The agriculture sector has always held an important place in Thailand, even though the country’s agricultural output accounts for less than 10 percent of gross domestic product (GDP).
The sector’s importance lies in the fact that it employed 12.2 million people, representing about 30 percent of the country’s labour force as of the fourth quarter of last year.
Though the sector has a long history of being wooed by political parties with populist policies to win votes, it has been plagued with multiple problems. For instance, the average age of labourers is 55 and farmers have low incomes compared with workers in the manufacturing and services sectors. These factors have long provided the justification for populist policies.
Pursuing short-term gains
As the country heads towards a general election in May, political parties are launching campaigns that promise short-term benefits instead of what’s good for the long term.
Critics are worried about taxpayers’ money being wasted in providing wrong incentives to farmers.
The policies proposed by the Democrat Party, a member of the outgoing ruling coalition, include income guarantee for farmers engaged in growing rice, cassava roots, rubber trees, palm and maize. It would also give a cash handout of 30,000 baht to each farmer household to help improve their farming efficiency. The party also has promised to provide a 100,000 baht a year subsidy to each fishing community, and issue ownership titles for up to 1 million land plots in four years.
The Democrats in the current coalition government oversee the Commerce Ministry and Ministry of Agriculture and Cooperatives, which are responsible for implementing the income guarantee scheme for farmers. Under the scheme, if the market price falls below the reference price set by the government, the state will pay the farmers the difference.
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‘Wasteful incentives’
Critics say the income guarantee scheme provides wrong incentives to farmers and is a waste of taxpayers’ money.
The scheme costs about 30 billion to 80 billion baht a year, depending on the price volatility of farm products. A higher market price results in a lower subsidy budget while the government foots a high bill when market prices drop.
“We find that the scheme does not encourage farmers to improve their productivity,” said Nipon Poapongsakorn, economist and distinguished fellow at the Thailand Development Research Institute (TDRI).
He lamented that Thailand’s rice productivity per rai is lower than that of developing countries such as Bangladesh and Nepal.
“From our research, we also find that many farmers cheat the government. They do not grow as much rice as they claim in the registration. The government too does not inspect whether the farmers are actually growing the quantity of rice they state in their registration to avail of the subsidy,” he said.
Funding the farm production efficiency scheme, which costs as much as 50 billion baht a year, overlaps the income guarantee scheme. It is like a cash handout, Nipon said.
According to the TDRI, the combined cost of the income guarantee scheme and the support for production efficiency was about 140 billion baht between 2021-2022.
The ruling coalition leader, Palang Pracharath Party, has pledged to provide fertilizer subsidy and debt reduction to farmers.
Another ruling coalition member, the Bhumjaithai Party, has promised a debt moratorium for three years for farmers. Each household would receive a debt moratorium of up to 1 million baht.
The opposition Pheu Thai Party has promised to give farmers a debt moratorium for three years. Farmers need not repay the principal amount as well as interest.
Any debt moratorium is expected to impose a heavy burden on the state-owned Bank for Agriculture and Agricultural Cooperatives.
Farmers also will be eligible to receive 10,000 baht under the Pheu Thai digital wallet scheme, which is offering cash to everyone aged 16 and above and is expected to cost over 500 billion baht.
Critics are worried that the debt moratorium policies will be a moral hazard, ending up in the government providing financial support to state-owned banks later.
Pheu Thai also has pledged to look into land rights of poor farmers.
The opposition Move Forward Party has pledged to release 10 million rai (1.6 million hectares) of land back to farmers and establish a land bank.
A questionable policy
Economists are questioning the wisdom behind giving public land to farmers. Nipon does not think providing land to farmers will reduce the inequality between the rich and the poor.
It might have worked 30-40 years ago, but land given to landless farmers could end up in the hands of influential people such as politicians, senior officials, and the rich having connections with state officials, he said.
Thailand started land reforms, known as Sor Por Kor 4-01, in 1975 by giving state land to landless farmers who could use it for agricultural purposes but not own it.
So far, Thai governments have given away about 3.64 million rai (0.528 million hectares) of land under this program, representing about 24 percent of total agricultural land, said Nipon.
“Thailand is among a few countries giving away large areas of public land to farmers,” he said. But just giving out lands to farmers will no longer work, instead of handing out cash and public land to farmers, the next government should focus on training farmers to do modern farming, Nipon stated.
The government should collaborate with regional universities and use their researchers to work with farmers on improving their productivity, he suggested. Researchers should also be given incentives to move their career path upward if they could support farmers with their own research.
Focus on training, not populism
There are some effective training courses provided by the department of agricultural extension of the Ministry of Agriculture and Cooperatives.
“It has run a smart young farmers’ course. It is quite good for engaging in sustainable agriculture, but it needs more support,” said Nipon.
Thailand is becoming an ageing society while the young generation does not want to work on farms. Modern farming requires new technology and higher education. The new generation has to be knowledgeable in order to manage their farms productively. Moreover, they also need to learn marketing and digital technology to sell their produce, Nipon suggested.
The government needs to provide digital infrastructure as currently the cost of internet connection is too high for people living in rural areas, he pointed out.
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Flexibility in land use
Currently, the public land given to farmers under the scheme requires them to use it for farming activity only.
But many land plots under the Sor Por Kor 4-01 may not be suitable for agriculture, so landless farmers should be allowed to use them for other activities, Nipon suggested. The right to use public land should be transferable to other people, not only descendants as currently required by the law, he said.
“Thailand needs a paradigm shift in agriculture by integrating the sector with rural development, aiming at improving the living standards of the people, so they could engage in many activities, not only agriculture,” added Nipon.
Need for tech-oriented approach
Former central bank governor Veerathai Santiprabhob has a similar view. He urged politicians to focus on solving supply-side issues of lower productivity in agriculture by paying more attention to agri-tech, edu-tech or gov-tech in order to make a real change rather than applying short-term stimulus policies.
He pointed out that traditional agriculture uses too much water, emits too much greenhouse gas and the sector is a major source of producing PM2.5 (particulate matter less than 2.5 microns in diameter) toxic dust, increasing the cost for public health.
By Thai PBS World’s Business Desk
