The Global New Light of Myanmar interviews Myanmar Rice Federation’s Chairman Dr Soe Tun about the state of Myanmar’s staple crop and its most important agricultural export commodity.
By May Thet Hnin
Q: What is the state of the rice industry in Myanmar?
A: The government relaxed its control of the rice industry in 2003. Since FY2012-2013, rice export volume has exceeded one million tons per year.
Q: Rice from Myanmar does not meet international standards and fails to sell for good prices in the international market. How can the federation improve rice quality?
A: This is mainly due to low quality seeds. There are not enough rice seed companies in Myanmar. So, farmers recycle paddies from their farms to plant rice the following year.
Also, modern processing machinery and technologies are beyond our farmers’ means. There are many other obstacles, including lack of storage. Past governments have tried to improve the agricultural sector, but still this sector has not yet reached a satisfactory level.
Q: Attracting investment is high on the government’s list of priorities, but foreign direct investment in agriculture is less than one per cent of all investment. Why is this so?
A: The key problem is that there are still big risks in agriculture, including the lack of a crop insurance system. Investors do not dare to make investment in the sector as the sector cannot guarantee a profit. It is possible that flooding could wipe out any profits. High real estate prices is another barrier for investors. Often there is no way to access agricultural land as it is a state-owned resource. Another problem is that it is difficult to access land records or get approval from the Myanmar Investment Commission to utilise land. Myanmar also has logistical problems, including poor infrastructure and lack of electricity in rural areas.
Q: State-run Myanma Insurance said it is working to implement crop insurance system soon. What are the benefits of crop insurance for farmers?
A: The country urgently needs a crop insurance system. This plan has been developing even during previous governments. In 2012, about 400,000 acres of farmlands in Ayeyawady Region were damaged by flooding. At that time, officials from Myanma Insurance said that it would not offer crop insurance as it could not do so and be certain to remain solvent. Farmers are going into debt due to floods that come about every three years and there is no system for them to recover their losses as there is no crop insurance system.
Currently, farmers rely on loans. But a loan system coupled with crop insurance would provide more benefits to farmers. In my opinion, I think it is difficult for farmers to pay full premiums for crop insurance. The solution is probably some kind of government subsidy for crop insurance.
It is also necessary to raise public awareness about insurance in areas at higher risk for natural disasters. Similar programmes have been implemented in neighbouring Thailand and India. I would like to urge responsible bodies in our country to follow their example.
Q: What are the risks of contract farming arrangements between farmers and agribusinesses?
A: Contract farming is an appropriate partnership for growth. Farmers have access to land and labour, but no capital. Companies have access to capital and to markets, as well as to technology. This is a good system for companies and farmers. Under this system, both share profits according to their partnership agreement.
But there are legal and regulatory requirements for foreign investors seeking to establish contract farming deals in Myanmar. The Myanmar Rice Federation has submitted to the Ministry of Agriculture, Livestock and Irrigation terms and conditions which should be included in contract farming agreements.
There are numerous forms of contract farming. They range from formal to informal agreements. With informal contract farming agreements, investors provide cash and fertilizer to farmers in advance and then take the yield. This method has been practiced in the country for a long time. In 2009, specialized agribusiness companies emerged to do contract farming at a commercial scale in anticipation of healthy exports. However, they sustained losses due to management challenges and climate change.
At that time, some farmers faced further difficulties because they still had to pay full settlements to their contract farming partners, even as companies lost billions of kyats within three or four years. The weak point of this system was poor implementation. Myanmar needs to establish stronger policies, laws and regulations to build in checks and balances between companies and farmers.
Q: Please describe the proposed national agriculture service centre project promoted by MRF, MAPCO and CITIC (China) Company last month?
A: Agribusiness service centres will be constructed in 33 places in different states and regions, except Kachin, Chin and Kayah states, and Taninthayi Region. The estimated cost of the whole project is US$400 million. We are planning to provide services to farmers including the sale of pedigree seeds, fertilizer and machinery for land restoration, crop drying and storage services, processing facilities and contract farming services.
MRF and MAPCO signed an MoU with CITIC and we tried to obtain a $400 million loan from the World Bank and the Asian Development Bank. But it is not certain that we would be granted the loan. Therefore, we tried to seek a development loan from the Chinese government. CITIC is a privately owned Chinese company with shares owned by the Chinese government. Currently, we are planning to write a proposal for the project. If we receive the loan, we will implement the project as soon as possible.
Q: What are the latest developments in Myanmar’s rice export sector?
A: Myanmar exported 1.7 million tons of rice last year. But this year, we intend to export two million tons. We have already exported 860,000 of tons since April. Currently, 60 per cent of our rice exports goes to China. We also export Myanmar rice to African, Asian and European countries, including Spain, Germany, Japan, Malaysia, Poland, Portugal, Romania, Singapore and Bangladesh.
Q: Lately, China has complained about illegal rice exports from Myanmar. How are their concerns being addressed?
A: China is our prime agricultural market. We export not only rice but also corn, watermelon, cucumber, mango and sugar. Although Myanmar exporters pay an official two per cent tax for agricultural products, our export trade is often regarded as illegal by the Chinese, who sometimes seize our goods and find fault with our products. The main problem is if China does not purchase our products, we experience big losses. Sometimes, China closes the market for 10 days to protect their farmers. China imposes 180 per cent tax on agricultural products exported. We would prefer to sell our products to China on a government-to-government basis, but even under such a system, we will find it difficult to sell our products legally if they impose high taxes.
The previous government signed an agreement to export over 100,000 tons of rice to China in 2015 but since then, we have exported only about 80,000 tons of rice under this agreement. Recently, we have not exported yet any products to China during the current government.
Q: What is the situation of the domestic rice market?
A: Recently, global rice prices have increased, so domestic prices have also increased because of high demand from abroad. Annually, rice prices increase in August and September. Rice prices will continue to increase until October and November.
Q: How can MRF stabilize rice prices?
A: Around the years 2012, 2013 and 2014, the former government purchased and stockpiled rice reserves at a cost of Ks14.5 billion, comprised of Ks10 billion in government loans and Ks4.5 billion in private sector funds. The rice reserve was usually bought at the floor price when the global rice price decreased during the harvest. Then, the government resold rice reserves at more competitive prices when prices increased locally. Additionally, the government also provided stockpiled rice to regions struck by natural disasters.