Thailand’s palm oil crisis: ‘Mr S’ strikes again
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Thailand’s palm oil crisis: ‘Mr S’ strikes again

By Dan Waites

Thailand has recently faced a severe shortage of palm oil. Despite being the world’s third-largest producer of the commodity, the country has been forced to import tens of thousands of tonnes of the stuff from Malaysia.

So how has this happened? The government is putting the blame on flooding and drought last year. But a quick look at the United States Department of Agriculture website shows this can’t be the whole story. According to the USDA, in 2010 Thailand produced 1.345 million tonnes of palm oil, down just 195,000 tonnes on 2009, when there was no “shortage”. Considering the country only consumes about 400,000 tonnes per year as food, with the rest used to make biodiesel, there has clearly been some mismanagement somewhere along the way. Unless you think filling gas tanks is more important than filling bellies, of course.

So what’s really going on? Recently, some people have been making some rather serious insinuations about Suthep Thaugsuban, Thailand’s deputy prime minister. Suthep, whose family is one of a handful who control the palm oil industry in the South, also happens to be chairman of the National Palm Oil Policy Committee. Conflict of interest? Arai na?

In an artfully worded op-ed in the Bangkok Post, Voranai Vanijaka did an impressive job of explaining how the crisis has happened and how a certain politician whose name begins with “S” may have benefited. And on page 11 of this week’s Matichon Weekend, there’s a damning article that throws caution to the wind and places the blame squarely at the feet of Suthep. The anonymous writer claims palm oil refiners in the South have pocketed at least 4-5 billion baht as a result of the shortage. Among the points the article makes:

  • In August 2010, Thailand had stocks of 209,659 tonnes of palm oil. From September, stock levels went on a downward trajectory, hitting 98,015 tonnes in November. At that point, the committee could have decided to import more palm oil, which is something that had happened in the past. But the committee did nothing. By December, stocks had run out completely.
  • Then, instead of importing more oil the government chose to raise the controlled retail price to 47 baht per bottle.
  • At the same time, palm oil refiners were buying palm fruit at 5 baht a kilo from farmers, not the 11 baht a kilo specified by the government.
  • About 80 percent of palm oil is processed in the southern provinces of Surat Thani, Chumphon and Krabi by 65-67 factories. These factories are owned by just 10 individuals. And all 10 of them are either politicians or hua khanaen, powerful businessmen who secure votes for politicians in exchange for political favours.
  • In November and December 2009, before any imports of palm oil entered the country, the monetary benefits to these 10 individuals from “pocketing the difference” amounted to between 4 and 5 billion baht.
  • As well as paying no heed to rapidly falling stocks of cooking palm oil, the government also continued to allow exports, which at the end of 2009 were continuing at above-average levels. And it continued to subsidise the production of biodiesel with palm oil, allowing 400,000 tonnes of the oil to be used for this purpose.
  • When the committee did eventually decide to import palm oil, it insisted the oil was crude and had to be refined in Thailand. So there were extra “benefits” here in terms of refining fees.
  • Having the Department of Special Investigations investigate vegetable oil factories is merely fixing the symptoms of the problem. The real question is why did the director of state policy, Suthep Thaugsuban, make such a monumental mess of the situation?

Of course, nothing’s been proven. But if the worst is true, it’s shocking stuff – the kind of thing that makes governments fall.

Funnily enough, a chance to make that very thing happen is just around the corner, with the opposition Pheu Thai Party’s much-vaunted censure debate against the government. Among the allegations the opposition will be hurling at the prime minister is: “Inefficiency in containing the cost of living and failure to ensure sufficient supply of consumer products”. Suthep is set for a grilling, too. While the chances of the censure motion succeeding are pretty much zero – coalition MPs don’t look about to vote themselves out of power – it should make interesting viewing.

It’s also worth noting that this isn’t the first time a Democrat coalition led by a squeaky clean prime minister has faced a censure motion. In 1995, when Chuan Leekpai was PM, his agriculture minister, a certain Mr Suthep, was accused of giving away land meant for poor farmers to some of the wealthiest families in Phuket. Rather than face questioning, Chuan dissolved parliament… and lost the subsequent election.