Southeast Asia's economics of rice

It is perhaps a truism to say that rice is the staple food of Southeast Asia.

This love affair with the seed of the grass species, oryza sativa is not only rooted in the tangible world but has its own mystical, non-corporeal underpinnings to it.

Such a relationship is observed through the worshipping of Dewi Sri; the goddess of rice, fertility, and wealth by communities prior to the advent of Islam in modern-day Indonesia.

In today’s world, this spiritual adulation has now turned into economic endeavour with the cultivation and export of rice.

Among some ASEAN member countries, rice cultivation and export has become an important contributor to their respective Gross Domestic Product (GDPs).

The Asian Development Bank has projected that total rice output in ASEAN will grow at 1.37percent annually, from nearly 110.5 million tonnes in 2010-2011 to 128.3 million tonnes by 2021-2022.

In addition, most of this projected output is contingent on improved yields, increasing by 1.22 percent per annum.

Almost all Southeast Asian countries have some form of self-sufficiency policy. For example, Brunei Darussalam has set a 60 percent target for its rice self-sufficiency plan over the longer term, ideally achieved by 2035.

As such, the implementation of policies directed towards achieving high levels of self-sufficiency has improved since the 2007/2008 food price crisis.

Amidst the rice pledging scheme that caused much brouhaha in Thailand about a decade ago, ‘The Land of Smiles’ still retains top spot as the region’s largest exporter of rice.

This scheme was introduced by Yingluck Shinawatra in her 2011 election campaign for the Pheu Thai Party, and was subsequently implemented after she attained the mandate to lead the nation.

One of the components within the scheme is the direct buying of unmilled rice by the Thai government from farmers, at approximately twice the market rate.

It is argued that such a move would put money into the pockets of poor farmers and stimulate domestic demand.

However, according to a report by the Global Legal Monitor, the government would end up having to provide subsidies amounting to a whopping US$9.375 billion, an amount that would surely place a burden on the Thai economy.

Considering the fact that two-fifths of Thais work in agriculture (with most of them being rice farmers), the incumbent leader of Thailand, General Prayuth Chan-ocha has not done away with the aforesaid scheme, rather he has re-evaluated it.

His state budget for subsidies is less than 10 percent of what was implemented prior.

Chan-ocha has realised that he needs to implement policies that will facilitate an equilibrium in supply and demand.

This is to avoid excessive price fluctuations and a heavy burden on public finances when market intervention is necessary to ease the hardships of farmers.

Thai rice exports usually average 10 million tones a year, with white rice making up half of that amount.

It is interesting to note that in 2017, Thailand exported 11.7 million tonnes of rice(an all-time record), up to approximately 14.8 percent year-on-year.

As for 2018, this country copious with natural resources, exported around 11.2 million tonnes of rice, indicating a holding back of supply through Chan-ocha’s smart recalculation of the plan implemented by his predecessor.

Another point of concern is the quality of rice piling up in Thailand’s warehouses.

There are growing claims that substandard rice of a different grain has contaminated the stocks.

Criminal groups and less than honest officials are said to have smuggled in thousands of tonnes of cheap grain from Cambodia and Myanmar, in the hope of taking advantage of the government’s generosity.

The significance of rice economics in the region is further exemplified by Indonesia’s production of this commodity.

Agriculture Minister of the Republic, Amran Sulaiman pointed out that the country had produced more rice than it needed in 2017, meeting President Joko Widodo’s target of rice self-sufficiency.

Not only that, Sulaiman also mentioned that rice production in January 2018 reached 8 million tonnes, more than the average monthly consumption of 2.5 million tonnes.

We need to also realise that for some, the consumption of rice is a choice, while for others it is a necessity.

For many struggling families in most Southeast Asian countries, having a surplus of rice to sell to the market will enable them to temporarily rise above the poverty line.

Considering the multifaceted nature of rice economics in the region, it is important that proper regulation be put in place and implemented so as to do away with the tampering of rice stockpiles.

Also, rice schemes ought to be thoroughly studied by governments and regulating bodies before their implementation.

As in the case of Thailand during Shinawatra’s rule, an attempt to pander to the whims and fancies of the agribusiness sector and fulfilling an election campaign promise made prior to being elected, has had damaging repercussions on the country’s economy.

General Prayuth’s timely re-evaluating of the scheme has to a certain extent prevented more serious financial implications on Thailand’s economy.

Such a situation ought to be taken as a lesson with regards to the precarious nature of rice economics in the region.

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Arief Subhan is a Research Assistant for the Political Futures Experts Group (PFEG) based at the International Institute of Islamic Thought and Civilisation (ISTAC).

The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the position of Astro AWANI.