: 4 2557

5 2554/55 2556/57 4

() () () () () () ()

2 ( 2554 2557) 4

(welfare cost) ( producer and consumer surplus) ( )

(dead-weight loss from excess supply) (dead-weight loss from export restrictition) ()

2 ( 2554- 2556) 2 ( 2556- 2557)

354 147 6 3 42 . ... 35 34 16 2

5 54.35 9.85 8.57 2557 5.39 ( 53% ) 5-10 17.4 6.7-7.5

iii

2557 2.36

4 () (producer surplus) 5.6 (welfare cost ) 1.23

84,476.20 3 1.02 7.8 45,094 ( 44) 4 21,512 ( 21) / 1.1 8,541 ( 8)

2.9 25 ,616 . 95 ( 25 ) 2557 1.9 ( 2) 2

. 2557 1.2 85 6.6 1.09

/

(1) (2) (3) (4) (5) 2554 2 (6) (7) 7

() (3.35 5 ) (3.69 3.59 ) / 4.1 3.7

v

(91 %) 36.44 %

6 5.85 51 24 14 9 2 0.4

() (rent seeking activities) 57.06 % 42 100 34-37 47%

5

( ) (consolidated accounts)

() ()

6 3

(1) () 3 ) ) )

(2)

vii

(3) () ...

(4) 5%-10%

(5) ( ) .

(6) (realized loss) (contingent debt) 5.4-7.5 . ( 26 2557)

(7). 30-50% (WFP: World Food Program)

(8) 1 50%

1

) 50-60 ) 15 3-5 3 (/) )

(9) () () ( ) () 10%-30% () . .

(10) (labor productivity)

2554/55 2556/57

3 6 (surveyor)

4 5.6 5.4-7.5 () 1.23

8.4 4 1.02 4.5 2.2 8.5 2.7 1.02

. 2557 1.2 85 6.6-9.6 () 1.09

5.85 2.97 1.38 8.4 5.4 9.6 2.2

10 1. 2. 3. 4. 5. 6. 7. WFP 8.1 9. 10.

1

Abstract Corruption in the paddy pledging policy The objectives of this paper are to identify corruption methods and to estimate the

size of corruption in the government rice sale from the 2011/12 to 2013/14 rice pledging scheme. The paper will also attempt to analyze available evidence on corruption in order to connect all the pieces into a big picture which establishes a possible involvement of top politicians and senior government officials with such corruption. Other objectives of this paper include, assessing welfare costs, survey of participants opinions on corruption, identifying rent-seeking activities by participants, and finally, offering constructive policy recommendations.

To evaluate the size of corruption and its effects, the researchers employ 3 main methods of study: (1) through an economic model that incorporates inclusively welfare costs; (2) through interviews and questionnaiere surveys with 634 farmers, 73 rice millers, 16 warehouse owners and 2 surveyors; and (3) in-depth interviews and focus group discussion with key participants in the program, along with reviewing government documents and following news.

The paper finds that the five paddy pledging projects in two and a half year used as much as 985 billion baht to buy 54.4 million tons of paddy (or 35 million tons of milled rice) from farmers. The accounting loss is estimated at 539-750 billion baht, depending on the duration to sell all the remaing stock of rice. Although farmers nationwide receive the producer surplus of 0.56 trillion baht, most of the surplus falls on medium to large scale farmers. The accounting loss as of April 2014 is estimated at 539 billion baht. More important, the welfare loss of the policy exceeds the producer and consumer surplus by 0.123 trillion baht. The policy also has other negative impact on rice export, and creates various kinds of distortions (or dead weight loss). Yet the estimated welfare cost still does not include the loss from rent seeking activities, the negative impact of Thai rice quality and the replacement of competitive rice trading with crony capitalism.

The size of corruption in rice sale, estimating from the rice market model, is 84,476 million baht. To check the reliability of our estimate, the researchers employ another research method by estimating the value of corruption in three channels of rice sale. The results show that the biggest component is the corruption invoving G-to-G deals (45,094 million baht), followed by sale to cronies who offered to buy rice at low price (21,512 million baht) and corruption of the cheap bagged rice policy (8,541 million baht). In addition, there is also another type of corruption that indirectly involve rice sale, i.e., a few influential connected brokers used their political connection to borrow 2.9 million tons of rice from some millers and sold them to the exporters or package rice suppliers. Then they bought low quality rice from the government old stockpiles (and from neighboring countries) to deliver back to the warehouses later. In addition some of the stolen rice were not returned. Such a corruption

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amounted to 27,567 million baht. Therefore total corruption in rice sale deals is 102 billion baht. The figure is still underestimated given the fact that more than 55% of the remaining rice stock (17.82 million tons) It should be noted that the estimates do not include corruption at the upstream (farmers registration and rice sale to millers) and mid-stream levels (millers, surveyors warehouse owners, and government officers).

The researchers also prooides a preliminary revised estimate of accounting loss and corruption after a prelimmary report of stock checking in October 2014. The revised accounting loss jumps to 660 to 960 billion baht, depending on how long it takes to sell all the rice stock. The value of corruption arising from rice sale. The value of corruption arising from rice sale slightly increases to 109 billion baht.

The paper also finds both the participants and non-participants of the rice pledging program all agree to a high level of corruption in the program and that corruption exists in all levels of operation. Similarly, interviews and field surveys reveal widespread rent-seeking activities by all participants which include the farmers additional cost to increase rice production, the millers expansion of milling capacity and the investment in warehouses and storage capacity. Such activities are unsurprising by induced by the incentive to make more money (economic rent) from the scheme. Total economic rent is estimated at 585.4 billion baht, of which 296.5 billion baht went to the farmers, 138.5 billion to consumers, 84.5 billion baht to connected traders, 54 billion baht to millers, 9.6 billion baht to warehouse owners, and 2.2 billion baht to 20 surveyors. The investment in rent-seeking activities is the waste of real resources for the society. Lastly, the government concealed the information on rice sale and did not bother to prepare the consolidated financial accounts. As a result, there was substantial cost over run and shortage of liquidity to pay the farmers.

In conclusion, the failure of the paddy pledging policy is caused both by the policy mistakes (of buying every grain of rice at too high a price and government monopoly of the rice market) and by the execution failure.

Nine recommendations can be drawn by the researchers. 1. Amend the constitution and strengthen the law on the use of off budget to finance the government intervention policies 2. Government must prepare a consolidated financial account for each intervention policy. 3. Disclose all information on policy implementation to the public and revise the public information law. 4. Limit or terminate unnecessary government intervention in markets. 5. Independent reports on the actual impact of the rice pledging policy. 6. Fiscalize the loss after closing of the rice pledging scheme accounts. 7. Donate rice to World Food Programme (WFP). 8. Streamline the direct subsidy for small farmers 9. Chan ging the methods of compensation for crop loss due to disasters and pest out break. 10. Focus on reducing production cost and increasing production yields.