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Agricultural policies do more harm than good

Publication Date : 24-04-2012

 

Disastrous price subsidies for farm produce will do long-term damage to Thailand's farmers, who form the core support of the ruling Pheu Thai Party

The government must revise its farm subsidy policy before the consequences of it have even more negative effects on the livelihood of the nation's farmers.

The government continues to claim that its subsidy policy will result in a better standard of living for Thai farmers, simply by boosting the prices of farm produce. But the evidence so far suggests that the government should immediately bring a halt to the scheme and stop the massive spending of taxpayers' money on wasteful projects that do not serve the purpose of boosting prices in a sustainable manner.

Worse still, the subsidy scheme has distorted the market, wrecking Thai competitiveness in exports of farm produce and eroding the incentives for Thai farmers to improve their productivity.

The government's price intervention programmes for rice, cassava, red onion, garlic and pineapple have cost huge sums of money that have ended up as a complete waste because, without buyers, some crops have spoiled in the government's vast stockpiles.

Unfortunately, Commerce Minister Boonsong Teriyapirom is adamant that the government will not revise the policy, because it was an election promise to gain rural votes. This is negligence that shows disregard for the evident bad results of the policy so far.

The government has so far spent 200 billion baht (US$6.45 billion) on the rice subsidy programme alone. Six months have passed and the rice price has not reached the government's target level. Even worse, overseas orders for Thai rice have evaporated because Thai rice prices are now higher than those of our neighbours, which can produce higher yields per hectare at a lower price and with no market distortion.

The failure of the rice subsidy programme is also reflected in the fact that so far no farmers have redeemed their produce with the government at the promised price of 15,000 baht per tonne because the prices on the market have never reached that target. In short, the rice programme has not actually boosted prices for farmers because the rice price is still quoted at less than 11,000 baht per tonne.

These wrong-headed policies do not encourage farmers to improve their capacity and productivity. According to a study by the Centre for International Trade Studies at the University of the Thai Chamber of Commerce, the average yield per rai of Thai rice is one of the lowest in the Southeast Asian region. In fact, Thailand now ranks a lowly 7th among Asean countries in terms of productivity. We now produce only 448 kilograms of rice per rai, compared to around 862 kilograms in Vietnam.

Thailand likes to brag that it is the world's biggest rice exporter but the yield per rai in the country is now far below the world average of 680 kilograms.

The government, however, seems blind to these factams with no focus on how to help our farmers improve their production capacity. Instead, the government tries to buy farmers' votes by promising high figures for selling rice directly to the government.

Another abject failure is the attempt to prop up the cassava price. This price has not yet increased in line with the government's pledging policy. The budget from the government to shore up the price of this commodity has been doubled to 40 billion baht for the coming season. The actual price of cassava remains low at 1.30-1.90 baht per kg compared with the government's pledging price of 2.75-2.90 baht.

Farmers are falling into this trap of expectancy. Pineapple growers are now also asking for urgent measures to shore up prices of that product. The 300 million baht spent so far on red onions has literally been wasted, with the putrid odour of mountains of these rotting vegetables in the government's stockpiles. No one has benefited from this disastrous scheme because the government did not have any management plan after buying these red onions from farmers.

These examples show how the farm subsidy programme has failed to serve its purpose. Except for spending taxpayers' money to satisfy its rural support base, the government does not have any idea about how to help the country's farmers realise their potential in a long-term, sustainable manner.

Eventually, these catastrophic polices will have a negative lasting effect on our farmers, who form the electoral stronghold of the Pheu Thai Party, and the government may end up paying the price of its failure.

 

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