Bangkok: A proposed “Opec-style” rice cartel in South-East Asia will go nowhere due to the inability of governments to cooperate with each other and control output from their farmers, analysts and traders said on Friday.
Thai Prime Minister Samak Sundaravej has revived the long-dormant idea of a price-setting body involving producers Thailand, Vietnam, Myanmar, Laos and Cambodia.
Not enough: A file photo of an Zennoh Pearl Rice Corp. employee, standing inside the company’s rice polishing plant in Tokyo, Japan.
The proposal, which threatens to add to global food supply fears amid record high rice prices, failed to gain traction seven years ago when it was first floated by Bangkok—and most see little chance it will fare better this time around.
“I don’t think it would work. All they can do is agree on a price, but they can’t control the supply like oil,” said Graham Catterwell, an economic analyst. “It’s going nowhere.”
The five mainland South-East Asian nations produce a combined 60 million tonnes (mt) of milled rice each year, about 14% of world output.
“We are all rice producers. Why don’t we cooperate in managing prices?” Samak said on Wednesday after talks with General Thein Sein, his counterpart from Myanmar.
Samak said Thein Sein had agreed in principle to the idea, but the general did not speak to reporters. Myanmar has resumed limited rice exports this year, mainly to South Asia, after several years off the market, people close to the development said.
The proposed group—which includes two democracies, two Communist-led governments and a military dictatorship—appears in no hurry to hammer out the details.
Agriculture ministers will discuss the proposal in September at a meeting of the 10-nation Association of Southeast Asian Nations (Asean) regional group in Vietnam, Cambodian agriculture minister Chan Sarun said on Friday.
Impoverished Cambodia, where 85% of a 14 million population are farmers, would join if a cartel offered technology benefits like better seed to boost output, he said.
Like several other big suppliers including Vietnam and India, Cambodia slapped restrictions on exports this year in an effort to secure domestic supply and keep local prices down.
“We must produce more rice to sell to overseas markets,” Cambodian Prime Minister Hun Sen recently said on state television.
Sharing technology is one thing. It’s quite another to set prices and control output like Opec, whose member nations have often had trouble singing from the same song sheet even though they pump over a third of the world’s oil.
“It’s impossible. We can’t fix prices as Opec does because we can’t control our production like Opec,” Chookiat Ophaswongse, President of the Thai Rice Exporters Association, said.
“It might be easy for Communist Laos or Vietnam to control their farmers, but we can’t do that in a free-market economy like Thailand. Farmers will rush to grow more rice when prices go up and shift to other crops when prices fall,” he said.