Moody’s, rice pledging and the Thai govt’s communication crisis – Pt 2
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Moody’s, rice pledging and the Thai govt’s communication crisis – Pt 2

Part 1 of this article is available here

The Nation on June 5:

The government yesterday ordered immediate verification of the status of the rice-pledging scheme in a bid to determine its profitability – and counter a warning by Moody’s rating agency that the controversial policy could hurt the Thai economy and cause a downgrade of its credit rating.

During the Cabinet meeting yesterday, Prime Minister Yingluck Shinawatra instructed Commerce Minister Boonsong Teriyapirom to reveal the details of the scheme’s operating costs, now reportedly a massive loss of Bt260 billion (US$6.3 billion).

The government was grilled about the scheme by the opposition in the 2014 budget bill debate last week.

During the debate, Boonsong said that the Bt260 billion loss, reportedly cited in an unofficial Finance Ministry report, associated with the scheme was groundless. But he did not produce any proof to support his claim.

The Bangkok Post:

Prime Minister Yingluck Shinawatra on Tuesday instructed Mr Boonsong to reveal details of the operating costs of the project, which was introduced in October 2011 to improve Thai farmers’ incomes.

So on Friday June 7, there was a press conference held at the Commerce Ministry with the Minister (Boonsong Teriyapirom) and Deputy Minister (Nattawut Saikuar).

The Bangkok Post:

Officials won’t say what the real losses are because they are still being calculated. Nor are they ready yet to explain how the government intends to sell the massive piles of rice it has in its stockpiles.

The country’s credibility has taken a beating this week after the US rating agency Moody’s said the extent of the losses from rice pledging could affect Thailand’s credit standing.

Commerce Minister Boonsong Teriyapirom and deputy Nattawut Saikuar held a joint press conference on Friday to discuss the finances of the rice scheme.

“The 260-billion-baht figure is made up,” said Mr Boonsong.

“Truthfully, the government has allocated a budget of 400 billion baht for the rice-mortgage scheme and all of the money has not been spent yet. Therefore, this figure cannot have occurred.”

Another Bangkok Post article:

Mr Boonsong said the ministry was still in the process of releasing stockpiled rice and was unable to tally the revenue raised from those sales. Detailed figures of the losses could not be calculated until the revenue was included, he said.

The minister had earlier promised to fully clarify the scheme’s losses.

“The stockpile of rice under this government’s rice-pledging programme stands at about 17 million tonnes. Since we have been releasing it to the market, it’s estimated that about 10 million tonnes remain,” Mr Boonsong said.

“It will take two to three years before we can get rid of the stockpile and realise the losses.”

The Nation:

The Commerce Ministry and government agencies responsible for the rice-pledging scheme yesterday rejected reports that the project had run up huge losses of up to Bt260 billion, but failed to produce any evidence to substantiate their rebuttal.

Commerce Minister Boonsong Teriyapirom denied yesterday that the government had suffered a Bt260-billion loss, arguing that the rice in the stockpile had still not been sold while the pledging project was still in operation.

“The government cannot yet estimate the final loss figure from the pledging scheme. The figures can be finalised only three years after the end of the pledging scheme this September. The government must release all rice stockpiles so that it can know exactly the cost and spending on the pledging programme,” he said.

He questioned how the committee could have calculated the losses as the government still has more than 10 million tonnes of rice in the stockpiles.

The Nation has more on the press conference:

Commerce Minister Boonsong Teriyapirom is still unable to say exactly how much money has been lost in the government’s rice-pledging scheme, even though he dismissed the Bt260-billion estimate produced by the Finance Ministry’s post-audit committee.

At a rare press conference held last week, Boonsong kept evading relevant questions and only provided stammered responses to other non-essential queries.

The minister appeared nervous, wiping away his perspiration and fiddling with his glasses.

Suthichai Yoon in The Nation:

Prime Minister Yingluck Shinawatra was supposed to have blown her top during a special meeting of Cabinet members on June 7 at Baan Phitsanulok. Thai Post Daily said she was very upset that ministers and their assistants had left her to defend the government almost all alone.

It was the same day that Commerce Minister Boonsong Taeriyapirom and his two deputy ministers met the press to say that they couldn’t offer any exact numbers on the heavy financial losses incurred from the government’s controversial rice-price pledging programme.

Reporters kept up a barrage of questions demanding to know the exact numbers. If the minister said the reported figure was wrong, what’s the truth?

The ministers appeared dumbfounded. …

That’s probably what the premier was mad about when she told her Cabinet members that they must be proactive about doing public relations on the government’s performance. Minister Boonsong might have been urged by the premier to “go out there and talk to the public” about this highly sensitive issue that has plagued the government. But when he finally did, it was nothing short of a major PR disaster.

Veera in the Bangkok Post:

Commerce Minister Boonsong Teriyapirom’s press conference last Friday which was supposed to enlighten us as to the actual status of the rice pledging scheme was a farce, a letdown as always as far as the populist scheme is concerned.

The farcical press conference has rendered Commerce Minister Boonsong completely unreliable, while the scheme itself stinks.

BP: Farcical is being kind. Video of the press conference is available (part 1, part 2, and part 3). It is a clusterf*ck of epic proportions.

His point is that as the rice hasn’t been sold, we don’t know the price we will get for it. On one hand this is true and if Vietnamese and Indian rice stocks were wiped up with a natural disaster, world rice price would go up and the loss would be much lower, but it is still perfectly reasonable to take the cost spent, money received so far, and then minus expenses, and then calculate the value of the rice stock you have now. You can’t just hope for natural disasters and say you need to wait 2-3 years to find out the cost.

