Asian rice politics eats into food security

Last year’s mythical rice crisis could increase calls to stop rice exports

Friday, Jul 10, 2009
DPA CORRESPONDENTS

"In Cambodia, Kuwaiti investors have reportedly signed 99-year leases for huge tracts of Cambodian rice farmlands to secure their own supply.

Chan Tong Yves, secretary of state for the Cambodian Ministry of Agriculture, confirmed there were plans to lease farmland to Kuwaiti investors, but would not provide specific details.

Such deals raise worries."

India has 24 million tonnes of rice in stock but still refuses to lift an export ban on the grain for fear of political repercussions at home.

Thailand has 8 million tonnes of rice waiting to be sold to buyers in Africa this month, but the government dares not release its stock for fear of accusations of corruption.

“Rice is a political commodity,” said Concepcion Calpe, senior economist and leading rice expert at the Rome-based Food and Agriculture Organization (FAO).

“It is political from the consumers’ point of view, who want low prices, and the producers point of view, who want high prices,” she said. “Obviously, you have governments that fall because of rice.”

Rice riots are actually rather rare nowadays.

With growing affluence, the slow spread of democracy in Asia and a trend toward populist policies to win elections in the countryside, it is the foreign consumer who is more likely to bear the brunt of governments’ self-serving rice policies, as was demonstrated by the so-called “food crisis” of last year.

The seeds of that crisis arguably sprouted in Australia, which suffered drought and a diminishing wheat crop, which then affected exports to India.

Worried about diminishing wheat stocks, India slapped a ban on exports of non-Basmati rice in March last year.

Vietnam, the world’s second-biggest rice exporter after Thailand (India usually ranks third) followed suit, capping its rice exports at 3.5 million tonnes, leading to a perceived rice crisis. Rice prices tripled, peaking at US$1,100 a tonne in May last year.

In fact, there was no rice supply shortage last year. Global rice production increased 4 percent to 688 million tonnes, FAO said.

Thailand, one of the few countries in Asia that placed no export restrictions on its rice exports last year, reaped the reward.

The kingdom shipped 10 million tonnes abroad, earning 200 billion baht (US$5.6 billion) in foreign exchange.

Thailand is unique in Asia in that almost half of its local production, about 20 million tonnes of rice a year, is for export.

But this year Thailand is suffering the drawbacks of the government’s growing role in what used to be a free-market rice trade.

Since 2001, Thai governments pushing populist policies have been offering above-market prices to purchase rice from farmers as a means of bolstering local prices and farmers’ incomes, good goals in theory.

The paddy-purchase schemes, however, have been tainted by numerous corruption scandals as the government effectively monopolized the rice stocks.

Only a handful of big rice exporters have won past government auctions at prices below the market’s, a sure sign of something fishy.

“Not everybody can bid for the government rice, you have to have connections,” said Chookiat Ophaswongse, president of the Thai Rice Exporters Association.

The last auction, on 6 million tonnes of second crop paddy, has been canceled because of corruption allegations, but uncertainly about what to do now has frozen supply, even though buyers from Africa are asking for Thai rice this month.

“They can’t release it because it’s become a political hot potato,” said Nipon Poapongsakorn, president of the Thailand Research and Development Institute, a think tank.

The Democrats, who lead the current coalition government, will be accused of colluding with a corrupt bid if they release the stocks now, he said.

Hopefully, the Democrats will do away with the rice-pledging scheme altogether before they leave office and replace it with an alternative program that assures farmers a decent price for their rice, but keeps the government out of the trade.

Given such convoluted political considerations, it is understandable that some countries are worried about their food security, even if last year’s shortage was essentially an illusion.

In Cambodia, Kuwaiti investors have reportedly signed 99-year leases for huge tracts of Cambodian rice farmlands to secure their own supply.

Chan Tong Yves, secretary of state for the Cambodian Ministry of Agriculture, confirmed there were plans to lease farmland to Kuwaiti investors, but would not provide specific details.

Such deals raise worries.

“One issue is do these countries have the legal system to protect people who claim a right to the land?” the FAO’s Calpe said. “And secondly, are the governments solid enough to handle these investments in a transparent manner, beneficial to the local community?”

What would be preferable is a free rice market that works.

