[Vnbiz] Soaring Asian Rice Prices Spark Global Inflation Fears

[Tai Phan]

  Soaring Asian Rice Prices Spark Global Inflation Fears



 The view that soaring rice prices will cause Asian wages to rise and thus
spark global inflation is gaining ground. Rice prices in Asia have hit an
all-time high, rising on average 41 percent.

The New York Times said Tuesday, "The free ride for American consumers is
ending. For two generations, Americans have imported goods produced ever
more cheaply from a succession of low-wage countries -- first Japan and
Korea, then China, and now increasingly places like Vietnam and India." This
report suggests rising rice prices have caused both wages and export prices
in Asia to rise.

William Pesek in his Monday column on Bloomberg writes, "Forget Bear
Stearns. Ignore what Ben Bernanke and Henry Paulson are up to. Take your
attention away from which hedge fund is about to blow up. Think about rice."
The column suggests the rise in rice prices has more serious effects on the
economy than those of oil or wheat.

     A store attendant sits behind commercial rice for sale inside a public
market on April 3 in Manila with price tags at P43 and P34 a kilo or US$1.04
and US$0.83 respectively. With the present increases in rice price, people
find it hard to afford the commercial rice, thus they wait in lines to buy
government subsidize imported rice. /AP
Taiwanese Vice President Hsiu-lien Annette Lu agrees. "We can get along by
reducing oil consumption, but can't do without rice," she said. Soaring rice
prices are "far more serious" than skyrocketing oil prices.

Rising rice prices stimulate wage increases in developing Asian countries
that have a high Engel's coefficient -- the proportion of income that goes
into food. In the wake of the increases in rice prices, the year-on-year
consumer price increase rate for March in the Philippines, a country that
strictly limits the amount of rice each person can buy, was 6.4 percent, a
20-month high. The average wage of urban workers in China, which suffered
price rise in foodstuffs last year, has increased as high as 18.7 percent.

Asia's concern over rising prices is never an Asian issue. In its Global
Economic Prospects report last year, the International Monetary Fund
expressed concern that wage increases in Asia may cause price rises in other
regions that have so far enjoyed affluence thanks to cheap goods imported
from Asia. Asia accounts for a large portion of global production.

As of late 2006, China and Southeast Asia took up 58 percent of the world's
total production of electronic goods, except IT products. India accounts for
65 percent of the world's call-center market and more than half of the
global software outsourcing market. Depending on product types, some 30 to
60 percent of the world's stuffed goods and clothing are being produced in
Southeast Asia.

Now there is widespread concern that Asia-wide wage increases caused by
soaring rice prices will spread to the entire world via trade routes and
eventually cause worldwide inflation.

If this concern turns into a reality, the South Korean economy will not
escape. Park Chun-il, chief of the price statistics team at the Bank of
Korea, said, "The rise in the prices of goods imported from China and
Southeast Asia will largely stimulate consumer prices in this country."

(englishnews at chosun.com )
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