Resurgent food prices, which rose by 10% on average in many regional economies in Asia in 2011, can push an additional 64 million people into extreme poverty, an Asian Development Bank (ADB) report says. The study, titled, ‘Global Food Price Inflation and Developing Asia’, by the multilateral lending agency, finds that a 10% rise in domestic food prices could push an additional 64 million people, out of 3.3 billion people living in the continent, into extreme poverty, based on the $1.25 a day poverty line. “For poor families in developing Asia, who already spend more than 60 per cent of their income on food, higher food prices further reduce their ability to pay for medical care and their children’s education,” ADB chief economist Changyong Rhee said.
The report said the fast and persistent rise in the cost of many Asian food staples since the middle of last year, coupled with crude oil reaching a 31-month high in March, are a serious setback for the region, which has rebounded rapidly and strongly from the global economic crisis. As per the report, if the global food and oil price hikes seen in early 2011 persist for the remainder of the year, economic growth in the region could be reduced by up to 1.5 percentage points.
“Left unchecked, the food crisis will badly undermine recent gains in poverty reduction made in Asia,” Rhee added.
The short-term outlook looks bleak, as food prices are likely to continue with their upward trend because of factors such as production shortfalls, rising demand for food from more populous and wealthier developing countries and shrinking available agricultural land, the report said. Other dampening factors behind the double-digit increases seen in the price of wheat, corn, sugar, edible oils, dairy products and meat include the weak US dollar, high oil prices and subsequent export bans by several key food producing nations. Commenting on the current scenario, Rhee said, “Efforts to stabilise food production should take centre stage, with greater investments in agricultural infrastructure to increase crop production and expand storage facilities, to better ensure grain produce is not wasted.”
The report further calls for enhanced market integration and the elimination of policy distortions that create hurdles in transferring food from surplus to deficit regions, besides, controlling speculative activities in food markets. The ASEAN Integrated Food Security Framework, under which the 10-member ASEAN group of countries has agreed to establish an emergency regional rice reserve system, is a positive step in that direction, the report said.