Financial Times

To be or not to be a rice exporter
By W.A. Wijewardena

At the lunch table, whilst partaking a meal of rice, somebody mooted the idea that Sri Lanka should strive to become a net rice exporter in the next few years. The argument was based on the new high price of rice in the international markets and the need for earning foreign exchange to repay loans borrowed for financing the Mahaweli Project. “It’s unfair,” he said. “The government borrowed a huge amount to fund the Mahaweli Project. Farmers got the benefit and raised the paddy output. It in a way helped us to reduce the importation of rice and saved foreign exchange. But to repay the loans, the country has to use foreign exchange earned by others.”

This was an interesting topic for my lunch table mates, because from time to time, many had expressed this wish as a way to regain country’s lost prestige. It has indeed been permanently ingrained in the psyche of all the countrymen. So, any suggestion at exporting rice was ardently loved by everyone. “I agree,” another mate expressed his view. “We had exported rice to the rest of the world in the past. We’ve that ability. We should do it again.”

Consensus around the table was that we have the ability and so we should become a net rice exporter. I was listening attentively, but I could no longer be a silent listener. They wished to have my views also. “It’s not a goal which we’re incapable of attaining, since current world market prices are attractive,” I said to their gleaming eyes. “But, it requires us to produce what the world market requires and generate an exportable surplus.”

“What’s the problem with the world market?” Somebody asked. I explained: “To sell something we must meet the consumer’s taste. The preference of consumers is for Thai long grain type rice. So, we’ve to change from the short grain rice that we currently produce to long grain rice. Short grain rice too could be sold, but it wouldn’t fetch a premium price”

“But, why can’t we sell our red rice variety which is supposed to be more nutritious?” another wanted to know. “We could,” I said. “But we need to change the consumers’ preference through advertising and marketing, the way the British popularised Tea in the mid-nineteenth century. Remember they presented tea to the market as a ‘brain tonic’ and cultivated a ‘tea culture’. That’s how tea became one of the leading drinks throughout the world. We’ve to undertake a similar campaign for our red rice and present it as a health product.”

“Oh, it’ll take time and cost a lot of money,” one said, expressing disappointment. “What about this generating an exportable surplus?” another asked. “Presently we’re not self sufficient in cereals. Our rice production is sufficient to meet only about 85 % of our rice requirement. On top of that we eat a lot of wheat flour – about 35 kilograms per individual annually. If we don’t eat wheat flour, our rice production is sufficient to meet only about 45 to 50 % of our cereal requirements. So, the first option for us to generate an exportable surplus is to squeeze domestic consumption. Since we can’t expropriate rice, we’ve to do it by raising the price. But, it has other problems,” I explained. They were now more attentive and wanted to know those other problems.

“Historically, we’re a great rice eating nation. We don’t take a balanced diet – that is, 40 % carbohydrate, 30 % fats and another 30 % proteins. Because of the high price of proteins and low price of cereals, we take 80 % of carbohydrates, 15% of fats and about 5 % of proteins. That is why our per capita rice consumption stands at 105 to 110 kilograms per annum. The comparable figures in other countries is 60 in Japan, 65 in Thailand, 81 in India, 50 in Taiwan and 96 in China. To generate an exportable surplus, assuming that we eat the same quantity of wheat flour, we have to reduce per capita consumption to about 60 kilos but increase both proteins and fats significantly.

That means the prices of meats and fish have to be reduced drastically. Otherwise we’ve to eat more wheat flour or any other starch to compensate for the reduction in cereal intake. But it would negate the foreign exchange earnings, because we’ve to pay more for wheat flour imports,” I said. “Isn’t there a way to raise the output and generate a surplus?” one of them asked.

“We could,” I said. “Nothing is impossible. But we’ve now reached the maximum yield level at about 4500 kilos per hectare. Japan, South Korea and USA produce about 9000 to 10000 kilos per hectare. To reach that level, we’ve to go for a second green revolution. High yielding seeds, improved fertiliser application, better and efficient water management and on top of that, advanced farm management are the prerequisites. While supplying them, we’ve to train and educate our farmers as well.”

“So, we can’t export rice,” they chorused mournfully. “No, we can,” I assured them. “It’s difficult to be a net exporter. But, we can export some special varieties, the way one of the leading companies is doing. At the same time, we’ve to import rice as well. So, we should not ban rice exports altogether as somebody has suggested. This type of trade policy is in accordance with the modern trade theory.” “What’s that modern theory?” somebody asked. “That’s Intra-industry trade or simultaneous import and export of the same commodity,” I said.


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