Thailand’s rice industry is a global powerhouse that leads the world in exports, with about 10 million tons expected to be sold abroad this year. The industry employs millions of workers across the country and both major political parties are competing for their votes. Analysts say some of the lucrative offers being discussed by politicians could actually reduce the country’s massive exports.
Winning over voters
As politicians campaign for Thailand’s July 3 general election, the major political parties are offering income guarantees and sharply higher rice prices in a bid to win over the vote in the country’s large rural community.
Thailand’s central and northern plains grow much of the country’s annual rice export haul worth more than $5 billion each year. Political analysts say the region is also politically important because most of the 500 seats in the House of Representatives lie in rural areas, especially in the central and northeastern regions.
In recent months some rice farmers have lobbied for more generous government subsidies. The current system run by the governing Democrat Party provides a guaranteed income of about 10,000 baht or $330 per ton for rice, depending on the type grown. If market prices fall below that mark, then registered farmers are paid the shortfall directly to their accounts.
Economists say this two-year-old system assists more than five million households, especially smaller farming operators in the poorer regions of the country. The rice insurance scheme replaced a previous plan that had the government directly buy and store the rice in huge warehouses. Critics of the current scheme say that the warehoused rice allowed the government to better control market prices.
The opposition Puea Thai Party is pledging to revive that system and pay farmers 15,000 baht per ton or $496.
Open to corruption
Viroj NaRanong, an analyst with the Thailand Development Research Institute (TDRI) says the Puea Thai Party’s "price pledging program" may be open to corruption.
“The major problem is that the government itself doesn’t have enough budget to provide to all the farmers who want it. So usually the money goes to provinces that have good connections with the politician who run the ministry of agriculture. This measure has been undertaken for a very long time and it always is very corruption prone," said Viroj NaRanong.
The Puea Thai Party is led by Yingluck Shinawatra, sister of Thaksin Shinawatra, ousted from power in a coup in 2006. Analysts see the election as an opportunity for Thaksin to return to Thailand and try to be cleared of corruption charges.
While the election is expected to be closely fought, Thaksin’s party is leading in recent opinions polls and rice traders say that market prices have already started to rise in anticipation of a Puea Thai victory.
Vichai Sriprasert, president of exporter, Riceland International Ltd and board member of the country’s powerful Thai Rice Exporters Association, backs the current government’s income support scheme.
“I say that the income support should be better. And I think the small farmers, particularly in the north east now they have their own account. The government pays them the difference between the target price and the actual market price - they get the actual cash in their bank account and lot of farmers benefit from this,” said Vichai Sriprasert.
Vichai says the Puea Thai’s pledging scheme benefits larger rice farms on the central plains where they plant up to three crops a year. The scheme could also drive rice prices higher, making them less competitive with exports from neighboring Vietnam. Members of the Rice Exports’s Association say it could cause exports to plummet and let vast rice reserves spoil in the government’s poorly-managed warehouse system.