Myanmar: Rice on the way back to the top

Rice is mounting a steady comeback in Myanmar. Exports in the 2012/13 fiscal year have already reached 1.2m tonnes thus far, surpassing its peak export period in 1956, and the Myanmar Rice Industry Association (MRIA) projects exports to reach 1.5m tonnes by the end of the fiscal year, double the 778,000 tonnes exported in 2012. This performance could be maintained – if not boosted further – in the coming years by increased foreign investment.

In the 1950s Myanmar had one of South-east Asia’s strongest economies, promising to become its top rice exporter as it shipped out over 1m tonnes per year. In the following years, however, when the country entered a decades-long global economic isolation, Myanmar forfeited the role, while the rest of South-east Asia “transformed itself through market-oriented reforms”, according to the IMF.

However, since Myanmar began relaxing its borders in 2011, and has steadily increased its efforts to once again take part in the global economy, the agriculture industry is showing its potential to become the country’s most-profitable sector. According to the Asian Development Bank (ADB), some 25-30% of exports come from the agriculture sector, which is also the largest source of employment in the country. Recent developments in the rice segment, such as increased use of fertilisers, high-quality seed and large-scale mill development, which have pushed production capabilities further, emphasise the sector’s promise.

At present, Europe, Singapore, Australia, China and Thailand are the primary destinations for Myanmar rice exports, but this year has also been marked by trade route diversification. Japan and South Korea have shown interest in importing Myanmar rice, and border trade with India is now permitted. Myanmar will also begin exporting a total of 500,000 tonnes of rice per year to Indonesia, once the two countries ink a deal, which is expected in March.

The government has taken a number of other steps to nurture growth potential across the sector, which, in turn, is expected to help revive the overall economy. In November 2012, President Thein Sein signed a new foreign investment law, which no longer includes a 35% limit on foreign ownership of business in the agriculture sector. The state also signed on for loans from the ADB and the World Bank, designated for the bulk of the government’s economic revitalisation procedure, which includes significant investment in rice production and other agricultural development projects.

Much of the $80m World Bank loan will fund agricultural infrastructure development, while the ADB loan will be filtered into Myanmar’s delta region, where much of the rice production occurs. The funds from the ADB loan will be used to improve and expand transport infrastructure in the region, as well as increase irrigation capabilities, which should significantly boost crop yields.

To help support rural farmers in Rakhine State, the National Rice Reserves Supervisory Committee of Myanmar (NRRSC) intends to buy 3000 tonnes of rice for reserve in 2013. The NRRSC made its first purchases in early 2013, offering a price higher than market value so that the surplus can pay for the production costs currently burdening farmers in the region. This assistance, combined with diversification of cultivation techniques, could potentially boost land value, thus increasing farmers’ eligibility for loans, as well as help the country rival its stronger competitors, Thailand and Vietnam.

A number of foreign agribusiness firms, including Singapore-based Wilmar, and US-based firms DuPont Pioneer and Cargill, are already exploring venture opportunities, which include rice, livestock and fertiliser. Tin Htut Oo, head of the National Economic and Social Development Advisory Committee, predicts that use of fertiliser in Myanmar will at least double due to planned expansion efforts.

With the new law allowing greater freedom for foreign investors and myriad venture opportunities available inside the newly opened borders, many agribusinesses and commodities traders consider the country to be a bountiful frontier. Supporting that notion is the fact that Myanmar’s geographical advantages, including favourable climate, three major rivers and other plentiful water sources, make it an ideal candidate for agricultural investment.

Myanmar would jump from ninth to fifth on the list of top rice exporters globally, surpassing Uruguay, Cambodia and Brazil, if it reaches its anticipated export volume of 1.5m tonnes for the 2012/13 fiscal year. Investment in agricultural infrastructure and diversified farming techniques could bring a rise in export totals to 3m tonnes by 2015. To do so, export goals will need to be supported with proper investment, which could lead to Myanmar one day reclaiming its status as the world’s top rice exporter.