With Rice Cartel, Critics Say Burma Must Learn to Walk before It Runs

Farmers plant rice seedlings in a paddy field on the outskirts of Rangoon on July 13, 2012. (Photo: Reuters)

Farmers plant rice seedlings in a paddy field on the outskirts of Rangoon on July 13, 2012. (Photo: Reuters)

Burma’s rice industry leaders have renewed their support for a Southeast Asian price-fixing cartel between exporting countries, though they have not yet addressed fundamental problems preventing an improvement in domestic production.

Support from the Myanmar Rice Federation for the Thailand-led cartel is at odds with a number of other countries in the Association of Southeast Asian Nations (Asean), the UN Food and Agriculture Organization (FAO) and the World Trade Organization (WTO).

Critics have described a cartel as unworkable and probably illegal under global trading rules, while the Asian Development Bank has labeled it as “irresponsible.”

Meanwhile, the International Rice Research Institute (IRRI) suggested such a move by Burma would be a case of running before the country had learned to walk. It said Burma’s rice industry could have a bright future as an independent, major exporting country—if it first addressed serious problems such as poor management, lack of investment, and damage risks to land and crops caused by extreme weather.

In an IRRI report, institute scientist David Johnson detailed what Burma’s rice sector still needed to do before becoming a serious exporter, never mind joining a cartel.

“Interventions to reduce the vulnerability of [Burma’s] farmers to extreme weather being caused by climate change mean promoting the use of rice varieties that can tolerate floods, salinity, and drought, as well as management approaches that support optimum performance of these improved rice varieties,” Johnson wrote in the report, titled “Asia’s next rice granary: Myanmar?”

“If the two million hectares rice-producing areas in the [Irrawaddy] delta use better management practices and appropriate rice varieties, they could easily boost Myanmar’s domestic and export capacities, critical for a country whose per capita rice consumption is the highest in the world at 190 kilograms per year,” he added.

Rice provides more than 70 percent of daily calories for most Burmese people.

The IRRI is working in Burma with other specialist groups, using satellite information to identify rice-growing areas susceptible to flooding, drought or salty conditions. The Philippines-based institute can then introduce varieties of rice capable of coping with these extreme conditions.

“IRRI also develops management technologies that not only help deliver higher yields but also promote environmental sustainability and reduce costs,” Johnson said in the report.

The proposal for a price-fixing cartel—modeled after the oil cartel OPEC, the Organization of the Petroleum Exporting Countries—is being driven by Thailand, which is currently the world’s biggest single rice exporter. Locking rival Vietnam and potential rival Burma into a joint price scheme would most likely benefit Thai producers and exporters, eliminating the risk of being undercut by a rising rice star at its western border.

Bangkok has invited Vietnam, Burma, Laos and Cambodia to join the cartel. The five Asean member countries produce only 12 percent of rice worldwide per year, or about 63 million tons, but are responsible for 56 percent of exports, or 19 million tons.

The Thai government says its objective is to stabilize international rice prices—and enable an annual price increase of up to 10 percent, critics say.

“The formation of an exporter-only cartel is not allowed under WTO rules. It may have very negative effects for global food security in the short term, but I do not believe it can be sustained in the longer term,” FAO economist Concepcion Calpe told the rice news website Oryza recently.

“Rice is different from petroleum, as many countries are able to respond to the surge in prices by stepping up production,” she added. “The collusion of the five major exporters could propel world prices very high in the short term, but this will foster a general move toward self-sufficiency programs which will eventually erode the very basis of the cartel.”

Regardless, Soe Tun, an official from the Myanmar Rice Federation, said Burma’s President Thein Sein had called on his country’s rice industry leaders to support the cartel idea.

The federation will “mainly work on two items: to boost the quality of rice exports and increase prices,” Soe Tun told Burmese media.

The federation, which recently changed its name from the Myanmar Rice Industry Association, includes groups for producers, traders and millers. Earlier this year, it said tens of millions of dollars were needed to rebuild Burma’s rice industry infrastructure, including its rice mills.

Thailand wasn’t always the preeminent rice exporter. In the mid-20th century before the onset of World War II, Burma held that title, shipping 7 million tons of rice abroad annually in the late 1930s when Thailand was still a subsistence agricultural backwater.

War and decades of incompetent military rule in Burma reversed these roles. In 2011, Burma exported 778,000 tons of mostly poor quality, broken rice, while Thailand dispatched 10 million tons of quality grain.

A rice export cartel, which would fix collective export prices, is being pushed by the Thai government, which has introduced a subsidy scheme guaranteeing Thai farmers a minimum price regardless of market conditions. The one-year-old scheme has coincided with a slump in Thai exports, expected to be down by more than 40 percent this year from last year’s exports. This has led to a huge stockpile in Thailand.

