Article Thailand: Crisis in Thai Rice Pledging Scheme

(Aug. 7, 2013) In mid-June 2013, the Thai government admitted that its rice subsidy program had lost 136 billion baht (about US$4.4 billion) in payments to support a rice pledging scheme for the country’s 2011-2012 growing season. (James Hookway, Thai Rice Aid Under Fire, THE WALL STREET JOURNAL (June 17, 2013) [subscription required for access].)


The Thai government, led by Prime Minister Yingluck Shinawatra, implemented the rice pledging scheme immediately after the 2011 election, to give Thai farmers the opportunity to pledge and then provide an unlimited supply of their rice to the government at a higher price for their crops than they would obtain by selling them at market rates. The ultimate goal of the scheme was to increase rice prices to safeguard farmers from middlemen. (Unmilled Season Rice Pledging Scheme 2011/12 [in Thai], PR Technical Development Office (Oct. 4, 2011).)

The program involved the appointment of a National Rice Policy Committee by the Prime Minister through an order issued under article 11(6) of the Organization of State Administration Act 1991. (Office of the Prime Minister’s Order No. 153/2011 [in Thai], Department of Internal Trade (Sept. 4, 2011).) The Committee set out the details of the rice pledging scheme in Minutes issued in September 2011 (Minutes of the Meeting: The National Rice Policy Committee 1/2011 [in Thai], Department of Internal Trade (Sept. 9, 2011).)

The Committee provided for unlimited rice pledging by specifying rice varieties and the prices for annual harvests of each type, as long as the humidity content of the rice was no more than 15%. (Id.) For example, unmilled jasmine rice was valued at 20,000 baht (about US$645) per ton and unmilled aroma rice at 18,000 baht (about US$580) per ton. Any Thai farmer who acquired a certification letter from the Ministry of Agriculture and Cooperatives and who was also a client of the Bank for Agriculture and Agricultural Cooperatives was eligible to participate in the scheme. (Id.) The Rice Trading Act 1946 is the overarching legislation that governs rice trading in Thailand. (Rice Trading Act 1946 [in English] (last visited July 31, 2013).)

Criticism of the Scheme

Scholars and the opposition party opposed the rice pledging scheme because the price that the government offered to farmers who pledged rice was higher than the market price by almost 50%. The critics claimed that for the scheme to succeed, the government would need to provide subsidies amounting to approximately 300 billion baht (about US$9.375 billion) for pledging rice within two years. (1 Year: Problems of Rice Pledging Scheme of Yingluck Administration [in Thai], THAI PBS NEWS (Dec. 25, 2012).) In December 2012, opponents requested that the Shinawatra administration cancel the scheme, because they considered that it would lead to a tremendous loss of money by the government. (Id.)

The Thailand Development Research Institute (TDRI), a private non-profit foundation that researches public policy, analyzed the rice pledging scheme in 2012 and identified several disadvantages. (Advantages and Disadvantages of Rice Pledging Scheme [in Thai] TDRI (Sept. 2012).) For example, it found that the farmers who would receive the most benefit from the scheme would be high to moderate-income farmers (around 1.185 million households), because they are capable of cultivating considerable amounts of rice for the purpose of selling their product to the government. (Id.) In contrast, low-income farmers possess only the ability to cultivate rice for consumption by their own households. Thus, they would not have enough rice to enter into the rice pledging scheme. (Id.) Furthermore, THAI PBS found that only 8% of farmers would benefit from this scheme. (1 Year: Problems of Rice Pl
edging Scheme of Yingluck Administration
, supra.)

In addition, TDRI considered that fraudulent or corrupt activities might occur in the implementation of the rice pledging scheme. (TDRI, supra.) For instance, Cambodian scholars estimated that more than 500,000 tons of rice from neighbors of Thailand were smuggled into Thailand to substitute for the Thai farmers’ rice before the latter was pledged to the government. (Id.) However, Nattawut Saikua, the Thai Deputy Minister of Commerce, contended that the claim of subrogation of the rice supply by Thailand’s neighbors was false, arguing that such a substitution, given the large number of trucks required for transport of the rice, would be noticed by border officials and that the pledging scheme is transparent because of the farmer certification process. (Nattawut Points Out It Is Difficult to Subrogate Rice Pledging Right [in Thai], THAIRAT (July 16, 2013).)

If the smuggling of rice is possible, as claimed by opponents of the scheme, Thailand’s neighbors may gain benefits from the Thai rice pledging scheme. According to a Burmese news outlet, Ye Min Aung, Secretary of the Burmese Rice Merchants Federation, stated that “at the beginning of this year, Thai traders started to buy normal rice and broken rice [grains] from Myanmar and transport it across the border. This cross border rice trade is related to the Thai government’s rice scheme. Thai farmers will benefit if they buy cheap Burmese rice and import it into Thailand for this scheme.” (Thai Subsidy Scheme Leads to Burmese Rice Sell-Off, THE IRRAWADDY (July 3, 2013).)

Furthermore, opponents of the scheme and critics in the media have pointed out that plans to release pledged rice are not well implemented, and this may cause rice prices to drop. (Lindsay Murdoch, Thailand’s Failed Rice Scheme Creates Moulding Mountains of Grain, THE EXAMINER (July 25, 2013).) If rice stored in rice mills is not constantly released, its quality will decrease due to the humidity in the mills. (Methods of Preserving Rice Before and After Harvest [in Thai], Bureau of Rice Research and Development website (last visited Aug. 1, 2013.)

Recent Government Measures

In June 2013, the Prime Minister announced that beginning on July 1, the amount paid to farmers for pledging rice would be cut by 20%. (Murdoch, supra.) However, she reversed this decision when the announcement brought protesting farmers to the streets of Bangkok. The government then announced that it would sell up to 1.5 million tons of rice a month this year through tenders and sales to other governments. (Id.)

Written by Chayada Polpun, Intern, Law Library of Congress, under the guidance of Sayuri Umeda, Senior Foreign Law Specialist.

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