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Thailand Rice Import Plan: Watana 'testing the water'
The Nation, May 8, 2004
Commerce Minister Watana Muangsook's controversial proposal to import 1.5 million tonnes of rice from Laos, Cambodia and Burma is aimed at testing market reactions and creating a psychological boost for prices, major rice exporters said yesterday.

An exporter who asked not to be named said that the proposal was part of Watana's pricing strategy to boost the world rice price by commanding the global market.

"The three countries can't export their rice to Thailand anyway at this high volume," he added.

Burma, for instance, currently imposes a ban on rice exports because the country is facing a shortage. Laos does not have a high production of standard rice because it mainly produces sticky rice. Cambodian rice production is mainly for domestic consumption.

The exporter played down the controversy surrounding the Commerce Ministry's plan to import the large volume of rice from Thailand's neighbours, which together form an Economic Cooperation Strategy with Thailand. If Thailand does go ahead and import, it will mark the first time in the country's history that it has decided to let in foreign rice.

"I think Khun Watana realises well that it's almost impossible to import such a high volume of rice. So the announcement can be interpreted as his pricing strategy," the exporter said.

Vichai Sriprasert, president of the Thai Rice Exporters Association, said he supported Watana's plan to allow imports.

"We don't have to fear rice from neighbouring countries. Our rice is more competitive," he said in a TV interview.

Vichai added that at the moment exporters do not have rice in their stocks, making imports necessary.

He said the plan would be beneficial because it would increase supply and demand on the market and support domestic prices.

Opponents of Watana's plan said it would dampen prices in the domestic market because the influx of the cheaper imported rice would hurt local farmers.

"OK, Thai rice is like a Mercedes-Benz car, and the others are like Toyota. If the government lets Benz compete directly with Toyota, what will happen to Thai rice?" said Pramote Vanitchanond, president of the Thai Rice Millers Association.

Besides, the ministry's initiative to re-export the rice from Indochina to the world market would tarnish the image of Thai rice if the quality of the imported rice did not live up to expectations.

Chaisiri Leesirikul, managing director of KC Rungrueng Kankaset Co and also the owner of the Chai Mongkol Rice Mill in Khon Kaen province, said: "Rice millers will be doing well. But I am afraid that the farmers will suffer, because this is the first time that Thailand will import such a large amount of rice from neighbouring countries."

Other exporters said that in reality the government might be able to bring in a certain amount, but the announcement would psychologically enhance the Thai position as the market leader and enable the government to set rice prices on the world market.

"It is the best time to announce the import of rice in such a big lot because at the moment, the world is facing a drought of rice exports," said another exporter. "China and India don't have sufficient supplies to export rice this year."

Over the past couple of years, India has released a total of 11 million tonnes from its stock, effectively reducing the country's export capacity to maintain food security on the domestic market.

China, meanwhile, has seen its rice stock decrease over the past five years due to poor harvests. The Chinese authorities have unloaded stocks to maintain the domestic price.

But Thailand also has the problem of a fiercely competitive environment among 161 rice exporting entities. "These exporters tend to cut rice prices on the world market, which results in sluggish prices," this exporter said.

Watana plans to reduce the number of direct exporters to avoid the problem of price-cutting. As part of this strategy, he has let only one exporter win bidding so far this year for overseas sales, thus giving himself full bargaining power to negotiate prices.

At the moment, President Agri Trading has won the bidding to export 1.8 million tonnes of rice, at the expense of Capital Rice - the biggest exporter last year, when it exported 1.5 million tonnes.

Exporters warn that the pricing policy may be harmful in the long term. "A pricing monopoly has never proved to be an effective policy," said one of them.

Watana earlier floated the idea by saying that the import of the rice from Laos, Cambodia and Burma would support Thailand's plan to become a regional hub for the rice trade. The commerce minister argued that the Kingdom had the potential to export up to 10 million tonnes.

Around 26 million tonnes of rice are expected to circulate around the world market this year. The additional 1.5 million tonnes of Indochinese rice would be added to 8.5 million tonnes of Thai rice on the market at the moment.

Some Thai rice exporters have welcomed the project. They said the imported rice would bring in more foreign exchange when it is re-exported.
MGR Archive 9.5.2004
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