16 October 2013 | Vol. 4, № 38.

From the Editor’s Desk

Dear FDI supporters,

Welcome to the Strategic Weekly

Analysis. This week, we begin with

Indonesia’s decision to enter into an

agreement to adopt a new haze

monitoring system aimed preventing

smog and prosecuting those responsible

for forest burning.

In Burma, we examine the tentative peace

agreement between the Government of

Burma and the Kachin Independence

Organisation.

Moving north-west, we examine the call

by some political parties in Nepal to

boycott the forthcoming elections. We

also consider the potential that situation

poses for more unrest in the country.

In Pakistan we look at the impact of the

Army Chief’s resignation on the Nawaz

Sharif government. We also look at the

economic impact of the power shortages

there.

Next, FDI Associate Dr Emile Nakhleh

analyses the repression, sham trials and

imprisonment of citizens in Kuwait.

In Sudan, we examine the violence

sparked by a gold rush and the sectarian

violence caused by the government’s

efforts to resuscitate its economy in the

absence of the revenues generated by oil.

Finally, we look at the on-going volatility

of food prices.

I trust you will enjoy this edition of the

Strategic Weekly Analysis.

Major General John Hartley AO (Retd) Institute Director and CEO Future Directions International

*****

Page 2 of 15

A Breath of Fresh Air? Indonesia, ASEAN Agree to Adopt Haze

Monitoring System

Indonesia and ASEAN have agreed to adopt a new haze monitoring system aimed

preventing smog and prosecuting those responsible for forest burning. The move indicates

that Indonesia, the region’s worst air polluter, is finally starting to take the issue seriously.

Background

Indonesia and ASEAN have agreed to adopt a new haze monitoring system in an effort to

prevent smog caused by forest fires which cripple major cities and cost governments millions

every year. The agreement, announced on 9 October during the East Asia Summit in Brunei,

reportedly includes sharing satellite data that should help countries track forest fires and

prosecute those responsible. The move has boosted hopes that ASEAN may finally start

reducing the air pollution that plagues the region, but critics argue stronger measures are

needed in order to stop the haze and bring people to account.

Comment

Under the system, members of ASEAN will share satellite data in order to pinpoint fires and

identify those people and companies responsible. The new initiative should bring greater

cooperation between ASEAN members as they aim to tackle haze, which reached record

levels in June this year. As Singaporean Prime Minister, Lee Hsien Loong, told the Singapore

Straits Times, the agreement was a ‘concrete example’ of cooperation among the east-Asian

states. He went on to say that the data should help ‘put the maps together with satellite

photos and we can make information available’.

Indeed, the new haze monitoring scheme could prove pivotal in tracking forest fires and

bringing those responsible to account. Previous efforts were undermined by the fact that

Indonesia, the region’s worst air polluter, had often turned a blind eye to forest burning. As

The Economist wrote earlier this year, ‘at least three laws in Indonesia prohibit the burning

and clearing of forests. But these have never been seriously enforced by the government’.

Indonesia’s neighbours have also been at pains to point out that the south-east Asian giant is

the only member of ASEAN not to have ratified the 2002 Agreement on Trans-boundary

Haze Pollution.

Yet Jakarta’s adoption of the haze monitoring scheme indicates it is finally starting to take

the problem seriously. It will now have to share vital information about forest burn-offs

within its borders, meaning that other countries will be able to hold it to account; it is

estimated the province of Riau in Sumatra accounted for almost 90 per cent of the region’s

haze this year alone. Moreover, though only a few farmers have been arrested for illegal

burning so far, more arrests are likely.

Importantly, Indonesia has also reiterated its commitment to ratify the Agreement on Trans-

boundary Haze Pollution. Though the government has signed the agreement, it needs to be

Page 3 of 15

debated in parliament before it can be ratified. Most observers see this as a foregone

conclusion, however, with the country likely to ratify the agreement by late this year or early

next year. The agreement requires signatories to ‘respond promptly’ to prevent burning and

monitor prevention efforts and will place further obligations on Indonesia in the future.

