Rice-pledging concerns WB

The bank also projects that the Thai economy will expand 5 per cent next year, while this year’s growth is expected to come in at 4.7 per cent after the country weathered the 2011 floods and adverse global economic conditions well.
Of the government’s various stimulus programmes, the paddy-pledging scheme is the costliest, according to a World Bank report released yesterday.
The predicted cost of the scheme is Bt376 billion for the 2011/2012 harvest season, with losses estimated to be Bt115 billion. The cost for the current harvest season is projected to be Bt432 billion, with losses estimated at Bt132 billion, Kirida Bhaopichitr, lead author of the report, told a press conference.
“It is the best-case scenario, in which we assume that the government is able to sell all of its rice stocks,” she said
The combined losses of for the two harvest seasons are equivalent to 1 per cent of gross domestic product, she added.
The costs cover the cost of pledging, milling, storage and administrative fees, but do not include spoilage and Bank for Agriculture and Agricultural Cooperatives interest.
Meanwhile, the price of Thailand’s 5-per-cent broken-rice variety in the global market is expected to fall from the current US$550 (Bt16,840) per tonne to $520 next year, Kirida said.
Historically, the government cannot negotiate to sell rice at higher than the market price, said Mathew Verghis, lead economist of the World Bank’s office in Bangkok.
“The projection at the moment is that rice prices are not going to rise in the near future, although if there were a change such as a major drought in other rice-exporting nations, that could happen. But the other way to minimise the losses is to increase rice exports by simply selling at world prices to the market,” he said.
The World Bank also urged the government to review all of its populist policies aimed at stimulating economic growth.
The current set of stimulus programmes amounts to 5.4 per cent of GDP this year, and an estimated 2.4 per cent in 2013, it said.
The measures include the tax rebate for first-time car buyers, tax exemption for first-house buyers, the minimum-wage increase and a cut in corporate income tax.
Spending has helped stimulate the domestic economy this year while the global economy is weakening, but this has added to public debt, which will have increased from 45 per cent of GDP at the end of this year to almost 50 per cent in 2013, said the bank.
“Public debt is still sustainable, but state-run banks are shouldering some of the costs, weakening their balance sheets and resulting in contingent liabilities for the government,” Kirida warned.
Some of these funds could be redirected to social programmes to help the poor and vulnerable, the bank suggested.
Spending on the rice-pledging scheme could be redirected to improving rice productivity and quality, and targeting low-income farmers, it said.
The average rice yield in Thailand is only 2,877 tonnes per hectare, which is the lowest among rice-producing countries. Vietnam and Myanmar achieve much higher yields at 4,834 tonnes and 3,757 tonnes, respectively, according to Food and Agriculture Organisation figures.

DOMESTIC DEMAND DRIVES GDP GROWTH
The World Bank said Thai GDP growth this year had been driven by domestic demand, as exports had expanded by just 3 per cent.
However, the economy will be boosted by consumption, investment and exports next year, with overseas shipments expected to rise by 5.2 per cent.
The global economy will experience slower growth for many years to come, added Kirida.