Finance Officials Troubled By Massive Farm Scheme Debts Call For Changes: Thailand

[webfact]

Finance officials troubled by massive farm scheme debts call for changes

Suphannee Pootpisut

The Nation

Police is checking warehouse in Ayutthaya where rice stockpile under the government's pledging scheme are stored.

BANGKOK: -- Rice and other farm subsidy schemes have led to the loss of over Bt200 billion and must be reviewed to cap the ballooning cost for taxpayers, Finance Ministry officials said last week. "If the government can't sell more rice and other products from its stocks, it will lead to a combined loss of Bt260 billion this year," a ministry source said.

The ministry recently reported to the prime minister the cost of 15 farm pledging projects since 2004, the source said.

The ministry officials led by deputy |permanent secretary Supa Piyajitti, who |is in charge of evaluating the price sup-|port schemes, suggested the government |to repay debt worth Bt200 billion to the Bank for Agriculture and Agricultural Cooperatives(BAAC), which had advanced payments to scheme recipients on behalf of the government.

The government may take five years to fully pay off its debt to the BAAC, the source said.

The ministry also suggested the government revise the pledging conditions to cut costs and prevent corruption, the source said.

Since 2004, past governments and the current government have implemented pledging schemes for 48 million tonnes of farm products from farmers, mainly rice.

These projects yielded revenue of Bt205 billion against costs of Bt412 billion, the source said, so the net loss so far is Bt206 billion.

The cost is expected to rise further as the government continues to buy crops from farmers at much higher prices than the |market.

As of May, the government's farm product inventory was Bt121 billion and its cost for storing rice was Bt33 billion.

The BAAC has had to pay out to farmers a total of Bt450 billion for the 15 price-|support schemes, but has received only Bt198 billion in compensation from the government so far, or less than half of the total cost.

Due to rising cost, the Finance Ministry proposed to the Commerce Ministry and the National Rice Policy Committee to report the cost every quarter.

To make the rice pledging scheme sustainable, the government needs to review the way it buys rice from farmers. The price should not be too much higher than the market, according to officials. The government promises to buy unlimited rice from farmers at an average price of Bt15,000 per tonne of unmilled rice.

The government was also urged to limit the quantity of rice that it will buy from farmers, as the open-ended policy has led to overproduction of rice and other farm products, officials said. For example, now farmers plant seven crops in each two-year cycle, up from five previously.

Since the government now has a monopoly in rice trading, it has distorted the market mechanism. Exporters and millers cannot buy rice at a reasonable price for trade. A few of them can win rice at government auctions, but that is because they have an unfair advantage over others, officials said.

The price support scheme also makes Thai rice more expensive than rivals' rice in the world market, leading to shrinking market share.

The scheme has also encouraged smuggling, as farmers in Asean countries can get higher prices by selling their rice to Thais.

The government should also consult with other agencies on conducting a comprehensive appraisal of the price support schemes to determine if they should be continued or changed, they said.

-- The Nation 2012-10-22

[HiSoLowSoNoSo]

Supa Piyajitti, who is in charge of evaluating the price sup-port schemes, suggested the government to repay debt worth Bt200 billion to the Bank for Agriculture and Agricultural Cooperatives(BAAC), which had advanced payments to scheme recipients on behalf of the government.

I wouldn't bank on this "government" to repay Bt200 Billion, a large chunk of the money found its' way to Hong Kong and Dubai already.

[BookMan]

A crazy scheme from day one, I am not sure how many bottom of the chain rice farmers life this scheme has enhanced.

I would imagine the boys further up the chain have made the largest share of the pie with various creative skimming and rorting techniques. Of course this is by no means unique to Thailand, happens the world over, but it doesn't make it right.

Despite the mounting losses of the scheme it will be kept open for a while longer, just to allow every drop of money to be sucked clean out.

[dcutman]

As of May B33 billion to store rice and counting.

The BAAC is charging B50 billion maintenance fee for the loan. So roughly 20% of total cost, just to maintain this scam. Brilliant!