But critics have pointed out that reducing the blazes in Sumatra will not be easy. The

practice has been endemic since the 1980s and slash-and-burn farming remains by far the

cheapest way to clear woodland in order to make way for palm-oil plantations. Until

expensive earth moving machines become more affordable, therefore, forest burning will

remain the most attractive option for the five million people who rely on the palm-oil

industry to survive. Furthermore, with the palm oil industry - the second largest in Indonesia

after coal - accounting for roughly US$17 billion a year, Jakarta will not want too many

disruptions to it. So while more arrests are likely, large companies, many of them from

Malaysia, are unlikely to be shut down any time soon.

Still, Indonesia’s adoption of the new haze monitoring system and its commitment to soon

ratify the ASEAN agreement indicates it is now taking the issue seriously. Though unlikely to

stop the haze, it is a step in the right direction.

Andrew Manners Research Analyst Indian Ocean Research Programme amanners@futuredirections.org.au

*****

A Tentative Peace Agreement in Burma/Myanmar

Although there are still substantial obstacles before a lasting peace agreement can be

reached, the recent signing of a preliminary deal between the Burmese government and

Kachin rebels is likely to bring about an uneasy ceasefire.

Background

Three days of negotiation between the Burma/Myanmar government and the Kachin

Independence Organisation (KIO) in the government-controlled town of Myitkyina, resulted

in a preliminary peace deal being signed on 10 October 2013. The KIO, which has been

fighting sporadically for autonomy since 1961, is the only significant rebel group that has not

signed a cease-fire agreement with the new regime in Burma.

The latest round of conflict started in June 2011, after the previous ceasefire, which had held

for seventeen years, broke down. Burmese forces have been accused of sustained atrocities,

including wantonly attacking civilian areas, using forced labour and pillaging or burning

down villages. In turn, the KIO has been accused of recruiting child soldiers and the

widespread use of landmines. The United Nations estimates that 100,000 people have been

displaced in the past two years of fighting.

Page 4 of 15

Comment

This recent peace deal is part of Burma’s reformist President Thein Sein’s plan to establish a

nationwide ceasefire by the end of 2013, in an effort to end the many insurgencies that have

seen the country in a state of perpetual war since its independence in 1948.

While the deal with the KIO falls noticeably short of a formal ceasefire, it does require both

sides to work towards “the end of all armed fighting.” This is to be done by both sides

redeploying their forces and establishing a joint committee to monitor the conflict and help

resettle the thousands of displaced people. Both sides have agreed to hold political

negotiations to reach an arrangement and establish a formal cease-fire. As a gesture of good

will, the Burmese government released fifty-six political prisoners, most of them Kachins, at

the start of the talks.

Despite being hailed by both sides as a breakthrough, there is much scepticism as to

whether this latest peace agreement will amount to anything. Previous orders for a

unilateral ceasefire by Thein Sein, in December 2011 and January 2013, were largely ignored

by troops on the ground. Indeed, fighting was still occurring while negotiations were

beginning, with the two sides clashing at several places on 7 October 2013. Both sides also

have radically different views on how Burma should be governed, which is likely to stall the

talks for months, if not years, to come.

The KIO, like most other ethnic groups within Burma, wishes to establish Burma as a

federation that would allow them autonomous governance, so they can preserve their

different culture, language and religion (the Kachin are predominantly Christians in a

Buddhist majority state). The Burmese government, however, has rejected calls to establish

a federation, insisting on maintaining its highly centralised ‘unity’ government; although, in

the spirit of reform, it declared

itself open to negotiation.

There is also significant distrust,

especially within the Kachin

community, about whether the

Burmese regime can be trusted

to deliver on its promises; given

the central government’s history

of reneging on deals, or refusing

to honour them when a new

leader seizes power. The

previous ceasefire, signed in

1994, was based on the pledge of economic development for the resource rich Kachin region

and the promise that autonomy and other rights would be discussed in the forthcoming new

constitution. No serious efforts were made by the central government to implement these

promises and the ceasefire collapsed when the military moved into resource rich areas

controlled by the KIO, to secure them for lucrative energy projects. This experience has left

the KIO reluctant to sign another cease-fire agreement.

