Myanmar seeks to rejoin top rice exporters

YANGON Thu Aug 9, 2012 12:21am EDT

Farmers plant rice seedlings in a paddy field on the outskirts of Yangon July 13, 2012. REUTERS/Soe Zeya Tun

Farmers plant rice seedlings in a paddy field on the outskirts of Yangon July 13, 2012.

Credit: Reuters/Soe Zeya Tun

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YANGON (Reuters) - As Myanmar emerges from decades of isolation and oppression, it hopes to reclaim its nearly forgotten status as the world's biggest rice exporter.

That's a tall order, but industry and government officials have begun drafting plans to revitalize the industry after years of neglect and military mismanagement.

No country's appetite is quite like Myanmar's, which boasts the world's highest annual rice consumption at 210 kg (460 lb) per person. It makes up 75 percent of the country's diet, according to government statistics.

That helps explains its economy.

Agriculture — including farms, fisheries, forestry and livestock -- accounts for 43 percent of gross domestic product, a quarter of exports and 70 percent of employment. Industrial production, including exports of natural gas, is about 20 percent of the $43 billion economy.

As Myanmar undergoes the most breathtaking reforms in the former British colony since a 1962 military coup when it was known as Burma, the government is looking for ways to revive the rice industry and reclaim its nearly forgotten status as the world's top rice exporter in the 1960s.

A top priority is to give farmers better access to high-quality seeds by encouraging investments from multinationals such as Monsanto Co and DuPont Co's Pioneer Hi-Bred seed unit.

"In China, every township has a seed production company," Tin Naing Thein, National Planning and Economic Development Minister told Reuters. "The government will encourage and support them here."

A recent easing in U.S. sanctions could make that easier. DuPont Pioneer, for instance, is "looking forward to exploring opportunities in Myanmar", spokeswoman Cookie Lo said in an e-mail.

Myanmar is predicting a big increase in exports, projecting shipments of as much as 2 million tonnes next year and 3 million by 2015, says Ye Min Aung, Secretary General of the Myanmar Rice Industry Association. That's up sharply from 778,000 last year.

It expects exports to double this year to 1.5 million tonnes. However, the U.S. Agriculture Department attache has forecast exports would likely tumble 23 percent in 2012, due to increased supplies from other rice producers.

CREDIT REFORM

A new agricultural bank was set up two months ago to provide credit to small farmers, many of whom are struggling with debt.

Myanma Agro-business Public Co has 76 shareholders, including agriculture development banks (ADCs) run by local tycoons that specialize in micro-credit. With an initial 16 billion kyat ($18 million) in capital, it will publicly sell shares after its business license is approved, says Myo Thuya Aye, managing director of Ayeyar Wun Trading Co Ltd, an ADC.

The bank is similar to one set up in Indonesia, whose political and economic reforms over the years Myanmar is studying. Unlike the Indonesian bank, Myanmo Agro-business will not be state controlled.

That could be a problem, says David Dapice, an economist at Harvard University's Ash Center, who helped Bank Rakyat Indonesia build a network of small, profitable outlets in the 1980s.

"In Indonesia, the government bank was able to act like a private bank and did very, very well. Rural credit became a profit centre," he says. "I have nothing against private banking going into rural areas. But I find they are generally reluctant to do so when the rural areas are not prosperous."

That's already happening. After lending $100 million in 2010/11, the ADCs cut that back to $25 million in the year to March, the U.S. Agriculture Department attache says.

"To have farmers thrive, Indonesia realized that the government had to invest in rural infrastructure and provide a realistic exchange rate, not just provide credit. The pieces are not yet in place in Myanmar," Dapice said.

ANTIQUATED MILLS

Mills are another problem. About 80 percent are small-scale, antiquated businesses that struggle to produce the white rice kernels expected by international buyers. As a result, mill losses, measured mostly by broken grains, are 20 percent higher than in Thailand and Vietnam, says Ye Min Aung at the rice industry association.

Several rice exporters are building large-scale mills that can handle as much as 200 tonnes a day, says Tin Htut Oo, head of the new National Economic and Social Development Advisory Committee, a body that advises the government.

"We can increase up to two million tonnes very quickly within one or two years," he says of rice exports.

He also expects fertilizer sales to boom. While Myanmar's farmland is similar in size to Vietnam and Thailand, it uses two-thirds less fertilizer - just a million tonnes a year. Expanding that, he says, could produce a big increase in yields.

"You can imagine in a few years' time the use of fertilizer in Myannar will at least double. I wouldn't be surprised if it tripled. That is a big area of investment."

Myanmar's total rice consumption accounts for 11 million to 13 million tonnes per year, compared with milled rice production of 14 million to 15 million, the rice industry body says. Target export markets are Africa, Bangladesh, Indonesia, Malaysia, the Philippines and East Timor.

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