Regional Bulk Purchase of Imported Rice Initiative by ECOWAS: A Feasibility Assessment

12 Pages Posted: 14 Feb 2013

See all articles by Rose Fiamohe

Rose Fiamohe

Africa Rice Center (WARDA)

Ibrahima Bamba

International Fund for Agricultural Development (IFAD)

Papa Seck

Africa Rice Center (WARDA)

Aliou Diagne

Africa Rice Center - Impact Assessment Unit

Date Written: 2012

Abstract

Rice being the leading source of food energy in West Africa and with all ECOWAS member states being net rice importers, the adverse impact of the 2007-2008 food crisis hit the region very hardly. To mitigate its pervasive effect and prevent future international price shocks on domestic markets of the region, a regional bulk purchase of imported rice was considered by ECOWAS in 2008.

In several major rice exporting and importing countries, state trading companies and government-to-government contracts play active roles. Government-to-government rice agreements often involve importing countries such as Malaysia, Indonesia and the Philippines, and exporting countries such as Myanmar, Pakistan, Thailand and Vietnam. In West Africa however, rice is typically imported by each individual country. There is currently no regional instrument for regulating rice imports into West Africa economic regional body like ECOWAS. The trading companies and government-to-government contracts have advantage to permit economies of scale, to increase market power and to reduce transaction costs and uncertainty across stages involved in trading rice in the international market. It becomes therefore imperative for ECOWAS States to implement a regional bulk purchase of imported rice on the international rice market.

This study aims to provide some empirical evidence which support or reject the implementation of regional bulk purchase of imported rice by ECOWAS. Specifically, we estimate the ECOWAS collective market power in the international rice market. The extent to which West African can exploit some market power is determined by estimating both the elasticity of the aggregate West African import demand for rice and the elasticity of supply for major rice exporters like Thailand. Based on the residual demand and supply models, a two-country partial equilibrium rice trade model is applied to the Thailand-ECOWAS and Thailand-Nigeria rice trade.

The data employed spanned from 1988 to 2010 and were collected from different sources including United Nations Food and Agriculture Organization (FAO) website, United States Department of Agriculture (USDA) website, OSIRIZ and GIEWS Food Price Data and Analysis tools etc. The primarily empirical results indicate that the ECOWAS region as a whole does possess a strong and significant market power in the international rice export market. These findings imply that bulk purchase of imported rice can confer to ECOWAS member states a greater bargaining power into rice import market. Also, Nigeria possesses more market power than Thailand exporters.

Nevertheless, Nigeria market power is not really expressed in Thailand rice market due to the lack of Nigeria’s policy instrument for regulating rice imports which could allow Nigeria to face the strong exporter government interference in Thailand rice market.

In conclusion, with the enhancement of the common external tariff on imported rice, which is in perspective within the ECOWAS, the implementation of imported rice bulk purchase would facilitate the rice imports trade and allow a better balance between rice imports and rice production in West Africa countries, giving producers the chance to bring production into line with regional market development. However, the type of regulation, institutional arrangements and coordination needed to ensure the effectiveness of a policy scheme such as the regional bulk purchase of imported rice needs to be further investigated. In addition, further evidence-based research is needed to inform the type of policy and institutional innovations needed in terms of public-private partnership

Keywords: ECOWAS, imported rice market, bulk purchase, market power

Suggested Citation

Fiamohe, Rose and Bamba, Ibrahima and Seck, Papa and Diagne, Aliou, Regional Bulk Purchase of Imported Rice Initiative by ECOWAS: A Feasibility Assessment (2012). OIDA International Journal of Sustainable Development, Vol. 5, No. 10, pp. 79-90, 2012, Available at SSRN: https://ssrn.com/abstract=2216123

Rose Fiamohe (Contact Author)

Africa Rice Center (WARDA) ( email )

01 B.P. 2031
Cotonou Benin
South Africa

Ibrahima Bamba

International Fund for Agricultural Development (IFAD) ( email )

Via Paolo di Dono
Rome, 00142
Italy

Papa Seck

Africa Rice Center (WARDA) ( email )

01 B.P. 2031
Cotonou Benin
South Africa

Aliou Diagne

Africa Rice Center - Impact Assessment Unit ( email )

01 B.P. 2031
Cotonou Benin
South Africa

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