A rice trader inspects the quality of rice at a warehouse at the Bayintnaung commodity trading centre in Yangon, August 23. Pic: Hein Latt Aung

THE Myanmar Rice Millers Association (MRMA) hopes to raise K5 billion in an initial public offering (IPO) of 50,000 shares that will mark the launch of a new trading company aimed at developing Myanmar’s rice exports.

A proposal to set up the company has been submitted to the Ministry of National Planning and Economic Development, although MRMA joint secretary U Win Aye Pe said government approval was unlikely to be a problem as forming the enterprise had been the ministry’s idea.

Details such as who will manage the firm and what it will be called are to be announced once permission has been formally granted, U Win Aye Pe said.

“This is a private company that will be led by the private sector,” another MRMA executive committee member told The Myanmar Times on condition of anonymity. “The company aims to control the Myanmar rice market both domestically and in exports.”

The ramifications of the move are massive. Agriculture is the mainstay of the Myanmar economy, employing more than 70 percent of the working population, and rice production is the backbone of the agricultural sector.

Increases in earnings from rice or paddy sales and the expansion of export markets have the potential to improve the lives of millions in Myanmar, as well as bring the country much-needed foreign currency.

It is with this in mind that the government has given the company its backing.
By uniting rice traders under a single banner it is hoped their collective financial might and supplying power will gain them access to new markets and allow them deeper penetration into existing ones. In doing so, U Win Aye Pe is confident investors will see good returns.

“If we can run this business efficiently and professionally, we are optimistic about our chances of financial success in the future.

U Win Aye Pe: “We will recruit economists and true business intellectuals.”

“In the past, public companies that made big promises suffered losses because they were not run efficiently. But we have no intention of making unrealistic claims to investors or running our company with people who lack experience in the private sector.

“We will recruit economists and true business intellectuals to fill the chief executive position and upper management levels,” he said.

At this stage the MRMA is keeping tight-lipped about who is likely to be in charge of the company.

The hiring of a professional management team is to be done by the association’s 24-member central executive committee. The committee is chaired by U Tin Win and the vice chairman is U Ko Ko Gyi.

“We have already shortlisted the professionals who will lead the company but it is too early to disclose who they are. We want to keep that a secret until the company is organised,” U Win Aye Pe said.

He pledged, however, that the “the individualism that reigned supreme in business operations in the past” would be replaced with an emphasis on teamwork in management and consultation with shareholders.

Bringing together the many different players in the rice industry also indicated a maturing of commercial enterprise in Myanmar, he claimed, saying it was a departure from the small-business culture of isolated operations.

“We are now welcoming all layers of society to invest in our company – we are welcoming,” U Win Aye Pe said.

The cost of shares though, at K100,000 each, is likely to keep many of Myanmar’s lower income earners out of the stockmarket.

A maximum of 1000 shares can be bought by any individual to prevent a single shareholder wielding too much influence. No foreigners are allowed to buy shares.

While the company will focus mainly on rice exports, U Win Aye Pe said it would likely engage in exporting a wide range of products, including those outside the agricultural sector if doing so was likely to be profitable.

Imports, meanwhile, would be limited to items that enhance agricultural production, such as fertiliser and related machinery, he said.

The way forward

Myanmar has a long road ahead if it is to fully develop its agricultural sector and reclaim the position it once held as a leading global rice exporter before the switch to a socialist system in the 1960s.

Dr Robert Zeigler, the world’s foremost rice expert, said during a visit to Myanmar in February this year that the country had the potential for a sharp increase in rice production.

He pointed to natural resources, irrigation opportunities and the large number of people involved in rice farming, but added that an increase in irrigated areas and greater use of fertiliser were crucial to development.

Dr Zeilger, the director general of the International Rice Research Institute, said only 25pc of the 7.6 million hectares used for growing rice were irrigated even though Myanmar had abundant water supplies.

U Win Aye Pe highlighted three other barriers to boosting rice exports. “Firstly, we don’t have uniformity – we have many different types of rice. The appearance of some of our rice isn’t good enough to compete with strains grown in other countries,” he said.

“Secondly, the main port facilities in Yangon are just river ports that are unsuitable for vessels that continue more than nine metres below the water level. They can only handle smaller ships with capacities below 20,000 tonnes.
“The ports in Yangon are about 50 miles from the sea, which means we have to use a two-step loading system and that pushes up freight costs. Meanwhile, our competitors like Vietnam have many deepsea ports. In a survey we did in 2001, we found our internal freight costs were US$50 per tonne (for delivery to West Africa) while Vietnam’s costs were $35. We have to step up our price competitiveness.”

The third problem, he continued, was inconsistent supplies to buyers.
“Although we might have shipped one million tonnes last year, it may go down up to a tenth of that this year (due to policy changes). So we’ve had difficulty holding on to customers over the long term.

“If we overcome these three barriers, Myanmar’s rice exports might be revitalised again”, he said.

While little progress has been made on producing more attractive rice, there are signs port access and policymaking may be improving.

Studies are underway for deepsea ports at Kyaukphyu in Rakhine State and Dawei in Tanintharyi Division. And the very fact the government has pushed for the formation of a large private-sector company to dominate exports indicates a growing respect for private enterprise.

In July, private entrepreneurs were for the first time encouraged to start international shipping lines. The same month, the Union of Myanmar Chambers of Commerce and Industry (UMFCCI) announced it was starting its own public trading company – Golden Land East Asia Development Ltd – at the request of the Ministry of Commerce.

Until recently, only four well-connected private companies have been allowed to export rice. But in early August, the Minister for Agriculture and Irrigation, Major General Htay Oo, announced the number of companies allowed to export rice would be increased.

Now, the MRMA’s introduction of a rice trading group rising out of the rice industry itself signals the arrival of a specialised firm acutely familiar with the sector’s unique needs.