US embassy cable - 03RANGOON977

C O N F I D E N T I A L SECTION 01 OF 02 RANGOON 000977 
 
SIPDIS 
 
STATE FOR EAP/BCLTV, EB 
BANGKOK FOR FAS 
COMMERCE FOR ITA JEAN KELLY 
TREASURY FOR OASIA JEFF NEIL 
USPACOM FOR FPA 
 
E.O. 12958: DECL: 08/12/2013 
TAGS: EAGR, ETRD, PGOV, BM 
SUBJECT: FEW EARLY VOLUNTEERS FOR BURMESE RICE TRADE 
 
REF: A. RANGOON 563 
     B. RANGOON 448 
 
Classified By: COM CARMEN MARTINEZ FOR REASONS 1.5 (B,D) 
 
1. (C) Summary: With only two or three months remaining 
before rice harvest time, private traders and agronomists are 
dubious that the GOB's rice liberalization policy will be a 
real short term success.  Too many uncertainties and holes 
remain for that to happen.  However, all agree that the 
regime will ensure, by bribery and force, that enough private 
sector entities take advantage of the policy for it to be 
deemed a "success."  End summary. 
 
Sanctions Impact Minimal 
 
2. (SBU) According to a private sector agricultural expert 
with whom we spoke, the new U.S. remittance and import bans 
will have little impact on the GOB's new, liberalized rice 
policy.  According to the GOB policy, announced suddenly in 
late March 2003, the government will end its 40-year monopoly 
on rice exports as well as its much maligned policy of 
mandatory advanced procurement from farmers at prices well 
below market.  Instead, according to the still sketchy plan, 
the private sector will have the freedom to buy and sell, 
locally and abroad, at whatever price the market will bear. 
Of course the government will maintain some control, sharing 
the export revenues and also procuring rice from merchants at 
cost for domestic need. 
 
3. (SBU) Most of the country's rice exports, which are 
extremely low quality, go to francophone West Africa, either 
directly or through a third country as a component of some 
barter arrangement.  Thus, it may be easier to shift the 
currency of the trade from U.S. dollars into euro -- a 
currency of choice, he asserted, for West Africa.  We have 
heard from other sources that the government intends to allow 
letters of credit and other trade facilitation to be carried 
out in other major currencies, but preferably the euro. 
 
Private Sector Dubious 
 
4. (SBU) Though the rice scheme seems on course for some 
success come harvest time in October or November, none of the 
outstanding questions raised in reftels has been answered, 
and there remains little incentive for small traders to get 
involved.  The government's policy has not been issued in 
writing, adding an element of uncertainty for potential rice 
exporters.  Likewise, there is no indication that the regime 
will set a price floor to guarantee farmers' income. 
 
5. (SBU) Though optimistic in theory, small private traders 
are skeptical about the profitability of getting involved 
during this inaugural year.  For one, the export price of 
Burmese rice (mostly poor quality) is quite low, but "fair" 
domestic prices tend to be high because of low yields per 
acre and high prices of transportation and imported 
agricultural inputs like fertilizer, diesel fuel, machinery, 
etc.  Also, prospective exporters will have to contend with 
the government's intended revenue sharing scheme (explained 
in detail in reftels).  Finally, traders complain, the 
government's proposal to procure, at cost, a to-be-determined 
amount of rice for domestic consumption will leave profit 
margins even thinner, and even less predictable. 
 
Guaranteed Success 
 
6. (C) Cynical traders and agricultural economists agree that 
whatever the hurdles, the regime will stack the deck to 
ensure at least an illusion of success for its new gambit. 
Already the government's agricultural procurement and trading 
company, Myanmar Agricultural Produce Trading company (MAPT) 
is mobilizing its stocks for possible export using cutout or 
crony private sector firms.  It's not unusual for the GOB to 
pressure a private firm to conduct a money losing, but 
politically important, transaction in return for some more 
lucrative contract or concession in another area.  Also, one 
economist reported, the government's rice policy guru, SPDC 
Secretary Two Lt. General Soe Win, summoned leaders of the 
 
SIPDIS 
country's rice and paddy merchants organization and 
encouraged them to collude to keep a ceiling on domestic 
procurement prices, to ensure as large an export margin as 
possible -- at the expense of local farmers. 
 
GOB Deals From the Bottom 
 
7. (SBU) Comment: Until the harvest and export seasons begin 
in earnest at the end of this year, we'll not be able to 
comment authoritatively on the new rice strategy's 
effectiveness.  Though we still feel the plan is an important 
and generally positive move, four months after the its 
announcement we are less convinced than before that this is 
the first of many agricultural reforms.  Likewise, based on 
the regime's lackluster efforts to flesh out other recent 
economic "policies" (such as those to resolve the banking 
crisis and deal with sanctions), we are dubious that the GOB 
will make the effort to address the many nagging and 
expensive, but crucial, details that would aid the policy's 
ultimate triumph.  Instead, we think the regime will 
typically first try administrative solutions to make sure 
there is a neat facade of success, no matter the reality. 
End comment. 
Martinez