Thai rice-pledging schemes cause 682 billion baht loss

[EnglishJohn]

There are Yellows here stating just outrageous figures of one trillion baht yesterday. Hope they come out today to explain the difference.

"However, the losses exclude the results of the inspection of the quality of rice in the state's inventory, about 19.2 million tonnes worth about Bt225 billion."

Assuming the rest is more or less rotten as the reports conclude, that makes over 900 billion.

Close enough ? - are you going to bicker some more over the huge loss (regardless of 6,7,8 or 900 billion) or are you going to keep quiet and hang your head in shame for defending it (like you should) ???.

[Nickymaster]

So Yingluck has managed to create a loss of over 4 BILLION USD per crop. Simply astonishing.

[northernjohn]

Before someone accuses me of being pro-Thaksin, I point out that I have been an advisor to the Democrats for 30 years. The author of the report produced by the Democrats on the losses of the Rice Subsidy Scheme is the son of a friend or mine. However, I point out that the report is one sided political propaganda it does not apportion any losses at all to the Democrats who started the vote buying scheme ran the rice pedging scheme at a loss for two years. For the 2011 election the Dems offered originally B11,000/tonnes whilst the farmers demanded B14,000/tonne. Phue Thai offered B15,000/tonne and were duly elected. Both the Dems and PTP schemes ould have made losses. The pie chart in the Nation article tries to apportion all losses to PTP and not to the schemes ran by the Dems, and other Goverments in power between 2004 and 2011. The article in the Bangkok Post is unbiased.

For a start the rice schemes were designed to subsidise the farmers and therefore designed to make a loss. From 2004 until 2007 the price of the rice bought by the program increased by a whopping 300% due to speculation in the commodity markets. This windfall profit therefore is the reason that the previous governments only lost 163Billion Baht. Had there not have been speculators gambling on the commodity markets, then the loss ot the previous Governments would have been similar to the current loss. It should also be realised that the currrent dumping of Thai stockpiled rice on the world market has reduced the selling price by a further 37% which has caused a further loss.

Let me get this right. It was only by shear luck that the previous Thaksin governments did not run up the losses the size this one did.

Now under the Dems plan there would have been a 4,000 baht per ton offer. Under the PTP scam. There was a 15,000 baht offer when all the farmers where asking for was 14,000 baht per ton. that seems to me to be an offer to not subsidize but to increase the profits of the rice growers who of course being given more than they needed (a free lunch) jumped at it.

Yes I agree that the subsidy plans are known to be money losers to the Government but do you not find it strange that when the farmer says 14,000 baht a ton will suffice the government offers 15,000 baht a ton. Where was the tax payer considered in that scam?

Have you noticed that with out the 15,000 guaranteed baht per ton the rice farmers are growing rice rather than congregating in Bangkok demanding their money.

[Nickymaster]

Before someone accuses me of being pro-Thaksin, I point out that I have been an advisor to the Democrats for 30 years. The author of the report produced by the Democrats on the losses of the Rice Subsidy Scheme is the son of a friend or mine. However, I point out that the report is one sided political propaganda it does not apportion any losses at all to the Democrats who started the vote buying scheme ran the rice pedging scheme at a loss for two years. For the 2011 election the Dems offered originally B11,000/tonnes whilst the farmers demanded B14,000/tonne. Phue Thai offered B15,000/tonne and were duly elected. Both the Dems and PTP schemes ould have made losses. The pie chart in the Nation article tries to apportion all losses to PTP and not to the schemes ran by the Dems, and other Goverments in power between 2004 and 2011. The article in the Bangkok Post is unbiased.

For a start the rice schemes were designed to subsidise the farmers and therefore designed to make a loss. From 2004 until 2007 the price of the rice bought by the program increased by a whopping 300% due to speculation in the commodity markets. This windfall profit therefore is the reason that the previous governments only lost 163Billion Baht. Had there not have been speculators gambling on the commodity markets, then the loss ot the previous Governments would have been similar to the current loss. It should also be realised that the currrent dumping of Thai stockpiled rice on the world market has reduced the selling price by a further 37% which has caused a further loss.

