Reported Siam Indiga rice deal prompts fears of corruption

Scandal-tainted Siam Indiga looks set to win an allocation of two million tonnes of government rice, which would open the door to massive corruption by politicians, a rice-trading source said. 

The government would lose billions of baht from this deal, which would allow the company to monopolise the government’s rice stocks through its close connections with politicians, the source said. 

A rice-trading source said the Commerce Ministry would soon allocate two million tonnes of government rice, which is now managed by the ministry’s Foreign Trade Department, to Siam Indiga. The company will then export the rice to Indonesia and Africa following the government’s stock-release plan.

The source said the cost to Siam Indiga would be only Bt11-Bt12 per kilogram compared with the market price of Bt15. The government would claim that the lower price is fair, as the stocks are old rice.

The source pointed out that the low price given to Siam Indiga would let the company and some politicians make a killing from the gaping spread between the cost and the high overseas price. 

Siam Indiga is known to be close to bankrupt President Agri Trading, the country’s biggest rice exporter during the time that Thaksin Shinawatra was prime minister. The company’s real top manager is Apichart Jansakulporn, a former executive of President Agri. He has close relations with Thaksin. 

President Agri Trading won a bid for a big lot of rice from the Commerce Ministry in 2007 when Wattana Muangsook, now a banned Thai Rak Thai politician, was the minister.

President Agri has been sued by the Public Warehouse Organisation (PWO) for Bt6 billion in compensation for defaulting on bidding orders in past years. President Agri also reportedly owes banks Bt10 billion. 

The rice-stockpile release by the Foreign Trade Department and the PWO has raised doubts among exporters and traders. The government would say it needs to release rice stocks quietly to prevent rice prices from falling in the market.

The source said the silent releasing method is unfair to traders and causes huge losses to the country as only a few companies, with close connections to the government, are included.

The method would lead to corruption by some politicians and unscrupulous traders since only a few officials are involved in the trading process. Few people will know about the rice-releasing procedures and the exact price offered, so the officials can easily collude with certain companies, the source said.

 

Huge losses

“Thailand has experienced huge losses from rice releases many times. Huge budgets from taxpayers have been spent to subsidise rice under the income-guarantee and price-pledging projects. But the government has wasted taxpayers’ money by releasing rice stocks at a low price to benefit only a certain firm and only a small group of people,” the source said.

Last month, the government sold 300,000 tonnes of rice to Indonesia by allowing only two trading firms, including Siam Indiga, to export this lot. It is an unusual case as the Foreign Trade Department, which directly manages the government’s whole inventory, let the PWO hold the auction.

Then, the PWO announced last month that it had decided to sell 300,000 tonnes of rice to Indonesia. Only two traders were named to join in the bidding and the process was not made public. The method created massive doubts in the rice trading industry.

Siam Indiga quoted US$590 (Bt18,750) per tonne when the market price at that time was more than $600.

Commerce Minister Kittiratt Na-Ranong immediately came up with an explanation, saying the government had to allow the two firms to export to the Indonesian government because they were specially named by Jakarta.

However, another rice trader source, whose main export market is Indonesia, said the Thai government had offered a list with the companies’ names for exporting rice to Indonesia. 

“The Thai government has tried to convince the Indonesian government to accept the companies it offered as there is some hidden agenda for rice trading,” the source said.

Thailand’s rice exports this year are predicted to drop to the lowest level in five years, only seven million tonnes. Thai rice exports are uncompetitive due to the government’s high subsidy programme, while other exporting countries are reporting bumper harvests.

Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association, said exports would drop this year from 10.5 million tonnes last year.

Some importers will shift to other countries, as Thai rice is priced too high.

Currently 5-per-cent Thai white rice is quoted at $530-$540 per tonne, while Vietnamese rice is quoted at $445 and Indian rice at $435.

Chookiat said India would this year export 6-6.5 million tonnes after its government said it would lift its export ban and plans to export at least two million tonnes of non-basmati rice.

 As India still has more than 30 million tonnes, it could export at least 4 million tonnes of non-basmati rice this year. India normally exports 2-2.5 million tonnes annually.

Vietnam will this year breathe down Thailand’s neck as it is expected to export as much as seven million tonnes of rice, he added.