High-level Regional Policy Dialogue on the Food Fuel Crisis and Climate Change: Reshaping the Development Agenda

H.E. Mr. Abu Rizal Bakhrie, Coordinating Minister for People’s Welfare of the Government of the Republic of Indonesia
H.E. Dr. Hassan Wirayuda, Minister of Foreign Affairs, Government of the Republic of Indonesia
H.E. Mr. Anton Apriyantono, Minister of Agriculture, Government of the Republic of Indonesia
H.E. Mr. Muhammad Hatta, Ambassador of Indonesia to Thailand and Permanent Representative to ESCAP
Excellencies, distinguished participants, ladies and gentlemen

I am honoured to welcome all of you to the High-level Policy Dialogue on food-fuel crisis and climate change in Bali. Let me first express my deep
appreciation to the Government of the Republic of Indonesia for co-hosting this important dialogue with ESCAP, the regional development arm of the United
Nations.

I wish to offer my profound gratitude to H.E. President Susilo Bambang Yudhyono for his warm and strong support and cooperation for this event.

Our special thanks to H.E. Mr. Abu Rizal Bakhrie, Coordinating Minister for People’s Welfare for delivering the keynote message sent by the President.
The pioneering leadership of President Yudhyono on regional and global issues and his steadfast commitment to the welfare of the people of Indonesia is an
inspiration to us all in engaging in a dialogue to find solutions to common problems. It was the President’s letter to the Secretary General, expressing the
hope that the United Nations would hold a summit to discuss the food and energy crisis that led to the organization of the International Summit on World
Food Security and Challenges of Climate Change, held in Rome on 3 to 5 June, 2008. We also recall with pride the leadership provided by the President in galvanizing regional and international support, including at G8, G20 and APEC, for collective action in meeting the multiple challenges that the region is facing
today.

Our sincere appreciation also goes to H.E. Dr. Hassan Wirajuda, Minister of Foreign Affairs, for gracing this event and extending his Ministry’s untiring
support to ESCAP in organizing this event in Bali.

I also thank H.E. Mr. Anton Apriyantono, Minister of Agriculture for kindly agreeing to taking part in the policy dialogue.

Our deep appreciation also goes to H.E. Mr. Mohammad Hatta, Ambassador Extraordinary and Plenipotentiary and Permanent Representative
to ESCAP and his able team for working closely and tirelessly with ESCAP in organizing this event in this beautiful island of Bali.

Excellencies, distinguished participants, ladies and gentlemen

Much has been written on the food-fuel-financial crises and climate change issues and many conferences have been organized in recent months. But
this high-level regional policy dialogue is unique. It is unique because, for the first time in this region, we are coming together to address all four crises in a comprehensive and integrated manner. It is also unique because we have gathered together a constellation of distinguished policy makers, finance experts,
climate change specialists, food security experts, agricultural innovators, private sector entrepreneurs and civil society leaders from the entire Asia-Pacific region to discuss the core issues in food-fuel-financial crisis and climate change and come up with an Outcome Document with actionable recommendations. This policy dialogue is also being organized at a time when the convergence of the food-fuel-financial crisis -- compounded by climate change -- threatens to inflict untold human costs. We are gathered here today to find strategies to address the impact of this triple crisis and to prevent the present crisis from becoming a development emergency.

Excellencies, distinguished participants, ladies and gentlemen

This policy dialogue is being held at a time when the world economy is going through an unprecedented period of uncertainty. The Asia-Pacific region
is once again the victim of contagion, although this time not between Asian economies but by a contagion that is emanating from abroad. Our region has
journeyed through a long path ----- a journey that has seen it emerging as the most dynamic region of the world economy within a few decades. Our people have worked hard to develop their countries and communities. Millions of people have been taken out of poverty. Progress has been made in reducing child and maternal mortality. Gender parity has been achieved in primary and secondary education. Trade and investment have generated shared prosperity. Many countries of the region have excelled in technological innovations and have made breakthroughs in agricultural and industrial production that remain the envy of the world.

Yet, all these development gains stand to be lost as the food-fuel-financial crises converge and pose unprecedented threats to our development. It was only
a few months back that the Asia and Pacific region was trying to come to grips with the dual challenge of food and fuel crises. This dual crisis was unfolding against the backdrop of a heightened global concern for climate change. In September 2008, the simmering financial crisis that appeared to be confined to a few developed countries, blew into a full-fledged global financial crisis, affecting individuals and communities far removed from the business of finance.

