After three years under Yingluck Shinawatra and her government's rice-pledging policy, where do we stand today? As if the problems of corruption, gargantuan costs and delays in paying rice farmers their due are not bad enough, consider this headline in the Bangkok Post on Feb 26: "Rice farmers poorest in Asean".
An official inspects pledged rice stored in a warehouse in Ayutthaya province amid farmers’ angry protests and the fact that Thai farmers remain the poorest in Asean despite the gargantuan subsidies from the rice-pledging scheme. Thiti Wannamontha
How can this be? The government has already borrowed 500 billion baht, or 4% of gross domestic product, to buy rice at prices as much as 40% over market price. And yet at the end of the day, even with hundreds of billions of baht in taxpayer assistance, Thai farmers are no better off than their neighbours, when measured by net income or productivity.
The government's initial premise was based on the questionable theory that by becoming the buyer of first resort, it could ultimately push market prices higher by controlling supply and demand. The argument continues that by paying farmers higher prices, they would be able to reduce household debt and ultimately take steps towards improving productivity. Ms Yingluck's brother Thaksin summarised the policy in an interview in September 2012 as follows: "If we manipulate the [rice market] mechanism for two years, three years, then things will be moving naturally [afterwards]".
Hardly anyone can argue credibly that Thai rice farmers have achieved any sustainable improvement from the past, particularly not when millions have suffered from the inability of the government to honour its contracts and pay for pledged rice because of a lack of funds and an absolute failure by the Commerce Ministry to secure buyers. Global rice prices have also moved lower over the past several years, due to higher world production and the knowledge among buyers that Thailand holds millions of tonnes of rice which eventually must either be sold or simply left to rot.
Isn't it high time that we acknowledge reality and chart a new course? No one questions the fact that rural poverty is a problem that must be addressed. But when policy goes awry, it is incumbent on the policymakers to make it right. The rice-pledging scheme, in its current incarnation, has fallen short of its goals to strengthen the country's rice industry, ease poverty and boost farm productivity. Rather than offer assistance to the genuinely needy, it seems that subsidy programmes are used as a means of financial blackmail between the ruling politicians and their constituents, where votes are bartered for immediate largesse; never mind the fact that such policies are hardly sustainable nor efficient.
Aat Pisanwanich, dean of the economics faculty at the University of the Thai Chamber of Commerce, offers some startling figures which shows how little the Thai rice industry has actually developed despite hundreds of billions of baht spent in subsidies.
Production costs for Thai rice farmers, for instance, are 139% higher than those in Vietnam and 37% than those of Myanmar. On the other hand, productivity for Thai farmers is just 450 kilogrammes per rai, better than 420kg/rai in Myanmar but a far cry from the 900kg/rai achieved by Vietnamese farmers.
In terms of profits, Thai farmers receive just 1,555 baht per tonne of paddy rice, compared with 3,180 baht per tonne in Vietnam and 3,484 baht in Myanmar. The fact is that Thai farmers are simply running in place under the rice-pledging scheme, with the real benefits received by middlemen, mills, politicians and suppliers.
The problems of low farm productivity and high costs are not new ones. Agricultural experts have spoken for years about different strategies which can be taken to raise productivity and reduce costs, such as reducing the excessive use of chemicals and fertilisers in areas such as the central provinces where gains from added use is marginal at best. The University of the Thai Chamber of Commerce has also proposed a different concept focusing on increased production of organic crops and maximising land use under the idea, "one rai, 100,000 baht".
The rice-pledging scheme however has done little to address the problems faced by farmers at the production side. Instead, the Pheu Thai Party and the Yingluck government has concentrated on a doomed strategy of artificially inflating prices in defiance of basic economics and business sense.
The sad fact is that this policy was never about development economics, but simple political reality. Since 2001 when Thaksin first took power up to today under his sister, it is clear that their policies have received strong support from the underclass and rural communities. Even the most jaded critics must acknowledge that programmes such as the farm debt moratorium, underground debt restructuring, the People's Bank microfinance scheme and universal health care have all been wildly popular among voters. Yet for all his trendsetting in the politics of the country, little headway has been made in addressing the root problems which supposedly are the raison d'etre of these policies — income inequality and unequal access to basic education, health and social services across society.
Wichit Chantanusornsiri is a senior business reporter, Bangkok Post.