Subject: Fuel costs undermine agricultural assistance

Fuel costs undermine agricultural assistance

DILI, 10 July 2008 (IRIN) - Government efforts to curb high food prices in one of the poorest countries in Asia could potentially sink efforts to attain food security, says the head of the UN Food and Agricultural Organization (FAO) in Timor-Leste.

After a worldwide spike in the cost of rice several months ago, the government of Timor-Leste began to subsidise rice, a staple food. Under this programme, government-subsidised rice sells for US$16 per 35kg bag while non-subsidised imported rice costs $27 per bag.

In addition to subsidising imported rice, the ministry of agriculture has been giving out thousands of hand tractors and encouraging subsistence farmers to farm even greater tracts of land in the hope of producing more food.

But rising fuel prices could have doomed this initiative because as food subsidies have made life easier for thousands of consumers, rampant petrol prices are killing farmers.

"The government hopes that farmers will cultivate more land with these hand tractors, but with the higher fuel prices, I'm not sure that will happen," said Chana Opaskornkul, the FAO emergency coordinator in Timor-Leste.

But even if the rice is planted and harvested, the government offers no help with transportation or marketing, and with fuel costs at an all-time high, Opaskornkul said he feared many farmers would choose to sit on their surplus.

Big trucks known as angunas carry people, animals and crops to market on a daily basis. After recent fuel price hikes, the few operating trucks are often dangerously overcrowded

Most families plant on about one hectare of land, so they could have several hundred kilos of excess food to sell," said Opaskornkul. "But, this [fuel] situation could actually force farmers to be more subsistent because high gas prices could keep farmers from the market and force them to leave their crops at home."

According to the FAO, recent fuel price hikes have doubled the cost of transportation in some areas. This has led to some uncomfortable choices.

Maria Nasciamento is a 58-year-old market seller. Piles of dried corn are set out before her, though nobody is buying. She has been here since daybreak, and she will wait until the late afternoon. If the corn is not sold by then, she will put it back in her basket and carry it on her head an hour uphill, on foot.

Each pile of corn costs 50 cents and with public transport 75 cents one-way, she simply cannot afford to pay. "I can't charge more money," Nasciamento said. "If I charged a dollar, no one would buy it."

Stabilisation package

A mid-year budget review is being debated in parliament, including a $240 million economic stabilisation package, which allocates hundreds of thousands of dollars in food and fuel subsidies. This could help, but as the budget will not be approved until late this month, it is unlikely to be of any immediate use to people like Nasciamento.

Petrol prices have gone up nearly a third since Indonesia, Timor's closest neighbour and largest fuel supplier, cut its fuel subsidies. Now Timor is considering its own fuel subsidy scheme.

"We'll give coupons to owners of public transport to get a percentage of fuel every month in order to subsidise their gas to keep transportation affordable for people to use," said Joao Goncalves, the minister of economy and development.

The minister said the budget would provide food and fuel subsidies for a year, after which he hoped they would not be necessary. The key was jobs, he said.

"We need to create enough jobs for our people," Goncalves said. "We're hoping to increase the number of investors in the country following some recent initiatives to reduce taxes. We have to create better incentives for foreign investors and we have to encourage more public sector investment by the government.

"As wages increase and our people can afford market prices without any problem, then the government will withdraw its assistance."

Yet Opaskornkul remains concerned that unless the government uses some of this money to support local farmers, the agricultural sector - by far the largest potential sector for employment - would falter.

"I would allocate part of this money from the government's budget to the farmers to buy their food," he said. "Maybe the government could encourage people to buy locally produced rice, not only imported rice."


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