You have been an advisor to the Dems for 30 years. Are you still an advisor today? If not, when did you end your advisory role? Please tell me a bit more about this advisory role.

Very strange what is going on here. You sort of criticize the Dems and protect PT.

[gemini81]

Before someone accuses me of being pro-Thaksin, I point out that I have been an advisor to the Democrats for 30 years. The author of the report produced by the Democrats on the losses of the Rice Subsidy Scheme is the son of a friend or mine. However, I point out that the report is one sided political propaganda it does not apportion any losses at all to the Democrats who started the vote buying scheme ran the rice pedging scheme at a loss for two years. For the 2011 election the Dems offered originally B11,000/tonnes whilst the farmers demanded B14,000/tonne. Phue Thai offered B15,000/tonne and were duly elected. Both the Dems and PTP schemes ould have made losses. The pie chart in the Nation article tries to apportion all losses to PTP and not to the schemes ran by the Dems, and other Goverments in power between 2004 and 2011. The article in the Bangkok Post is unbiased.

For a start the rice schemes were designed to subsidise the farmers and therefore designed to make a loss. From 2004 until 2007 the price of the rice bought by the program increased by a whopping 300% due to speculation in the commodity markets. This windfall profit therefore is the reason that the previous governments only lost 163Billion Baht. Had there not have been speculators gambling on the commodity markets, then the loss ot the previous Governments would have been similar to the current loss. It should also be realised that the currrent dumping of Thai stockpiled rice on the world market has reduced the selling price by a further 37% which has caused a further loss.

LOL!

[Nickymaster]

Before someone accuses me of being pro-Thaksin, I point out that I have been an advisor to the Democrats for 30 years. The author of the report produced by the Democrats on the losses of the Rice Subsidy Scheme is the son of a friend or mine. However, I point out that the report is one sided political propaganda it does not apportion any losses at all to the Democrats who started the vote buying scheme ran the rice pedging scheme at a loss for two years. For the 2011 election the Dems offered originally B11,000/tonnes whilst the farmers demanded B14,000/tonne. Phue Thai offered B15,000/tonne and were duly elected. Both the Dems and PTP schemes ould have made losses. The pie chart in the Nation article tries to apportion all losses to PTP and not to the schemes ran by the Dems, and other Goverments in power between 2004 and 2011. The article in the Bangkok Post is unbiased.

For a start the rice schemes were designed to subsidise the farmers and therefore designed to make a loss. From 2004 until 2007 the price of the rice bought by the program increased by a whopping 300% due to speculation in the commodity markets. This windfall profit therefore is the reason that the previous governments only lost 163Billion Baht. Had there not have been speculators gambling on the commodity markets, then the loss ot the previous Governments would have been similar to the current loss. It should also be realised that the currrent dumping of Thai stockpiled rice on the world market has reduced the selling price by a further 37% which has caused a further loss.

“If we manipulate the mechanism for two years, three years, then things will be moving naturally,” Thaksin, who was ousted in a 2006 coup and has lived overseas since fleeing a 2008 jail sentence, said in Singapore today. “The rice price in the world market is increasing.”

http://www.bloomberg.com/news/2012-09-24/thai-rice-policy-should-stay-several-more-years-thaksin-says.html

But Thaksin advisers said that withdrawing rice from world markets in this way would force up the price. Since Thailand was the world’s biggest exporter, the government would be able to cash in later by selling its stockpiles of grain at a profit. So much for the weird theory. In practice, other countries have undercut Thailand, whose exports have tumbled (by about 4m tonnes, or a third, in the first full year of the subsidy scheme).

http://www.economist.com/news/asia/21583281-increasingly-unpopular-government-sticks-its-worst-and-most-costly-policy-rice-mountain

Edited November 14, 2014 by Nickymaster

[than]

Well PT and YL continue to affirm there was not problem with their scheme...............

