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10 November 2014
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‘Stop politicians from reaping off farners’

Academics, government officials and rice traders have called for the establishment of concrete laws and regulations to prevent politicians reaping benefits from crop-subsidy projects, and mainly from rice schemes, by requiring the declaration of funds sourced from budget spending and the regular reporting of account balances.

They also urged involved parties to launch a campaign aimed at creating a new attitude among farmers, so that they do not have to rely on pledging or any other form of subsidy scheme.

At yesterday’s “Heading to new subsidy idea: lesson from rice pledging scheme” seminar, co-organised by the Thailand Research Fund and the Thailand Development Research Institute (TDRI), panellists shared the view that the rice-pledging scheme had destroyed the sector’s development, ruined the country’s rice-export competitiveness and created a huge fiscal burden.

They agreed that Thailand should not have had such a high-subsidy programme, as it had led to low development of the rice-farming industry.

The authorities should introduce clear regulations to prevent politicians and new governments from launching such a project in the future, otherwise the country would find itself mired in the same problems as currently, facing huge financial losses, and lower development and competitiveness.

According to a TDRI study, Thailand faces a loss of Bt660 billion from the last government’s rice-pledging scheme, after the inspection team of the current military-led government found in October that more than 85 per cent of 17.4 million tonnes of rice in the stockpiles had deteriorated in quality.

Of this amount, some 5 per cent had been damaged, the team found.

Moreover, out of a total loss of Bt660 billion, the TDRI found that nearly one sixth, or Bt123 billion, had gone to politicians involved in the subsidy project.

If calculated based on the government’s ability to release rice from its stockpiles over the next 10 years, the country could face a loss up to Bt960 billion, as it would needed to shoulder stocking and operating costs, said the research institute.

The country spent up to Bt985 billion buying 54.4 million tonnes of paddy in two and a half years under the now-scrapped rice-pledging scheme, but most of the Bt560-billion producer surplus went to medium-to-large-scale farmers.

More importantly, the TDRI said the “welfare cost” of the policy exceeded the producer and consumer surplus by Bt120 billion.

Nipon Puapongsakorn, distinguished fellow of the institute, said the current government should come up with concrete laws and regulations that prevent future administrations from launch pledging schemes that damage the interests of farmers and the national budget.

“Thailand should amend the Constitution Act, the Election Act and budget disbursement law to prevent each government from overspending the Kingdom’s budget on farm subsidies,” he said.

Since the country has to shoulder a huge burden for managing 17.4 million tonnes of rice, he also suggested that the government consider donating 30-50 per cent of rice in the stockpiles to the World Food Programme, so that the fiscal burden can be reduced.

He added that damaged rice should not be used to produce ethanol, because the cost of production would not be feasible.

Nipon suggested that the government and involved bodies in the agricultural sector needed to come up with a concrete campaign and plan to encourage farmers to rely more on their own resources and become less dependent on subsidy projects.

Sadly, he pointed out, almost 70 per cent of farmers still want subsidies from the government.

He said the media and involved sectors should help develop the rice industry and promote a self-sufficiency policy among farmers.

Luck Wajananawat, managing director of the Bank of Agriculture and Agricultural Cooperatives, said rice trading should be processed independently in line with the market mechanism, and without any intervention.

He called for farmers and enterprises to help develop rice-industry growth, so that the sector can survive on its own.

To promote growth, he said agricultural cooperatives would act as an “efficiency tool” to strengthen farmers’ bargaining power, while rice millers should also create “fair milling” to share the benefits from by-products with farmers.

Vichai Sriprasert, honorary president of the Thai Rice Exporters Association, said the sector had not been developed for many years due to politicians using assistance to rice farmers as a tool to win votes in general elections.

He warned that as long as the world market acknowledged that the government held enormous rice stocks, prices would continue to fall, hurting farmers.

International traders have said that the price of Thai rice will drop by another US$30-$50 (Bt985-Bt1,642) a tonne in the near future, he added.

He called for the government to create a sustainable plan to develop the rice industry by focusing on cost reduction rather than subsidised prices.

Speaking elsewhere, former deputy prime minister and commerce minister Niwattumrong Boonsongpaisan said the previous government had not created a huge loss of Bt700 billion from the rice-pledging programme, as some had accused it of doing.

He claimed that since the pledging was aimed at helping farmers, it had benefited both the economy and farmers’ incomes.

He also said that the administration he served had been able to generate sales that compensated for some of the spending on the scheme, while also denying that politicians had benefited from the project.



First published: The Nation, November 6, 2014