Myanmar must attract more foreign direct investment in rice production if it is to achieve a potential doubling of rice exports, said World Bank Southeast Asia senior agricultural economist Sergiy Zorya.
The Foreign Direct Investment law forbids foreign joint-venture partners in rice milling and trading without special government approval, but Mr Zorya said Myanmar needs to relax restrictions and improve mills if it is to gain more orders from higher-value European and Middle Eastern markets.
Myanmar currently focuses on producing low-quality rice, with up to 95 percent of the 1.2 million tonnes exported in 2013-14 fiscal year of the low-quality 25 percent broken variety. African countries and China together make up most of the Myanmar’s exports.
“Many Thai and other potential investors find the new investment law and implementing regulations both unclear and seemingly unwelcome,” the World Bank’s Myanmar: Capitalising on Rice Export Opportunities report said.
It notes that three of Thailand’s top 10 rice exporters are investing in Cambodia and others are looking at Vietnam, but “virtually all are hesitant to invest in Myanmar”.
Myanmar Rice Millers Association chair U Tin Win said that while there may be up to 10,000 rice mills in Myanmar, only 1312 can produce 25pc broken rice and the rest are too outdated even for that. Few can produce highest quality rice, he added.
Foreign investment is allowed in the rice milling industry, but in practice the hurdles are significant and discouraging, according to U Myo Thura Aye, former joint-secretary of the Myanmar Rice Federation (MRF).
Besides foreign investment restrictions, the industry is often stymied by a lack of a crop insurance system, poor infrastructure and machinery repairs, along with many other concerns.
A large number of MoUs have been signed between local and foreign firms, but few projects have so far progressed any further, he said.
Mr Zorya said that while there has been lots of discussion about investors coming to Myanmar, he has only heard of three concrete examples of FDI in the rice sector.
“Even in a small country, Cambodia, there are 44 [instances of] FDI in the rice industry,” he said, adding Cambodia’s rice exports had greatly benefited from foreign interest.
In 2012-2013, Myanmar exported up to 1.6 million tonnes of rice, the largest amount in 46 years, largely due to booming demand from China. Traders say about 60pc of exports went to China, 35pc to Africa and the rest to a variety of markets.
However, exports to China are unofficial from Beijing’s point of view due to a lack of an agreement on health standards for rice.
The European Union gave Myanmar rice preferential market access in 2012, and many are pointing to it as an area of future expansion particularly for more value-added rice.
“The opportunities are there if Myanmar can offer good quality products at competitive prices,” said Mr Zorya. Significant changes need to be made, not least the modernisation of the rice mills.
“We would say if there are no changes in the rice mills … the amount of export to the EU and the Middle East will be limited.”
Some have pointed to a complicated history of involvement by foreigners in Myanmar’s rice production and export.
Under British rule Myanmar became the single most important exporter of rice in the world, said Ian Brown, a professor of economic history at the University of London’s School of Oriental and African Studies.
While increases in rice production during that period were built principally on the labour of the rice cultivator, but the profits went to the middlemen, moneylenders and export merchants, who were overwhelmingly Indian and British foreigners, he said. A high proportion of cultivators had also been dispossessed of their land by the end of the colonial period by foreigners, he added.
“It is little wonder that independent Myanmar was determined to keep foreigners out of the rice economy,” he said.
“The colonial experience, and the fight against the colonial legacy after 1948, are deeply etched in Myanmar›s perceptions of the outside world.”
Source: MYANMAR TIMES