BBC News online reported recently Yingluck Shinnawatra, Thailand caretaker PM is facing an investigation of National Anti-Corruption Commission (NACC) on the scandalous rice subsidy scheme for possible negligence of duty.

Thailand is one of the world’s most corruption found countries. The corruptions are found among governmental levels and private enterprises. There are tricks used by those corrupted projects by networks cooperation among government related offices and business parts both domestic and abroad. Thailand Rice SubsidyScheme is one of them.

Rice is one of special products in terms of pricing for trading related to economic system. It went wrong when Yingluck’s government used it to serve the pro populist policies of Pheu Thai Party to win the last election with the huge supporters who are farmers and rural people.
Rice SubsidyScheme has become a big project with huge money related. This might have brought ones related in trouble. To simplify the corruption complex, MThai Inter is explaining in details.

Let’s look at the process set by the government.
When the first button was wrong placed
The government propagandized one of ridiculous populist policies by giving farmers a promise to guarantee their rice products at high price, about 15,000 THB / one rai. Yes, it is wrong, but it has happened again and over again in Thailand, where nobody cares when some of Thai people said out loud Reform (the political system) before Election.
The price set without considering of the world prices and market mechanism. This has become a trap to the government itself.

Let’s have a look at what is called Rice subsidy scheme in Thailand.

  • - Rice fields : Rice farmers grow rice in their own / rent fields.
  • - Local offices of Department of Agricultural Extension (DOAE): Rice farmers register for receiving a register paper declaring the farmers are legal to sell the rice harvested to the government.[The paper is the key for the income the government pledged before an election.]
  • - Rice fields: Rice is all harvested (the end of a long waiting).
  • - Rice mills: Farmers deliver rice harvested to a rice mill to turn it to white rice and they must receive a ticket saying their rice is being milled here.
  • - Rice farmers take the ticket to Bank for Agriculture and Agricultural Co-operatives (BAAC), a state enterprise of Thailand to get their money.
  • - Rice mills: Do rice milling and keep it at “Central Warehouse” of Ministry of Commerce, waits for exporting.

Things seemed to be going well, with G2G agreement between Thailand and China governments, Thailand government should receive money back to pay the farmers as promised. Happy ending. Unfortunately, there were disturbance and intervention.

See what really happened to the system above.

- Rice fields: Rice farmers grow rice in their own / rent fields.

- Local offices of Department of Agricultural Extension (DOAE): Rice farmers register for receiving a register paper declaring the farmers are legal to sell the rice harvested to the government.[The paper is the key for the income the government pledged before an election.]

- Groups of gangster reached rural villages, persuaded farmers to sell the paper or even robbed the paper of right on the rice product from the farmers.

- Much lower quality rice imported by somebody from neighbouring countries taken to rice mills.

- Rice fields: Rice is all harvested (the end of a long waiting).

- Rice mills: Farmers deliver rice harvested to a rice mill to turn it to white rice and they must receive a ticket saying their rice is being milled here.

- Forged Tickets to get money from the DOAE
- Cheating networks of rice mills and gangster make profits of the grabbed tickets from farmers without rice on hands.
- Milled rice stolen from the mill both with and without cooperation of the mill management to sell. This has been without awareness of the Ministry of Commerce (or ignored).

- Rice farmers take the tickets to Bank for Agriculture and Agricultural Co-operatives (BAAC), a state enterprise of Thailand to get their money.

- Rice mills: Do rice milling and keep it at “Central Warehouse” of Ministry of Commerce, waits for exporting.

G2G rice trade between Thailand and China caused some cheats on the scheme by

G2G means there was no auctions on the process of rice pricing.

“Somebody authorized by China’s representatives company” took some rice from Dept. of Foreign Trade or DFT (on awaiting for exporting) to sell at the price set for the agreement between Thailand and China governments that is 40 % lower market prices and those rice were sold to the rice mills, eventually came back to the government via the process of subsidy scheme at 40 % over market prices.

Meaning – After the government sold the rice to “Somebody authorized by China’s representatives company” at 40 % lower market price, it purchased back its own rice at 40 % higher market prices.

Questions:
1. Who was the “Somebody authorized by China’s representatives company”?

2. How come the “Somebody authorized by China’s representatives company” did things without any comment, notice or even awareness of related authorized offices?

Friday, July 19, 2013, 09:06

Price pledge puts stress on Thai economy

By Jennifer Lo in Chiang Mai, Thailand

Controversial rice Subsidy scheme is creating widespread insecurity

It is not yet harvest time. But Ronwarit Pariyachattrakul feels as if he has been on a rollercoaster ride recently.

