Five rice producing countries in the Mekong River Delta are setting up a price-fixing cartel amid skyrocketing rice prices and shortages in Asia described by the United Nations as a “real global crisis.” The cartel is expected to isolate the Philippines from its Asian rice suppliers.

The proposed cartel, called Organization of Rice Exporting Countries (OREC), similar to the OPEC (Organization of Petroleum Exporting Countries), embrace Thailand, Vietnam, Burma, Cambodia and Laos, which have agreed in principle to form a bloc inside the 10-member Association of Southeast Asian Nations designed to cement political and economic solidarity in the region.

The launching of the cartel initiative by Thailand, the world’s biggest rice exporter, could not have come at a worse time for the Asia-Pacific region, where 1.5 billion people, three times the population of Europe, live on less than $2 a day. The Asian Development Bank estimates that the very poorest people in the region spend 60 percent of their income on food and a further 15 percent on fuel, two basic commodities whose prices have risen relentless in the past few months.

The food price inflation has hit hardest the poorest in the region and threatens the governments in food-short countries, including the Philippines with social unrest. Rising food prices have sparked rioting in parts of Africa and Asia and in Haiti in the past few weeks.

The Mekong rice cartel plan drives a new wedge in the ASEAN, which has since its founding in 1967 struggled to integrate economically and politically—a sort of a European Union in Asia—with less than impressive success.

The irony that mocks the Mekong Five rice cartel is that it is led by Thailand, which together with the Philippines was among the five founding nations of ASEAN in Bangkok in 1967. The project puts the two countries at loggerheads. It has immediately touched off denunciations from Filipino officials who regard it as an act of strangulation at a time when the Philippines, the world’s biggest rice produce importer, is scrambling to import rice from fellow ASEAN members Thailand and Vietnam. The project is seen by some ASEAN members as a “beggar your neighbor” action to use the Mekong Five’s rice surplus to drive up rice price.

Another irony is that historically, among the ASEAN members, the Philippines and Thailand have been closest politically, economically and ideologically. Both were the Asian anchors of the anti-communist regional alliance, beginning with the Southeast Asia Treaty Organization in 1955 after the withdrawal of the French from Indochina following their defeat in the hands of the communist Vietminh in the Battle of Dienbienphu. Both have had more exposure to democratic rule than the other ASEAN members.

But in the rocky relations among postcolonial states, it has been shown that common democratic experience and ideological compatibility can give way to economic tensions arising from very basic issues like food security. The rice crisis has now put these ties to the test.

At the Asian Development Bank meeting in Madrid last Saturday, ADB president Haruhiko Kuroda said the bank did not favor the cartel proposal, saying it was better to let market forces operate freely. He said many Asian countries were grappling with the crisis by imposing price controls or bars on food exports. Such measures could backfire by discouraging farmers from planting, thus reducing supplies and raising prices.

Thailand’s Prime Minister Samak Sundaravej tried to reassure that, “We don’t aspire to be like OPEC, but we hope to be just a group of five to help each other.” Significantly, he made no mention of helping ASEAN countries hit by a rice shortage. It was Cambodian Prime Minister Hun Sen, whose country is a minor player in the cartel, who said, “We will not only ensure food security in each of our own countries, but will help solve the entire problem of food shortages across the region and the world.”

The impact of the cartel plan was immediately felt in the Philippine emergency rice procurement program which has Thailand and Vietnam as the main suppliers. Less than a week after Thailand said it was considering the formation of the cartel, the rice buying program ran into difficulties. The National Food Authority (NFA) reported that only one company submitted a bid (Vietnam Southern Food Corp.) for the supply of 675,000 metric tons to fill its procurement target of 2.1 million metric tons for 2008. The NFA declared the auction “a failure,” underlining the tightness of supply in the international market.

This happened despite claims by Agriculture Secretary Arthur Yap that the Philippine and Vietnamese governments had signed a memorandum of agreement in which the latter pledged best effort to continue supplying rice to the Philippines this year.

Thailand announced last Thursday that it would not join the Philippine tender of May 5 because the Thai government does not endorse private exporters. The announcement came a day after it confirmed that it had agreed with the four other Mekong rice producing countries to form a cartel.

Yap has claimed that the Philippines has signed contracts with the Thai government committing the latter to export rice to the Philippines as part of its procurement program for 1.6 million metric tons to fill up its buffer stock for 2008.

The uncertainty of supply has highlighted the issue of rice security being held hostage to the national interest of rice supplying countries. The Philippines has been reduced to an orphan state, twisting in the squeeze of its neighbors that are looking after their own interests above all else.