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Thailand's rice sector doomed?

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Thai rice sector may be heading towards corruption-plagued government-to government trading, business given to companies that do business with the politicians in power, many exporters may be wiped out. 



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Thai rice trade faces peril

SPECIAL REPORT: Mortgage programme could endanger economy but Thaksin thinks not
23/04/2012
Nattaya Chetchotiros & Walailak Keeratipipatpong

Experts are sounding warnings again about the government's rice mortgage policy, saying the scheme is ruining the local and overseas markets for Thai rice while creating a huge and unnecessary debt burden for the state.

But former prime minister Thaksin Shinawatra, de facto leader of the ruling Pheu Thai Party, insists the policy benefits farmers and will not be scrapped.

The rice mortgage scheme was a Pheu Thai campaign platform that helped push the party to victory in last year's general election.

The Commerce Ministry set a historical high budget of 435.5 billion baht for the mortgage of the first crop of rice which went to market between Oct 7 last year to Feb 29. The sum, a quarter of the government's annual budget, was to pay for 25 million tonnes of rice that farmers were expected to pledge during the period.

However, according to the Commerce Ministry, farmers actually pledged only 6.8 million tonnes of rice then.

Nipon Puapongsakorn, chairman of the Thailand Development Research Institute (TDRI), told the Bangkok Post that the rice mortgage scheme would ruin the national economy.

"The policy will cause several rounds of losses to the government because Thai rice is too expensive to compete. Now no one knows how the government can sell the rice or if the government will monopolise the rice trade and if this will ruin the rice trading system completely," he said.

He warned that the government had set the mortgage price high, which would force it to borrow 112 billion baht to fund the mortgage of first-crop rice and 30 billion baht for second-crop rice. 

In March and April this year, the government borrowed 90 billion baht from the Bank for Agriculture and Agricultural Cooperatives, 30 billion baht from the Government Savings Bank and an undisclosed sum from Krung Thai Bank for the mortgage policy.

Mr Nipon said the government was unnecessarily incurring debt.

"Why should the government bear the loss instead of letting rice trade mechanisms function normally?" Mr Nipon said. "We would not be losing market share to Vietnam and India, and possibly to Myanmar in the future [if it weren't for the scheme]." 

We are destroying what our ancestors created in the past century: our [leadership in] rice sales and the world's best-quality rice.

He warned that the scheme would cause the price of milled rice to increase in a few months and there would be no rice available in local markets. Then the government would be forced to sell rice from its stocks, leading to a plunge in local rice prices.

Apart from shaking Thai rice markets locally and overseas, Mr Nipon warned that the mortgage policy would force the government to serve as a rice trader engaged in government-to-government sales. That may put the government in violation of the constitution as the state would become a player in a private sector business.

He also pointed out that government-to-government sales were prone to corruption and bribery and few such approaches remained in the world except in the Philippines and Indonesia.

"As the government has no clear policy on rice sales, control of the trade rests with a few companies that do business with politicians in power and I believe that many exporters will be wiped out," Mr Nipon said

However, Thaksin insisted during an interview with the Bangkok Post that the rice mortgage policy with the set mortgage price of 15,000 baht a tonne for normal white rice and 20,000 baht for fragrant rice was the best solution for Thai farmers.

"This policy cannot end. We want farmers who grow the rice we eat to survive. They should have their minimum income guaranteed so that they continue to grow rice for us," Thaksin said.

He insisted the rice mortgage policy was better than the rice price insurance policy of the past Democrat-led government. He said that policy had benefited middlemen and the state had to pay compensation even to the farmers who grew rice for their own consumption.

He admitted that the mortgage policy's high prices made Thai rice uncompetitive with rice from Vietnam and India but he said he had a way out.

"There will not be any problem if exporters do not want to sell. The government can sell by itself. Many people want our rice," Thaksin said.

A major rice exporter told the Bangkok Post on condition of anonymity that the government lacked efficient trade agencies as both the Public Warehouse Organisation and the Marketing Organisation for Farmers were failure-plagued state enterprises.

Without efficient agencies for government-to-government exports, the government would hand its rice orders to exporters who paid bribes for the privilege, said the source.

The exporter said that sales by the government amounted to only 260,870 tonnes out of total rice exports of 10.7 million tonnes last year.

This year the Commerce Ministry predicts the government will receive orders for at least 2.5 million tonnes of rice from the Philippines and Indonesia. However, the exporter said both countries had ordered only some 700,000 tonnes during the 2008 food crisis.

The rice mortgage scheme has raised rice prices by 40-50%. Consequently, exporters predict that the price of Thai fragrant rice in the world market will be at least US$755 (24,000 baht) a tonne.

