The Ministry of Commerce (MOC) and government of Yunnan Province, China, signed a memorandum of understanding on the export of Myanmar rice and other crops to China on April 21.

Under the agreement, Myanmar will be able to legally export crops such as rice as well as fisheries to China via the Muse border trade gate.

The MoU, which is a part of barter system, will see Myanmar importing construction materials and farming machinery manufactured in Yunnan Province in exchange for an equal amount in value of Myanmar-produced agricultural products. 

The Agriculture, Livestock and Fishery Development Committee under the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI) will take charge of this agreement, which will take effect in May. Exporting rice to China will be the government’s top priority. 

The barter agreement comes after tonnes of Myanmar agricultural products, including rice, sugar and maize, had accumulated at warehouses near the border after China, in an attempt to crack down on illegal border trade, temporarily banned all imports from Myanmar.

Since Chinese New Year in February, around one million bags of rice and 5000 head of cattle have been stuck in transit at Muse. 

As a result, rice prices have decreased by up to 20 yuan per bag, while breeders were forced to sell their cattle at low prices. In total, trade volumes have fallen by a value of US$650 million year-to-date in the current fiscal year compared to the year before, according to the MOC.

China currently imports commodities based on a quota system. Myanmar’s official export quota, set in 2016, is 100,000 tonnes of rice. According to data from the MOC, over 50 percent of Myanmar-produced rice is sold to China via the border. As such traders are lobbying for that quota to be quadrupled, to 400,000 tonnes. 

Traders have expressed skepticism at the agreement though. “The MoU is just an initial phase,” said U Mike, a rice trader from Mandalay. He pointed out that Myanmar had signed several MoUs on trade with China in the past. Myanmar agricultural products, which up until now have been deemed illegal by China, will be costly if they are made official so it might be not profitable for traders and farmers in the early stages of the MoU, rice traders said.

Although rice production in Myanmar hit its highest in 73 years last year, production is expected to taper this year as a result of declining demand in the Chinese market, which is the main buyer of Myanmar rice, according to rice traders. 

Rice is a main export of the country, generating over K5 trillion annually of which 40pc is generated by exports. As it plays a major role in the country’s economy, it is very important for  rice producers to focus not only on the price but also on the quality, vice president U Henry Van Thio said at the Seminar for Development of Myanmar Rice and General Assembly and Annual General Meeting held by Myanmar Rice Federation on February 9.