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Published on April 12, 2008

One weakness is the lack of political will to develop the rice sector for medium- and long-term benefits. In other words, Thai politicians have mostly been short-sighted over the past several decades when it comes to managing the rice sector.

Among the most popular measures are price intervention and related schemes used by previous governments to alleviate farmers' short-term problems. In the eyes of most politicians, price intervention makes sense because it is easier to implement than other long-term measures, and also the most effective to win the support of farmers.

So virtually every government has taken this step, including the previous Thaksin administration, resulting in a huge surplus of storage and milling capacity, as investors hope to cash in on these lucrative government-sponsored schemes.

At present, the country has a combined annual capacity to store and mill up to 90 million tonnes of paddy, nearly three times the actual supply of about 30 million tonnes. The lack of political will has also meant little new technology has been introduced in the rice-farming sector, while managerial skills and farmers' know-how are often limited. More importantly, water resources and logistics have often been mismanaged, resulting in low productivity and high transport costs.

In terms of productivity, Thailand is ranked among the lowest of major producers and exporters of rice, as its yield per rai is just 430 kg compared to Burma's 500 kg, Vietnam's 700 kg and China's 900 kg. Low productivity has also resulted from the lack of economies of scale, as most Thai rice farms are small, ranging from just 5-10 rai to a few hundred rai per household.

For large-scale farming using high-tech equipment, each farm needs to be at least 5,000-10,000 rai to achieve greater operational efficiency. One solution for Thailand is to promote the grouping of many small rice farms into one single operation. But few politicians are serious about pushing for such a transformation to boost efficiency and competitiveness. Given the global upward trend in rice prices - in which new records have been set over the past 3-4 months - it looks like there will be more farmers encroaching on forest and other public land. But little is expected to be done to boost productivity.

On logistics, high oil prices have jacked up transport costs for Thai rice to nearly 25 per cent of the total - far higher than the global average of 10 per cent. This is a negative consequence of previous governments' failure to develop alternative transportation modes for the rice sector. Today, 99 per cent of all rice is still transported by truck, whereas Vietnam, the world's third-largest rice exporter, relies heavily on much cheaper and more efficient water transport. Because up to half of all Vietnamese rice is not dependent on land transport, Vietnam's logistics costs are significantly lower than those of Thai producers.

Former PM General Surayud Chulanond recently admitted that most of the key issues facing Thai farmers remain unsolved, even though they were clearly identified two decades ago.

So there is little hope that the ongoing price increases - in which the world's most expensive hom mali, or jasmine fragrant, rice is currently quoted at over US$1,300 (Bt41,080) per tonne, more than double the level just 3-4 months ago - will do any good in the long run for the plight of Thai farmers.

Nophakhun Limsamarnphun

nop1122@yahoo.com

The Nation