Rotten Longan fruit
Symbol of Thailand's bankrupt crop
mortgage system
By Jon Fernquest
Rotten
longan
fruit
have quickly become the symbol of Thailand's deeply
flawed
system of agricultural subsidies (Read Bangkok
Post editorial today).
Paying subsidies for more than the true value of crops helped Thaksin backed political parties win votes and elections.
It is uncertain how much of these subsidies gets to the poor farmers heard about in the news everyday, rather than rich farmers with lots of irrigated land or middle men in the agricultural supply chain.
After paying prices far above market value, the government has taken huge losses when it sells these crops:
...mortgage
programmes for crops implemented by previous governments caused 16 billion baht in losses
from mortgages on rice, accounting for 80% of all crop losses in the
programme in 2008-09. (Source: Bangkok
Post)
These losses seem to be getting larger: "The government expects to lose 20-30 billion baht from its mortgage programme this year."
Despite these losses, farmer groups insist that nothing is really wrong with the system (Read article).A corn auction was also called off recently in the face of great losses to the government and taxpayers:
Commerce
Minister Porntiva Nakasai was upset after Mr Abhisit on May 13 put the brakes on
the ministry's plan to auction
449,000 tonnes of mortgaged corn worth more than 2 billion baht
on suspicions the sale lacked transparency.
(Source: Bangkok
Post)
Recently, Commerce Minister Porntiva Nakasai was about to release 2.6-million-tonnes of rice from government stockpiles for export with estimated losses of 4 billion baht to taxpayers. All of this was to be done without the knowledge of the cabinet. The Prime Minister blocked the sale. Exporters then threatened to sue.
Crop insurance could reduce the problems that farmers face selling their crops without the large losses to the taxpayer:
1.
Price uncertainty: Farmers can't be sure how much they
will receive for
their crops many months later when they plant their crops.
2. Glut on the market at harvest time: Farmers all harvest their crops at the same times and have little ability to store the crop to sell in the future. High supply at harvest time depresses prices, so farmers don't get as much for their crops as they could if they had their own storage silos and could store the crop until prices were higher.
2. Glut on the market at harvest time: Farmers all harvest their crops at the same times and have little ability to store the crop to sell in the future. High supply at harvest time depresses prices, so farmers don't get as much for their crops as they could if they had their own storage silos and could store the crop until prices were higher.
Todays article looks at problems in the crop mortgage scheme for the longan fruit (see photo above) "initiated in 2004 by then agriculture minister Somsak Thepsuthin. Mr Somsak is now a key member of Mr Newin's faction."
For further background, read previous Bangkok Post articles over the last three years on the crop subsidy problem (See Business blog archives and Easy Business English archives).
One thing that distinguishes the middle class from lower income groups, according to a recent special report on the middle class in emerging market economies like Thailand, is that they place more value on accountability and less value on patronage politics (See The Economist special report and downloadable MP3 audio).
Clearly, patronage politics is at work here. Certain farming related special interest groups do not feel that politicians need to be held accountable for losses because they are receive monetary benefits or patronage from these politicians.
longan - a fruit,
see photo above right (See Wikipedia)
deeply flawed - has a big problem and does not work correctly
subsidy - helping to pay the costs of something
irrigated land - land with a water supply brought to it through canals or pipes
a supply chain - all the different steps that a product or good takes during production until it finally reaches a store and is bought by a consumer
called off - ended, cancelled
put the brakes on - stop
an auction - when many people all offer a price for something, the best price gets to buy
blocked the sale - prevented the sale
crop insurance - incurance that protects farmers against loss of revenue due to declines in the prices of agricultural commodities (See Wikipedia)
a glut - when there is to much of something in the market being sold
accountability - being responsible for an activity and able to explain and justify it
patronage - support and money given by someone to a group as charity (without any return)
deeply flawed - has a big problem and does not work correctly
subsidy - helping to pay the costs of something
irrigated land - land with a water supply brought to it through canals or pipes
a supply chain - all the different steps that a product or good takes during production until it finally reaches a store and is bought by a consumer
called off - ended, cancelled
put the brakes on - stop
an auction - when many people all offer a price for something, the best price gets to buy
blocked the sale - prevented the sale
crop insurance - incurance that protects farmers against loss of revenue due to declines in the prices of agricultural commodities (See Wikipedia)
a glut - when there is to much of something in the market being sold
accountability - being responsible for an activity and able to explain and justify it
patronage - support and money given by someone to a group as charity (without any return)
MORTGAGE SCHEME
Govt agrees to pay B90m to destroy rotten longan
By: PRADIT RUANGDIT10/06/2009
Worthless stocks of dried longan left over from a scandal-tainted mortgage scheme initiated by the Thaksin government will be destroyed at a cost of 90 million baht.
Prime Minister Abhisit Vejjajiva said the cabinet had approved the destruction of the fruit harvested between 2003 and 2004 and worth originally 4.8 billion baht.
Mr Abhisit yesterday said the move was meant to ensure the old stocks were not mixed with this year's crop, which could affect the price of longan.
