A threat or a blessing?

ASIA FOCUS

Surging rice exports from Burma and Vietnam have sparked fears in Thailand that the country will lose market share and may even be displaced as the world's No. 1 rice exporter.

But some leading industry experts say the region's booming rice trade can stimulate Southeast Asia's economy as a whole and give Thailand the chance to bolster its position by becoming the trading centre for what will be the world's major rice trading area.

"Instead of worrying about growing rice exports from Burma and Vietnam, we should focus on and develop our expertise, marketing, delivery efficiency, rice processing capability and infrastructure, to develop Thailand as rice trading centre," said Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association.

This will maximise the benefits granted under the Asean Free Trade Area (Afta) agreement, under which Brunei, Malaysia, Indonesia, the Philippines, Singapore, and Thailand, agreed to eliminate import tariffs on rice on Jan 1. Burma, Cambodia, Laos and Vietnam are set to follow suit by 2015.

The region produced about 108 million tonnes of rice in 2008, about 24% of the world's total production of 433 million tonnes.

Thailand and Vietnam are the world's two largest rice exporters with a combined export volume of more than 14 million tonnes, or half of world's total last year.

Vietnam exported about 6 million tonnes of rice in 2009, up from 4.6 million the year before.

Burma shipped about one million tonnes last year, a massive increase from the 30,000 tonnes it shipped just a couple of years earlier.

Mr Chookiat said that rice from these countries, especially Burma, was very competitive in price, due largely to lower production costs and higher yields.

"Burma has big potential in rice exports thanks to its rich cultivation area along the Irrawaddy Delta that helps the output to reach 30 million tonnes of paddy a year," he said.

"But it still needs better management and technology."

Making Thailand the region's trading centre for rice would take a few years, however. The country first has to open the rice market to Asean members and clearly separate imported grain at warehouses for re-export to prevent any being mixed with Thai rice, he said.

Many foreign brokers and trading firms have flocked to Burma and bought paddy at low prices, he said.

The co-operation with Burma is clearly aimed at ensuring Thailand and Burma can avoid a price war over lower-grade rice, 25% white rice in particular, as Burma's rice is much cheaper. Last year it quoted selling prices for 25% grade white rice at US$340 (11,256 baht) to $350 a tonne, compared with about $500 for Thai rice.

Mr Chookiat said Vietnamese rice exporters had also offered similar co-operation to Cambodia, where rice production has been increasing in recent years.

Pramote Vanichanont, honorary president of the Thai Rice Mills Association, echoed Mr Chookiat's views.

He called on the government to set strategic plans for the rice industry over the next five to 10 years to cash in on the larger Asean and Asean+3 (China, South Korea and Japan) markets.

"We need to keep our focus on supplying premium quality rice and find market niches with added-value rice products such as medicinal and high-nutrition products," Mr Pramote said.

Clear strategic vision and direction are essential if Thailand is to maintain its position as the world's leading rice exporter and face down increasingly tough competition over the next five to 10 years, said Mr Pramote said.

Mr Pramote shrugged off the threat from rising exports from Burma and Vietnam.

"Production costs in Burma are quite low at between 1,500 to 1,800 baht per tonne of paddy, compared with about 4,600 tonnes in Thailand, but product quality is much different," he said.

Thai rice has a longer kernel than the Burmese grain, which also has a different taste and colour.

Burmese rice millers sought assistance from their Thai counterparts to develop different rice varieties at a meeting of the Thai and Burmese rice millers associations late last year.

The Burmese millers' association, with more than 900 members, is upbeat and enthusiastic about building exports from the country.

They expect trading regulations to be relaxed in the months leading up to this year's general elections.

Burma was the world's largest rice exporter before Ne Win plunged the country into isolation in 1962.

"They adjust themselves quickly and we should co-operate with them to strengthen the region as rice trading centre," said Mr Chookiat.