Asian rice politics eats into food security

Last year’s mythical rice crisis could increase calls to stop rice exports


Fri, Jul 10, 2009 - Page 9

India has 24 million tonnes of rice in stock but still refuses to lift an export ban on the grain for fear of political repercussions at home.

Thailand has 8 million tonnes of rice waiting to be sold to buyers in Africa this month, but the government dares not release its stock for fear of accusations of corruption.

“Rice is a political commodity,” said Concepcion Calpe, senior economist and leading rice expert at the Rome-based Food and Agriculture Organization (FAO).

“It is political from the consumers’ point of view, who want low prices, and the producers point of view, who want high prices,” she said. “Obviously, you have governments that fall because of rice.”

Rice riots are actually rather rare nowadays.

With growing affluence, the slow spread of democracy in Asia and a trend toward populist policies to win elections in the countryside, it is the foreign consumer who is more likely to bear the brunt of governments’ self-serving rice policies, as was demonstrated by the so-called “food crisis” of last year.

The seeds of that crisis arguably sprouted in Australia, which suffered drought and a diminishing wheat crop, which then affected exports to India.

Worried about diminishing wheat stocks, India slapped a ban on exports of non-Basmati rice in March last year.

Vietnam, the world’s second-biggest rice exporter after Thailand (India usually ranks third) followed suit, capping its rice exports at 3.5 million tonnes, leading to a perceived rice crisis. Rice prices tripled, peaking at US$1,100 a tonne in May last year.

In fact, there was no rice supply shortage last year. Global rice production increased 4 percent to 688 million tonnes, FAO said.

Thailand, one of the few countries in Asia that placed no export restrictions on its rice exports last year, reaped the reward.

The kingdom shipped 10 million tonnes abroad, earning 200 billion baht (US$5.6 billion) in foreign exchange.

Thailand is unique in Asia in that almost half of its local production, about 20 million tonnes of rice a year, is for export.

But this year Thailand is suffering the drawbacks of the government’s growing role in what used to be a free-market rice trade.

Since 2001, Thai governments pushing populist policies have been offering above-market prices to purchase rice from farmers as a means of bolstering local prices and farmers’ incomes, good goals in theory.

The paddy-purchase schemes, however, have been tainted by numerous corruption scandals as the government effectively monopolized the rice stocks.

Only a handful of big rice exporters have won past government auctions at prices below the market’s, a sure sign of something fishy.

“Not everybody can bid for the government rice, you have to have connections,” said Chookiat Ophaswongse, president of the Thai Rice Exporters Association.

The last auction, on 6 million tonnes of second crop paddy, has been canceled because of corruption allegations, but uncertainly about what to do now has frozen supply, even though buyers from Africa are asking for Thai rice this month.

“They can’t release it because it’s become a political hot potato,” said Nipon Poapongsakorn, president of the Thailand Research and Development Institute, a think tank.

The Democrats, who lead the current coalition government, will be accused of colluding with a corrupt bid if they release the stocks now, he said.

Hopefully, the Democrats will do away with the rice-pledging scheme altogether before they leave office and replace it with an alternative program that assures farmers a decent price for their rice, but keeps the government out of the trade.

Given such convoluted political considerations, it is understandable that some countries are worried about their food security, even if last year’s shortage was essentially an illusion.

In Cambodia, Kuwaiti investors have reportedly signed 99-year leases for huge tracts of Cambodian rice farmlands to secure their own supply.

Chan Tong Yves, secretary of state for the Cambodian Ministry of Agriculture, confirmed there were plans to lease farmland to Kuwaiti investors, but would not provide specific details.

Such deals raise worries.

“One issue is do these countries have the legal system to protect people who claim a right to the land?” the FAO’s Calpe said. “And secondly, are the governments solid enough to handle these investments in a transparent manner, beneficial to the local community?”

What would be preferable is a free rice market that works.

“If there is a proper marketing policy and the government does not intervene, there is no need for Middle Eastern investments in rice farms,” analyst Nipon said. “They don’t need to come here as long as the government keeps its hands off.”