Page 5 of 15

Nonetheless, a ceasefire will probably arise from this deal. On one hand, the KIO has few

external supporters and does not appear to be well enough equipped to effectively resist

the Burmese military for much longer. As the cease-fires with other ethnic movements

within Burma have been honoured thus far by the Thein Sein regime, the KIO has an added

incentive to negotiate. On the other hand, the Burmese government is determined to

establish a nationwide cease-fire to gain the time to allow its reforms to take root, or at least

to keep up appearances for the benefit of the international community.

There has also reportedly been pressure from China for the two sides to come to an

accommodation. Kachin shares a border with China and the fighting in the province has

brought a sharp increase in smuggling and people fleeing into China. China is also keen to

expand its influence in Burma and to keep other states out of the region. This has compelled

it to help end the conflict before others such as the USA or Europe decide to intervene in

earnest.

Overall, while deep distrust and differences between the two sides mean that a final peace

agreement is likely to be some years coming, this recent effort at reaching a sustained peace

could, at least, establish an uneasy truce, which will offer the political process a chance of

success.

Stephen Westcott Research Assistant Indian Ocean Research Programme

*****

Election Boycott in Nepal Has the Potential to Cause Unrest

After many years of political unrest, Nepal is just days away from an election. But with

thirty-three fringe parties threatening to boycott the election, a move that could incite

violence, there is no guarantee of a peaceful day at the polls.

Background

Nepal is on the verge of institutionalising their new democratic system, with elections to be

held on 19 November. Currently led by Chief Justice Khil Raj Regmi, Nepalese citizens will

finally have the opportunity to vote, after repeated delays. It has been seven years since the

Nepalese Civil War ended and although there is now far greater cooperation between the

different factions of parliament, tensions are still running high in the lead-up to the election.

Even though the election is set to go ahead, thirty-three minor parties, led by Mohan

Baidya’s Communist Party Nepal (Maoist), look likely to boycott the poll and potentially

incite violence during the election period.

Comment

From February 1996 to November 2006, Nepal was consumed by civil war, which ended

when the Government of Nepal and Maoist guerrillas signed a peace accord. The ten-year

Page 6 of 15

rebel insurgency claimed the lives of around 15,000 people, while over 100,000 others were

internally displaced. Putting down their weapons and moving into parliament, members of

the Maoist group shrugged off the guerrilla mantle, creating the opportunity to bring about

change in a peaceful manner. Along with this, the rebels agreed to allow the UN to monitor

their weapons, prompting the UN to describe the deal as “another key step forward in the

peace process”.

But since the ceasefire was announced in 2006, the transition has not been as smooth as

was hoped. With mass strikes and rallies, violence and general unrest, major cities, such as

the capital Kathmandu, have seen near total shut-downs. In 2010, a national strike was

called by the Unified Communist Party of Nepal (Maoist). This particular strike crippled the

country, with shops, businesses, schools and offices being ordered to shut down by the

party. Supporters of the party filled the streets in protest against the government, saying

they would not back down until the government resigned. The Maoist group did not achieve

its goal of pressuring the prime minister and his government to step down, but did bring the

country to a near standstill over the six-day duration of the strike.

Now, with the upcoming election, there are fears that a boycott by the Mohan Baidya-led

CPN (M) could lead to unrest. The Baidya group has not only decided to boycott the election,

but has also threatened to disrupt it. General Secretary for the CPN (M), Ram Bahadur

Thapa, has not avoided the issue of the potential breakaway group’s violence, stating that

they would launch a “second armed struggle” as the election draws near. In addition to this,

a statement released by the party on 2 November put to rest any chance of cooperation.

