Rethinking the rice policy: A moral and financial issue
In recent weeks, the debate relating to the widespread desire to amend Thailand's current rice price-pledging scheme has increasingly focused on over-simplified partisan arguments, while the interests of farmers themselves are seemingly being further neglected. But when we consider making changes to what has become a heavily subsidised and regulated rice market, it would be premature to jump into making an expedient, short-term decision between either of the two options currently on offer.
Of these, there is a proposed update to the rice price-pledging scheme introduced by Yingluck Shinawatra's government and supported by the majority of rice farmers. The alternative is seemingly a reintroduction of the rice price-guarantee programme of Abhisit Vejjajiva's former government, which is supported by farmers who benefited from this previous policy, and also by many landowners.The suggestion that we need to further reflect, gains merit when we recognise that it is precisely because both policies have their own strengths and weaknesses that a more fully thought through policy can provide for a solution with greater feasibility in the long term. Moreover, it is no secret that other approaches to promote agricultural policy have been suggested, originating from Thailand, and also from around the world.
We may well ask the question why Thailand's political decision-making process remains as narrowly defined as this major example of policy formulation appears to be on the verge of suggesting. In order to attempt to better respond to this challenge, there are a number of important concerns that can be more fully brought into the debate, but have so far been somewhat neglected.
There are obvious questions that policy-makers should be asking, regardless of political affiliation. These ought to relate directly to what we can expect to achieve in subsidising rice farmers, the implications on rice production and the wellbeing of farmers in the long run. If policy-makers have truly answered such questions, then we can expect a greater degree of success in the effectiveness of their policy instruments.
It is true to say that the rice price-guarantee programme proved a viable policy to respond to the natural uncertainty that comes with agricultural production. Indeed, both during and after the flood of 2011, rice farmers that were affected claimed that they would have been better off if this policy had still been in place.
Essentially, under that programme, farmers received the difference between the market price and the price-guarantee regardless of their production, because each payment was calculated on the basis of the land each had registered as their rice farm. However, a moral hazard undoubtedly existed, whereby opportunists were able to enjoy the benefits of these subsidies without having to produce any rice at all.
Under the current rice price-pledging scheme, farmers are only able to claim its benefits as and when they trade their rice within the market, which has mitigated the moral hazard and acted to elevate rice-farmer incomes. Nevertheless, the artificially high level of the price has been perceived by many as an unnecessary burden on government spending, and this argument was made even before Prime Minister Yingluck took office. In addition, this policy has been questioned by many, over issues relating to transparency and corruption.
Among rice farmers, the perception has become increasingly widespread that the current price-pledge is their entitlement, and it is now the obligation of the government to act to promote their standard of living. It only follows therefore, that rice farmers who benefit from the policy are overwhelmingly dissatisfied with the government's decision to reduce the price-pledge from Bt15,000 to Bt12,000. Their response had been predicted because of their expectation of receiving the higher level of subsidy, although their meeting with Prime Minister Yingluck in an attempt to negotiate for a restoration of the Bt15,000 price-pledge will likely prove unsuccessful.
Yet in certain key respects, today's Thai farmers are not so different from farmers from across the world. Even in the developed West, farmers seemingly cannot survive the market without considerable support from their governments, as evidenced by the Farm Bill in the US, and the Common Agricultural Policy in the European Union.
In his Common Agricultural Policy blog regarding "Farmers and the EU", Wyn Grant, a professor of politics at the University of Warwick, recently wrote: "When I said 'many' farmers could not survive without the single farm payment, I was corrected by the word 'all'. If this is the case, it is worrying in terms of the viability of British farming. An arable farmer did emphasise that most farmers would prefer to earn a living from the market if they could get a fair price and this led us into a discussion of the economic power of the supermarkets."
We must of course, recognise that the agricultural sector remains a politically sensitive issue from the local level all the way up to the international level. Moreover, the World Trade Organisation has agreed to allow its members all kinds of exemptions, in order that they can support and protect their agricultural markets.
Nevertheless, a trend has now emerged internationally, which seeks to unwind support for subsidies, overall. This arguably began with the Uruguay Round of the General Agreement on Tariffs and Trade (GATT, the forerunner of the WTO) between 1986-1994, which was the first time in which the liberalisation of agricultural trade was so seriously addressed. Reforms such as these have, since then, often acknowledged a stated aim of intending to act to ensure that farmers can develop greater self-reliance.
Today, many rice farmers are not completely dependent on income from their farms, as alternative sources of income, such as seasonal labour migration or remittances from the younger generations who work in the industrial sector, increasingly assist in supporting rural farming families. Therefore, a comprehensive re-examination of the underlying structure of the country's rice economy would be an important starting point, in attempting to more effectively reconsider the role of the government in this.
The intention to support rice farmers need not be restricted of course to the use of various methods of market intervention. Therefore, in order to realise a more effective long-term strategy when it comes to important matters such as rice policy, it is incumbent on Thai policy-makers that they act to transcend the existing debate, which has thus far, only got us so far.
Titipol Phakdeewanich is a visiting fellow at the Centre for the Study of Globalisation and Regionalisation at the University of Warwick, in the UK. He is based at Ubon Ratchathani University.
