Monthly Archives: February 2016

Rice Sector Facing Collapse, Millers Warn

About half of the country’s rice millers and exporters went out of business last year and those clinging on are likely to follow suit within two years unless the government injects capital into the sector and takes measures to curb the flood of imported rice from Vietnam, millers and exporters said in a letter to the Commerce Ministry yesterday.

“The government may not know or understand the extent of the gravity of the situation facing the rice industry now and in the near future,” the letter from an “activist” group in the Cambodia Rice Federation said. “Nobody has given any concrete attention to the plight of millers and farmers,” it added before outlining risks the industry faces and solutions to avoid bankruptcy for millers and farmers.

The letter also referred to the rice federation as a “sinking ship,” and urged the Commerce Ministry to facilitate an extraordinary general meeting of the federation in order to change its charter and bylaws to salvage it.

The federation needs to be overhauled to strengthen it, create unity, add “brain power,” experience, capacity and unity in decision making as well as good governance, the letter said.

This is required to “strengthen the rice industry by forging unity [and] reaching out and mobilizing all stakeholders to come up with a pragmatic strategic road map with a clear set of much needed government interventions in the short run.

“This has not happened as complete inertia, destructive narrow interests and unprofessional management have prevailed [in the federation and the rice sector],” the letter stated.

The letter called on the government to move quickly because competition in export markets, as well as domestic ones, is increasing.

Millers and exporters face a threat in their key European Union market due to falling import duties on rice imported by the EU from Vietnam, following a free trade agreement signed between the bloc and Hanoi, according to the letter, which notes that Thailand is also increasing its rice exports.

Farmers are also facing a cash crunch due to a flood of low-grade rice from Vietnam, it adds, stressing that bankruptcy has been widespread among farmers, millers and exporters alike.

“If the threat and the problem remain unresolved [by] the government, the following consequences and chain reaction will likely occur – all our rice mills will go bankrupt within the next two years,” the letter said. “This will lead to massive uncertainty, poverty and social instability in our rural area as our farmers won’t be able to sell their paddy.”

Song Saran, president of miller and exporter Amru Rice, said the letter was written by millers and exporters (including himself) to explain the current issues and challenges rice millers, exporters and farmers face. It also lists several recommendations, including a ban and/or tax on rice imported from Vietnam, and financing for projects like a warehouse at Sihanoukville port.

They also sent their letter to the Cambodia Rice Federation. “Rice millers and exporters are upset that companies or traders are allowed to import rice from Vietnam while we have enough milling capacity and paddy surplus to supply the local market,” he said.

“Small and medium-sized millers need more loans to buy paddy from farmers during harvest so that they can store it to supply the market year round,” Mr. Saran said.

He said Vietnamese companies were snapping up high-quality Cambodian paddy for export from Vietnam and flooding the Cambodian market with low-grade rice. This is driving domestic millers out of the market, Mr. Saran said.

“We cannot sell in the domestic market in recent year because we cannot compete with Vietnam rice. The government should increase tax on imported rice to protect domestic farmers,” he added.

Vietnam also reached a free trade agreement (FTA) with the EU earlier this year that will see the EU remove all duties on about 80,000 tons of rice imports annually from Vietnam, including 20,000 tons of husked rice and 30,000 tons of aromatic rice. Duties on other rice products will gradually fall over the next five years, according to the FTA.

According to the letter sent to the Commerce Ministry yesterday, Cambodian rice exports to the EU will be affected, as half of all rice exported by Cambodia goes to that market.

Vietnamese exporters have lower production and shipping costs, while Cambodian exporters struggle with high production and transportation costs, a lack of infrastructure, insufficient storage facilities, a lack of unity and price wars.

Hun Lak, vice president of the Cambodia Rice Federation, told Khmer Times recently that the EU-Vietnam FTA will restrain growth of Cambodian milled rice export to the EU this year, but added that the federation had set up five working groups to improve domestic capacity and find ways to maintain competitiveness in the global market.

According to yesterday’s letter, domestic rice millers and exporters requested the Commerce Ministry to prohibit imports of milled rice from Vietnam for six months or enact policy measures to stem them. It also called for soft loans of about $500 million at 4 percent per annum to develop infrastructure and cut electricity costs to $0.10 per kilowatt hour so that domestic millers can become as competitive as their counterparts in Thailand and Vietnam. It also called for a warehouse to be built at Sihanoukville port with the capacity to hold 20,000 tons of rice.