[edwinchester]

Of course there's oversupply!!! If you pay well over the rate something is worth farmers will grow every single grain they can.

In our village every single spare piece of land is given over to rice and some are getting four crops per year. The price to rent paddy has gone from 800bht per rai a couple of years ago to 2000bht this year.

It is all unsustainable madness.

[GentlemanJim]

How clever! The government come up with a scam which they are claiming all the success for, but they get the BAAC to pay the bill. I think the bank are going to find themselves in a pretty precarious position soon.

[siampolee]

I think the bank are going to find themselves in a pretty precarious position soon.

Don't worry the current maladministration will go and borrow more money to bail out the bank and of course the cronies in this Ponzi rice scam will be on a 30% commission so all will be well till the bill hits the man in the street.

[Ricardo]

The government owes 200 Billion to a government-bank, out of one pocket and into another, with what level of losses or commissions & costs along the way ?

What happens when the government cannot/refuses-to pay its bills to the BAAC ? The whole scheme scam just carries on !

Meanwhile the rice-mountain rises-up ever-higher, and the quality of the stocks deteriorate, as they age, and other countries' rice-exports surpass Thailand's own over-priced attempted-exports, losing long-established markets.

Then when the warehoused-stocks are eventually released/dumped, the quality blows the former-reputation big-time, and long-term !

But it will only take another few years of attempting to manipulate the global-market, protests the Big Boss, and it's only public-money after-all, so who will really care until it's too late, and the full impact comes home to roost ?

Who is really making money out of this ? Speculators overseas (mention no names) and local middle-men and millers, with a small amount left over for the poor Thai farmers, who still trust the promises of a Brave New World ? Wake Up ... the Emperor's new clothes are transparent, unlike the details of public-funded government-to-government rice-sales !

The Finance Ministry poo-yais are right to be troubled.

[Valentine]

Google "EU butter mountain" to see similar schemes there although I imagine those subsidies are not being exploited to the extent they are here.

[siampolee]

The Finance Ministry poo-yais are right to be troubled.

Not as much as the Thai people are going to be when the financial effluent meets the fan and they've to foot the bill..

Edited October 22, 2012 by siampolee

[jonclark]

I know its an aside to the topic, but has anyone noticed the quality of rice on sale (5kg bags in tesco and the like) going down. For the last few months the rice we've bought just seems well crap - goes hard when cold, more 'nutty' grains, less tasty on the whole. After 13 years here I have grown accustomed to the 'taste and texture' of rice and the rice seems to have gone to crap. Anyone else noticed this?

[OzMick]

A recent article in the BP said that, on average, farming households owe B110,000. If the aim of the rice-pledging scheme is to help these people, you could pay off ALL the debts of 2 million poor farming families every year for the same cost as the rice pledging scheme, which instead is claimed to increased their incomes by 8%.

Of course, that is if the aim of the rice pledging scam is as claimed and it is not a camouflage for something more nefarious.

[AleG]

A recent article in the BP said that, on average, farming households owe B110,000. If the aim of the rice-pledging scheme is to help these people, you could pay off ALL the debts of 2 million poor farming families every year for the same cost as the rice pledging scheme, which instead is claimed to increased their incomes by 8%.

Of course, that is if the aim of the rice pledging scam is as claimed and it is not a camouflage for something more nefarious.

Indeed.

What I have been trying to find is what percentage of the total goes to what you can characterize as "Poor Farmer". It's always defended as helping the Poor Farmer™, but this is a blanket scheme, large agro-industrial corporations are getting the same (probably more I guess) subsidized price for the rice they produce. Why should those corporations be subsidized if the putative aim is to help the bucolic Poor Farmer™ scraping a living out of his patch of land?

[tragickingdom]

I would say start cutting cost by sending tens of thousands of these kind of government officials home. Not the rice buying scheme is the problem, the sheer number of bureaucrats and the cost to society is.

[MikeThaison]

"These projects yielded revenue of Bt205 billion against costs of Bt412 billion, the source said, so the net loss so far is Bt206 billion."

