How Thailand became the world's leading rice exporter and lost its place?

Thailand was the world's largest rice exporter for decades, with close ties to Hong Kong traders playing a key role.

The country then lost its first place in 2012 due to a disastrous aid program by the government of Yingluck Shinawatra.

Like many successful Chinese-Thai businessmen, Vichai Sriprasert was introduced to the Chinese work ethic at a young age.

“My grandmother used to say:

“Be honest, work hard and don’t spend anything,” says Vichai, 75.

He grew up with his grandmother in Bangkok Ayutthaya Province in central Thailand, where he ran the family rice mill.

Despite his grandmother's maxim, the family was willing to spend money on education and sent Vichai to the United States, where he studied economics at the University of Michigan.

He returned to Thailand to help his father's rice business in the 1970s.

He persuaded his father to export parboiled rice instead of ordinary white rice or jasmine rice.

“What I learned in school was product differentiation,” Vichai explains.

“You have to do something to make your product different from your competitors.”

Parboiled rice is soaked in hot water and then steamed to gelatinize the starches in the rice grain, giving it a translucent appearance and a hard texture that makes it durable.

Vichai introduced US-based parboiling technology to Thailand and began exporting parboiled rice to new markets.

“I controlled the South African market for decades by replacing American parboiled rice because our rice was about $100 cheaper per ton,” Vichai says.

"I made a lot of money."

Thailand is now a major exporter of parboiled rice, accounting for nearly a third of the country's annual shipments of between 10 and 11 million tonnes.

Export markets include Africa, Europe and the Middle East.

Thailand is the world's largest rice exporter

Thai Buddhist monks walking in the middle of a rice paddy

For decades, the country was the world's leading rice exporter.

It replaced Myanmar after 1962, when General Ne Win staged a coup and transformed Burma's once-thriving economy into a socialist affair, crippling the rice export sector in the process.

Although the country was the world's third largest rice exporter in 2020 , Thailand has long had a rice surplus of around 10 million tonnes per year.

This is due in part to the large dams built in the 1950s and 1960s that feed an irrigation system in the lush central plains, as well as the business acumen of its rice exporters.

Long before that, dating back to the mid-19th century, Thailand exported rice to southern China.

The rice trade, like most lucrative activities, was a royal monopoly until the enlightened reign of King Mongkut (1851-1868).

King Mongkut, a scholar, liberalized the rice trade early in his reign and then opened the kingdom to international trade with the Treaty of Bowring in 1855.

Rice has given rise to many Sino-Thai fortunes, such as those of the Wang Lee (banking), Bulakul (property), Trivisvavet (construction) and Assakul (glassmaking) business clans, all of which started in rice milling.

“The first rice merchant Wang Lee was based in Swatow (present-day Shantou),” said Sanan Wanglee, general manager of Lhong 1919, a former port and warehouse depot on Bangkok’s Chao Phraya River that was recently transformed into a tourist attraction.

"He started trading rice from Hong Kong for sugar from Swatow and, after becoming a shipowner, he started trading rice from further afield, from Thailand."

The Wang Lees emigrated to Thailand in the 1850s and eventually became a major player in the rice trade.

"Chinese soldiers came here with tea, silk and ceramics and left with rice," Sanan says.

The Wang Lee family then diversified into finance, first to manage remittances from Chinese workers in Thailand, and then to establish Wang Lee Bank, later renamed Nakornthon Bank.

Wanglee still exports rice and is one of the oldest members of the Thai Rice Exporters Association (TREA), a largely Sino-Thai club whose members are responsible for about 90% of Thailand's rice exports.

When Thailand began expanding its rice exports in the 1960s, its first major export market was Hong Kong, where trade was facilitated by language.

Many rice importers from Hong Kong are Teochew , the dominant Chinese dialect group in Thailand (Teochew or Chiu Chow speakers are from Fujian province or the eastern part of Guangdong province in southern China).

Vichai, Chairman and CEO of Riceland International, is a fourth-generation Teochew Chinese.

