Thai rice pledge scheme: Who should we trust - economist, accountant or politician?

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THAI TALK
Rice pledge scheme: Who should we trust - economist, accountant or politician?
Suthichai Yoon
The Nation


Former deputy premier and finance minister MR Pridiyathorn Devakul

So, what's the estimated loss the government will incur from the controversial rice price-pledging scheme?

BANGKOK: -- Former deputy premier and finance minister MR Pridiyathorn Devakul predicts the loss will be in the range of Bt200 billion a year.

No, says Deputy Premier and Commerce Minister Niwatthamrong Boonsongpaisarn, that figure is far too high. A "reasonable estimate" of the deficit would be around Bt100 billion annually, he says.

Finance Minister Kittiratt Na Ranong suggested that Pridiyathorn's assessment of total losses of Bt425 billion was a "misunderstanding".

That, the minister said, was due to the fact that some economists simply don't understanding accounting.

"Some economists might not appreciate the difference between accounting loss and the real loss on this project," Kittiratt said. "And when they produce these numbers for the public, they can create the wrong kinds of perceptions."

Of course Pridiyathorn did study accounting - and did quite well at that. The discrepancy has nothing to do with one's knowledge of accounting. It's based on the fact that the government and its critics were using two different sets of rice prices: One was based on the purchase price of paddy at Bt15,000 per tonne (or Bt24,000 per tonne of milled rice) while the other was calculating the loss on the basis of the market price.

That's why both can claim the other side was wrong. As far as accounting is concerned, they were on different pages and talking at cross-purposes. Technically, both sides might be right. Politically, only one party can convince the public that it's telling the truth.

If one was running a private company listed on the stock market and under the shareholders' constant scrutiny, the profit-and-loss account must necessarily be based on the market price so that management can make plans for "real losses" and not "paper losses".

If the government was to be up front with the public, it could offer both the accounting loss and the real deficit so that the taxpayers could determine for themselves how big of a financial burden they consider acceptable.

In accounting terms, this is called "lower of cost or market" (LCM), or replacement cost. It's known as a "conservatism principle", which means you don't attempt any of the "creative accounting" that politicians favour but which can wreak havoc on the real bottom line - the country's coffers.

The politicians were obviously embarrassed by the professional accountants at the Finance Ministry in charge of "closing the books" on the rice price-pledging project. This particular working group was headed by a tough, professional accountant, Supa Piyachitti, who was rightly determined to tell it like it was.

Supa reported that the first two harvests saw the government lose Bt136.89 billion, based on the market price at the time. Her political bosses were furious and initially refused to accept the number. Under great public pressure, though, the ministry's chiefs had to grudgingly take that number as the official statement. Since the price of rice has since been on a downward trend, it's likely that, if the books were revised today, the size of the deficit would be even greater.

Then there are the stories flying around that the Commerce Ministry has been selling rice stocks at even lower prices to certain groups of traders. This has fuelled speculation that the government's bottom line in this case could be even worse, as much as 30 per cent lower than the already low level of revenue.

Is that why we taxpayers haven't been shown the real "income statement" and "profit-and-loss accounts" of this scheme that has been the subject of heated debate? Is this why all the talk about government-to-government deals and memoranda of understanding with this and that government has not been substantiated with transparent disclosure of details pertaining to the supposed contracts?

It has come to a point where it's not clear who is the taxpayer's worst enemy: the economist, the accountant or the politician.


-- The Nation 2013-11-21

[waza]

"It has come to a point where it's not clear who is the taxpayer's worst enemy: the economist, the accountant or the politician."

Obviously the taxpayer's worst enemy is the politicians who implemented and perpetuate this financial black hole and muddy the water so their deception is veiled.

Edited November 20, 2013 by waza

[Ricardo]

Good for Khun Supa, sticking to her guns, and telling it how it really is,regardless of the pressure to 'cook the books'.

Also a shame that the government have tried to hide the truth, about how much the scheme has really cost, the taxpayer is entitled to know the full truth !

Posters on ThaiVisa have been warning about the attempted cover-up, as various versions of the news slowly trickled out, for years !

[NongKhaiKid]

Who should we trust ? If the title has the word Thai in front...!

[ramrod711]

Farmers are not paid yet for their rice sales

I'm fairly sure it isn't economists that haven't paid these people.

[Tatsujin]

Rice pledge scheme: Who should we trust - economist, accountant or politician?

That's an easy one to answer. None, They're all liars, cheats and thieves.

And yes, I do love to tar everyone with the same brush and overgeneralize.

[chooka]

NOBODY.....

[moe666]

Who cares in the end the tax payer will have to pay what ever the price and none of the politicians involved will be brought before a court of justice

[Thainy Tim]

I would say the cost is far greater than baht value.

After all, this scheme has been nothing more than a vote buying scam that utilizes the tax payer to foot bill. If you are going to buy votes Thaksin, at least use your own money to do it.

