Asia Times: Cooperation the key as low prices hit rice exporters



	July 17, 1999	atimes.com

Asian Crisis

Cooperation the key as low prices hit rice exporters
By Prangtip Daorueng

BANGKOK - Thailand and Vietnam share the same woes about falling rice prices, which are forcing Asia's rice-exporting rivals to look for common ways to ease the impact of this trend on their large rural populations already hit by the regional crisis.

And while they try to survive less than ideal conditions in the world market, the real challenge for Thailand and Vietnam, which are among the world's largest rice exporters, is how to cooperate at a time when competition for tightening markets heats up.

''Prices of our jasmine rice have dropped because the Asian market turned to cheaper and lower-quality rice,'' Thailand's Agriculture Minister Pongpol Adireksarn said recently. This, he added, is a result of the region's financial hardships in recent years.

At a meeting organized by the United Nations Food and Agriculture Organization (FAO) in June, Vietnamese Vice Agricultural Minister Ngo The Dan said the fall in Thailand's rice prices has had an impact on Vietnam's too. ''It has an effect on our rice prices. But I still think that Vietnam and Thailand can still work together because our rice qualities are different,'' he said.

In addition to falling prices, lower demand has also helped create a production surplus among rice exporters, adding to unemployment at a time when people are being exhorted to return to the villages to escape the collapse in urban economies.

The world's rice trade in 1999 is expected to reach 22.1 million tons, about 5.8 million tons below last year's total tonnage. At the same time, this year Thailand's projection for paddy output increased to 23 million tons, up from 21.5 million tons in 1998. And although Vietnam's estimated output has been reduced to 28 million tons, it shares the same problem about slackening demand and falling purchases. This also applies to other major rice exporters. China's total paddy output, for example, is predicted to increase to 197 million tons from last year's 193 million tons.

One reason for declining prices is the increase in production of rice-importing countries, paring their demand for overseas purchases. For instance, Indonesia, a big market for Thai rice that at the height of the economic crisis scrambled to import this staple, has become more self-sufficient lately. Indonesia expects a total 52 million tons of paddy rice output this year, much higher than last year's 45 million tons.

Dr. Soleh Solahuddin, Indonesia's agriculture minister, said the country expected to import 1.5 million tons of rice this year, one-third of the 4.6 million tons imported last year. ''We now have a relatively stable food supply,'' he said.

Even China has been feeling the effects of low rice prices. At the FAO meeting, Liu Jian, China's vice minister of agriculture, said the export value of the country's agricultural commodities to eight Southeast Asian countries, its major export markets, fell by 11 percent or $1.1 billion in 1998. A rice importer as well, China is predicted to halve its purchases of rice from the 400,000 tons of last year.

Competition among rice producers and exporters has become unavoidable, but officials of rice-exporting countries also say cut-throat rivalry through slashing prices to get orders will not help them or their rice farmers at all.

''Recently our rice prices haven't been as high as they should have been,'' said Sonboon Pathaichang, manager of the Thai Rice Exporters Association, because countries like Vietnam or Burma have been exporting as well. ''Although they still have limited amounts of exports, it has made us struggle to maintain a good price for farmers,'' he explained. Likewise, ''the fact that Vietnam's cost of production is lower while yields per unit are higher than ours makes it a bit difficult for us to compete in terms of pricing."

However, Sonboon says the situation is still in control. ''We aim to export about 5.3 million tons this year, and in the first six months of the year we have already sold 2.8 million tons. Although Indonesia will buy less, we hope to find some other buyers."

Thailand and Vietnam had earlier signed a memorandum of understanding on cooperation in rice exports, but no concrete activity has yet been initiated from either side. This is not discouraging to the Thais. ''The most important thing is information sharing,'' said Sonboon. ''We should be able to share whatever we have between us."

The two countries also share the socio-economic backlash from the downturn in the rice sector. They have been working on measures to reduce the economic burden of their farmers, which still make up bulk of their populations.

Pongpol says Thailand's unemployment has led to a heavier burden on villages, where many of the country's 1.7 million unemployed have come to rely on the agricultural sector as a source of income. To help rice growers, the Thai government is operating several projects, including the adoption of a policy to maximize land use and to identify suitable crops for food security and sustainability.

''This policy will stop farmers from using too much of their water resources on unsuitable crops,'' Pongpol noted. ''It will help to move them toward more agricultural diversity, which would help in reducing the surplus of agricultural products in the future."

For its part, Vietnam has initiated a subsidy policy on rice prices to address the surplus problem created by its decline in exports last year. Incentive credit has also been given to state enterprises to buy rice from farmers at a ceiling rate, to assure them better income. ''Rice stock facilities that belong to Vietnamese farmers are very limited,'' said Dan. ''This puts pressure on them to sell rice in a short period of time."

Vietnam, 80 percent of whose population lives in the villages, has experienced a migration from cities to the country since the onset of the Asian crisis. Dan says the rural unemployment rate has now increased by 1 percent. Thus, ''we need to guarantee that farmers can earn enough for a living by initiating a price rate that helps them maintain at least 10 percent benefit."

Both the Thai and Vietnamese governments agree that small-scale industries and self-sufficient economies will help ease poverty. Vietnam has focused on assisting 1,000 of the poorest communes in remote areas to set up small-scale industries and develop agriculture. Thailand, whose king had urged Thais to return to the villages, is going in the same direction.

(Inter Press Service)