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Rising Food Prices in Indonesia Raise Security Concerns


The soaring cost of rice and other basic food in Asia has raised security concerns across many Asian countries. In Indonesia, the high cost of staple foods is hurting the poor and raising fears of social unrest. VOA's Nancy-Amelia Collins has more in a background report from Jakarta.

Iwan, 40, has been selling noodles on the streets of Jakarta for more than 10 years. Although poor, he has been able to take care of his family with this small business.

But, with the soaring rise in the price of basic food staples such as cooking oil, rice and soybeans, Iwan is no longer able to make a profit and fears soon he will not be able to feed his family.

"It is only now that I find it difficult to buy oil for cooking," said Iwan. "It is hard to find and the price is too high. I must raise the price of my noodles to make a profit, but if I raise the price of the noodles, no one will buy them."

According to government statistics, in the past year cooking oil has risen nearly 40 percent, rice is up 25 percent and tofu, a staple of the Indonesian diet, has gone up by 50 percent.

Bayu Krisnamurti, the deputy minister for agriculture, says the government is concerned the high price of basic commodities has the capability of fueling social unrest, similar to the 1965 coup that led to the rise of the dictator Suharto and the 1998 protests that toppled the former president.

"We are worried. In 1965 we faced a very, very depressing situation to make social unrest," said Krisnamurti. "Even in a more recent history, in 1998, it's also a similar situation. We do hope that 2008 is not another situation like that because the cost to the economy is too high."

Sensitive to price-related unrest, the government continues to spend about 35 percent of its entire budget on fuel and electricity subsidies to keep those commodities affordable for the poor.

In January, the government was forced to cut import taxes for soybeans after thousands of people took to the streets in protest over rising costs. Last week, hundreds held demonstrations in Jakarta to demand the government bring down food prices.

The World Bank estimates about half of Indonesia's population of 220 million lives in poverty, on around $2 a day.

The rising cost of food has raised concerns even more people will slip into poverty.

Agricultural analyst H.S. Dillon says this is a recipe for disaster.

"What is the prognosis? High food prices amidst poverty? I see nothing and I don't have a crystal ball, I see nothing but social unrest," said Dillon.

High food and energy prices are also starting to fuel inflation, which held to a 16-month high in February of 7.4 percent, above the country's full-year target of six percent.

Economists say the inflation rate will likely increase in the coming months, reducing the room for the central bank to cut interest rates to spur economic growth.

Some intrepid Indonesians, like Hamid, have found a way around the problem.

He continues to sell the popular fried snack, tempe, made out of fermented soybeans, on a noisy, congested street in Jakarta. He still makes a small profit.

"I do not want to raise my prices but I still need to make a profit, so now I just make my pieces of tempe smaller," said Hamid.

And, with the higher inflation, slower growth and tougher times for exporters in Asia after world oil prices hit new highs and the dollar plunged last week, it is unlikely food prices are going to improve any time soon.

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