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MANILA BULLETIN
Business & Society
August 25, 2008
FACING THE FOOD CRISIS
World leaders have been asked by World Bank President Robert Zoellick to face
squarely the serious problem of rising poverty due to a crisis in global food and fuel prices.
In a letter to leaders of the Group of Eight, Zoellick wrote: "What we are witnessing is not a
natural disaster--a silent tsunami or a perfect storm. It is a manmade catastrophe, and as such
must be fixed by people." He said that higher prices threaten a growing number of countries
with rising poverty and social instability. Already food riots have erupted in some 30
countries and unrest over high fuel prices is spreading. As an example, a transport strike
paralyzed the economies of major Spanish cities just a few weeks ago.
Indeed, the ongoing food crisis is a manmade catastrophe. The culprits are, of course,
not the hundreds of millions in emerging markets like China, India, Brazil, Russia, Indonesia,
Vietnam, and the Philippines who are now able to purchase food products of better quality
and in greater quantities. There is no doubt that there has been a dramatic increase in demand
for food over the last ten years because of the spectacular growth in incomes of those living
in emerging economies. This phenomenon should be cause for worldwide rejoicing.
The question is why cannot the supply of food increase fast enough to meet the much
higher demand? The answer will lead us to the perpetrators of the "manmade catastrophe" to
which Zoellick was referring. The first group of culprits is made up of countries of the
developed world, like the U.S., France, and Italy, that have distorted the international markets
for food with the humongous subsidies that they have showered on their farmers for the past
two or three decades. By subsidizing their farmers, these countries have caused international
food prices to sink to such low levels that millions of farmers in the developing economies
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could not sell their products at profitable prices. These subsidies have been one of the major
causes of extreme poverty in many countries in Asia, Africa and Latin America.
The second group of culprits includes countries like the Philippines that have been so
obsessed with import-substitution industrialization that they considered their agricultural
sector as the very symbol of backwardness, thus failing to invest much-needed infrastructures
in the countryside. The neglect of agriculture is very visible in Africa, Asia and Latin
America. Tens of millions of farmers are unable to make their farms productive because they
no farm-to-market roads, irrigation systems, post-harvest facilities, and agricultural extension
service. In the absence of these infrastructural support, it is very difficult for the supply side
of agricultural to immediately respond to a large jump in demand. Thus, the inevitable result
has been the increase in prices.
But given time, say five to ten years, the solutions will be found in enlightened
government policies working hand in hand with market forces. There is a greater probability
now that developed countries will stop or at least significantly reduce their farm subsidies,
now that food prices are at very high levels. There are also very positive signs that the
developing countries (including the Philippines) are already investing more heavily in
countryside and agricultural infrastructures, thus helping the small farmers to be more
productive and cost-effective in coming out with their respective crops. Taiwan and
Thailand, among others, have clearly demonstrated that small farms can be productive if they
are provided by the State with efficient infrastructures.
The market will also attract large investors to focus more on agribusiness as a profitable
business. Already in the Philippines, there is the good news that San Miguel Corporation and
Malaysia's Kuok Group plan to invest about $1 billion to develop a million hectares of public
land to help boost production of rice, corn, sugar and other crops. The agreement between
the two ASEAN conglomerates is called Feeding Our Future. It is a demonstration of the fact
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that feeding the population, now and in the future, is a challenge that can be met by large
businesses, who while making a profit are contributing to solving a national problem. It was
made clear by the proponents of the project that it is a business venture and not a
philanthropic undertaking. Once again, we are seeing here that market forces can address a
major part of the problem of poverty, although enlightened State leadership is still needed to
supplement what markets cannot accomplish in the primordial task of poverty eradication. I
congratulate Mr. Eduardo Cojuangco and Mr. Robert Kuok for this brilliant combination of
profit seeking and social responsibility by investing in the difficult and challenging business
of agriculture. Knowing Danding personally, agricultural has been the love of his lifetime.
In addition to this corporate initiative, I am sure that the increasing demand for food coming
from China, India, and other emerging economies will elicit a lot of creativity and
entrepreneurial spirit among numerous individuals in Asia and elsewhere. Already, I
received an unsolicited email from a certain Sixto U. Saguisin who made an imaginative
proposal. He wants an investment group to take a look at the vast tracts of swamp lands in
Northern Australia around the area of Darwin. He proposes to lease the land for rice farming.
He can do so because he has Australian citizenship. Filipino workers can be recruited to
work in the rice farms, whose output can then be exported to Mindanao and other Southern
islands of the Philippines. Mr. Saguinsin is thinking out of the box. I am sure there will be
others like him. Once again, the entrepreneurial spirit of Mr. Cojuangco, Mr. Kuok, and Mr.
Saguinsin has demonstrated that the ultimate resource is the human resource. We will always
solve our problems of scarcity because there is an unlimited supply of human intelligence and
creativity with which God has endowed this planet. For comments, my email address is
bvillegas@uap.edu.ph.
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