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Can Laos Be a Rice Exporter?

By Anoulack Khammalavong, Vientiane Times, Laos

Laos has been ashamed for years to see its neighbours, Thailand and Vietnam, which have poorer land conditions, become the world’s No.1 and No. 2 rice exporters. And it will have to wait longer.
 One of Thailand’s rice exporters, Mr. Vichai Sriprasert, who is also the president of Thailand’s Riceland International Ltd., said that Laos was not ready to be exporter since its infrastructure was not ready.
 
"Your infrastructure is poor. You don’t have roads to bring rice from farmers,"  he said.
 Laos, a country with a population of 4.9 million people living in a territory of 236,800 square kilometers, is not affected by serious natural disasters. The country is also rich in water and fertile production land. Thailand and Vietnam have become the world’s No. 1 and No. 2 rice exporter for years, while Laos has to import rice from them most of the time. Mr. Vichai, who has been involved in rice business for the last two decades, said that farmers would not have an incentive to cultivate their farms if they cannot bring their products to the market place.
 
"In Laos and in Cambodia, people have rice but they cannot bring it into the roads," Mr. Vichai emphasized. He believes that people near the Lao-Thai border export rice to Thailand because they find that the access to the market is much nearer than to Laos’ main cities.

"You need investment, which is productive, not put in Switzerland,"  he said, referring to government officials putting investment funds in private bank accounts.
 
A businessman of the Thai Business Initiative in Rural Development Programme, Mr. Tanothai Sookdhis, who has been successful in bringing development into the rural areas, said that the development in one country has to cover both the countryside and the cities.
 
"The first two things that people in the countryside will ask for are roads and electricity," he said.
" When people in the rural areas have roads and those in the cities have cars, the latter will take their cars to buy goods from the former."
 
Perhaps, infrastructure is the most important factor for rice production development. However, Mr. Vichai finds that political philosophy also plays an important role in this business since it will encourage people to produce more or less. He raised an example that before the World War II, Myanmar used to export millions of tonnes of rice. But it exported only 100,000 tonnes every year since the government took away the incentives from the farmers.
 
"Vietnam 30 years ago also had surplus to export rice but it stopped after the country had the new administrative regime and it began to export again in 1989 when the policy was more open for the market economy. It now becomes world No. 2 or No. 3," Mr. Vichai said.
 
Financial conditions also have an implication on rice export as all of Thailand’s rice exporters this year have faced terrible financial deficits caused by the collapse of the financial sector.
 
Thailand wants to keep its share of the world market (6 million tonnes per year) to make sure that other competitors would not take that space. That’s why the exporters had to use all the funds they had to buy rice from farmers to supply the markets.
 
However, most of the exporters made a mistake. Earlier this year, when the Thai baht initially became weak, about 30 baht per one US dollar, they rushed to change their dollars into baht hoping to get much profit. However, the baht became weaker than they expected, 50 baht or sometimes 60 baht per one US dollar, so the companies lost about half of their saving. Mr. Vichai said that when the banks collapsed, they did not have enough money for the rice exporters, and the latter had to buy the rice from the rice mills by providing higher prices and promising to pay them sometime later. The rice mill owners also used the same techniques to buy rice from farmers. This caused the debt to increase more and more.

" I have exported rice for 20 years and this year is the worst year," he said.

 When asked if Laos can become a rice exporter since there are still many problems it has to solve, Mr. Vichai said that Laos could become a big exporter if the government was able to invest in infrastructure. However, he believed that the most governments would not want to be responsible for this field.
 
Mr. Vichai also said that Laos is now at a low level of development, so it has the potential to go to a higher level but it needs to get good lessons from experienced exporters.
 
"You can look at Thailand, you can get the lead from Thailand and you can tell your farmers to do the same," Mr. Vichai concluded.

Copyright 2009 IMMF.