It's time for them to leave thai politics for good !

[Thai at Heart]

Why is there no investigation of people involved in rice whose bank accounts have become swollen in the past 4 years eg millers, brokers and price setters. $25 billion US or so has gone missing, the farmers got nothing but someone did....given the huge amount of money and the limited number of participants it should not be difficult to find a group of people whose net worth has increased massively in the past 4 years.

If I pay a Thai person 100 baht for something but its current value is only 70 baht, from the perspective of a country, where is the loss.

Someone got paid 100 baht

[Thai at Heart]

Before someone accuses me of being pro-Thaksin, I point out that I have been an advisor to the Democrats for 30 years. The author of the report produced by the Democrats on the losses of the Rice Subsidy Scheme is the son of a friend or mine. However, I point out that the report is one sided political propaganda it does not apportion any losses at all to the Democrats who started the vote buying scheme ran the rice pedging scheme at a loss for two years. For the 2011 election the Dems offered originally B11,000/tonnes whilst the farmers demanded B14,000/tonne. Phue Thai offered B15,000/tonne and were duly elected. Both the Dems and PTP schemes ould have made losses. The pie chart in the Nation article tries to apportion all losses to PTP and not to the schemes ran by the Dems, and other Goverments in power between 2004 and 2011. The article in the Bangkok Post is unbiased.

For a start the rice schemes were designed to subsidise the farmers and therefore designed to make a loss. From 2004 until 2007 the price of the rice bought by the program increased by a whopping 300% due to speculation in the commodity markets. This windfall profit therefore is the reason that the previous governments only lost 163Billion Baht. Had there not have been speculators gambling on the commodity markets, then the loss ot the previous Governments would have been similar to the current loss. It should also be realised that the currrent dumping of Thai stockpiled rice on the world market has reduced the selling price by a further 37% which has caused a further loss.

If we manipulate the mechanism for two years, three years, then things will be moving naturally, Thaksin, who was ousted in a 2006 coup and has lived overseas since fleeing a 2008 jail sentence, said in Singapore today. The rice price in the world market is increasing.

http://www.bloomberg.com/news/2012-09-24/thai-rice-policy-should-stay-several-more-years-thaksin-says.html

But Thaksin advisers said that withdrawing rice from world markets in this way would force up the price. Since Thailand was the worlds biggest exporter, the government would be able to cash in later by selling its stockpiles of grain at a profit. So much for the weird theory. In practice, other countries have undercut Thailand, whose exports have tumbled (by about 4m tonnes, or a third, in the first full year of the subsidy scheme).

http://www.economist.com/news/asia/21583281-increasingly-unpopular-government-sticks-its-worst-and-most-costly-policy-rice-mountain

From an economic perspective, he should have burnt the rice in order to push up the price. Or he could have paid all the ageing farmers to sit around and do nothing thus shortening the market.

His attitude was that of a typical Thai Chinese monopolist. Can't think where he learnt that having run AIS

[JOC]

Why is there no investigation of people involved in rice whose bank accounts have become swollen in the past 4 years eg millers, brokers and price setters. $25 billion US or so has gone missing, the farmers got nothing but someone did....given the huge amount of money and the limited number of participants it should not be difficult to find a group of people whose net worth has increased massively in the past 4 years.

If I pay a Thai person 100 baht for something but its current value is only 70 baht, from the perspective of a country, where is the loss.

Someone got paid 100 baht

The loss is created by you stealing the 100 baht from your grandchildrens piggybank!!

[Thai at Heart]

Why is there no investigation of people involved in rice whose bank accounts have become swollen in the past 4 years eg millers, brokers and price setters. $25 billion US or so has gone missing, the farmers got nothing but someone did....given the huge amount of money and the limited number of participants it should not be difficult to find a group of people whose net worth has increased massively in the past 4 years.

