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Mortgage Rice Price Policy In Thailand And Its Hiding Aim

2722 words - 11 pages

Mortgage rice price policy in Thailand and its hiding aim


Thailand has had a great influence on the global rice market for decades due to its huge stock and export. Hence, the Thai government has intervened in the paddy rice market by introducing the mortgage rice price policy. The policy was first implemented in 1980 in order to resolve the low-price problem in the paddy rice market. However, in the 21st century the government attempted to re-issue the policy, even though the paddy rice market price was already high at that time, resulted in a marketing failure to both domestic and international markets. Furthermore, the cost of the policy was excessively ...view middle of the document...

Hence, rice is economics and political response. In 1980, the paddy rice market price (rice which still has its inedible husk) was low, so the Thai government intervened to help farmers by implementing the mortgage rice price policy. The policy was effective and the paddy rice price increased, following which the policy was abolished in 2000. In 2001 the government launched the policy again, however, but at this time the paddy rice market price trend was increasing (Forssell, 2008). This caused a lot of negative effects on rice domestic market and export market as well. Besides, the cost of the policy was more than 450 billion baht (฿). It was questionable whether economics or politics was the principle reason for amending the policy at the time. The argument regarding the main reason for the government amending the policy has been made at length elsewhere. Therefore, this essay will argue that the government’s motivation for implementing the policy was political rather than economical. This paper begins with the process of the mortgage rice price policy and its distribution system, followed by the effects, problems and errors, then the cost of the policy, and finally, the hidden aim of the policy.

The process of the mortgage rice price policy
Agriculture is the most important sector in the Thai economy. Hence, the Thai government has expressed a great interest in this industry particularly in term of rice production. The history of the Thailand’s rice policy can be divided into two periods. Firstly, between 1980 and 2001 the Ministry of Agriculture and Cooperatives worked with the Ministry of Commerce for the Thailand’s mortgage rice policy. Paddy rice was a consistent low-priced agricultural product. A massive amount of the paddy rice went into the market during the main harvest period, whereas demand remained stable throughout the year. Therefore, the purpose of the policy was to retard the entry of large quantities of paddy rice onto the market, which was the cause of the low-price problem (Forssell, 2008). The principle of the policy was that the government provided low interest rate loans for farmers “against the pledge of rice, with the pledged rice canceling the debt if rice prices do not meet a target”(World Bank, 2008, p. 36). In this case, the government set the minimum price guarantee that farmers were able to mortgage their paddy rice with Agricultural Cooperatives (BAAC). After 90 days, if the market price was higher than the guarantee price plus three percent interest, then farmers had the power to buy back their paddy rice and sold it on the market (Ponnarong, 2008). This policy was rescinded in 2000. The second period started in 2001 and continues up to the present. In this period, the government set the minimum price guarantee higher than the market price, so the entire paddy rice in the country was mortgaged to the BAAC. The difference from the previous policy was that the government had no agent to buy paddy rice directly...

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