Shinawatra (Thailand) clan leads Thai economy to collapse. [View all]

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Beyond the criminal & political crimes of Thaksin and Yingluck we now are entertained by the likely collapse of the Thai bond market as we watch the last few months of their incompetency.

Under the rubric of progressive sounding schemes the current regime engaged in a number of hair brained economic plans that have left the Thai government in deep debt and no one buying their bonds.

One of the plans was to provide down payments for 100,000 first time car buyers. This was a big bonanza for the manufacturers and dealers but most of the people who qualified for the plan were unable to sustain car payments and massive repossessions undermined the resale equity of existing car owners who now have cars who cannot be sold in a market flooded with cheap repossessed cars.

An even greater folly was the plan to provide increased income to rice farmers by subsidizing rice prices. There was a long history of this working well for decades but it worked because of its modest goals and the basic idea was to provide level prices, allowing farmers to get the benefit of the highest prices of the season. The Shinawatra promised more, much more. They were going to offer farmers twice the world price.

Here are the results:

High quality global journalism requires investment.

http://blogs.ft.com/beyond-brics/2013/01/07/controversial-rice-policy-costs-thailand-export-crown/#ixzz2qzNKddt2


After more than 30 years at the top, Thailand has lost its spot to India as the world’s number one rice exporter, slipping to third place last year due largely to a controversial government farm subsidy policy.

Now some critics say that as well as disrupting exports, the policy could undermine the food security because the government’s radical intervention could make supplies less stable in the future.

Billions have been spent but who has gotten the money?

Not the farmers

http://online.wsj.com/news/articles/SB10001424052702303465004579322153849112452

Thailand's flagship rice subsidy is running out of cash and backfiring at a critical time for Prime Minister Yingluck Shinawatra, whose political future hinges on support from farmers and other rural voters as her rivals intensify their campaign to remove her from office.

The government has been buying up rice from farmers at about 50% above market prices to boost rural incomes since Ms. Yingluck's Pheu Thai Party took office in 2011. Now, it can't sell the rice fast enough to fund the subsidy. Rival exporters such as India and Vietnam have ramped up production, selling rice cheaper and knocking Thailand off its perch as the No. 1 exporter.

"Farmers are very angry," said Nipon Poapongsakorn, a rural development specialist at Thailand Development Research Institute, a think tank. "It is the first time in our history that farmers didn't get money for the rice that they already sold to the government,''

The state-owned bank tasked with funding the policy, the Bank of Agriculture and Agricultural Cooperatives, is seeking to raise 20 billion baht ($610 million) in a bond auction Thursday it hopes will make up the shortfall from a 75 billion baht auction in November, when only half of the issue was purchased.

The funds will go toward paying rice farmers, some of whom haven't been paid in months. The government on Wednesday extend a deadline for the payment of October's harvest, while local media said that in one northern province, only a small fraction of its nearly 50,000 rice farmers received money from the government.

So the farmers didn't get the money but Yingluck isn't letting anyone know where the B 700 billion has gone keeping payments secret

http://www.bangkokpost.com/business/news/390431/going-against-the-grain

The public knows only that the rice pledging scheme has cost the country more than 700 billion baht in budgets so far, with losses projected to exceed 200 billion baht, according to economists. Plagued by rampant corruption, the pledging scheme is the most controversial policy of the Pheu Thai Party. Yet the party vowed to carry on with the programme if re-elected despite heavy criticism and a lack of to pay farmers at this time.

Now Thailand is unable to float a bond

http://www.bangkokpost.com/news/local/390521/thai-default-risk-soars-as-funds-pull-out-4-billion

The perceived risk of Thailand defaulting on its debt is at its highest since August last year, as anti-government protests prompt money managers to sell off Thai stocks and bonds.

The cost of protecting Thailand's debt soared after investors including Wells Fargo Inc pulled more than US$4 billion from Thai stocks and bonds since Oct 31, as rallies clogged up Bangkok roads and clashes left nine dead with 550 injured. Pacific Investment Management Co, Goldman Sachs Group Inc and Kokusai Asset Management Co reduced debt holdings before protests first erupted in late October, regulatory filings show.

"We sold the entire Thai position in our international bond fund through the end of last year," Lauren Van Biljon, an analyst in London at Wells Fargo's First International Advisors LLC unit, said in a Jan 17 telephone interview. "There seems to be a very wide gulf between the different political sides."

It is estimated that to make up the shortfall on this one scheme it will cost the Thais 3.2% of GDP, an astronomical figure.