If I pay a Thai person 100 baht for something but its current value is only 70 baht, from the perspective of a country, where is the loss.

Someone got paid 100 baht

The loss is created by you stealing the 100 baht from your grandchildrens piggybank!!

Ah but, the govt left a big fat IOU in the tin. Normally, soveriegn govts are good for it.

[JOC]

Why is there no investigation of people involved in rice whose bank accounts have become swollen in the past 4 years eg millers, brokers and price setters. $25 billion US or so has gone missing, the farmers got nothing but someone did....given the huge amount of money and the limited number of participants it should not be difficult to find a group of people whose net worth has increased massively in the past 4 years.

If I pay a Thai person 100 baht for something but its current value is only 70 baht, from the perspective of a country, where is the loss.

Someone got paid 100 baht

The loss is created by you stealing the 100 baht from your grandchildrens piggybank!!

Ah but, the govt left a big fat IOU in the tin. Normally, soveriegn govts are good for it.

So according to you, it is okay for any future governments to go ahead with whatever stupid schemes/scams, because there is still money left in the tin?? No accountability to anyone, because "we can afford it" ?

But the big question here is not the amount, that in government economic terms really isn't that big, but what happened to the money?

If the payments had actually ended in the pockets of the ricefarmers, I think that most of us would have accepted it to a greater extent!!

[SOTIRIOS]

...yet it appears that nobody will be held accountable......

[Thai at Heart]

Why is there no investigation of people involved in rice whose bank accounts have become swollen in the past 4 years eg millers, brokers and price setters. $25 billion US or so has gone missing, the farmers got nothing but someone did....given the huge amount of money and the limited number of participants it should not be difficult to find a group of people whose net worth has increased massively in the past 4 years.

I don't see what is illegal for a miller to make a profit for milling rice, nor brokers for selling it.

They do this as a matter of normal business. The losses can be virtually all attributed to the system itself, without there being any actual theft.....

[Robby nz]

Before someone accuses me of being pro-Thaksin, I point out that I have been an advisor to the Democrats for 30 years. The author of the report produced by the Democrats on the losses of the Rice Subsidy Scheme is the son of a friend or mine. However, I point out that the report is one sided political propaganda it does not apportion any losses at all to the Democrats who started the vote buying scheme ran the rice pedging scheme at a loss for two years. For the 2011 election the Dems offered originally B11,000/tonnes whilst the farmers demanded B14,000/tonne. Phue Thai offered B15,000/tonne and were duly elected. Both the Dems and PTP schemes ould have made losses. The pie chart in the Nation article tries to apportion all losses to PTP and not to the schemes ran by the Dems, and other Goverments in power between 2004 and 2011. The article in the Bangkok Post is unbiased.

For a start the rice schemes were designed to subsidise the farmers and therefore designed to make a loss. From 2004 until 2007 the price of the rice bought by the program increased by a whopping 300% due to speculation in the commodity markets. This windfall profit therefore is the reason that the previous governments only lost 163Billion Baht. Had there not have been speculators gambling on the commodity markets, then the loss ot the previous Governments would have been similar to the current loss. It should also be realised that the currrent dumping of Thai stockpiled rice on the world market has reduced the selling price by a further 37% which has caused a further loss.

You have that very wrong. The Dems scheme was a direct subsidy paid to the farmers and included in the budget.

While both the Thaksin and Yingluck schemes were touted as revolving funds that were outside budget and would in the future run at a profit and not at any time said to be a subsidy.

Sure the Dems subsidy ran at a loss but it was designed that way and was, as I said, included in the budget.

While the Thaksin and Yingluck schemes were supposed to be self funding and indeed profit making.

The Dems subsidy would not be included because it was a budget item and paid out of normal budget.

[Thai at Heart]

So according to you, it is okay for any future governments to go ahead with whatever stupid schemes/scams, because there is still money left in the tin?? No accountability to anyone, because "we can afford it" ?

But the big question here is not the amount, that in government economic terms really isn't that big, but what happened to the money?

