Page last updated at 16:41 GMT, Tuesday, 14 July 2009 17:41 UK

Thailand's misguided rice policy

By Jonathan Head
BBC News, Bangkok

Urban rice farmers in Thailand
Rice farmers are some of the poorest people in Thailand

The first rains of the year have been falling for a couple of months now in Thailand’s often dry north-east, and farmers are out most days in the freshly-flooded fields, transplanting young jasmine rice seedlings.

They work quickly, bent over double, expertly spacing the seedlings in the silt.

But it is back-breaking work. And although jasmine is one of the most highly-prized rice varieties – it is grown almost exclusively in north-eastern Thailand – the farmers in this region are some of the poorest people in the country, most of them mired in debt.

Lack of investment

Their problem, says veteran rice researcher Kwanchai Gomez from Bangkok’s Kasaertsart University, is a chronic lack of investment in rice farming.

Very little of the north-east – one of Thailand’s most populous regions – is irrigated.

“Water is the most important thing that guarantees low risk," she says.

“And risk is the main problem for farmers. One year no rain, the next year floods. So you have to get a loan. Then your crop fails, and you get into debt.”

A Nepalese farmer plants rice in a field on the outskirts of Kathmandu
Other nations are threatening Thailand's place as the top rice exporter

When world rice prices soared last year, everyone assumed that farmers in Thailand – for many years the world’s top rice exporter – must have done well.

Some did. But only those in the central plains region, which get irrigation from the Chaophraya River.

They grow up to three crops a year, mostly higher yield varieties than jasmine.

That is where most of Thailand’s exports come from.

The indebtedness and poverty of farmers was ignored for decades by governments in Bangkok.

Then in the 2001 election, a wealthy telecoms tycoon, Thaksin Shinawatra, drew up a platform of policies aimed directly at farmers, like debt forgiveness and a village loan fund.

It proved a stunningly successful vote-winning strategy, delivering Mr Thaksin three successive election victories, before he was ousted by a coup in September 2006.

But many of those policies have done less for farmers than Mr Thaksin claimed.

Rice mortgage

One, in particular, is proving a huge headache for the current government, led by his main rival, the Democrat Party.

Tongsuan Sodapak
I realized that our problems with debt and crop prices would never be cured just by waiting for the government to help
Tongsuan Sodapak

It is called the rice mortgage scheme. The idea is to help farmers ride out price volatility by allowing them to sell their rice to the government at a guaranteed price.

Farmers usually have no way to store or process their rice, so they are all forced to sell at once at harvest time, allowing the millers – who do have these facilities – to bargain down the price and take most of the profit.

But the scheme has become riddled with corruption, and benefits only a minority of farmers.

“Most of them, unfortunately, are rich farmers with irrigation,” says economist Nipon Poapongsakorn from the Thailand Development Research Institute.

“Poor farmers in the north-east don’t have a surplus of rice to sell, so they don’t benefit from this policy at all. It is a pro-rich, pro-business policy”.

The scheme is also very expensive for the government, especially now, because last year – when rice prices were unusually volatile – a weak government, led by Mr Thaksin’s allies, set the guaranteed price too high.

Those with rice to sell would only sell to the government. Rice traders, like Asia Golden Rice - one of Thailand’s most successful - found it difficult to procure supplies at competitive prices for their overseas customers.

“We might even lose our number one ranking as a rice exporter to our competitors,” says Saranyu Jeamsinkul, deputy managing director for Asia Golden Rice.

“We are at least $100 a tonne higher than Vietnam - so it is rather difficult to export at the moment”.

Sorting the mess

The government has ordered Deputy Prime Minister Kobsak Sapavasu to sort out the mess.

The BBC is Taking the Pulse of the Global Economy, looking at a range of subjects this summer
Consumer behaviour - how have lifestyles changed over the year
Food prices - which remain a concern particularly in many developing economies
Highly volatile energy prices - which have been a major issue in the past year
The plight of migrant workers - as the global recession takes hold in many economies
Housing markets - which have turned from boom to bust in many countries
Rising unemployment levels - as firms cut back because of falling orders

He estimates it has already cost 11 billion baht ($325m) just to process and store crops bought under the mortgage scheme.

And because rice prices have fallen this year, when the government sells the stocks he estimates it will lose another 20 billion baht ($590m).

“The numbers are just unbelievable," says Mr Kobsak.

But his attempts to close down the mortgage scheme, and replace it with a simpler subsidy, have been blocked by his own coalition partners.

There is a strong suspicion, shared by Mr Kobsak, that a lot of politicians are making money out of the scheme – perhaps from bribes from warehouse-keepers storing it, or traders trying to buy at bargain prices.

With any hope of a new agricultural policy stalled over political bickering, one group of farmers near the north-eastern town of Ubon Ratchathani have decided to try to lift their living standards by themselves.

They have joined forces to run their own rice mill, and they are saving on escalating fertiliser costs by recycling cow dung and growing organic jasmine rice.

Urban rice farmers in Thailand
The escalating price of rice has not made many Thai farmers any richer

"I wondered why so many farmers were abandoning their farms," said Tongsuan Sodapak, the local teacher whose idea it is. "Then I realised that our problems with debt and crop prices would never be cured just by waiting for the government to help."

This group of farmers has been fortunate, because they have been able to make contact with a buyer for their organic rice in Italy. Most other farmers in the north-east have no way of marketing their jasmine rice, despite its famed fragrance and flavour.

Thailand's long preoccupation with being the number one exporter should now shift, says Nipon Poapongsakorn - to a strategy of marketing Thai rice for its quality and variety.

One retailer in Bangkok has made a start in promoting Thailand's 81 rice varieties. Gourmet Market, a luxury supermarket chain, has bins of different kinds of rice, explaining exactly which region they come from, and their characteristic. It is a bit like the terroir of wine.

"We have people coming here from places like Hong Kong," says company vice president Lakana Naviroj. "They take rice home, because they don't have the variety and quality we have here."

One supermarket alone, though, will not give Thailand's rice the impact it could have on global markets. That requires a concerted drive coordinated by different government agencies, something that seems unlikely in today's volatile political climate.

At the school where Tongsun Sodapak teaches, when he's not helping grow to rice, I asked a group of teenage girls - nearly all of them the children of farmers - how many of them would be happy to stay on the farm when they left school.

Only four, out of 34, raised their hands.

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