Rice-Pledging Scheme Could ' Doom Yingluck '

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EXCLUSIVE INTERVIEW

Rice-pledging scheme could 'doom Yingluck'

Achara Deboonme,

Piyanart Srivalo

The Nation

Virabongsa

BANGKOK: -- Central bank chairman Virabongsa Ramangkura advises Pheu Thai govt to quickly scrap massive project, which he says is wide open to corruption

The Pheu Thai government should swiftly scrap its rice-pledging scheme, as it requires huge debt-financed budgets and opens the door wide to corruption, economic guru Virabongsa Ramangkura said yesterday.

"The country will be doomed if the government proceeds with the rice-pledging scheme," Virabongsa said in an interview with Nation Multimedia Group.

"This government demonstrates stability. But if there's anything to rock the stability, it's this scheme."

Serving on the Strategic Formula-tion Committee for Reconstruction and Future Development and widely viewed as the government's chief adviser, Virabongsa said the programme, no matter which government introduced it, was riddled with graft.

Stunning verdict

Virabongsa's stunning verdict on the controversial policy came only a few days after former prime minister Thaksin Shinawatra staunchly defended the scheme in an interview in Singapore. It also came on the same day that Prime Minister Yingluck Shinawatra vowed vehemently to carry on with the project.

The veteran economist is a top adviser in the government. Analysts believe that the government backed his presence in the Bank of Thailand, of which he is now chairman, because it wants to counterbalance the central bank's governor, Prasarn Trairatvorakul, with whom it disagrees over some key monetary policies.

The government is extending the pledging project by another year, which could involve funding of Bt400 billion for the new harvests. The Commerce Ministry is now seeking help from rice millers with spare warehousing capacity to join the scheme, in preparation for the new crops.

The Cabinet yesterday also approved the rice-pledging scheme for the 2012-13 harvest year, which would require a budget of Bt405 billion. However, according to Commerce Minister Boonsong Teriyaphirom, the Cabinet allowed the ministry first to accommodate 15 million tonnes from the main crop, which will require a budget of Bt240 billion.

The pledging for the second crop, 11 million tonnes, will be decided later. The funding will also come from the proceeds from releasing stocks of government rice.

The Commerce Ministry, which in charge of the release, estimates that it would reap a total of Bt260 billion from selling the rice from the 2011-12 main crop, which means a net loss of Bt10 billion.

Losses are incurred from the falling prices of rice in inventory against market prices at the time of the releases. It was first estimated that total losses would be about Bt60 billion.

The rice-pledging scheme was one of the key election-campaign promises of the Pheu Thai Party. In its first year, the project drew heavy criticism. Farmers complained that they did not gain as much as Bt15,000 per tonne as promised, because of heavy deductions by rice millers.

Exporters complained that setting the price at a high level gave them big headaches, as global prices are falling on new supplies from Vietnam and India that are cheaper.

Last week, in the headlines was news from Vietnam claiming that it could surpass Thailand as the world's biggest rice exporter.

Vietnam 'in the lead'

Nguyen Van Don, general director of rice exporter Viet Hung, said that thanks to Thailand's high price guarantee for farmers, Vietnam was in the lead so far.

"The reason is … the programme of storing and buying up rice to support the farmers of Thailand. Now it is very difficult to compete for selling price. Now Vietnam is competing very [strongly] with India and Pakistan and Burma, mostly with India."

The huge losses prompted 127 academics to file a petition to the Constitution Court last week for the court to have the rice-pledging scheme terminated. The court has yet to decide whether it will take this case into consideration.

Yingluck yesterday insisted that the government was ready to explain to the court why the government will proceed with the scheme. She insisted that this scheme was aimed at raising the standard of living of farmers. Referring to her field trips, she said farmers had benefited tremendously.

"I plead for sympathy. Please put mutual benefits before anything. This project is to give an answer to the majority. Without this, the market mechanism might not work.

"But since this is executed nationwide, there could be bottlenecks at the low level and we need time to improve this. Something can't be 100 per cent perfect. But this is not because it is a bad policy or a bad process," she said.

