FOOD prices are indeed shooting up. What is the role of the government, and how should consumers respond?

Both global and local factors affect food prices. The global factors are increasing demand and decreasing supply. Increasing demand is a result of an increase in global population, and the demand for higher value food in emerging economies, especially India and China.

Decreasing supply is the consequence of diminishing inputs, such as water and land for agriculture, and the most important factor, climate change.

Without major intervention at the global and local levels, the situation will worsen.

What about local factors? The most significant factor affecting food prices is the lack of investment in the agricultural sector.
In Malaysia, agricultural development fell from 22 per cent in 1980 to 3.8 per cent in 2007. Agriculture's contribution to gross domestic product fell from 22.9 per cent in 1980 to 7.7 per cent in 2007.

The result was a greater dependence on imports. The country's import bill increased from RM11.6 billion in 2003 to RM21.5 billion in 2007.

Thus, to reduce dependence on food imports and to ensure affordable food prices and, importantly, food security, the government needs to invest and give higher priority to food development.

The government should help producers deal with weather and market risks as well as offer incentives that will reach all producers efficiently.

There is also greater need for strengthening farmer and consumer institutions, such as farmer and consumer cooperatives. Pasar tani also have to be expanded.

Structural and institutional reforms to deal with the 34,300ha of abandoned land should be undertaken to boost food production.

Next, because of various anti-competitive practices in the market, such as market collusion, licensing and approved permits, the prices of food and other items are distorted.

Through collusion, certain traders or groups of traders are able to manipulate prices, thus preventing prices to be determined by an open and free market.

Hopefully, through the Competition Act and the Price Control and Anti-Profiteering Act, the government can eliminate such practices and ensure "true" market prices.

For consumers, the first realisation should be that the factors affecting food prices are structural.

Governments, apart from controlling the prices of certain items, cannot do much.

Thus, it falls on the consumer to become a more mindful and self-reliant consumer.

Read more: Fair prices: Boost food production, help farmers and co-ops http://www.nst.com.my/nst/articles/24price/Article/#ixzz1NK9Ofgem

DATUK PAUL SELVA RAJ for Federation of Malaysian Consumers Associations, Kuala Lumpur