Mr Abhisit said the old stocks were so degraded they could not even be used to make fertiliser.
Political observers felt the cabinet's decision was a bid to indirectly put more blame on the Bhumjaithai Party over its controversial rice mortgage scheme.
The ruling Democrat Party pressured the cabinet to revoke further rice mortgage schemes and blocked the planned auction of corn and rice stocks held under past mortgages. The auctions were backed by Commerce Minister Porntiva Nakasai of the Bhumjaithai Party, which is dominated by banned Buri Ram politician Newin Chidchob's faction.
Rice farmers rallied in several provinces, particularly in the North and Northeast, against the resolution to drop the rice mortgage scheme and replace it with a crop price guarantee.
degraded - became
low quality
fertiliser - food for plants, chemicals to make plants grow faster
political observers - experts who watch everything that is going on in politics and comment on it
put blame on Y for X - say that Y was the one who caused X, was responsible for X
pressured the cabinet - forced the cabinet do something
revoke - take away
backed by - supported by, helped by
banned - not allowed to participate in an activity (here politics)
a faction - a smaller group within a larger group
resolution - a formal decision taken at a meeting after a vote
rice mortgage scheme - the old system of giving subsidies usually far above market for crops
crop price guarantee - the proposed new system
fertiliser - food for plants, chemicals to make plants grow faster
political observers - experts who watch everything that is going on in politics and comment on it
put blame on Y for X - say that Y was the one who caused X, was responsible for X
pressured the cabinet - forced the cabinet do something
revoke - take away
backed by - supported by, helped by
banned - not allowed to participate in an activity (here politics)
a faction - a smaller group within a larger group
resolution - a formal decision taken at a meeting after a vote
rice mortgage scheme - the old system of giving subsidies usually far above market for crops
crop price guarantee - the proposed new system
Mr Abhisit said the longan mortgage scheme was an important lesson.
"Getting rid of it requires 90 million baht. But most important, it is a lesson about crop mortgage schemes," he said.
"Such schemes can ultimately cause damage. The government will not let similar things recur."
The longan mortgage scheme was said to be riddled with corruption, resulting in the loss of hundreds of millions of baht.
The Department of Special Investigation and the National Anti-Corruption Commission are now investigating irregularities in the scheme.
Deputy government spokesman Watchara Kannikar said 46,839 tonnes of the fruit were held by the Marketing Organisation for Farmers (MOF) and the Public Warehouse Organisation.
He said the stocks had become tainted with fungi and could not be eaten.
riddled with corruption
- full of corruption
irregularities - events that don't follow normal patterns, that might be breaking a law or a rule (for example a teller is siphoning off money to his account everyday, so there is a record of strange transactions)
investigating irregularities - looking closely to see if strange patterns are actually breaking the law
Marketing Organisation for Farmers (MOF) -
Public Warehouse Organisation (PWO) - the government agency that overseas the warehouses where crops purchased by the government are stored before they are sold
taint - spoil of damage food or medicine (and make it dangerous to use)
fungi - a plant like a mushroom that has no green clouring and no leaves or flowers
tainted with fungi - damaged by fungi growing on it
irregularities - events that don't follow normal patterns, that might be breaking a law or a rule (for example a teller is siphoning off money to his account everyday, so there is a record of strange transactions)
investigating irregularities - looking closely to see if strange patterns are actually breaking the law
Marketing Organisation for Farmers (MOF) -
Public Warehouse Organisation (PWO) - the government agency that overseas the warehouses where crops purchased by the government are stored before they are sold
taint - spoil of damage food or medicine (and make it dangerous to use)
fungi - a plant like a mushroom that has no green clouring and no leaves or flowers
tainted with fungi - damaged by fungi growing on it
The longan mortgage scheme was initiated in 2004 by then agriculture minister Somsak Thepsuthin. Mr Somsak is now a key member of Mr Newin's faction.
The scheme was intended to replace the fraud-ridden longan price subsidy scheme, which had failed to solve price problems caused by corruption among agricultural officials and traders.
It required the state-run MOF to purchase about 300,000 tonnes of fresh longan and send it to Por Heng Intertrade for processing. About 50,000 tonnes of the dried longan later went missing.
In late 2004, police inspector-general Seripisuth Temiyavej looked into the irregularities that he said cost the state about 2.18 billion baht in lost revenue.
He alleged more than 3,000 farmers, politicians, agricultural officials and private firms had colluded with MOF staff to forge documents of sales of fresh longan to the scheme even though some farmers had no longan at all.
fraud - the crime
of gaining money by tricking or lying to people
fraud-ridden - full of fraud
price subsidy - pay part of the price of something
colluded - work together for bad purpose, like breaking the law
forge - create
fraud-ridden - full of fraud
price subsidy - pay part of the price of something
colluded - work together for bad purpose, like breaking the law
forge - create
(Source: Bangkok Post, business, Govt agrees to pay B90m to destroy rotten longan, PRADIT RUANGDIT, 10/06/2009, link)
