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



	July 17, 1999	atimes.com

Southeast Asia

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 atime when competition for tightening markets heats up.

''Prices of our jasmine rice have dropped because the Asianmarket turned to cheaper and lower-quality rice,'' Thailand'sAgriculture 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 andAgriculture Organization (FAO) in June, Vietnamese ViceAgricultural Minister Ngo The Dan said the fall in Thailand's riceprices 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 ricequalities 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 arebeing exhorted to return to the villages to escape the collapse inurban economies.

The world's rice trade in 1999 is expected to reach 22.1million 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 reducedto 28 million tons, it shares the same problem about slackeningdemand and falling purchases. This also applies to other major rice exporters. China's totalpaddy output, for example, is predicted to increase to 197 milliontons 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 overseaspurchases. For instance, Indonesia, a big market for Thairice that at the height of the economic crisis scrambled to importthis staple, has become more self-sufficient lately. Indonesia expectsa total 52 million tons of paddy rice output this year, muchhigher than last year's 45 million tons.

Dr. Soleh Solahuddin, Indonesia's agriculture minister, said thecountry 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. Atthe FAO meeting, Liu Jian, China's vice minister of agriculture,said the export value of the country's agricultural commodities toeight Southeast Asian countries, its major exportmarkets, 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 becomeunavoidable, but officials of rice-exporting countries also saycut-throat rivalry through slashing prices to get orders will nothelp them or their rice farmers at all.

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

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

Thailand and Vietnam had earlier signed a memorandum ofunderstanding on cooperation in rice exports, but no concreteactivity has yet been initiated from either side. This is not discouraging to the Thais. ''The most important thing is information sharing,'' saidSonboon. ''We should be able to share whatever we have betweenus."

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

Pongpol says Thailand's unemployment has led to a heavierburden on villages, where many of the country's 1.7 millionunemployed have come to rely on the agricultural sector as a sourceof income. To help rice growers, the Thai government is operating several projects,including the adoption of a policy to maximize land use and toidentify 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 riceprices to address the surplus problem created by its decline inexports last year. Incentive credit has also been given to stateenterprises to buy rice from farmers at a ceiling rate, to assurethem better income. ''Rice stock facilities that belong to Vietnamese farmers arevery limited,'' said Dan. ''This puts pressure on them to sellrice 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 therural 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-scaleindustries and self-sufficient economies will helpease poverty. Vietnam has focused on assisting 1,000 of the poorest communes inremote areas to set up small-scale industries and develop agriculture. Thailand, whose king had urged Thais to return to thevillages, is going in the same direction.

(Inter Press Service)

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