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ADB Warns of Possible Spike in Food Prices
Dion Bisara | February 06, 2012

An Indonesian vendor waits for customers at a market in Jakarta on Wednesday. The consumer price index in Indonesia rose 3.65 percent year-on-year in January, slower than the 3.79 percent growth in December, meanwhile inflation continued to ease in January, according to Central Statistic Agency. (AFP Photo) An Indonesian vendor waits for customers at a market in Jakarta on Wednesday. The consumer price index in Indonesia rose 3.65 percent year-on-year in January, slower than the 3.79 percent growth in December, meanwhile inflation continued to ease in January, according to Central Statistic Agency. (AFP Photo)
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The Asian Development Bank has warned that Indonesia and other nations in Southeast Asia should be prepared for a possible rise in food prices, which might stoke inflation.

Changyong Rhee, chief economist at the Manila-based lender, said on Monday that the global financial turmoil, marked by the euro zone debt crisis and a possible slowdown in the US economy, might increase the volatility of prices for food and other commodities.

Research funding is being depleted amid climate change, making it difficult for food production to keep up with growing demand, he said.

“Food price increases have become more persistent than in the past,” he said in Jakarta. “It has a major impact on food security for millions [of people].”

The food price index of the Food and Agriculture Organization has risen by 50 percent in the last four years. That compares with a 16 percent increase from 1991 to 2006.

Iwan Jaya Azis, head of ADB’s office of regional economic integration, said it had become imperative for Indonesia to cooperate with other countries in the region to pool food resources in order to shield its citizens from a global food crisis.

“This is a problem that is better to be solved together,” he said.

ADB’s mission is to eliminate poverty in the Asia Pacific.

Last year the 10-member Association of Southeast Asian Nations along with China, South Korea and Japan established a pool rice reserve of 787,000 tons to keep prices of the grain from rising.

Indonesia has the biggest economy in Southeast Asia. While it is among the biggest exporters of commodities such as palm oil, it imports sugar, wheat and rice.

Still, Iwan said the pressure on food prices this year would not be as high as it was in 2008, due to a possible decline in global demand. “But that is not a reason to be complacent,” he said.

ADB expects Indonesia’s inflation to accelerate at a 4.5 percent to 5 percent rate this year, as the government raises the subsidized fuel price or restricts subsidized fuel consumption.

ADB’s inflation forecast is within the range set by Bank Indonesia, the central bank, which has a target of 3.5 percent to 5.5 percent. Indonesia’s inflation slowed to 3.79 percent last year due to stable food prices.

Finance Minister Agus Martowardojo said the government would make food security a high priority this year.

“There are two critical ways in which we can tackle the impact of climate change and higher food prices; through stronger regional cooperation and by ensuring the poor and the vulnerable aren’t hurt more than the other,” Agus said in the same meeting as the ADB on Monday.

“We can help the poor to improve their livelihoods through better infrastructure.”