Rice cartel not workable in long run: ADB economist
A cartel among leading rice-exporting nations will not work in the long run, an Asian Development Bank economist said yesterday.
Moreover, the government’s rice-pledging scheme is unsustainable and the authorities would do better to invest in supporting farmers to achieve low-cost production, said Lourdes Adriano, practice leader for Agriculture, Food Security and Rural Development in the ADB’s Regional Sustainable Development Department.
A cartel is not feasible in the long run, even though it may be beneficial for rice exporters in the short term, she said. She was commenting on the possibility of creating a rice cartel similar to the oil cartel of the Organisation of Petroleum Exporting Countries. Seniors officials at the Commerce Ministry have proposed the formation of such a cartel with other rice-exporting nations, the aim being to move prices up in the global market.
Adriano said it would not work in the long run because each exporting nation would always want to sell more of its rice than its competitors. A rice cartel had been tried over the past decade but failed, she said during a videoconference from Manila with reporters in Bangkok. She also said the rice-pledging scheme implemented by the government was not sustainable as it would have fiscal implications. It is a political decision, she added.
The state-run Bank for Agriculture and Agricultural Cooperatives plans to spend about Bt400 billion to support a new round of rice-price support for the upcoming crop year, having spent about Bt270 billion for previous years’ output. She said the scheme would, therefore, leave the government with scarce resources to support other farm products or services.
She stressed that the ADB was not suggesting the price-support scheme be scrapped. The government could adopt an income-transfer strategy, as its predecessor had done, by handing out cash to farmers who have to sell rice at low market prices.
This would lessen the impact on the fiscal position, she added.
Adriano also said the government would do better by focusing on investment that could help farmers to lower rice production costs, notably the cost of transport, marketing and fertiliser.