Some observers see the subsidy as politically driven.

“The government buys rice direct from farmers at about twice the normal market price,” said The Economist newspaper recently. “This benefits mostly small-scale rice farmers in Thailand’s poor rural north-east and central plains, a constituency fiercely loyal to the ruling Pheu Thai party of [Prime Minister] Yingluck [Shinawatra].”

But not all Thais support a cartel. Economist Ammar Siamwalla of the Thailand Development Research Institute described the idea as “stupid,” not least because rice could not be stored indefinitely, like oil.

And although Burma’s industry federation says exports are growing, it is not clear just how much rice the country produces.

“Production statistics vary markedly depending on the source,” the IRRI said in a separate report recently. “From our household surveys and focus group discussions, farmers harvest only about 3.5 tonnes per hectare in the [Irrawaddy] delta.

“If rice production in [Burma] is increased, poverty may be alleviated and the livelihoods of rural poor would improve.”

On the evidence, a price-fixing group seems primarily designed to support the Thai government’s expensive domestic subsidy scheme.

“Thailand’s position as the world No. 1 rice exporter is under threat from Vietnam and India because of meddling by the Thai government, which has held back exports this year as a consequence of the subsidy program, and which is expected to cost the country between $1 billion and $2 billion this year,” said an industry insider in Bangkok, speaking on condition of anonymity due to the sensitivity of the subject. “I think it would be a mistake for Myanmar [Burma] to get drawn into a scheme which would benefit Thai farmers more than Burmese farmers.”

Thailand’s Ministry of Commerce, which hosted the cartel negotiations, said the five would-be members would resume talks early next year.

2 Responses to With Rice Cartel, Critics Say Burma Must Learn to Walk before It Runs

  1. Rice is food and rice is the culture of Burma. Thousands of year old.

    To change the way sustainable and sustained for thousands of years need more thatn idiotic mechanization, large scale farming and most of all using genetically modified or not modified high yield seeds obliterating the grand native variety for compulsory use of certain fertilizers and licensed by certain international corporations and use of pesticide as seen around the world is simply biggest crime and Human Rights Abuse.

    For the people of Burma, it is important to realise that the traditional leading lights of “Media” people are now well compromised or ill-informed and Jewish Rothschilds/ Soros agent Aung San Suu Kyi in collusion with the world’s most powerful domestically repressive military is not likely to stop either introduction of foreign pesticide/ fertilizer dependent seeds or large scale eviction of farmers for their land to be used as large scale mechanised farming for that “Leading Rice Exporter” status of dubious honour and manual servitude for the now landless farmers for generations.

  2. “Food and water” is the “next petroleum” of the world which is getting daily worse in selfishness, ruthlessness and  recklessness to the detriment of ALL.   The disgraceful and dangerous and idiotic monetised confiscation of arable and cultivable land in poor countries especially Ethiopia and North Africa by neo-colonialist Saudi Arabia, Kuwaiti  and most significantly that Largest Democracy of the land India, is shameful and regrettable.

    Same picture is emerging in Burma. The very Soviet style slogan of “Largest Rice Producer” in the world and re-gaining the Past Glory (  very Buddhist Lawba and Mawha of course) are CHILLING.

    The people who want such Grand Vision at the expense of the millennia old honestly working food producing farmers, their dependent socially cohesive families and their precious, irreplaceable lands  are well compromised Aung San Suu Kyi/ 88’s led progressive politicians, deliciously half-educated “media” people and commentators and keyboard wielding wise internet-ters playing right into the game of international financial institutions and the business men and of course the comprador bourgeoisie ( quintessential “axe-handles”). 

    Thein Sein fronted Sit-tut, Aung San Suu Kyi / 88’s led national and international business communities and compromised, misguided “Media'” leading the charge on the farmers as united front,  the only salvation for the farmers and their land is themselves and the un-corruptible masses of students.

    What the farmers need is fair, interest free small loans with sound financial advice and help, technical know how and help with storage and transport leaving 
    their millennia  long social and traditional lives as they are.

    Introduction of Monsato dependent high yield seeds the WISE people think is so smart will destroy not just Burma but the whole world in due course.

    The landless farmers driven out to f their ancestral land as now desired by Aung San Suu Kyi, the Western/ Eastern Business Agent, for the Lapadaung villagers will necessarily invent a rootless, socially disintegrated disruptive mobs ripe for crime and drug abuse.

    At least this one Mahathir got it right. The “Asian Way” is for  a self-style elites to be totally uninformed/ idiotic and yet think they are so smart and make decision of the masses as they know the best (Sayagyi’s). Unique. 

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