Wednesday, February 5, 2014

Burmese Smugglers Milking £13 Billion Thai Rice Subsidies

 Burmese smuggling rice into Thailand at Maesot.
Burmese smugglers are getting rich quick on Yingluck Shinawatra's £13 billion Thai rice subsidies. A populist subsidy on rice by Thailand's ruling party is enabling smugglers from neighbouring Burma to make a quick buck at the expense of Thai taxpayers.

For the rice smugglers of Myawaddy, business has never been better. A scrappy, dusty Burmese border town, Myawaddy has long been notorious as an illicit trading hub for drugs, guns and precious gems.

Now, Myawaddy has become a centre for the trafficking of a more nutritious but scarcely less profitable product, as rice smugglers take advantage of the substantially higher grain prices on offer in neighbouring Thailand.

In Myawaddy, 50 kilos of rice sells for £16. But in Thailand, the same amount is worth £30, a consequence of the ruling Pheu Thai Party’s controversial subsidies to the rice farmers who make up much of its support base.

Known as the “rice-pledging scheme”, the populist policy has cost the government more than £13 billion, prompting the IMF to warn that the scheme is undermining the economy.

But the rice subsidies are also a huge source of anger among the largely middle-class anti-government protesters who have taken to the streets of Bangkok to try and topple Prime Minister Yingluck Shinawatra and her Pheu Thai party from power.

They allege that not only has taxpayers’ money been squandered to buy votes for Pheu Thai, but that millions has disappeared into the pockets of the politicians and officials overseeing the scheme.

Last month, Thailand’s National Anti-Corruption Commission (NACC) announced a probe into the rice-pledging policy, only adding to the pressure Ms Yingluck is under.

The prime minister was forced to call a snap election that took place on Sunday - which was boycotted and labelled as illegitimate by the opposition - in a failed attempt to end the political crisis gripping Thailand. Results are yet to be announced. Ms Yingluck’s role as head of the national rice committee means she could face criminal charges arising from the NACC’s investigation.

The commission is ready to charge 15 other people, including a former commerce minister, with corruption linked to the rice programme, spokesman Vicha Mahakun told a news conference.

A huge rice warehouse storing government-purchased rice.
On Tuesday, China ditched a huge rice deal to buy 1.2m tonnes of rice from Thailand, around a fifth of the country’s annual exports, due to uncertainty over its agricultural sector. While the subsidies have played a major part in causing the turmoil engulfing the Thai capital, for the rice traffickers the policy has resulted in huge gains.

Boats loaded with what the smugglers coyly describe as “chicken feed” travel daily across the narrow stretch of the Moei River that separates Myawaddy in Burma from the neighbouring Thai town of Mae Sot.

On the outskirts of Myawaddy, The Telegraph watched as lorries pulled into a compound close to the river bank guarded by Burmese soldiers. Sacks of rice were swiftly unloaded and transferred to waiting boats.

“We started sending ’chicken feed’ to Thailand in big quantities a couple of years ago,” said the officer in charge of the soldiers. “It’s transported mostly at night. Generally, we’ll send 100 sacks at a time. Each sack is 50 kilos.”

Some enterprising individuals sling sacks of rice on their backs and simply wade across the Moei River. It is the equivalent of smuggling tea into China, or opium to Afghanistan, because until 2012 Thailand was the world’s largest rice exporter.

That began to change following the government’s decision in October 2011 to pay almost double the market price for rice to farmers. The policy was conceived as a reward for the rural voters who make up much of the ruling party’s power base.

But it was also a highly ambitious attempt to corner the global market in rice, with the government gambling on stockpiling vast amounts of grain it could later sell at a huge profit.

The scheme, though, has instead backfired in spectacular fashion. A worldwide slump in rice prices means that the government has spent almost £13.5 billion buying rice it is unable to sell at a profit, leaving it with a vast mountain - 18 million tons - of unsold grain, nearly as much as the country produces in a year.

Meanwhile India and Vietnam have now overtaken Thailand as the world’s leading rice exporters. And with prices for rice far higher than in neighbouring countries, up to 750,000 tons of rice is being smuggled into Thailand annually, where it is passed off as locally-grown grain so that it can be sold to the government at the artificial price.

Thai PM Yinluk inspecting a subsidized -rice Warehouse
“The government is running into serious financial trouble from the scheme,” said Dr Nipon Puapongsakorn, an economist at the Thailand Development Research Institute who has made a study of the subsidy policy.

“Rice isn’t like wine; you can’t keep it forever. The longer the government stockpiles it, the more it will depreciate in value.” With the average salary in Myawaddy just £2.50 a day, there is plenty of incentive for people to smuggle rice: a 42-year-old smuggler, who gave his name as “Brother Tone” said he could earn up to £60 a day, almost 25 times as much.

Nor do the smugglers have to worry about getting caught. “As long as you have permission from the army and pay the right people, it’s no problem. No one goes to prison for this in Burma,” said Mr Tone.

Stopping the smuggled flow is a near impossible task for the Thai authorities. “We have 59 officials to cover almost 340 miles of the border,” said Supachai Sasomboon, deputy director of the Mae Sot customs post. “So it’s very hard to police the border.”

Thailand’s economy is now under mounting pressure from both the influx of smuggled grain and the spiralling costs of the rice-pledging scheme itself. The credit agency Moody’s has already warned that it could lead to Thailand’s rating being downgraded.

Worse still for Ms Yingluck, the policy has come to symbolise what the anti-government protesters regard as Pheu Thai’s abuse of power. “People see rice-smuggling as a victimless crime,” said Dr Nipon. “But it’s the Thai taxpayers who are suffering.” 

August 10, 2004 -- Thai customs officials in Mae Sot yesterday seized 309 sacks of Burmese rice that were smuggled into the country illegally, said the Tak Province customs chief.

Smuggled-Burmese-rice seized by Thai Customs at Maesot.
Klisada Thongthammachart said the rice was intercepted on the bank of the Moei River, which separates Thailand and Burma. He added that since April customs officials in Tak have confiscated more than one thousand sacks of rice worth an estimated half million baht (US $12,000) from Burma.

Thailand bans the import of Burmese rice, which is cheaper than Thai broken rice. Most of the smuggled grain goes to Thai rice noodle factories or to chicken and pig farms where the rice is used as feed.

Burmese rice traders on the border said they pay Thai officials to allow the rice to enter the country. Thai traders then carry the contraband grain to the interior provinces.

“But sometimes they [customs officials] don’t take our money and seize our rice instead,” said a Burmese trader, whose rice was confiscated yesterday. He also complained that Thai authorities often seize Burmese rice at the river as it enters the country but then allow Thai rice sellers to transport deeper inside Thailand without any problem.

“It is just to show that customs is preventing the smuggling of Burmese rice into Thailand,” he said.

Thailand officially restricts the import of basic goods from Burma such as rice, chili, onion, garlic and several varieties of beans. But earlier this year customs officials have allowed small amounts of restricted goods to enter the country to make up for shortfalls.

According to the customs official, from October 2003 to July 2004 Thailand exported 10,345 million baht worth of goods to Burma through the Mae Sot border crossing and imported 453 million baht worth of cattle, gems, seafood, wood and agricultural products.