BURMA LIFTS RICE EXPORT BAN; WFP UNABLE TO BUY

C O N F I D E N T I A L SECTION 01 OF 03 RANGOON 000874 SIPDIS STATE FOR EAP/MLS, INR/EAP DEPT PASS TO USDA DEPT PASS TO USAID PACOM FOR FPA TREASURY FOR OASIA, OFAC E.O. 12958: DECL: 11/10/2018 TAGS: EAGR ECON EFIN PREL PGOV BM SUBJECT: BURMA LIFTS RICE EXPORT BAN; WFP UNABLE TO BUY RICE LOCALLY REF: A. RANGOON 742 ¶B. RANGOON 743 RANGOON 00000874 001.2 OF 003 Classified By: Economic Officer Samantha A. Carl-Yoder for Reasons 1.4 (b and d). Summary -------------- ¶1. (C) The Burmese Government, confident that it will have more than 300,000 metric tons of surplus rice after the November harvest, lifted its ban on rice exports on November 4, issuing 11 permits to private Burmese companies. However, the GOB has not yet approved a World Food Programme (WFP) request to once again procure rice locally to meet needs in the Delta and elsewhere, though the WFP is optimistic it will receive the necessary permission soon. The WFP predicts a significant break in its food pipeline in December due to a delay in expected shipments and, in response, will either procure rice locally or again rely on NGOs to do so to cover the shortfall. End Summary. Surplus of Rice Expected/Export Ban Lifted -------------- ¶2. (C) The Burmese Government expects a rice surplus of more than 300,000 metric tons with the November harvest, and as a result has reportedly lifted the ban on rice exports. By November 7, the GOB had issued 11 rice export permits to 10 companies, businessman Anwar Hussain told us. SGS Consultant U Kyaw Tin confirmed that the GOB will have a rice surplus after the November harvest. Although Cyclone Nargis devastated the Irrawaddy Division, which accounts for approximately 35 percent of Burma's overall rice production, the hardest hit areas account for only five percent of production. Other rice producing areas have increased their yields, he stated. During an embassy trip to Mandalay in early October, local rice traders confirmed that rice production in Mandalay and Sagaing Divisions is up by 20 and 25 percent, respectively, due to additional plantings and increased rainfall. ¶3. (SBU) WFP and the Food and Agricultural Organization (FAO) are conducting a country-wide Crop Supply and Food Assessment to determine Burma's food production sufficiency. Preliminary results indicate that Burma will produce enough rice in the November harvest to meet the country's needs and allow for exports. Final results are expected by mid-November. WFP: Still No Local Procurement -------------- ¶4. (C) Despite lifting the ban on rice exports, the GOB has yet to allow WFP to procure rice locally, WFP Country Director Chris Kaye told us. Kaye met with the Minister of Commerce on November 7 to request procurement permission; the Minister told Kaye that "he did not have the authority" to make a decision on WFP's status. He then told Kaye that the Tripartite Core Group (TCG) should submit a letter to the Ministry, endorsing WFP's need to procure rice for Delta operations, which the Minister would forward to the Trade Council. Kaye met with the TCG on November 10. He told us the TCG would send the required letter to the Minister shortly, and said he is optimistic the GOB would approve. RANGOON 00000874 002.2 OF 003 ¶5. (C) Kaye will have to submit a separate request to the Ministry of Progress of Border Areas and National Races Development Affairs to obtain permission to procure rice locally for the WFP's feeding program in the rest of the country -- the Protracted Relief and Recovery Operation (PRRO). He told us privately that if the GOB does not grant permission to resume local procurement, he would highlight for the international media the GOB's hypocrisy in lifting the ban on rice exports while forcing WFP to import rice for its domestic aid programs. WFP Predicting Food Shortfalls -------------- ¶6. (C) WFP, which has provided more than 104,000 metric tons of food to 924,000 cyclone victims since May 3, will face a 9,000 metric ton shortfall in December due to a delay in the shipment of USAID/Food for Peace's USD 16 million food and commodities donation, Kaye told us. In September, WFP faced a similar problem, and due to its inability to procure rice locally, relied on its NGO partners to purchase rice on its behalf (Ref B). Kaye noted that WFP will look for ways to cover the December shortfall, either by directly procuring rice locally (assuming a policy shift) or once again relying on NGOs to purchase rice under the table from willing traders. Since WFP expects the number of beneficiaries to drop after the November harvest, WFP or NGOs will need to purchase less than in September. Once the December shortfall is resolved, WFP will be able to provide rice to its beneficiaries through February, Kaye stated. ¶7. (SBU) WFP still needs funds to cover a significant shortfall in its PRRO program, which operates in Shan State, Northern Rakhine State, and Magwe Division. WFP needs $44 million to fund the remainder of this three-year program, which provides food to 1.2 million Burmese living under the food poverty line. Kaye urged donors to contribute to the PRRO. Rice Traders Facing Losses -------------- ¶8. (C) Most rice traders are unenthusiastic about the GOB's plan to resume exports in November, businessman Anwar Hussain told us. Prior to Cyclone Nargis, rice traders had been speculating on rice, purchasing local stocks for USD 400/metric ton that they then exported at USD 700/metric ton - a substantial profit. After Nargis, the GOB suspended rice exports, forcing traders to hold rice stocks worth an estimated USD 15 million (Ref A). The international price of rice has dropped dramatically since May, from more than USD 800/metric ton to USD 400/metric ton, U Kyaw Tin commented. Burmese rice commands an even lower price on the international market, approximately USD 320/metric ton, so Burmese exporters who purchased rice at higher prices are reluctant to export their existing stocks, he explained. ¶9. (C) U Kyaw Tin confirmed reports that Bangladesh imported more than 11,000 metric tons of rice across the Burma border in early October, although he noted that military-owned Myanmar Economic Corporation (MEC) made the sale. MEC exports are not included in Burma's overall rice export figures, he stated. U Kyaw Tin also confirmed that while the Bangladesh Government wants to procure 100,000 metric tons of rice annually from Burma, it wants to set the price at less than USD 400/metric ton. He was unaware of RANGOON 00000874 003.2 OF 003 whether the GOB agreed to that price, since traders would be unable to earn a profit. DINGER