Thai rice dealers warn government initiatives would hurt exports

Jul 28, 2011, 5:31 GMT

Bangkok - Thailand's rice exporters have warned that overseas shipments of the staple could drop by half next year if the government goes ahead with a proposed price intervention scheme, a news report said Thursday.

The price guarantee would push up prices of Thai rice on the international market, making it less competitive and potentially causing exports to drop by half from the 10 million tons predicted this year, the Thai Rice Exporters Association honorary president Chookiat Ophaswongse told a meeting Wednesday, according to The Nation newspaper.

Thailand has been the world's leading rice exporter for five decades, but the kingdom faces growing competition from Vietnam, Cambodia and India.

In addition to foreign competition, the sector is now threatened by the incoming government's policies, the exporters' association said.

The Pheu Thai party, which won the July 3 election and is due to set up a new cabinet next month, has promised farmers fixed prices of 15,000 baht (500 dollars) a ton for plain white rice and 20,000 baht a ton for jasmine, a high-quality variety that is popular in premier export markets such as Hong Kong and Singapore.

The party said the scheme will be in place by November, in time to purchase the winter crop, the largest of the harvest cycle.

But Chookiat warned that 'Thai exporters would certainly lose their competitiveness to their rivals.'

Export prices on plain Thai rice will increase from 545 dollars per ton at present to 850 dollars, he warned, while jasmine prices would jump from 1,050 dollars per ton to 1,400 dollars.

The outgoing Democrat-led government also supported rice farmers, but pegged the domestic price to the international market price, and supplemented it with direct subsidies.

Called the income-guarantee scheme, the programme benefited an estimated 4 million farmers and cost the government 80 billion baht (2.6 billion dollars) over a two-year period, which went directly into the farmers' pockets.

The scheme replaced the so-called pledging scheme devised by the former Thai Rak Thai Party of fugitive former prime minister Thaksin Shinawatra during his premiership between 2001 and 2006.

Thaksin is also the de facto leader of the Pheu Thai Party, and the new programme is a reincarnation of the pledging scheme, in which the government essentially buys up huge stocks of rice at inflated prices and then stockpiles it for the export market.

The scheme was prone to corruption, with about 30 per cent of the subsidy ending up in the pockets of rice millers and politicians instead of farmers, according to the Thailand Development Research Institute, a think tank.

Asia's most populous countries, China and India, have huge stockpiles of rice, while Thailand, Vietnam, Cambodia and even Myanmar have growing surpluses.

Thailand has been the world's leading rice exporter since 1963, when it replaced Myanmar, also called Burma, which had previously claimed the top slot.

Myanmar's socialist regime nationalised all industries including the rice industry when it took power in 1962.

In 2010, Thailand exported 9.05 million tons, earning the country 5.3 billion dollars.