Economists: Little Impact on M’sia from Food Price Hike

Friday February 18, 2011
By DANNY YAP
danny@thestar.com.my


PETALING JAYA: Economists said there is no cause for alarm regarding the spiralling food prices in the domestic market.

The issue of rising food prices was raised when World Bank president Robert Zoellick said last Tuesday that food prices globally were at “dangerous levels” and could lead to countries practising trade curbs.

He said in the latest edition of the World Bank Report: Food Price Watch, the food price index (FPI) had climbed 15% between last October and January. Last month's FPI was 29% higher than a year earlier.

The report said global food prices were just 3% below the all-time high in 2008.

Zoellick said: “It is important that governments increase their focus on food security and there is no room for complacency.”

However, he conceded that rising food prices would impact poorer nations more severely, especially developing countries.

In Malaysia, RAM Holdings group chief economist Dr Yeah Kim Leng said the impact of rising food prices to consumers would not be too significant.

“We don't see rising food prices to be a major concern as the country's economy is overall better than many other developing countries,” he said, adding that the Government had put in place various mechanisms such as price control on essential items, especially on food products and subsidies to alleviate poverty.

However, Yeah said there might be sharp spikes in food prices at certain times and this could impact Malaysian consumers severely when suppliers hoarded food items in anticipation of a hike in prices of selected food products to make a quick gain.

He said Malaysia was not at a dangerous level of spiralling food prices impacting local consumers severely as was the case in some developing countries.

However, he concurred with Zoellick that the spiraling food prices globally was expected to impact countries facing abject poverty more severely.

According to World Bank, 44 million people worldwide have been pushed into extreme poverty since last June by high food costs.

AmResearch senior economist Manokaran Mottain said while he agreed that there was no cause for alarm in Malaysia, there was a need to maintain vigilance on food prices.

“We are in a period of great volatility of commodities, raw materials and essential food items,” he said, adding that while Malaysia economy remained stable and food prices remained reasonable, there was a need for the Government to constantly monitor the situation.

Manokaran said the current rally on commodities was unsustainable and that a correction was on course.

On rising food prices, he said: “So long as basic food items rise incrementally over time, we should not have a major problem.”

Manokaran said in Malaysia, generally there was no shortage of supply for most essential food items as well as commodities.

“It's more the case of speculators trying to make a fast buck from consumers that create market distortions,” he noted.

Another local economist said the current global food hike had not resulted in most countries developed or developing taking severe measures such as trade curbs.

“We're not seeing trade curbs taking place in a big way for now but this does not mean that it will not happen,” he said, adding that such protective measures might be an option taken by selective countries that experience food shortage at critical levels.

The International Trade and Industry Ministry was unavailable for comment at press time.

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