Developments in the Asian rice economy

Proceedings of a Workshop, 25-28 January 2000, Bangkok, Thailand

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The transformation of the Asian rice economy and directions for future research: the need for increased productivity
R. Barker and D. Dawe

Following World War II, growing concern about the pending food crisis in Asia led to support among international donors and national policymakers for the so-called Green Revolution technology-improved seeds, expanded irrigation, and the increased use of chemical fertilizer. For almost two decades, from the mid-1960s to the mid-1980s, rice production grew at close to 3% per annum. Slower growth since the mid-1980s has been influenced by both supply and demand factors: sharply lower prices for rice, environmental degradation and overexploitation of soil and water resources, and a decline in per capita consumption with the rising incomes in some regions.

The major structural transformation in Asia's rice economy over the past three decades has been part and parcel of the process transition toward an industrial economy. Indicators of this transformation are a decline in percentage gross domestic product and labor force in agriculture, a decline in population growth rate, a decline in percentage calories from rice in the diet, the change in rice production practices (many of which had existed for hundreds of years), the decline in percentage of farm income from rice, and a decline in the percentage of households below the poverty line. 

The comparative advantage in rice production appears to be shifting back to Asia's major river deltas, where water is plentiful and labor is cheap. Many countries will face, on the one hand, pressure from the World Trade Organization to engage in free trade and, on the other, domestic pressure to protect the rice industry. 
These changes raise issues concerning the future directions for rice research. Rice remains the dominant food crop in Asia and a major source of livelihood for many poor consumers and producers. With declining financial support for research and the rising cost of resources-labor, land, and water-priority areas must be clearly identified. Increasing rice productivity continues to be the foundation of rural development in Asia and a key component of sustainable poverty alleviation.

* This is a modified version of Barker R, Dawe D (2001): "The Asian rice economy in transition," in Rockwood WG, editor: Rice research and production in the 21st century: symposium honoring Robert F. Chandler, Jr., published by the International Rice Research Institute, Los Baños, Philippines. p 45-77. Copyright International Rice Research Institute. 2001. 

China's rice economy and policy: supply, demand, and trade in the 21st century
J. Huang, S. Rozelle, R. Hu, and N. Li

Rice is the most important food crop in China. China's rice is also the largest component and most dynamic part of the world rice economy. The purpose of this paper is to examine trends in China's rice economy and policies governing the agricultural sector and predict China's future involvement in world rice markets. The study shows that, while the rice sector has been heavily penalized by price and marketing policies as well as macroeconomic policies such as the overvaluation of domestic currency, rice productivity has gained substantially from productivity-enhancing investment such as agricultural research and irrigation. Projections show that, under the most plausible expected growth rates in the important factors, China's grain imports will rise over the projection period. But, rice trends are in stark contrast to those of feed grains. Increasing maize imports arise mainly from the accelerating demand for meat and feed grains. The expected increasing rice exports will offset part of the increase in feed grain imports.

The most important difference among the projections for rice supply, demand, and trade is in the sensitivity of predictions to the simulation assumptions. Different rates of agricultural investment create some of the largest differences in production and trade. Most major demand factors-urbanization, income growth, and market liberalization-are pushing China's consumers to reduce rice demand over the next 20 years. With a significant change in agricultural policy in response to China's entry into the World Trade Organization, supply will not only be able to keep up with demand, but also rice exports will be enlarged. China is expected to become a major player in the world japonica rice market in the coming decades. 

Medium- and long term- prospects of rice supply and demand in the 21st century in India
P. Kumar, M. Hossain, and S. Mittal 

