World Bank Group President, Robert B. Zoellick, is a worried man. The indicators are for real that Sub-Saharan Africa could miss all the Millennium Development Goals. To add to the woes – there is an international food crisis.
Zoellick spoke in detail at the opening press briefing on various issues on the agenda of the world body; poverty, hunger and food shortage, were undeniably the main focus. Zoellick said much attention was given to the rising gasoline prices in the US and Europe over the last year, “While many are worrying about filling their gas tanks, many others around the world are struggling to fill their stomachs, and it is getting more and more difficult every day. In many developing countries, the poor spend up to 75 per cent of their income on food.”
He cited two examples to highlight what happens when prices of basic foods rises: “In just two months, rice prices have skyrocketed to near historical levels, rising by around 75 per cent globally and more in some markets, with more likely to come. In Bangladesh, a 2- kilogram bag of rice – now consumes about half of the daily income of a poor family. With little margin for survival, rising prices too often means fewer meals.
“Or, take wheat, where over the past year, the price has risen by 120 per cent. That means that the price of a loaf of bread--like this--has more than doubled. Poor people in Yemen are now spending more than a quarter of their incomes just on bread before they pay for other essential foods for their children, let alone basic health care or shelter.”
Lamenting the fact that the effect of this food crisis on poverty reduction worldwide is on the order of seven lost years, Zoellick urged the world community to come up with a New Deal on Global Food Policy. UN's World Food Programme is short of USD500 million to meet emergency needs. He urged the governments to come up with this assistance and come up with it now. “The allocation of even one per cent of the assets of sovereign wealth funds to equity investment in Africa could draw $30 billion to African growth, development and opportunity.”
Agriculture
“We must make agriculture a priority,” said Zoellick, “The Bank has announced that it will double agricultural lending for Sub-Saharan Africa over the next year, from $450 million to $800 million. IFC, our private sector arm, will be boosting its agribusiness investments across the value chain of product. And we need to complete the Doha Round.”
To the question on how Brazil can help with their experience and technical expertise in Agriculture, Zoellick said, “One of the things that the Brazil Government has talked about working with us on is sharing some of its expertise in agricultural research, particularly in Sub-Saharan Africa, and that's the other key component that we are trying to move quickly toward is trying to expand the production.”
“Brazil is a country that has had great agricultural experience, so there are short and medium-term aspects as well as helping to share its experience overall. And then, Brazil will be an important player in the Doha negotiations, which are very important to build confidence for the world economy and help end the prospects of the impediments of subsidies and tariff barriers that have impeded the market.”
Rice and Wheat
Talking about why prices of rice and wheat have risen so rapidly – and what needs to be done to address this difficult situation, Zoellick said there are a number of elements responsible for the crisis, apart from the bio-fuels issue. “One, you do have globally some shifting of diet and higher incomes and people shifting to, for example, meat, which will use more grain. In some cases, you have also had climatic conditions; you have had very bad droughts in Australia, some in Central Europe.”
“What has further complicated this market is that food stocks are very, very low, so you actually have a similarity here to what you see in the energy markets, where in the energy markets, the ability to expand capacity is quite limited, and in agriculture, the ability to have stocks that deal with extreme circumstances are very, very low. That means that if there is any fear or uncertainty or any sense of hoarding or sense that prices may be going up, you have much greater risk in the sense that you cannot bring other supply on line.
“So that is a complicating feature with financial markets, because as people have money that they want to invest, one needs to recognise that energy and food are now part of commodity prices, so people will shift to commodity price as an asset class. So you have a number of activities here that are coming together.”
“The medium- and long-term answer is to try to increase the productivity and increase the supply of food,” said Zoellick, “and then there is avoiding the distortions in the global market and the trading system.”
Bio-fuels
The World Bank report had put a great deal of emphasis on bio-fuels for the current food crisis. Zoellick said, “On biofuels, it is important any time you have a product to distinguish among different aspects. So, as I have said on other occasions, the data that I have seen suggests that the sugar-based biofuels out of Brazil have the greatest benefits in terms of both fuel and dealing with the climatic effects.
“I also think that there are some important possibilities with some of the second-generation biofuels, some of the cellulosic developments, and we have been in touch with some around the world that are trying to deal with some of the energy security issues.
“So what we are seeking to do in the report is recognise that bio-fuels have responded to different purposes. One is they have responded to the very high energy prices. Some of them have responded to concerns about energy security. So people should look closely at the effects of these and see the effects in terms of overall food prices. If they have subsidies for these, they should certainly consider whether the subsidies make sense. If they have tariffs at the same time that impede the imports of something that they are subsidizing, that certainly would be something that people should look at and see if that makes economic sense.”
