Since the government of Yingluck Shinawatra took office, questions have been raised about its pricey rice-pledging policy, ranging from its sustainability to whether this government could fully execute the third year of the programme to satisfy millions o
Sustainability needs not be debated now, as this scheme has been proved otherwise. One estimate is that the government lost more than Bt400 billion in the first two years. All this because of the exorbitant pledging price – Bt15,000 for every tonne of paddy rice.
When it started, the price of 5-per-cent broken milled white rice was quoted at US$615.55 per tonne, or Bt18,466 at the Bt30 exchange rate. Since then, the price has been on a downtrend to $447.55 in December, or Bt14,634 at a Bt32.7 rate. The government has to take care of the difference, which is huge, as nearly all 20 million tonnes of new-crop rice enters the scheme every year.
Even if the government’s term were not cut short, the scheme could not be continued without changes. The government attempted to do that in the middle of last year, when it planned to cut the price or reduce the pledging volume, only to face opposition even from the Democrat Party. Even though the Democrats hated the policy, they said the Pheu Thai Party must not change it for the sake of farmers.
With support from the biggest opposition party, the pledging scheme for the 2013-14 harvest season should have gone smoothly. However, the abrupt dissolution of the House of Representatives changed all that. Distrust of the government stemming from the controversial amnesty bill reawakened the loathing towards former prime minister Thaksin Shinawatra. Because of the combined forces of hatred towards the “Thaksin regime”, the caretaker government’s hands now are tied.
Because of the political protests, the Bank for Agriculture and Agricultural Cooperatives, which handles the pledging scheme, could not raise Bt75 billion via a bond offering in November. Because of negligence and possible corruption, the government lost all its credibility in managing the scheme, making raising Bt130 billion for this scheme an impossible challenge.
Even when the Public Debt Management Office (PDMO) endorsed this issue, criticism abounded. Banks shunned the office’s tender call for loans.
A banker who asked for anonymity said his bank opted out of that auction over regulatory complications. The government has used up the allocated budget of Bt700 billion and as it now is in a caretaker role, it should not borrow more, as that would put a burden on the next administration. What if the next administration does not take responsibility for the loan? He said nothing when asked how that could be a problem since the PDMO had given the green light.
The government stumbled further in its attempt to find a bridge loan. Rumours raced around social media that state institutions such as the Government Pension Fund would step in. Amid thes attacks, the GPF publicly declared that there was no such plan. Krungthai Bank, 51 per cent owned by the Financial Institutions Development Fund, was also drawn into the fray.
No financial institution would want to experience what the Government Savings Bank is going through now. Its agreement to lend Bt20 billion to the BAAC led to a massive run on deposits, forcing the GSB to cancel the loan. Some savers said they had lost confidence in the bank, even though deposits at all state-owned banks are fully guaranteed. At commercial banks, they can expect a guarantee of up to Bt50 million per account per bank.
In the anti-government camp, sentiment is running high against letting the caretaker administration accomplish anything. As this spirals into a political game, the government’s supporters have come out fighting. They vowed to meet and deposit money at the GSB today.
This has become a class struggle between the upper middle class, which supports the anti-government movement, and the lower class, which opposes that movement. At stake are the GSB’s health and trust in the financial system. It must be a nightmare for the authorities. A run on deposits can be ignited by rumours and misperceptions.
Also at stake are the rice farmers. Despite their protests in Bangkok, the chances that they will get paid soon are slim. As ever, the Commerce Ministry has been slow in releasing rice stocks, said to have reached 17 million tonnes. Despite Chinese Premier Li Keqiang’s vow to buy Thai rice on a government-to-government basis, a Chinese firm recently backed out of a deal. That is understandable. The promise was given to a government that was expected to stay in power for some time while China does not need that much rice.
However, it’s not too late to release the rice stocks now, even if it means a huge loss, as this seems to be the only way to raise the needed funds for farmers and also to prove that the stockpiles exist despite rumours of their absence. Destroying inventories, as suggested by one exporter, seems ridiculous when more than 600 million people around the world are living in poverty.
Caretaker Prime Minister Yingluck Shinawatra was right to say yesterday that the issue was being politicised, with farmers held as hostages. Unable to find money anywhere, the government resorted to having the BAAC extend the debt-repayment period for all farmers by six months without any mention of the interest cost incurred.
It was right for her to say that there was no corruption at the policy level, as this is supposed to be a good measure to boost farmers’ income. However, poor and corruption-prone management cancelled out all the possible benefits.
Politicising this issue will hurt not only the government but also the farmers and the country. We can blame the “Thaksin regime” for all the madness, but we also have ourselves to blame, as this is a result of our tolerance of an inefficient checks-and-balances system.
The only good lesson learned from this is that a political party should not sell any unsustainable policy. All parties should be sincere in solving problems and should stop dragging this into a political ball game. We need to admit that the policy was well meant to raise the income of poor farmers. The real problem lies with the corruption-riddled implementation, which should have been prevented by an effective surveillance system.
It is the most needed thing, as corruption cannot be easily wiped out just by ousting the “Thaksin regime”.