She also promised to heed advice from everyone. Deputy Prime Minister Chalerm Yoobamrung has been assigned to rectify missteps in an integrated manner.

Criticised for offering a high price, which in effect sets up competition with exporters, she said the government had no policy to reap profits from the project. The programme is simply to realign supply and demand. Without the mechanism, rice prices would fall to an irrecoverable level. The project incurs some losses, but it won't affect the overall economy. Higher rice prices were raising farmers' living standards and this would boost economic cycles, she said.

While supporting the other policies of the Pheu Thai government, Virabongsa expressed strong opposition to all pledging schemes for agricultural crops that involve rice, rubber, tapioca, corn, shrimp and other crops.

In an article he wrote for Prachachart Turakij, dated August 15, 2011, when the Pheu Thai government took office, he lashed out at the pledging scheme. This article has resurfaced again on media websites, at a time when the government has pledged to proceed with the scheme despite a possible no-confidence debate launched by the Democrat-led opposition.

"Since agricultural pledging schemes were first introduced in 1986 [by the Prem Tinsulanonda administration], Thailand had wasted a huge amount of money and farmers were not end-beneficiaries as expected. Much of the gains fall into the pockets of rice millers, ministers and politicians' cronies, which explains why nobody wants it to end," Virabongsa said in the article.

'Flawed' process

A pledging policy in general means items are pledged below market prices in the expectation that the owners will later redeem the items. However, in this scheme, rice is pledged above market prices and the government needs to release stockpiles at a loss, he said.

In theory, rice prices are determined by global demand and like other agricultural products, they can be substituted by other crops and new supplies are hitting markets all the time. Accumulating stocks now can't influence global prices, he said.

In practice, the process in choosing participating rice millers contains flaws. Millers can forge pledging documents, showing the government that they buy "invisible" rice at the guaranteed price. However, when farmers actually sell rice, the millers buy at market prices, which are below the pledging levels, he said.

Then, when the government holds rice auctions to unload stocks, exporters with political connections bid for the rice, containing physical and invisible rice, as they know the actual cost. Millers and exporters without connections would go bankrupt, he said.

"In the corruption loop, the government lost hugely and farmers gained nothing … It remains to be seen how this will end," he concluded.

-- The Nation 2012-10-03

[asiawatcher]

So the nations top economist says scrap it as it is rife with corruption and will bring down the Government whilst the puppet master defends it publicly in Singapore. Who would you believe? Why would Thaksin want to defend it when it can bring down 'his' government. A last ditch killing at scamming a few billion Baht more? I wonder when the Thai people will wake up.

[KarenBravo]

I wonder when the Thai people will wake up.

Errrm...........never.

[dcutman]

With 15 mil tons of rice in storage, why has Thailand suddenly become a rice importer(250,000 tons a month? This scheme has distorted so many markets, not only does the tax payer get bent over, but every person in Thailand has to pay much more their incomes to buy the food they eat.

http://mnews.thegktr...rice-supply-gap

Edited October 3, 2012 by dcutman

[HiSoLowSoNoSo]

'In practice, the process in choosing participating rice millers contains flaws. Millers can forge pledging documents, showing the government that they buy "invisible" rice at the guaranteed price. However, when farmers actually sell rice, the millers buy at market prices, which are below the pledging levels, he said.

Then, when the government holds rice auctions to unload stocks, exporters with political connections bid for the rice, containing physical and invisible rice, as they know the actual cost. Millers and exporters without connections would go bankrupt, he said.

"In the corruption loop, the government lost hugely and farmers gained nothing … It remains to be seen how this will end"

In doom I believe.

[jaltsc]

I wonder when the Thai people will wake up.

Errrm...........never.

The answer to your question might lie in the other headline: Thai Children Lag Among Asian Readers. If children are schooled to believe what they are told and never taught how to seek opposing opinions, they grow into adults who accept whatever the government offers them. Mark Twain once said: "I never let my schooling get in the way of my education". In Thailand and many other countries, it should read: "I never let education get in the way of my schooling".

[Thai at Heart]

The Central bank chairman makes a statement like this? The country will be doomed?

I think in terms of dealing with the media he makes kittirat look like a genius.

