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Rice Price Policy in Thailand

Forssell, Sara (2009)
Department of Economics
Abstract
Formulating and implementing agricultural policies are important for the development of the
agricultural sector and the rural population. The process of policy making is a political
bargain between politicians and citizens. The outcome of this process, the policies, cannot be
expected to be Pareto efficient resource allocations since altruistic behaviour is not very
likely. All participants in the process have their own agenda.
Thailand is the world’s largest rice exporter and one of the most efficient producers.
Rice policies in Thailand have always been rather sensible due to the export orientation of
the agricultural sector. Interventions in the rice market were first introduced after the Second
World War, when export taxes were... (More)
Formulating and implementing agricultural policies are important for the development of the
agricultural sector and the rural population. The process of policy making is a political
bargain between politicians and citizens. The outcome of this process, the policies, cannot be
expected to be Pareto efficient resource allocations since altruistic behaviour is not very
likely. All participants in the process have their own agenda.
Thailand is the world’s largest rice exporter and one of the most efficient producers.
Rice policies in Thailand have always been rather sensible due to the export orientation of
the agricultural sector. Interventions in the rice market were first introduced after the Second
World War, when export taxes were implemented. Influenced by the development on the
world rice market and the domestic economy, rice policies have been altered during the
decades. In the 1980s Thailand abolished the export taxes and rice policies were liberalized.
In the beginning of the 21st century the Thai government introduced a new rice price
policy that has been in use on and off since the introduction. The policy functions as a
mortgage program in favour of the producers. When the Samak government reintroduced the
price policy for the crops in 2008, the pledging price was the highest ever. This had a
negative effect on the domestic rice market and also consequences for the rice trade. Due to
the high prices, export orders went down as the importers decided to wait for rice from
cheaper producer countries. Millers had problems joining the mortgage program due to lack
of credit and high requirements. The policy has undermined the market forces and therefore
also negatively affected the integration of the rice market. If the policy is sustained with high
pledging prices, there is a risk of large negative effects in the long run since farmers’
incentives to reduce costs and become more effective might be harmed.
The rationale behind the program was most likely not economic but rather political.
The peculiar political situation in Thailand might have triggered the new government to
launch the program in order to receive support from farmers even though a negative impact
on the domestic rice market and the rice trade was very likely. (Less)
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author
Forssell, Sara
supervisor
organization
year
type
H1 - Master's Degree (One Year)
subject
keywords
Thailand, rice, price policy, rice marketing system, Economics, econometrics, economic theory, economic systems, economic policy, Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik
language
English
id
1389016
date added to LUP
2009-04-19 00:00:00
date last changed
2010-08-03 10:52:15
@misc{1389016,
  abstract     = {Formulating and implementing agricultural policies are important for the development of the
agricultural sector and the rural population. The process of policy making is a political
bargain between politicians and citizens. The outcome of this process, the policies, cannot be
expected to be Pareto efficient resource allocations since altruistic behaviour is not very
likely. All participants in the process have their own agenda.
Thailand is the world’s largest rice exporter and one of the most efficient producers.
Rice policies in Thailand have always been rather sensible due to the export orientation of
the agricultural sector. Interventions in the rice market were first introduced after the Second
World War, when export taxes were implemented. Influenced by the development on the
world rice market and the domestic economy, rice policies have been altered during the
decades. In the 1980s Thailand abolished the export taxes and rice policies were liberalized.
In the beginning of the 21st century the Thai government introduced a new rice price
policy that has been in use on and off since the introduction. The policy functions as a
mortgage program in favour of the producers. When the Samak government reintroduced the
price policy for the crops in 2008, the pledging price was the highest ever. This had a
negative effect on the domestic rice market and also consequences for the rice trade. Due to
the high prices, export orders went down as the importers decided to wait for rice from
cheaper producer countries. Millers had problems joining the mortgage program due to lack
of credit and high requirements. The policy has undermined the market forces and therefore
also negatively affected the integration of the rice market. If the policy is sustained with high
pledging prices, there is a risk of large negative effects in the long run since farmers’
incentives to reduce costs and become more effective might be harmed.
The rationale behind the program was most likely not economic but rather political.
The peculiar political situation in Thailand might have triggered the new government to
launch the program in order to receive support from farmers even though a negative impact
on the domestic rice market and the rice trade was very likely.},
  author       = {Forssell, Sara},
  keyword      = {Thailand,rice,price policy,rice marketing system,Economics, econometrics, economic theory, economic systems, economic policy,Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik},
  language     = {eng},
  note         = {Student Paper},
  title        = {Rice Price Policy in Thailand},
  year         = {2009},
}