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Figure 3.4 Increase in real prices of rice, Q2 2007 to Q2 2008 (%)
120
100
80
60
40
20
0
-20
Source: Dawe, 2010
47
Bangladesh
4
14
China India
Indonesia
Philippines
Thailand
Viet Nam
Other factors also helped limit price transmission for a number of countries, including
low reliance on international trade and availability of large public stocks, which
reduced the likelihood of speculation and hoarding. A clear message from governments
plus sound policies prevented speculation and panic among domestic farmers, traders
and consumers.
A little-discussed response was the role of remittances sent by migrants to their families
struggling to cope with high food prices (see Box 3.3).
Box 3.3 Remittances and kinship at the
forefront of the response
The plethora of international conferences and
summits that focused on policy responses to
high food prices and international assistance
to poor countries has tended to ignore the
fact that the burden of the rise in 2007–2008
prices was borne by the poor. Remittances by
migrants played a key role in helping their
families and communities to cope with the
–1
33
increased food costs. Recorded remittances
totalled close to US$ 340 billion in 2008, a
40 per cent increase compared to US$ 240
billion in 2007. The true size of remittances,
including unrecorded flows, is believed to be
even larger (Ratha et al., 2007), amounting
to more than US$ 500 billion in 2008 (ABC,
2008). In 2008, recorded remittances were
111
37
about three times the annual amount of overseas
development assistance provided to low-
and middle-income countries by rich countries
and constituted the second largest source of
external funding after foreign direct investment.
According to Oxfam, remittances to Nepal,
for example, increased by 30 per cent in
2008 (Oxfam, 2010). Figure 3.5 shows a similar
evolution for Bangladesh. For sub-Saharan
Africa, remittances jumped from an estimated
US$ 13 billion in 2006 to above US$ 20 billion
in 2008, i.e., an increase of more than
50 per cent in two years. Oxfam’s findings are
corroborated by a 2008 study published by
the World Food Programme on migration in
Nepal entitled Passage to India: Migration as
a Coping Strategy in Times of Crisis in Nepal.
The study found that 64 per cent of the very
poor and 62 per cent of the poor said that
they would migrate after a price shock. Many
said they would change their mind if they had
sufficient access to food or were guaranteed
full employment for three months (WFP, 2008).
A number of studies also indicate that different
forms of help, such as borrowing from
relatives or neighbours, or securing credit,
was one of the most widely used mechanisms
to cope with high food prices. For instance, a
national survey in Cambodia found that, along
with cutting expenditure on meals, 70 per cent
of the people responded to higher food prices
by borrowing in cash or kind (Compton, 2010).
The level of remittances slightly decreased
in 2009 as a consequence of the economic
crisis in the rich countries. In Bangladesh, remittances
declined by 9 per cent in February
2009 when large numbers of migrant workers
were sent home, mainly from the Gulf states.
Ghana experienced a 16 per cent decline in
remittances compared to the previous year
(WFP, 2008). However, at US$ 317 billion,
the global sum of remittances in 2009 was
still higher than before the 2008 crisis (World
Bank, 2009b). Following the 2009 slowdown,
remittances rose again, reaching US$ 325 billion
in 2010 (World Bank, 2010).
Figure 3.5 Remittances and rice prices, Bangladesh, June 2006–December 20
50
45
40
35
30
25
20
15
10
5
0
May 06 Aug. 06 Nov. 06 Feb. 07 May 07 Aug. 07 Nov. 07 Feb. 08 May 08 Aug. 08 Nov. 08
Source: Chhibber et al., 2009
Wholesale prices, taka per kilo
Remittances
Despite its importance, especially in times
of crisis as in 2008, the issue of remittances remains
a marginal area of research, advocacy
and policy work. People’s own responses to
high food prices go mostly unnoticed by policymakers
and practitioners, who tend to focus on
international assistance or foreign investments.
There are a number of possible ways to
maximize the impact of remittances and thus
favour a form of assistance that is based on
work and community solidarity mechanisms.
In its 2006 report Economic Implications of
Remittances and Migration, the World Bank
observed that the “remittance fees are high,
regressive, and non-transparent, and reducing
remittance fees will increase remittance flows
to developing countries” (World Bank, 2006).
This study suggested that decreasing the cost
of each transaction by as much as 33 per cent
would still produce profits for some of the companies
involved in the remittances business. It
also found that a 12 per cent reduction in remittance
costs could result in an increase of up to
11 per cent in remittance flows to low- and middle-income
countries. Such an increase, worth
more than US$ 3 billion, would represent the
World Disasters Report 2011 – Focus on hunger and malnutrition 81