As Thailand enters its third week under military rule and pledges of reform, the National Centre for Peace and Order (NCPO) is being bombarded by requests and suggestions.
Here’s my bombshell for the Generals – get rid of all subsidies.
Subsidies of all forms are naturally “immoral”, as they distort the market mechanism and lead to irresponsible behaviour among the people involved.
Take the price of diesel as an example. Due to a resolution since May 2011 to maintain the pump price below Bt30 per litre, the number of diesel-driven pickup trucks has remained high, and would have done so with or without the first-car buyer scheme. In March, 34,813 ordinary cars were sold, compared with 40,797 pickup trucks. In April, the figures were 31,168 versus 34,383 units.
There are strong signs that the low pump price encourages the purchase of trucks. Who would want to drive a passenger car when petrol costs more than Bt30 a litre?
Meanwhile, waiving the excise tax on diesel cuts its price by Bt5.40 per litre but means the Excise Department is losing about Bt7.5 billion a month, or about Bt90 billion a year.
Compare that with the Bt51.8 billion that the 21km extension of the MRT Blue Line (Bang Sue-Tha Phra and Hua Lamphong-Bang Khae) will cost, according to the Mass Rapid Transit Authority of Thailand.
If we had resolved to spend the same amount on trains as we spend on diesel subsidies, we could have built many more kilometres of track by now. To be exact, the Bt277.5 billion spent on diesel subsidies between May 2011 and May this year could have financed the construction of 112km of electric train lines, based on Blue Line costs.
Just think of the better air quality that would come from getting more people off the road and onto convenient public transport – not to mention the contribution to the global battle against climate change.
Some say that scrapping the fuel subsidy would lead to rising inflation, given that transport of goods relies on diesel. Their fears are empty. Many logistics companies are now relying on gas, which is cheaper. And pickup truck owners nowadays are mostly city people who have nothing to do with transportation.
Personally, I hate it when a pickup driver overtakes my car at dangerous speed – I know he can only afford to burn that energy because of the subsidy.
I also get annoyed by farmers who hop on their trucks and head to Bangkok whenever agricultural product prices drop. Make it clear that subsidies will never be granted, and such protests would be killed at the root.
While I fully support the NCPO’s decision to make long-overdue payments to the farmers for their crops, I strongly recommend that it kills the rice-pledging scheme, which has benefited no one in a sustainable way.
In the beginning, it looked good. Farmers were guaranteed Bt15,000 per tonne of rice, almost regardless of quality. Yet this scheme has smashed Thailand’s rice industry. As global prices drop below Bt15,000 a tonne, there is no buyer out there to absorb Thai rice. We produce about 20 million tonnes a year, half of which is consumed domestically. Without buyers, our excess rice rots and loses any value. Releasing massive volumes of the stockpiled rice also depresses the price, which hurts farmers.
But this kind of subsidy seems to have deep roots in Thailand. I have plenty of memories of protests by farmers who cultivate other crops – rubber, tapioca, corn, pineapple, etc.
This week, you members of the NCPO will make a decision on how to help rice farmers. They have asked for a subsidy of Bt3,000 per tonne plus special assistance for production costs. But you should realise that if you say yes to the request, every farmer nationwide will demand same thing. You are not Santa Claus. Any money to be spent on subsidies is taxpayers’ money. No matter how good your intentions, you will be forever remembered for sponsoring subsidies with somebody else’s money.
I do understand that some people in our society do need some form of help. People are not born equal and not all people have equal access to government services. But if help is exclusively extended to farmers, what benefits are the relatively wealthy Thais who pay for the subsidies through tax entitled to? How can we make sure that taxpayers’ money is fairly and equally distributed?
Other forms of subsidy need to be eliminated, too. Some politicians hire their children or relatives to work for them, then use official budgets to travel with them overseas. Shouldn’t we have a rule that makes such appointments illegal?
In our culture of handouts, it will be hard work to kill all the free gifts. But if anyone has the power and support to do so, it is you, the NCPO.