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IN light
of the projected increases in commodity prices this
year, the World Bank is urging the government to
implement policies that will help liberalize the
agriculture sector and consider giving subsidies to the
poor.
World
Bank-Philippines lead economist Vera Songwe said
liberalizing the agriculture sector would help farmers
increase their production and ensure sustainable
livelihoods.
Songwe
added the government may also consider giving subsidies
similar to oil subsidies given in
Indonesia,
particularly for those earning below $1 or $2 a day.
These,
she said, will help the poor cope with escalating rice
prices, especially since the World Bank’s chief
economist Vikram Nehru had noted that commodity prices
are rising rapidly due to speculative buying and
hoarding.
“Rising
commodity prices [are] a considerable concern.
Institutions may not be enough to address this. This
presents a serious challenge [to countries],” Nehru said
in a video conference with journalists from East Asia on
Tuesday.
To date,
one-third of the country’s poor are in the rural areas
and engaged in agriculture. With market liberalization,
Songwe said farmers would be able to increase their
yields and similarly increase their profits.
She said
this could also ensure food security. She told reporters
that liberalizing agriculture would greatly help the
rural poor move out of poverty.
“The
best thing to do for the government is to begin to
liberalize the market and have prices reduced for oil.
That’s one of the ways to address the issue. We need
competition irrespective of the kind of commodity,”
Songwe said.
Meanwhile, Songwe cautioned that subsidies the
government can provide must be directly given to a
targeted part of the population and must be temporary.
Subsidies, she warned, have a tendency to become
permanent since many of the recipients become dependent
on it.
Nehru
said subsidies must still be fiscally sustainable and
must not be allowed to become a permanent expense of the
government.
He said
rising commodity prices are expected to cause income
losses for the Philippines, China, Thailand, Laos,
Cambodia and South Korea, but will cause income gains in
Mongolia, Malaysia, Vietnam, and Indonesia.
The bank
projects oil prices will rise by 22.3 percent in 2008;
rice, 55 percent; and iron ore, 65.3 percent.
Coconut
oil, copper and rubber prices, on the other hand, are
projected to slow down from last year’s levels to 8.8
percent, 2.6 percent and decline by 2.1 percent this
year.
However,
Nehru said that if the measures implemented by the
Bangko Sentral ng Philippines will be continued, the
country can weather the problems caused by high prices
and, consequently, higher inflation.
The
World Bank projects inflation to increase to 4.5 percent
in 2008 and 3 percent in 2009. These, however, are
within the Development Budget Coordination Committee’s
inflation projections, which are at 3 percent to 5
percent in 2008 and 2.5 to 4.5 percent in 2009. |
