By John Grafilo Jul 23, 2008, 4:27 GMT
Singapore - East Asia is struggling with soaring fuel and food prices threatening robust economic growth, more than one year after 16 countries in the region agreed to take steps to ensure energy security.
Economists warned the price spiral would drag down economic growth in East Asia in the next two years. With price hikes not expected to subside anytime soon, the problem also threatens political stability in the region.
Amid such grim prospects, foreign ministers of the Association of South-East Asian Nations (ASEAN) and their counterparts from China, Japan, South Korea, India, Australia and New Zealand agreed to further boost cooperation to ensure food and energy security.
The ministers noted while 'substantive progress' were made in the areas of energy efficiency and conservation in the region, much remained to be to done.
'East Asia countries could consider strengthening dialogue and communication between energy producers and consumers, encouraging the private sector to participate in the development of alternative energy sources...as well as to address the problem of oil speculation,' the ministers said in a statement.
The officials underscored the importance of 'coming up with longer-term agricultural solutions' to address the problem of food security, such as the use of hybrid seeds and greater research and development.
They also planned to pursue 'concrete cooperation' in the areas of production, transportation and preservation of food, with the participation of the private sector.
In a new report on Tuesday, the Philippines-based Asian Development Bank (ADB) said inflation in South-East Asia has risen sharply due to the increases in the prices of fuel, food and other basic commodities.
Inflation hit a 26-year high in Singapore at 7.5 per cent, the report said. In May, inflation rose above 25 per cent in Vietnam and by June, inflation reached 11 per cent in Indonesia and 11.4 per cent in the Philippines.
The report projected East Asia's economic growth was to slow down to 7.6 per cent in 2008 and 2009 from 9 per cent in 2007, as the region faced off a global economic slowdown and sharp rise in food and energy prices.
'Rising inflation is a serious threat to the region's sustained, strong growth as high import costs of food and fuel threaten to trigger a price and wage spiral, unleashing more inflation,' said Jong-Wha Lee, head of ADB's Office of Regional Economic Integration.
The ADB noted as the average household in the region spent over 50 per cent of its monthly expenditure on food and fuel, the high prices would have 'serious implications' and policymakers had to rein in the increases.
The ASEAN ministers noted earlier that the mounting challenges posed by unabated fuel and food price hikes were threatening 'people's welfare as well as (their) countries' continued economic development.'
'To address rising food prices, we stressed the importance of regional and international efforts to ensure the efficient functioning of market forces, as well as come up with longer-term agricultural solutions,' the ministers said.
'We encouraged all countries to do away with price distorting export subsidies and other protectionist policies and to provide market to access to competitive food exports,' they added.
Chinese Foreign Minister Yang Jiechi said ASEAN and its partners must further strengthen their cooperation in order to address the food crisis.
'We should give priority to cooperation in agriculture,' he told his counterparts from ASEAN, Japan and South Korea.
Yang said China was to work closely with other countries and provide support to ASEAN, including sharing agricultural expertise, expanding agro-technology cooperation and strengthening personnel training to help improve productivity.
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