[rubl]

"I plead for sympathy. Please put mutual benefits before anything. This project is to give an answer to the majority. Without this, the market mechanism might not work.

"But since this is executed nationwide, there could be bottlenecks at the low level and we need time to improve this. Something can't be 100 per cent perfect. But this is not because it is a bad policy or a bad process," she said.

She also promised to heed advice from everyone. Deputy Prime Minister Chalerm Yoobamrung has been assigned to rectify missteps in an integrated manner.

Criticised for offering a high price, which in effect sets up competition with exporters, she said the government had no policy to reap profits from the project. The programme is simply to realign supply and demand. Without the mechanism, rice prices would fall to an irrecoverable level. The project incurs some losses, but it won't affect the overall economy. Higher rice prices were raising farmers' living standards and this would boost economic cycles, she said.

We need time to improve, Rome wasn't build in a day you know. Give us a chance and the benefit of the doubt. We're only talking about THB 500, 600, 700 billion in two years. Some will really trickle down to needy farmers and poor workers get 300B/day to pay for higher prices and a house and car. Surely everyone profits except the government

[GentlemanJim]

With 15 mil tons of rice in storage, why has Thailand suddenly become a rice importer(250,000 tons a month? This scheme has distorted so many markets, not only does the tax payer get bent over, but every person in Thailand has to pay much more their incomes to buy the food they eat.

http://mnews.thegktr...rice-supply-gap

Well, if I could buy 250 000 tons of rice at 8000 baht a ton, then rebag it and send it through the mill system and claim 15 000 baht for it then guess what I would do. There will be hundreds of truck loads of this stuff being brought in from Cambodia, Vietnam, Malaysia etc etc, all 're-cycled' as Thai rice to qualify for the government payments.

I must admit that the financial numbers associated with these populist schemes are pretty terrifying. In the article on first time car rebates, a minister says 'don't worry, we have 500 billion in Treasury reserves'. 500 billion is a tiny amount considering the same amount is being spent on rice pledging, and when a similar amount is disappearing along with the flood waters. There are very few tax payers in this country compared to the number of population, and the spending that is going on is simply unsustainable. Where will it end?....Doom indeed!

[Thai at Heart]

What type of picture is that? He looks like a character from Wallace and Gromit.

We are doomed, hahahahahahahahaha

[Mosha]

With 15 mil tons of rice in storage, why has Thailand suddenly become a rice importer(250,000 tons a month? This scheme has distorted so many markets, not only does the tax payer get bent over, but every person in Thailand has to pay much more their incomes to buy the food they eat.

http://mnews.thegktr...rice-supply-gap

Well, if I could buy 250 000 tons of rice at 8000 baht a ton, then rebag it and send it through the mill system and claim 15 000 baht for it then guess what I would do. There will be hundreds of truck loads of this stuff being brought in from Cambodia, Vietnam, Malaysia etc etc, all 're-cycled' as Thai rice to qualify for the government payments.

I must admit that the financial numbers associated with these populist schemes are pretty terrifying. In the article on first time car rebates, a minister says 'don't worry, we have 500 billion in Treasury reserves'. 500 billion is a tiny amount considering the same amount is being spent on rice pledging, and when a similar amount is disappearing along with the flood waters. There are very few tax payers in this country compared to the number of population, and the spending that is going on is simply unsustainable. Where will it end?....Doom indeed!

That reads like a plot from one of Ray Feist's books.

[GentlemanJim]

With 15 mil tons of rice in storage, why has Thailand suddenly become a rice importer(250,000 tons a month? This scheme has distorted so many markets, not only does the tax payer get bent over, but every person in Thailand has to pay much more their incomes to buy the food they eat.

http://mnews.thegktr...rice-supply-gap

Well, if I could buy 250 000 tons of rice at 8000 baht a ton, then rebag it and send it through the mill system and claim 15 000 baht for it then guess what I would do. There will be hundreds of truck loads of this stuff being brought in from Cambodia, Vietnam, Malaysia etc etc, all 're-cycled' as Thai rice to qualify for the government payments.