Ken Ratha, a spokesman for the Commerce Ministry, told Khmer Times yesterday that a meeting had been held between the minister and exporters and millers yesterday to address all the challenges and concerns from the industry.

He described it as a “normal meeting” during which “concern and challenges” were discussed. “The minister noted the concerns and issues,” he said without elaborating.

A source who was present at the meeting said Commerce Minister Sun Chanthol “basically agreed with all of our recommendations to save the industry and called for us to provide a detailed cost analysis of the supply chain.”

The ministry will submit the report to Prime Minister Hun Sen urgently, said the source who asked not to be named. A suggestion that Deputy Keat Chhon chair an “urgent inter-ministerial meeting” on the rice sector will also be made, the source said.

Cambodian rice won the World’s Best Rice award for three consecutive years, 2012 to 2014, while milled rice exports rose about 40 percent from 2014 to 538,396 tons last year, according to government figures. This amount, however, fell far short of the government’s export target of 1 million tons.

DRI Unearths Over Rs 1,000 Crore Scam in Rice Export

Authorities have unearthed a massive scam in export of high-quality Basmati rice to Iran, running into over Rs 1,000 crore, in which the commodity was fraudulently diverted mid-sea to Dubai.

According to a probe being done by the Directorate of Revenue Intelligence (DRI), over two lakh metric tonnes of Basmati rice was illegally offloaded in Dubai in the last over a year instead of in Bandar Abbas in Iran, official sources said.

Over 25 big exporters from Haryana and Punjab are under the scanner of DRI and other agencies for their involvement in the multi-crore scam, they said.

Explaining the modus operandi, the sources said rice would be taken to Gujarat’s Kandla Port by these exporters. They would then file Shipping Bills–documents filed with customs authorities carrying details of goods to be exported, consignor and consignee- for export to Iran, they said.

Instead of the consignment reaching Iranian shores, it would be diverted mid-sea to Dubai allegedly with the connivance of cargo ship operators carrying the goods. Surprisingly, payments were also made from Iran to these exporters in India. Importers and port officials would allegedly acknowledge the receipt of rice and allow payment to be made against it here, the sources said.

What is worrying for intelligence agencies here is that they do not know the end-use of rice off-loaded in Dubai. They suspect use of rice as barter system to fund some illegal activity like terror financing, the sources said.

The DRI has red-flagged the scam at the highest level and is in touch with authorities concerned in Dubai about the scam. Prima facie, two lakh metric tonnes of rice valued at about Rs 1,000 crore has been off-loaded in Dubai instead of Iran, they said.

While India lost foreign exchange which it could have got from Dubai in case of genuine trade, Iran was also deprived of customs duty it would have been entitled to if rice was delivered at its shore, the sources said.

The authorities suspect the proceeds of the scam assumed the form of black money. The DRI has informed Supreme Court- appointed Special Investigation Team on black money about the case. It has also roped in the Enforcement Directorate to look into the matter, they said.

Legal export of rice from the country has risen in the past two years. India had exported 2,77,880.22 kg of Basmati rice to United Arab Emirates in 2014-15. About 4,11,776.06 kg of rice had been sent to the UAE between April and November 2015, as per the latest data of export compiled by Directorate General of Foreign Trade.

A total of 9,35,567.81 kg of Basmati rice was exported to Iran in the last fiscal and 4,57,023.63 kg between April and November this financial year, they said.

Pakistan eyeing Iranian markets for its agriculture goods

To boost its agriculture commodity exports, Pakistan has decided to invite Iranian agriculture minister to the country. The formal request for the visit is likely to be extended by the Minister for National Food Security Sikander Hayat Bosan in the next few days to the Iranian ambassador.

An official source said the decision to invite the Iranian Agriculture minister was made as it was found out that the Iranian Agriculture Ministry authorises all the commodities imports while the Iranian Commerce Ministry has no role in the process. The diplomatic move was advised by the Ministry of Commerce.

After lifting of international trade restrictions on Iran, Pakistan is hopeful of gaining access to the Iranian market. Pakistan has surplus wheat, rice, sugar, vegetables potato and onions and fruits. The government is under pressure from the business community to find new markets for these produce as the prices have crashed locally.