This paper assesses the total factor productivity (TFP) of rice grown in various regions of India and examines the sources of productivity growth and marginal rates of return to public investment in rice research. The paper also projects the supply and demand of rice in the 21st century in India. The results of the study highlight a spectacular increase in rice yield from 1.1 t ha-1 in 1967-71 to 1.9 t ha-1 in 1997-99. The TFP index has risen at 0.9% per annum and has contributed one-third of production growth. A decelerating tendency in TFP growth is observed. The cost per unit of rice has declined steadily. The cultivation of basmati rice has benefited farmers in the northern states of India. Demand for rice will be met in the future with a marginal surplus for trade. To maintain the surplus status of rice, the study emphasizes the need to strengthen efforts to increase production by maintaining or increasing TFP through public investment in irrigation, infrastructure development, research, and efficient input use. More than half of the required growth in yield to meet the demand target must be met from research efforts in developing location-specific and low-input-use technologies with emphasis on the regions where current yield is below the required national average yield. All efforts need to concentrate on accelerating growth in TFP while conserving natural resources and promoting the ecological integrity of the agricultural system.

Medium- and long term- prospects of rice supply and demand in Indonesia
Tahlim Sudaryanto, Pantjar Simatupang, Bambang Irawan, and Dewa Ketut Sadra Swastika 


The rice industry remains a strategic sector in the Indonesian economy in terms of its contribution to economic growth, food security, and poverty alleviation. Government policies for the rice sector have changed significantly from "high support and high protection" since the 1970s to "low support and low protection" since the mid-1980s. In line with changes in the policy environment, rice productivity growth has tended to decline. However, under the prevailing world market price, rice farming shows a comparative and competitive advantage. For the medium- and long-term perspective, the Indonesian rice supply cannot meet increasing rice demand, which leads the country to import around 1-3 million tons of rice annually. Under the current policy environment, an appropriate strategy to stimulate rice production is through land development and innovation systems.

Determinants of rice supply and demand in Bangladesh: recent trends and projections1
S. Zohir, Q. Shahabuddin, and M. Hossain

Growth in Bangladesh agriculture has largely centered on the adoption of modern rice varieties through investments in irrigation infrastructure, research, and extension services, and by subsidizing fertilizer prices. This study aims to provide an overview of recent developments in the rice sector of the economy and to develop a perspective of the rice supply and demand balance for Bangladesh in the early 21st century. It gives an overview of food and agricultural policies in Bangladesh, including an assessment of some recent macroeconomic and sectoral policy changes in terms of their implications for production incentives. Sources of growth in rice production and productivity are also analyzed. The projection exercise is based on two independent analyses of rice supply and demand. The supply parameters for the projection are estimated from modeling of the dynamic supply response of rice and substitute crop enterprises. A multistage budgeting demand system is developed and estimated to estimate the demand parameters. Based on these estimates and introducing the concept of no-trade regime, a perspective of the demand-supply balance for 2000-20 is presented in this paper. 

1This updated synthesis paper is based on the IRRI/IFPRI project report on Projections and Policy Implications of Medium- and Long-Term Rice Supply and Demand: Country Report for Bangladesh. The report was prepared by S. Zohir and Q. Shahabuddin and the synthesis and updating were done by M. Hossain.

Governance constraints to sustainable rice productivity in the Philippines
V.B.J. Tolentino

Since the early 1980s, growth in rice production in the Philippines has been quite slow. The rate of growth in rice productivity in particular, and in the country's agricultural sector in general, has also lagged behind much of Asia.
Political instability has contributed to the disappointing performance of the Philippines in food security and agricultural and rural development over the past 20 years. This paper outlines the effects of political and bureaucratic instability on the formulation and implementation of government policy and support programs for food security and agricultural productivity, particularly for rice.

Rice supply and demand scenarios for Vietnam
C.T. Hoanh, P.Q. Dieu, N.N. Que, S.P. Kam, P.M. Bolink, S. de Vries, D.K. Son, A. Rala, and L. Villano 

In Vietnam, it is necessary to have updated information on rice supply and demand balances for the government to effectively meet its twin objectives of further improving food security and maintaining its prominent position in the international export market. However, most existing rice supply and demand models are applied at the national level. Thus, they fail to provide more detailed characteristics of rice marketing at the regional level, where food security is in great disparity. In this connection, a rice balance model that describes supply and demand interactions at the subnational level would be most helpful for planning and programming by decision makers. Such a model is presented and described in this paper. The data used are gathered from the subnational level. The supply equation in the model is linked to a raster geographic information system to provide the geographic dimension for rice supply analysis. It is estimated taking into account the potential as well as attainable yields and applied to the cultivated area. Rice demand is also estimated on the regional level based on the population distribution and consumption patterns of urban and rural populations. Different scenarios affecting rice supply and demand are analyzed and net balances are estimated at both the regional and national level.