If the payments had actually ended in the pockets of the ricefarmers, I think that most of us would have accepted it to a greater extent!!

Well, now you get to economic disussion about government spending.

Obama bailed out the USA car industry at enormous cost, but it kept hundreds of thousands in jobs. Many countries subsidize all sorts of things, so the debate is valid. Every country around of significance is running a deficit, and yet they still subsidize things. They are writing IOUs for future generations left right and centre. We have seen more polticians spending money on apparenlty stupid things in the last 7 or 8 years than probably ever before. Baling out this, and baling out that. THe issue is whether you sit on the Fox news side of govt, or the left wing to decide whether you believe it was worth while.

So, the issue as you say, isn't the amount of money, but how efffective was it at putting money in people's hands and how much did it boost the economy. If, the money hadn't been put into the economy, there would have been a requisite drop in GDP which would have had to be made up somewhere else. So the issue isn't the cost or the loss from a political economic question.

They could equally have given every civil servant a bonus over a 3 year period which have easily eaten up the same amount of money. This system put a monstrous amount of money into the rural economy beyond what would have gone out there if there had been no intervention at all. Who knows, maybe thousands of of farmers would have starved without this extra money. As for accountability. Lets not bother to debate that at a time when the country is being run by a junta put in by a coup, who basically ring fence their budgets and buy stupid things like aircraft carriers, and are in the market for a submarine. That is a level of accountablity unheard of in Thailand.

What happened to the money, 8 to 12k per tonne went to a farmer or middle men in between, it got milled, it got bagged, it got stored, some got shipped, some didnt. All paid for into the Thai economy, and the stuff now sits on teh books at lets say 15k to 25k, with a sale price of between 9 to 17k depending on variety.

Some money got spent by farmers because they got it, some money got spent by rice millers, some got spent by people who supply rice sacks. etc etc. Some got saved. Believe me, it bought a lot of Mercs and BMWs

[maidee]

and off course, nobody will be acountable or go to jail ...

[Robespiere]

So policies that result in government expenditure ending up in the pockets of the poor are deemed losses?

The big bag of money has to stay in Bangkok or else there'll be a coup.

[rubl]

Subsidies are by definition expenses. The money doesn't get burned, it goes into the local economy. TDRI seems to ignore that fact.

2.4 trillion baht being spent on rail/infrastructure is also a subsidy.

Questions on that? No. And why not?

Agree, subsidies cost money, some even a lot of money.

Mind you here we discuss the RPPS (i.e. Rice Price Pledging Scheme) which the Yingluck Government positioned as 'self-financing' scheme which didin't require allocation in the National Budget, but just a 500 billion Baht 'revolving funds' to pay out from it, put back from rice sales revenue.

The rail/infrastructure project which is to be financed from reservations in eights years of National Budgets (so actually from government income like taxes). This type of activity is normally not really seen as subsidy, but improving the country in general. Unlike farming subsidies, with the infrastructure projects we 'have' something, tracks, roads, opportunities. Of course you might say those involved in building profit as this is a slack time, but for those companies involved the revenue should be just on a normal level (i.e. real costs plus some margin as business need).

[rubl]

So policies that result in government expenditure ending up in the pockets of the poor are deemed losses?

The big bag of money has to stay in Bangkok or else there'll be a coup.

So, hand-outs for the poor and not reaching them are to be preferred to infrastructure projects which generate work and income two times, while building and while using when finished?

I think it is to be preferred the government spent 682 billion Baht on infrastructure projects (like the planned dual track 160km/h rail links) covering 'upcountry' that would be better than 'losing' the same amount with poor still poor and neither population nor country being able to profit from the investment for a long time.

[fab4]

So policies that result in government expenditure ending up in the pockets of the poor are deemed losses?

The big bag of money has to stay in Bangkok or else there'll be a coup.

So, hand-outs for the poor and not reaching them are to be preferred to infrastructure projects which generate work and income two times, while building and while using when finished?

