Bangkok Post 22/04/08
Poor consumers left to fend for themselves
There are now three economic crises facing the world: the ongoing credit crisis, high fuel prices and the rise in grain prices culminating in what is now being called the Global Food Crisis.
The impact on Thailand from the credit crisis is more indirect in terms of the US economy slowing down as a result, whilst Thailand's pain as a result of the rise in the oil price is well-documented and remains a huge challenge.
The food crisis is different. Put simply, we are a net surplus producer and thus higher prices are a good thing. It is the opportunity we need to structurally solve the imbalance of half of our population working in an industry that earns them less than 10% of the national income. Yet, the Thai people don't seem to feel that they stand to benefit from this windfall in the way that people of Saudi Arabia do when oil prices rise _ and this includes producers, not just consumers.
Unfortunately, we are not getting any help from the government.
I was hoping the Prime Minister would use his weekly broadcast over the Thai new year to outline his government's strategy; but I was not merely disappointed, I was crushed. All we heard were complaints about his role, relative to Thaksin, and a long monologue concerning his family history.
In the meantime, silence from the Agriculture Minister; nothing from the Minister for Labour; the Finance Minister was off telling US investors that Thailand needs a constitution amendment, and even the Commerce Minister seems to have run out of new U-turns to make.
The only message we are hearing loud and clear from the government are issues that are entirely self-serving and detrimental to the longer-term stability of Thai society.
I have strong views about why we need to resist the attempts to change the rules of the game through amendments in the Constitution, and certainly believe that the government is failing in its duty by focusing on this issue rather than on needs of the people. This is especially true given current challenges and opportunities.
When was the last time there was a world crisis in which our country and our people were considered key players in the provision of a global solution? This is a historic moment for our people and the government is cynically ignoring the challenge.
The issue is Food, and it is pivotal for Thailand because we are a very large ``marginal'' producer. By this I mean that though we are not the largest producer, our excess production is what fills the gap in world demand. In rice in particular, less than 10% of the world's production is actually traded (the rest is consumed by the producing country) and that's why even though China produces 10 times more rice than we do, our exports can account for around 30% of total rice traded internationally.
As I write, Indonesia has just become yet another grain producing country to have slapped a ban on exports. Each announcement of such bans causes world prices to rise, and now there is a genuine risk that the poorer grain importing countries will face shortages. I read recently that in the Philippines, a net rice importer, the government has asked restaurants to halve the portions of rice normally served.
I wrote two weeks ago that the Thai government should not impose export restrictions on rice _ partly because it will have the opposite of the desired effect of reducing local prices, partly because it would limit the potential gains farmers could make from the higher world price, and partly because I do not think it right that we embark on a ``beggar-thy-neighbour'' policy, especially when there is no risk of a domestic shortage.
Having said that, if the World Bank, as stated in its recent meetings in Washington, wishes Thailand to concentrate on growing grain for food as opposed to fuel, measures need to be taken too for the oil producing countries not to ``beggar'' us by contriving to sell oil at record prices.
The developed countries have been asked to put together a US$500 million fund to help developing countries _ a pitifully small amount when compared to the scale of their economic activities. The IMF, for example, recently estimated that the total subprime losses would total US$1 trillion. The chain of events leading to higher consumer prices clearly derived from higher oil prices and, in part, also from the lower dollar. In both there are beneficiaries _ the oil exporters and the US itself, in terms of reduced value of real debt (money they owe us) as well as increased competitiveness of their industries.
If we are to talk about global fairness, significant distribution of these benefits must be made. Moreover, it is in the US in particular that incentive structures have led to a boom in biofuels away from production of food.
In any case, the good news is that we are one of the few net producers, not net consumers of food. The pivotal questions that face us are thus:
1) How can we become more efficient from the land/water resources we have;
2) How can we ensure that those responsible for production rather than trade derive most of the benefits (farmers, not traders);
3) How can we ensure that the consumers within our country survive rising prices; 4) How can we leverage our role as the marginal producer internationally?
I don't have sufficient expertise nor column space to answer these questions here. However, it is clear that the government is not sufficiently addressing the issues. It is obvious that the root of the problem is one related to water management and not land.
Our capacity is more limited by access to water than to farmland, and we know most rain water in Isan is not captured by the existing irrigation infrastructure. We know that farmers without access to their own irrigated land are being charged rent that is 2-3 times higher for the next crop because of rising product prices, and we know that the minimum wage for the poorest ``consumers'' _ manual labourers _ is stuck at less than 150 baht a day in the provinces and 195 baht for the industrial zones of Bangkok and its environs.
We also know that this is not fair, especially with the government already providing substantial tax reductions to corporate employers, especially those in the property development industry, a major employer of lower income labourers.
Recent delaying tactics by the Labour Ministry postponing a decision on increasing the minimum wage is inexcusable. What is being done for the workers?Food and fuel prices have been rising year-on-year in double digit terms, with every other product following suit, and in the meantime free education and even minimal benefits for the aged have been postponed by the current government.
The Democrats were talking about raising the minimum wage to 200 baht in our campaign even before the coup. Since then prices for basic products, especially food and fuel, have virtually doubled. The government is all the while entirely focused on politics, to the dismay of the general public. This is not what a return to democracy was meant to deliver. Put your own and Mr Thaksin's interests aside and get to work.
Korn Chatikavanij