Merit in rice trade plan [but why Cambodian rice has to be imported to Thailand cheaply, processed and then re-exported for profit by Thailand? Does this mean that Thailand controls the price of rice?]

Published: 15/11/2012 
Bangkok Post 

The [Thai] cabinet on Tuesday approved a proposal allowing the Commerce Ministry to form a rice trade partnership with Asean's four other rice-producing countries, namely Vietnam, Laos, Cambodia and Myanmar, to stabilise rice prices in the global market and to promote food security in the region.

The plan involves the creation of a rice trade zone (RTZ) in Asean which is slated to be first implemented between Thailand and Cambodia with Cambodian paddy imported into Thailand, milled and then exported by Thailand on behalf of Cambodia.

The idea of a cartel of rice-producing countries in the Asean region was floated many years ago by Thailand, the world's number one rice exporter for several years until this year when the top ranking was captured by India. Back then, it hoped to make use of its dominant market position to influence prices in the global market.

Four years ago, then prime minister Samak Sundaravej said Thailand was trying to create a cartel of rice-producing countries in partnership with Vietnam, Laos, Cambodia and Myanmar. However, the idea failed to gain sufficient support and so never came to be.

But that does not mean the idea is unsound or impossible. If it becomes a reality, it would certainly benefit Thailand and the four other rice-producing countries in the region in terms of helping to support rice prices, although it may invite protests from rice-importing countries _ even among Asean countries such as the Philippines and Indonesia.

The only big problem which makes this idea still an unrealised dream is that rice is not a depletable commodity like oil and the five Asean rice-producing countries are not the world's biggest rice producers.

Rice prices are not dictated by the rice exporters but are influenced by the annual rice outputs of the world's big producers such as China and India. In years when there are bumpy harvests in China and India, rice prices in the global market will fall. Conversely, if the harvests are bad due to drought or other natural disasters, prices will go up.

Nevertheless, the idea is worth a try although the chances of success are not high unless there is a consensus among Thailand's four neighbours. While the Commerce Ministry's forward-looking plan for the RTZ and the rice cartel has potential merit, its handling of the rice pledging scheme at home is deplorable, to say the least.

The ministry's persistent refusal to disclose to the public details of its government-to-government rice deals on the grounds they are classified information, and its special rice auctions which bypass normal auction procedures, are just a couple of outrageous examples of the ministry's utter disregard for transparency and good governance and contempt for taxpayers.

The rice pledging scheme has not benefited those poor farmers who produce only enough rice for consumption, but the landlords and the rich farmers who do not have to labour in the rice fields themselves but reap the crops from the poor who rent their land. Millers, greedy politicians and sundry other crooks also feed on the scheme.

But the worst part of this badly thought-out scheme is that taxpayers will have to bear the burden of a huge public debt as a result of its design _ about 100 billion baht for the 2011-2012 rice season and probably another 200 billion baht for the current season.

That's the estimate provided by former Bank of Thailand governor MR Pridiyathorn Devakula, if the scheme is allowed to run its course unchecked.