Our region ---- noted for its economic dynamism and determined fight against poverty --- stands exposed to the ravages of all these crises which are
already beginning to have severe economic, social and environmental consequences. In particular, the global financial crisis, compounded by the food-
fuel crises and climate change, can be expected to slow down the region’s economic growth, increase unemployment, increase food and energy insecurity,
and unravel many other development gains. The food-fuel-financial crises and climate change have exposed our region to enormous human, environmental and
economic costs. But the convergence of these crises has also brought an opportunity to take a fresh look at our policies and reshape our development
agenda. For that, we must act together and act now.

Excellencies, distinguished participants, ladies and gentlemen,

In the backdrop of these crises and in our quest for a new development paradigm, please allow me to share with you some of my own thoughts and
perceptions.

The crisis poses a serious threat to the outlook for Asia-Pacific economies. Investment and consumer confidence has been shaken by falling corporate
profits, credit squeezes and mounting concerns of job security and reduced household incomes. ESCAP’s latest findings indicate that the economic growth
in our region’s developing economies will decline to an estimated 6.1 per cent next year, from 7.0 per cent in 2008. A number of countries, including Japan and
Singapore, are officially in recession. Our equity markets have fallen sharply during the past few months – by more than 40 per cent in India, Indonesia,
Kazakhstan, the Russian Federation and Thailand since mid-August. In China, it fell by over 20 per cent. Of equal concern is the excessive currency volatility seen
in recent months. The greatest losses since mid-August have been seen in the Republic of Korea and Indonesia, with their currencies falling by more than 15 per cent, followed by India at 12 percent and the Russian Federation and Pakistan by 8 percent.

The least developed countries, the landlocked developing countries and the small island developing States stand to suffer most from the global financial
crisis. Although they have limited exposure to the global financial system, the downstream effects of a global slowdown and a reduced demand for their
exports, particularly a steep decline in the demand for low cost manufactures and labour services, could have significant impact on their economies. Official
development assistance (ODA) could also decline as a result of the spreading recession in the developed countries, hitting this special group of countries the
most. We need to ensure that the pipeline for development funding continues unabated.

The global financial crisis has complicated the region’s quest for energy and food security. With economic slowdown and rapid contraction in bank
lending and reduction in external capital flows, vital investments in new and innovative energy-efficient technologies will be deferred or abandoned.
Similarly, lack of working capital can have detrimental effects on farmers’ ability to maintain food production. Governments may be forced to scale back
investments in agricultural R&D and critical rural infrastructure projects needed to sustain and improve agricultural productivity. With reduced incomes, poor
people will be further excluded from accessing food for their daily survival.

How do we face the global financial crisis and its consequences? The good news is that we are not starting from scratch. The regulatory reforms that were implemented after the 1997 financial crisis, and the massive foreign exchange reserves that have been built up since then, have provided a cushion to
withstand the worst of the fallout. The events of 1997 also propelled the region to look for mechanisms at reducing its vulnerability to crises. These include the Asian Bond Fund through which regional central banks have set aside a portion of their reserves in a pool to invest in bonds issued by Asian governments; and the ASEAN +3’s Chiang Mai Initiative to provide foreign exchange reserves liquidity support.

But are these initiatives enough? Are they robust enough to cope with the present crises which - taken together – have never been faced by our people
before? More needs to be done. For instance, the Asian Bond Fund – which stands at some US$2 billion now -- should become a vehicle for mobilizing the region’s savings and channeling those for developing the social and physical infrastructure of the region. We also need to take a fresh look at some of the conditionalities embodied in these initiatives. At the same time, we should explore how our region’s Sovereign Wealth Funds can be used to shield us from
the on-going crises, and contribute to the region’s social and economic development.

Above all, existing and new initiatives and instruments must protect the most precious resource we have --- our people, our communities. We all know
that the 1997 crisis inflicted huge economic and social costs on our people. If anything, the present crises together with climate change can bring about human
and economic costs that will pale those of 1997. We have to act now to see that this does not happen. We must make sure that whatever new or existing initiatives we resort to are inclusive enough for all countries to participate, including the poorer economies of our region, so that they do not fall further behind. These instruments must deal with growing inequalities and exclusion between and within countries which, I am afraid, seem to be on the rise as a result of the present crises.