I must admit that the financial numbers associated with these populist schemes are pretty terrifying. In the article on first time car rebates, a minister says 'don't worry, we have 500 billion in Treasury reserves'. 500 billion is a tiny amount considering the same amount is being spent on rice pledging, and when a similar amount is disappearing along with the flood waters. There are very few tax payers in this country compared to the number of population, and the spending that is going on is simply unsustainable. Where will it end?....Doom indeed!

That reads like a plot from one of Ray Feist's books.

Rather than taking the somewhat disappointing approach of labeling my post as some sort of fantasy fiction, perhaps you might contribute more by saying what is wrong with it and why?. I don't believe it to be fiction at all, the facts support it as a genuine possibility. I wouldn't worry about the 250 000 tons being fed back in to the system, there could be substantially more than that as many millions of tons of rice could be going round the bouy again to qualify for payments in the next fiscal year. So, back to your post, where is the fiction part then?

[moe666]

Where is GK when you need him. He has made a few post in support of the rice pledging scheme, I would like to see his rebuttal to this guy.

[JoePai]

Looks like he is visiting the dentist

[Buchholz]

Well, if I could buy 250 000 tons of rice at 8000 baht a ton, then rebag it and send it through the mill system and claim 15 000 baht for it then guess what I would do. There will be hundreds of truck loads of this stuff being brought in from Cambodia, Vietnam, Malaysia etc etc, all 're-cycled' as Thai rice to qualify for the government payments.

I must admit that the financial numbers associated with these populist schemes are pretty terrifying. In the article on first time car rebates, a minister says 'don't worry, we have 500 billion in Treasury reserves'. 500 billion is a tiny amount considering the same amount is being spent on rice pledging, and when a similar amount is disappearing along with the flood waters. There are very few tax payers in this country compared to the number of population, and the spending that is going on is simply unsustainable. Where will it end?....Doom indeed!

the smuggling is in full swing... with such a sweet deal the amount involved has no doubt risen since.

According to reports in the press and observations here. They already are importing rice from Cambodia

By the truckloads.... in order to sell it.... at Yingluck's inflated price.... by calling it Thai rice....

http://www.thaivisa....ost__p__5253478

Seems now that there was a lot more than truckloads of foreign rice being sold as Thai rice for the inflated price.

The Thailand Research and Development Institute has highlighted that as much as 1 million ton of rice is apparently involved as they've compared the numbers of what was produced in Thailand, what was exported, and what was consumed domestically versus the amount listed in Thailand's reserve.

A nice earner for the smugglers, who are no doubt grateful for the over-market price that Thailand is paying out for rice.

.

[Mosha]

With 15 mil tons of rice in storage, why has Thailand suddenly become a rice importer(250,000 tons a month? This scheme has distorted so many markets, not only does the tax payer get bent over, but every person in Thailand has to pay much more their incomes to buy the food they eat.

http://mnews.thegktr...rice-supply-gap

Well, if I could buy 250 000 tons of rice at 8000 baht a ton, then rebag it and send it through the mill system and claim 15 000 baht for it then guess what I would do. There will be hundreds of truck loads of this stuff being brought in from Cambodia, Vietnam, Malaysia etc etc, all 're-cycled' as Thai rice to qualify for the government payments.

I must admit that the financial numbers associated with these populist schemes are pretty terrifying. In the article on first time car rebates, a minister says 'don't worry, we have 500 billion in Treasury reserves'. 500 billion is a tiny amount considering the same amount is being spent on rice pledging, and when a similar amount is disappearing along with the flood waters. There are very few tax payers in this country compared to the number of population, and the spending that is going on is simply unsustainable. Where will it end?....Doom indeed!

That reads like a plot from one of Ray Feist's books.

Rather than taking the somewhat disappointing approach of labeling my post as some sort of fantasy fiction, perhaps you might contribute more by saying what is wrong with it and why?. I don't believe it to be fiction at all, the facts support it as a genuine possibility. I wouldn't worry about the 250 000 tons being fed back in to the system, there could be substantially more than that as many millions of tons of rice could be going round the bouy again to qualify for payments in the next fiscal year. So, back to your post, where is the fiction part then?

There is a story line in "Rise of a merchant prince" about a consortium buying up wheat options. I wasn't having a go at you. I was pointing to similarities in the storyline. Sorry if it came across wrong.