Although the rice mortgage policy has been in effect for six months, the actual price of rice in local markets stands at 9,900 baht a tonne for rice with 15% moisture content.

In the previous first crop, the market price of fragrant rice remained at 13,000-13,500 baht a tonne compared with its mortgage price of 20,000 baht a tonne and the market price of ordinary rice ranged from 8,700 to 9,000 baht a tonne compared with its mortgage price of 15,000 baht per tonne.

In the world rice market, Thailand must compete with a number of countries that produce rice of similar quality. Vietnam is also growing fragrant rice and India is selling its good basmati rice at a lower price.

Thailand sells white rice 5% broken for $550 a tonne, Vietnam quotes it at $440, India at $445 and Pakistan at $470.

Thai rice exports dropped 45% to 1.8 million tonnes between Jan 1 and April 18 from the same period last year.

(Source: Bangkok Post, Thai rice trade faces peril, SPECIAL REPORT: Mortgage programme could endanger economy but Thaksin thinks not, 23/04/2012, Nattaya Chetchotiros & Walailak Keeratipipatpong, link

Thai Rice Trade Vocabulary

trade - the buying and selling of goods การค้าขาย
rice trade
trader -
a person or company that buys and sells something
rice trader
Thai rice trade - the buying the selling of rice in Thailand, rice markets in Thailand
rice trade mechanisms - the system for buying and selling rice at a place

peril - great danger ภัยอันตราย
face peril  - in a very dangerous situation

Thai rice trade faces peril

endanger - to put into danger ทำอันตราย ทำให้ตกอยู่ในอันตราย
endanger the economy - create a danger that the economy could be harmed (perhaps permanently)

Mortgage programme could endanger economy but Thaksin thinks not

warning - telling someone about something dangerous (telling them to be careful)
sounding warnings - giving warnings to people
policy - a plan of action to guide decisions and achieve outcomes นโยบาย (See Wikipedia)
rice mortgage policy - the government system for guaranteeing farmers a price for their rice
scheme - a plan that is developed by a government or large organisation in order to provide a particular service for people แผนการ โครงการ
local market
overseas markets
debt - an amount of money that you owe หนี้
burden - a serious or difficult responsibility that you have to deal with, a difficult thing that must be done, a heavy load to carry ภาระ (See glossary)
state - government รัฐ
debt burden for the state - the difficult responsibility for paying back a large amount of money that the government borrows to pay for expensive things

Experts are sounding warnings again about the government's rice mortgage policy, saying the scheme is ruining the local and overseas markets for Thai rice while creating a huge and unnecessary debt burden for the state.

de facto - actually but not officially 
de facto leader - the person who is actually the leader but not officially

rule - have control of the government of a country
ruling Pheu Thai Party - the Pheu Thai political party which has control of the government of the country

insist -
say very strongly and firmly that something must be true or happen
benefits (noun) - goods things that can happen from a project or activity ผลประโยชน์
benefits (verb) - a project or activity that gives good things to certain people
policy benefits farmers

scrapped - ended, discarded, cancelled;  decided not to continue with something, such as a plan or event ยุติแผนที่วางไว้

But former prime minister Thaksin Shinawatra, de facto leader of the ruling Pheu Thai Party, insists the policy benefits farmers and will not be scrapped.

campaign - a planned series of activities designed to persuade voters to vote for a particular candidate or political party การรณรงค์หาสียง
campaign platform - the set of policies that a political party uses to gain votes and win an election
party - political party, group of politicians joining together to win election
election - the process of choosing a person or a group of person for a position, especially by voting elect (v) electoral (adj) synonym: the polls การเลือกตั้ง
push the party to victory - causing the political party to win the election
general election - a big election; that elects most MPs and that ends in the selection of a new Prime Minister 

The rice mortgage scheme was a Pheu Thai campaign platform that helped push the party to victory in last year's general election.

budget - the amounts of money that an organisation has available to spend on different things during a period งบประมาณ (See Wikipedia)
annual - happening once a year ประจำปี
government's annual budget
a quarter of the government's annual budget
set a historical high budget
the sum - an amount of something, especially money จำนวนเงิน
expected - believe will happen คาดว่า (จะเกิดขึ้น)
pledge - 1. to leave something as collateral for a loan; 2. promise สัญญา; seriously promise to do something สาบาน
expected to pledge
national economy

The Commerce Ministry set a historical high budget of 435.5 billion baht for the mortgage of the first crop of rice which went to market between Oct 7 last year to Feb 29. The sum, a quarter of the government's annual budget, was to pay for 25 million tonnes of rice that farmers were expected to pledge during the period. However, according to the Commerce Ministry, farmers actually pledged only 6.8 million tonnes of rice then. Nipon Puapongsakorn, chairman of the Thailand Development Research Institute (TDRI), told the Bangkok Post that the rice mortgage scheme would ruin the national economy.

