Pawning rice is worse than pawning Thailand

COMMENTARY

Pawning rice is worse than pawning Thailand

Published: 5 Dec 2012 at 00.00
Newspaper section: News

Since the launching of the rice-pawning scheme a few months ago ("pawning" is not only a correct translation of the Thai word jam nam but also reflects the sense of the scheme better than the "pledging" that many writers have used), two areas have been analysed most thoroughly: its potential impact on the budget and national debt, resulting from the large losses that will occur, and the corruption that is due to happen at various steps of the scheme. Some analysts go so far as to say that losses from this scheme will bankrupt the country and pawning rice is tantamount to pawning the country.

Losses have not been realised so far as the millions of tonnes of pawned rice now sitting in various silos and warehouses across the country have yet to be sold. The potential losses remain huge, however, as prices of rice in the world markets remain substantially lower than the price paid by the government at 15,000 baht per tonne of paddy. Some members of the cabinet themselves have openly admitted that corruption is likely to take place and investigations are already ongoing, partly as a result of the details emerging from last week's parliamentary debate.

Other aspects of this scheme have received less attention from analysts; three in particular have been neglected.

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brilliant
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Discussion 10 : 05 Dec 2012 at 22.1010
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musashi - one basic accounting rule is that cost of goods is an expense that is directly subtracted from gross profit. Please exchange "expense" for "loss". Effectively the same thing. The cost of the rice as well as the storage costs are expenses already on the books with no sales to offset them. Effectively on January 1, 203 it will become a loss.

"That's where some financial magic can be performed to cushion the losses"

Yes, I'm sure PTP will do their best to hide the hundreds of BILLIONS of baht lost.
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genii
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Discussion 9 : 05 Dec 2012 at 18.169
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The PT government beleives the farmers and their rice or worth the price whereas others do not. Not sure what the rush is to sell the rice. Opposition may come from those not making their cut of the sells now that PT or in control. As for losses this will depend strictly on the price of the sell and until the sell is made how can you estimate losses.
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Renaissance
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Discussion 8 : 05 Dec 2012 at 16.308
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In Discussion 7, a key phrase is, "The resentment builds." I think hat it will explode once Thaksin has had himself and his cronies whitewashed. I am sure that if he does return, the Red Shirts will be bused into Bangkok in huge numbers so that he can be welcomed by a 100,000-strong, flag-waving, flapper-flapping, cheering sea of red.
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dao
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Discussion 7 : 05 Dec 2012 at 14.417
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Dont even for a second think that PT has the farmers best interests at heart .Farmers want cash .PT wants to give it to them so they use taxpayer money disguised as the rice scam .Even when it fails it doesnt really matter to each side because once again taxpayers will pick up the tab .Massive debt ? who cares .PT wont have to pay it .Neither will the farmers .Taxpayers will .As long as it instills loyalty to Thaksin who by the way doesnt pay tax unless ordered by the court that is all that really matters .The resentment builds .
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Renaissance
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Discussion 6 : 05 Dec 2012 at 12.126
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The day will come when the Thais realize how they are being used and have been used and misled by self-serving politicians. But, by that time the country will be in the vice-like grip of these politicians and their leader. Unfortunately, the politicians and their leader will not release their grip willingly, and the ultimate sacrifice will have to be made by a huge number of people before the grip is released. However, once the storm has passed, Thailand must learn the lessons in order to experience a brighter future.
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pjt
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Discussion 5 : 05 Dec 2012 at 08.085
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D4@musashi - I think you are being selective in your accounting rules which also state that inventory should be valued at the lower of cost and net realisable value. The market price is well below the accumulated costs including storage. The government also does not help itself by hiding behind national security as the reason not to disclose the value realised in major transaction such as G2G and perhaps ease the concerns regards the size of losses
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musashi
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Discussion 4 : 05 Dec 2012 at 07.114
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brilliant #2: The writer is correct. Read up on basic accounting, and you will know that costs are not classified as losses.

The rice and storage costs could be viewed as semifixed costs, but over a longer period of time we can classify them as discretionary variable costs. That's where some financial magic can be performed to cushion the losses (this scheme is meant to alleviate poverty, remember).

Nevertheless I am surprised by the writer's sentiments, because as a development economist, I was expecting him to accept that this rice scheme would result in a managed loss but one that will unleash the future economic potential of farme
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johnbegood
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Discussion 3 : 05 Dec 2012 at 06.583
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Great Article! Interesting reading.
Becoming an avid reader of BKP in recent years,
I would say this arcticle some how defines the strategy of the government!
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brilliant
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Discussion 2 : 05 Dec 2012 at 04.082
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Well put.
Except for this, it is an accurate article "Losses have not been realised so far as the millions of tonnes of pawned rice now sitting in various silos and warehouses across the country have yet to be sold."
The rice has been paid for, storage costs are ongoing so how can you say that losses have not been realized? Actually losses are all that have been realized until the rice is sold then the losses diminished. the rice as an asset is no where near what was paid for it.
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bangmodken
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Discussion 1 : 05 Dec 2012 at 02.481
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This has to be the most accurate and well argued commentary I've read to date. It sure knocks the socks off the usual commentary writers of Bangkok Post. People who claim they want democracy for Thailand and in general,should take notice of the similarities between Thaksin's red shirts and the brown/black shirts of Hitler/Mussolini,something both I and other anti-Thaksin posters here has often pointed out. PTP/UDD is anything but pro-democracy.
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Pawning rice is worse than pawning Thailand | Bangkok Post: opinion