[GentlemanJim]

There is a story line in "Rise of a merchant prince" about a consortium buying up wheat options. I wasn't having a go at you. I was pointing to similarities in the storyline. Sorry if it came across wrong.

Ah ! Cool, thanks for the explanation, haven't read that one and just know him for his great Fantasy Fiction.

[DLock]

Looks like he is visiting the dentist

He should be visiting his Doctor for a liver test. His complexion looks "unnatural".

[ggold]

So the nations top economist says scrap it as it is rife with corruption and will bring down the Government whilst the puppet master defends it publicly in Singapore. Who would you believe? Why would Thaksin want to defend it when it can bring down 'his' government. A last ditch killing at scamming a few billion Baht more? I wonder when the Thai people will wake up.

Its pay back time, if they can't get Thaksin back to Thailand, Thaksin will <<snip>> the country.

Sent from my GT-P6200 using Thaivisa Connect App

Edited October 3, 2012 by metisdead

[saltandpepper]

OK, let's do this

Government doomed, protests, riots, escalation, army steps in, restores law and order

interested anyone?

For me, anyway, anything will be way better than these buffoons

[cloudhopper]

The Central bank chairman makes a statement like this? The country will be doomed?

I think in terms of dealing with the media he makes kittirat look like a genius.

Maybe so but his math is correct and that market is indeed doomed. What will happen to the market when all that stored rice is dumped? The longer this program runs the worse the outcome will be.

[kerrysum]

In my honest opinion?????????????

It never helps the farmers and producers, just the middle man, and whom ever they can buy..... I also read other posts about bringing in rice from other countries.... Noticed how YINGLUCK IS DOING so much traveling lately? Hmmm wonder what they are up to........ Do not know how it is where you live, but here in the U.S. asian stores selling this rice are shaking in their boots...

The point is this, the farmers will take it in the ass again, while the PM tells them fairytales....

Kerry

[billd766]

With 15 mil tons of rice in storage, why has Thailand suddenly become a rice importer(250,000 tons a month? This scheme has distorted so many markets, not only does the tax payer get bent over, but every person in Thailand has to pay much more their incomes to buy the food they eat.

http://mnews.thegktr...rice-supply-gap

Well, if I could buy 250 000 tons of rice at 8000 baht a ton, then rebag it and send it through the mill system and claim 15 000 baht for it then guess what I would do. There will be hundreds of truck loads of this stuff being brought in from Cambodia, Vietnam, Malaysia etc etc, all 're-cycled' as Thai rice to qualify for the government payments.

I must admit that the financial numbers associated with these populist schemes are pretty terrifying. In the article on first time car rebates, a minister says 'don't worry, we have 500 billion in Treasury reserves'. 500 billion is a tiny amount considering the same amount is being spent on rice pledging, and when a similar amount is disappearing along with the flood waters. There are very few tax payers in this country compared to the number of population, and the spending that is going on is simply unsustainable. Where will it end?....Doom indeed!

That reads like a plot from one of Ray Feist's books.

Rather than taking the somewhat disappointing approach of labeling my post as some sort of fantasy fiction, perhaps you might contribute more by saying what is wrong with it and why?. I don't believe it to be fiction at all, the facts support it as a genuine possibility. I wouldn't worry about the 250 000 tons being fed back in to the system, there could be substantially more than that as many millions of tons of rice could be going round the bouy again to qualify for payments in the next fiscal year. So, back to your post, where is the fiction part then?

I suppose in theory a bent rice miller could buy invisible rice and sell it to the government who in turn could sell it to a "favoured" rice exporter who in turn could sell it back to the bent rice miller who in turn..............

Nice earner for some people.

[MunterHunter]

Rice-pledging scheme could 'doom Yingluck'

We aint that lucky...

[GeorgeO]

"The government is extending the pledging project by another year, which could involve funding of Bt400 billion for the new harvests. The Commerce Ministry is now seeking help from rice millers with spare warehousing capacity to join the scheme, in preparation for the new crops.

The Cabinet yesterday also approved the rice-pledging scheme for the 2012-13 harvest year, which would require a budget of Bt405 billion."