Rice supply and demand in Thailand: recent trends and future outlook
S. Isvilanonda

This paper discusses the factors that contributed to the development of the rice sector in Thailand and analyzes their impact on the emerging trends in domestic rice supply and demand. Supply and demand parameters are estimated based on time-series data from 1971 to 1999 for use in assessing Thailand's rice exportable surplus in the next two decades. The study notes significant improvement in labor productivity despite slower growth in yield. Such improvement came from higher rural wage rates as labor shifted from rural to urban areas, thus inducing the adoption of machinery and other labor-saving techniques in rice production. The own-price elasticity of the rice supply is very inelastic. Among the nonprice factors, investment in rice research played a dominant role in raising the rice supply. Growth in the rice supply is projected to slow down at 0.54% per annum. Demand analysis similarly shows that the response to rice price is inelastic. The income effect on demand, however, is negative, which indicates that rice is an inferior good. With a projected lower growth rate in population, future growth in domestic rice demand will decline at 0.30% per annum. The projected trends in rice supply and demand will enable Thailand to maintain its exportable surplus. It is expected that surpluses will further increase from 7.4 million t (of milled rice) in 1999 to 9.9 million t in 2020. 

The rice economy in Taiwan: demand and supply determinants and prospects
Masahiko Gemma 

The economy in Taiwan has exhibited remarkable growth for the past few decades, when the rice economy in Taiwan has gone through drastic changes. Per capita rice consumption declined to 55 kg in 1999 from 130 kg in the 1970s. The continuous decline in the use of labor and land has also been observed on the production side of the rice economy. The objectives of this study were to identify the determining factors of the future demand and supply of rice and to project future demand-supply conditions of the rice economy in Taiwan.

This study found that future changes in rice consumption in Taiwan would mainly depend on changes in real income. It also discovered that rice area would be influenced by the level of urbanization while rice yields would be determined by rice prices and technical change. If we assume that the present pace of the changes in area and yields for rice continues in the future, Taiwan would become a net exporter of rice under high-income growth scenario. Under the low-income growth scenario, Taiwan would be a net importer of rice. The impact of the liberalization of the rice market in Taiwan under the Minimum Access Agreement with the World Trade Organization would be relatively small for domestic producers in the short run as a large portion of the imported rice would be kept by the government for storage. In the long run, domestic producers face challenges to become more competitive in terms of production costs and product quality for their own survival. 

Rice supply and demand scenarios for Malaysia
S.P. Kam, Ariffin Tawang, C.T. Hoanh, Abd. Razak Hamzah, A. Rala, and L. Villano

The paper analyzes the trends and future status of rice supply and demand in Malaysia, taking into consideration the new and emerging challenges the country faces. The assessment is done by using the rice supply and demand analyses (RSDA) model, an integrative model that considers both biophysical and socioeconomic factors in determining the supply-demand balance under different development scenarios. The supply scenario takes into consideration possible changes in land-use pattern, irrigation efficiency, technology, farm inputs, and farm prices. On the demand side, consideration is given to future changes in population and per capita consumption. The analyses indicate that the pursuance of a 65% self-sufficiency level, which is one policy thrust in the rice industry, will be jeopardized if rice production is concentrated only in the eight granary areas of Peninsular Malaysia, unless farm productivity improves significantly. Although the effect brought about by the decline in the farm-gate price caused by liberalization is marginal, the complete removal of the rice price subsidy would result in a significant decline in the supply-demand ratio. These represent some of the challenges faced by policymakers and planners in achieving an acceptable ratio between rice production and consumption in Malaysia. 