The government has already lifted all the restrictions on trade with Iran. The State Bank of Pakistan has allowed banks to establish banking links with Iran. This will help in creating a formal payment mechanism between the two neighbouring countries.

The visit of the Iranian Agriculture Ministry will help apprise Iranian officials about Pakistani commodities like wheat, rice, vegetables, fruits and meat. During the last thirty years of isolation of Iran, Pakistan has become a major agriculture producer and can easily meet the brotherly neighbour’s food requirements, a senior official said.

Importers urge KPA to release cargo

The Association of Importers has protested against the Kenya Ports Authority’s decision to continue holding thousands of containers that were to be stored at the Autoports and Portside container freight stations.

The two CFSs associated with Mombasa Governor Hassan Joho’s family were shut last month on allegations of holding contraband.

The government ordered that all imported cargo on transit be verified and cleared at the port.

Previously, imports were verified and cleared at the CFSs.

More than 2,000 containers, including 37,500 tonnes of rice imported from Pakistan, have been at the port for a month since the two CFSs were closed.

The importers say the rice was to be stored at the two CFSs.

Last week, the Pakistan High Commission commercial counsellor, Amir Mohyuddin, and Rice Exporters Association of Pakistan chairman Rafique Suileman urged KPA to release the cargo.

The importers lawyer, Japheth Asige, said his clients have incurred huge losses.

Speaking to journalists in Mombasa town on Thursday, he said perishable goods are going bad.

There are reports containers have piled up at the port because only one scanner is working.

Asige said KPA granted Dot.Com Consultancy Ltd, a firm representing the importers, permission to clear the cargo from the port on February 18.

“My clients have not been allowed to collect a single container yet charges and penalties are running into millions

of shillings, they fear they may not raise the money,” he said.

Kenya starts releasing stuck-up Pak rice consignments

The Kenyan government has started releasing Pakistan’s around 37,000 tonnes rice cargoes worth $13 million, which were stuck at the Kenyan seaport for the last one month due to cancellation of license of harbour yards, following the settlement between Pakistani exporters and the Kenyan Port Authority.
The rice exporters said that federal commerce minister Khurram Dastgir Khan, on the request of REAP chairman, sent a letter to the secretary of foreign affairs ministry in Kenya to take up the issue with the Kenyan government for early release of Pakistani rice consignments. The Kenyan authorities were also asked for withdrawal of examination condition imposed on stuck rice consignments.
They said that around 1,500 rice containers had been held up at Kenyan seaport last month due to cancellation of licenses of Auto Ports Container Freight Station.
Rice Exporters Association of Pakistan chairman Ch Muhammad Shafique said the abrupt closure of CFS yards disrupted the normal cargo clearance at Mombasa Port. Accordingly, the delay in the release of the cargo forced the REAP to intervene and safeguard the interests of rice exporters of Pakistan.
Ch Shafique said that Reap delegation in Kenya made full efforts to resolve the issue, getting the containers released without examination and paying any additional fine.
REAP chairman said that Pakistan High Commission in Nairobi arranged meetings with KPA officials to ensure the timely release of consignments.
During the meeting, it was agreed that KPA will waive all demurrages and storage charges that may have accrued due to the policy change. Accordingly, KPA has asked REAP to provide the details of Bill of Lading along with container numbers of the consignments lying at the KPA.
Ch Shafique said that the Pakistan delegation in the lead of former chairman Rafiq Suleman also held meetings with Kenya Revenue Authority (KRA) to outline the procedure for releasing and removing the balance containers of Pakistani rice exporters. Meetings with KPA and KRA representatives were very fruitful and created a way forward to clear the held up cargo that was nominated to the closed CFSs, he added.
He said that the Pakistan delegation also asked for a deadline of 15th March, 2016 for removing the balance rice consignments from KPA without any storage or additional charge and KPA officials are almost agreed to it.
The REAP chairman appreciated the federal commerce minister for taking prompt action and approaching the top Kenyan authorities to resolve the issue on an urgent basis.
He appreciated the efforts of High Commissioner of Pakistan at Nairobi, Ministry of Foreign Affairs and TDAP officials for their active involvement to resolve the issue.

