US embassy cable - 04RANGOON1330

C O N F I D E N T I A L SECTION 01 OF 02 RANGOON 001330 
 
SIPDIS 
 
STATE FOR EAP/BCLTV, EB 
BANGKOK FOR FAS 
COLOMBO FOR ECON MANLOWE 
COMMERCE FOR ITA JEAN KELLY 
TREASURY FOR OASIA JEFF NEIL 
USPACOM FOR FPA 
 
E.O. 12958: DECL: 10/06/2014 
TAGS: EAGR, ETRD, ECON, PGOV, BM, Economy 
SUBJECT: BURMA: RICE POLICY INDECISION 
 
REF: RANGOON 625 AND PREVIOUS 
 
Classified By: COM CARMEN MARTINEZ FOR REASONS 1.4 (B,D) 
 
1. (C) Summary: A surprising re-entry into the rice market by 
the GOB's agricultural export arm adds another layer of 
confusion to the government's rice policy.  We don't see the 
GOB remaining in the business long, though we cannot predict 
the imminent return of the private sector either.  However, 
we are hearing that the future of the ten-month "temporary" 
export ban may be decided one way or the other by the end of 
the year.  End summary. 
 
The Old Bait and Switch and Bait 
 
2. (C) The GOB's rice export "policy" continues to drift. 
Though the government's "temporary" ban on the export of rice 
continues into its tenth month, there are signs that the 
embargo is beginning to crack.  However, this has been no 
boon for jilted private exporters as the initial hushed 
contracts have benefited the old agricultural commodity 
monopoly: Myanmar Agricultural Products Trading (MAPT). 
According to a knowledgeable commodities trader, MAPT has 
been tasked with providing the 130,000 tons of rice the GOB 
has sold in recent months (though only 23,000 tons have been 
shipped to date, with another 30,000-40,000 tons expected to 
ship before the end of CY 2004). 
 
3. (C) It's unlikely that this new arrangement will last. 
According to the source, MAPT has been quietly brought off 
the bench to sell off the GOB's warehoused stock that is 
becoming valueless with age.  Ironically, poor record keeping 
and years of corruption by state warehouse managers, who sold 
rice out the back door, have left MAPT about 65,000 tons 
short of the amount contracted.  This amount will have to be 
made up from the private sector, as government 
forced-procurement of rice from farmers ended this year. 
 
4. (C) Another piece of evidence that the government's 
re-entry into rice is short-term is the GOB's clear intent to 
dissolve the state's agribusiness entities.  Since the March 
2003 decision to open the rice market, MAPT staff has been 
cut from 14,000 to 3,000 employees (not enough to run a 
massive procurement, storage, and export operation). 
Additionally, the Ministry of Agriculture's export promotion 
and agricultural research and education arm, the Myanmar 
Agriculture Service, is reportedly being downgraded from a 
state-owned enterprise to a department within the ministry. 
 
5. (C) The GOB's move to eliminate its role in rice exporting 
does not necessarily signal an imminent return of the private 
sector.  The initial justification for the export ban was 
fear of rising rice prices and a weak grasp on nationwide 
production and demand statistics.  The latter problems have 
not been touched, and recent flooding in agricultural areas 
(plus a huge spate of buying earlier this year by the 
military, see reftel) have been nudging up prices.  However, 
there is some good news.  The government in August lifted the 
ban, also in place since January, on exports of corn and 
reliable sources tell us the senior SPDC leadership will 
revisit the question of private sector rice exports in 
December. 
 
Comment: Believe it When You See it 
 
6. (C) The result of this expected policy review is 
impossible to predict, but we see three possible outcomes. 
First, the SPDC could allow the private sector to resume its 
pre-January operations freely buying and selling within the 
new system.  Second, the SPDC could re-open partially the 
rice market, allowing such military-controlled "private" 
firms like Myanmar Economic Holdings, Ltd. to take the lead. 
Finally, the SPDC could decide the situation is still too 
fragile to allow the market to prevail, and keep things at 
the politically safe status quo -- with the attendant damage 
to farmers, exporters, and foreign exchange reserves. End 
comment. 
Martinez