Yingluck’s $15 Billion Mistake
15,000 baht per tonne was the magical price former PM Yingluck Shinawatra promised voters before the election, despite the fact that the rice subsidy scheme was questioned from the beginning. While the world saw a significant surge in supply for rice worldwide, Yingluck guaranteed the Thai people a price that was significantly higher than the average global market value.
Thailand has approxiamtely 13 million farmers, and from a political point of view, creating a policy that benefits them would ensure a victory for the elections. That was exactly what former Prime Minister Yingluck Shinawatra did, creating a policy that would win the farmer’s hearts with little to no consideration for its impact on the Thai economy.
The cabinet approved the rice-subsidy scheme for 2011/12 with 15% moisture at 15,000 baht a tonne as promoted. Within 2 weeks, the State Audit Office sent a warning letter to the then PM, Yingluck, stating the risks involved. However, the letter did not stop the 410 billion baht budget from being overturned. Following this event, Yingluck’s cabinet quickly approved the bill. The State Audit Office tried to warn the cabinet again at the beginning of 2012 but to no avail. The cabinet finally approved the scheme with the policy allowing for no more than 500,000 baht worth of subsidies per individual. The market price for rice was approximately 6,000-7,000 baht but the state was buying it for 15,000 baht, at least 50% higher than the market value. The whole scheme was very farfetched, to subsidize the rice for the farmers with the price that did not reflect the market and to stock the rice until the market price turns profitable.
Nobody would come back for the rice that the government had subsidized. After India removed a ban on exporting rice, over 10 million tonnes of rice flooded the market which also led to Vietnam slashing the value of their share of supply. What the Pheu Thai government did to stockpile rice in order to appreciate its value was a horrible gamble because India’s ban lift was an obvious speculation. They ignored the warnings and catered their policy which costed Thailand 15 billion USD.
There was also corruption from the lowest to the highest ranks, with attempts from some officials of the Pheu Thai Party to falsify documents in order to minimize the image of the damage from the government’s stockpile. Towards the end of the Pheu Thai Party’s tenure many farmers came to protest as the budget ran dry, and there were reports of farmers who took their own life from the financial drought which further intensified poverty in the rural.
These are the types of policies that can easily win elections, but on the contrary can easily destroy a country’s economic infrastructure. For too long, the Thai people have made political decisions based on policies that have been sold to them at face-value. But now, we have the tools and knowledge to expose how the destructive rice subsidy scheme was simply designed to win the election but the Thai people have lost a lot of tax money as a result of it.