December 23, 1999
Dr. David Dawe and Carolyn Dedolph
International Rice Research Institute

Governments in Asia go to great lengths to produce more rice and insulate their rice sectors from any instability in world markets. Why is this grain so politically sacred?

Rice rules in Asia. Alone, it provides 30-76 percent of people's daily calories. No single food in the West comes close to matching rice's dietary dominance in the East. A secure, bountiful supply of rice in Asia has typically ensured food security stability.

"The first sign of civil unrest can often be traced to rising rice prices," says IRRI economist Dr. Mahabub Hossain. Poor distribution and lack of purchasing power are also often responsible for hardship, as experienced in the famines in Bengal in 1943-44 and in Bangladesh in 1974-75.

Have Rice, Will Keep Working Urban workers and the rural landless, who spend 50-70 percent of their total income on rice, cannot tolerate drastic price increases. Poor rice farmers also have limited ability to tolerate sudden, sharp price declines. With the danger of disrupting political stability, it's no wonder rice holds such a lofty position in Asian culture and is of such critical importance to government policymaking.

The "rule of rice and prosperity" in Asia is simple: make sure the masses have enough rice to eat if the country wants to maintain social and political stability. But what is it about rice that makes it more sacred than other staples? And why is maintaining domestic rice security such a political issue? In many of the poorer Asian countries, economic development and industrial growth are closely linked to a reliable supply of cheap rice. If rice prices go up, workers will demand more pay, which in turn lowers the economy's competitive strength in the world market.

Whether rich or poor, most Asian countries follow the same food security strategy: they grow most of their own rice, maintain a public-sector monopoly in external trade, and hold rice stocks to dampen sharp price fluctuations. "But countries do not necessarily require self-sufficiency in rice to achieve or sustain food security," explains Dr. Hossain. A few countries have proven this point. Malaysia imports 40 percent of its rice, and wealthy Singapore and Hong Kong (which doesn't produce any rice) have better records of food security than their major rice-growing neighbors.

The critical factor for food security is "self-reliance," the economist says, which requires favorable export growth so that those with a rice deficit can import food from those with surpluses who can produce it at a lower cost. Self-reliance also requires "entitlement," as coined by Nobel laureate Amartya Sen, which is the assurance of productive employment so that people can buy food from the market.

The Uruguay Round of the General Agreement on Tariffs and Trade brought agriculture into the spotlight of negotiations. This will bring many benefits, the most prominent of which is that once subsidies and tariffs are removed, global agricultural production will become more efficient. However, the transition to free trade in rice must be managed carefully, especially in poor Asian countries, so that the food security of vulnerable segments of the population is not endangered.

Several important reasons exist why rice presents some special complications when it comes to free trade. When compared with the world markets for wheat and maize, that for rice is extremely small and unstable. Even though the international rice trade has increased significantly in the past few years, only 6.6 percent of the world's rice crop will be sold on the world market in 1999. World rice prices are more volatile, and no futures market of any significant size exists. At times, the world rice market has even closed Asian countries being large relative to the size of the world market, relying on it could mean very large increases in world prices if a major harvest failure occurs.

Because rice makes up such a large share of poor farmers' incomes and poor consumers' expenditures on food, unstable prices can lead to large and abrupt swings in purchasing power for these individuals. Such risk and uncertainty contradict the very notion of food security. Allowing world markets to determine domestic rice prices on a month-to-month basis is probably not the recipe for food security in Asia.

Indonesia provides a sobering lesson about what could happen in the absence of any government intervention. The stunning plunge of the Indonesian rupiah during the financial crisis triggered a sixfold increase in the domestic rice price within a few months, while consumer incomes remained stagnant. Rice prices did increase substantially, but, thanks to the government's stabilization policies, the increase was much less than a factor of six and was not abrupt. Without these policies, widespread famine might have occurred.

In the name of stability, however, many governments have intervened excessively in domestic grain marketing, ignoring the crucial role of the private sector. Much research, at IRRI and elsewhere, has shown that private traders are more efficient at moving farm inputs and outputs.

The challenge for economists and policymakers is to find cost-effective mechanisms that provide for adequate stability, yet still preserve as many of the benefits of free trade as possible and allow the private sector to have a dominant role.

With the increasing costs of labor, land, and water, it will be more efficient for richer countries to shift resources away from growing their own rice and buy their supplies from countries with a comparative advantage in producing rice. "Before the economic crisis in Asia, many political leaders were in favor of adopting this strategy" Hossain. Because the political costs of failing to feed their people are so incredibly high, most governments are not willing to take this risk.

"Asian nations need to collaborate mutually to strengthen agricultural research and develop irrigation and marketing infrastructure," says Dr. Hossain. International support is required to address food security in places with extensive poverty, that are threatened by political instability, or that have a vulnerable natural resource base. All this requires political will, changes in philosophy, and regional cooperation. What happens to rice in Asia will largely be based on politics.

"IRRI, with its headquarters in the Philippines and offices in 11 other countries, is the world's leading international rice research and training center. It is an autonomous, nonprofit institution that is focused on improving the well-being of present and future generations of rice farmers and consumers, particularly those with low incomes, while preserving natural resources. IRRI is part of the Consultative Group on International Agricultural Research (CGIAR), an association of public and private donor agencies that funds 16 international research centers.

For more information visit the CGIAR (www.cgiar.org) or Future Harvest websites (www.futureharvest.org). Future Harvest is an initiative of the 16 CGIAR research centers and their donor agencies to raise public awareness of the importance of agricultural research worldwide.

In April 2000, IRRI will celebrate its 40th anniversary under the theme "Rice Research for the New Millennium." As part of the celebrations, the Institute will host the International Rice Research Conference from 31 March to 3 April, a special Farmers' Day on 3 April, and a range of other events on the actual anniversary day of 4 April. To mark the occasion, Philippine President Joseph Estrada has been invited to give a keynote speech.