The statement showed that talks between the four major parties and the government had

ended. It went on to say that: “The opposing 33-party alliance will carry out ‘political and

publicity’ campaigns and effectively and strongly boycott the Nov 19 elections”.

The unrest and calls to disrupt the election come after certain demands by the CPN (M) were

not met. The demands called for the current administration to be disbanded and that its

leader, Khil Raj Regmi, resign from his post as Chief Justice. The party also sought to have the

election postponed until May next year. There has been some debate as to whether some of

these demands should have been met, to appease the party and avoid the potential conflict

that may arise due to the boycott. But it would seem that, whether or not the demands are

met, the thirty-three fringe parties are looking for an excuse to boycott the election, to bring

about change by a less democratic process.

In reaction to the threats made by the CPN (M), it seems possible that the Nepalese armed

forces will be deployed during the elections. Sixty-one troops have been prepared to deal

with violence should conflict arise; with the party declaring they will stage a ten-day protest

during the election, there are no guarantees that the troops will not be used. Now with the

election just a few days away, all eyes in the region will be turned towards Nepal, to see how

the process unfolds.

David Martin Research Assistant Indian Ocean Research Programme

*****

Page 7 of 15

Pakistan Army Chief’s Resignation Poses a Challenge for Prime

Minister Sharif

The resignation of General Ashfaq Parvez Kayani, the Chief of Pakistan’s army, could have

significant ramifications, not only for security, but also for the future of democracy in

Pakistan.

Background

The Chief of Pakistan’s army, General Ashfaq Parvez Kayani, has announced that he will

retire from the post of Chief of the Army Staff (COAS) on 29 November, quelling speculation

that he would seek an extension to his three-year term. The expectation is that he will

continue to work in a key defence role, possibly as head of a revamped Joint Chiefs of Staff

Committee (JCSC). On the one hand, his continuing influence over the Pakistan military could

be a force for stability, in the face of immense security challenges. In a country that has long

been plagued by military coups, however, there is genuine reason to be concerned about

how the change in military leadership could affect the future of democracy in Pakistan.

Comment

General Kayani has served as Pakistan’s COAS for the past six years. In 2010, his

appointment was extended for another full three-year term. His decision to announce his

retirement more than a month before the end of that term, can be seen as a response to

growing media speculation about the possibility that he would seek another three-year

extension. This prompted concerns about how the extension of Kayani’s influence could

serve to undermine democratic institutions and processes.

In a statement explaining his decision to retire from this position, Kayani sought to highlight

his commitment to the principles of democracy, stating: ‘I share the general opinion that

institutions and traditions are stronger than individuals and must take precedence.’

According to a report by Reuters, however, Prime Minister Sharif wants to make Kayani head

of the JCSC. While this was established as a ceremonial post, reports indicate that Sharif

plans to extend the powers of the JCSC into a “central defence body”, in charge of the entire

military establishment. Media reports have also suggested that Kayani may be appointed

either as National Security Advisor, or Ambassador to the US.

The rationale for keeping Kayani in a position of influence is the need for stability and

experienced leadership, at a time when Pakistan faces immense security challenges. The

spread of militant insurgents in Pakistan and the upcoming withdrawal of US-Coalition

troops from Afghanistan, are of primary concern. General Kayani is also valued for the strong

relationship he has developed with the US.

Possible successors to the position of COAS include Lieutenant-General Rashad Mahmood,

the current Chief of the General Staff; Lieutenant-General Tariq Khan, who is considered to

be pragmatic on US relations; and Lieutenant-General Haroon Aslam, the most senior official

after Kayani.

Page 8 of 15

Under Kayani’s leadership, the military’s influence over politics has been restrained. The

election in May this year marked the first time in Pakistan’s history that a civilian

government completed its full term and stood aside for a new democratically elected

government. Given Pakistan’s long history of military rule, however, there is genuine reason

to be concerned that under new leadership the military may seek greater authority over the

government. In 1999, Sharif was ousted by General Pervez Musharraf, the man he had

picked for military chief just a year earlier. His decisions on the successors to the posts of

COAS and the head of the JCSC could have far-reaching consequences.

