US embassy cable - 05RANGOON824

UNCLAS RANGOON 000824 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EAP/BCLTV, EB 
COMMERCE FOR ITA JEAN KELLY 
TREASURY FOR OASIA 
USPACOM FOR FPA 
 
E.O. 12958: N/A 
TAGS: ETRD, EAGR, ECON, BM, Economy 
SUBJECT: BURMA'S RICE POLICY: THE MIDDLE PATH 
 
REF: A. RANGOON 372 
     B. 04 RANGOON 1330 AND PREVIOUS 
 
1. (SBU) Summary: The GOB has tweaked its rice export policy 
again to allow some private companies to sell the staple 
overseas, but only if the rice has been grown on "new" land. 
This tortured evolution is not a meaningful return of the 
private sector to the rice trade, and will not bring rice 
export volumes close to their recent highs in 2002.  However, 
it will allow the GOB to devolve some responsibility to 
trusted "entrepreneurs" while still keeping a tight rein on 
this most sensitive of markets.  End summary. 
 
Taking the Middle Path 
 
2. (SBU) Since the SPDC aborted its half-hearted effort to 
liberalize the rice trade 18 months ago (ref B), there have 
been few clues about the future of Burma's once dominant 
agricultural export.  Since January 2004, when rice exports 
were "banned," the GOB itself has been exporting small 
amounts of rice -- mostly from its aging surplus stocks -- 
but the regime has prohibited the private sector from playing 
a real role.  The result has been a drop in total rice 
exports to about 100,000 tons in CY 2004 (down from 900,000 
tons in 2002).  Now it appears the regime is allowing the 
private sector back into the export game, but in a very 
controlled way. 
 
3. (SBU) For several years, the GOB has been encouraging 
"national entrepreneurs" (read: business cronies) to grow key 
crops -- especially rice and oil palms -- on reclaimed or 
virgin land.  For the 30 "entrepreneurial" rice planters, 
located mostly in the Irrawaddy delta region, the GOB 
promised it would allow them to freely export all crops grown 
on these lands, even with the overall ban on private rice 
exports intact.  This policy came to fruition in FY 2004-05 
(April-March) when the GOB handed out permits to four of 
these entrepreneurs for rice exports of around 5,000 tons 
total.  In June, however, the government announced it was 
giving a license to a fifth private firm to export about 
10,000 tons of rice grown on its 17,000 acres of land.  The 
company, Ayeyarshwewar, is controlled by Tay Za, the GOB's 
top business crony. 
 
4. (SBU) Naturally, the process is not as easy as just 
growing new "export only" crops.  For an entrepreneur to get 
the license, s/he must first get recommendation letters from 
regional civil and military officials and then from the 
Rangoon-based Union of Myanmar Federation of Chambers of 
Commerce and Industry.  With these referrals in hand, the 
company must then put their license request to the Trade 
Policy Council, chaired by SPDC number two, Vice Senior 
General Maung Aye. 
 
Comment: An Unsatisfactory Solution 
 
5. (SBU) We don't see this as a meaningful return of the 
private sector to the rice game and don't believe it will 
improve Burma's export position much from the 2004.  In fact, 
the GOB's handing of the lucrative business to loyalists with 
no experience in the cutthroat business of rice trading may 
limit export revenues as more experienced importers (and 
local middlemen) squeeze the cronies for all they're worth. 
However, the SPDC's priority is keeping rice prices cheap on 
the domestic market -- no matter the cost to farmers, 
exporters, and even the regime's own foreign exchange 
accounts.  End comment. 
Martinez