With Europe threatening to push the global economy into yet another recession, one would think this would be a time for economies to batten down the hatches, build fiscal and foreign exchange buffers, and brace for the coming storm.
Think again. Yingluck Shinawatra’s government recently introduced a new rice policy that will cause a haemorrhaging of Thailand’s public funds at a time when its economy desperately needs to improve its international competitiveness by increasing public investment in education, transport and energy.The new policy, which was rolled out in 2011, guarantees the purchase of rice from farmers at 15,000 baht (US$472) a ton for white unmilled rice and 20,000 baht (US$630) for ‘jasmine’ rice — 50-60 percent above the prevailing market price.
This new program departs from previous rice-buying schemes because of its high price, and because it fails to set any limit on government purchases. If anyone is prepared to sell, the government is duty-bound to buy.The policy has made the government the world’s largest rice trader overnight, dealing with virtually the entire marketable surplus of rice in the country
Thailand’s rice policy gets sticky