I think it is to be preferred the government spent 682 billion Baht on infrastructure projects (like the planned dual track 160km/h rail links) covering 'upcountry' that would be better than 'losing' the same amount with poor still poor and neither population nor country being able to profit from the investment for a long time.

That's strange, I could have sworn that had it not been for the Dems, PDRC and certain backers there would have been 2 Trillion baht spent on Infrastructure projects independent of, and in addition to the Rice Subsidy Scheme, so your "argument", such as it is, being based on a non existent either / or hypothesis, is irrelevant.

Edited November 15, 2014 by fab4

[rubl]

So policies that result in government expenditure ending up in the pockets of the poor are deemed losses?

The big bag of money has to stay in Bangkok or else there'll be a coup.

So, hand-outs for the poor and not reaching them are to be preferred to infrastructure projects which generate work and income two times, while building and while using when finished?

I think it is to be preferred the government spent 682 billion Baht on infrastructure projects (like the planned dual track 160km/h rail links) covering 'upcountry' that would be better than 'losing' the same amount with poor still poor and neither population nor country being able to profit from the investment for a long time.

That's strange, I could have sworn that had it not been for the Dems, PDRC and certain backers there would have been 2 Trillion baht spent on Infrastructure projects independent of, and in addition to the Rice Subsidy Scheme, so your "argument", such as it is, being based on a non existent either / or hypothesis, is irrelevant.

True, true, the Yingluck Government planned for additional losses, 2.2 trillion. They even 'offloaded' items normally in the National Budget to this extra parliamentary funds.

So, the current loss of 'only' 682 billion Baht should be enough for the time being, don't you think? Mind you, you might not be a tax payer in Thailand

[rubl]

682 billion baht lost.......................thais should read the news and say something about this new.....with that money you can build quiet a few university and hospital or renew at least the materiel....but these people who permit such things are criminals

or one could get 3 years 6 months of military expenditure (at 2013 rates), or a coup* - they don't come cheap in terms of GDP...........................

( * Paul Collier, a professor of economics at Oxford who has noted that coups “are not a cheap way of replacing a government”, calculates that the cumulative effect of a coup, tracked over several years, is to reduce incomes by 7%.) http://www.economist.com/blogs/banyan/2014/10/thailands-economy

Of course most of the military expenditures are within the National Budget, unlike the "self-financing" RPPS which only needed a "revolving funds".

BTW the economist article is really interesting although a bit too general at times. It also doesn't hint at the costs to the country had the Yingluck government been able to muddle along. That would be too specific and is therefore not covered although the coup is put on the heap of 'coups'.

"Like every government before theirs, the generals-turned-civilians face two longstanding economic puzzles: How much to pay farmers for their rice; and how best to manage the exchange rate. They are unlikely to find solutions fundamentally different from those attempted by the elected government they ousted."

Now if only the Yingluck government hadn't been on a spending spree the current government would be much more able to tackle the sluggish economy.

Anyway, the 40 billion Baht the current government spends on a 'rice' is a real subsidy, included in the National Budget 2014/2015.

Spending spree - with the economy showing a debt to GDP ratio of 45.7% in 2013 I hardly think the economy was in a parlous state (not including the economic damage caused by the dem/pdrc government ouster campaign of course) You do know that the junta are planning to spend 3 Trillion Baht, more than the Yingluck government planned to, more even than the dems own 1.4 Trillion Baht schemes, and all with no appearances in the budget or transparency?

Anyway, glad you got your oft repeated "revolving fund" phrase in there , even if you can't use the 700++ one anymore.................................

"and all with no appearances in the budget or transparency?"

You might have missed that the first installment for the two dual-track 160 km/h lines is put in the National Budget 2014/2015. As for transparency, didn't you get invited to the National Budget Scrutiny Committee?

Anyway, if only the Yingluck Government had been more into 'administration' we could have avoided lots of 'discussions', even whether its 700-- or 700++