Experts urge changes in Thai rice scheme

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RICE
Experts urge changes in rice scheme
Petchanet Pratruangkrai
The Nation

Billions going to people who aren't farmers, Pridiyathorn tells seminar; says direct payment is the way to go

BANGKOK: -- Three leading rice experts have got together to try to convince the government to scrap the rice-pledging scheme - or replace it with a direct-pay scheme.

Former deputy prime minister and central bank chief MR Pridiyathorn Devakula has joined hands with Ammar Siamwalla, one of the country's top researchers, and scholar Nipon Puapongsakorn, who is with the Thailand Development Research Institute (TDRI), to try to change the highly controversial policy.

Pridiyathorn and Nipon joined a seminar yesterday on the rice scheme hosted by the Puey Ungpakorn Institute.
He said many farmers got no benefit from the scheme even though it racked up at least Bt425 billion in losses over the past two seasons.

"The government should not proceed with the third year of pledging, but shift to directly paying farmers equally, as it has already done recently to solve the falling price of rubber," he said.

The government spent Bt678 billion for rice pledging in the two harvest seasons.

Pridiyathorn also unveiled an open letter to Prime Minister Yingluck Shinawatra. 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 but other people who should not have benefited gained Bt115.8 billion from the two-year project.

Although the pledging scheme could help farmers, there were other ways to help farmers and avoid huge losses or payments to other people, he said. Unlike the price guarantee, a direct payment to farmers would ensure that every farmer gets equal payment.

If the prime minister allowed the third year of pledging to go ahead, it would clearly show she has led the country to financial disaster, Pridiyathorn said.

Cumulative losses for several years would damage the country's development and financial status. The government could help farmers by choosing other methods it has already created by directly paying money to farmers as compensation for low rice prices, while allowing traders to do their job in promoting rice trading, he said.

A police report showed that more than a million tonnes of rice had disappeared from government stocks, meaning the government has faced unexpected losses, Pridiyathorn said. And the Post Audit Committee found that Thailand already faced losses of Bt130 billion for the first year of pledging (2011-12 season).

TDRI researcher emeritus Ammar Siamwala called on the government to be responsible for negative affects of the scheme.

The global glut in rice was growing because of the huge stockpile in Thailand, making it difficult to sell, he said.

"The government is creating a huge loss and having problems obtaining loans to further fund the scheme. The world's demand for consumption of high-quality rice is on the rise, while Thailand, influenced by the scheme, is producing low-quality rice, which would become a long-term problem," he said.

The US Department of Agriculture estimates that reserves in Thailand will increase 24 per cent to 15.5 million metric tonnes this and next year as global output rises 1.7 per cent to an all-time high of 476.8 million tonnes.

The price of 5-per-cent broken Thai white rice, an Asian benchmark, will drop 12 per cent to US$390 a tonne by April, a five-year low, according to the median of eight trader and analyst estimates compiled by Bloomberg.

Nipon Puapongsakorn, a TDRI scholar, said while the pledging scheme was not totally without advantages, it had created huge losses and stopped Thailand being the world's largest rice exporter.

The pledging scheme could help more than a million farmers and keep retail rice prices low, but the country now faced more than Bt400 billion in losses, he said.

Thailand's rice-trading system was now called "capitalism for government cronies", because only firms with good connections with the government benefit from the pledging scheme, as they can buy rice at a low price, he said.

The government should change its pledging policy and directly pay farmers assistance money, he said.

The government must stockpile huge quantities of rice that will continue to deteriorate in quality. It would get less from the scheme, but needs to spend more to stock the rice and faces higher interest rates for its loans to pay for the pledging scheme, he said.

Vichai Sriprasert, honorary president of the Thai Rice Exporters Association, said the government had chosen the wrong method by setting the pledging price too high, and had not shown concern for rice traders, especially general exporters.

Instead of spending a huge amount for the rice subsidy, it should finance long-term development projects such as irrigation systems, logistics, seed quality and research.

"The pledging is giving only small benefits to some people or companies who have close connections to the government," he said, urging the government to allow exporters to be involved in stockpile releases. This government used to sell rice at a very low price of Bt5.70 per kilogram to some exporters, while the cost of pledging is as high as Bt28.30 a kilogram, he said.

