World Bank: Rice scheme will incur huge losses

Thailand is set to lose up to 150 billion baht per harvest through the government's scheme of buying rice at inflated prices, the World Bank warned on Wednesday.

While the international development lender predicted the Thai economy would grow a healthy 4.7% this year as it recovers from the 2011 great floodi, the World Bank also said the government would incur huge losses from some of the populist policies that brought it to power in last year's general election.
It said the "paddy-pledging scheme'' had proven to be the most costly and would ring up a bill of 115 billion to 150 billion baht per harvest. Areas of Thailand harvest rice from one to three times per year.
It raised its forecast for Thailand's economic growth this year from the 4.5% prediction made in May, and said it expected 2013 growth to be 5%.

File photo

Under the rice scheme, the government pays 15,000 baht per tonne for plain, white, unhusked rice and 20,000 baht per tonne for Hom Mali, or Jasmine rice. Purchases began in October 2011. This is way above the market price/
The World Bank estimated that the government spent 376 billion baht in purchasing rice in the past fiscal year, which ended Sept 30, 2012 and would spend another 450 billion baht this fiscal year, equivalent to 3.8% of gross domestic product.
The government has accumulated more than 12 million tonnes of rice in warehouses that it has been unable to sell overseas because Thai rice prices are about US$200 dollars per tonne above international market prices.
The government's intervention in the rice market has played havoc with Thailand's private-sector rice exporters, who have seen their shipments fall 40% to 50% this year.
Thailand, which has been the world's leading rice exporter for the past three decades, was expected to fall behind India and Vietnam in the trade this year.
From January until Dec 18 this year, Thailand exported a total of 4.83 million tonnes of rice, down 40.54% from 8.13 million tonnes shipped in the same period last year, according to statistics collected by Thai Rice Exporters Association.
World Bank senior economist Kirida Paopichit said Thailand's exports are are projected to expand by around 5.5%, up from the earlier 3% forecast for this year.
Risk factors that could affect economic expansion included the eurozone debt crisis, the conflict over the fiscal cliff in the US, internal political problems, the impact of populist policies and the 300 baht daily wage that could erode trade competitiveness in the business sector, she said.
The senior economist projected that the country's public debt would increase from 45% of gross domestic product this year to almost 50% in 2013, as the government would have to acquire loans for financing its water and flood resources management projects.

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