One way a developing country can head toward bankruptcy is the way the Thailand government’s ruling party won election—promising farmers more than the government can afford in crop subsidies.
The rice producer subsidy has become known as the “Thai rice scheme” and has the government owning about 17 million tonnes of milled rice, or nearly twice what it exports normally in a year.
The government is committed to paying farmers 15,000 baht (1$=29.82 baht) per tonne for rice. The Thai government is involved in marketing its farmers’ rice; therefore, the asking price for Thai rice is at $570 a tonne, about $170 higher than rice from its main rivals in the market—India and Vietnam, explained a Reuters News Agency report.
Prime Minister Yingluck Shinawatra came into power in 2011 on a promise to pay farmers way above what was then the market rate for their rice. Now, the government owns all this overpriced rice that has gone into storage—and continues to go into storage. Dumping the rice on the market could plunge the price of rice worldwide.
The government is paying for warehouse storage, and also running out of storage warehouses for the milled rice. And although the government has threatened arrest of anyone entering the warehouses without permission, there are reports that the rice is going out of condition and spoiling, which is logical considering the country’s hot and humid climate.
Officials who know the particulars report the government spent a minimum of $11.3 billion on the first year of the program through last September, and the current year’s program is underway with the financial mess compounding itself.
Having been to Thailand twice as a guest of the previous ruling political party, I was in Thailand when the last election campaign was underway, and it was obvious that promising the large rural population a higher income than the ruling party was willing to promise was swaying the vote of rural rice growers. Those rural low-income voters are still loyal to the new ruling party because they appreciate the higher income and aren’t concerned about the total economic situation of the country.