Let me suggest some areas where regional cooperation in financial and monetary matters could be further strengthened. Firstly, the Asia-Pacific region
must play a leading role in the discussions on reforming the global financial architecture. The new financial architecture must have a human face. Secondly,
we should cooperate in the formulation of effective and coordinated macroeconomic policies at the regional level to reduce economic vulnerability,
inequality and exclusion. In particular, countries should coordinate their domestic economic stimulation packages that are coherent and mutually
reinforcing in achieving a set of development goals that correspond to the aspirations of our people. Thirdly, a regional contingency plan needs to be
established to respond quickly to liquidity and capitalization problems of domestic financial institutions. Fourthly, consideration should be given to a regional trade financing facility to address concerns that recession in developed countries will significantly restrict trade as trade credit dries up. Fifthly,
governments must take action to institute or to improve on the delivery of cash transfer programs and other social protection mechanisms that promote gender equality, and are targeted to those who need these most. ESCAP stands ready as a regional platform to move further on these initiatives.

Excellencies, distinguished participants, ladies and gentlemen

Let me now turn to the issue of energy security and climate change.

The grave challenge of energy security facing the region can be traced to a combination of demand and supply factors, leading to bouts of steep rises in
energy prices. ESCAP already has a new energy security paradigm, debated and endorsed by the Commission at its sixty-fourth session in April 2008. We need to
move and build on this new energy security paradigm which aims at creating a virtuous cycle of sustainable energy. Three issues need to be addressed in
creating such a virtuous cycle: an increased emphasis on the quality of economic growth, more reliance on renewable energy and improved energy efficiency, and
concerted and sustained efforts in mitigating climate change. A key element connecting all three issues is a drastic reduction in waste and inefficiency that
dominate our present patterns of economic management and energy governance.

Many low and middle-income developing countries are vulnerable to negative effects as a result of fuel price volatility. In that regard, let me draw
your attention to our region’s least developed countries, the landlocked developing countries and the small island developing States which are most
vulnerable to energy shocks and can be expected to bear the major brunt of the adverse effects of the deepening energy insecurity. Their growing dependence on fossil fuels has complicated their search for energy security and remains a major obstacle in reducing poverty and expanding their economic base. Here I ought to highlight the specific needs of the small island developing countries which face increased vulnerabilities due to energy insecurity. High energy prices, combined with some 30 per cent increase in food prices, have significantly reduced their ability to mobilize resources for development. The spectre of sea-level rise and its devastating impact in eliminating the small and vulnerable islands from the face of the vast Pacific ocean looms large and can become a reality if we do not act now. I would call for a decided shift away from dependency on fossil fuels in favour of renewable energy sources, including hydro, solar and wave and wind energy, as part of the quest for energy security in the Pacific sub-region. Here, greater regional and sub-regional cooperation, particularly in mitigating climate change and addressing food, water and energy security, could lead to durable outcomes.

Where do we go from here? As I mentioned before, we must look for a paradigm shift in our search for energy security in the region. This paradigm
shift requires political will and policy foresight. All countries of the region also need to be actively involved. We must find ways to expand access to renewable
energy sources without compromising long-term prosperity and environmental sustainability. The development of new and renewable energy sources provides
a long-term response to reduce dependence on fossil fuels and address climate change, thereby creating low-carbon and environmentally friendly economies.
We need to strengthen our efforts to substantially increase the share of renewable energies and to promote energy efficiency and conservation. There are 1 billion
people in our region who do not have access to electricity, imposing enormous human and economic costs on them. We therefore need to reaffirm their access to
basic energy services and to clean and sustainable energy which are also important to eradicate extreme poverty and to achieve the internationally agreed
development goals, including the Millennium Development Goals.

Following the Bali Conference on Climate Change, the Secretary-General announced that he expected ESCAP to be the venue for Asia-Pacific dialogue on
climate change action. In that context, I had already proposed the establishment of a trans-Asian energy system in the last Commission session. This system
would span the entire region and link together all the sub-regions through a common energy infrastructure. We need to strengthen partnerships to develop
energy systems that are conducive in meeting development needs and are consistent with efforts to stabilize the global climate.

You may recall that the Commission at its sixty-fourth session adopted a resolution, calling for promoting renewable for energy security and sustainable
development in Asia and the Pacific region. ESCAP stands ready to work with member States and other development partners in making the proposed trans-
Asian energy system a reality. In addition, we offer our services as the regional platform for sharing best practices in promoting renewable energy and
facilitating the transfer of green technology.

