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Insights and Analysis

Averting the Impending Food Crisis

April 23, 2008

By V. Bruce J. Tolentino

Widespread hunger now threatens the developing world, especially in Asia. The knee-jerk reactions of individual countries are worsening the situation. Unilateral actions by certain countries have exacerbated the problem of food price increases. Countries and economies are inextricably and unavoidably ever more linked; actions in one nation impact all.

For example, the Indian government imposed a ban on rice exports in November 2007 and took itself”the world’s second-largest exporter of rice”out of the market. This immediately set off repercussions in the countries of other major exporters”particularly Vietnam. In the last twelve months, Vietnam has experienced unprecedented inflation and suffered a slight downturn in rice production. Now, Vietnam is limiting its own exports.

Fortunately, Thailand, the world’s largest rice exporter, has resisted domestic calls to restrain its own exports, instead entering into dialogues with consumer groups and issuing assurances of adequate stocks and a balance between farmer and consumer interests. Even more, overall consumer food prices in Thailand have tended to be low and accompanied by rising incomes, so there’s room for food prices to rise.

Some large importing countries have worsened their own bargaining stances through hastily-implemented and inappropriate moves. The Philippines, the world’s largest importer, has given the impression of being in dire straits by announcing crackdowns on so-called rice “hoarders” and “profiteers,” while directly calling on the governments of exporting countries, such as Vietnam, to supply larger amounts of rice. The National Food Authority, the Philippines’ government monopoly on rice imports, has issued several large tenders for rice, driving prices up to unprecedented levels”now almost US$1,200 per ton for rice that was priced at under $400 per ton the previous year.

By enacting controls on rice exports, exporting countries are hurting their own rice farmers. Export controls do not allow price signals to be fully transmitted from the international to the farm level, leaving farmers”often among the poorest groups in developing Asia”unable to benefit from higher commodity prices.

Moreover, the spiral in rice prices is now exacerbating hunger in countries that need help the most”particularly the hungry populations of North Korea, the Sudan, and the many other pockets of deprivation in the world. The UN World Food Program is now facing major difficulties in sourcing the food stocks it needs to feed displaced populations and refugees, and the UN Secretary-General has issued a warning of a “global food emergency.”

Immediate multilateral cooperation and action is crucial in order to curb the spiral in rice and food prices. The governments of both importing and exporting countries must share information on cross-country stocks and prospects to enable rational and more moderate, long-term assessments of supplies and prices. The dialogue should lead to international assurances that rice exporting nations, as well as importing nations, have shared interest in stable, if higher, rice prices.

The Association of South East Asian Nations (ASEAN) already has a base to build from in serving as a framework for multilateral dialogue and collaboration in the management of food supplies and prices. ASEAN members include two of the world’s leading rice exporters, Thailand and Vietnam, as well as the leading rice importers, the Philippines and Indonesia. In the wake of the food crisis of the early 1970s, ASEAN has been, in fits and starts, organizing and tinkering with the ASEAN Food Security Reserve”an agreement among members to set aside and share rice stocks for situations just like this. It’s high time these discussions be accelerated and implemented.

Bruce Tolentino is The Asia Foundation’s Director for Economic Reform. He can be reached at [email protected].


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