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Rice debacle could spell the end of Thai government
Sydney Morning Herald - February 7, 2014
"All of the people in my district supported Yingluck in the past but now none of us do," says Narumol Klysiri, a 55 year-old farmer holding a receipt for seven tonnes of rice she sold to the government four months ago. "Where is my money? My family has no money to eat," she says.
Mrs Narumol is one of more than one million farmers who have not being paid for months as a rice subsidy scheme that helped sweep Ms Yingluck into power in 2011 teeters on collapse, with losses that economists say could be as high as $12 billion. Thousands of farmers have been left in deep debt and there are reports of increasing rural suicides.
The government's inability to pay the farmers appears to have caused a sharp drop in support for Ms Yingluck's ruling Pheu Thai party at last Sunday's national elections. The scheme was seen initially as her way of mimicking her elder brother Thaksin Shinawatra, who introduced popular expansionist economic policies before he was ousted in a 2006 coup.
Ms Yingluck also faces an investigation by the country's anti-corruption agency that could see her impeached for allegedly ignoring the scale of the scheme's losses.
She could be sent for trial in the Senate, a process that could lead to her dismissal. Fifteen other people, including a former commerce minister, also face corruption investigations linked to the scheme.
Ms Narumol traveled 100 kilometres from her farm in Ratchaburi central province to join other farmers protesting outside the country's Commerce Ministry on Bangkok's outskirts, one of a growing number of farmer rallies and road blockades across the country.
Anti-government protesters who have been demonstrating for almost three months on Bangkok's streets and are camped out in the city's Lumpini park have joined the farmers, claiming the scheme is symptomatic of reckless populism pursued by the government.
Previously the two groups were protagonists in an eight-year conflict that has deeply divided the nation.
Ms Yingluck, who called the election to try to defuse the unrest, this week blamed protesters for derailing the scheme, saying her administration's powers have been limited after the dissolution of parliament in December.
"The government was trying its best to keep its monetary discipline... we sympathise with the farmers who suffer (from the late payments)," she said.
Many economists, academics and public figures have criticised the scheme, whose losses threaten to downgrade Thailand's credit rating. Economists estimate it costs more than $9 billion a year to run the scheme - about 2.5 per cent of gross domestic product.
The fiasco began with the government's attempt two years ago to manipulate the world's rice market. Thailand was at the time the largest exporter of rice, which is not just a staple in the country, but an object of respect.
The plan was to buy local rice harvests for as much as 50 per cent above market rates to drive up global prices. But the market saw it as a clumsy attempt at price manipulation.
Rice exporters such as Vietnam and India stepped up their production while Thai exporters responded by investing in emerging producers such as Cambodia, Myanmar and Laos.
Global prices stayed low and the Thai government amassed stockpiles rather than selling overseas at a steep loss. Thailand effectively priced itself out of the market.
Warehouses across the country are full with rice stockpiles estimated at 18 million tonnes, 17 per cent of total global stocks. Its quality is deteriorating the longer it stays there and there are reports some is already rotten.
Huge shipments of rice continue to be smuggled across Thailand's porous border from Cambodia and Myanmar to be sold at substantially higher prices on offer in the Thai market.
State and private banks are reluctant to provide funds to finance the scheme amid speculation Ms Yingluck, facing multiple challenges to her rule, may soon be forced from office.
Early this week China cancelled a deal to buy more than a million tonnes of the rice, citing the anti-corruption agency's probe into the scheme.
Thai Commerce Minister Niwatthamrong Boonsongpaisal acknowledged the Chinese state-owned buyer "lacks confidence to do business with us".
The government has refused to detail the full cost of the scheme amid allegations of widespread corruption. Reports of government-to-government deals to buy the rice have been denied by the parties said to be involved, and by traders in the industry.
Clyde Russell, a market analyst quoted by Reuters, predicts the scheme is fatally damaged.
"However there are likely to be months of uncertainty ahead and a policy vacuum that may fuel anger from farmers and rural communities that form the backbone of Yingluck's support as they realise that the government's financial support has gone," Mr Russell says.
"For rice markets, it seems unlikely that whoever ends up in control in Bangkok will have any other choice than to continue to offload the massive stockpile at whatever price can be achieved," he says.
Nipon Puapongsakorn, a rice expert at the Thailand Development Research Institute, warns that if the scheme continues "the country will go broke."
Ms Narumol, a mother of three, has borrowed the equivalent of $3670 the government owes her, paying a loan shark an accumulative 10 per cent interest a month because state banks refused her a loan.
"We have four cows that provide milk but without the money for our rice we have nothing," she says. "I don't know how we will be able to repay the money."
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