News Column

Six years to settle rice debt

June 9, 2014

By Wichit Chantanusornsiri, Bangkok Post, Thailand

June 09--The planned high-cost high-speed trains will most certainly be shelved by the National Council for Peace and Order, which is due to meet this week to discuss the sources to fund the new infrastructure development projects.

It is quite clear now the four high-speed train development projects, costing more than 700 billion baht, will be put on hold as questions remain concerning the projects' appropriateness and benefits as well as economic viability, said a source who asked not to be named.

The Yingluck Shinawatra administration planned to build four high-speed train lines from Bangkok to provincial areas as part of the 2-trillion-baht borrowing bill which was ruled unconstitutional by the Constitutional Court in March.

Construction of the first phase of the four routes ? Bangkok-Phitsanulok, Bangkok-Hua Hin, Bangkok-Rayong and Bangkok-Nakhon Ratchasima ? was expected to be completed by 2019.

According to the source, the new infrastructure projects are likely to tap the fiscal budget, borrowing and public-private partnerships (PPPs), and the outlay would be cut back to about 1.3 trillion baht against 2 trillion planned earlier by the Yingluck government.

Priority projects would primarily be dual-track railways, motorways, highways in remote areas, ports, an upgrade of existing four-land roads and skytrain extensions. Nonetheless, they have to go through the usual approval process in which the project's owners are required to propose their development plans to the National Economic and Social Development Board for vetting and later for cabinet approval.

Chula Sukmanop, director-general of the Office of Transport and Traffic Policy and Planning, said construction of four-lane roads, ports, motorways and the skytrain extension should be based on the fiscal budget, while mass-transit routes and some dual-track railways should rely on domestic and foreign loans.

Projects for PPPs should go for motorways linking Nonthaburi's Bang Yai district with Kanchanaburi, Pattaya with Map Ta Phu, and Bang Pa-in with Nakhon Ratchasima.

The 98km Bang Yai-Kanchanaburi link is estimated to cost 55.6 billion baht including 5.2 billion baht for land expropriation and property compensation. The environmental impact assessment (EIA) and project design have been completed.

The 196km Bang Pa-in-Nakhon Ratchasima link requires an investment of 84.6 billion baht. Its EIA was approved in 2006.

The 32km Pattaya-Map Ta Phut motorway, meanwhile, needs investment of 14.2 billioIt could take at least five or six years to settle the estimated loss and interest burdens incurred from the Yingluck Shinawatra administration's flagship rice-pledging scheme, according to a Finance Ministry source.

The Pheu Thai Party-led government borrowed 730 billion baht in loans carrying an average annual interest rate of 3% or 20 billion baht to fund the scheme for the five crops starting with the 2011-12 main crop.

Academics have estimated that losses from pledging rice at 40-50% higher than market prices could reach 500 billion baht.

Thailand must also shoulder a loss of another 100 billion baht from subsidising agricultural products before the Yingluck government.

Further delays in releasing stockpiled rice will add to the time it takes to settle the loss and interest burdens, the source said.

The source said about 150 billion baht in losses incurred from the rice subsidy has been rolled over each year.

The scheme was aimed at boosting rice farmers' income and driving domestic consumption. The government withheld a large amount of rice from the market in the hope the price would rise. The move backfired when supply from other countries flooded the market and put pressure on prices.

Moreover, the rollover of debt payment will limit the Finance Ministry's ability to guarantee state enterprises' borrowing. The Public Debt Management Act permits the ministry to back their borrowing up to 20% of annual expenditure.

In the 2014 fiscal year, the ministry's credit guarantee to state enterprises accounts for almost 10% of government expenditure, offering more room for a rollover of debt payment.

The country's public debt stands at 5.55 trillion baht, representing 46% of GDP. The ratio accelerated from 40.78% when Ms Yingluck took the helm in late 2011 and the rice scheme has been largely blamed.

Rice exporters estimated the government has kept 15-16 million tonnes of milled rice that accumulated from the scheme over the past three years. It may take up to three years to clear the huge stock even if the rice scheme is stopped to prevent new supplies entering state stocks.

Holding a large amount of stock and speedy exports by the Commerce Ministry in recent months to get quick cash to pay back the Finance Ministry have dampened Thai rice prices in the global market.

Based on May statistics from the Thai Rice Exporters Association, export prices of Thai rice were lower than those of competitors, with 5% white rice sold at US$390 per tonne compared with $405 for Vietnamese rice, $435 for Indian rice and $440 for Pakistani rice.

The association's president Charoen Laothamatas suggested authorities make a comprehensive stock check to classify the quality of grains kept in state warehouses.

Knowing the quantity and condition of rice could help the state outline sales plans more efficiently and increase rice prices, he said. More importantly, authorities may focus on the sale of newly harvested rice while managing the sale of old rice through auctions.n baht.


(c)2014 the Bangkok Post (Bangkok, Thailand)

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Source: Bangkok Post (Thailand)

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