Lia Collinson Research Assistant Indian Ocean research Programme

*****

Pakistan Minister Says Tough Decisions Need To Be Made To

Avert a Looming Economic Crisis

Pervez Rashid lists regional confrontation and terrorism as the primary causes of the

economic slowdown and the power crisis

Background

Pakistan’s Minister for Information and Broadcasting, Pervez Rashid has invited inancial

experts from the business community to provide suggestions to ameliorate the current

power shortage and the economic slowdown in Pakistan. Rashid has said that regional

confrontations and domestic terrorism have caused the economic problems and the power

shortage, currently sweeping across the country. Rashid has also urged regional neighbours

to promote a policy of cooperation to benefit from each other’s resources. Agreements have

been signed with Azerbaijan and Turkmenistan to import electricity. Russia has also offered

Pakistan a deal aimed at securing electricity supplies.

Comment

Pakistan’s shortage of electricity, which has had an impact on the economy, comes in the

wake of bitter internal turmoil between the different Muslim sects. This unfortunate

animosity between some elements in these groups has been driven mainly by extremists,

forcing some minority groups into exile. Rashid has reiterated the importance of restoring

internal stability, to not only maintain peace and stability, but also to encourage foreign

investment and provide economic stability.

The new government of Pakistan, which was voted into power in mid-2013, inherited an

economy with low growth, high fiscal deficit, runaway inflation, dwindling investments, an

unstable exchange rate and crippling energy shortages. Recently, however, Pakistan’s

Page 9 of 15

Finance Minister Ishaq Dar has said that Islamabad has begun implementing a series of long-

delayed reforms, aimed at revitalising the ailing economy and relieving the energy crisis.

Recent developments include the finalisation of the new International Monetary Fund

program, a step taken by officials in Islamabad a year earlier, but never concluded. This deal

with the IMF has also enabled other global organisations to partner with Pakistan to improve

its economy. Foreign investment confidence in doing business with Pakistan has also

increased dramatically. A bi-annual survey conducted by the Overseas Investors Chamber of

Commerce and Industry (OICCI) in August, showed a confidence level of +2, up substantially

from the lowest level reached in the last two years of -34. The energy reforms implemented

include agreements with neighbouring Central Asian countries, such as Turkmenistan and

Azerbaijan, to import electricity; they also include the planning of the Dasu and Diamer

Basha dams. An attack on tax evasion has also played a pivotal role in recent reforms, with

officials handing out over 30,000 notices to tax evaders. These reforms come in the wake of

the announcement by the current ruling party, the new Pakistan Muslim League-Nawaz

(PML-N), of the importance of combating terrorism. Officials have stated that the economic

reforms must be implemented simultaneously with the clampdown on terror – a menace

that is threatening Pakistan’s social fabric and exacerbating civil tension.

The manifesto issued by the PML-N during the election period in May 2013, stated that the

party would promise to set the economy on a growth trajectory that would match the rapid

growth of other Asian economies. The party is hoping to reach a growth rate of six to seven

per cent by 2018, when its time in office will end. For the long term, Pakistan strives to

implement development programmes to cover all sectors of the economy, including reforms

to improve the relationship between the private and public sectors. These reforms form the

underlying topics for “Vision 2030”, an initiative being prepared by the official Planning

Commission.

Mo Hineidi Research Assistant Indian Ocean Research Programme

*****

Bahrain: Repression, Sham Trials and Imprisonment

To re-establish stability in Bahrain and end the uprising, King Hamad bin Isa al-Khalifa

could take specific steps that would create a new political atmosphere, conducive to a

genuine national reconciliation dialogue with the opposition.