REAP demands zero-rated status for rice exports

Rice Exporters Association of Pakistan (REAP) requesting zero rated status for Rice has urged Mian Muhammad Nawaz Sharif Prime Minister of Pakistan to declare rice exports as industry. Abdul Rahim Janoo Chief Patron and Noman Ahmed Shaikh acting Chairman REAP has said that apart from textile, rice exports are much ahead of other four sectors. Negligence of rice sector will discourage rice exports and we will loose our established markets as well as it will dishearten rice exporters, they added.

“If government’s intentions are good then “No Payment No Tax” policy will curb corruption and will release many staff members of FBR to do other jobs. The working capital of exporters gets blocked and refunds are pending since many years, of which industry has to borrow loans to run their units or shut down”, they said.

Noman Ahmed Shaikh urged that for one tax to be collected through banks at the time of negotiating documents or on receipt of payments. This will increase Government revenue and eliminate corruption and calculation formula is very easy, add all Federal and Provincial taxes like EOBI, Social Security, Market Committee and divide by total export value, if it comes 0.05% or 0.10 % put it along with the withholding tax and save exporters from collection mafia, he added.

“It will give peace of mind to exporters and exports will increase and once export increases the revenue increases”, he said. He also requested Prime Minister to re-activate Federal Export Board and must head it for meeting on every three months. In order to enhance trade with Iran, he suggested that delegations to be sent immediately to Iran to re-capture our lost markets and it is evident that around 85 percent countries world-wide that their neighbours are their largest trading partners due to the saving in freight cost.

Vietnam sees no future in exporting fragrant rice

The scented rice that Soc Trang Food Company exports to Hong Kong, Taiwan, Singapore and the US has been increasing rapidly. This prompted the company to join forces with farmers in 2015 to increase the Jasmine 85 fragrant rice growing area from 1,800 hectares to 4,000 hectares.

The Vietnam Food Association (VFA) also decided to develop Jasmine 85 into a national rice brand.

However, some experts said this was a hasty decision.

Weak brand

In 2010, Vietnam exported 216,000 tons of scented rice, while the figure soared to 1.3 million tons in 2014. The scented rice export price increased rapidly from $460 to $620 per ton.

Even China and Africa have imported more fragrant rice from Vietnam because Vietnam’s rice has a more competitive price than Thailand’s.

Australia and New Zealand have also begun importing scented rice from Vietnam. Vietnam’s scented rice first appeared in the US in late 2015.

However, US consumers favor Vietnam’s rice less than Thailand’s, though Vietnam products sell $10-45 per kilo cheaper. Thai Hom Mali rice is exported at $1,075 per ton, while Indian Masmati $1,525 per ton.

Though the scented rice exports have been increasing rapidly, the export volume from Vietnam is very modest.

Meanwhile, Vietnam’s scented rice export price is just equal to 50 percent of Cambodia’s and Thailand’s. In the US, according to Dr Tran Van Dat from FAO (Food & Agriculture Organization), Thai scented rice accounts for 80 percent of the market share.

Cambodia is also a very strong rival to Vietnam. Though Cambodia cannot compare with Vietnam in terms of export volume, its export price is higher.

According to CRF, Cambodia’s Jasmine can be sold for $820-850 per ton, while Vietnam’s Jasmine average export price is between $450 and $620 per ton.

What kind of rice should be exported?

Vietnam is still wavering between making high-quality scented rice or low-cost high-yield rice.

VFA wants to develop Jasmine 85 into Vietnam’s national rice brand. However, according to Prof Vo Tong Xuan, the Vietnamese leading rice expert, Jasmine has been abandoned in many countries.

Meanwhile, according to an analyst, Vietnamese Jasmine rice products can be sold for prices equal to one-half of Thai Hom Mali rice and 1/3 of Indian Basmati because Vietnamese rice exporters offer low prices to scramble for export contracts.

Rolando Dy from Filipino Asia Pacific University noted that Vietnam should not follow Thailand and focus on making scented rice, but instead should focus on high-yield rice varieties which have selling prices of $700-800 per ton.

