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(Bloomberg) — Thailand’s major political parties are wooing more than 14 million farmers, the largest group of voters, with promises such as the suspension of crop loans and measures to triple their income in four years.
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Pheu Thai, a party with deep roots in Thailand’s rural and farming community and leading in preliminary polls, plans to suspend interest and principal payments on farm loans for three years if it wins a May 14 general election. The debt freeze will allow 7.4 million farm households to save money for new investments, the party said.
He also promised to transfer ownership of some 50 million rai (8 million hectares) to debt-ridden farmers, which will give them new access to credit by using the land as collateral. Move Forward, another opposition party that also gains in the polls, has promised to confer land titles worth around 40 million rai.
Prime Minister Prayuth Chan-Ocha’s United Thai Nation has said it will set up a fund to support agricultural product prices, while Deputy Prime Minister Anutin Charnvirakul’s Bhumjaithai Party, which has gained popularity with its successful push for cannabis liberalization and is promoting it as a crop currency, pledges to secure crop prices.
Thailand’s agricultural heartlands in the north and northeast have become key battlegrounds as they can affect the outcome of elections for some 175 seats in the 500-member House of Representatives. The way political parties approach the issue also has consequences for global food security and inflation, with the country being a major supplier of rice, sugar and rubber to the global market.
While the Thai government spends about 150 billion baht ($4.4 billion) a year to shore up crop prices, insurance and other farmer benefits, plunging prices of rice, rubber, sugar and oil palm over the years due to rising costs of fertilizers and pesticides has driven them deeper into debt.
Past efforts by political parties to improve the lot of farmers have produced mixed results at best. A policy of buying rice above market price since 2011 by the then Pheu Thai-led government under Yingluck Shinawatra has burdened the nation with millions of tons of stockpiles and cost more than $15 billion.
Distorted markets
It has also distorted the global market, with Thailand unable to export much of the high-priced grain and having to use it as feed for livestock. Yingluck’s government was overthrown in a 2014 coup and she fled the country three years later rather than face prison in a rice program-related criminal case. Her brother, Thaksin Shinawatra, an enduring but polarizing figure in Thai politics whose tenure has been marred by allegations of corruption, Pheu Thai said.
Agriculture, which employs about a third of the nation’s total workforce of about 40 million, has seen its share in the national economy steadily shrink over the past few decades with low crop prices, rising input costs, and rising debt. The sector now accounts for about 8% of gross domestic product, down from about 36% in the 1960s.
According to a study by the Puey Ungphakorn Institute of Economic Research, more than 90 percent of Thai farm households are in debt on average 450,000 baht, and the vicious cycle of debt and credit reliance to overcome the burden drives them into a trap.
If all the agriculture support measures announced by the main parties were to be implemented, it could cost up to 300 billion baht, according to Nipon Poapongsakorn, a distinguished fellow at the Thailand Development Research Institute.
The way out of the debt trap, according to Puey Ungphakorn’s study, is not moratoriums but the creation of a functioning rural financial market, ensuring that households can repay by increasing agricultural income through value added.
“The debt moratorium policy has been implemented every year. This has not addressed the farmers’ debt problem, but rather exacerbated it,” Nipon said.
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