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Published on November 1, 2007

"There's always the danger of a bank like the BAAC being used as a political tool. We've seen many populist schemes designed to gain favour with farmers and grass-roots voters," he said during his keynote address to the 2nd World Congress on Agricultural and Rural Finance, which opened yesterday.

He pointed out that programmes like crop-mortgage schemes, in which the mortgage price was deliberately set much higher than the market price, had led to huge losses for the state.

Farmers simply mortgage their crops with no intention of getting them back. The BAAC is usually the pawn in such schemes, having to lend money to finance the mortgages and then having to return to the Cabinet to ask for compensation, he said.

Chalongphob called on the local media and people to watch the bank and politicians closely. With a general election approaching, all political parties have promised farmers high prices for their farm products.

The Thaksin government launched many populist schemes and was accused of using the BAAC as political tool. The present government thus ended several populist programmes. BAAC president Thirapong Tangthirasunan said the bank still needed compensation of about Bt50 billion to Bt60 billion from the government to cover the cost of previous farm subsidies.

"To protect the bank, we must make politicians understand the way the bank does business and its limitations," said Thiraphong.

Applying the sufficiency-economy philosophy of His Majesty the King to agricultural development would also lessen political interference in the bank's business, said Thirapong, who is also chairman of the Asia-Pacific Rural and Agricultural Credit Association.

Association secretary-general Benedicto Bayaua said more dialogue between bankers, politicians and the general public would foster better understanding among relevant parties.

"We need politicians to make good rules," he said.

Bayaua said agricultural and rural financial institutions around the globe had now turned their attention to environmental issues, while in the past they simply made loans to farmers without taking into account how farming affected the environment.

With the theme of this year's meeting being the contribution of agricultural and rural economies to sustainable and equitable development, about 1,000 participants represented rural financial institutions in 120 countries at the gathering, which closes on Saturday.

He also said many governments now faced a dilemma, because oil prices were higher. The governments try to encourage farmers to process their farm products into biofuel, but at the same time they need food security,

he said.

Wichit Chaitrong The Nation