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6 June 2014
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‘Replace subsidy system with welfare system’

THE NATIONAL COUNCIL for Peace and Order should replace the country’s subsidy system, including the rice-pledging policy, with a welfare system that would cover all people and the poor in particular, Nipon Poapongsakorn, a distinguished fellow at the Thailand Research Development Institute, said yesterday.

An administrative system should be set up to run the social welfare programme. The value-added-tax could be raised from 7 per cent to 10 per cent to finance it, he said.

Subsidies to support the former government’s populist policies have been realised as dangerous and leading to possible political problems.

Government support for the prices of rice and other agricultural products will distort the market mechanism and require a huge budget. Not only poor farmers, but also everyone, including the rich, will get those subsidies from the government.

In the short term, to solve the rice problem, the NCPO should make a total accounting of the real quantity of rice being received under the rice-pledging scheme, and how much of that has been already sold. The accounting would include the real amount of rotting and missing rice.

“In my point of view, an independent body with professional members should be formed to evaluate all stocks to find out how much rice remains and its quality,” he said.

The former government claimed 16 million-17 million tonnes of rice were still stored and such a massive amount caused the price to plunge.

However, if the real amount was only 10 million tonnes, the price would automatically go up.

“Thailand is one of the major rice exporters to the world, and we are not able to offer a higher price than the market. During government intervention, the rice price will get higher,” he said.

“The former government released a colossal amount of rice from its stocks as it wanted to raise money to pay farmers for the rice-pledging scheme. That caused the price of rice to trend down since the middle of last year,” he said.

The ousted government launched problem-making policies, and the money allocated for such subsidy policies should be limited. The rice price should be handled carefully to avoid further falls.

“I highly agree with the NCPO’s order prohibiting government-to-government exports of rice. Rice should be sold through the futures exchange to support its retail price in the domestic market,” he added.



First published: The Nation, June 5, 2014


Nipon Poapongsakorn, Ph.D.
Distinguished Fellow