Comparative advantage of milled rice production in Thailand and Vietnam

Abstract

This article aims to analyze the cost and comparative advantage of overall rice milled production in Thailand and Vietnam. Based on the data on input-output tables, it was found that the cost of production in Thailand is relatively higher than in Vietnam due to the cost of intermediate production factors particularly that of paddy to be milled as well as cost of electricity, wholesales and retailing activities and transportation cost. Additionally, Thailand also entails higher primary cost of production in terms of value-added for operating surplus than Vietnam.

The study on ratio of domestic resource cost (DRC) to the official exchange rate found that Vietnam has advantage over Thailand in the milled rice production. However, when comparing DRC to the shadow exchange rate, in case of no government’s intervention, Thailand has advantage over Vietnam. The advantage in milled rice production of both Thailand and Vietnam is highly sensitive against production volume or export price; shadow exchange rate; and intermediate production factors, particularly paddy cost. In that respect, Thailand should place importance on increment of rice yield; improvement of milled rice quality; reduction of paddy production cost and develop paddy quality to minimize losses during milling. The price intervention should be considered taking into accounts the competitiveness of Thai milled rice; development of public utility and transportation infrastructure to ensure competitive electricity and transportation cost; and monitoring of exchange rate in tune with that of the competing country.