Regional Rice Plan Faces Uncertainties

BANGKOK — Several Southeast Asian countries are making a second attempt to organize the region’s rice industry.

The effort follows a failed bid led by Thailand one year ago to form a cartel in the wake of rocketing rice prices supposedly caused by shortages.

At the time, critics of the cartel argued that the shortages had been artificially created, caused by panic buying when Vietnam announced it would sell less for export—a move which encouraged profiteers to push up prices.

A farmer harvests a rice paddy field in Ngoc Nu village outside Hanoi. (Photo: Reuters)

Now, five members of the Association of Southeast Asian Nations (Asean)—Thailand, Vietnam, Cambodia, Laos and Burma—say they will work to form a regional rice-trading association.

The objective, they say, is to coordinate production to meet market demand with stable prices.

Thailand and Vietnam are the world’s two largest rice exporters, and any unforeseen change in their export levels risks short-term shortages leading to pressure for higher prices, say industry insiders.

But their partners in the latest rice cartel venture—proposed on the fringes of recent Asean conferences—have much smaller and notoriously inefficient production. Laos produces only sticky rice, for instance.

And another major Asean member and rice exporter, the Philippines, is unwilling to join the trading association.

The president of the influential Thai Rice Exporters Association, Chookiat Ophaswongse, doubts whether a regional trading association for rice will work. Its objective of stabilizing production and prices would be difficult because each country involved has different production methods and costs, he says.

Both Thailand and Vietnam are likely to exceed their target export levels this year. Thailand will probably sell 8.5 million tonnes overseas, while Vietnam’s exports will be close to 6 million tonnes. These are figures well in excess of the combined production of Laos, Cambodia and Burma, where verifiable production and export statistics are difficult to come by.

Higher export levels by Thailand and Vietnam this year come at the expense of India, where rainfall during the monsoon season was 25 percent less than usual, resulting in lower rice production. The New Delhi government has restricted exports.

“The problem with the trading association proposal is that it does not include several significant regional producers,” said an official at Bangkok’s commerce ministry, speaking on condition of anonymity this week because of the sensitivity of the subject.

“It could be difficult to coordinate trading and other ideas such as improved production through better technology and equipment without a comprehensive membership,” the official added.

India, Pakistan, Bangladesh and the Philippines are not involved in the plans for the association, which was proposed by Cambodian Prime Minister Hun Sen.

His idea is based on an existing but largely inactive and vague association built around a three-river region and called ACMECS—the Ayeyawady [Irrawaddy]-Chao Phraya-Mekong Economic Cooperation Strategy.

Alongside the plan is an idea to lease up to 200,000 hectares of land in Laos for a rice venture partially funded by the tiny Middle Eastern country of Kuwait. But it would need the support of advanced Thai farming methods to succeed, according to industry experts speaking to The Irrawaddy.

The experts also cast doubts on the ability of Burma and Laos, with their highly restricted economies, to make any worthwhile contribution to a rice cartel. Cambodia has a freer market, they said, but operates a backward agricultural economy.

Another issue is the vast difference in the quality of produced by the proposed cartel partners. Thailand, for example, produces the widely sought-after Jasmine variety, while Burma can deliver only low-grade and poorly milled rice.

“The two countries supply completely different markets. Thailand caters to top dollar customers in the West, while Burma can sell its quality only to neighboring Bangladesh or to poor African countries,” said one industry insider.

In any case, Burma’s rice-producing capability since Cyclone Nargis devastated The Irrawaddy delta in May 2008 is unclear.

The ruling junta has claimed that rice growing is back to normal and now striving to achieve new export levels.