Background

The lengthy prison sentences given last week to 50 Shia activists and the refusal of Bahraini

courts to hear their allegations of torture, have once again confirmed the continued

repression of the opposition. In a statement this week, Amnesty International decried the

Page 10 of 15

unfair trials and sentencing of the activists and the refusal to allow the defence lawyers to

present witnesses, or challenge the authorities’ politically motivated charges. Court

decisions seem to be pre-ordained, regardless of the facts.

Comment

In a recent interview with Al Monitor, the Bahraini foreign minister defended his

government’s ‘serious’ commitment to the so-called national reconciliation dialogue and

accused the opposition of undermining it. He said the dialogue is ‘there to stay’, but, just this

week, the government suspended the dialogue until 30 October.

From the very beginning, the government-organised dialogue has been a public relations

stunt, to buy time and perhaps mollify critical Western governments. It failed because it

mostly focussed on process, not substance.

Apart from the convictions, the government crackdown has included: banning non-

governmental organisations from contacting foreign funding sources or diplomats without

government approval; arresting Khalil Marzuq, a leading member of al-Wifaq party;

depriving a number of Bahrainis of citizenship; and pursuing an anti-Shia sectarian agenda.

These actions have incurred international condemnation and prompted the opposition to

pull out of the dialogue in mid-September.

Restrictions on NGOs finally prompted the US State Department to issue a statement on

19 September, expressing ‘concern’ about the Bahraini Government’s recent restrictions on

civil society groups and their ability to freely communicate ‘with foreign governments and

international organisations.’ European governments, spearheaded by Switzerland, have

repeatedly condemned human rights abuses in Bahrain, both privately and publicly. The

recent human rights declaration, signed by 47 countries, is another sign of growing

international impatience with the Bahraini regime.

In recent media interviews, the Bahraini foreign minister criticised US President Barak

Obama for lumping Bahrain with Iraq and Syria, as regimes that have promoted

sectarianism. ‘We are different from the other two states, and this is hard to take,’ the

foreign minister said in an interview with the Saudi-owned Al-Hayat newspaper.

The King views himself as a “constitutional monarch” above the political fray and as an

arbiter of family ideological feuds. Whatever game the King is playing, it is destined to fail in

the long run. He cannot possibly envision a stable and peaceful Bahrain if he continues to

allow an extremist Sunni, anti-Shia, faction within his family to run the country, with total

disregard for the majority. That is a recipe for violence and chaos.

If the King is still committed to genuine reform, he should shed his “constitutional monarch”

posture and act decisively and courageously. He could immediately take the following ten

steps:

Remove the Prime Minister, appoint the Crown Prince or another distinguished

Bahraini as Acting Prime Minister and call for free national elections.

Appoint a respected and representative commission to initiate a genuine national

reconciliation dialogue, involving all segments of society.

Page 11 of 15

Stop illegal arrests and sham trials.

Void the 22 amendments to the law that the Lower House of the Bahraini

Parliament passed recently, which, among other things, call for stripping Bahrainis of

their citizenship if they criticise Al Khalifa, whether on Twitter or in person.

Remove all vestiges of employment discrimination against the Shia, especially in

defence and the security services.

Implement the key recommendations of the Bassiouni Commission report.

Make new appointments in the Royal Court and the top echelons of the military.

Review the court system and revisit the contractual appointments of expatriate

judges.

Void the recent sentences and arrests of peaceful opposition protesters.

Announce these steps in a nationally televised address to the nation.

Dr Emile Nakhleh FDI Associate

About the Author: Dr Nakhleh is former Director of the Political Islam Strategic Analysis

Programme at CIA and author of A Necessary Engagement: Reinventing America’s Relations

with the Muslim World and Bahrain: Political Development in a Modernizing Society.

*****

Gold-rush in Sudan Sparks Violence

In an attempt to bolster the struggling economy, the Sudanese government has made gold

the new oil – creating a gold rush that has fuelled violence once more in Darfur.

