Kittirat brushes aside IMF's suggestions

[Arkady]

The rice program was proposed and promised prior to the last election as a vote buying/populist carrot, for the vote in specific areas. After the fact (election won) the current program itself was implemented with the result being a massive graft of funds, the rice farmer getting about 10% more for his rice crop than under the old rice program which cost the taxpayer a pittance. compared to this one. The present government has implemented several other farm subsidies (rice, milk, corn, palm oil, etc) and they all have the common practice of the funds going thru several hands before the farmer receives a single bhat.

When you digest what the government says is in storage (rice) 10.5 million tons, amount repaid to the Ag bank, 140 billion baht, then do a little subtracting from the 600 billion investment (itsbee gone for 10 months), and just for grins add in monthly storage fees, grain losses as allowed by the government (15% just in transport), flood damage, fire damage, etc and you will find a staggering figure, to buy vote from/help 2.2 million+_ rice farmers.

According to TDRI the poorest 40% of farmers have no rice to pledge because they only produce enough rice for their own needs. 50% are well enough off not to need help, leaving 10% who need this scheme and can benefit from it. Of those, very few get full value because the millers fraudulently calibrate the equipment that measures moisture or farmers can't wait for days in the queue or pay others to wait for them or whatever. Meanwhile the millers, government officials, politicians etc are making billions from pledging rice in the names of poor farmers who had none to sell or couldn't wait, chiseling farmers on the moisture content, pledging rice smuggled from Laos, Cambodia and Burma etc. Meanwhile more money is made by privileged rice traders who export the govt's rice at a huge loss to other crooked third world govts funneling some of the purchase price offshore. They have created a huge gravy train with so many bloated pigs' snouts at the trough that they don't dare switch it off. If you have to hollow out the nation's finances to such a staggering extent to make people love you, is that real love. Eva Peron here we come. It will surely end in tears.

The other side of the coin is that virtually nothing is being spent on improving productivity of farmers through better strains of rice, better farming methods, better irrigation or organic fertiliser and pesticide. In fact the govt bans many organic products just to support the petrochemicals industry. Marginal rice farmers who should either be encouraged to grow something else or being taught a new trade are all incentivised to produced as much poor quality rice as they can. There is nothing about sustainability or improving competitiveness. The policy guarantees that farmers remain poor, while the fat pigs get fatter.

[Arkady]

The IMF report seems to have been written by distinguished economists after detailed research on the ground and review of the latest data at the time which was largely the 2nd quarter GDP numbers. They also have access to the economics research of their parent company, The World Bank, which maintains an office in Bangkok with highly trained Thai and foreign economists. For someone with no formal training in economics and only an MBA from a Thai university to criticize the report as as lacking a fundamental understanding of the Thai economy and being based on old data without even bothering to read the report is an insult to the Thai taxpayers who pay his salary. It is reminiscent of the morons at the Bank of Thailand who criticized foreign economists warning of a financial meltdown in 1996, the year before the meltdown occurred. Thailand is actually a rather small economy that is quite easy to understand and being born and brought up in Thailand is not a prerequisite.

The report actually seems rather mild and polite in criticizing the shortcomings of economic policy. Saying that direct assistance to farmers who are really in need with an emphasis on education to improve employment prospects and that the massive losses will strain confidence in Thailand's public finances is an understatement.

As I pointed out in a previous post, it appears to me that Kittirat wasn't responding to what the IMF actually said, but rather to a reporter's apparently erroneous description of what the report recommended. He's actually in no disagreement with the IMF on the interest rate/inflation issue. If you read the article carefully and compare with what the IMF report actually says, you'll probably come to the same conclusion.

Regards replacing the rice scheme with direct assistance, all he said was that it'd have to be studied first, which is perfectly true... I don't think the guy is a particularly brilliant FM but the criticism he's getting for his comments in this specific case seem to be unfair. Also think it's worth bearing in mind re your comments about 'foreign economists' & 1997, that countries post-crisis who ignored the IMF recommendations and 'structural adjustment packages' recovered faster than those that implemented the reforms fully. Which proves that it *is* sometimes better to ignore foreign economists. The IMF seems to have changed for the better now though, less beholden to neoliberal dogma than it was in the 90s/00s.

Maybe his comments were indeed taken slightly lout of context in this instance but he has, nevertheless, been an aggressive proponent of this hugely ruinous rice pledging scheme all along and in that sense has brought the criticism on himself.

The predictions of financial meltdown in 1996 didn't come from the IMF or World Bank. They came from the private sector. One very big call from Dr Jim Walker, regional economist of CLSA who was accused of looking at out-of-date data by smug Bank of Thailand officials in a similar vein to Kittirat. They invited him to the central bank and claimed they had shown him the correct data and that everything would thenceforward be OK, although Walker didn't change his view. Another whistle blower in 1996 was Ted Bardake of The Financial Times who had previously been made persona non grata in Mexico for correctly predicting the tesabono crisis there. Bardake quoted Bantoon the president of KBANK saying that Thai banks NPLs were much worse than reported and that a crisis was imminent. It created such an uproar that Bantoon was forced to retract his statement, saying it was a misquote, despite Bardake's insistence he had recorded the interview, and the Thai financial system rocketed on towards the brick wall unchecked.

For countries that needed an IMF bail out in 1997 -98 there wasn't an option to ignore the structural reform requirements. No one else offered to help Thailand and the baht hit 55 to the dollar before the IMF came in. Thailand could have let the currency remain in free fall and defaulted on most of it public and private sector debt by not taking the IMF loans but it is likely that it would have taken much longer to recover. Yes, the excessive tightening of liquidity by the IMF was a mistake based on what had been necessary in hyperinflationary environments in Latin America and Africa in the 70s and 80s and, as you say, they acknowledge that now. Countries that were able to ignore IMF suggestions, such as Malaysia, didn't have such a massive problem as Thailand, Indonesia and Korea. Malaysia a lot of domestic debt but no real problem with external debt which gave them a lot of flexibility to try alternative methods like exchange controls without needing to borrow from the IMF. It is hard to say they could have made a relatively quick recovery without an IMF bail out, if they had been in the same deep sh*t with external debt as the other three.

[moe666]

As the rice scam doesn't help the poor farmer but continues to pump money into the coffers of the rich farmer and the millers not that many people would complain about its demise least of all the ones they say they help but donot

Edited November 17, 2013 by moe666