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Special Seminar on
“Global Food Crisis: Causes, Consequences
and Policy Choices”
organized by the Institute of Microfinance (InM)
The Institute
of Microfinance (InM) organized a special
seminar titled “Global Food Crisis: Causes,
Consequences and Policy Choices” at PKSF
auditorium on the 16th July, 2008. The seminar
was presided over by the Chairman of the
Institute, Prof. Wahiduddin Mahmud. Dr.
Hassan Zaman, Lead Economist, the World
Bank, was the keynote speaker of the
seminar.
Keynote Speech
Dr. Zaman presented
that world food prices were three times higher by
May 2008 than that in 2000. On the other hand the
fertilizer and crude oil prices doubled over the
past year. This price hike is a function of
multifarious factors such as energy costs, declining
dollar value, rising demand for bio-fuel, export
restrictions on food grains, carrying cost, climate
change, etc. Concerns over oil prices, energy
security and climate change have prompted
governments to encourage production and use of
bio-fuel. Coupled with this bio-fuel obsession,
export restrictions imposed by India, Vietnam,
Russia, and Argentina, and increase in speculations
have intensified the price rise. He also mentioned
that hoarding of food items at farmer, household,
trader and exporter levels contributed to a virtual
collapse of normal market mechanisms. Citing the
example of China, Dr. Zaman mentioned that the
carrying and marketing cost are other significant
factors that pushed the price of food grains up.
The price rise has widened the gap between the
export and import value in the food grain importing
countries which has affected the terms of trade and
foreign exchange reserve. The fiscal impact of this
price hike leads to the reduction of taxes on food
grain import and a rise in subsidies in the
production of the same. Referring to a recent IMF
survey on the poverty and distributional impact of
price hike, Dr. Zaman mentioned that food price rise
has raised the income of the net sellers but it has
badly affected the consumer groups.
Dr. Zaman showed an estimated increase in global
$1/day poverty head count by 4.5 percentage points,
that is, 105 million additional poor has been added
to the pool of the world poor. This results in
increasing inequality where large farmers accrue
greater benefit than the small farmers and the urban
poor. It is empirically evident that females are
worse off during economic hardships. Dr. Zaman
focused on four types of policy options to cope with
the current situation: lowering food prices by
lowering all types of taxes, enhancing safety net
programs, increasing food production, and ensuring
longer term food security. To reduce the domestic
food price, all kinds of import tariffs, VAT and
other taxes can be reduced to a significant extent.
In some cases, grain subsidy can be provided to the
target group. For long run safety the food grain
stocks can be raised and, in safety net programs,
the cash based transfer and near cash like food
stamps, vouchers can be used as alternatives.
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Floor Comments
In the open discussion, one of the
participants argued that in India feed demand
has tremendously increased and this has led to
substitution of food grains as feed, causing a
rise in other easily obtainable food items
like wheat and maize. This activity has a long
term effect. A representative of the UNICEF
has identified that the presenter has ignored
the impact of food price rise on children and
women. Children and women have less coping
capacity. She said that with the food price
rise, the vulnerability of children and women
increases. As policy options, she emphasized
the community based intervention and building
strong information system.
The Managing Director of Palli Karma Shahayak
Foundation (PKSF) argued that the situation is
complex and there is no single solution to
this problem. He mentioned that the world food
supply has decreased by only 5% of total world
production because countries producing rice
and consuming it themselves. He urged that the
government should perform more efficiently and
has to take actions so that the market
performs properly. The CEO of Institutional
Development Services Linkage (IDSL) drew the
attention towards monitoring the production
that would give proper signal to the market.
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Comments of the Chair
Dr. Wahiduddin Mahmud said that though
Bangladesh imports a lion’s share of its
import of rice from India at low cost,
recently India raised stocks and asked for
unfairly higher price. In Bangladesh, the main
sources of calorie are rice and wheat. Thus in
spite of a rise in wheat and rice price,
people still consume rice and wheat.
Therefore, the food price rise affects the
poor extensively. Dr. Mahmud suggested that
the government should begin selling rice from
its stock right at this moment to keep the
local market stable. He argued that price of
both rice and wheat has recently begun to
decline in the international market and the
government should take the opportunity and
import the two items to keep the local market
stable. Otherwise, the private sector would
charge higher price if they are allowed to
import. Dr. Mahmud criticized the methodology
of assessing poverty followed by the
government agencies. Government agencies show
that poverty in Bangladesh has declined from
50% to 40% in Bangladesh. But the situation is
not too much optimistic because the proportion
of people starving is increasing. |
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