Global crisis
 15 June 2008

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President Gloria Macapagal Arroyo instructed the Cabinet Officers for Regional Development (CORD) to go to their respective areas of responsibility and present the current global crisis on food and energy as well as to promote the government’s primary efforts to mitigate the situation.

As CORD for Central Visayas, I was in Cebu City last Friday to perform this task, and in Bacolod City the next day. At about the same time, Executive Secretary Eduardo Ermita was in Pagadian and Zamboanga City, spearheading the briefing in Mindanao.

Given such short notice, Mayor Tommy Osmeña was nonetheless able to organize the City Council and Barangay officials, together with Cebu’s business and media leaders, for an in-depth look at the crisis.

The Philippines is not the only country suffering from inflation. High food and oil prices are global problems. Even countries like the United States, Europe, China, and Japan are experiencing increases in prices of these commodities.

It is estimated that the average world inflation rate has risen to 5.5 percent, its highest since 1999. Surging oil and food prices have primarily caused the recent jump in inflation.

Rice price has risen due to speculation and panic in the international market and in the rice-consuming countries, among other factors. When big rice exporting countries such as India and Vietnam saw the price of other grains such as wheat, soybean and corn rising, they restricted their rice exports to ensure availability of their domestic supply at stable prices.

While this action may have stabilized prices in their domestic markets, it led to price increase in the international market as consumers elsewhere panicked due to the perception of a rice shortage.

Moreover, some of our agri lands planted to palay have been converted and utilized for other purposes such as biofuels, poultry and hog raising, and housing, among others. This shift in land utilization, driven by anxieties over climate change, is global.

On the other hand, oil prices have risen because of several factors, among them the increasing demand of developing countries such as China and India, compounded by the decrease in oil production. From the third quarter of 2007, oil production was down by 0.62 million barrels per day from 85.08 million barrels per day.

Third, uncertainties in the global market on supply and impending increase in oil prices have led to speculations. Oil is traded in the world market in US dollars, and due to the weakening of dollar, the price of oil tends to increase. Lastly, instability in the Middle East, the major oil producer in the world, has not made the supply picture any better.

On food prices, a confluence of events contributed to the sudden soaring of food prices. The country is experiencing a tightening of food supply due to the increase in the price of oil, which has caused an increase in the price of fertilizers. The other factors are: Climate change – heat waves, droughts, and excessive rains; Rush to produce bio-fuels has led to reduction in lands devoted for food production; Global de-emphasis on agriculture and food production in favor of industrial and technological development; Economic development in countries like China and India caused changes in consumption patterns and diets that is producing more demand in grain for animal feeds; Some major food exporting countries introduced increased export taxes, bans and other restrictions on agricultural products to keep domestic prices down.

In the face of these challenges, the government is working non-stop and triple time to address these problems and sustain the country’s economic gains.

This administration is undertaking the following strategies – ensuring food security; promoting energy security; stabilizing prices of other commodities; providing targeted subsidies to the poorest of the poor; and implementing austerity measures.

In the next column, we will give you the specifics of these strategies, and how Cebu City could be the model for the smooth and seamless distribution of subsidized rice for those who most need it.

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