Oct 4, 2011

Myanmar back in the world rice trade

Myanmar, plagued for decades by government interference in its rice industry, aims to increase its rice exports to 1 million tons this fiscal year, helped by Thailand's price support programme that promises to make the Thai crop less competitive on the world market.

'Our rice is the cheapest in the world,' said Myo Thuya Aye, managing director of the Ayeyar Wun Trading Co.

'Myanmar rice is 50 to 60 dollars cheaper [per ton] than Thai rice, 40 to 50 dollars cheaper than Vietnamese rice and 30 to 40 dollars cheaper than Pakistan's,' Myo Thuya Aye said.

The price differential is seen as a way for the country to nearly double the exports of 570,000 tons it saw in the past fiscal year, which ended March 30.

Last year's low number was largely because the then-ruling military junta was worried about domestic rice prices.

'That was an election year, so the government and the rice association had to consider price stability,' Myo Thuya Aye said.

Myanmar held its first general election in 20 years on November 7, ushering in a government led by the Union Solidarity and Development Party, which is packed with former military men.

Myanmar's new president, former general Thein Sein, has implemented some policies beneficial for Myanmar's private sector, such as dropping an 8-per-cent export tax on rice and 14 other goods in August.

In the first half of this fiscal year, Myanmar shipped an estimated 370,000 tons of rice to markets such as West Africa, Bangladesh and the Philippines. Shipments should rise for the rest of the year, and Myo Thuya Aye said traders hope to export 1 million tons for the entire fiscal year.

'For years, no other country has had an export tax on rice,' said Sein Win Hlaing, chairman of the Myanmar Paddy Producers Association. 'We have been suffering for a long time.'

Myanmar's rice traders have actually been suffering for as much as six decades.

Prior to World War II, Myanmar was the world's leading rice exporter, shipping an average of 3 million tons a year from the Irrawaddy Delta, the country's rice bowl.

Myanmar's first post-independence president, socialist-leaning U Nu (1949-1962), put rice exports under government control, limiting the private sector to the domestic trade.

When military strongman Ne Win seized power in 1962, he nationalized the entire rice industry - exports and domestic trade, mills and warehouses.

Thereafter, Thailand swiftly replaced Myanmar as the world's top exporter, a position it has held for almost four decades but is now in danger of losing.

Thailand exported about 10 million tons of rice in 2010 and is expected to reach a similar level this year.

But nobody knows how Thailand's rice exports will fare in 2012 after the government on Friday introduces a price guarantee scheme for Thai rice farmers.

Under the programme, which was expected to be discussed when Thai Prime Minister Yingluck Shinawatra visits Myanmar Wednesday, the government is to pay farmers 500 dollars per ton of plain white rice, regardless of the prevailing market price, and 666 dollars for jasmine rice, the fragrant grain Thailand is famed for.

The price guarantees, designed to win votes for the Pheu Thai Party in Thailand's July 3 general election, which it won, is expected to boost Thai rice prices by 40 per cent on the world market.

'It will create a lot of opportunities for other people to come in,' said Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association.

The Thai move towards government intervention comes just as Myanmar is lifting decades of constraints on its own private sector.

The process began before the current government came to power.

In 2003, the junta allowed private businesses to get involved in rice exports, an activity previously monopolized by the State Agricultural Marketing Board.

In 2009, a year after Cyclone Nargis devastated the Irrawaddy Delta, the government allowed the establishment of 39 'rice specialist' companies to provide farmers with low-interest loans to purchase fertilizers, pesticides and rice seeds.

Besides waiving the export tax on rice exports, a waiver that is to be reconsidered in February, the new government has also allowed the Myanmar rice association to elect its own board and determine rice export quotas on a monthly basis.

Source: M&C News

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