A long-term outlook for rice supply and demand balances in South, Southeast, and East Asia
M.A. Sombilla, M.W. Rosegrant, and S. Meijer 

Alarms are once more being sounded about the beginning of a long-term trend in which staple grain harvests, particularly of rice, are slackening and are failing to outpace demand in several countries in Asia. This spells trouble for the region, which is the home of about 800 million poor people that depend on rice for food energy. 
This paper tries to assess the world rice market in the years ahead by analyzing projection results to 2025 generated from the International Model for Policy Analysis of Agricultural Commodities and Trade (IMPACT) on supply, demand, trade, and prices under various scenarios. The baseline scenario indicates that rice production in the Asian region as a whole will still be able to increase at a rate to meet demand for the commodity while prices will further decline. This rosy picture is contingent on the continuation of trends of a large number of underlying drivers of world food markets as these are influenced by complex interactions among technology, policy, investment, environment, and human behavior. 

The alternative scenarios indicate that policy or technology failures that change the course of any one of these drivers could have a significant impact on future rice balances. The low population growth rate scenario, for example, can be beneficial for welfare improvement with the attainment of much lower prices that lead to higher per capita demand of rice, less pressure on fragile land to be brought into cultivation, and significant expansion of trade. The low yield scenario, on the one hand, can translate into market difficulties-high world prices, high domestic prices, and social protests-especially in the low-income countries that depend the most on rice for their staple food. In contrast, the high yield growth scenario could bring significant benefits but should be achieved with great care so that gains would accrue to both producers and consumers, especially in the high-poverty countries and less-favored regions within those countries. 

In all of the scenarios, including the baseline, the poor countries-mostly in South Asia and some in Southeast Asia-are greatly affected by variations in the factors that influence production and demand. This is because these countries have the most fragile environments for rice production. The future challenge is clear: to adopt appropriate and well-balanced policy reforms that promote growth and equity in Asia, especially in the more difficult agroecological and low-potential systems. 

The comparative advantage in rice production in India, 1975-97
B. Bagchi and M. Hossain 

This study aims to evaluate the comparative advantage in rice production for India, using the detailed data on costs and returns available from the reports of the costs of cultivation of principal crops. It also identifies the factors that caused changes in the comparative advantage from 1975 to 1995 when India experienced respectable growth in rice production through technological progress. The comparative advantage is assessed through an estimation of social profitability and domestic resource cost ratio by imputing the value of rice and the resources involved in its cultivation at their opportunity costs.

Comparative advantage of rice production in Sri Lanka with special reference to irrigation costs
M. Kikuchi, R. Barker, M. Samad and P. Weligamage 

By estimating the domestic resource cost, this paper examines the changes in the comparative advantage of rice production in Sri Lanka during the last three decades. Although dramatic increases in productivity because of the Green Revolution occurred in the 1970s, rice production in the major irrigation regime has had no comparative advantage throughout the period as long as the cost of new irrigation construction is taken into account. Even if the cost of new irrigation construction is treated as a sunk cost, rice production had no comparative advantage before the Green Revolution. Within one decade after the Green Revolution, rice production became highly socially advantageous relative to rice imports because of the irrigation infrastructure. However, the comparative advantage has been eroded since the country attained self-sufficiency in rice in the mid-1980s. At present, rice production is nearly on a par with the international rice market. It has lost the comparative advantage it once enjoyed in the 1980s but it has not fallen into an overt comparative disadvantage either.

The major factor that has been pushing down the comparative advantage of rice production in recent years is the increase in the wage rate. Under the condition that it is difficult for Sri Lankan rice to find a market in world rice trade, the only option for maintaining domestic rice production that is economically sound is to increase labor productivity by pursuing economies of scale, which require significant increases in farm size. The rice sector in Sri Lanka has already entered the difficult stage of agricultural development and faces adjustment problems. 

