Publication: TODAY, pp 1-2 Date: 2 April 2008 Headline: Food price hikes: No simple solutions

FOOD PRICE HIKES: NO SIMPLE SOLUTIONS NEO CHAl CHIN AND ALICIA WONG chaichinQmediacorp.com.sg

IN THEORY, importing food from many sources sounds like a good way to keep rising prices in check - apart from hedging one's bets against supply disruptions due to, say, natural disasters.

But realty is rarely so simple. With food prices going up

around the world, economists point out, diversification will not be enough to avoid inflation in Singapore, which imports about 90 per cent of its edibles.

The theory works only if there is a "disconnect between two markets", said Forecast's economist Vishnu Varathan. For instance, if Australia is facing a drought, dairy prices here can be kept stable if imports are still coming in from other regions.

That's not the case with the brewing Asian rice crisis, how- ever. Noting shortages report- ed from Cambodia to the Philip pines, rice importer Hong Lian Gim Kee said: "How can you negotiate prices?"

Yesterday, the World Bank said that inflation poses a bigger

challenge to East Asia than the current credit crisis does. For one, it has led to higher fuel prices - which leads to higher freight costs that could negate cost-savings from food sourced further afield, said a spokesman from the Singapore Cereal Oils Foodstuffs and Native Products Import and Export Association.

Said Mr Varathan: "We can get some limited relief from in- flation by changing consumer patterns, but unless we have a backyard to plant some crops, there's little we can do."

But, how far are consumers here willing to adapt?

Importer See Hoy Chan's o p erations manager E K Lim bdieves "people want higher quality rice". For instance, Vietnamese rice is

often too rough, and Chinese, Aus tralian and American rice too sticky for the fussy Singapore palate.

NTUC Fairprice's director of integrated purchasing Tng Ah Yiam said sales of its house-brand rice from Vietnam have doubled since its launch last October, part- ly because it is 20-percent cheap er than Thai rice.

Yet there are those like house wife Pauline Wong, 59, who would "switch to a cheaper brand of Thai rice" easdy but fuss over the stan- dards of Vietnamese rice. It is dif- ficult for consumer tastes to change within a short time, said associate research fellow Ng Sue Chia of the S Rajaratnam School of International Studies.

Likewise, divers*ng food sources may also take time. Sheng Siong supermarket will "definitely" look for other rice suppliers, but it could take years to build a working re- lationship if mutual benefits cannot be found, said its international business development deputy general manager Wong Heng San.

Meanwhile, what Singapore can do seems to have already been done.

According to the Ministry of Trade and Industry, the Government requires all white rice traders to stockpile twice their month- ly import quantities. The growth dividends and GST credits to be paid out later this year will also help to offset inflation, a ministry spokesperson told TODAY.

Also, as Assistant Professor Tomoki Fujii of the Singapore Management Uni- versity's School of Economics pointed out: "With little control over the price of food it buys from other countries, the Govern- ment can let the Singapore dollar appreci- ate against other currencies to mitigate in- flation - which is indeed being done."

FairPrice - the island's largest super- market chain - said it tries to help consumers by being the last retailer to adjust prices. While it raised the prices of three inhouse rice brands last Friday by 10 to 15 per cent, it eliminates middlemen costs by importing directly from countries like Thailand and Vietnam, said Mr Tng. FairPrice is also studying setting up budget outlets for the needy, possibly next year.

Sheng Siong supermarket - with 21 out- lets - imports some of its rice directly, and will keep promotional prices for rice con- stant until stocks run out.

xt harvest of white rice will be in the middle of the year, with the fragrant rice hawest at yeafs end, said Mr E K Lim, operations manager of rice importer See Hay Chtm. But he mu- tioned mat supply will depend on factors such as weather, too.

Mr Jkmy Soh, managing director of Chye Choon Foods, said exporting coun- tries inrill "evaluate after the next harvest if its appropriate to open up the export market. I'm sure they will because these economies rely on the expo0 of rice or w e agriculture-based".

But general manager Jaffar Sadik, of Sayeed Muhammad and Sons Traders, feels things are still unpre- dictable with some countries. The importer, who buys rice from India, said E~O one knows when the government of- hdia might decide to impose or lift a ban on rice exports. -ALICIA WONG I

Prof Fujii suggested coping with short- term price fluctuations by making long-term contracts with foodexporting countries.

Freezing food prices, like what Thailand is considering, would create a "disastrous sit- uation" with insufficient food to meet demand. But increasing food subsidies for the poor could be considered, he said.

Prof Fujii also mooted the idea of im- posing a tax on restaurants for food wastage, with the money going to the poor. Households could also be taxed according to how much waste they generate. But such an idea would be hard to implement, he admitted.