UN agricultural agency urges investment to contain soaring food prices

11 March 2008

In the wake of world food prices leaping almost 40 per cent last year, the United Nations agricultural agency is calling on governments and businesses to boost production through investment.

“A supportive institutional and regulatory environment is mandatory to attract private investment at all levels of the food chain,” according to a paper presented by the UN Food and Agricultural Organization (FAO) at a conference in London yesterday.

“Improving policy dialogue between private stakeholders and policymakers will be instrumental,” it concluded.

At the conference, co-sponsored by the European Bank for Reconstruction and Development (EBRD), agribusiness leaders met with government officials from Eastern Europe and the Commonwealth of Independent States (CIS), which is believed to have great untapped agricultural potential, especially Russia, Ukraine and Kazakhstan.

In these countries around 23 million hectares of arable land were withdrawn from production in recent years, and at least 13 million hectares could be returned to production, with no major environmental cost, FAO said.

In a speech delivered by Charles Riemenschneider, Director of FAO’s Investment Centre, FAO Director-General Jacques Diouf noted that current predictions for CIS grain production point to a rise of seven per cent to 159 million tons between 2007 and 2016.

“But let us be bolder and imagine the removal of the institutional and financial constraints that limit production in the region. The region’s cereal output and its contribution to world exports would then be well above those projections,” Mr. Diouf said.

An EBRD paper submitted to the conference shows that governments have responded to rising food prices by introducing price controls, increased subsidies, reduced import barriers and restrictions on exports designed to benefit consumers.

The Bank maintains that many of these measures could prove to be counterproductive on a long-term basis, and encourages governments to limit interventions that would distort domestic markets or disadvantage producers and traders.

Protection of the poorest consumers, the paper suggests, could be achieved through targeted income support to the most vulnerable segments of the population.

The Bank said it would target its own investments to the development of local supply chains and to the development of new rural financing methods.

 

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