ASEAN KEY DESTINATIONS
Thai government advised to drop food price caps
The Thai government should abandon its policy of food price control, as it causes food shortages and affects farmers' incentives to stay in the industry.
Nipon Poapongsakorn, president of the Thailand Development Research Institute, said the government had erred in its attempt to control food prices at the expense of farmers' incomes. The policy has also resulted in food shortages such as with palm oil, where the price exceeded what it would have been if allowed to rise freely.
Increasing rice prices would benefit farmers but would suggest higher inflation, he said at the Thailand Focus 2011 conference yesterday.
The government's price limit on sugar is lower than the global sugar price, so smuggling is a problem.
Dr. Nipon proposed the crop insurance programme be expanded from covering only maize because it guarantees a minimum income for farmers in case of damages, but they shoulder some burden with insurance premiums.
The government can take care of the poor with different programmes such as offering a cash subsidy to a target group by requiring them to work, he noted. For those less educated or unemployed, the government needs to offer training to allow them to take care of themselves over the long term.
Dr. Nipon believes the government could cut the budget by abolishing food price controls but maintaining price caps for monopoly products such as electricity.
He also proposed the government abolish the existing policy of free rides on certain buses, free third-class rail fare and free electricity for 90-unit usage or less, because some rich people can also take advantage of these gifts. These subsidies should be replaced by a cash subsidy, he said.
In a related development, Apichart Jongsakul, secretary-general to the Office of Agricultural Economics, said the National Palm Oil Policy Committee expected to maintain the palm oil price of 47 baht a litre, in line with the price of crude palm oil in Malaysia.
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