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Published February 10, 2014, 09:39 AM

China cancels Thai rice deal

China has canceled a deal to buy 1.2 million metric tons of Thai rice after Thailand’s anti-corruption agency launched investigations into a state rice-buying scheme, the Thai commerce minister said Feb. 4.

By: Pracha Hariraksapitak, Reuters

BANGKOK — China has canceled a deal to buy 1.2 million metric tons of Thai rice after Thailand’s anti-corruption agency launched investigations into a state rice-buying scheme, the Thai commerce minister said Feb. 4.

The cancellation will add to the pressure on Thailand’s government, which is struggling to secure funds for the rice scheme at a time when farmers who have not been paid are protesting in the provinces.

“China lacks confidence to do business with us after the National Anti-Corruption Commission started investigations into the transparency of rice deals between Thailand and China,” says Niwatthamrong Bunsongphaisan.

The deal between Thailand and Chinese state enterprise Beidahuang was signed on Nov. 20 for delivery starting in December. The shipment was delayed, however, after Prime Minister Yingluck Shinawatra dissolved parliament in December.

Niwatthamrong says the government would open a tender to sell 400,000 metric tons of rice from its stocks this week. Industry experts estimate those stocks could be about 15 million metric tons.

The government is desperate to get funds for the scheme because some farmers who have sold grain to the state have been waiting for months for their money.

The World Bank has estimated annual losses of 200 billion baht ($6 billion) since it was introduced in 2011. The government has struggled to sell the rice because of its high price at a time when global demand is thin.

Opponents of the government are angry that taxpayers are footing the bill for a program they call tantamount to vote buying.

Thin demand

Niwatthamrong says this week’s tender will bring in 10 billion baht to pay farmers.

That compares with the 130 billion baht it needs to pay up to a million farmers.

Traders and industry officials are not sure the tender will generate much interest, given the likely cost and thin demand at the moment.

The Chinese cancellation is the latest in a series of setbacks for Yingluck, who campaigned on the rice scheme to win support in the vote-rich north and northeast, where many households live off income from rice farming.

Her government has faced three months of, at times, violent protests by a political movement trying to oust her and an election to try to defuse the crisis has failed to resolve anything.

It could be months before the official results of the disrupted poll are known, leaving her in charge on a caretaker basis with no authority to make budget or spending decisions.

The government’s efforts to secure loans from banks to rescue the scheme have been unsuccessful. About 500 employees of state-owned Krung Thai Bank held a demonstration on Feb. 4 urging the bank not to give the government a loan.

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