 million metric tons of rice. Its rice self-sufficiency has been at a low of 88%, in recent years, while before it acceded to the WTO, it had a 98% self-sufficiency. Its rice stock levels remain precariously low at below 20% in the last 3 years.
In India, wheat and rice stocks have come down over the past three years because of low production and exports.
2. Declining government support and subsidies in agriculture
Agriculture subsidies in the 80's and 90's which had the effect of raising agriculture productivity and outputs of developing countries and led them to achieve remarkable levels of food self-sufficiency have been either reduced or withdrawn in many countries. Indonesia, for example, achieved rice self-sufficiency in 1985 through aggressive domestic support and public spending but was forced to withdraw its fertilizer subsidies in 1997 under IMF supervision causing its rice output to plummet down from 51.9 million metric tons in 1996 to 49.24 million metric tons in 1998.
Key agriculture support programmes in irrigation and infrastructure had considerably weakened with irrigation development both in the Philippines and Indonesia halted to their 1985 implementation level. In recent years, only minor repairs have been initiated while no new construction have been made, despite the fact that only half of the total potentially irrigable lands in both countries have been serviced. In Bangladesh, the delivery of irrigation water has been privatized. Credit support and other government incentives likewise have been redirected towards promoting high value commercial crop production in these countries.
3. Increased privatization of agriculture support services and state trading enterprises
The dismantling and privatization of state trading enterprises and food marketing boards had not only led to declining farmgate prices and thus decreased incentives for small farmers to raise their production but also to the rise and consolidation of big agriculture trading monopolies that wield considerable control in domestic trade and production, by controlling price and supply of both farm inputs and output.
Bangladesh has, in the past two years, increased the participation of the private sector in rice production, especially in irrigation and in the production, import and marketing of rice seeds, including hybrids.
Nepal's rice marketing is almost entirely privately run. The Nepal Food Corporation now procures only for distribution in the deficit zones in the hilly and mountainous parts of the country and for reserves.
4. Shift in food policy to agribusiness strategy
Under the 1999-2003 National Guidelines, Indonesia adopted an agriculture development strategy revolving around an agribusiness approach. Similarly, the Philippines government's 10-point agenda for national development has agribusiness promotion as a top priority. The same with Bangladesh, as government seeks to diversify crop production to high-value crops for exports.
Agribusiness Expansion
The agribusiness strategy has been increasingly adopted by most developing and least developed countries in the region, largely facilitated by increased economic integration and trade liberalization. While subsistence and small-scale farming devoted to food production has received minimal public spending, government priorities have turned to promoting and supporting large-scale commercial crop plantations owned and operated by the landowning elite and transnational companies. The emphasis of the agriculture policy has shifted from ensuring adequate supply of food domestically to meeting the demands of the export market. In the Philippines, the most productive lands in Mindanao, which is the country's food basket is devoted to export crops like coconut, oil palm, banana, pineapple, and flowers. Yet, the incidence of hunger and malnutrition is highest in this region. Rice self-sufficiency had dropped from 90 percent in 1995 to 66 percent in 2000. Recently the Philippine government announced that it will target the further development of agribusiness in 2 million hectares of land in Mindanao. Indonesia's agriculture development strategy, which in recent years has revolved around an agribusiness approach has been instrumental in converting lands and state plantations devoted into food crops into oil palm and other crops for exports. Pushed by the recent boom in agrofuels market, millions of hectares of prime forest lands are being cleared for the establishment of oil palm plantations, Similarly, Bangladesh' food and agriculture policy since the 90's have sought the diversification of production away from single crop and the promotion of more profitable and efficient agricultural production system, read: agribusiness.
Driving this shift in policy is the powerful global agriculture/ food business, which is next only to the pharmaceutical industry. Even the World Bank in its World Development Report 2008 has noted the powerful role of agribusiness in shaping policies and political affairs. The policies of trade liberalization, deregulation and privatization for the last two decades have enormously strengthened and expanded the powers of agri-food TNCs. At present, only five companies control about 90 percent of global grain trade and only six corporations control ¾ of the global pesticides market. Control of TNCs on the seeds market through patenting and the dissemination of technology packages has enabled these companies to control agriculture production in the South. WTO agreements as well as bilateral trade treaties have enormously expanded the control of TNCs on agriculture and food supply chain.
TNCs have also expanded their investments in export-oriented cash crop production. In the Philippines, for example TNCs like Dole, Del Monte, Japanese Sumitomo, Cargill, etc. are operating large plantations devoted to banana, pineapple, coconut, palm, etc.
Agrofuels and the Food Crisis
The demand for agrofuels and the emerging agrofuels market have boosted the production of fuels from food crops. Commodities like sugar, corn, soya, palm oil, cassava are being grown for production of agrofuel. Moreover the policy environment for biofuel investments is also pushing demand for these commodities.