“If there is a proper marketing policy and the government does not intervene, there is no need for Middle Eastern investments in rice farms,” analyst Nipon said. “They don’t need to come here as long as the government keeps its hands off.”

Food security or economic slavery?

Monday, 01 June 2009
Ogho Okiti
Business Day

In the last edition of The Economist, the magazine reported a new and growing form of foreign agricultural investment. National governments of rich but limited land resources are now undertaking agriculture investment in foreign countries but the produce meant specifically and only for the home country.

For instance, the report mentioned that Saudi Arabia, earlier this year, received the first imported rice of its agriculture investment in Ethiopia. South Korea, the United Arab Emirates (UAE), and Egypt have made similar investments in Sudan, Africa’s largest country by size. China has joined, making its investments in Congo, just as Kuwait has the same type of arrangement with Zambia and Cambodia.

Though the details of these agriculture investments may differ, the core feature is that national governments are negotiating with national governments of some poor developing countries for hectares of land for agriculture use in exchange for some forms of benefits to the country.

These transactions constitute movement of capital from the rich country to the poor country for the purpose of food production accompanied by improvements in agriculture technology and seedling. The end result is an improvement in yields in places that these have been carried out so far, compared to the average in Africa. As the report rightly claimed, it is a case of “countries that export capital but import food are outsourcing farm production to countries that need capital but have land to spare”.

The practice has proved very contentious. Those that support the arrangement do so on the basis that it provides poor countries with new seeds, techniques and money for agriculture. Opponents call it “land grabs”, because the lands are insulated from host countries and argue that poor farmers are pushed off the lands they have farmed for generations.

This growing phenomena raises some serious fundamental issues about the future relationship between rich and poor countries. Though foreign agriculture investment is not new, they have been conducted much the same way as other investments, before now. The present form is initiated at the government level, introducing cross border political dimensions to agriculture investment. Because of the seriousness of food security, this measure will introduce or escalate political instability in the countries in question. Such arrangements give the most visible political interest, rather than solely commercial. Indeed, it is not surprising that, besides Zambia, many of the countries that have accepted such arrangements have some level of political instability. It is a roll call of potential time bombs waiting to explode and that include countries such as Sudan, Ethiopia, Congo, and the arrangement has already consumed a government in Madagascar.

It is disingenuous to see the growing type of foreign investment as another form of outsourcing. In its purest and natural form, outsourcing consists of the “shipment of jobs” abroad to areas that same services can be provided with lower costs, due mainly to improvement in technology. With outsourcing, the host country benefits in terms of improvement in income, knowledge, training and expertise.

This is not the case with this arrangement as the farmers are completely insulated from the local dynamic economy. This arrangement is also peculiar such that all the produce are specifically meant for the home country. Effectively, the international trade process on food is being circumvented. This can only be regarded as the height of neo colonialism because these countries are poor, some of them being fed by the World Food Programme (WFP). These countries have not got enough food, mainly because they cannot muster the capital requirements for improving their food production. A rich country now engages in some kind of cosy arrangement with dubious political leadership to guarantee food for its own people. The least acceptable, is for the home country and the investing country to share the produce.

Another ingredient of neo colonialism in this arrangement is the lack of any form of control by the home nation. The produce, the quantity of the produce, the method, and the destination of the produce are all decided outside the host country. It is also possible that the payments made to host countries are shrouded in secrecy, raising serious questions about taxes, tariffs, and duties and their applicability in such instances. The only benefit I see for now is the domestic jobs in these farms, but it is possible that existing jobs are displayed, anyway. And in the case of China’s investment, the report suggests the workers will be Chinese.

So, these arrangements are reminiscent of “banana republics” when many African countries served as plantations for European countries, but even those did not come with such explicit restrictions and rigidities.

But, what can we learn from this? First, it is the most concrete evidence yet that food security remains a political issue, and should remain a number one political goal. Nations that have no much land will have to use their vast capital to ensure food security, even if it means another neo colonialism. Second, this is mostly in response to the 1997 and 1998 global food shortages that drove up food prices. In the context of these two issues, the response of the federal government is to provide access to N200 billion to commercial farmers. Third, it demonstrates that commercial agriculture value chain remains the best option for African counties such as ours to improve on agriculture produce. And finally, these rich nations realize that any measure of food insecurity is a return of poverty. Effectively, food insecurity is poverty!