THE PHILIPPINES and other Southeast Asian countries should consider
putting up a common commodities exchange and to have a regional index for
rice—a staple for many households in the region.
According to the Asian
Development Bank, having a market for rice and other basic commodities would
help promote transparency in the market prices of different rice variants,
thereby benefiting farmers and consumers.
Transparency in rice prices, the
ADB explained, would address price increases arising from abuses or flaws in
the rice distribution system wherein middlemen largely profit and influence the
prices of rice.
It said a regional rice index
(RRI), which could be derived from prices of rice to be traded in the proposed
regional commodities exchange, should represent the most exported and consumed
grades of rice in the region.
The RRI may serve as a guide for
rice prices in countries in the region and address problems of significant
price spikes resulting from abuses or flaws in the distribution process.
The ADB said it was vital for
Southeast Asia to have a mechanism for addressing potential price-related
problems in rice because the region remained a huge consumer of rice and played
a major role in supplying the commodity to other parts of the world, including
Africa.
It said countries in the region
should come up with preemptive measures for avoiding rice price shocks such as
that experienced in 2007.
“The Asean [Association of
Southeast Asian Nations] can play a major catalytic role in developing the
commodities exchange as a viable option for addressing price risk and price
volatility in rice,” the ADB said in a study it commissioned titled “Commodities
Exchange: Options for Addressing Price Risk and Price Volatility in Rice.”
In the study, authored by
Framroze Pochara, a former executive director at the Singapore Mercantile
Exchange, the ADB said the establishment of a commodities exchange could be complemented
by the establishment of a “warehouse receipt system.” Under such a system, rice
producers may keep their produce in a common warehouse until a buyer gets them.
The producers also have an option to publicly sell the receipts.
“They [governments] could build
warehouse infrastructure and lease this to private players or provide
incentives to private players to set up the infrastructure,” ADB said.
Future contracts and options for
rice and other commodities may also be traded in the proposed regional
commodities exchange.
Lourdes Adriano of the ADB’s
rural development and regional sustainability department said Southeast Asia
has a critical role in helping ensure supply and price stability of rice given
the world’s dependence on the region for a significant portion of the global
demand for the commodity.
According to the ADB’s estimates,
rice production by Southeast Asia could increase by 16 percent to 128.3 million
metric tons in 2021-2022 from 110.5 million metric tons in 2010-2011.
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