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Why is the Thai govt stuck in the mud over rice-pledging scheme?
Publication Date : 13-02-2014
Someone in the newsroom posed a very simple question on a subject undermining the caretaker government to the point of near collapse: Can the Yingluck caretaker government pay farmers under the rice-pledging scheme?
Somebody immediately responded: "Yes. Payments could be made to farmers because it would be a continuation of a policy adopted by the government."
Somebody else added: "It depends on how the interim government goes about doing it. If it has to make new loans to pay, permission must first be sought from the Election Commission. Check Article 181 of the Constitution. If it falls under that clause, it can't be done."
Article 181 says that a caretaker government cannot take actions that result in approving activities or projects that could be seen as binding commitments on the new Cabinet after the election.
The government was channeling its payments to farmers under this project through the Bank of Agriculture and Agricultural Cooperatons (BAAC), a government financial institution, before the House dissolution.
It ran into a liquidity problem because the government had asked the bank to pay out in advance. Once the limit was reached, the bank halted the payments. That's when the BAAC labour union smelled something fishy - and came out in public to protest.
Someone else in the newsroom chipped in with to explain that the BAAC could have extended the advance payments for farmers on behalf of the government but an official Cabinet endorsement would be required - and the BAAC would have asked the Finance Ministry where the refund would come from.
In the past, the BAAC had gone along with government requests for such advances, but this time around the ministry wasn't clear how it would repay the bank.
For this year's paddy crop, the government had set a budget of 270,000 million baht (US$8,300) for the scheme. The real pay-out was to be 400,000 million baht ($12,200). The shortfall of 130,000 million baht ($4,000) was what the government's "credit crisis" was all about.
There wouldn't have been a problem if the Commerce Ministry could sell part of the mountain of paddy stock. But that became an uphill task - for the simple reason that the government had bought paddy from farmers at a price much higher than the market average. And even when the ministry tried to get friendly governments to sign "government-to-government" deals to deflate criticism, it failed miserably. There were some diplomatically polite gestures from some governments, but when they sat down to discuss the price, none of the proposed deals could be sealed.
And when it tried to manipulate things, the Commerce Ministry screwed up. The previous Commerce minister is under investigation by the Anti-Corruption Commission for accusations that he was responsible for faking a "g-to-g" deal with Guangdong Stationery & Sporting Foods Import & Export Corp (GSSG) and Hainan Grain & Oil Industrial Trading Company of China.
Then, another Chinese firm, Heilongjiang Beidahuang Rice Industry Group, was said to have signed another "g-to-g" deal. Last week, the Commerce Ministry confirmed that the firm had cancelled the contract due to Thailand's domestic changes.
Neither deal, however, could be considered a genuine "g-to-g" contract since it is well known that the Chinese government would consider any deal a government-to-government transaction only if it is done through its national state enterprise for this purpose - COFCO.
COFCO does have a five-year contract to buy 200,000 tonnes of rice yearly. Another deal was to be signed on December 15, last year, for a two-year special offer to buy one million tonnes each year after Premier Li Keqiang's visit last year. The draft agreement mentioned the Thai government's readiness to give priority consideration to China's participation in the country's high-speed train project - and Beijing's agreement to receive agricultural products as part of the payment for that service.
But the signing never took place because of the House dissolution.
Why the Yingluck government has never come clean with the Thai public about the "official government-to-government rice deals" with China remains a mystery. It is clear, however, that not even the most powerful country in the world can come to the rescue of a government determined to commit political suicide through extreme populist policies.