Last I checked 412 - 205 = 207 Billion as a net loss NOT 206 BILLION. I don't want to jump the gun and correct me if I am wrong, but if simple subtraction can't be followed by a source and checked by the journalist, we may never know the true cost of this project.

Edited October 22, 2012 by MikeThaison

[Ricardo]

Merely a rounding-error, I'd suggest ?

[SICHONSTEVE]

"These projects yielded revenue of Bt205 billion against costs of Bt412 billion, the source said, so the net loss so far is Bt206 billion."

Last I checked 412 - 205 = 207 Billion as a net loss NOT 206 BILLION. I don't want to jump the gun and correct me if I am wrong, but if simple subtraction can't be followed by a source and checked by the journalist, we may never know the true cost of this project.

Stop nit-picking - what's a billion amongst friends!!!!

[scorecard]

A crazy scheme from day one, I am not sure how many bottom of the chain rice farmers life this scheme has enhanced.

I would imagine the boys further up the chain have made the largest share of the pie with various creative skimming and rorting techniques. Of course this is by no means unique to Thailand, happens the world over, but it doesn't make it right.

Despite the mounting losses of the scheme it will be kept open for a while longer, just to allow every drop of money to be sucked clean out.

Join the 'Get Rich Quick Club'.

Qualifications: no capabilities, no experience, no morals, at ease with accepting brown paper bags / expect brown paper bags.

Questions & comments from members not needed not allowed.

[scorecard]

The government owes 200 Billion to a government-bank, out of one pocket and into another, with what level of losses or commissions & costs along the way ?

What happens when the government cannot/refuses-to pay its bills to the BAAC ? The whole scheme scam just carries on !

Meanwhile the rice-mountain rises-up ever-higher, and the quality of the stocks deteriorate, as they age, and other countries' rice-exports surpass Thailand's own over-priced attempted-exports, losing long-established markets.

Then when the warehoused-stocks are eventually released/dumped, the quality blows the former-reputation big-time, and long-term !

But it will only take another few years of attempting to manipulate the global-market, protests the Big Boss, and it's only public-money after-all, so who will really care until it's too late, and the full impact comes home to roost ?

Who is really making money out of this ? Speculators overseas (mention no names) and local middle-men and millers, with a small amount left over for the poor Thai farmers, who still trust the promises of a Brave New World ? Wake Up ... the Emperor's new clothes are transparent, unlike the details of public-funded government-to-government rice-sales !

The Finance Ministry poo-yais are right to be troubled.

And I know one senior finance public servant who recently resigned on the spot and walked out when he was pressured to sign documents which he says were way less then truthful and contained very big numbers.

[scorecard]

The Finance Ministry poo-yais are right to be troubled.

Not as much as the Thai people are going to be when the financial effluent meets the fan and they've to foot the bill..

And there are plenty of Thais who do currently pay income tax who are already vocal about the fact that 99% of farmers plus low wage earners (very large numbers of Thais) don't pay any income tax.

If bankruptcy looms and personal tax rates go up, the current tax payers are quite likely to demand that a much larger % of all Thais pay some income tax.

The farmers (just one example) are the losers again.

And PT / red leaders etc., still have never spoken one word about:

1. Long term policies to reform the farming sector to make it more profitable and sustainable.

2. Education in various forms which would equip more Thais to gain a better qaulity of life through their own productivity.

Not one word has been spoken on this by PT or the red / udd leaders. And I'm not holding my breath.

Edited October 24, 2012 by scorecard

[siampolee]

Indeed this Ponzi rice pledging ( populist vote buying ) scam scheme is going to result in Thailand falling on its sword in the international rice market in the not too distant future.

.

Edited October 24, 2012 by siampolee

[Ricardo]

And I know one senior finance public servant who recently resigned on the spot and walked out when he was pressured to sign documents which he says were way less then truthful and contained very big numbers.

Good to know there are some public-servants, who are either honest, or can see that they might well be set-up to become future scapegoats for the scheme's shortcomings.