Poor stuck buying more expensive rice. Rice exporters, millers, warehousers, richer farmers, the cronies of politicians, the ones who will really benefit.
Infographic above shows the inner workings of the complicated rice pledging scheme used in the past that lacked transparency and provided many opportunities for corruption.
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AGRIBUSINESS: Rice pledging scheme crushed, TDRI's Ammar fears oligopoly, cronyism by Parista Yuthamanop
The government's revival of the rice pledging scheme will fail to achieve the wealth distribution agenda, hurt the country's rice exports, and incur huge fiscal losses, says Ammar Siamwalla, an honorary economist with the Thailand Development Research Institute.
Dr Ammar said that paddy pledging, which pushed up rice prices well above market rates, would result in rice exports dwindling. As a result, there will be a high risk of an oligopoly in which the rice export trade is controlled by a few companies with close connections to the government, which would in turn subsidise the export prices for them.
"The Commerce Ministry has said that rice prices came down because competition is too high. It is my fear that the government wants to run the rice exports with a monopoly of its cronies who get its subsidies," he told the Foreign Correspondents Club of Thailand on Wednesday.
There's nothing as crazy as when the government goes around the world and begs foreigners to help by buying rice at higher prices with an excuse that Thai farmers are poor.
Dr Ammar said studies on previous pledging schemes found that the top 40% of participating farmers received about half of the budget while the bottom 15% got only 15%.
Meanwhile, the bottom one-fifth of the farmers were split evenly between those with a paddy production surplus and those with a deficit, he said.
"Around half of the farmers in the bottom 20% will suffer from an increase in domestic rice prices and this will even out the positive impact of the other half. So rice pledging certainly is not the way to go in improving income distribution," Dr Ammar said.
He also said the paddy pledging scheme also incurred various administrative costs. In the latest programme in 2007-08, the government incurred 19 billion baht in losses. Of the total amount, the biggest chunk went to milling and processing fees and warehouse rentals. Farmers shared 40% of the total benefits, followed by exporters at 23%.
"Meanwhile, just a few exporters benefited from the auctions of stocks in the previous scheme, and this poses a challenge for the new pledging scheme on how to monitor exporters' transactions to ensure transparency. "This has been carried too far and needs serious thought," he said.
He said the programme could also erode the quality of rice because farmers would rush to grow crops and lower-quality rice would be smuggled in from neighbouring countries.
Instead, the government should focus on improving quality to remain competitive, he suggested.
While admitting he helped design the competing approach, the rice insurance scheme introduced by the Abhisit Vejjajiva government, Dr Ammar said the government extended the insured amount from 10-30 tonnes per household, causing the programme to run a higher cost than it should have.
Vichai Sriprasert, CEO of Riceland International, a top parboiled rice exporter, agreed that the country risked losing its rice-exporting leadership in the market because of increasing competition from Vietnam and India. Heavy floods this year are likely to ramp up rice production, he said.
Mr Vichai added that the government's pledging prices were far too high, at 15,000 baht. That translates to a milled-rice price of $830 per tonne free on board, compared to $600 currently.
800 FOB is historically high. I suspect all of our rice will be left unsold.
(Source: Bangkok Post, AGRIBUSINESS, Rice pledging scheme crushed, TDRI's Ammar fears oligopoly, cronyism, 23/09/2011, Parista Yuthamanop, link)
Rice Industry Vocabulary
agribusiness - businesses related to agriculture and the crops grown and animals raised by farmers (See Wikipedia)
scheme - a plan that is developed by a government or large organisation in order to provide a particular service for people แผนการ โครงการ
rice pledging scheme - the systems of subsidies and rice price supports used in the past by governments
paddy - rice after it has been harvested from the field ข้าวเปลือก
paddy pledging - the process (under the old system) of the farmer bringing his rice to the government and pretending to get a loan with rice as security (the rice is "pledged" as security for a loan that is not really a loan)
revival - bring back to life (to bring back into use something that has not been used for a period of time)
revival of the rice pledging scheme - bringing back into use the old system of price price supports and supports
crushed - defeated
oligopoly - the control of an industry by a small group of companies (See Wikipedia)
risk - the possibility that something dangerous or unpleasant might happen ความเสี่ยง
high risk of an oligopoly - danger of rice export industry being dominated by a small group of Pheu Thai friendly rice exporters (cronies)
wealth - how much money and assets a person or country owns
wealth distribution - the unequal way that money and wealth is spread over different people in society (how much richer than the poor, the rich are)
agenda - list of goals to achieve in the future
wealth distribution agenda - a plan to change the way that wealth is distributed in a society make the poor richer
fail to achieve the wealth distribution agenda - fail to achieve goals of making poor people richer
income - money that people receive from work or some other source, used for household consumption and savings
