Diversification of trade partners is important for Myanmar's rice export: over 90 percent of Myanmar's rice trade is done via border trade with China (Myanmar Rice Federation)

Myanmar rice exports are up 93 percent from 2008 with most of the gains attributed from trade with the Chinese market, but such heavy reliance on its northern neighbour could become disastrous.

This sentiment was disclosed at the annual general meeting of the Myanmar Rice Federation (MRF) and a workshop on the development of Myanmar rice sector.

Over 90 percent of Myanmar’s rice trade is done via border trade with China. Penetrating the international market and increasing shares of other foreign markets will take time, experts say.

To cut such heavy dependence on the Chinese for rice exports, rice traders should begin to evaluate how to diversify their trade partners, U AungThanOo, chairman of Myanmar Rice Traders Association, said during a presentation at the meeting.

According to the statistics from the Customs Department, up to January 28 in 2015-16 fiscal year, maritime export of Myanmar rice reached 66,393 tonnes (7.3 percent) while border trade accounts for 840,804 tonnes (92.96 percent) of the total export.

Though Myanmar legally exports rice through the Muse border trade station on the China-Myanmar border, some traders from China are illegally purchasing rice to avoid paying taxes, U ThanOo, secretary of Myanmar Rice Association, told Myanmar Business Today.

Traders from China purchase all types and quality of Myanmar rice so it is more convenient to trade over the border than export by sea, he added.

“Chinese traders have been purchasing rice illegally, but we still like trading through the border. If Chinese officials begin to seize its traders for illegally purchasing rice, we don’t know where to sell the rice. It will affect our domestic rice mill business owners also,” U ThanOo said.

Moreover, because Myanmar sells rice to the Chinese traders on credit, any money owed to Myanmar exporters could be lost if the traders were to be arrested, according to the Rice Traders Association.

“Our supply is greater than the demand. When five traders from the China want 50,000 bags of rice, we have 100,000 to sell. So we sell them the extra 50,000 bags on credit. If there is no seizure and they make profit, the credit is not lost,” U ThanOo said.

There were several series of arrests of illegal rice traders by Chinese authorities recently which resulted in a loss for roughly one or two percent of Myanmar rice traders.

U ThanOo explained that because the illegal Chinese merchants aren’t paying dues on their rice imports, they can offer a better rates than the standard international price.

“In dealing with the illegal rice traders, Myanmar exporters can charge a higher rate because the illegal merchants are not paying taxes on their goods.”

If China’s policy changes, it may shake up the market, therefore, Myanmar needs to search for new markets and upgrade the quality of rice to become more competitive, U ThanSoe, a member of parliament, told Myanmar Business Today.

He claimed the rice imports by China from Myanmar are not used for human consumption, but are fed to animals.

“It is essential for Myanmar to find African and European Union markets to sell rice to, as well as approach the Middle-eastern markets again for trade. Although, without upgrading the quality of rice to provide varieties such as steamed rice, it will be difficult,” he said.

It may be better if both the [Chinese and Myanmar] governments make efforts to ensure the legality of border trade. The new government, traders and the federation should cooperate with the relevant government institutions to make that happen, U ThanSoe added.

According to Myanmar Rice Association, the export of Myanmar rice was nearly 900,000 tonnes in 2009-10 fiscal year garnering $279 million, which has risen to more than 1.8 million tonnes (worth $644 million) in 2014-15.

Reference: http://www.mmbiztoday.com/articles/diversification-must-myanmar-rice-export

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