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The rice mountain: Thai govt sticks to its worst and most costly policy

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Thailand's economy
The rice mountain

An increasingly unpopular government sticks to its worst and most costly policy

BANGKOK: -- IT HAS not been a happy second anniversary for the government of Yingluck Shinawatra. Thousands of diehard opponents of her elder brother Thaksin Shinawatra, himself a former prime minister, took to the streets of Bangkok on August 7th to protest against a bill that could grant Mr Thaksin an amnesty for past offences and open up the possibility of his return from exile.

Probably Ms Yingluck is used by now to these kinds of protests, along with the usual rumours of coups. More worrying, perhaps, is widespread and growing dismay over her government’s economic performance, supposedly its strong suit.

This week an opinion poll carried out by Bangkok University found that the government’s approval rating has fallen to its lowest level yet. Most damaging to its reputation is its flagship scheme to subsidise rice. This was the brainchild of Mr Thaksin, who dictates most of his sister’s policies from afar. It was a useful vote-winner during the election campaign in 2011. But its costs now jeopardise both the government’s finances and the economy as a whole.

The rice subsidy was classic Thaksin populism. Two-fifths of Thais work in agriculture, most of them as rice farmers. Ms Yingluck promised that, if she were elected, her government would buy unmilled rice directly from farmers at about twice the market rate, or 15,000 baht (about $500) per tonne. This would put money into poor farmers’ pockets and stimulate domestic demand. Naysayers warned that the scheme would be impossibly expensive.

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

-- The Economist 2013-08-09

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From the link comes this pinpoint assessment of the rice pledging scheme by The Economist:

It is a fiasco.

Well done Thaksin and company. bah.gif

"Eternal Brother calling Agent Thaksin. Mission accomplished. Return to base."

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I'm fascinated by the long-term implications of this policy. International buyers are just biding their time, waiting for the grand Thai-rice fire sale. There's no way Thailand will ever regain it's position as the world's top rice exporter. It's reputation for supplying high-quality jasmine rice has already gone if people are suspicious that old or foreign-sourced grain has been mixed in.

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Meanwhile, daily revelations of incompetence and corruption surrounding the rice scheme take their toll on the government’s standing, and investors fret about the wider effect on the public finances. Government debt levels are rising, and Moody’s, a ratings agency, has warned of the risk that the rice scheme poses to the country’s fiscal discipline.

All part of the plan, after Thaksin returns he will blame the whole mess on Yingluck and take over to save the country.

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I'm fascinated by the long-term implications of this policy. International buyers are just biding their time, waiting for the grand Thai-rice fire sale. There's no way Thailand will ever regain it's position as the world's top rice exporter. It's reputation for supplying high-quality jasmine rice has already gone if people are suspicious that old or foreign-sourced grain has been mixed in.

It's getting to a point of being unsellable because people now know that future crops will be subsidised less, and thus cheaper.

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Rice Pledging Scam to help poor farmers, in the BP recently a piece says that the scam actually only helps rich farmers as the ones needing help do not qualify to participate

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I'm fascinated by the long-term implications of this policy. International buyers are just biding their time, waiting for the grand Thai-rice fire sale. There's no way Thailand will ever regain it's position as the world's top rice exporter. It's reputation for supplying high-quality jasmine rice has already gone if people are suspicious that old or foreign-sourced grain has been mixed in.

But are they really waiting? If so, it may be a long wait. In addition to low quality, dirty, spoiled produce, Thailand cannot be seen to dump rice below international market prices. It has a legal obligation to ASEAN, the WTO and the United Nations. No easy way out that I can see. And still there are some people who insist that Thaksin has vision - how very shortsighted.

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Why dont they turn it into wine? Very popular in Europe.

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Why dont they turn it into wine? Very popular in Europe.

Why not indeed, the Austrians once put anti-freeze in their wine so what could the Thais do with rotting rice ?

Chateau Cardboard could take on a whole new meaning.

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"Poor quality may be one reason why the latest auction of rice stocks was so disappointing. The government managed to sell just 210,000 tonnes, well short of a hoped-for 1m tonnes. But this was also a matter of plain economics, says Vichai Sriprasert, head of Riceland International, a family-run exporter. Why buy now when the government will be forced to sell overflowing stocks later, at almost any price?"