Background

The decade-old sectarian and political conflict in Darfur has transformed into a fight for gold,

as rival clans struggle to control the gold mines in western Sudan. Arab tribes, once united in

a fight to suppress rebel groups, have turned their weapons on each other. The outbreak of

violence commenced in January in the Jebel Amer area near Kabkabiya in North Darfur,

resulting in more than 800 casualties, the looting and burning of nearby villages and the

displacement of 150,000 civilians.

Comment

The 2003 conflict in Darfur began as a land dispute between African pastoralists and

nomadic Arab tribes. Rebel insurgents accused the Government of Sudan of marginalising

Page 12 of 15

Darfur’s non-Arab population. The government responded by arming militias in an ethnic

cleansing campaign that resulted in virtual genocide. The resurgence of violence stems from

the economic crisis triggered by the secession of South Sudan. When South Sudan seceded

in July 2011, Sudan lost three-quarters of its oil production, translating into the loss of

billions of dollars in oil revenue.

In an effort to fortify the struggling economy against the impact of losing the oil-rich south,

Sudanese president Omer Hassan al-Bashir has encouraged mining for gold. The government

has handed out exploration contracts to more than six hundred mining firms, to search for

gold and other minerals. In September, the Khartoum government opened the country’s first

gold refinery – expected to produce more than 300 tonnes of gold annually. The area once

inhabited by artisanal miners, has been flooded by half a million gold prospectors, some

arriving from neighbouring countries.

The gold rush has made Sudan Africa’s third largest producer, after South Africa and Ghana.

Estimates indicate, however, that a full quarter of Sudan’s gold is smuggled abroad, costing

the government millions of dollars of urgently required funds. UN officials suggest that the

Sudanese government has become desperate to control the mines. They claim it has been

complicit in the resurgence of violence, by arming and inciting the Rizeigat and Bani Hussein

tribes against each other. Darfuri rebels, also after gold, are adding to the tensions.

Sudanese officials downplay the violence, maintaining that the situation is much improved;

but reports suggest otherwise. On 30 September, ten people were reportedly killed during

clashes over mining rights between two factions of the Abblala tribe.

Many in Sudan have

grown weary of the

worsening economic

situation and have taken

to the streets in protest

over the past two

months. Demonstrations

that began south of

Khartoum have spread to

the capital and other

cities. Public protests

have led to lethal

crackdowns by security

forces, instigating further

violent demonstrations

across the country.

According to human

rights organisations, the

government continues to

restrict the African Union-

United Nations Mission in

Darfur (UNAMID) and NGOs from accessing areas of conflict to provide humanitarian

assistance and protect residents.

Page 13 of 15

The mining industry is one of the few growth areas in Sudan’s economy. The government

sees gold as the last hope of keeping its economy afloat. International mining organisations

that had long ignored Sudan because of political and ethnic strife, are now taking an interest

in investing there. They continue to face a number of obstacles, however: high royalties, few

qualified workers, the cost of hauling equipment over long distances and the U.S. embargo

applied because of Sudan’s human rights record. The resurgence of violence adds to the long

list of hurdles. It has also slowed developments of the Qatar-sponsored deal between

Khartoum and rebel groups to bring peace to Darfur. If public protests and intertribal clashes

continue, the already vulnerable economy will continue its decline.

Kaelin Lutz Research Assistant Indian Ocean Research Programme

*****

Global Food Prices to Remain Volatile Global food prices are expected to be volatile over the next few years. The current period

of stable lower prices, provides an important opportunity for governments to implement

policies to adapt to forecast volatility.

Background

The Food and Agriculture Organization’s Committee on World Food Security, met last week

in Rome to review global efforts to combat food insecurity. At the meeting of agricultural

ministers from over 30 countries around the world, the FAO Director-General José Graziano

da Silva said that despite recent stability in global food prices, international prices ‘are still

above their historical levels. And prices are expected to remain volatile over the next years.’

