News Analysis: Thai govt subsidizes rubber planters to ease plight

Source:Xinhua Published: 2013-9-11 17:54:49

Deputy Prime Minister Kittirat na Ranong has announced that an estimated $706 million in government subsidy will be directly distributed to rubber planters in all parts of the country for one year beginning this month.

The deputy premier said that the subsidy will be in addition to the market interventions undertaken by the government to boost the rubber price to 3 US dollars per kilogram.

The rubber planters' demand for up to $3.3 to $4 a kilo has been turned down by the government for fear that it would make the Thai rubber too expensive in the world market. Such a move could automatically benefit its rivals that are selling the rubber at a relatively low price.

The direct subsidy which amounts to $210 per acre is meant to absorb the production cost which currently totals $2.2 per kilo. The 3-dollar-a-kilo price in the domestic market is being provided by the government of Prime Minister Yingluck Shinawatra after the price plummeted to $2.5 a kilo.

All mass protests, particularly those in southern provinces, where the country's biggest rubber plantations are located, will finally grind to a halt, given the increased government subsidy as endorsed by the Committee for National Rubber Policy.

Disgruntled rubber planters who had blocked up road traffic and railways to press the government to meet their demands for a price hike would now be satisfied, according to the deputy premier.

The protests staged by rubber planters in Thailand's southern region have caused economic havoc, with tourism as the main victim.

The Department of Tourism claimed that no less than $15.8 million in earnings for several southern tourist resorts have been lost due to road and railway blockades by protesters while the Land Transport Federation of Thailand reported that logistics and transportation businesses in the southern provinces have also lost about $100 million in a week's time.

Criticized by opposition legislators inside parliament and outside for allegedly doing more favor for rice farmers than for rubber planters, the Yingluck government was forced to give the subsidy. But at the same time, the government hopes that rubber prices in the world market will sooner or later rebound so that the subsidies could be withdrawn.

Deputy Prime Minister and Agriculture Minister Yukhon Limlaemthong commented that the plunging rubber prices will remain a repetitive problem for the government to solve on a yearly basis.

"Rubber prices go up and down like a cycle in which they may vary from time to time. But the government will certainly continue to subsidize the rubber planters and at the same time avoid doing anything which might otherwise spoil market mechanisms," he said.

Not only the government but all others involved in Thai rubber production hope for an increase in rubber consumption which has largely declined due to global recession that has resulted in a surplus of rubber supply in the world market.

With 7.6 million acres of rubber plantations, Thailand produces 3.5 million tons in a year, 88 percent of which is for export worldwide.

China, the biggest customer for the Thai rubber, has bought 1.2 million tons yearly.

The Office of Rubber Replanting Aid Fund's acting chief Prasit Meadsen said rubber demands in China, the United States, Japan and European countries will not substantially increase unless their respective economies would improve.

The rise and fall of the price of rubber depend not only on the world consumers but on the producers as well. Apart from Thailand, Indonesia and Malaysia - the world's top rubber producers, and several other Southeast Asian states have increased their rubber production.

Yukhon feared the worst is yet to come as the new rivals, namely Vietnam, Laos, Cambodia and Myanmar, are girding to compete against Thailand and this would keep prices down because there would be more supply than demand.

Nevertheless, Prasit commented that Thailand's domestic demands for rubber could possibly increase if rubber would be processed into consumer products such as gloves, condoms, mattresses, futsal pitch surfaces, railway sleepers and components for road surfaces.

Posted in: Economy

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