The sharks are circling and waiting. There is absolutely no way of recouping their losses yet PT cannot abandon this policy as there support base won't allow it. This can only end in tears ( and economic collapse of course. Economist article says last two years of purchases have cost 27.5 billion US dollars, 4% of GDP this year alone).

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Rice Pledging Scam to help poor farmers, in the BP recently a piece says that the scam actually only helps rich farmers as the ones needing help do not qualify to participate

Most farmers do qualify for the scheme but get nowhere near the 15k bht per tonne.

The guy who rents some of my wifes paddy got 13k last crop and 12.5k for the crop before that.

With the increase in labour and fertiliser costs he says he is only getting as much as he did before the scheme was introduced.

Taking into account inflation he is actually worse off.

Sent from my GT-I9003 using Thaivisa Connect Thailand mobile app

53% of the rice farmers can´t grow enough rice to support them selfes.

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The cost of bribing their way into power and buying people's votes was NOTHING compared to the gains to be made through corruption once you are in the hotseat. Taksin knows only too well as he is an expert at stealing from the country and now his sister and cronies are doing it for him in his absence. The country folk fell for the populist policy lies and now they are stuck with these fools for 2 more years. We can only hope at the next election they realize the error and vote for someone else. Meanwhile Taksin and co have hundreds of billions stashed away and couldn't care less about the cost to the country and it's people and will pass on millions upon millions of tons of stockpiled rotting rice to whoever takes over to deal with it...

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I'm fascinated by the long-term implications of this policy. International buyers are just biding their time, waiting for the grand Thai-rice fire sale. There's no way Thailand will ever regain it's position as the world's top rice exporter. It's reputation for supplying high-quality jasmine rice has already gone if people are suspicious that old or foreign-sourced grain has been mixed in.

But are they really waiting? If so, it may be a long wait. In addition to low quality, dirty, spoiled produce, Thailand cannot be seen to dump rice below international market prices. It has a legal obligation to ASEAN, the WTO and the United Nations. No easy way out that I can see. And still there are some people who insist that Thaksin has vision - how very shortsighted.

Of course Thaksin has vision. He is in power, all his cronies make good money and do you think his family pays for the rice?

So well done for him, just not good for Thailand.

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Why is it absolutely necessary to have the "exporters" in the middle of this deal? Why can't the government offer FOB pricing and allow foreign companies to bid directly FOB?

What exactly does an exporter bring to this deal? Just another layer of necessary profit.

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Rice Pledging Scam to help poor farmers, in the BP recently a piece says that the scam actually only helps rich farmers as the ones needing help do not qualify to participate

Most farmers do qualify for the scheme but get nowhere near the 15k bht per tonne.

The guy who rents some of my wifes paddy got 13k last crop and 12.5k for the crop before that.

With the increase in labour and fertiliser costs he says he is only getting as much as he did before the scheme was introduced.

Taking into account inflation he is actually worse off.

Sent from my GT-I9003 using Thaivisa Connect Thailand mobile app

maybe you could reduce his rent,to help like a good neighbour would do,wai2.gif

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Frantic Cabinet: "Can't stop now...we got to continue like this...it will all go away...don't lose face...Thaksin will fix it...sigh, sob, howl"

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This is a terrible situation for Thailand to be in, I won't comment on whose fault it is as there are many posts doing that (and I agree with most). I have posted on this before but I have to add that I feel for the poor people of Thailand (my new adopted home). This is going to have be dealt with sooner or later, it cannot just go away. So, I hope the mud slinging can take a back seat whilst a real solution is found to reverse the current trend and map a way out.

I like the post about making wine out of it, the wine can store for many years, longer then rice I am sure. Also, there must be other products manufactured from rice where the rice can be sudsidised to local production under the agreement that the end product is not dumped into the market. The local government will benefit from tax returns and it will boost other manufacturers margins (maybe).

Whatever the solution it has to be quick as I can only imagine what the impact will be like when it comes crashing down, as I said in my opening sentence terrible situation to be in.

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Why is it absolutely necessary to have the "exporters" in the middle of this deal? Why can't the government offer FOB pricing and allow foreign companies to bid directly FOB?

What exactly does an exporter bring to this deal? Just another layer of necessary profit.

I think simply because if they offered it FOB auction style no one would buy it. It will be above market price, unless of course they fire sale it then that's different but they wont be able to do this without being clobbered for anti dumping.

There is a surplus of supply, therefore a buyers market so you need people in the middle to "sell" it.

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