The politics and perils of rice-pledging scheme and impact of Yingluck case

PHOTO: Reuters

The case against former prime minister Yingluck Shinawatra of alleged negligence in managing her government's controversial rice-pledging scheme, has raised many questions ahead of a Supreme Court verdict scheduled to be handed down on August 25.

That verdict is expected to have impacts on both future economic policies and the political landscape.

We examine some of the issues raised by the rice saga.

IS THE RICE-PLEDGING SCHEME REALLY BAD?

From an economic point of view, buying large quantities of rice from farmers would offer the wrong incentive, encouraging farmers to grow more rice and reinforce downward price pressure on the crop.

Government involvement in the rice trade is prone to poor management and corruption.

Politicians and officials do not specialise in the rice trade and they do not care much about public money. In contrast, private rice traders must be very careful, otherwise they could go bankrupt or be cheated by other parties.

WHY IS A BAD POLICY SO HARD TO AVOID?

Large numbers of people depend on rice farming although the farm sector is much smaller compared with the industry and services sectors.

The farm sector is only eight per cent of Thai gross domestic product, but 3.7 million families - about 15 million of the nation's 68 million people - are dependent on rice farming.

Politicians want to serve the demands of their large voter base, so the conditions are ripe for populist policies.

HOW MUCH DID THE PAST RICE POLICY COST AND HOW MUCH CAN WE TOLERATE?

The government estimated the cost of the rice-pledging scheme during the Yingluck administration (2011 to 2014) was about Bt500 billion.

On the other hand, the Pheu Thai Party argued the cost would have been much lower had the current government properly managed the rice auction.

The previous ruling party also said the financial impact was under control during the implementation of the rice scheme.

Yet no one would know the real cost until stockpiled rice is all sold. The party also argued that it had controlled potential damage while helping several million farmers.

The cost and benefits of the project are debatable.

HOW DOES THE FUTURE FARM POLICY EVOLVE?

Populist policies may not go away as elected governments would continue to be under high pressure from constituent demand. There would be pressure to help farmers and labourers until they could find higher-income jobs in other sectors.

Close to 40 per cent of Thailand's total labour pool depends on the farm sector, so populist policies would not go away, said Soraphol Tulayasathien, director of the economic stability analysis division at the Fiscal Policy Office.

Short-term market intervention would be necessary. Insurance against the impact of weather |conditions - natural disasters, |flooding and drought - may be a |partial substitute, but it is unlikely to replace populist policies.

WILL A VERDICT ON YINGLUCK'S CASE EXACERBATE THE POLITICAL DIVISION?

Many middle-class people in big cities would continue to voice their opposition to a rice-pledging policy should a newly elected government reintroduce it.

But people in rural areas would welcome it.

Then the question of who is right and who is wrong could depend on the voter's vested interest. It would be hard to find a political consensus on the farm issue and the welfare of farmers.

WILL LEGAL ACTION STEMMING FROM THE RICE-PLEDGING SCHEME AFFECT EFFORTS FOR POLITICAL RECONCILIATION?

With the ongoing legal and legislative actions taken in the tenure of a post-coup administration, it is not easy to convince political adversaries that the measures are fair.

The cases impact not only politicians who are accused of corruption or negligence but also their political base.

Hence, ongoing efforts for political reconciliation might be adversely affected.

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