You really got to love how in just two paragraphs, the figure jumps from Bt 400 to Bt405 billion. These people can't type fast enought to keep up with the kickbacks....!!

[RamblingSam]

The Thai rice farmers certainly still deserve a better price or bigger share of what the rice eventually sells for, than they were getting, prior to this scheme; somehow some mechanism needs to be devised to deliver this, which doesn't involve the Millers and Middle-men. Maybe what is needed, is officials 'in the field' who are the equivelent of a weights & measures dept, which have the duty of

a: Assessing how much Rai of rice is being grown in their Tambon,

b: Whilst the crop's gathered in, he/she oversees the weighing and bagging into containers supplied by the dept. If the volume collected, does not tally with what is expected, a rat will be smelt.

c: Once bagged and officially tagged and the farmers receive a receipt stating the quantity bagged, the amounts are then sent onto a 'Rice Payments Board'

d: When the middlemen or millers buy the rice, once the farmer has received that money, he sends in his payment receipt from the bank, into the 'Rice payments Board' and the subsidy is sent directly to the farmer's bank account.

e: No middlemen or millers involved in the subsidy payment, they cannot palm-off imported rice as Thai.

f: The farmer, has to prove he has received his payment in full from the middle-man or miller, before the Rice board will pay out, so they cannot claw back some of that money off the farmer.

It might add to the adminitstrating bill, but I'm guessing, the cost incurred would be far less than the money 'lost' via the present system. Also, the farmers probably have more power, which in my mind, isn't a bad thing.

[HiSoLowSoNoSo]

^{Will be very interesting to hear Phua Thai's excuses to the rice farmers of Thailand why they can't accept any more rice from them after failing to sell the huge stockpiles of rice they got.}

[Thai at Heart]

The Thai rice farmers certainly still deserve a better price or bigger share of what the rice eventually sells for, than they were getting, prior to this scheme; somehow some mechanism needs to be devised to deliver this, which doesn't involve the Millers and Middle-men. Maybe what is needed, is officials 'in the field' who are the equivelent of a weights & measures dept, which have the duty of

a: Assessing how much Rai of rice is being grown in their Tambon,

b: Whilst the crop's gathered in, he/she oversees the weighing and bagging into containers supplied by the dept. If the volume collected, does not tally with what is expected, a rat will be smelt.

c: Once bagged and officially tagged and the farmers receive a receipt stating the quantity bagged, the amounts are then sent onto a 'Rice Payments Board'

d: When the middlemen or millers buy the rice, once the farmer has received that money, he sends in his payment receipt from the bank, into the 'Rice payments Board' and the subsidy is sent directly to the farmer's bank account.

e: No middlemen or millers involved in the subsidy payment, they cannot palm-off imported rice as Thai.

f: The farmer, has to prove he has received his payment in full from the middle-man or miller, before the Rice board will pay out, so they cannot claw back some of that money off the farmer.

It might add to the adminitstrating bill, but I'm guessing, the cost incurred would be far less than the money 'lost' via the present system. Also, the farmers probably have more power, which in my mind, isn't a bad thing.

Sounds like the CAP and needs quotas to stop smuggling.

[Arkady]

He says the disastrous rice pledging starting when Prem was PM. If my memory serves me well, Virabongse was also an economic advisor to Prem. These days it's funny hearing him speaking his mind against the government. Otherwise he seems to be a perfect puppet for the Shinawatras.

[vijer]

"But since this is executed nationwide, there could be bottlenecks at the low level and we need time to improve this. Something can't be 100 per cent perfect. But this is not because it is a bad policy or a bad process," she said.

Yes no reason you could not pay the money directly to the farmer, no the miller has to be involved so he can take his cut, the administrator has to be involved so he can take his cut, the local government needs to be involved so it can take its cut, etc. Then at the end of the chain is the poor farmer, who was to benefit from this scheme and he is lucky to get a couple thousand extra bhat.

Sounds oddly familiar to the bailout of the banks in America, instead of bailing out the homeowners the banks who caused the problem got the money. Here in Thailand instead of the farmer getting the money the a++Hol++ got it instead.