BANGKOK—Thailand’s government took a step toward disclosing the full cost of its rice-price support program, saying it had lost 136 billion baht, or $4.4 billion, on the subsidy from fall 2011 to September 2012.
Prime Minister’s Office Minister Varathep Rattanakorn said the losses from the 2012 to 2013 rice season hadn’t been calculated, but the scale of the government funds so far diverted to the rice subsidy will likely embolden anti-government protesters, who already have been staging rallies against Prime Minister Yingluck Shinawatra‘s policies.
Opposition politicians have criticized the rice-price support program as a misguided attempt by Ms. Yingluck to mimic the kind of expansionist economic policies pursued by her elder brother, Thaksin Shinawatra, who was ousted in a military coup in 2006. Along with tax rebates for first-time house and car buyers, Ms. Yingluck’s government introduced the rice subsidy after a landslide election win in 2011 to help boost rural incomes, banking on Thailand’s status at the time as the world’s largest exporter of the grain to drive up global prices. Government officials began buying up rice at about 15,000 baht, or about $500, a ton, some 50% above the market price.
Rival exporters, including India and Vietnam, stepped up production, while major importers such as the Philippines ramped up their own domestic output as part of a long-running attempt to improve food security.
The result was that India and Vietnam were selling rice at about $150 to $170 a ton less than Thailand, toppling Thailand from its perch as the world’s top exporter and leaving it with stockpiles estimated by the U.S. Department of Agriculture at about 17 million tons of milled rice.
The 136 billion baht loss is calculated based on what Thailand would lose by selling the rice at the prevailing global price.
The political and economic fallout from the subsidy has increased in recent weeks, especially after Moody’s Investors Service warned that the cost of the program could potentially affect Thailand’s Baa1 credit rating despite its relatively strong economy. Government ministers scrambled to deny local media reports citing allegedly leaked figures that suggested that total losses for the rice-price support program could total 260 billion baht.
On Sunday, the opposition Democrat Party won a by-election in the Don Muang district, in Bangkok’s northern suburbs—the first time it has captured the parliamentary seat in 37 years—as local media coverage over the issue continued. While political analysts said the election loss is unlikely to damage the standing of Ms. Yingluck’s party in Parliament, where it has a large majority, it will increase the pressure on the government.
In recent weeks, antigovernment protesters have donned the kind of white Guy Fawkes masks popularized in the film “V for Vendetta” and took to the streets of Bangkok, demanding her resignation and, in some cases, that the army stage another coup. Mr. Thaksin has urged his sister’s government to quickly disclose the full cost of its rice program.
Some farmers, too, are becoming worried over how long the government can afford to maintain its rice-buying program.
“I know that with the government buying rice at 15,000 baht a ton, we can’t compete with our competitors and the government won’t be able to sell our rice,” said Somsak Reukanan, a 63-year-old farmer from Ayutthaya, north of Bangkok. “When I meet with other farmers, I tell them we should start thinking about what we should do if the government stops the rice-buying program, but nobody cares.”
Thailand’s government last month committed to continuing the rice-price support program for a third year, but there are signs that the program’s problems could worsen, analysts say. Darren Cooper, senior economist at the London-based International Grains Council, said this month that Thailand’s large stockpiles could grow unless the country agrees to sell its holdings at lower prices.
The cost of storing the grain is mounting, too. Thailand’s Public Warehousing Organization says it costs 300 million baht per month, or around $10 million, to keep Thailand’s rice stocks in good condition. – James Hookway, Wilawan Watcharasakwet