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Thailand's rice subsidy scheme concerns World Bank

Publication Date : 20-12-2012

 

The World Bank has expressed concern over the Thai government's rice-price support scheme due to its high cost and large losses, while predicting that the global prices of rice and rubber - both major Thai export commodities - will likely fall next year.

The bank also projects that the Thai economy will expand 5 per cent next year, while this year's growth is expected to come in at 4.7 per cent after the country weathered the 2011 floods and adverse global economic conditions well.

Of the government's various stimulus programmes, the paddy-pledging scheme is the costliest, according to a World Bank report released yesterday.

The predicted cost of the scheme is 376 billion baht (US$12.2 billion) for the 2011/2012 harvest season, with losses estimated to be 115 billion baht. The cost for the current harvest season is projected to be 432 billion baht, with losses estimated at 132 billion baht, Kirida Bhaopichitr, lead author of the report, told a press conference.

"It is the best-case scenario, in which we assume that the government is able to sell all of its rice stocks," she said

The combined losses of for the two harvest seasons are equivalent to 1 per cent of gross domestic product, she added.

The costs cover the cost of pledging, milling, storage and administrative fees, but do not include spoilage and Bank for Agriculture and Agricultural Cooperatives interest.

Meanwhile, the price of Thailand's 5-per-cent broken-rice variety in the global market is expected to fall from the current US$550 per tonne to $520 next year, Kirida said.

Historically, the government cannot negotiate to sell rice at higher than the market price, said Mathew Verghis, lead economist of the World Bank's office in Bangkok.

"The projection at the moment is that rice prices are not going to rise in the near future, although if there were a change such as a major drought in other rice-exporting nations, that could happen. But the other way to minimise the losses is to increase rice exports by simply selling at world prices to the market," he said.

The World Bank also urged the government to review all of its populist policies aimed at stimulating economic growth.

The current set of stimulus programmes amounts to 5.4 per cent of GDP this year, and an estimated 2.4 per cent in 2013, it said.

The measures include the tax rebate for first-time car buyers, tax exemption for first-house buyers, the minimum-wage increase and a cut in corporate income tax.

Spending has helped stimulate the domestic economy this year while the global economy is weakening, but this has added to public debt, which will have increased from 45 per cent of GDP at the end of this year to almost 50 per cent in 2013, said the bank.

*US$1=30.6 baht

 

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