ASEAN Region Struggles with Global Rice Prices and Food Security
Over the past month, ASEAN, a region that heavily depends on rice as a crucial staple food, has grappled with fluctuations in global rice prices that are increasing steeply due to climate disruptions such as floods, heat waves, and other extreme weather conditions.
The All Rice Price Index of the Food and Agriculture Organization (FAO) reached 142.4 in August, marking a 31% increase from the previous year. This was driven by a global rice shortage and export restrictions that India imposed in July.
Locally produced rice has become scarce in Malaysia with local rice production only meeting about 70% of the domestic demand. Many supermarkets and small groceries have empty shelves as customers quickly snap up the new stocks of 5 and 10-kilogram bags of local rice as soon as they arrive.
The scarcity is heavily attributed to the growing rice disparity between locally produced rice and imported varieties. Local rice is a government-regulated food item in Malaysia, having a price cap of 26 MYR (5.54 USD) per 10 kilograms. Even before the recent global price hikes, imported rice had generally been more expensive than local rice.
In the Philippines, the government also implemented the same policy by setting a price ceiling which is the maximum allowable selling price for consumers. The policy puts an upper limit of 41 PHP (72 cents) per kilogram for regular and 45 for well-milled rice. The price ceiling policy has the same implication: the occurrence of rice scarcity due to the price ceiling not being supported by a substantial rice reserve only exacerbates the shortages.
Indonesia is facing the same difficulties as well due to the rising global rice prices. According to the National Strategic Food Price Information Center, the rice price in Jakarta increased by an average of 130 IDR (0.8 cents) per kilogram from 14,500 IDR per kg in the first week of August to 15,200 IDR per kg in the second week of September.
To prevent panic buying, the purchase of subsidized rice branded-name (SPHP) rice is restricted to a maximum of two bags of SPHP, with each weighing 5 kg, in all modern retail outlets in Indonesia.
Thailand, Vietnam, and Cambodia, ASEAN countries that are positioned as rice exporters, tend to limit or reduce their rice exports as a precautionary measure against the transmission of rice price fluctuations in the international market.
A 2019 report by the World Bank indicated protectionist policies, similar to the ones exemplified, implemented during the 2010-2011 food crisis, contributed as much as 40% to the increase in world wheat prices and a quarter to global corn prices, resulting in 8.3 million people becoming impoverished. The World Bank’s findings emphasized how the use of trade policy interventions can have negative implications that don’t benefit the population and even exacerbate poverty.
The ASEAN rice market is integrated, meaning that price increases in one country can be transmitted to other ASEAN countries. When considering food security, it is crucial for every ASEAN member country to avoid inward-looking policies and instead emphasize a broader perspective, namely the interests of ASEAN food security, particularly because eight out of 10 member countries are categorized as middle-income countries.
The populations in middle-income countries are the most vulnerable to spikes in international food prices. Addressing the impacts of food price volatility is in the best interest of most ASEAN countries and should be handled collectively.
The ASEAN Plus Three Emergency Rice Reserve (APTERR), established in 2012, is making significant progress with food security cooperation in the ASEAN. A collaboration between the 10 ASEAN member countries and their three external partners namely China, Japan, and South Korea, APTERR’s primary goal is to address rice supply instability in the region and mitigate the adverse effects of food crises.
However, according to Teng and Darvin (2019), the APTERR’s role still needs to be improved. As it primarily focuses on providing emergency rice supplies to countries suffering an acute shortage. This means that APTERR has not yet played a significant role in stabilizing rice prices and supplies in the region, which was the primary objective behind its establishment.
ASEAN countries should enhance their commitment to achieving stability and rice supply in the ASEAN region. While the introduction of the ASEAN Economic Community in 2015 has successfully reduced import tariffs for agricultural products within the ASEAN region, it has not significantly increased agricultural commodity trade within ASEAN due to high trading costs.
ASEAN’s commitment needs to be reinforced to facilitate essential staple food trade, especially rice, within the ASEAN. Expediting customs clearance and simplifying the process for rice exports and imports, reducing or eliminating non-tariff barriers for rice exports and imports, enhancing the establishment of information networks for quarantine and food safety cooperation related to rice, providing information about rice stocks, reserves, surpluses, deficits, and production in ASEAN countries, and prioritizing the fulfillment of rice needs for ASEAN countries may help in the event of international rice price disruptions.
