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 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

As previously mentioned in another article, rice production levels have gone down significantly for the first time in 6 years. They’re nowhere near 2008 crisis levels. But even the 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 where 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.

The ban 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.

As such, the burden of finding all that extra rice will now fall onto the shoulders of the government which is now going through unprecedented change.

 

Myanmar, Philippines Both Seek to Benefit

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

For the Philippines, it obviously means another source of rice imports. Having limited land for agriculture, the country could use all the extra land it 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. The assistance provided by the Philippines in terms of technology and farming methods is also another huge plus.

Myanmar has also expressed interest to rely less on China and increase its political leverage. China is also the #1 importer of rice from Myanmar, so they should be happy to find another trade partner.

Some progress has already been made between the two countries. A pilot joint venture program featuring private companies from both nations has produced satisfactory results. Agriculture experts have already concluded that Myanmar would be a viable production site for the Philippines’ rice export.

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

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

About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's experienced with trading stocks and buying property in Thailand, Cambodia, and elsewhere. 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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