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February 21, 2014

Thai Rice Farmers Give Government a Week to Make Payments

by Ron Corben

Pressure on Thailand's government eased Friday after thousands of rice farmers, preparing to demonstrate in Bangkok over delayed rice payments, accepted promises of money next week. Thai rice sector remains deeply troubled as the government tries to find a way to pay tens of thousands of farmers.

Faced with threats from thousands of farmers arriving in Bangkok, Thailand's besieged government of Prime Minister Yingluck Shinawatra successfully negotiated their return home Friday with promises to meet outstanding payments next week.

The farmers, from the central regions, are among as many as one million rice growers waiting for outstanding payments from last year's crop under the government's controversial rice price support scheme.

The Thai Government has sent more than $20 billion during the two years it has been in office to farmers and millers as part of a scheme that offered to pay growers 50 percent above world prices.

The plan was a center piece of the governing Pheu Thai Party's election manifesto in 2011 and helped it secure the votes of the rural electorate in the north and northwest of the country.

But analysts and rice industry observers say the scheme has been dogged by corruption allegations and suggestions of fake government-to-government  deals that failed to materialize.

Vichai Siriprasert, honorary president of the Thai Rice Exporters Association, said the scheme has led to huge losses for the government.

"Now we have a big mess because the price was set at the wrong level. We know that as a consequence we could not sell the rice - overstocked and ran out of money," he explained. "The government I would say lost about two thirds of the investment. So after two years they managed to get back only 18 baht for every 100 baht invested in the mortgage scheme."

Anger over the late payments has grown within the rural community as farmers face increasing indebtedness. Farmers associations have linked some 11 farmer suicides in part to the delays.

Earlier this week, Yingluck, on national TV, offered a public apology.

But while Yingluck spoke of her sadness for the farmers, she defended the scheme, claiming delays in payment were due to on-going anti-government protests in Bangkok.

At the same time, the National Anti-Corruption Commission (NACC) is to press charges against Ms Yingluck in her role as chair of the national rice policy committee. Yingluck has rebutted the claims.

Thailand, once the world's leading rice exporter has slipped to third place behind India and Vietnam. Unable to sell its rice stockpiles on the international market without major losses, some 20 million tons of rice is now in warehouses, often deteriorating in quality.

David Dawe, a U.N. Food and Agriculture Organization (FAO) economist, says Thailand faces challenges in attempting international sales to raise funds to pay farmers without triggering a collapse in the global rice market.

"If they hold this stuff for too long it continues to deteriorate in storage and incur costs as well. But if they get rid of it all now they are going to cause the market to really collapse and so it's really going to be a fine balancing act," stated Dawe.

But Dawe said Thailand could return to being the world's top rice exporter once the current problems are overcome.  

The government, a caretaker administration until a new cabinet is formed after the February 2 national polls, has sought alternative funding sources to pay the farmers, including loans from state-owned banks. But depositors and staff have protested including a run on deposits at one bank that led to a halt in loans.

The rice farmers, strong supporters of the governing Pheu Thai Party, have given the Yingluck a week to meet the outstanding payments or are vowing to return and besiege the city.