The government is trying to stop the export of unprocessed rice to boost local supply, but the long-term solution is to invest in infrastructure, especially irrigation, officials say.

High food and energy prices

are driving up inflation across Asia and Cambodia is no exception.

The National Institute of

Statistics (NIS)

reported that the consumer price index rose 18.7 percent between January 2007

and January 2008 with the big hikes coming in the last quarter of the year.

Food prices increased 24.2

percent in the same period, according to the report released on March 3.

The Cambodian government’s

official figure for inflation in 2007 is 5.8 percent, which is a 12-month

moving average. But according to the NIS,

the three-month moving average for the last quarter of 2007 was 9.6 percent,

with December alone running at 10.7 percent.

Still, the government’s

official forecast for 2008 was for four percent inflation, which some bankers

said sounds low.

"Fuel and food – especially fish,

pork, meat generally have increased a lot,” said Chea Sok, chairman of the

ACLEDA board.

"Transport costs have

increased by 13 percent. I don’t expect transport to go down – oil is still

going up. Before it was $1 for one liter; now it is $1.2 or more. And nearly every

vegetable is transported in,” Sok said.

Cambodia is fortunate that rice prices have not yet shot up as

much as in other parts of Asia.  Sok said that "rice management” was key.

"The problem is that

[farmers] export it now, but then you have no rice in August or September,” he

said.

The Ministry of Finance is

attempting to manage the rice supply through a $4-million loan to the

Association of Rice producers to buy up Cambodian surplus rice now and release

it onto the market later in the year.

Sok said the government is

trying to stop the export of unprocessed rice but the long-term solution to

this problem is to invest in infrastructure, especially irrigation, in order to

double or triple rice production.

He said he expected that January

and February inflation will increase but from May onwards it will go down and

prices will decrease.

He said 7-8 percent inflation

would be a serious problem. "Five percent we can manage, more than that we

cannot manage. It would really affect the poor people.”

Across Asia,

as inflation rates rise, governments are turning to price controls and

government subsidies to try and curb inflation.

In China inflation surged to an

11-year high of 7.1 percent in January and looks set to climb further this

month. After recent severe snow storms, the government froze the prices of energy,

transport and water, and announced that producers of essential food items, such

as meat, grain, eggs and cooking oil must seek approval before raising prices.

Cambodia has not introduced price controls. While many experts

warn the Kingdom’s heavy reliance on imports makes the economy vulnerable to

shocks such as increases in fuel prices, others argue that the current spike in

food inflation is due to normal seasonal fluctuations.