Don't believe it: Rice scheme is a major worry

In what superficially and briefly seemed like a good democratic exercise, that of a political leader defending his initiative, former prime minister Thaksin Shinawatra rebuffed critics of the Yingluck government’s rice price-pledging scheme. Speaking in Singapore, he shrugged off widespread domestic concern that the price guarantee policy would cause long-term damage to farmers, that it was already hurting Thai rice exports, and plagued with corruption.

The timing was conspicuous. His sister, Prime Minister Yingluck Shinawatra, was again on the global stage, with spotlight not just on her political problems but also economic performance. Her government’s rating, though still relatively satisfactory, was beset by a number of issues. The last report by the Truth for Reconciliation Commission of Thailand tainted what Thaksin always proclaimed was a peaceful grass-root uprising in 2010 that paved the way for Yingluck to rise to power.

Political and ethical questions aside, Thaksin did not do a good job defending the rice price pledging policy. His claims that the programme, under which the government buys rice from farmers at well above market rates, was reaping economic gains that are about three times the scheme’s cost, was vague, if not unproven.

Thaksin did not dwell on the serious issue of suspected rampant corruption. His attempt to counter criticism that the rice programme was glutting government storage and undermining Thailand’s export status was also ambiguous. According to Thaksin, sales to Indonesia, Iraq and Ivory Coast, as well as other countries in the Middle East and Africa, would help keep reserves down. He added that with some “manipulation” in the next two to three years, things should “move naturally”, benefiting Thai farmers and providing good economic cushion for the whole country amid global uncertainties.

Real figures, though, can hardly be disputed, and most, if not all, are not promising. Even Thaksin had to quote the worrisome records of 17 million tonnes of paddy in government hands apart from an estimated 4 million tonnes of milled rice. Thaksin was pinning hope on world rice prices continuing to climb, in his insistence that the programme would in fact benefit state coffers.

Such hope flies in the face of some massive figures that do not inspire confidence. The government has spent more than Bt280 billion since October buying about 18 million metric tonnes of un-milled rice from 2.45 million farmers at above-market rates, according to the Ministry of Commerce. Spending may even increase by a further Bt405 billion in the fiscal year starting October 1, as the government wants to buy as much as 34 million tonnes, Commerce Minister Boonsong Teriyapirom said last Friday.

Thaksin insisted Thai farmers were happy with the programme. The question is, what farmer wouldn’t? A subsidy is the one thing that people on the “receiving end” do not complain about. And Thaksin did not mention the fact that the rice price-pledging scheme is not the only policy that requires a staggering state subsidy. This raises big questions, when he suggested that the government budget was unlikely to be seriously affected by what critics deem a populist approach. 

Critics have estimated that the government could lose more than Bt100 billion from the first round of the price-pledging programme. And although the government tried to cite benefits for grassroots farmers, charges of corruption abound and concerns have grown over the competitiveness of the largest sector of the Thai population.

The critics view the rice price programme as a huge threat to the country’s long-term fiscal discipline. With the farmers themselves likely to be affected in the long run by subsidies and handouts – which could wreak havoc on productivity, competitiveness or self-reliance – the scheme deserves to be thoroughly rethought. The need for a review is glaring, and Thaksin’s attempt to repaint the programme with bright colours has done little to hide any of this.