Thailand faces no threat from Indonesian debt freeze

Thailand faces no threat from Indonesian debt freeze

BANGKOK (Reuters): Thailand's rice exports faced no threat from the temporary freeze on debt repayments called by Indonesia, which was expected to be the biggest buyer of Thai rice this year, a top industry source said.

Indonesia on Tuesday said it had proposed a freeze on foreign debt repayments by local companies, many of which were unable to pay back the foreign-currency-denominated borrowing due to the Indonesian rupiah's plunge in value.

But Vorapong Pichpongsa, president of the Thai Rice Exporters' Association, said a greater concern to the Thai rice industry was whether it would be able to meet strong demand.

Vorapong told Reuters in an interview on Friday that he still expected Indonesia to buy around 800,000 tons of rice from Thailand this year despite its debt and currency crisis.

"We are not worried about Indonesia. Rice is an important staple food that the government there must be able to procure to meet its people's needs and that need should be on the top of any country's list of priorities," he said.

Thailand is a leading world exporter of rice.

Vorapong said the world milled rice trade this year was set to grow to 19 million tons from 18.1 million tons in 1997.

Thai rice exports for 1998 would be steady or slightly higher from the previous year due to tight supply caused mostly by the unpredictable weather of the El Nio phenomenon and its impact on crops, he said.

Vorapong projected Thai rice exports this year would reach 5.3-5.5 million tons against 5.27 million tons in 1997.

However, revenue from those sales would surge to around 80-90 billion baht from 60 billion baht in 1997 due to the baht's plunge in value of more than 50 percent since the currency's flotation last July, he said.

Thai rice supplies for the 1997/98 (March-April) season were expected to total 24.93 million tons, of which 21.27 million tons would be from the first and second crops and the rest would be from stocks carried over, commerce ministry data show.

The total amount translates into approximately 16.5 million tons of milled rice.

"Thailand has no problem with marketing this year but rather with the supplies. Some exporters dare not commit much, fearing that they cannot meet obligations as the price of local rice has been surging," he said.

Vorapong said the Thai government should invest more in developing rice production to help boost the industry, a major foreign exchange earner for cash-strapped Thailand which is weathering its worst economic crisis in decades.

Although Thailand has been a top rice exporter for many years, production yields are much lower than those of competitors like the United States and even Vietnam.

Thailand's rice yield this year was around 1.95 tons per hectare compared with 3.12 tons in Vietnam and 5.60 tons in the United States, he said.

"We are successful because of our marketing. The fact that Thailand is a free market enables the private sector to work hard in establishing its name," Vorapong said.

"If the government can help improve production technology and boost yields, we will be able to export more," he said.

Besides Indonesia, big buyers of Thai rice this year were expected to be Nigeria -- last year's top buyer -- Iran, Malaysia, China and the Philippines, he said.

Iraq would also buy after it was allowed to sell crude oil for food by the United Nations, Vorapong said, predicting that Baghdad could buy around 200,000 tons of Thai rice in 1998.