Pledging scheme could destroy Thai rice exports

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EDITORIAL
Pledging scheme could destroy Thai rice exports
The Nation 2011-09-09

The only beneficiaries from govt rice subsidies will be brokers, millers and middlemen, not poor farmers.

Thai politicians lack the political will and courage to help improve the capacity of our farmers. Government subsidies implemented for farmers are aimed at short-term solutions and artificially inflate prices. As a result, Thai farmers are losing their competitive edge. Thailand does not have sufficient research and development centres to develop Thai rice strains to move ahead of other countries that are fast catching up with Thailand.

The newly introduced rice policy of the current government will make things even worse for Thai farmers. The rice pledging scheme is an exemplary case of how a short-sighted rice subsidy policy will severely affect Thai farmers.

Dr Ammar Siamwalla, a prominent economist at the Thailand Development Research Institute (TDRI), has recently pointed to the downside of the rice policy. It will become a tax burden, create a price advantage for Vietnam and add a price burden for local consumers.

Prime Minister Yingluck Shinawatra used the rice pledging programme during her campaign to attract farmers, who account for a majority of Thais. Although the subsidy is an attractive campaign feature, the programme will not strengthen Thai farmers. It will further weaken them and make them more dependent instead of enabling them to stand on their own.

The failure of previous governments' subsidy programmes is evidenced by the fact that most Thai farmers are still living in poverty and are desperately reliant on government support. The assistance programmes should have made our farmers stronger, but that is not the case.

First of all, the high pledging price will distort the market. The Yingluck government plans to buy paddy at Bt15,000 per tonne from farmers, compared to the market price of around Bt9,000 per tonne of white rice. The artificial high price of Thai rice will erode its competitiveness on the global market, especially compared to cheaper rice from Vietnam. The government may claim that the pledging scheme will push up rice prices on the world market because the Thai rice price is considered a benchmark. But Thailand does not have the influence to ask the other Organisation of Rice Exporting Countries to increase their prices in parallel, in the same fashion that the Organisation of Petroleum Exporting Countries do.

It is estimated that the price of Thai white rice on the world market will rise from US$500 to $800-$850 per tonne after the rice pledging programme. But, in reality, Vietnamese producers will offer much lower prices than Thai exporters because they don't have any reason to increase their price.

The scheme also puts pressure on rice prices on the domestic market, as prices are set to rise from the current Bt15 per kilogramme to Bt20. Consumers will not mind spending more on rice if the farmers receive benefits, but they do not.

Farming should be supported to ensure the continuation of our food security and traditional lifestyle. But price rises will now likely come from speculation. Already, some rice brokers are hoarding produce ahead of the implementation of the pledging policy.

The main beneficiaries of this pledging scheme will be the rice millers, not the farmers, especially the small-scale farmers with no silos or equipment to dehydrate paddy to the level required by the pledging scheme.

The government of the late prime minister Samak Sundaravej implemented a rice pledging programme that left a burden of more than 5 million tonnes of stockpiled rice that the succeeding government was forced to sell at a loss to rice exporters and millers.

Subservient small farmers are the target group of the government's subsidy. But they are unable to pledge their rice because they don't have storage facilities. They have to rush to sell their paddy at a lower price to middlemen. Most of these buyers have the facility to store and dehydrate the paddy. They can keep stock in their facilities and wait to cash in on the subsidy programme.

This programme will in no way serve its stated purpose to help farmers - not to mention the fact that such massive schemes like this are an open invitation to corruption.

These policies have weakened farmers' ability to compete. The government does not provide sufficient research and development work to assist farmers in improving their methods and yields. Big corporations meanwhile control the new technology to develop farming and refuse to share this information with the majority of farmers.

To sum up, small farmers have become weaker and big corporations have become stronger as they manage to control both the production and the market.

In fact, farmers don't want these subsidies that have only short-term results, but they do want policies to help them in the long run, such as good irrigation, innovations to improve rice strains and an assistance programme to help improve their productivity. It is unfortunate that Thai governments, this one in particular, never focus on how to promote the capacity of our farmers in a sustainable manner.