His sentiment is due to a second policy shift in the space of two months. The Thai government recently decided to set the purchase price of rice at 15,000 baht ($485) per ton, reversing a decision last month to trim the price paid to farmers by 20 percent.

“The (rice) market has been slowing down for years,” says Ronwarit, president of the E-san community enterprise agrarian network. He represents a group of northern Thai farmers who export organic Hom Mali, a high-quality jasmine rice, to China, Malaysia, Germany and the United States.

Prime Minister Yingluck Shinawatra’s populist program is mostly to blame. Since October 2011, the government has been buying ordinary rice from rural farmers for as much as 15,000 baht per ton, or around 50 percent higher than the market level.

While that won support for Yingluck among rural voters, few outside the rice farming community could see the sense in such a costly and risky scheme.

The higher prices pledged by the government have lured organic farmers to switch back to traditional farming in pursuit of higher yield and quicker profit. Organic farming generally requires more intensive care and greater effort to ensure farmlands are chemical-free. The result is a lower yield.

The scheme is not only a disaster for organic growers, but also a nightmare for Thai rice exporters.

The subsidized rice price has significantly weakened the competitiveness of Thai rice. Exports plummeted over one-third to 6.9 million tons last year, compared with a record 10.6 million tons in 2011, according to the Thai Rice Exporters Association.

Rivals have been quick to fill the vacuum. For the first time since 1980, Thailand lost its spot as the world’s top rice exporter. Last year, India overtook Thailand as the largest exporter with 10 million tons, and Vietnam gained the second place with 7.7 million tons.

Price is the issue. Thai rice, sold at $530 a ton, is about $150 per ton more expensive than that offered by rival exporters such as Vietnam, India and Pakistan.

At the Thailand Rice Convention 2013 held in Chiang Mai in late May, the then commerce minister Boonsong Teriyapirom insisted that Thailand would continue its controversial scheme for a third year. He was later removed from office.

Aware of the damage done to its rice export market, the government did consider reducing the price paid to farmers. In a bid to save declining exports, the Thai cabinet on June 19 announced that the pledging price would be reduced to 12,000 baht per ton, down from between 15,000 baht to 20,000 baht, starting from June 30.

The official reason cited for this change in policy was the global increase in rice supply, appreciation of the baht and the hope of reaching a balanced budget by 2017.

Not surprisingly, the cut angered most paddy farmers, who threatened to stage protests. The government quickly backtracked, announcing that it would stick to the original price until September, when the crop season will finish.

Meanwhile, Thailand is confident that it will regain its role as the world’s top rice exporter this year — with an ambitious export volume of 8 million tons. This target is in line with forecasts of the United States Department of Agriculture and the Food and Agricultural Organization (FAO) of the United Nations.

Such optimism is largely attributed to external factors, however, rather than Thai government policy. These factors include a huge demand for rice in the global market, particularly from China, the world’s largest importer of rice.

Added to this is that competitors including India and Vietnam are likely to cut exports in the second half of the year due to poor harvests and declining stocks, giving Thailand an advantage.

But in the long run, improving quality as well as crop yields is crucial if Thailand is to regain its reputation as a leader in rice production.

Due to Thailand’s lack of irrigation systems, the World Bank has ranked the country last in average rice productivity among major producers. Some smallholder farmers still subsist on rain-fed cultivation — relying on natural rainfall to water their crops.

Ultimately, Thailand is determined to pull itself out of a price war with major rice exporters such as Vietnam and Cambodia. Adding value to its rice products is one way out.

“It’s not good news if price rises never come with quality improvement,” says Nattawut Saikua, Thailand’s deputy minister of commerce.

With changing consumer tastes and more people switching to fair trade and organic products, Thailand is determined to increase its hold in this niche market, despite years of delay.

“Spending in high-end and niche markets is less affected by purchasing power as consumers tend to have stronger loyalty for the product,” says Olarn Chaipravat, president of Thailand trade representatives and advisor to the prime minister.

This niche market remains small, however. In 2011, the total export volume of organic rice in Thailand reached only 4,776 tons, accounting for less than 1 percent of its 10 million tons of rice exports.

But the fact that the gloomy eurozone actually took up two-thirds of Thailand’s organic rice export in the same year is encouraging.

“It is (certainly) the best rice that it will make the environment, everyone’s health — and life of Thai’s farmers better,” says Ronwarit, the organic farmer.