How much more DAMAGE can we afford?
The rice price-pledging scheme has cost the taxpayer billions of Baht and lost Thailand its position as the world's leading rice exporter; it's time to reverse this populist policy before its too late
Opposition is growing to the government’s expensive and loss-making rice price-pledging scheme. Over the two latest harvest seasons the government has spent Bt678 billion buying rice at above market prices, and the scheme is estimated to have racked up at least Bt425 billion in losses.
Academics, opposition politicians and international organisations have cautioned the government against continuing this scheme at such a cost to taxpayers. They say the huge losses could severely weaken Thailand’s financial status. The World Bank expressed concern, warning that Thailand will lose up to Bt150 billion per harvest if it continues buying rice at inflated prices.
The rice scheme is one of the populist policies that brought the Pheu Thai Party to power in 2011. The policy platform helped the party win support from farmers, who form a large proportion of voters in the provinces.
In the latest move against the controversial policy, three economics and rice experts on Tuesday attempted to convince the government to scrap it and find a replacement that is less costly. Former Bank of Thailand governor MR Pridiyathorn Devakula, leading senior researcher Ammar Siamwalla and Thailand Development Research Institute (TDRI) scholar Nipon Puapongsakorn called for changes to the policy.
By setting the pledging price much higher than the market price, the government has also been blamed for the fall in Thai exports of rice. Thailand has already lost its position as the world’s top rice exporter, falling behind India and Vietnam last year. The Kingdom exported 6.9 million tonnes in 2012, down 35.5 per cent from 10.7 million tonnes in 2011, while India’s exports exceeded 9.5 million tonnes and Vietnam’s reached 7.6 million. The Thai Rice Exporters’
Association blamed the drop in exports on the pledging scheme. The government has stockpiled an estimated 15.5 million tonnes as the price of Thai rice on the international market rose by US$100 to $200 above those of its competitors.
Some experts warn that the quality and reputation of Thai rice could be at stake as well, since farmers have opted to grow low-quality rice that can be harvested quickly so they can sell more paddy under the scheme. In a recent survey of exporters, 70.6 per cent said the country stands to lose from the government’s policy, given the distorted price. They said the scheme has damaged the quality of Thai rice and, even if the scheme were immediately terminated, it would take several years for Thailand to reclaim its position as the world’s leading source of rice.
Corruption is another concern. A study by Pridiyathorn and the TDRI, based on data from the Finance Ministry’s Post Audit Committee, showed that farmers gained only Bt210.12 billion from the scheme, while people who should not have benefited gained Bt115.8 billion. Those people include exporters and millers with connections to politicians in power. Pridiyathorn suggested that there were ways other than price pledging to help farmers – while also preventing irregularities – such as a direct payment to ensure that every farmer gets equal payment.
Government officials have questioned the credibility of the critics’ estimates and other information, but they have refused to disclose key figures from the project, citing a need for confidentiality. If the government is sincere about helping rice farmers sell their produce at a fair price, there are alternatives to this scheme that are less costly and less likely to adversely affect Thailand’s rice exports and the quality of Thai rice.
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