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Rice scheme and the perils of populism

Publication Date : 22-01-2014

 

Widespread protests by rice farmers have demonstrated the failure of the government's controversial rice-pledging scheme. The protests are taking place in parallel with the ongoing anti-government rallies in Bangkok. As such, the hazards of a populist policy are being blurred by cut-throat politics. This was underlined when the National Anti-Corruption Commission agreed to investigate caretaker Prime Minister Yingluck Shinawatra's involvement in the rice scheme.

This politicises the issue even further, but in fact, a policy as costly and contentious as this one demands close scrutiny.

In its aim to boost farmers' income and help alleviate rural poverty, the subsidy programme looks promising on paper. It guarantees farmers above-market prices, which lured many to join in. But critics have been warning of the dangers of this populist programme since its launch in 2011. Leading economists doubt whether the scheme will ever be economically viable. They have also detected loopholes that make it vulnerable to corruption.

The farmers have become victims of the scheme, and are collectively demanding 110 billion baht (US$3.34 billion) in payments that are now almost five months overdue. The Bank for Agriculture and Agricultural Cooperatives has told the farmers the government has inadequate funds for the scheme and cannot pay them for the rice.

In urgent need of financing for the next planting season, farmers are now in danger of becoming prey to loan sharks and sinking even further into debt.

The problem is compounded by the falling global competitiveness of the Thai rice industry.

With 680 billion baht spent on the scheme over the past two years, the pledge policy has put enormous pressure on the country's finances. The government now needs to find 130 billion baht to pay 1.4 million farmers. So far only 300,000 have been paid. The major problem - a lack of cash flow - partly stems from the accumulation of huge stockpiles of rice that the government cannot sell.

What is now clear is that the supposed beneficiaries of the pledge - the farmers - have become its victims. Instead, the policy has benefited millers, traders, corrupt officials and politicians. The government knows well the positive effects of populism, but when it turns on you, problems loom on all sides.

With the problem becoming evermore urgent, the government has no way out but to find fiscal loopholes to pay the farmers. Yet this will bring further scrutiny from taxpayers, check-and-balance agencies and others. The government's opponents can now heap on the pain.

Worse still, the issue has become a political football, with government supporters accusing unpaid farmers of being part of a conspiracy to overthrow it.

However, anti-government protesters don't need to make a case for the disastrous nature of the policy - that the rice pledge has brought misery to farmers is hardly in dispute. "I've seen nothing as bad as this rice scheme," former Thailand Development Research and Institute director Ammar Siamwalla has commented. "Nothing but lies and boasting."

Let the rice scheme serve as a warning to our next government of the costly dangers of populism. Before launching such a grand concept aimed at bettering the lot of our poorest citizens, it needs to answer a big question: Who will actually benefit?

US$1 = 33 baht

 

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