This bunch of losers have damaged this country in so many ways during its short term in office, they are abusing their power, stealing money from every direction, attempting to hijack the senate as its lapdog, meddling with the constitution and attempting to saddle the country with 5 trillion worth of debt that has to be paid back by future generations.

That is the true cost of the rice pledging scheme.... and still it rolls on.

[Artisi]

200M or 100M loss per year, doesn't make much difference to the fact that the fugitive lead screw-up shouldn't go unpunished, heads should roll starting from the top and with another charge levelled at the fugitive as it is surely at his directions. I'm sure the likes of Tarit, the expert in all things pertaining to Thai law or his own modification of the law could come up with something creative.

[Pib]

Rice pledge scheme: Who should we trust - economist, accountant or politician?

Surely the article's author jests when he includes "politician" in the headline. Why a politician would probably have a stroke if telling the whole truth.

[Local Drunk]

Economist don't understand accounting cooking the books the way politicians do.

[GentlemanJim]

Finance Minister Kittiratt Na Ranong suggested that Pridiyathorn's assessment of total losses of Bt425 billion was a "misunderstanding".

That, the minister said, was due to the fact that some economists simply don't understanding accounting.

That should have Moody's laughing all the way to the 'Down grade Committee meeting!

[bigbamboo]

'Who should we trust..... economist, accountant or politician?'

Jeez, talk about Hobson's choice. Throw in policeman and jet ski operator and you've got a full house!

Suddenly a visit to the fortune teller doesn't seem such a bad idea after all.

[Baerboxer]

Some of the 2.2 trillion will be used to finance this and keep the gravy flowing. The rice can be sold off at lower than market price, which means all the talk will be about volumes and nothing will be mentioned about profit and loss. Thailand will be hailed as the number one rice exporter again, purely based on volume. No details of losses will be allowed to emerge. Every body "happy" - apart from the tax payers whose money has been lost. But as they'll be told its all a great success, they won't be worried and certainly not allowed to ask questions. If the whitewash gets rammed through, the boss will claim this as a success when he's back.

Yeh for PTP financial genius and creative accounting ! Thailand is different alright !

[mikebell]

200M or 100M loss per year, doesn't make much difference to the fact that the fugitive lead screw-up shouldn't go unpunished, heads should roll starting from the top and with another charge levelled at the fugitive as it is surely at his directions. I'm sure the likes of Tarit, the expert in all things pertaining to Thai law or his own modification of the law could come up with something creative.

200 or 100 million is a huge sum BUT we are talking billions. What a difference a letter makes!

[bigbamboo]

Maybe Kittikat should go back to managing the Thai national football team.

Or maybe not. He was crap at that too.

[Artisi]

200M or 100M loss per year, doesn't make much difference to the fact that the fugitive lead screw-up shouldn't go unpunished, heads should roll starting from the top and with another charge levelled at the fugitive as it is surely at his directions. I'm sure the likes of Tarit, the expert in all things pertaining to Thai law or his own modification of the law could come up with something creative.

200 or 100 million is a huge sum BUT we are talking billions. What a difference a letter makes!

Oop's however, whether it was Bht1 or Bht200B, doesn't change the fact it was undertaken for one purpose and one person only.

Edited November 21, 2013 by Artisi

[Thakkar]

I suppose we should see it as progress of sorts that the debate has now shifted from whether it was a successful scheme to whether the the losses are in the OMFG!! hundreds of billions or just the OMG! hundreds of billions.

T

[Loles]

You should believe to the world market and not to any idiot.

[Ulic]

Politicians lie like a rug, accountants cook the books, and economists can be found to predict anything

you want them to. You need to listen to everyone, but understand they may have an agenda. After reading

or listening to many points of view you will know the answer if you just use common sense.(which is rarely common)

So listening to the points from economists, world trade organizations, etc.... of course this rice scheme is

a big looser for the Thai people. From one side saying they will drive up the price of rice and make the farmers

more money and the rice pledging scheme will not loose any money to it will only loose a little money to it will

loose money but not as much as the opposition and international economists say... So my thought is the loss is

equal to the amount they put into the scheme. As rice is sold and money is put back into the scheme it is a little

less. Over time this is whittled away till all the money is gone and the program needs to be topped up. As farmers

have not been paid yet this year the money is finished and the program needs to be topped up. The only asset is

the rice.If you listen to one side there is 7 million tonnes the other says 18 million tonnes. The funny thing is the

less rice the bigger the loss so the government would be in a better position asset wise if it was 18 vs 7 but

politically 7 vs 18. The rice is a depreciating asset as it slowly spoils or is eaten by rats/mice etc...

It will all come out in the wash but it will take years and be covered up as much as possible.

[Ricardo]

Rice pledge scheme: Who should we trust - economist, accountant or politician ?

Answer ... None of the Above, but a Golf-Caddy in the Middle-East !