This article will, upon some further modifications, form the basis for a series of articles that are to be published in local papers on the issue of food, free trade and social stability.

Thailand Under Crisis: The Rural Picture and Food Security
 

Thailand’s Structural Adjustment Programme (SAP), dealt out by the World Bank and the IMF to try to contain the financial meltdown in 1997 is largely focused on privatization of state enterprises (a goal the World Bank has been working for in Thailand for a couple of decades) and high interest rates. As is well known now, this had the effect of slowing down the economy more than anyone had projected.  But still Thailand’s technocracy envisioned a strengthened agricultural sector since all those idle hands would of course return from whence they came - the farms - and it was going to be that strengthened agricultural sector that was going to pull Thailand out of the mire once again.

As is the case for agriculture almost the world over, it is forgotten about until needed.  It is not surprising, then, that the government did not take into early consideration of the fact that it wasn’t just the financial and industrial sectors that had paralyzing debt. Grassroots debt, estimated in excess of 250 billion baht, was crushing farmers. There was a call for a debt moratorium by farmers.  It was partially met.  Yet a large part of this debt was outside of the reach of government aid.

Private money lenders play a very large role in agricultural financing and farmers turn to these sources when turned down by the stricter demands of the government agricultural bank.  Estimates of such private lending reach anywhere from between 50 to 100 billion baht.  Many farmers lost and are losing their land because of this situation. Now with the impending Bankruptcy and Foreclosure regulations - regulations drafted as a result of IMF/WB ‘bail-out’ negotiations -  facing the nation, it is argued that there stands the potential for a great increase in the number of smallholder farm reposessions.

Making things even heavier, the banks are moving to reduce exposure to agricultural loans.  The trend of declining world prices in agricultural commodities is making Thai banks look carefully at farmer’s short term capacities to repay loans.  The banks can’t afford to show any more bad debt in their books.  Recently posted net losses by the major Thai banks show figures ranging from 12.86 to 49.5 billion baht!  That’s red ink in bold and italics.

As if that wasn’t enough bad news for Thai farmers, several more near-Extinction Level Events came searing explosively into the fields.  The first of these came in the form of the European Union’s revision of its Generalised System of Preferences (a most improbable title in these times of supposed non-preferential treatment amongst WTO members).  This is a body of tariffs and tariff exceptions that the EU manipulates to massage import costs to their favour.  This revision has seen the tariff against Thai vegetable imports increase 1600% from from a mere 1.2% to a hefty and restrictive 20.4%.  This bodes ominously for Thailand while putting the EU in a very comfortable bargaining position.

Very comfortable indeed.  In the latest UNFAO survey, Thailand rated the 11th largest vegetable producing nation of all nations surveyed, weighing in at 500 million tonnes per year of over 70 different kinds of vegetables.  The EU is Thailand’s second largest market.  The number of Thai farmers who will suffer at the EU’s decision will be enormous.

The second catastrophic event is Brazil.  While the full reaches of South America’s impact on the region is as yet unpredictable (lest we show the same humbling piety the IMF held when Thailand first went down), what can be said is that the immediate impacts on Thai sugar exports look to be severe.  Brazil was a strong competitor to Thailand in sugar exports before the Brazilian currency was devalued. What also needs to be considered here is that Thai consumers are paying higher than world prices for sugar - de facto support of the export industry.  Thailand, it would seem,  is only superficially competetive.

This has been a sensitive political issue especially over the last year as the whole sugar cane production and trade chain has been calling for increased government intervention.  They have since received some quite substantial support but the industry now faces ever stronger pressure to reduce costs.  Just this past December 30, 1998 one of the largest Thai sugar refining conglomerates filed for restructuring of its debt.  It is having troubles servicing the 15 billion baht  (US$416.667 million) that built up because of non-liquidity.  This group holds a combined 13% of the total export quota and directly employs over 3000 people.  It is but one of a number of sugar groups queing up to follow suit. Sugar cane growers and their dependents make up a vast chunk of  the population of the poorest part of Thailand.  In Thailand, this whole industry is dying before our eyes.

The third meteor to threaten farmers recently is drought. The water shortage has reached such an extent that at the rivers’ culmination, seawater is flowing at alarming rates up past the regular boundaries of the estuaries. There is now concern of brackish water contaminating agricultural fields further upstream from the estuaries.

Thailand has been concerned with its water supply for some time now and is again facing growing domestic pressure to take decisive political action. The State has declared, however, that it is not the owner of the water in rivers and other bodies.  This has put the government in an awkward position of not being able to strongly enforce water use guidelines.  There have been pictures in the local media of dry river beds because of damming and diversion activities by upstream communities.  Frustration downstream is growing steadily everyday.

A fourth meteor yet to crash down but on a collision-course and bigger than all the others is Thailand’s agricultural support.  Thailand spends about 100 billion Baht a year on price support measures alone.  Just in the last month there has been announcements of multi-billion baht measures to aid cassava and rubber markets.  Palm oil and sugar have also been recently addressed on a similar scale.  On top of that, the government is always maneuvering to provide seed, loans and other support to farmers and the related processing industries throughout the year.  Much of this support actually goes against what is allowed under subsidization agreements under the Agreement on Agriculture of the WTO.

