Thailand drops rice cartel plan amid opposition
May 08, 2008
Thailand's Foreign Minister Noppadon Pattama said Tuesday that the
kingdom is dropping its previous plans to create a cartel with other
rice-exporting countries in Southeast Asia, citing concerns over food
security.
"If Thailand sets up a rice cartel and fixes a price, that will worsen
food security," Noppadon told press.
The statement signaled the about-face on the cartel after Prime
Minister Samak Sundaravej said last week that Thailand had agreed in
principle to form an OPEC-like cartel with Mekong nations of Vietnam,
Cambodia, Myanmar and Laos.
The five nations produce a combined 600 million tons of rice each
year, about 14 percent of the world output.
The proposal, staunchly backed by Cambodia and met with positive
responses from other three countries, came under fire of rice-
importing countries such as the Philippines which claimed that the
formation of an oligopoly may deprive a large number of people of
their rights to reach for staple food.
IDEA OF RICE CARTEL REVIVED
Thailand first floated the idea of rice cartel in 2001 to stave off a
shrink in market share caused by higher export price. Samak revived
the long-dormant rice cartel talk to give rice producers greater
control over prices which has tripled since January this year.
The proposal was welcomed by Cambodia, whose government spokesman said
the formation of such an association would facilitate the exchange of
information and help fend off a price war.
The rice cartel, tentatively named Organization of Rice Exporting
Countries (OREC), is aimed to ensure food stability and address food
shortages in the region and the world, Cambodia Prime Minister Hun Sen
said Monday.
Lao Foreign Minister spokesman said his country would seriously
consider the idea, saying a cartel would give the group of countries
"bargaining power."
After meeting with visiting Myanmar Prime Minister Thein Sein last
Friday, Samak told media that Thein Sein has approved in principle of
the thought.
Vietnam has also made its stance clear that it can join the OPEC-like
body if the future organization ensures the harmonization of interests
of both Vietnam and the international community.
ARGUMENT OVER PLAN
Despite the major rice-exporting nations' enthusiasm for the plan, the
Philippines, the world's biggest rice importer, slammed Thailand's
proposal as a "bad idea."
Edgardo Angara, chairman of the Philippine Senate's Committee on
Agriculture, worried that a small group of producers could control the
staple food and price it beyond the reach for millions and millions of
people. Senior officials of the island country blasted the proposal,
warning it would aggravate hunger and poverty.
The Asian Development Bank (ADB) also came out against the idea of
setting up an OPEC-style rice cartel. The bank's president Haruhiko
Kuroda suggested it would be better to allow market forces to operate
freely.
In a time when the global food market is experiencing continuous price
hikes, hoarding and panic buying, raising the proposal is
inappropriate and may not be beneficial to the rice exporting
countries and their farmers in long term, said He Changchui, regional
representative for Asia and the Pacific of the Food and Agriculture
Organization (FAO).
Even inside Thailand, the Rice Exporters Association tried to explain
to the premier why OREC is technically impractical. They said unlike
oil, rice is renewable and sustainable, and it can grow pretty well
anywhere. They added that the rice-exporting countries can't fix price
as OPEC does because they can't control their production.
Analysts say that even if the five countries agree on a broad price
band, it would be difficult to enforce since buyers could turn to
elsewhere to purchase.
They pointed out that maintaining rice prices would please large-scale
rice farmers and traders in countries like Thailand and Vietnam, but
it would enrage nations which rely heavily on imported rice.
REPLACEMENT SUGGESTED
To replace the short-lived rice cartel proposal, Nappadon said Tuesday
that he favored the creation of a Council of Rice Trading Countries
(CRTC) to discuss boosting rice production, exchange of technology and
improving rice quality.
The foreign minister invited ambassadors from India, Pakistan,
Cambodia, China, Vietnam and Myanmar to appoint representatives for
the council in the next few months.
Cambodia, however, still insisted that an association of rice
exporting countries could still be helpful to avoid fierce competition
which will threaten the livelihoods of people in the region and
beyond.
The country's Information Minister Khieu Kanharith said they would
pursue discussions about forming such an association at a meeting in
Vietnam later this year.
After the Philippines scrapped its largest 675,000-ton rice tender of
the year, Thai rice prices dipped by some 5-10 percent Tuesday. But
experts forecast that Thai rice prices are expected to remain strong
as the current fall is not a big deal compared with the price surge
over the last few months.
The ADB announced last week emergency funding to help poor countries
grappling with spiraling rice prices. It warned that price for staple
food could keep rising and it would stifle economic growth in the
region.
The benchmark Thai variety, Pathumthani fragrant rice, was priced two
weeks ago at 998 dollars per ton for export, up from 512 dollars in
January.
Thailand is world's No. 1 rice exporter and it shipped an estimated
9.5 million tons of rice overseas in 2007.
Source: Xinhua
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