Lifting Rice Controls: More Questions Than Answers
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Lifting Rice Controls: More Questions Than Answers

By Min Htet Myat MAY, 2003 - VOLUME 11 NO.4

Burma’s new rice trading policy change is a step in the right direction but several questions remain unanswered. On April 24, one week after the Burmese Buddhist New Year, Secretary Two of the ruling State Peace and Development Council (SPDC) Lt-Gen Soe Win issued a statement that scrapped Burma’s 30-year-old state rice procurement policy which was introduced by Ne Win’s regime on Oct 10, 1973. Beginning from the next harvest, before the end of this year, the government will no longer buy paddy directly from farmers. At the same time, the government announced a new trading policy, which stipulates: "All nationals have a right to trade rice. The price will be according to the prevailing rates, and monopolizing the rice trade will not be allowed for anyone or any organization." Citizens are now free to participate in the domestic rice trade. As far as rice exports are concerned, however, citizens will have to follow the three guidelines set by the newly formed Myanmar Rice Trading Leading Committee (MRTLC): rice will only be exported when it is in surplus, exporters must pay a ten percent export tax, and the net export earnings after taxes will be shared between the government and rice exporters on a 50-50 basis. Rice trading associations will buy rice directly from farmers and then sell to the Myanmar Agricultural Produce Trading (MAPT), which then distributes rice to the armed forces at cost. The MRTLC comprises ministers from related economic sectors with participation from private sector representatives from organizations such as the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI), the Myanmar Rice Traders Association and the Myanmar Rice Millers Association. The junta is optimistic this policy change will put Burma’s rice sector back on its feet. But what do the people think of the change? They would generally be delighted and welcome these measures, but 40 years of military rule has bred popular skepticism at the government’s sincerity. This is the second time the junta has scrapped the state-purchase of rice policy. In Nov 1997, they informed the public that the state would procure paddy through a tender bid system, but that plan never materialized and requirements to sell paddy to the state remained. There are lessons to be learned from Vietnam. The country was a rice importer until Apr 1988, when the government instituted Resolution No 10, which eliminated the rice procurement system by the state and abolished agricultural collectives. Shortly after Resolution 10 was passed, Vietnam became the third largest rice exporter in the world after the US and Thailand. Now, it is the world’s second largest rice exporter after Thailand. This suggests that Burma could significantly increase its rice output once it abandons the compulsory sale of paddy to the state. The new policy could benefit many. Giving farmers license to sell at market prices instead of to the state at a discounted price will boost their motivation to increase yields and hence paddy production. Increased yields would not only help sustain rural development but would also, in theory, prevent exports from digging into the supply of rice needed for domestic consumption. Furthermore, the policy change would integrate Burma’s domestic rice market more closely with the world market. Paddy farmers would gain, as the domestic price of rice would fall in line with the world market. More important, competition for the export market among private rice traders would eventually raise efficiency. But several questions remain unanswered. First, it is not clear whether the government will still intervene in the rice trade since nobody knows precisely what "guidelines" have been prescribed by the MRTLC. Second, how can rice trading associations earn a profit if, according to the new policy, they buy paddy from farmers only to sell it to Myanmar Agricultural Produce Trading for the armed forces at the same price at which they have purchased it? Third, until now, civil servants, like the armed forces, obtained rice at a subsidized rate from the state. Will the government be able to justify making them buy rice at prevailing market prices? Has the government set measures to relieve civil servants from the rising price of rice? So far, no one knows. Rumors that civil servants will receive another pay rise, which would be the third increase since 2000, are the products of wishful thinking.

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