income distribution - how a nation’s total economy is distributed amongst its population, whether the rich have a lot more than the poor (See Wikipedia)
not the way to go - not the right way to do something (in order to achieve goals)
not the way to go in improving income distribution - not the right way to improve income distribution
incur - having to pay an amount of money (examples: incur costs, incur expenses, incur liabilities)
fiscal - connected with the government spending and budget, i.e., public money เกี่ยวกับงบประมาณ
incur huge fiscal losses - when the government loses a lot of money
incurred administrative costs
incurred 19 billion baht in losses
rice exports dwindling - rice exports decreasing
trade - the buying and selling of goods การค้าขาย
rice export trade - the buying and selling of rice
connections - the people you know (who can help you and do favours for you, a "well-connected person" has a lot of "business connections")
close connections to the government
subsidise - when the government pays part of the cost of something ชดเชย เงินช่วยเหลือจากรัฐ
subsidise export prices - pay part of the export prices (paying for overpriced rice and then selling it for a low price to rice exporters)
monopoly - companies that have complete control over a market
cronies - close friends helped by a business person
subsidies - when the government pays part of the cost เงินช่วยเหลือ เงินสนับสนุน
run the rice exports with a monopoly of its cronies who get its subsidies
schemes - systems for achieving some goal
budget - an amount of money able to be spent on something งบประมาณ
the bottom one-fifth of the farmers - the poorest 20% of farmers
split - to divide ทำให้แตกแยก
split evenly between X and Y -
surplus - an amount above the required or necessary amount
paddy production surplus -
deficit - an amount below the required or necessary amount
paddy production deficit -
suffer - experience a bad situation (such as loss of money or physical or mental pain)
domestic - within the country ภายในประเทศ
domestic rice prices - the price of rice within Thailand (could be higher than other countries, if controlled by the government)
positive - something good ในแง่ดี hopeful and confident, or giving cause for hope and confidence ซึ่งมองในแง่ดี
impact - an effect or influence ผลกระทบ
positive impact - the good effect
even out the positive impact - reduce the positive impact; reduce the good effect
chunk - a part or piece of something
fees - money that you pay for some service ค่าธรรมเนียม
the biggest chunk went to milling and processing fees
warehouse - a large building for storing things โกดังสินค้า, คลังสินค้า, โรงพัสดุ
benefits - good things people get from the project or activity ผลประโยชน์
auctions - when the highest price offered (bid) gets to buy the item being auctioned) (See Wikipedia)
stocks - large amounts stored for future use
challenge - something that needs a lot of skill, energy, and determination to deal with or achieve สิ่งที่ท้าทาย, การท้าทาย
poses a challenge for - creates a problem that is difficult to solve (will require a lot of energy and effort)
poses a challenge for the new pledging scheme
monitor - keep track of ตรวจ, ติดตาม, เฝ้าสังเกต to regularly check something or watch someone in order to find out what is happening ตรวจสอบ ตรวจตรา
monitor exporters' transactions - check rice exporter buy and sell contracts (to make sure there is no corruption)
ensure - to make certain that something happens or is done รับรอง ให้ความมั่นใจ ให้การยืนยัน
ensure transparency - making sure that the public can see what is happening (otherwise corruption is possible)
transparency - an honest way of doing things that allows other people to know exactly what you are doing ความโปร่งใส
erode - 1. to decrease slowly; 2. to rub or be rubbed away gradually กร่อน, กัดกร่อน
erode the quality of rice - slowly decrease the quality of rice
rush - to move or do something very quickly, too quickly รีบเร่ง, วิ่ง
rush to grow crops - act too quickly to grow crops
smuggled - bring goods into a country secretly and illegally
lower-quality rice would be smuggled in from neighbouring countries.
focus - think about and work on one thing (rather than waste time on many), concentrate time and attention on one thing ให้ความสำคัญ
competitive (adjective) - involving competition (people struggling to get, fighting over scarce, limited resources) มีการแข่งขัน
approach - a way of doing or dealing with some problem การจัดการกับปัญหา วิธีการทำให้ถึงจุดหมาย
competing approach - another way of doing something or solving a problem
insurance - a system that pays money to help people harmed by a bad event (See Wikipedia) การประกันภัย
rice insurance scheme - a system to protect farmers from changes in rice prices (but not to provide them extra subsidy income, above what they would have earned from growing the rice)
extended - increased
extended the insured amount - increased the amount of rice that was insured
extended the insured amount from 10-30 tonnes per household
household - a group of people, often a family, who live together ครัวเรือน
parboiled rice - rice that is boiled until partially cooked ข้าวต้มสำเร็จรูป
leadership - being the first in some area (example: Thailand has had the leadership in world rice markets in the past)
the country risked losing its rice-exporting leadership
ramp up rice production - increase rice production
milled-rice price of $830 per tonne free on board
free on board (FOB) - a contract to sales contract in which the buyer of goods is responsible for the goods once they are put on the ship, the seller of goods delivers the goods to a ship at a particular port and gets official permission for them to be exported (See Wikipedia)
suspect - to believe that something is true สงสัย
X suspects Y - X believes that Y is not true
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