RI 'puts on hold' rice order from Thailand

RI 'puts on hold' rice order from Thailand

SINGAPORE (Dow Jones): Following failed negotiations over a 400,000-ton portion of its purchase of Thai rice, Indonesia is putting on hold the whole 500,000-ton rice order from Thailand, leading to widespread talk about a possible cancellation of the deal, rice trade and industry sources in Bangkok told Dow Jones Newswires this week.

Meanwhile, Indonesia is in discussions with Vietnam about a 400,000-ton rice purchase, which is over and above their previous agreement. In July, Vietnam agreed to sell 100,000 tons of rice to Indonesia.

Thailand was to sell Indonesia 100,000 tons on a three-year deferred payment basis and 400,000 tons on a cash basis, for shipment from September to January 1999. The contracted price was to be US$282/ton, FOB.

Such were the terms in a memorandum of understanding the two parties signed on Aug. 7. Negotiations on the contract followed, and Indonesia sealed the 100,000-ton deal. But Indonesia didn't agree to the terms for the 400,000-ton deal, for which it has to open a sight letter of credit, which requires immediate payment upon delivery, the traders said.

The Thai government has stated the 500,000-ton rice deal won't be broken up, meaning Indonesia will buy the 500,000 tons or nothing.

Indonesia is expected to send a letter to the Thai Commerce Ministry to suggest changes in some terms in the rice contract for the 400,000 tons, said a Department of Foreign Trade official at Thailand's Commerce Ministry. As of late Tuesday, the letter hadn't been received.

Commerce Minister and Deputy Prime Minister Supachai Panatchpakdi will have to submit his proposal to the Cabinet as to whether Thailand should proceed with the rice deal, said the Department of Foreign trade official.

He said the Department is unsure if Indonesia will proceed with the entire rice deal and said there's a strong likelihood of Indonesia canceling the deal.

Indonesia last week asked Thai rice exporters to be the direct suppliers of the 400,000 tons at the MOU agreed price of $282/ton, but on a two-year deferred payment basis with interest, said a Bangkok rice trader.

A few small Thai rice companies showed interest. But major Thai rice exporting companies didn't want to participate.

"It's a matter of principle," said the Bangkok rice trader. "We know the deal belongs to the government. The Indonesians want to buy under the table, but if they cannot get the rice from us or others, they will have to go back to the (Thai) government."

Meanwhile, Vietnam's deputy trade minister Nguyen Xuan Quang is in Jakarta negotiating the sale of 400,000 tons of rice to Indonesia, according to the Vietnamese Ministry of Trade Wednesday.

Vietnam's Prime Minister Phan Van Khai on Aug. 15 instructed the Ministry of Trade to discuss the sale with Indonesia's State Logistics Agency, Bulog.

This was one of the reasons for Vietnam's decision to temporarily ban new export contracts from Aug. 15. The ban applies to all contracts, except the 500,000-ton government-to- government sale to Indonesia.

In mid-July, Vietnam agreed to sell 100,000 tons to Indonesia on a one-year interest-free deferred payment basis.

An official at the state-owned Vietnam Southern Food Corp., also known as Vinafood II, which is instructed to carry out the Indonesian order once it is confirmed, said the deal is expected to be finalized in the next few days or at the latest, by early next week.

If the deal is completed, the shipment of the 500,000 tons to Indonesia is scheduled for September through December, he said.