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May 5, 2008

ADB chief opposes OPEC-style cartel

The chief of the Asian Development Bank (ADB) said on Saturday that he opposed the idea of setting up an OPEC-style rice cartel as suggested by Thailand amid surging food prices.

"Agricultural markets should be market oriented. It would not be good for exporters and it certainly would not be good for importers," ADB President Haruhiko Kuroda told reporters on the sidelines of the bank's annual meeting, which began n Madrid Sunday

Thailand has said recently it had contacted Myanmar, Laos, Vietnam and Cambodia, four members of the Association of Southeast Asian Nations, on the proposal to form an OPEC-style rice cartel for a stronger voice on international price-setting.

In the past month, rice prices have doubled, whose impacts have been most pronounced in import-dependent countries. During the past year, domestic rice prices doubled in Bangladesh and Cambodia, and rose 70 percent in Afghanistan, 55 percent in Sri Lanka and 40 percent in the Philippines, according to the Manila-based ADB.

Kuroda said that to tackle rising food prices in the medium and long term, the most important task is to increase agricultural productivity.

In a 15-page report, the ADB urged governments to step up investment, boost rural infrastructures and strengthen institutions to sustain higher farm output.

However, Kuroda played down the role of supply shortages behind the current price hikes.

"According to various statistics, supply of most agricultural products has been increasing steadily," Kuroda said. Despite the recent surge in food prices, particularly rice prices, "supply of rice in Asia is not short of covering demand," he added.

But Kuroda admitted that the rise in prices made people worry about future supplies and rush to buy more rice than they usually do, which contributed to an even worse situation.

Grain inventories have declined sharply in recent years, a sign that speculators may not have been involved to a large extent in the food price surge, he said.

Figures showed the current stocks of rice, wheat and corn were estimated to have fallen by over 40 percent between 2002 and 2007.

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