In a condition of tightening global food supply worsened by recent drops in global output of major food crops due to droughts and climate-related impacts, the increasing demand for agrofuels will certainly create the environment for rising food prices. Even the Food and Agriculture Organization (FAO) has pointed to the culpability of agrofuels production in the recent rise of food prices.
Both the US and the EU are leading the rapidly escalating global demand for agrofuel use. Their policies for mandatory blending of agrofuel in petrol and tax exemptions for use of renewable resources as fuel as well as the increasing rise in oil prices are all driving the expansion of markets for agrofuel. The US Energy Policy Act of 2005 for example mandated substitution of 7.5 billion gallons of gasoline per year by agrofuels. This has in turn resulted to huge production of corn-based bioethanol of 6 billion gallons in 2006-2007, accounting for about 20% of US corn outputs in 2006 and is targeted to increase further to 9.7 gallons in 2010-2011, representing an estimated 28% of US corn outputs in 2010.
In the EU, the 2003 directive on the promotion of the use of agrofuels in transport set a reference target of 2% agrofuel use in road transport for 2005 and of 5.75% for 2010.
The policy environment in these countries certainly is driving the huge investments in agrofuel plantation and production in the Asia-Pacific region. Similarly developing countries have fashioned their energy policy in line with the global push for agrofuels. In Indonesia, the government has set the target of meeting 17 percent of the country's energy requirements from renewable sources by 2025 and in 2007 it established a National Team for Biofuel Development (TimNas BBN) to develop alternative energy supplies from crops such as palm oil, cassava, jatropha and sugar cane. According to the government's biofuel development strategy, the country expects fresh supplies from a newly opened 750,000 hectares of sugar cane and 1.5 million hectares each of cassava, jatropha and oil palm plantations by 2010.
The Indonesian biofuel policy implies that the land under present palm oil cultivation will expand from the current six million hectares to 20 million has. by 2020. Surely, this will have tremendous impact on domestic food production, as well as the state of the country's forests and agricultural resources including water. This is extremely worrisome since Indonesia is currently a net importer of soybeans (two million tons), corn (one million tons) and sugar (1.5 million tons). Likewise, the Philippines is a net food importer.
Meanwhile, domestic agribusiness corporations in partnership with TNCs will reap windfall profits from agrofuel production and trade.
Finance markets
The tight supply of food internationally, as well as forecasts of further constricting supply owing to a host of factors including climate change impacts has fueled speculation in agriculture commodity trading. Big domestic traders and exporters have engaged in hoarding to manipulate prices to their advantage. The response of many net food importing countries to replenish their depleted stocks in the face of soaring international prices has also triggered further speculation.
However, the recent surge of investments in agriculture commodities triggered by the debacle in global financial markets that have reduced returns from bonds, equities and other financial assets as compared to commodities has also contributed to the increased volatility of food prices (ADB Paper on Soaring Food Prices, 2008). Meanwhile FAO posited that the abundance of liquidity particularly in emerging economies, coupled with the low interest rates and rising petroleum prices has also led speculators to diversify their portfolio to include agriculture market based derivative trading to get increasing returns from their investments.
The April 17, 2008 tender for rice imports offered by the Philippine government clearly revealed a growing speculation in the international rice trade leading to raising the commodity's spot price volatility. Thus, from an average contract price of US$700/metric ton of rice in mid-March, the Philippine government got offers of more than US$1,100/metric ton, effectively raising the price of rice by 60%. Some analysts have pointed out that the Philippine government's series of tenders have actually drove the international price of rice to its highest level in several years. In the said April tender, six suppliers, including four trading houses, offered to supply a total of 195,000 tons from Thailand. Trading in rice futures is very recent in Thailand. The food crisis is hitting the poor the hardest.
Asia is home to more than 1 billion poor and near-poor. Food expenditures comprise 60% of the poor's total expenditures in the region. Thus, soaring food prices will considerably reduce their purchasing power, resulting to drastic decline in their food intake as well as reduced expenditures in other basic necessities such as education and health. In the Philippines, official statistics reveal that 40% of the population fall below the official poverty line, while in Indonesia, 59% of the population are poor. Food shortage and price rise will surely increase the ranks of those in absolute poverty and deepen poverty of low income groups like farmers, settlers, artisanal fishers, indigenous peoples, workers and urban poor. It will likely increase the vulnerability of women and children.