"Most rice importers in Hong Kong stay in the Sheung Wan district on Hong Kong Island," said Charoen Laothamatas, chairman of TREA.

"They have a rice importers' association there and I would say half of them are Teochew."

Bangsue Chia Meng Rice Mill, for example, has been exporting fragrant jasmine rice to Hong Kong for 60 years under its Golden Phoenix brand.

"Hong Kong was our first export market," said the company's managing director, Vallop Manathanya.

"We have two important clients in Hong Kong and my uncle can speak Teochew with them so they can communicate."

Bangsue Chia Meng is now a major exporter of jasmine rice worldwide.

"The Hong Kong market was good for our reputation," Vallop said.

“Our customers are Chinese who have emigrated around the world and when they want good rice from Thailand, they ask their contacts in Hong Kong.”

How did Thailand lose its 1st place?

Yingluck Shinawatra during her trial in 2017, she then fled the country just before the Supreme Court sentenced her to five years in prison.

Thanks to its good connections in Hong Kong, Vallop was able to survive the collapse of Thailand's rice export sector under the Thai government's "populist rice buying program" from 2011 to 2014.

This program was led by Yingluck Shinawatra, sister of Thaksin Shinawatra .

Thaksin is a business tycoon turned politician who now lives in exile, as does his sister Yingluck.

In September 2017, Yingluck was sentenced in absentia to five years in prison for negligence in connection with the rice purchase program, which promised Thai farmers would buy "every grain of rice" at prices 40 to 50 percent above market rates.

The policy cost the country around 600 billion baht (15 billion euros) and was one of the justifications given by the military for its 2014 coup, which ended the country's civilian government.

This policy also led to the fall of Thailand, which had long held the rank of the world's largest rice exporter, which was replaced by India in 2012.

Thai rice exporters have been unable to compete in the global market.

Exports fell to around 7 million tonnes in 2012 and only returned to the previous level of 10 to 11 million tonnes in 2014.

During the Yingluck years, Thailand's share of Hong Kong's rice market fell from 90% to 45%.

Since then, it has recovered, but it will never be the same again.

“Before (Yingluck Shinawatra’s policy), Hong Kong’s high-end market never bothered to buy jasmine rice from neighboring countries like Vietnam and Cambodia because they didn’t trust the quality,” said Chookiat Ophaswongse, honorary chairman of TREA.

"But they were forced to buy during the operation because our price was too high."

Vietnam controlled 20-25% of the jasmine rice market in Hong Kong in 2018, and Cambodia is also on the rise.

Needless to say, TREA was not a supporter of the guaranteed price program for rice, nor of any of the other populist policies involving rice cultivation, which still employs around seven million Thais, a significant voting bloc.

“Politicians like to spend money to increase the price of rice, but not on the production side,” Chookiat said.

“As a private sector association, we have become much more involved in agriculture than in the past.

We can't rely on the government, so we try to help ourselves."

Under Charoen's leadership, TREA distributed soft rice seeds, popular in Hong Kong and China, to Thai farmers in the Central Plains in 2018 in an effort to diversify Thai rice production.

They pay farmers above market price for new varieties.

Vallop did something similar with jasmine rice farmers in northeast Thailand in 2014, offering them better quality seeds and introducing a new, more economical sowing method.

Its farmers were able to increase their incomes by 40%, which helped Bangsue Chia Meng recruit nearly 2,100 farming families into the program in 2018, up from 53 in 2014.

As Thai rice exports face increasing competition from their neighbors – India, Cambodia, Myanmar and Vietnam – global warming, soil degradation and the use of modern cultivation methods appear to pose additional challenges.

See also:

How Bangkok's Khao San Road Went From a Rice Market to the World's Most Famous Backpacker District

Thailand's Grand Alliances with China and Dominant World Powers

How a secret hippie hideout in Thailand turned into a world-famous retreat

Source: South China Morning Post , a 2018 article updated September 5, 2021