Rice Bowl Plan Brings Myanmar Back to the Future: Southeast Asia

Myanmar plans to more than double
rice shipments as the country that used to be the largest
exporter embraces trade and opens its economy, challenging
Thailand, Vietnam and Cambodia for sales amid a global glut.

Shipments may increase to 2.5 million metric tons in
2014-2015 from an estimated 1.8 million tons in the year that
started April 1, according to Toe Aung Myint, director general
of the department of trade promotion at the Ministry of
Commerce. Exports are targeted to increase to 4.8 million tons
in 2019-2020, Toe said in an interview in Hong Kong.

Myanmar's shift to democracy after five decades of military
rule and its reengagement with the global economy are spurring
interest in the agricultural potential of one of Southeast
Asia's poorest states. President Thein Sein said the country can
supply food to the region, provided it attracts investment.
While infrastructure bottlenecks and competition for sales are
seen complicating the drive to increase shipments, the country's
exports are cheaper than output from rivals including Thailand.

"Myanmar has a capacity to produce more but its logistics
do not allow them to export a large volume," said Mamadou Ciss,
president of Alliance Commodities (Suisse) SA, which handles
400,000 tons a year. "Port facilities are very congested. It
needs to work more on facilities and quality."

The price of Thai 5 percent broken white rice, an Asian
benchmark, tumbled 24 percent to $442 a ton this year. World
reserves will expand 1.2 percent to 109.3 million tons in
2013-2014 as stockpiles in the five largest exporters including
Thailand, India and Vietnam expand to records, according to
forecasts from the London-based International Grains Council.

'Cheap Rice'

"Cheap rice from Myanmar makes the grain become
attractive, compared with Thailand and Vietnam, which are about
$80 a ton more expensive," said Kiattisak Kanlayasirivat, a
Bangkok-based director at Ascend Commodities SA, which trades
about 500,000 tons a year. "Sales will continue to increase."

Agricultural output has fallen behind potential and efforts
to revive the industry can take advantage of rising food demand,
McKinsey Global Institute said in a report in June, noting
Myanmar used to be known as the "rice bowl of Asia."

Milled rice supply is expected to total 12.9 million tons
this crop year, topping local demand of 11 million tons, and
output may increase to 13.3 million tons next season, Toe said.
Export figures and forecasts include trade with China, which
accounts for about half of total shipments, he said.

'Produce More'

"We see promising opportunities in the sector because the
global rice market grows and China demand increases," Toe said,
listing China, African countries, Russia and Europe as buyers.
"We have resources and can produce more to meet demand."

The rice industry contributed about 13 percent of gross
domestic product in 2011, and more than 70 percent of the
population is connected with the trade, according to a
presentation from Toe. Myanmar's strengths are low production
costs, vast land and abundant water and labor, according to a
2012 study from the Manila-based Asian Development Bank.

Myanmar shares a border with China, and the U.S. Department
of Agriculture forecasts rice imports by Asia's largest economy
will rise to 3.4 million tons next year, making it the biggest
buyer. China's purchases may total 5 million tons in 2014,
according to Samarendu Mohanty, senior economist at the
International Rice Research Institute.

Largest Shipper

Myanmar was the world's biggest rice exporter from 1961 to
1963, with shipments of 1.6 million to 1.7 million tons a year,
until it was displaced by neighbor Thailand, according to data
from the USDA that starts in 1961. Exports fell as low as 15,000
tons in 1997. Last year, it shipped 690,000 tons to rank ninth
worldwide.

A state rice-buying program in Thailand that's cost $21
billion has spurred output while swelling government stockpiles
to a record and hurting prices. The Thai hoard will increase 18
percent to 14.9 million tons in 2013-2014, according to the IGC.
Thailand shipped 7 million tons last year and was that season's
largest exporter after India and Vietnam, which traded 11
million tons and 7.2 million tons respectively, USDA data show.

Cambodia is also boosting exports, heightening competition.
In November 2012, Prime Minister Hun Sen targeted shipments of 1
million tons by 2015 and called for investment. The USDA
forecasts the 1 million ton total may be reached next year.

Myanmar needs to develop infrastructure for processing,
shipping and transport, Concepcion Calpe, a senior economist at
the United Nations' Food Agriculture Organization, wrote in an
e-mail. The privatization of rice exports in 2003 helped to
unleash the sector's potential, and the opening of land to
overseas investors in 2010 was another milestone, Calpe said.

Infrastructure Quality

The country ranked 129th worldwide in a 2012 study of
logistics by the Washington-based World Bank that assessed
benchmarks including quality of infrastructure. Thailand placed
38th, Vietnam 53rd and Cambodia 101st.

About $320 billion needs to be invested in infrastructure
by 2030 if the economy is to expand 8 percent a year, according
to the McKinsey study. Transport networks are insufficient to
support growing activity, the Asian Development Bank said.

While loading a 20,000 deadweight-ton vessel with rice
takes about four days in Thailand or Vietnam, the task can take
eight days in Myanmar at present, said Kiattisak, the director
at Ascend Commodities.

"Myanmar certainly has the potential to become one of the
leading rice exporters, if not the leading one, in the medium
run," said the FAO's Calpe. "It is one of the few countries in
the region that faces no land, water or labor constraints and it
is strategically located, having China and India as neighbors."

To contact the reporter on this story:
Supunnabul Suwannakij in Bangkok at
ssuwannakij@bloomberg.net

To contact the editor responsible for this story:
James Poole at
jpoole4@bloomberg.net

Source: http://www.news.myanmaronlinecentre.com/2013/11/28/rice-bowl-plan-brings-myanmar-back-to-the-future-southeast-asia/