Addressing the Food Crisis From the Perspectives of Poor Farmers, Workers and the Urban Poor
As oil prices continue to soar and as more of the same formula of neo-liberal policies are being peddled by national governments, the WTO and international financial institutions to address the food crisis, there may not be temporary relief in sight particularly for the most affected section of the population. In the Philippines, the government has lifted the tariffs on rice imports and is proposing the removal of the importa quota and privatizing rice importation. Indonesia has lifted its tariffs on soya with disastrous impact on farm prices of domestic soya. In most countries affected by the crisis, food subsidies have been implemented targeting the lowest income groups, while cash have been distributed to a few households.
We believe all these measures will not make the poor less vulnerable to the crisis, instead they may be even counter-productive as the private sector may further tighten their control on grains and food trading and thus, jeopardize the people's access to adequate and affordable food.
We believe that now more than ever, people and governments should recognize and adopt food sovereignty as a guiding policy framework. Protecting small farmer's livelihoods, creating a vibrant local economy based on the linkages of farming with off-farm activities and protecting and promoting agriculture biodiversity will create the conditions to lasting solutions to the food crisis and rural poverty.
In the short-term, we call for the implementation of the following emergency measures:
Institute price control on food and basic commodities to avert the further spike in food prices due to continued global food uncertainty and oil price hike;
Provide increased and comprehensive subsidies to small rice farmers, including input and credit subsidy and price support this coming planting season;
Immediately rehabilitate irrigation systems through a food-for-work scheme and establish post-harvest and marketing facilities in key production areas;
Increase wages of workers to recover the depreciation of their current wages due to inflation;
Maintain quantitative restrictions or import controls on grains and other food staples;
Strengthen regulation of state trading enterprises over domestic and external trade to prohibit transmission of soaring international prices to the domestic market;
Investigate and prosecute traders, agribusiness and commodity speculators involved in hoarding and speculating which contributed to the crisis;
Stop conversion of lands devoted to food production to other uses like biofuels, commercial crops, real estate, etc.
Stop payment of onerous debts by the government to free-up needed resources to finance agriculture support programs to increase productivity.
Stop free trade and investment agreements that will further liberalize agriculture markets such as the ASEAN-EU, ASEAN-Japan,
Impose a moratorium on countries' national legislation promoting the production and use of biofuels.
Promote sustainable and ecological farming.
In the medium-term, there is a need to institute a coherent agricultural and food policy and strategy embedded in a national development strategy that takes into account the strategic role of agriculture in securing food for domestic population and the important linkages of agriculture to rural and broader national development. Food sovereignty should be the over-arching framework of national food policy. Thus, the absolute trade liberalization policy adopted by national governments should be abandoned and agriculture re-oriented from one that is external market-driven to one that seeks to secure first the country's food needs.Public investments in irrigation and infrastructure support should be expanded, along with increased spending in farm input subsidies. Moreover, institutional reforms must be hastened. A comprehensive land and asset reform that grants and secures the poor landless peasants' and indigenous peoples' ownership and claim on their land and natural resources should be completed in the fastest period possible. National and local programs for gender and women empowerment must be in-place. Rural finance mut be made available to poor farmers, instead to agribusiness to encourage more diversified economic activities in the rural areas. Cooperatives or community associations should increasingly take part in the marketing and distribution of commodities and inputs to enable poor farmers to gain greater value from farming and other off-farm ventures. Finally, scientific, farmer-based and sustainable technologies are needed to raise food production and improve farm productivity as well as promote agro-biodiversity. In the context of worsening impacts of climate change on agriculture, production systems that enhance the environment and protect and conserve soil as well as forest resources should be prioritized.
National governments should review their commitments to the WTO. There should be no new round of multi-lateral trade negotiations until the ills and imbalances of the present international trading regime are dismantled and poorer countries' ability to become food self-sufficient to protect them from further food price and supply volatilities has been regained. The national governments must be able to institute support measures for small farmers without reprise from the WTO and the IMF-WB. Moreover, negotiations for bilateral and regional free trade agreements should be immediately stopped.
We call for the enforcement of international legal instruments protecting the people's basic human rights including their social and economic rights and to work towards a new international trading regulation that will curb developed countries' practice of food dumping, eliminate TNC control on agriculture and food and allow greater flexibility for poorer countries to exercise their right to food sovereignty and food security.
We are committed to mobilizing creative people's action to bring about these policy changes both nationally and internationally and to engaging our national governments as well as international institutions in various events such as during the FAO Summit on the Food Crisis and Climate Change on June 3-5, 2008, the ASEAN-EU Meeting in Manila in June 23-25, SAARC Meeting In Colombo, Sri Lanka, the G8 Summit in July in Hokaido, Japan and the High Level Conference on Aid Effectiveness in Ghana in September 2008.
ASIA-PACIFIC NETWORK FOR FOOD SOVEREIGNTY (APNFS)
22 May 2008
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