monopolise -
control prices and sales in a market
the government will monopolise the rice trade
fund - to provide money for something ให้เงินทุน
fund the mortgage of first-crop rice
disclose -
report to the public
undisclosed - not reported publicly ไม่เปิดเผย
an undisclosed sum

"The policy will cause several rounds of losses to the government because Thai rice is too expensive to compete. Now no one knows how the government can sell the rice or if the government will monopolise the rice trade and if this will ruin the rice trading system completely," he said. He warned that the government had set the mortgage price high, which would force it to borrow 112 billion baht to fund the mortgage of first-crop rice and 30 billion baht for second-crop rice.  In March and April this year, the government borrowed 90 billion baht from the Bank for Agriculture and Agricultural Cooperatives, 30 billion baht from the Government Savings Bank and an undisclosed sum from Krung Thai Bank for the mortgage policy.

incurring debt - borrowing money from others (so you have to pay back in the future)
bear - to accept, tolerate or endure especially something unpleasant ทน
bear the loss - lose money (that you have pay for with your own money) 
function - to work or operate in a normal way เป็นปกติ ใช้การได้ปกติ
letting rice trade mechanisms function normally
share - to have or use something at the same time as someone else ใช้ร่วมกัน
market share - the percentage of sales and customers in a market that  a company has
lose market share - when a company has less of the sales and customers in a market
losing market share to Vietnam and India
ancestors - people in your family who a lived long time ago in the past บรรพบุรุษ
stocks - large amounts stored for future use
plunge - to fall quickly from a high position ดิ่งลงมาจากท้องฟ้า
century - a period of one hundred years ศตวรรษ
the past century - the period of time from now to 100 years in the past
plunge in local rice prices - a sudden and fast decrease in the price of rice

Mr Nipon said the government was unnecessarily incurring debt. "Why should the government bear the loss instead of letting rice trade mechanisms function normally?" Mr Nipon said. "We would not be losing market share to Vietnam and India, and possibly to Myanmar in the future [if it weren't for the scheme]."   We are destroying what our ancestors created in the past century: our [leadership in] rice sales and the world's best-quality rice.  He warned that the scheme would cause the price of milled rice to increase in a few months and there would be no rice available in local markets. Then the government would be forced to sell rice from its stocks, leading to a plunge in local rice prices.

shaking Thai rice markets
engaged - actively involved in what you are doing
government-to-government sales
would force the government to serve as a rice trader engaged in government-to-government sales
violation - an action that is against a law, agreement, principle, etc. การฝ่าฝืนกฎหมาย  the breaking of a rule or a law การฝ่าฝืน
sector - a part of the economy ภาคเศรษฐกิจของประเทศ (public sector = government, private sector = all businesses, household sector = families and consumers, banking sector,...) (See Wikipedia)
in violation of the constitution
the state would become a player in a private sector business
corruption - (See Wikipedia on bribery, corporate corruption, and political corruption)
bribery - the crime of giving money or presents to someone so that they will help you by doing something dishonest or illegal การให้สินบน
pointed out that government-to-government sales were prone to corruption and bribery
clear - simple and easy to understand
the government has no clear policy on rice sales
control of the trade rests with a few companies that do business with politicians in
power
wiped out - destroyed
many exporters will be wiped out


Apart from shaking Thai rice markets locally and overseas, Mr Nipon warned that the mortgage policy would force the government to serve as a rice trader engaged in government-to-government sales. That may put the government in violation of the constitution as the state would become a player in a private sector business.  He also pointed out that government-to-government sales were prone to corruption and bribery and few such approaches remained in the world except in the Philippines and Indonesia. "As the government has no clear policy on rice sales, control of the trade rests with a few companies that do business with politicians in power and I believe that many exporters will be wiped out," Mr Nipon said

