This was in spite of the move receiving an unholy bashing from the press and widespread criticism from the public, both locally and across the globe, where the scheme’s impact was being felt given the quantity of the crop Thailand exports.
Today, such criticism has boiled over into widespread unrest with export prices lowering by the week and widespread corruption being unearthed in the media. All the while, government transparency has been slammed by opponents.
Through the terms of the scheme, farmers can pledge paddy at nearly US$500 per tonne, therefore making it a clear vote winner in rural areas.
But exporters have been continuing to lower their quotes to the point that they are now just between US$10 and US$30 per tonne above equivalent Pakistani and Indian quotes – and at around a US$150 discount to those from the US and Latin America.
As a result, unofficial figures suggest the scheme has seen losses of up to THB200bn (US$6.5bn) in its first year – well above the Finance Ministry’s initial forecast of THB70-100bn.
Leaked by a whistle-blower, this figure alone have caused a furore in the Thai press, since prompting widespread reaction and calls of a government cover-up.
After all, if there is one thing worse than a government haemorrhaging funds in the support of a populist scheme involving its biggest export, it is for those in charge of the economy to keep quiet about it.
The effect the scheme has had on the wider Thai economy was quantified in a Moody’s report entitled Thailand’s Increasingly Expensive Rice Buying Scheme Is Credit Negative.
“While financing of Thailand’s budget deficits is supported by the country’s deep onshore capital markets, the growing losses from the rice buying scheme and the potential need for additional government funding resulting from the continuation of the scheme increasingly jeopardize a reduced deficit, which we previously forecast will be 3.1% of GDP in fiscal 2013. In addition, this makes achieving a balanced budget by 2017 more challenging,” it said.
“The overall budget deficit for the fiscal year ended September 30, 2012 reached 4.1% of GDP, revised slightly downward from 3.9% because of a larger-than-expected non-budgetary cash deficit.”
Meanwhile, corruption has become rife on the back of the scheme, with four rice mill operators charged with embezzlement by Thailand’s Public Warehouse Organisation after they were found to have misreported their depleted and rotting stocks to the government.
At one mill, stocks were 555 tonnes short of milled rice, and the stocks were badly contaminated. Likewise, eight other mills and warehouses have been ordered to suspend rice pledging activities through excess paddy and missing milled rice.
Reaction within the country has been vocal with many commentators suggesting that many other instances of corruption just haven’t been reported.
Meanwhile, the main political parties have been brawling for political capital each step of the way. The ruling PTP has been using investigations to demonstrate how it is actively pursuing corruption from the scheme, while the opposition Democratic Party has been accused of undermining the government through its criticism.
Tensions are growing to the point that Oryza, the respected global rice monitor, has voiced some quite dramatic possibilities.
“All that seems certain is that the political climate in Thailand is boiling and [whether] it boils over into an attempted return of [exiled former president] Thaksin and/or a military coup and/or a civil war, or some other dramatic event is unclear.
“It may depend on how the public [are] manipulated and what they are willing to endure. The rice scheme is likely to come under increasing pressure but the government has yet to back down from this unsustainable program.”
Right from the beginning a political move, the Thai rice mortgage scheme now runs the quite possible risk of boiling over and taking its creators with it.