BANGKOK - Repressive state policies and a "dysfunctional" market in military-ruled Burma mean 5 million people do not have enough food in what was once the rice-bowl of Asia, the World Food Programme (WFP) said on Wednesday.

"In a food surplus country like Burma, nobody should be going hungry, but millions are," WFP Regional Director Tony Banbury said after a five-day trip planned well before last month's bloody crackdown on pro-democracy protests.

"It used to be the bread-basket of this region. It can produce a food surplus very easily, but it is now failing to provide the food that its population needs," he said, appealing for more money for WFP relief operations.

At the moment, the United Nations agency -- one of the few aid organisations permitted to operate by the junta -- is trying to feed 500,000 people, even though it estimates 5 million, nearly 10 percent of the population, are at risk.

However, funding shortfalls and the perennial headaches of liaising with one of the world's most isolated regimes mean aid -- mostly locally purchased rice -- is reaching only about half the intended numbers, Banbury said.

"Who do we cut off? Which village, which school, which family? Who that we've promised food do we turn round and say sorry to?" he said at a news conference in Bangkok.

Given that Burma, then called Burma, was one of Asia's brightest economic prospects when it won independence from Britain in 1948, its health statistics are a shocking indictment of the military's 45 years in power.

The U.N. estimates one-third of children under five are underweight and 10 percent are classified as "wasted", or acutely malnourished. Child mortality rates of 106 per 1,000 are among the worst in Asia.

REFORM, AID NEEDED

Yet the junta continues to force rice farmers to sell to the government at below market prices and refuses to contemplate relaxing restrictions on free movement and trade that would allow a proper market to emerge, Banbury said.

"The Burma authorities must undertake critical reforms," he said. "Humanitarian assistance from the WFP and other aid organisations can only be a band-aid. The sad thing is that right now the world is not even willing to pay for that band-aid."

WFP aid operations, which go directly to the needy and not through the government, are budgeted to cost $51 million for 2007-09. However, $35 million pledged by donors has yet to materialise.

Australia leads the way with $5 million in paid-up funding, followed by $2 million from the U.N.'s own coffers and $1 million each from Japan and the European Union.

The United States, which typically funds more than 40 percent of WFP projects elsewhere, has contributed just $300,000, Britain nothing.

With many Western governments contemplating sanctions after the junta crackdown, in which at least 10 people were killed, it remains to be seen if the humanitarian aid flow will go up or down.

"The world now is saying how concerned it is about the people of Burma," Banbury said. "But so far, with the exception of Australia, we have not seen that turn into donations."