BURMA'S RICE PROBLEM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001600010029-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 16
• Document Creation Date: December 22, 2016
• Document Release Date: October 1, 2009
• Sequence Number: 29
• Publication Date: July 1, 1968
• Content Type: IM

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Secret
]DIRECTORATE OF
INTELLIGENCE
Intelligence Memorandum
Burma's Rice Problem
Secret
ER IM 68-79
July 1988
coy No.
76
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WARNING
This document contains information affecting the national
defense of the United States, within the meaning of Title
18, sections 793 and 794, of the US Code, as amended.
Its transmission or revelation of its contents to or re-
ceipt by an unauthorized person is prohibited by law.
GROUP I
E[[lud.d horn outomati[
dowogroding and
dalooifi[otion
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
July 1968
INTELLIGENCE MEMORANDUM
Burma's Rice Problem
Summary
Burma's rice exports are continuing their sharp
decline and may amount to no more than 300,000 tons*
in 1968. In comparison, Burma exported about 500,000
tons in 1967 and 1.7 million tons in 1963, when it
was the world's leading rice exporter. Current col-
lections from peasants are running behind plans,
and on 9 May Rangoon imposed a moratorium on rice
exports until at least September of this year.
Since rice normally accounts for 60 to 70 per-
cent of the country's foreign exchange earnings,
imports of machinery and equipment, as well as
consumer goods, seem certain to fall further.
Economic conditions in Burma are not likely to
improve as long as General Ne Win remains commit-
ted to his present policy which gives no incentive
to the peasant to sell rice to the government or
for the privately owned sector of the milling in-
dustry to modernize its equipment. Unless govern-
ment policy changes considerably, the long-run
prospects for increased rice exports and some re-
v-ival in economic activity appear quite bled:.
* All tonnages are in metric tons.
Note: This memorandum was produced solely by CIA.
It was prepared by the Office of Economic Research
and was coordinated with the Office of Current
Intelligence.
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Rice exports began to decline when the Ne Win
government late in 1963 took complete control of
procuring rice from the peasants. Prices offered
the farmer have remained so low that the amount of
rice they have been willing to sell the government
has steadily declined, although production has re-
mained relatively constant. Moreover, a rising
share of government rice procurement has been used
to meet urban needs, with the result that the amount
of rice available for export was sharply reduced.
With export earnings down nearly 50 percent in
1967, compared with 1963, and continuing to decline
in 1968, Rangoon has chosen to cut imports by an
almost equal amount rather than spend its foreign
exchange reserves, which came to $154 million in
April 1968. There has been a decline in investment
and government revenue, an increase in the general
price level, and about a 20-percent drop in national
income between 1963 and 1967.
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Rice and The Burmese Way to Socialism
1. When General Ne Win, through an almost
bloodless military coup, seized power for the
second time on 2 March 1962, he declared that par-
liamentary democracy ;:nder Prime Minister U Nu had
failed.* Subsequently, the ruling Revolutionary
Council of senior military officers, headed by Ne
Win, announced an official policy entitled "The
Burmese Way to Socialism." Under the Ne Win regime,
socialism was accelerated a.-,d almost all of the
private sector came under state control. W.I.th the
transportation, communications, and power industries
already nationalized, Rangoon took over the tobacco
industry, all domestic and foreign trade, the timber
industry, commercial banks, mining, several large
rice mills, and the wholesale and retail commodity
distribution systems. Foreign-controlled joint-
venture corporations, such as the Burma Oil Company,
also came under state ownership.
2. The Ne Win government's takeover of several
large rice mills and the threat to nationalize all
others has hindered modernization of Burma's rice-
milling industry. Private owners have been under-
standably reluctant to invest in new plant and
equipment, and the government has failed to make im-
provements in those mills already nationalized, be-
cause of a lack of foreign exchange to import need-
ed equipment. Thus Burmese rice exports continue
* Ne Win had previously acted as the leader of a
military caretaker government from October 1958 to
April 1960. The stated purpose of this caretaker
government was to create security conditions which
would allow democratic general elections. During
this eighteen-month period, He Win encouraged private
indigenous and foreign investment and the private
trade in rice and teak. He also liquidated the
state's monopolies of rubber and cotton.
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to be of low quality, commanding a much lower pr- ce
than those of the other leading rice-exporting
countries -- the United States and Thailand.
In 1967, for examp_.e, one of Burma's better grades
of rice sold for $120 per ton on the world market,
compared with a price of about $215 per ton for the
better grade of Thai rice.
3. In agriculture -- the main sector of the
Burmese economy -- government contr.;l was sought
through the establishment of cooperatives rather
than through nationalization. Approximately 12,000
marketing cooperatives have been established and
are charged with the management of about one-third
of the government's rice-purchasing centers. These
cooperatives have not met their procurement goals,
because they generally have been poorly administered
and unresponsive to government policies. Despite
these shortcomings, in April 1968 Rangoon announced
its intentions to expand the cooperative movement
by replacing a number of government stores, which
deal in primary foodstuffs, with a system of con-
sumer cooperatives.
