Price stabilization and impacts of trade liberalization in the Southeast Asian rice market

A global rice model using a partial equilibrium framework is used to investigate the impact of trade liberalization in major rice trading countries of Southeast Asia, focusing on the price stabilization mechanism that has long been adopted by governments in Indonesia, Malaysia and the Philippines. The simulation results suggest that the removal of state trading enterprises in these three countries would lower their domestic prices by as much as 34% but increase the world prices by about 20%. When free trade liberalization is realized in 2020, domestic prices decline further in Indonesia and the Philippines, leading to an increase in their imports, which are estimated to be as much as 4.5 million tons. The impact on domestic prices, however, is absorbed nearly evenly among Indonesia, the Philippines, Thailand and Vietnam.