Workers load a ship with 1000 tons of rice at the Asia Golden Rice export company in Bang Pakong. Photo: AFP/Getty Images
Thailand’s divisive rice-buying scheme will not be renewed at the end of February, when it’s set to expire. The program’s basics: the government buys rice from farmers at above-market prices — up to 50% above — as a way to boost rural incomes and generate political support.
Thailand’s current political crisis stems, in part, from the botch the Shinawatra government has made of the initially popular program. Farmers took to the streets when the government failed to make good on its promises of above-market price payments for rice pledged to government stores. Many farmers haven’t seen any of the promised cash for months (roughly one million). The Thailand Development Research Institute says the government needs $3.6 billion to catch up with payments.
The scheme was controversial from the get-go. Opposition members criticized the plan by saying that it deepened the country’s debt; indeed it did — and now the government seeks to borrow money from banks without any success (due mostly to its large budget debt). On a global scale the subsidy distorted rice prices in the international markets but failed to generate a hoped-for surge in the grain’s price. The government is now sitting record stockpiles that it doesn’t know how to manage. Even the IMF criticized the initiative back in November in its annual review of the Thai economy: “The staff sees clear merit in replacing the rice pledging scheme with budgetary transfers targeted at low-income agricultural households.”
The Ministry of Commerce said Wednesday that it auctioned 460,000 tons of rice from its stockpile in an attempt to secure funds to pay the farmers, hoping to raise over 10 billion baht ($307 million). To speed up the rice release, the director-general of the Department of Foreign Trade said that they would holding as many as two to three rice auctions a month going forward, with the next lot of over 500,000 tons to be available for bidding next week, according to the National News Bureau of Thailand.
Speculation that the military may be planning a coup is as heated as ever. They could easily seize the farmers’ rage as a pretext for doing so. With the republic today in a political limbo, guided by a caretaker administration since December that holds very little authority, the timing of the subsidy scheme ending and the decision to not revive it will very likely bring harsh consequences for the nation. The worst for Southeast Asia’s second-largest economy (and the world’s one-time leading rice exporter) may be yet to come.
