16,000 tonnes of disappearing rice in Chiang Rai Thailand,
said to be in China,
who pocketed the 30-40 million baht?
By Jon Fernquest |
Many may believe that free markets are unfair and oppressive.
Free markets are at least transparent.
What's happening in regulated markets is often not visible to the public, take government crop mortgage schemes.
Crop mortage schemes were designed to help poor farmers.
Instead they help rich owners of rice warehouses.
Recent revelations in Thailand's rice market show that mill owners and some invisible rich and powerful rent seekers profit from the mortgaged rice that farmers do not reclaim, not the government as one might assume.
In an article in yesterday's Bangkok Post, a knowledgeable rice industry source describes in detail what is going on at warehouses storing rice that is technically owned by the government.
The government may own the rice but the rice has already left country for China and some rich and powerful people with political connections made money at public expense without facing public scrutiny.
If the public knew that the rice mortgage scheme helped make the rich even richer rather than benefiting the poor as touted, how would they feel?
Here is the article in full:
MORTGAGE SCHEME SAGA
Missing rice stocks 'already in China'
THEERAWAT KHAMTHITA
(Wednesday March 05, 2008)
CHIANG RAI : The disappearance of 16,000 tonnes of rice stored under the crop mortgage scheme is nothing but a high-level conspiracy, as the missing grain has already reached China, a source involved in the rice business said yesterday.
The comment follows the discovery by the Public Warehouse Organisation (PWO) last Wednesday that about 16,000 tonnes of rice, worth about 138 million baht under the scheme, was missing from two private warehouses where it was stockpiled by the PWO.
Provincial governor Preecha Kamolbut said the law requires the mortgagee, or the warehouse operator, to indemnify the state according to the price stipulated in the mortgage contract.
The source said it was unusual as the contract set compensation at 9,000 baht for a tonne of missing rice, while the market rate is 12,000 baht per tonne.
[Comment: The penalty in the contract made violating the cotnract worthwhile, it seems.]
According to Mr Preecha, 12,712 tonnes of rice, worth 107 million baht, went missing from a warehouse of Khao Thai Chiang Rai Rice Mill Partnership, run by Yossawee Sirikunanand, in Pa Daet district.
Another 4,043 tonnes of rice, worth 139 million baht, stored at a warehouse of the Golden Hardware Rice Mill in Muang district, has also disappeared.
When the governor was informed of it, he ordered PWO officials to lodge a complaint with police. As of yesterday, police had not invited the warehouse owners for questioning.
Khao Thai Chiang Rai Rice Mill Partnership's warehouse was being tightly guarded yesterday. No government officials were being allowed inside for inspection. While just one security guard was manning the gate of the Golden Hardware Rice Mill's warehouse yesterday when officials arrived for inspections. The remaining rice stocks were still there.
The source blamed investors from other provinces well connected to politicians for the rice conspiracy. "Many subsidiaries were set up in several districts in order to extract as much mortgaged rice as possible. They used legal loopholes to smuggle out and sell the unhusked rice locally or overseas," the source said.
"The main overseas market is China. The rice is smuggled there via the Lao border. Given the high rice prices at home and aboard, this missing lot could fetch no less than 30-40 million baht in profits," said the source.
Whenever authorities find any stock of mortgaged rice missing, all the PWO officials do is report the matter to police. The warehouse operators then compensate the PWO at the rate set in the mortgage contract.
[Comment: Institutionalised corruption? How long has it been going on?]
The source said the PWO officials also had a share in the ill-gotten gains.
"It is a win-win situation, and the case is closed. Warehouse operators go unpunished and the officials can claim that the state had been compensated. The legal loopholes offer hefty profits. No wonder this racket is so common in Chiang Rai," said the source.
The scheme is aimed at helping farmers hit by low rice prices on the market. Under the scheme, farmers can pledge paddy to the government at set prices. For a period of time they can withdraw the mortgaged rice and sell it on the open market if the price rises above the government's offer.
[Comment: And after that period of time expires, this benfit accrues to other unnamed rich and powerful parties.]
(Source: Bangkok Post, 05-03-08, page B2, Theerwat Khamthita, temp-link)
Vocabulary:
pocket - take something that really does not belong to you
free markets - a market where the price is determined by people freely buying and selling in the market with free information about what prices are also (See Wikipedia on free markets)
transparent - visible to the public, not hidden or secret
crop mortage schemes - when farmers give the government rice in exchange for a receiving a price at or above the current market price, the farmers can usually reclaim the rice in the future if they benefit from even higher rice prices, or they can just leave the rice with the government
revelations - surprising and interesting facts that are made known to people
rent seekers - "Cutting yourself a bigger slice of the cake rather than making the cake bigger. Trying to make more money without producing more for customers." In this case some rich and powerful people are probably taking a cut from the warehouse owners in what amounts to a "protection racket" (See The Economist glossary)
what is going on - what is happening
technically Y - Y is true according to a strict interpretation of rules or facts
political connections - friendships with politically powerful people that can be used for personal gain
at public expense - personal gain from government or public money
scrutiny - carefully examining, studying, and observing (See glossary)
facing public scrutiny - when the public starts carefully examining, studying, and observing an issue
X touted as Y - convince people that X is good because it has a good quality Y
a conspiracy - when a group of people plan secretly to do something illegally
a high-level conspiracy - when a group of rich and powerful people plan secretly to do something illegally
Public Warehouse Organisation (PWO) - the Thai government agency in charge of storing rice that farmers have pledged to the government under the rice mortgage scheme
stockpiled - store large quantities for future use (See glossary)
mortgagee - the person who receives the rice from the mortgager (farmer) in this case the warehouse operator
indemnify - protect financially against soemthing bad happening
stipulated - state clearly that something must be done, in an agreement or a contract, for instance (See glossary)
compensation - the amount paid to a person
the contract set compensation at Y - the contract stated that the amount to be paid to the person was Y
lodge a complaint with police - report that a crime has been committed to the police, demanding legal action
a loophole, a legal loophole - an imperfection in a law that allows legal experts to avoid and go around the law
smuggle - take things into or out of a place secretly or illegally
unhusked rice - harvested rice that hasn't had the outer shell removed from it yet
fetch a price Y - bought for price Y
ill-gotten gains - profit from breaking the law or misusing government programmes and policies (i.e. corruption)
a win-win situation - a situation in which everyone benefits, also a way of thinking: let's find a solution to the problem in which everyone benefits rather than some benefit and some lose (See The Seven Habits of Highly Effective People)
hefty profits - very large profits
pledge paddy to the government at set prices - when the farmer provides rice to be stored in the government warehouse and received compensation (e.g. 9,000-10,000 baht per tonne) in return