insisted - say firmly that something must happen or is true, and will not change mind
interview - to ask someone questions in a meeting for a newspaper article, television show, etc. The noun form is also interview สัมภาษณ์, การสัมภาษณ์
survive - to continue to live and exist อยู่รอด สืบต่อไปได้ รอดพ้น  มีชีวิตรอด
income
- money that people receive from work or some other source, used for household consumption and savings
guaranteed - will happen for sure (promises have been given)
minimum - the smallest amount possible
minimum income - the smallest possible income
minimum income guaranteed - say that people will get at least a certain amount of money (as income) for sure
insurance - a system that pays money to help people harmed by bad event (See Wikipedia) การประกันภัย การประกัน (การประกันความเสี่ยง ประกันราคา)
rice price
insurance policy of the past Democrat-led government
middlemen - companies that buy and sell goods (often in bulk) between the factory and the final consumer พ่อค้าคนกลาง
benefited middlemen - helped middlemen (not farmers)
compensation - money that someone receives because something bad has happened to them;  money paid to a person for damage they suffered การจ่า่ยเงินชดเชย
consumption - 1. money spent by households and families on goods and services (See Wikipedia) การบริโภค; 2. using, eating or drinking something 
grew rice for their own consumption
competitive - a good that is sold at a price that attracts many customers
uncompetitive - a good that is sold at a price that does not attract many customers
high prices made Thai rice uncompetitive with rice from Vietnam and India
a way out -
solution to the problem

However, Thaksin insisted during an interview with the Bangkok Post that the rice mortgage policy with the set mortgage price of 15,000 baht a tonne for normal white rice and 20,000 baht for fragrant rice was the best solution for Thai farmers. "This policy cannot end. We want farmers who grow the rice we eat to survive. They should have their minimum income guaranteed so that they continue to grow rice for us," Thaksin said. He insisted the rice mortgage policy was better than the rice price insurance policy of the past Democrat-led government. He said that policy had benefited middlemen and the state had to pay compensation even to the farmers who grew rice for their own consumption. He admitted that the mortgage policy's high prices made Thai rice uncompetitive with rice from Vietnam and India but he said he had a way out. "There will not be any problem if exporters do not want to sell. The government can sell by itself. Many people want our rice," Thaksin said.

condition - something that must be true or most be done before another thing can happen เงื่อนไข
anonymity - when someone's name is not given or known การไม่ระบุชื่อ
told on condition of anonymity - the person gave the media information in return for the media not saying who they are
efficient - produces a lot from few resources
the government lacked efficient trade agencies
Public Warehouse Organisation (PWO) -
the government agency in charge of storing rice
Marketing Organisation for Farmers
plagued - caused a lot of problems for someone or something for a long period of time ทำให้ยุ่งยาก ลำบากมานาน
enterprises - companies
failure-plagued - fails all the time, a business that loses money all the time (never successful)
failure-plagued state enterprises  
efficient agencies for government-to-government exports
bribes - money or a present given to someone so that they will help you doing something dishonest or illegal สินบน
privilege - a special benefit that is available only to a particular person or group เอกสิทธิ์ when some people get to do things that others can't (rich elite get to do it, but poor people cannot)
exporters who paid bribes for the privilege
source - someone who gives information to the media แหล่งข่าว

A major rice exporter told the Bangkok Post on condition of anonymity that the government lacked efficient trade agencies as both the Public Warehouse Organisation and the Marketing Organisation for Farmers were failure-plagued state enterprises.  Without efficient agencies for government-to-government exports, the government would hand its rice orders to exporters who paid bribes for the privilege, said the source. The exporter said that sales by the government amounted to only 260,870 tonnes out of total rice exports of 10.7 million tonnes last year.

crisis - an urgent, difficult or dangerous situation วิกฤตการณ์ วิกฤต
the 2008 food crisis
predict - to say that an event or action will happen in the future, especially as a result of knowledge or experience คาดการณ์ว่า พยากรณ์จากสถิติว่า
actual - real; existing in fact จริง
actual price
content - the parts of a good
moisture content - the percentage of water in the rice (making it heavier and thus worth less after drying)

This year the Commerce Ministry predicts the government will receive orders for at least 2.5 million tonnes of rice from the Philippines and Indonesia. However, the exporter said both countries had ordered only some 700,000 tonnes during the 2008 food crisis.  The rice mortgage scheme has raised rice prices by 40-50%. Consequently, exporters predict that the price of Thai fragrant rice in the world market will be at least US$755 (24,000 baht) a tonne.  Although the rice mortgage policy has been in effect for six months, the actual price of rice in local markets stands at 9,900 baht a tonne for rice with 15% moisture content. In the previous first crop, the market price of fragrant rice remained at 13,000-13,500 baht a tonne compared with its mortgage price of 20,000 baht a tonne and the market price of ordinary rice ranged from 8,700 to 9,000 baht a tonne compared with its mortgage price of 15,000 baht per tonne. In the world rice market, Thailand must compete with a number of countries that produce rice of similar quality. Vietnam is also growing fragrant rice and India is selling its good basmati rice at a lower price.  Thailand sells white rice 5% broken for $550 a tonne, Vietnam quotes it at $440, India at $445 and Pakistan at $470. Thai rice exports dropped 45% to 1.8 million tonnes between Jan 1 and April 18 from the same period last year.

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