4. Rangoon also initiated measures designed
to improve the lot of the small tenant farmer. In
March 1963 the government announced a rent control
program and a month later adopted a land reform
program prepared by U Ba Nyein, a well-known
Burmese Marxist and the military regime's financial
adviser. Land owned or controlled by absentee land-
lords was to be redistributed, largely among the
former tenants. Although more than four million
acres out of a total of about 20 million acres
being farmed were redistributed, this program has
not resulted in increased rice production. Rangoon
also announced in late 1963 that, beginning with the
current rice crop, it would assume control over the
entire external and internal rice trade and would
purchase rice directly from farmers. (For the princi-
pal rice growing areas in Burma, see Figure 1.) The
rice export trade essentially had been a government
monopoly since 1947, with only a few private firms
being allowed to export rice under strict government
control. Under the new regime, private exports have
been completely eliminated.
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5. Before the Ne Win regime, the domestic rice
trade was handled principally by private wholesalers
and retailers. The government did purchase some rice,
but at a single low price that did not distinguish
between grades -- this was basically a support price.
Private traders, however, purchased rice at multiple
prices, depending on the grade. Although peasants were
free to sell their rice to either government or
private buyers, the price offered by the government
was Fo low that peasants generally offered the govern-
ment only the lower quality rice. The better quality
rice, generally commanding prices considerably greater
than that offered by the government, was sold to private
traders and consumed domestically. In 1962, for example,
one year before the Ne Win government monopolized the
rice trade, private traders offered prices which were
10 to 35 percent greater than the government's single
price of $30 per ton. As a result, rice exports,
which came exclusively from government procurements,
were of an extremely low quality.
6. Under Ne Win, the government established a
system of multiple procurement prices for different
grades of rice and abolished the free market. But
these prices have been 10 to 20 percent lower, grade
for grade, than the prices formerly paid in the free
market. Furthermore, black market prices may have
been two to three times higher than the government
prices. As a result, peasants have either hoarded
their rice or sold it on the black market, and
government procurements have dropped off sharply.
In this situation, exports have steadily declined.
In 1963, government procurement prices averaged about
$35 per ton and by the end of crop year 1965/66*
had increased to an average of only about $36 per
ton, the lowest in the world (see Figure 2).
* The crop year begins in August of one year and
ends the followiiv,g JuZy. Rice exports for a given
calendar year are generally derived from the pre-
ceding crop year.
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The Result of Nationalizing The Rice Trade
7. The most serious shortcoming of the Ne Win
government's rice policies has been the failure of
Rangoon's monopoly in purchasing rice. Prior to
complete nationalization of the rice trade, govern-
ment rice procurements went principally for exports.
The government had little difficulty in meeting its
export requirements, although the rice procured was
generally of extremely low quality. Government rice
procurements under Ne Win have steadily fallen.
Available data on rice production, exports, and
domestic consumption since 1948, including govern-
ment rice procurements under the Ne Win regime, are
shown in Figure 3.
8. Burma's rice exports in 1967 fell to their
lowest level since World War II (see Figure 4),
causing Burma to drop to fourth place among the world's
leading rice exporters. Extorts declined in 1964,
although rice production in crop year. 1963/64 had
reached a record level of 5.5 million tons (milled),
principally because of immediate gains resulting
from Ne Win's land reclamation programs. From 1964
to 1968, however, rice production remained relatively
constant at P somewhat lower level, except for a
sharp drop in 1966 as a result of poor weather. The
stagnation of production is possibly due to the reduced
incentive for farmers to produce rice beyond their
own needs.
9. By August 1967 the supply of rice was so
short -- because of the continued decline in government
rice procurements -- that Burma was forced to default
on 1967 export contracts to ease its own rice
shortage. Even so, Rangoon had to institute urban
rice rationing. The supply was inadequate even at
the rationed level, and the government, unable to
procure enough rice at its low procurement price,
temporarily permitted consumers to purchase directly
from peasants at free market prices which, in effect,
legalized the black market. Even these measures
were not enough, and widespread riots and lootings
of government rice distribution cent.e3:s occurred
throughout Burma, culminating in August when Burmese
troops killed 22 people in a rice riot in Akyab.
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10. Despite the unrest, in October 1967 the
government began to reassert its control over the
internal rice trade. On 15 February 1968, Rangoon
announced new and more stringent controls. Black
market rice traders now faced a maximum penalty of
death and confiscation of their property. Direct
purchases from peasants were greatly circumscribed.
Within ten days the black market price of rice in
Rangoon more than doubled.
11. Because rice exports normally account for
60 to 70 percent of Burma's foreign exch