Comment

The world market is currently experiencing a lull in food prices. The FAO Food Price Index

has fallen for five consecutive months and world cereal prices are 20 per cent lower than

they were this time last year. The lower prices are driven by strong world cereal production;

an 8 per cent increase in global production is forecast for this year, with the wheat harvest

expected to be the largest on record. With food supply set to exceed demand, stock-to-use

ratios will be driven up to over 23 per cent, the highest level since 2003. This should bring

greater stability to prices. Estimates indicate that lower food prices will mean that there are

nearly 30 million fewer chronically undernourished people in the world this year.

Despite these improvements, prices are still at historically high levels, similar to the spikes

reached during the global food crisis in 2008. While increased reserves may deflate prices

somewhat and improve stability, Graziano da Silva emphasised that ‘higher and volatile

prices are here to stay’. Grain demand is expected to continue rising, driven by both

population growth and changing consumption patterns among the growing middle classes in

Page 14 of 15

emerging economies. Furthermore, the rising incidence of extreme weather events forecast

as the global climate continues to warm will have severe destabilising effects on price levels.

Food price volatility is a major threat. While hunger has been reduced over recent decades,

the global food price spike of 2008 pushed the number of people experiencing chronic

hunger over one billion, for the first time in history. It also triggered rioting and political

instability in countries across the world. Volatility is especially dangerous to small farmers in

the developing world, who have only restricted access to financial mechanisms to manage

the impacts of price fluctuations, and to poor net food-buyers, for whom food purchases

make up the majority of their household budgets.

With food prices expected to remain volatile, the current market lull provides an important

opportunity for countries to think strategically and develop collaborative policies and

measures to prepare for and mitigate the effects of future volatility. Improved global

governance has played an important role in reducing the impacts of additional food spikes,

by preventing serious inflation following the US drought in 2012 for example. Improved

transparency through the Agricultural Market Information System (AMIS), created by the

G20 in 2011, has been an effective tool in fostering collaboration and reducing excessive

volatility.

Low food prices are not an unmitigated good. Over two decades of falling prices prior to the

2007/8 crisis, caused significant harm to the agricultural sectors of developing countries and

reduced research and development in agriculture throughout the world. Graziano da Silva

has highlighted two critical issues for countries to address in the future high price climate.

Firstly, strategies must be developed to allow poor smallholder farmers to benefit from

higher food prices; secondly, measures must be introduced to protect the low income

families who suffer as a result of them. High food prices are not necessarily a bad thing if

they are not accompanied by excessive volatility; countries just need to build the resilience

of the most vulnerable to cope with rising price levels.

Lauren Power Research Manager Global Food and Water Crises Research Programme lpower@futuredirections.org.au

*****

Page 15 of 15

Any opinions or views expressed in this paper are those of the individual authors, unless stated to be those of Future

Directions International.

Published by Future Directions International Pty Ltd.

80 Birdwood Parade, Dalkeith, WA 6009

Tel: +61 8 9389 9831 Fax: +61 8 9389 8803

E-mail: lluke@futuredirections.org.au Web: www.futuredirections.org.au

What’s Next?

EU Foreign Ministers meet in Luxembourg on 18 October.

Australian Foreign Minister Julie Bishop visits Japan, South Korea and Hong Kong to boost economic ties and speed up free trade agreements with Japan and South Korea between 14 and 20 October.

Planned military exercises between the US Army and Japan’s Ground Self-Defense Force to be held between 15 and 28 October have been cancelled due to the US Government shut-down.

Pakistani and Thai Prime Ministers, Nawaz Sharif and Yingluck Shinawatra, are scheduled to meet in Bangkok to discuss trade, terrorism, and defence issues between 18 and 20 October.

India and Russia to conduct military exercises in India between 18 and 28 October aimed at improving their ability to uncover illegal and armed groups.

Indian Prime Minister, Manmohan Singh, will hold discussions in Moscow on 20 to 22 October on bilateral trade, nuclear co-operation and defence issues. He then travels to Beijing on 22 October to discuss trade deficits, trans-national river issues, and boundary issues.

The annual Muslim Hajj (pilgrimage) to Mecca began this week.