Assessment of comparative advantage in rice cultivation in Bangladesh 
Q. Shahabuddin, M. Hossain, B.A.A. Mustafi, and J. Narciso

This paper examines the comparative advantage of rice using two indicators: net economic profitability and domestic resource cost ratio. The profitability estimates and estimated domestic cost ratio suggest that Bangladesh has a comparative advantage in rice production except for the upland aus crop and the deepwater aman rice. So, diversification in favor of nonrice economic activities for both uplands and extreme lowlands is socially justified. The comparative advantage in the cultivation of modern varieties is higher for wet-season aman rice, which is relatively low input-intensive, than for dry-season boro rice, although the average yield is substantially lower for the former than for the latter. Although there has been a substantial decline in the real rice price in both the domestic and world market, the comparative advantage has improved over the last two decades. 

The comparative advantage of rice production in the Philippines, 1966-992
J.P. Estudillo, M. Fujimura, and M. Hossain

This study aims to assess the comparative advantage of rice production in the Philippines since 1966. We have found that the country gained a sharp improvement in the comparative advantage of rice production in 1979, when yield rose markedly because of the diffusion of pest- and disease-resistant modern rice varieties. Beginning in 1986, however, the country appears to have slowly lost its comparative advantage because of the decline in rice prices, stagnation in rice yield, and rising cost of domestic factors such as land and labor. By 1990, the country completely lost its comparative advantage in rice production. 

2 This paper is an update of Estudillo J.P., M. Fujimura, and M. Hossain (1999), "New Rice Technology and Comparative Advantage in Rice Production in the Philippines," published in The Journal of Development Studies, 35(5):162-184. This paper is published with permission from The Journal of Development Studies. Views expressed in this paper do not reflect the views of the institutions to which the authors belong. The authors would like to thank Prof. Yujiro Hayami for his insightful comments on an earlier draft and Fe Gascon for providing an excellent data set.

Total factor productivity analysis and its components in a high-potential rice-wheat system: a case study of the Indian Punjab
J. Singh and M. Hossain

In the high-potential rice-wheat system of agriculture in the Indian Punjab, a decline in total factor productivity growth was observed in spite of the positive contribution of technological improvements and technical change apart from an increase in input use. Thus, this paper has attempted to examine the effects of environmental degradation on total factor productivity growth.

Using El Niño/Southern Oscillation climate data to improve food policy planning in Indonesia
R.L. Naylor, W.P. Falcon, N. Wada, D. Rochberg

Despite the strong effect of El Niño/Southern Oscillation (ENSO) events on climate in the Indo-Pacific region, models linking ENSO-based climate variability to Indonesian cereal production have not been well developed. This study successfully measures the connections among sea-surface temperature anomalies (SSTAs), rainfall, and rice and corn production in Indonesia during the past three decades. About half of the interannual variance in paddy (gabah) production during the main (wet) season is explained by year-to-year fluctuations in August SSTAs. These effects are cumulative for rice; during strong El Niño years, production shortfalls in the wet season are not made up later in the year. Econometric results for corn, while less consistent than those for rice, indicate a largely inverse pattern. The study shows that paddy production in Indonesia varies on average by about 1.4 million tons for every 1 °C change in the August SSTA for the central Pacific Ocean. It also illustrates how policymakers might use an SSTA model to improve food policy planning within Indonesia.

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The transformation of the Asian rice economy and directions for future research: the need for increased productivity

China's rice economy and policy: supply, demand, and trade in the 21st century

Medium- and long term- prospects of rice supply and demand in the 21st century in India

Medium- and long term- prospects of rice supply and demand in Indonesia

Determinants of rice supply and demand in Bangladesh: recent trends and projections

Rice supply and demand scenarios for Vietnam

Rice supply and demand in Thailand: recent trends and future outlook

The rice economy in Taiwan: demand and supply determinants and prospects

Rice supply and demand scenarios for Malaysia

A long-term outlook for rice supply and demand balances in South, Southeast, and East Asia

The comparative advantage in rice production in India, 1975-97

Comparative advantage of rice production in Sri Lanka with special reference to irrigation costs 

Assessment of comparative advantage in rice cultivation in Bangladesh 

The comparative advantage of rice production in the Philippines, 1966-992 

Total factor productivity analysis and its components in a high-potential rice-wheat system: a case study of the Indian Punjab 

Using El Niño/Southern Oscillation climate data to improve food policy planning in Indonesia