by Piyaporn Hawiset
16-JUL-99
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 challenge for Thailand and Vietnam, which are among the world's largest rice exporters, is how to cooperate at a time when competition tends to heat up for tighter markets.
"Prices of our jasmine rice have dropped because the Asia market turned to cheaper and lower-quality rice," Thailand's Agriculture Minister Pongpol Adireksarn said in Bangkok in July. This, he adds, reflects the region's financial hardships in recent years.
At a meeting organized by the United Nations Food and Agriculture Organization (FAO) in June 1999, 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.
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 of urban economies. The world's rice trade in 1999 was expected to reach 22.1 million tonnes, about 5.8 million tonnes below that of 1998. At the same time, in 1999 Thailand's projection for paddy output increased to 23 million tonnes, up from 21.5 million tonnes in 1998. And although Vietnam's estimated output was reduced to 28 million tonnes, it shared the same problem about slackening demand and falling purchases. This also applies to other major rice exporters. China's total paddy output, for example, was predicted to increase to 197 million tonnes from 1998's 193 million tonnes.
One reason for declining prices is the increase in yields of rice-importing countries, paring their demand for overseas purchases. For instance, the supply in Indonesia, a big market for Thai rice that at the worst of its economic crisis scrambled to import the staple, became more sufficient of late. Indonesia expected a total 52 million tonnes of paddy rice output in 1999, much higher than 1998's 45 million tonnes. Dr Soleh Solahuddin, Indonesia's agriculture minister, said the country expected to import 1.5 million tonnes of rice in 1999, one-third of the 4.6 million tonnes imported in 1998.
"We now have a relatively stable food supply," he said. "As long as the main concern which is rice is enough and food prices are stable, we can manage well."
Even China felt 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 commodity to eight Southeast Asian countries, which are its major export markets, fell by 11 percent or $1.1 billion in 1998. A rice importer as well, China was predicted to lower its purchases of rice by half the 400,000 tonnes in 1998.
Competition among rice producers and exporters became unavoidable, but officials of rice-exporting countries also said cut-throat rivalry through slashing prices to get orders would not help them or their rice farmers any.
"Recently our rice prices haven't been as high as they should have been," Sonboon Pathaichang, manager of Thai Rice Exporters Association, said, because countries like Vietnam or Burma have been exporting as well.
"Although they still have limited amounts of exports, it has made us put efforts in trying to keep a good price for farmers," he explained.
Likewise, "the fact that Vietnam's cost of production is lower while yields per unit is higher than us makes it a bit difficult for us to compete in terms of pricing," Sonboon said. However, he says the situation was still within control.
"We aim to export about 5.3 million tonnes this year and in the fist six months of the year, we have already sold 2.8 million tonnes. Although Indonesia will buy less, we hope to find some other buyers," Sonboon added.
Thailand and Vietnam had earlier signed a memorandum of understanding on cooperation in rice exports, but no concrete activity has yet been initiated from both sides.
"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 rice sector. Pongpol says Thailand's unemployment led to a heavier burden on villages, where many of the country's 1.7 million unemployed have gone to rely on the agricultural sector as source of income. The two countries have been working on measures to reduce the economic burden of their farmers, which still make up bulk of their population. The Thai government was running projects to help rice growers, including the adoption of a policy to maximize land use and to identify suitable crops for food security and sustainability.
"This zone-reorganizing policy will stop farmers from using too much water resources in unsuitable crops," Pongpol noted. "It will help to move them toward more agricultural diversity, which would help in reducing surplus of agricultural products in the future."
For its part, Vietnam initiated a subsidy policy on rice prices to address the surplus problem created by its decline in exports in 1998. 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 rural villages, has faced reverse migration after Asia's crisis and Dan says the rural unemployment rate had by now increased by one percent. Thus, "we need to guarantee that farmers can earn enough for a living by initiating a price rate that help them maintain at least 10 percent benefit," Dan added.
Both the Thai and Vietnamese governments agreed that small-scale industries and aiming for self-sufficient economies would help ease poverty.
Vietnam focused on assisting 1,000 poorest communes in remote areas in small-scale industries and agricultural development. Thailand, whose king had urged Thais to return to the villages, turned to the same direction.