Excellencies, distinguished participants, ladies and gentlemen

Please allow me to share with you some of my thoughts on the issue of food security. Food security is not just a food problem. It is intimately
connected with climate change, fuel crisis and now the financial crisis. The issue that faces us today, as I mentioned repeatedly, is very clear: how do we prevent
the food-fuel-financial crisis and climate change from becoming a development emergency?

Food insecurity is seldom associated with Asia and the Pacific region, largely due to its dynamic economic performance and success in reducing
income poverty. But the high food prices which hit the world in mid 2007 brought the issue of food security to the forefront of global attention. Food
insecurity has been a major development challenge in many countries of the region for a long time. It is estimated that the region has some 900 million
people living below the revised poverty line. Another 583 million people are undernourished, a direct result of food insecurity. Forty-six percent of all
children in South Asia and 29 percent of children in South-East Asia are underweight. It is feared that the global financial crisis will exacerbate this
situation and push many more people into poverty and despair if appropriate measures are not taken to protect the poor and the vulnerable groups.

How do we ensure food security for our region?

Scarcity of food and its high prices are just one aspect of food security. It is multidimensional in nature. Food availability, and people’s access and their
affordability are key elements that must be addressed in an integrated manner. There are also structural issues -- especially faced by millions in some countries of our region – that must be taken into account in ensuring food security. These issues include processes, policies, institutions and inclusion. Long-term measures would be needed to address some of these pressing issues.

Although food prices have moderated somewhat, we ought to remember that the era of cheap food is effectively over. Here too a combination of demand
and supply conditions points to a future in which food prices will remain relatively high, at least in nominal terms. High food prices can also be an
opportunity. Many countries like Cambodia, Myanmar, Thailand and Vietnam can become the rice bowl and food basket for Asia and beyond. Prudent policies
and targeted measures would be needed in exploiting this opportunity.

What are the new policy directions in the short to medium term in ensuring food security? Let me emphasize that the present food crisis has its
roots in the long neglect of agriculture during the last decade or two. Prices for many agricultural products fell steadily from late 1980s to about 2002, sapping away incentives to raise agricultural productivity. Poorly designed liberalization polices along with ill-conceived policy interventions in developed as well as
developing countries contributed to declines in agricultural products. In particular, when income support to farmers in the developed countries has gone
up from about $299 billion in the late 1980s to some $365 billion in 2007, developing countries have progressively withdrawn their support to their
agricultural sector as part of market reforms. Additionally, many of them have scaled back their investments in rural infrastructure, a vital component in
maintaining and raising food production. Even ODA earmarked for agriculture went down from some 13 per cent in early 1980s to just 2.9 per cent in 2005-2006.

These trends need to be reversed. The Common Framework of Action (CFA), proposed by the United Nations High-level Task Force on the Food Crisis,
provides a broad and comprehensive approach to go forward. The outcomes of the World Food Summit in Rome and UN High Level Event on MDGs also need
to be implemented to put us on sound footing to address food and nutritional security, agricultural development and social protection. To achieve these inter-related goals, we need to expand food production in our region by enhancing investments and productivity in the agricultural sector, including in
small-scale farms, and promoting rural development and intensifying agricultural research. Barriers to food production need to be eliminated. We
also need to improve processing and distribution of food over time and to have carefully targeted safety nets in the event of food crises. In this context, ESCAP along with its partners in the UN system stands ready to forge the development of an inclusive regional partnership for ensuring food security.

Excellencies, distinguished participants, ladies and gentlemen

This policy dialogue underscores the special challenges emerging from the uncertainty in international commodity markets, particularly the volatility of
food and energy prices within the context of the current global financial crisis. During the next two days, you will discuss some very complex and challenging issues and concerns. I believe that these issues and concerns have also brought a new opportunity for Asia and the Pacific region. Let us seize this opportunity and begin the process of crafting a brighter future for our citizens and communities by reshaping our development agenda. It is our sincere hope that you will come up with an Outcome Document with actionable recommendations which can inform and influence the various inter-governmental regional
processes in meeting the food-fuel-financial crisis and climate change, including the ASEAN-UN Summit in March 2009 and the sixty-fifth session of the
Commission in April 2009, thereby ensuring that your voice is heard and that your leadership steers our commitment in reshaping our development agenda at
the highest levels of regional and global forums. With this new development agenda, our region can look forward to an era of shared prosperity, equity, social
justice, peace and human dignity for all.

I wish the policy dialogue all success.

I thank you.