Thailand's Farmer-Friendly Rice Subsidy Backfires

[webfact]

Thailand's farmer-friendly rice subsidy backfires
By Bruce Einhorn

file photo

BANGKOK: -- Until last year, business was good for Charoen Laothamatas, the president of Thai rice exporter Uthai Produce. With Thailand dominating the global market for rice exports, Uthai enjoyed strong demand. In 2012, though, Charoen had to cut his workforce by 40 percent.

The culprit: a Thai government policy that pays local farmers vastly inflated prices for their rice. While the government sees the program as a way to boost rural incomes, the policy has made Thai rice uncompetitive against rice from Vietnam and India. Before the new policy went into effect, Uthai exported 200,000 tons to the U.S., China, and Hong Kong. This year, he says, “we will be lucky if we get 80,000.”

Charoen’s troubles are related to the political challenges the kingdom has endured since a military coup ousted populist Prime Minister Thaksin Shinawatra in 2006. The current premier is his sister, Yingluck Shinawatra, and in 2011 she decided an easy way to cement her party’s grip on power was to win over farmers by paying above-market prices for their rice.

Full story: http://www.businessweek.com/articles/2013-04-18/thailands-farmer-friendly-rice-subsidy-backfires

-- Bloomberg Businessweek 2013-04-19

[RickBradford]

it's called 'the law of unintended consequences', and is often to be found where ignorant politicians decide to foist their pet ideologies on the populace.

The 300-baht minimum wage is suffering from the same effect.

[Bellweather]

No, No I refuse to believe this, another PTP populist policy has gone wrong ? Impossible

[jamhar]

I hope the architect for these measures modeled these policies.

Because if they are wrong,

the Thai people will be suffering for these measures for years to come.

[OzMick]

"Four months after the 38,500 tons arrived, however, the Ivorian government has had to trash 7,600 tons because of quality problems.........."

I'm sure the Ivory Coast paid full market price for rotten rice. Remember when Thai rice sold at a premium because of its high quality?

[Pib]

It may have backfired but it still got the PTP elected. Mission Accomplished!

[Locationthailand]

It is a directive to achieve a payback for seizure of Thaksin's assets whilst on the surface continuing to appear to being their revered saviour. Som Num Na.

[AleG]

it's called 'the law of unintended consequences', and is often to be found where ignorant politicians decide to foist their pet ideologies on the populace.

The 300-baht minimum wage is suffering from the same effect.

I beg to differ, it's the "I don't give a damn about the consequences" paradigm. Only an idiot, or a brainwashed lemming would not had seen this coming, PTP used the scheme to get elected at the expense of the whole country, it puts any declaration from them that they are working for the Thai people in the B.S. waste bin.

[BrianCR]

It seems to me that it is based on a European idea of farm subsidies where, tax payers have to subsidies almost every product grown or produced by (unlike Thailand) very rich farmers! This also backfired and in Europe's case these subsidies are so high that the EU is screaming over how much money is being spent

[asiasurfer]

Can I be subsidized by the government too? Oh sorry forgot. I cannot vote...

[Ragzilb]

In other word part of the global Ponzi scheme

[Noistar]

No, No I refuse to believe this, another PTP populist policy has gone wrong ? Impossible

Must be biased reporting (again). Any criticism of PTP usually comes down to this

[Bellweather]

No, No I refuse to believe this, another PTP populist policy has gone wrong ? Impossible

Must be biased reporting (again). Any criticism of PTP usually comes down to this

So PTP and their policies are a raging success ?

[Robby nz]

SURIN, 17 April 2013 (NNT) - More than 150 houses, rice barns and mills, and animal farms in Surin were destroyed after a tropical storm hit this northeastern province last evening.

Authorities said the trail of damages could be seen in Jom Phra and Muang Districts, adding the storm has blown away roofs of many houses a few kilometers away. The provincial rice depot belonging to the government’s rice pledging scheme was also completely torn down by the storm.

Theres some that they wont have to worry about getting rid of.

Wonder what sort of insurance they had if any?

[hellodolly]

Can I be subsidized by the government too? Oh sorry forgot. I cannot vote...

Maybe if you make a trip to Dubai it can be arranged.

[PattayaPhom]

With the strong Baht against the $ they dont care as POTT are making billions for doing sweet fa and subsidising the farmers who then pay higher prices than needed for energy.....vicious circle reminisent of the Western world in the 70's. But still nice to be part of a booming economy.

[ianf]

It may have backfired but it still got the PTP elected. Mission Accomplished!

And is that a good thing?

[Joe Mamma]

Another short lived -short term idea.

[Pimay1]

Thailand's farmer-friendly rice subsidy backfires

I take issue with this headline. It has accomplished exactly what it was intended to do. Help put PTP in power and made untold millions of dollars for certain targeted people.