To give you an idea on how bad his performance was, The Nation reports on government MPs who are unhappy and are on the record in their disappointment:

Pheu Thai’s Nakhon Phanom MP Paijit Srivarakan said he believed Boonsong had failed to clarify about the losses under the rice-pledging scheme. He said the minister should not make the public feel as if the project is under a cloud.

“Although farmers are happy with the project, the management of the scheme must be more transparent. If the minister fails to give a clear explanation, the opposition will move politically to attack us and there are other groups waiting in the wings to topple the government. Therefore, the government must fully understand the scheme and give a better explanation,” he said.

Pheu Thai’s Ubon Ratchathani MP Somkid Chuakong said he was irritated with Boonsong’s clarification on the rice-pledging scheme, saying it was difficult for the public to understand even though he was able to give easy-to-understand messages.

“I believe Boonsong does not have the figures on rice stocks in the warehouses and how much rice has been sold last year and this year. The concerned agencies have yet to provide him with the figures. This makes the public sceptical about his clarification. He is a quiet man but next time he must be better prepared with information so that the government does not fall a victim to attacks by critics,” he said.

BP: Remembering this directed at one of their own Ministers, it is embarrassing…

After the press conference, Yingluck assigned Deputy Prime Minister Varathep to be responsible for finding out the losses from the scheme. The Nation:

PM’s Office Minister Varathep Ratanakorn has been assigned to collect information related to the rice-pledging scheme from all government agencies, in a move by the government to clarify confusing figures.

Prime Minister Yingluck Shina-watra said yesterday that there is no a single set of information regarding the loss incurred by the rice-pledging scheme, as each government agency has its own set of information.

BP: Then when later asked if Boonsong would still be in the Cabinet, she stated it depended on the amount of the losses complied by Varathep.

While the Commerce Minister and others deny the 260 billion figure, The Nation has details of how it was calculated by the Ministry of Finance:

…while huge stocks still remain from the scheme, the pledging process for three harvest seasons of combined first and second crops has already ended, so the committee could make the calculation to close the scheme’s account by basing it on the outcome of the project to find the net result.

The committee first deducted the proceeds from rice sales from gross expenses. Then it calculated the value of the remaining inventoried rice, using the price of the already sold rice, and subtracted that from the first result to reach the net result, the source added.

According to the committee, governments linked to former PM Thaksin Shinawatra have inflicted cumulative losses of almost Bt400 billion on the country through the pledging schemes for rice and other crops, and the current government is responsible for a loss of up to Bt260 billion as of the end of last month.

BP: That 400 billion is for a variety of different agricultural products and not just for this government.

The Bangkok Post:

Of the estimated 260 billion baht in losses, 42.9 billion came from the 2011-12 main crop, 93.9 million from the 2012 second crop, 84 billion from the 2012-13 main crop and the remaining 40 billion from 10-billion-baht losses in each month from February to May.

BP: Government figures still deny the 260 billion figure. For example, the Bangkok Post:

Mr Prompong said that while the data about the rice scheme was incomplete, the estimated losses of 260 billion baht claimed by the Democrat Party and government critics were exaggerated.

“The 260 billion baht figure came from a questionable source. It came from reports that hadn’t been examined and verified,” he said.

BP: However, since Varathep has taken more control, they had stopped denying the underlying math.

The Nation:

The Finance Ministry’s subpanel put the loss at Bt130 billion, a figure that PM’s Officer Minister Varathep Ratanakorn, who supervises the scheme, said was acceptable. However, the figure is based on only two crops of rice, and excludes the huge output cultivated from the third and latest crop.

The loss of Bt130 billion was the same amount incurred in the first year when a similar scheme was implemented under the previous government, the subpanel said yesterday.

She said a majority of the National Rice Policy Committee (NRPC) members approved of this method. The panel had earlier estimated a loss amounting to Bt260 billion, and later reduced it to Bt220 billion, calculating on three crops of rice since the Yingluck government took power and initiated the scheme.

The Bangkok Post:

PM’s Office Minister Varathep Rattanakorn said the NRPC Monday accepted the government posted losses of 136 billion baht from its rice scheme during the programme’s first year as reported by a Finance Ministry panel.

The loss of 136 billion baht was based on all expenses in the rice-pledging scheme in its first year _ the 2011/2012 crop year _ including management costs, interest and the estimated value of remaining rice stocks.

The NRPC has not concluded on the losses for the second year _ the 2012/2013 crop season _ despite the fact that the Finance Ministry’s panel reported the first crop losses for the second year at 84 billion baht.

BP: To summarize, a confirmed forecast loss of around 135 billion loss the first year and the government now accepts this. This is lower than the initial Bangkok Post/Moody’s figure of 200 billion Baht, but it is much higher than the government had planned for and and had previously stated.

For the second year that runs until September 2013, we have around 90 billion baht for the main harvest and so far an estimated 40 billion baht loss up until the end of May although the NPRC has not affirmed those figures as it is not the end of the year. Nevertheless, as the majority of the NPRC and the Minister now in charge of managing the situation confirm the underlying math, we are now on track for a loss of around 150-160 billion baht for the second year.

Wouldn’t it have been easier just to confirm this is all two weeks ago and avoid the problems that have arisen?

More on what the government is planning to do next soon.