Govt may have to cancel contracts

Like it or not, his government has to decide whether to cancel the contracts between the Commerce Ministry and 17 rice exporters to avoid an estimated loss of Bt20 billion and a possible bribery-scandal alleged to amount to Bt2 billion.

Another thing to consider is how this type of rice policy could undermine the country's competitiveness as the world's biggest rice exporter, as well as the overall economy.

The critics' main argument - that the policy largely benefits politicians and traders, not farmers, who are the backbone of the country - must be taken seriously into account.

Prime Minister Abhisit Vejjajiva yesterday said any farm crops under government support programmes should be managed and sold in a transparent manner. The schemes must not produce losses as big as those suffered by previous governments.

"We're very serious about this government rice auction. I don't want to see huge losses like last year. We want to create transparent methods that cause the government less losses at the same time," Abhisit said.

The government will consider minimising the price-pledging and subsidy programmes for farm crops and substituting more prudent price-guarantee schemes instead, in order to cut government expenditures.

Abhisit was apparently arriving at the right logic at a time when the issue has turned into a hot political potato. How to "release" 2.6 million tonnes of rice that ended up in state warehouses as a measure to shore up market prices is becoming a matter of life and death as far as the relationship among the coalition partners is concerned.

But if Abhisit's thinking is correct, his ideas have yet to be translated into action. The government's urgent meeting on the issue on Wednesday, chaired by Deputy Prime Minister Suthep Thaugsuban, produced an ambiguous, if not disappointing, outcome.

Exporter sources viewed it as a compromise designed to serve vested interests among the coalition partners more than the country's interest.

"The Democrat Party should have taken a stronger stance on this suspected corruption in rice sales instead of being concerned only about securing the government's power," the source said.

Commerce Minister Porntiva Nakasai introduced a highly questionable auction of 2.6 million tonnes of the government's rice. Seventeen exporters won the bidding, including Siam Indiga, Asia Golden Rice, Capital Cereals, Chaiyaporn Rice and Food Products, Ponglarb, Singto Thong Rice and CP Intertrade.

The deals with those winners had been inked prior to the Cabinet's consideration, pitting Porntiva against Deputy Prime Minister Korbsak Sabhavasu, who looks after economic policy.

The ministry's auction is expected to lose Bt20 billion for the government. The ministry had approved the sale of stockpiled rice at an average price of Bt14,200 to Bt15,500 a tonne, while the going market price is Bt16,500 to Bt17,000.

The government's cost for storing the rice is Bt22,000 to Bt24,000 a tonne.

A source from the Thai Rice Exporters Association said the whole thing was an ongoing mistake that started when the government introduced the rice-pledging programme, "which is the traditional way politicians benefit".

The government's rice-mortgage programme will require about Bt100 billion a year, of which only 30 per cent will actually go to farmers. The rest will allegedly be taken by politicians, millers and middlemen.

Although Porntiva yesterday insisted the Foreign Trade Department would soon set up a special committee to draw up the ministry's strategy to release all the government's stored crops, it will not solve the biggest problem: the corruption the policy generates and encourages.

Will the new committee make a daring proposal to cancel the 2.6-million tonne auction? The public hopes to see a fair and transparent process for a new auction or a new option of selling the inventory under government-to-government deals.

A Thai Rice Exporters Association source said if the government bargained for a slight price increase of Bt50 a tonne, exporters might agree to ensure minimum losses from defaulting on deliveries to their buyers.

However, the source said it would be best if the government simply cancelled this rice tender, in order to restore transparency.

To ensure stable rice prices in the market, the government should consider releasing small lots of rice instead of dumping all of it on the market at one time. Big-lot auctioning not only causes market prices to collapse, but also encourages bribery and corruption.

CP Intertrade managing director Sumeth Laomoraphorn said the company was prompted to negotiate for an increase its bidding price with the Foreign Trade Department even though the firm had already offered a price near the market rate of Bt25,000 to Bt26,000 a tonne for jasmine rice.

If the bidding is cancelled, the government will have to set clearer regulations for all traders, he said.

Asia Golden Rice president Sombat Chalermwutinan said his firm would seek clarification from the Commerce Ministry, because the bidding suspension had created huge damage to the firm. He also refused to increase the price that the company offered for 500,000 tonnes of rice.