Cablegate: Burma's Rice Policy: The Middle Path

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS RANGOON 000824

SIPDIS

SENSITIVE

STATE FOR EAP/BCLTV, EB
COMMERCE FOR ITA JEAN KELLY
TREASURY FOR OASIA
USPACOM FOR FPA

E.O. 12958: N/A
TAGS: ETRD EAGR ECON BM
SUBJECT: BURMA'S RICE POLICY: THE MIDDLE PATH

REF: A. RANGOON 372
B. 04 RANGOON 1330 AND PREVIOUS

1. (SBU) Summary: The GOB has tweaked its rice export policy
again to allow some private companies to sell the staple
overseas, but only if the rice has been grown on "new" land.
This tortured evolution is not a meaningful return of the
private sector to the rice trade, and will not bring rice
export volumes close to their recent highs in 2002. However,
it will allow the GOB to devolve some responsibility to
trusted "entrepreneurs" while still keeping a tight rein on
this most sensitive of markets. End summary.

Taking the Middle Path

2. (SBU) Since the SPDC aborted its half-hearted effort to
liberalize the rice trade 18 months ago (ref B), there have
been few clues about the future of Burma's once dominant
agricultural export. Since January 2004, when rice exports
were "banned," the GOB itself has been exporting small
amounts of rice -- mostly from its aging surplus stocks --
but the regime has prohibited the private sector from playing
a real role. The result has been a drop in total rice
exports to about 100,000 tons in CY 2004 (down from 900,000
tons in 2002). Now it appears the regime is allowing the
private sector back into the export game, but in a very
controlled way.

3. (SBU) For several years, the GOB has been encouraging
"national entrepreneurs" (read: business cronies) to grow key
crops -- especially rice and oil palms -- on reclaimed or
virgin land. For the 30 "entrepreneurial" rice planters,
located mostly in the Irrawaddy delta region, the GOB
promised it would allow them to freely export all crops grown
on these lands, even with the overall ban on private rice
exports intact. This policy came to fruition in FY 2004-05
(April-March) when the GOB handed out permits to four of
these entrepreneurs for rice exports of around 5,000 tons
total. In June, however, the government announced it was
giving a license to a fifth private firm to export about
10,000 tons of rice grown on its 17,000 acres of land. The
company, Ayeyarshwewar, is controlled by Tay Za, the GOB's
top business crony.

4. (SBU) Naturally, the process is not as easy as just
growing new "export only" crops. For an entrepreneur to get
the license, s/he must first get recommendation letters from
regional civil and military officials and then from the
Rangoon-based Union of Myanmar Federation of Chambers of
Commerce and Industry. With these referrals in hand, the
company must then put their license request to the Trade
Policy Council, chaired by SPDC number two, Vice Senior
General Maung Aye.

Comment: An Unsatisfactory Solution

5. (SBU) We don't see this as a meaningful return of the
private sector to the rice game and don't believe it will
improve Burma's export position much from the 2004. In fact,
the GOB's handing of the lucrative business to loyalists with
no experience in the cutthroat business of rice trading may
limit export revenues as more experienced importers (and
local middlemen) squeeze the cronies for all they're worth.
However, the SPDC's priority is keeping rice prices cheap on
the domestic market -- no matter the cost to farmers,
exporters, and even the regime's own foreign exchange
accounts. End comment.
Martinez

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