The cost of rice stocks managed by the government was also very high at Bt3,300 a tonne, while private exporters would spend only Bt1,000 to manage a tonne of rice before shipment. Although the price of Thai rice had been cut, Thailand faced difficulty selling it overseas and competing with rivals. This was because overseas traders knew Thai rice was being stored in enormous amounts and continued to deteriorate in quality as the pledging method has gone on, he said.

Legal woes mount

National Anti-Corruption Commission member Vicha Mahakhun said yesterday that the NACC had accepted a complaint against Deputy Prime Minister Kittiratt Na-Ranong and former commerce minister Boonsong Teriyapirom lodged recently by Pridiyathorn Devakula over their alleged roles in assigning ailing firm Siam Indica to benefit unfairly from the rice-pledging scheme.


-- The Nation 2013-10-16

[Thai at Heart]

A high school economist could have predicted this. In fact a farmer from any rural part of Europe knew this would happen... Takes Thai experts to work this out?

[apetley]

The Democrats had a direct to farmer scheme, which worked well according to my Thai father in law.

[dcutman]

Instead of spending a huge amount for the rice subsidy, it should finance long-term development projects such as irrigation systems, logistics, seed quality and research.

Infrastructure and research to help farmers? Gee, just think how happy farmers would be if their yields increased by 50%, and using less chemicals to do it.

[robertson468]

Reading this article, one can only think of gross mismanagement and malpractice and one has to wonder why this is not being investigated at the highest level. If found to be true, one would expect it to be a fatal blow to the Government and possible dissolution of Parliament. Surely (no not Shirley), I am not the only one thinking this? Anyone have any inside information on what, if anything is being done about it? One would have thought that the Democrats would have been all over this like a swarm of bees!

[indyuk]

Instead of spending a huge amount for the rice subsidy, it should finance long-term development projects such as irrigation systems, logistics, seed quality and research.

Infrastructure and research to help farmers? Gee, just think how happy farmers would be if their yields increased by 50%, and using less chemicals to do it.

You raise good ideas. However These initiatives intended to improve the lot the rice industry and rice farmers has already been done by previous Thai governments and also by international agricultural organisations.

[shaurene]

I just read on the Bloomberg program that the Thai rice stock has caused a world glut, so only one way for the rice price to go.

It has been proved so many times a government of companies cannot control a world commodity. But the inexperience of Thai ministers think other wise. Like the 2 American brothers few years back tried to buy most of the world supply of silver and went bust, good.

[ratcatcher]

Reading this article, one can only think of gross mismanagement and malpractice and one has to wonder why this is not being investigated at the highest level. If found to be true, one would expect it to be a fatal blow to the Government and possible dissolution of Parliament. Surely (no not Shirley), I am not the only one thinking this? Anyone have any inside information on what, if anything is being done about it? One would have thought that the Democrats would have been all over this like a swarm of bees!

You make valid points and no, you're not the only one thinking this.

But with this government, any investigations at 'the highest level' would be akin to Al Capone investigating the IRS.

As for the Democrats, the sting seems to have gone out of their tail (if there ever was one).

[ratcatcher]

I just read on the Bloomberg program that the Thai rice stock has caused a world glut, so only one way for the rice price to go.

It has been proved so many times a government of companies cannot control a world commodity. But the inexperience of Thai ministers think other wise. Like the 2 American brothers few years back tried to buy most of the world supply of silver and went bust, good.

It isn't "the inexperience of Thai ministers" so much as the overweening arrogance of one man.

[Nickymaster]

What a corrupt mess this government. Makes me sick if I think about how they are cheating the Thai people.

[siampolee]

The Democrats had a direct to farmer scheme, which worked well according to my Thai father in law.

It did work well and the monies reached the target i.e. the farmers .my family got their payments without any problems at all.

[dcutman]

Instead of spending a huge amount for the rice subsidy, it should finance long-term development projects such as irrigation systems, logistics, seed quality and research.

Infrastructure and research to help farmers? Gee, just think how happy farmers would be if their yields increased by 50%, and using less chemicals to do it.

You raise good ideas. However These initiatives intended to improve the lot the rice industry and rice farmers has already been done by previous Thai governments and also by international agricultural organisations.

They have?

The last time I looked, Thai rice farmers have some of the lowest yields out of all rice producing countries.

[Traveling Sailor]

A high school economist could have predicted this. In fact a farmer from any rural part of Europe knew this would happen... Takes Thai experts to work this out?

This seems to be because of the Thai education system. Only the Thai experts seem to have the ability to think critically, whereas Thai farmers and politicians cannot think as well as the average farmer in Europe or America.