And this is the big issue. Ground Z-e-r-o.  Centrality.  The Thai agriculture’s Event Horizon.

1999 was supposed to be the year of review of the ‘progress’ of the last round of WTO negotiations - known as the Uruguay Round.  It was supposed to be simply a review but the talk on the street is new rounds of fresh negotiations and that style of talk is coming not just from Washington. If Thailand’s Mr. Supachai actually makes it to the top position of the WTO as is hoped by Thailand and many other nations in the region, what kind of pressures will this create to clean Thailand’s domestic and export support habits and what effects would this reduced support have on the farmers?

These are very relevant questions that have to date been ignored.  It can be reasonably assumed that the Chuan administration is eschewing the issue because Chuan et al. are already quite despised by the vast majority of the national constituency - the farmers - precisely because of his acquiescence (whether perceived or real) to the IMF and the WB.  For Chuan Leekpai to address the deconstruction of support measures at the imminent behest of the WTO would spell the absolute end of his political career.  An apt image that comes to mind would he consider addressing the issue is an amphetamine-high rhinestone mahout trying to break a wild elephant.

Where is this going?

Free trade in agriculture is all about outsourcing food production.  Those crops that a nation cannot produce ‘efficiently’ are to be left to some other country to produce for you and you just buy it from them. Just in case no one has yet to notice: poor people do not buy food.  That word ‘efficiency’ is of course as defined in the narrowest of economic senses.  There seems to be no apparent need by those who draft trade regulations to consider the efficient access to food or the overall efficiency of social stability provided by a well-fed population.

The stress quivering through Thailand’s rural population is becoming tangible.  Downstream frustration towards upstream diversion activities under drought conditions is growing steadily.  Sugar cane processors have already taken to the streets and blocked access to mills in the very recent past.  Suicides are up noticeably and the general state of mental health is also becoming an issue in the local media with a noted increase in consultation statistics of regional health services.

What provides a more revealing picture of the rural psyche, however, is the fact that farmers have planted their fields to a second crop of rice against all government warnings of drought.  The total area planted to rice is 300% greater than what water reserves then could properly irrigate.  One has to look questioningly at this.  Is it that farmers have thrown caution to the wind - drunk on images of the possibly increased prices in this period of regional rice shortages?  Probably not.  Farmers generally would not take such a chance with their seedstock. If this crop dies they will have to buy seedstock for the next planting season. With an ever decreasing chance of approved loans this would be of grave concern.  So then is it despair in the face of incapacitating debt?  More likely, yes.

If there is not yet enough evidence against the Chuan government’s Agricultural Trade Will Save The Country Again  approach, then surely the final nail in the coffin is that those 900,000 industrial sector refugees that had returned to the farm looking for respite from the recession are now starting to return to the cities once again.  The farms were unable to receive them.

Shouldda called ahead.  It seems there was No Vacancy at the Inn on the Country. Why?  Because agriculture was spiralling down the free trade toilet along with the rest of the economy.

Free trade was envisioned first in the 50’s by the then Bretton Woods Institute which eventually begat the WTO.  Free trade was seen as a means of global stability.  Jim Rowher, in his 1995 book "Asia Rising" (one of the many poorly timed and ill-concieved lionizings of Asia’s only possible direction of up, up and yet up further still), quoted Lee Kwan Yew on the subject of free trade:
 

It is the only way you can keep the world peaceful, where people cooperate and compete with each other economically without going to war.  ...
That made possible a Germany where large numbers of Germans were cramped into a smaller area.  And large numbers of Japanese left the Asian mainland and were cramped into a few Japanese islands.  The Japanese and the Germans were told, you stay behind your lines and we will exchange goods and services.  You can invest in me; I can invest in you.  We will cooperate; we will compete. And the Japanese and the Germans were able to flourish and grow without causing wars in the world.

The regional economic and meteorological crises have also put Thailand in the politically uncomfortable situation of being of The Have’s while many of its neighbours were of The Have-Not’s.  Thailand quietly realized its predicament and made moves to safeguard itself.  It ceased government to government credit for rice sales to Indonesia as well as cut down the usual amount of rice exported to that country.  Manila was getting quite concerned with the amount of rice Indonesia was importing - as much as 600,000 tonnes per month (not all from Thailand) - as it was a serious drain on global supplies and the Philippines, too, was needing to be able to get some for itself.  The stage was set for a good quarrel.  Regional multilateral stability could reasonably be expected to trip somewhat if the situation became any more acute.

The situation then was already so serious that in September 1998 Thailand - the world’s Number 1 exporter of rice by far and away - had begun to talk of ceasing rice exports altogether should the regional food production crisis continue; this in order to ensure domestic supply.  Indonesia is still apparently needing intensive relief from a number of international agencies to ease its food crisis.  The global stock is now greatly reduced because of Indonesia’s and Philippines’ shortfall.  Now, with greatly feared drought falling heavily upon Thailand’s second rice crop, it would seem ‘any more acute’ could be achieved in short order:

So if someone could explain to me, then, how the spectre of regional social and political instability leads to increased global prosperity and peace then I will finally understand all the excitement about Free Trade.  Until then I fear I will remain one of those many ignorant boobs who finds the cause for exuberance distinctly elusive.