It’s been a rough year for rice producing countries, especially in Southeast Asia.

That’s because of El Niño which is among the strongest in two decades. Production levels have dropped enough to affect rice imports and global food prices.

As difficult as things are for producers, it’s even harder for countries which rely on rice but cannot produce it.

The world’s third largest importer of rice, the Philippines, is especially facing a dilemma. They’re experiencing a change in leadership, a drop in domestic rice production, and a recent ban on rice imports by private traders all at the same time.

In the face of all these challenges, the Philippine government and private sector are searching for alternatives to meet rice demand. One method they’ve found is forming a joint venture with Myanmar.

 

Philippines Must Resort to Rice Imports

We previously mentioned in another article that rice production levels have decreased significantly for the first time in six years.

They’re nowhere near 2008 crisis levels. But even a slight increase in this commodity’s price has the Philippine government on edge, considering the events of the last food crisis.

In 2008, widespread panic took place when the world realized there was going to be a rice shortage. The world’s top rice exporter, India, banned all rice exports which was the first domino to fall.

This led to food riots taking place all over the world, but most notably in the Philippines. The military cracked down on rice hoarders and placed restrictions on fast-food chains.

While theoretically sound, the current ban on importing rice by private traders could work against the government’s ambitions for rice self-sufficiency.

A ban in the Philippines was created in an attempt to end abuse of a rice import auction system. Under the system, importers with permits from government auctions offered other importers the use of their permits for a fee.

The burden of finding extra rice now falls on the shoulders of government which is now going through unprecedented change.

 

Myanmar, Philippines Will Both Benefit

There are many reasons why a strategic alliance between the Philippines and Myanmar makes sense for both sides.

It obviously means another source of rice imports for the Philippines. As an island nation, they could use all the extra agriculture they can get. That’s especially true after a GMO ban which experts predict will reduce crop yields.

For Myanmar, it means more income for the country’s local farmers, greater economic development, and higher use for fertile land still yet to be farmed on.

Assistance provided by the Philippines in terms of technology and farming methods is also another huge plus.

Myanmar wants to rely less on China and increase their political leverage too. China is the top importer of rice from Myanmar, so they should be happy to find another trade partner.

Progress is already being made between the two countries. A pilot joint venture program with private companies from both nations produced good results.

Furthermore, agriculture experts concluded that Myanmar is a viable production site for the Philippines’ rice imports.

According to a World Bank report, Myanmar has potential to double rice exports by diversifying and increasing rice production, opening their rice sector to foreign investment, and reducing export costs.

These factors should all help lead the Philippines into a strategic alliance with Myanmar.

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About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's an accomplished stock trader and property investor in Thailand, Cambodia, and many other places. He's been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.

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