Saturday May 3, 2008 MYT 8:57:44 PM

Asian Development Bank announces emergency aid to cope with food crisis

MADRID, Spain (AP): The Asian Development Bank announced emergency funding Saturday to help poor countries struggling with rice prices that have nearly tripled in four months.

Bank President Haruhiko Kuroda warned, however, that even after this short-term crisis passes, prices may keep rising over the medium- and long-term.

"The cheap food era may be over,'' Kuroda told a news conference in Madrid, where the bank was holding its annual meeting.

The aid will come in the form of soft loans for the governments of countries hardest hit by the global food crisis, such as Bangladesh.

Kuroda declined to give a figure, saying it would depend on requests governments make. He said the amount would be "sizable, but not enormous.''

Asia is home to two-thirds of the world's poor, and nearly 1.7 billion people in the region live on US$2 (euro1.30) a day or less. Asia's poor are particularly vulnerable to rising prices for staples such as rice because 60 percent of their spending goes toward food, and the figure rises to 75 percent if fuel costs are included, the bank said.

Many countries in the region are grappling with the crisis by imposing price controls or bans on food exports, but the bank says this can backfire by discouraging farmers from planting, thus reducing supplies and raising prices.

Food-specific aid is a better idea, Kuroda said.

"We believe targeted interventions to protect food entitlements of the most vulnerable and poor are more effective to mitigate the immediate impact of rising food prices,'' he said.

He also said the bank does not like Thailand's idea of creating a rice-exporting cartel along the lines of OPEC, saying it is better to let market forces operate.

The Manila-based bank was created in 1966 to fight poverty in the Asia-Pacific region, and every other year holds its annual meeting in one of its 19 member countries that are outside the region. This year it picked Spain, which joined in 1986.

Soaring prices for staples have been stoked by higher fuel costs, unpredictable weather and greater demand from emerging powerhouses such as India and China.

In Washington, U.S. President George W. Bush responded to the world's rising food prices by asking Congress to approve US$770 million (euro500 million) in new global food aid for the coming fiscal year.

The bank says that while stocks of rice are the lowest they have been in a decade, the real problem is one of prices: the ability of poor people to buy food.

At this meeting, the bank will discuss how governments can help these people, including measures such as targeted aid, and over the long term with greater investment in agriculture and infrastructure like irrigation systems to increase production.

The bank wants developed countries to stop paying subsidies for production of biofuels, saying it makes staples more expensive.

The meeting of the bank's board begins in earnest on Monday and will bring together about 3,000 delegates, including finance ministers, academics and members of other multilateral development agencies.

On Friday night the bank secured US$11.3 billion (euro7.3 billion) from member countries for the next four years to replenish a development fund that caters to the region's poorest countries.

Over the weekend, the bank is to hold a series of seminars -- including one in which researchers from China and India, the region's two emerging economic giants, will discuss what they have learned about each other's development models.

The bank will also discuss a newly approved long-term plan called Strategy 2020, with goals that include a greater emphasis on regional cooperation and integration, and environmentally sustainable growth.

Asia has been experiencing torrid economic expansion -- 8.7 percent last year -- and the bank forecasts it at a still-robust 7.6 percent in 2008, excluding Japan, despite slowdowns in the United States and elsewhere.

But for Asia, this has come with inflation now running at 5.1 percent -- the highest in a decade -- and disregard for the environment amid go-go development and industrialization.

News Poll

Latest Jobs from Star-Jobs

Latest from StarProperty