[MauriceVanTine]

I am for anything that trickels down to the farmers espically the small holdings the middle men get wealthy while the farmer struggles to survive.

[boblunch]

Isn't it better to get the money to the farmers instead of into the pockets of a big company that also owns many other businesses including 7-11?

[marcusd]

This Government is cementing more money from wherever they can to fill pockets of those who will support them. They are meglomaniacs.

See this article by Bloomberg on why the Thai baht is so strong.

http://www.bloomberg.com/news/2013-04-09/thai-baht-bonds-advance-as-boj-easing-seen-driving-more-inflows.html

Now this is also why the Government is supporting those rice farmers so they ghet more votes WITH BORROWED MONEY and rice they will not be able to sell. SHORT TERM VISON again - usual for MOST politiciands of all nations except here the pollies get all the casjh. And yes this is the government who pays the farmers to vote fopr them and the farmers burn the rice causing smoke issues - so round and round we go.

It is notable in the article I attached that THIS SAME SITUATION occurred prior to the big ASIAN CRASH of 1997.

Interesting.

Please also note, Thailand is a SMALL ECONOMY with a large population featuring 50 on the world index of the worlds biggest economies.

To put that in perspective, a company like PEPSICO can BUY ALL THAILAND if they wanted to.

So go figure whewre Thailand will be in 2 years... hmmm another Asian crash perhaps lead by dim wits at the ships helm? Rice pledging, over borrowing and an econoimy running on EXPORTS with a THAI BAHT so high no one wants the goods. Indeed a GENIOUS policy.

[Yunla]

Is there a 'surprised face' emote on this site? I'll go with /shock

[Chicken George]

Now what will happen? Will the government only pay 10K baht a tonne now to the farmers? Now if they did how would the farmers pay for their new morgaged house the new truck the 300 baht a day wage.. Farmers to sell more land off borrow more money? Its called digging yourself in deeper and who is to blame? Polititions to be perfectly 100% honest and do they care? No most dont they have made their money will in office.. What is the answer? Maybe a devaluation of the baht could help but better still is a reality check by the voters. Short term gain long term loss.

[LuckyLew]

There is no issue with the rice pledging scheme, the scheme was intended

for certain friends and certain friends families to get even richer, and IMO

this has happened.

[apetley]

I am for anything that trickels down to the farmers espically the small holdings the middle men get wealthy while the farmer struggles to survive.

Instead of a trickle down to farmers the Democrats had a scheme whereby a subsidy was paid directly to the farmer. It was less open to corruption so it's surprising PT didn't implement similar.

[kimamey]

It seems to me that it is based on a European idea of farm subsidies where, tax payers have to subsidies almost every product grown or produced by (unlike Thailand) very rich farmers! This also backfired and in Europe's case these subsidies are so high that the EU is screaming over how much money is being spent

There is some similarity and you're right that there is criticism over the Common Agricultural Policy (CAP). There are many differences though and it's far more complex than the rice subsidy and has somewhat different objectives. I must admit to not fully understanding the Thai system but for some reason it seems that it's not the farmers that get most of the benefit but the millers. Maybe someone else can give some help on this.

The CAP has several functions.

It helps provide a decent income for farmers.

It is used to help farmers modernise and maintain competitiveness and protect the environment.

It also helps when there destabilising factors such as bad weather.

The Thai system is purely for increasing the price paid for rice and has no mechanism for modernisation, competitiveness, market stabilisation or protecting the environment.

I think you can judge the commercial success of the scheme by the lack of transfarency regarding the sale of this rice in G2G deals.

Edited April 19, 2013 by kimamey

[Pimay1]

I am for anything that trickels down to the farmers espically the small holdings the middle men get wealthy while the farmer struggles to survive.

Instead of a trickle down to farmers the Democrats had a scheme whereby a subsidy was paid directly to the farmer. It was less open to corruption so it's surprising PT didn't implement similar.

Corruption is the key word in your post.

[backtonormal]

There is no issue with the rice pledging scheme, the scheme was intended

for certain friends and certain friends families to get even richer, and IMO

this has happened.

Please state which 'friends families' got richer and how exactly it was achieved

[backtonormal]

Now anybody who watches FOX News realises what a one sided tv station it is. I can only compare it to 'The Nonsense' in its 135th attempt to raise the rise issue as a thread here. Tell those exporters its over and nobody cares about their plight. Tell them please go gracefully and quietly with the billions they have raped on the backs of the poor (my attempt at a 'Churchillian' speech. Seriously Thailand does not need to rely on rice exports, lets grow something else up North. These exporters are an open sore. Please editor no more rice stories, most people dont give a <deleted> about greedy multi billionaires who are having a hard time