Auctions of old rice may be opened to foreign bidders

The Commerce Ministry is considering allowing international bidding at auctions for the old rice still in the government stockpile from the previous government’s rice-pledging scheme
Permanent secretary Chutima Bunyapraphasara said on Friday the ministry wanted to open the auctions to foreign bidders, not only local buyers, this year as it planned to sell at least 5 million tonnes of the old grain.
Officials were looking into the details and would have to consider whether the ministry had enough staff because international bids would require many procedures and involve a large volume of documents that would all have to be examined, she said.
There were still about 11 million tonnes of rice in the old stockpile. Ms Chutima said 1-2 monthly auctions would be organised between March and July, when farmers would not have new grain to offer on the market.
The next round of bidding would be in late March, for 400,000-500,000 tonnes of rice, she said.
The National Rice Policy Committee approved the sale of 362,864 tonnes of old rice to winning bidders from the last auction on Feb 16 and 17, when 570,000 tonnes were on offer.
Of the approved amount, 141,489 tonnes were sold to general buyers and 221,375 tonnes to industrialists, mainly the producers of animal feed and noodles. The best price was at 6-7 baht per kilogramme, Ms Chutima said.
Officials of the Department of Foreign Trade (DFT) would discuss prices and terms with Chinese officials next month for the delivery of 100,000 tonnes of rice to China which had signed a memorandum to buy a total of 2 million tonnes of Thai rice.
Many other countries were also interested in buying Thai rice to cope with possible shortages – including Indonesia, Iran and the Philippines, Ms Chutima said.
DFT director-general Duangporn Rodphaya said drought was worldwide and global rice traders were aware that Thailand had a huge stock of rice and Vietnam would sell out its current stockpile in March.
She predicted that Thailand would export 9.5 million tonnes of rice in 2016, because demand was likely to rise in the second half of this year.

Pakistan central bank clears financial transactions with Iran

Pakistan’s central bank has cleared all commercial banks and financial institutions for business with Iran, paving the way for the two countries to resume regular business activity that was hampered by years of sanctions.

Global transaction network SWIFT reconnected a number of Iranian banks to its system earlier this month, allowing them to restart cross-border transactions with foreign banks after the lifting of most sanctions on Tehran in January.

Iranian banks were disconnected from Belgium-based SWIFT, the Society for Worldwide Interbank Financial Telecommunication, in March 2012 as international sanctions against Tehran over its disputed nuclear program tightened.

“In line with the federal government’s decision to implement the United Nations Security Council Resolution  regarding lifting of sanctions against Iran, the State Bank of Pakistan has communicated to banks/financial institutions that previous sanctions on Iran have been removed and normal business activities can be commenced within the scope of the Resolution,” the central bank said in a statement.

“It is expected that the lifting of sanctions and restoration of banking channels between Pakistan and Iran would revive normal trade and business activities between the two neighbors.”

Trade between Pakistan and Iran fell to $431.76 million in 2010-11 from $1.32 billion in 2008-09, according to the Trade Development Authority of Pakistan.

But tightening of sanctions on Iran made smuggling, particularly of petroleum products, extremely lucrative.

Major Pakistani exports to Iran include Basmati rice, plastics, paper and oranges, and the big imports items include liquefied petroleum gas, petroleum products, electric transformers and dry fruits.

Thailand plans steps worth $285 million to help drought-hit rice farmers

Thailand’s government on Friday announced measures worth around $285 million to help desperate rice farmers grappling with drought and low prices for their crop.

Thailand, the world’s second largest rice exporter after India, is facing what some experts say is its worst drought in decades.

That has crimped production but has not pushed up prices as the country has about 12 million tonnes of rice in storage that it is trying to offload, the legacy of a scheme by the previous administration to support rural areas.

Prices have also been hit as the economy slows in China, the world’s top rice importer.

Rice farmers have for months been pressuring the military government to do more to help cushion the fall in prices that has plunged many into debt.

They have also demanded the government do more to manage water reserves across the country that have dipped below 2015 levels.

The measures announced on Friday by the country’s rice management committee are worth around 10 billion baht ($285 million) and include plans to assist farmers in rice production.

The committee said in a statement that 6.76 billion baht of the total would go towards stabilising rice prices through soft loans for farmers who store paddy.

The government-owned Bank for Agriculture and Agricultural Cooperatives (BAAC) will approve loans of up to 300,000 baht ($8,415) to farmers who store rice to curb supply.

Domestic and international demand for Thai paddy this year will stand at around 25 million tonnes, the committee said.

It expects output of 27.17 million tonnes in 2016, compared to an average of about 30 million tonnes of paddy in recent years.

Prime Minister Prayuth Chan-ocha on Wednesday told farmers to grow less rice to help manage limited water resources.

($1 = 35.6900 baht)