Junta blamed for stunting Burmese output

By Amy Kazmin in Bangkok

April 28 2008 (FT) - In the late 1930s, Burma, then under British colonial rule, was the world’s largest rice exporter, sending 3.3m tonnes a year from its fertile Irrawaddy delta to foreign markets, mainly in neighbouring India.

Despite vast tracts of potential paddy land and abundant water, Burma is now a marginal player in the global rice market. Its farmers, and their output, have been hit by chronic neglect of rural infrastructure and misguided controls to ensure cheap urban food.

While no reliable data are available, economists and rice experts say Burmese rice production is just a fraction of its potential. Fertile paddy land is lying fallow and irrigation channels are silting up, while farmers sink deeper into poverty.

“Here is this gold mine – this huge potential – which Burma is sitting on, but it’s just not performing,” says Sean Turnell, editor of Burma Economics Watch. “It’s another example of how Burma’s problems are not its alone.”

Since the 1960s Burmese farmers have been forced to sell a significant quantity of their rice harvests to state authorities at below-market prices, while the regime tightly controls exports and restricts domestic rice movements. The generals’ rationale for these policies has been to ensure cheap rice to feed the army and civil servants, and to keep urban rice prices down.

But economists say these punitive policies have so deeply impoverished farmers that today they have no resources – or incentive – to invest in fertiliser, high-yielding seeds or other modern inputs that could greatly boost their rice output.

“Their farmers refuse to grow rice,” says Thai rice exporter Vichai Sriprasert, who has tried to advise the regime to loosen control over the rice sector. “They only want to grow enough for themselves to eat.”

In 2003 the junta did lurch towards liberalisation, abolishing the “compulsory quota system” that required farmers to give a fixed quantity of paddy, based on their landholdings, to the state each year.

But according to industry experts, local military commanders still routinely restrict the movement of rice out of rice-growing areas, causing local prices to crash and letting the government buy rice on the cheap.

While the junta also technically ended the state’s monopoly on exporting rice in 2003, only a handful of regime cronies were permitted to enter the trade, which in effect remains under tight state control

Yet Mr Vichai says Burma could re-emerge as a big force on the global rice market, if the regime ever relaxed controls and let paddy farmers make a fair profit from their labour. “If you just give farmers the incentives, everything would change,” he says. “Once they free up the market, they can be number one again in the world.”