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Cablegate: Burma's Rice Supply Shrinks After October Floods

VZCZCXRO7530
OO RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGO #1807/01 3521005
ZNR UUUUU ZZH
O 181005Z DEC 06
FM AMEMBASSY RANGOON
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5518
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 1269
RUEHBY/AMEMBASSY CANBERRA 0073
RUEHKA/AMEMBASSY DHAKA 4416
RUEHLO/AMEMBASSY LONDON 1885
RUEHNE/AMEMBASSY NEW DELHI 3665
RUEHUL/AMEMBASSY SEOUL 7171
RUEHTC/AMEMBASSY THE HAGUE 0572
RUEHKO/AMEMBASSY TOKYO 4757
RUEHCI/AMCONSUL CALCUTTA 0996
RUEHCN/AMCONSUL CHENGDU 0999
RUDKIA/AMCONSUL CHIANG MAI 0768
RUEATRS/DEPT OF TREASURY WASHDC
RUEHGV/USMISSION GENEVA 2975
RHEHNSC/NSC WASHDC
RUEKJCS/SECDEF WASHDC
RUEKJCS/JOINT STAFF WASHDC
RUCNDT/USMISSION USUN NEW YORK 0638
RUEHBS/USEU BRUSSELS

UNCLAS SECTION 01 OF 02 RANGOON 001807

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/MLS; PACOM FOR FPA, TREASURY FOR OASIA:AJEWELL

E.O. 12958: N/A
TAGS: ECON PGOV EAGR EAID BM
SUBJECT: BURMA'S RICE SUPPLY SHRINKS AFTER OCTOBER FLOODS

REF: A. RANGOON 1783

B. RANGOON 1216

RANGOON 00001807 001.2 OF 002


1. (U) Rumors are have circulated around Rangoon about an
impending rice shortage as Burmese officials move rice stocks
to provinces in central Burma hit by severe flooding in
October. In addition, smuggling, inflated production
estimates, poor storage, and inadequate buffer stocks
exacerbate the risk. Burmese officials are increasingly
concerned and have begun to ask for assistance. End summary

Low Key Pleas For Help Garner Low Key Responses
--------------------------------------------- --
2. (SBU) While the GOB refuses to publicly disclose the
extensive damage caused by early October flooding (ref A), it
has begun to respond to some of the most urgentneds in the
afflicted areas. Ministry of Agriculture and Irrigation
officials toured the flooded areas in Mandalay Division
recently together with FAO and WFP reps, and requested their
assistance to rehabilitate some paddy fields. WFP provided
20 metric tons of rice to workers who helped restore an
irrigation canal, as the GOB requested. FAO Country Director
Tang Zhengping asked for additional emergency assistance from
Bangkok FAO headquarters, but was informed that no funds were
available. Tang then met with Chinese, Indian and Singaporean
Embassy officials to seek their support, but was told that
they prefer to make bilateral arrangements directly with the
GOB.

3. (SBU) Government estimates of damage indicate that the
floods damaged 200,000 acres of agricultural land in central
Burma. 70,000 acres in Kyaukse District used for growing
rice, cotton, vegetables and fodder were especially hard hit,
and 13,000 acres were severely damaged. The official
newspaper printed a few photos of evacuees receiving cash and
rice from government officials and from the regime's mass
member political arm, the Union Solidarity and Development
Association (USDA), but did not mention the floods, and only
stated that households "moved to safer places due to bank
erosion."

Where Has All the Rice Gone?
----------------------------
4. (SBU) To Flooded Areas: Embassy Agricultural Specialist
leaned that the GOB moved most or all of its surplus rice
stocks to flood-affected areas in Mandalay and Sagaing
Divisions and in Shan State, forcing rice traders to close
the small shops they established to sell price-controlled
rice in Rangoon (ref B). The quality of rice currently sold
in the Rangoon main markets is poor, but traders believe
enough of the old crop is available to last until a new crop
is harvested in January and February 2007. However, many
rice merchants are concerned about adequate rice supplies in
mid-2007, when the new rice crop is depleted and stores may
not be adequate to cover any shortages before the October
monsoon harvest.

5. (SBU) Almost Exported: This year, officials allowed export
of rice to other countries only in June. While authorities
have not instituted an official ban, permits to export can be
refused. Only the Myanmar Economic Corporation (MEC), run by
the regime, has a valid permit to export rice. One trading
contact said the MEC attempted to export rice stocks earlier
this year to earn hard currency, but could not find any
international buyer willing to pay for the poor quality
supplies it offered, so the MEC sold the rice on the domestic
market and will try again with rice from the new harvest in
January.

6. (SBU) It Never Existed: Officials also are faced with

RANGOON 00001807 002.2 OF 002


shortages caused by their own inflated production figures.
The GOB claims that 17 million acres of paddy have been
planted, but contacts in the industry and farmers told us
that the cultivated acreage has not increased this year, and
that 14 million acres remains more likely. Private sector
reps also inflate their yields to gain permission to export a
fictional "surplus." Contacts at the Ministry of Agriculture
and Irrigation report ongoing internal conflicts over the
discrepancies between official figures and non-existent
stocks.

7. (U) Smuggled: One rumor repeated around Rangoon is that up
to 500,000 metric tons (MT) of rice were smuggled out of
Burma this year. The main routes are Muse-Ruili (China),
Tachilek-Mae Sai (Thailand) and Ranong-Kawthoung (Thailand),
and islands off the coast of Rakhine State to Bangladesh.
Traders concede that some smuggling occurs, but say the
claimed volume is not possible, given the 40 MT weight limit
of most trucks and tighter border controls. Contacts in the
import/export business suspect that the private sector
created this story to encourage the GOB to allow more legal
exports.

8. (SBU) Hoarded: In an attempt to discourage speculation,
authorities barred U Nyein, former Chairman of the Rice/Paddy
Traders Association, from trading any rice for one year. He
was also assessed K.30 million (USD 24,000) in tax on the
hoarded rice that officials discovered in his Rangoon
warehouse. Inexperience caused some new traders to store
their rice stocks for too long, which resulted in significant
spoilage and waste. To better monitor the market, the
Association now demands that new entrants into the rice trade
provide prior notification before entering the business.

9. (SBU) Comment: Burma once was, and could be, a major rice
exporter. In trying to protect and control the supply and
price of rice, Burma's staple, the regime tends to follow one
ill-advised decision with another. Frequent and
unpredictable government interventions create disincentives
for farmers, disrupt efficient market mechanisms, and result
in less information, less transparency, and ultimately less
rice. Given the steadily declining economy in general, rice
shortages would significantly weaken the regime. Thus they
will try to monitor the situation closely, but can do little
to correct the situation in the short to medium term, and
have not reached the stage where they would contemplate long
term reforms. End Comment.
VILLAROSA

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