Myanmar looks to new rice agreement with Jakarta

01.09.2016

The governments of Indonesia and Myanmar will sign a memorandum of understanding next month on continued rice exports, but the two commerce ministers then face an unresolved issue over payment for a previous shipment that failed to comply with Indonesian regulations.

Commerce Minister U Than Myint will travel to Indonesia on September 13 for an MoU signing ceremony, after which he and his Indonesian counterpart will discuss the terms of a new export agreement, the ministry has confirmed.

The new contract for rice exports will involve private sector exporters and buyers, thus officials from the Myanmar Rice Federation (MRF) and MAPCO will be involved in discussion about exactly how much rice Myanmar will export and at what price.

The original government-to-government agreement with Indonesia was signed by Myanmar’s previous government in April 2013. But Indonesia only approached Myanmar for rice imports in 2015.

Under the terms of the old agreement Myanmar could have exported 100,000 tonnes in the 2015-16 fiscal year, but due to widespread flooding it managed only 20,000, according to U Nay Lin Zin, joint secretary of the MRF.

The MRF expects the new MoU to allow Myanmar to export 300,000 tonnes of rice to Indonesia each fiscal year – more than 20% of the total rice exports in 2015-16. Myanmar exported 1.3 million tonnes of rice that year, down from 1.5 million in 2014-15, according to the MRF.

U Nay Lin Zin said extending the agreement with Indonesia was a positive move for the local industry.

“The Philipinnes also wants to sign an MoU with Myanmar for rice exports, but price negotiations are still ongoing,” he said. Myanmar has been too reliant on exporting rice to China, and it was time for the country to broaden its trade relations to new markets, he added.

But the commerce ministers will have to help settle a months-long dispute over payment for a shipment that MAPCO made to Indonesia in March, which a Myanmar delegation to Indonesia in June failed to resolve.

MAPCO sent almost 14,000 tonnes of rice to the port of Surabaya, which failed to meet new Indonesian food safety regulations. The imported rice was not tested at an Indonesian-government approved laboratory, because MAPCO was unaware of the new rules.

As a result it sat unloaded at the port for months, racking up a demurrage charge of around $1.8 million.

“Despite two months of delays at the port, Myanmar’s rice quality is still good and perhaps good enough to satisfy Indonesia. That’s why we are planning to renew the contract,” said U Khin Maung Lwin, deputy permanent secretary at the Ministry of Commerce.

MAPCO’s executive director U Thaung Win said Myanmar has prepared a system of laboratory certification and so similar difficulties in the future are unlikely. But Indonesia’s state-run Bureau of Logistics, known as Bulog, has paid MAPCO for less than half of the $5.3 million shipment, and MAPCO has still not paid the demurrage charge.

MAPCO is seeking a 70% discount on the charge, but as of mid-August Bulog had offered just 15% to 20%. The deadline for Bulog to pay was extended from July 31 to August 31, and has now been extended to mid-September with the commerce ministers scheduled to debate the matter after the signing ceremony, said U Ye Min Aung, MAPCO’s managing director and the general secretary of the MRF, told The Myanmar Times.

Once the discounted demurrage charge is paid, Bulog is expected to pay for the rest of the shipment, he said.


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