High food prices 'will hit Pacific'

AAP

May 12, 2008 - 1:27PM

High food and oil prices will put thousands in the Pacific at risk this year and could spark fresh violence in East Timor, an economist has found.

Craig Sugden from the Asia Development Bank, who recently led a study into the effect of high prices in the Pacific, predicted tough times ahead.

Sugden said the food staples of rice and wheat would probably double in price in the Pacific this year, hitting East Timor and Fiji hardest.

He said the UN World Food Program helped provide emergency assistance to 300,000 people in East Timor last year and that number looked set to rise.

Across the rest of the Pacific many more would be hurt by rising prices, Sugden said.

"It is very hard to say (how many) because we don't know how governments are going to react. I wouldn't put it in the hundreds of thousands, but I would put it in the tens of thousands of people that really are at serious risk in 2008," he said.

"A lot of people are going to suffer ... they may go very hungry and face having a very poor diet," Sugden said.

The Living With High Prices report he led showed an extra five per cent of households in the Pacific could slip into poverty this year.

He said Fiji's problems were compounded by a military coup in December 2006, when the democratically elected government of Laisenia Qarase was ousted.

"They have had quite a number of shocks, quite serious economic shocks in the past two or three years in Fiji, of course starting in December 2006," he said.

"Most of the garment industry has closed down. Wages are generally under pressure because the economy is struggling.

"What has happened is that the December coup added to business uncertainty," Sugden said.

His research found East Timor could face fresh outbreaks of violence.

"That is an obvious worry. The big problem is going to be the low-income urban households ... It certainly heightens the risk of instability," he said.

While Papua New Guinea would be one of the few overall winners from rising oil and food prices, he said squatter settlements would face big problems, potentially leading to crime rises in the capital Port Moresby.

Although high oil prices have boosted earnings of East Timor too, its money was tied up in long-term funds, Sugden said.

He said some countries, like Vanuatu, may be able to stave off food shortages by switching from rice and wheat to goods such as sweet potatoes and taro, but ultimately these items would rise in price too.

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