Monday, September 26, 2005

The Politics of Rice 3

Many people asked me about my posts on rice. I think I should reiterate my position: I am for removing rice import ban (the way I support removing some export bans). One thing that I am obviously against with is if the import license is given to one single firm. And that firm, as we're not surprised, is Bulog. And as days go by, the politics reveal itself. We've been having rice at price higher than those in other countries. Pro-protectinists also argue that this is what we want: to protect farmers. I say, not completely. In fact, it may end up hurting the entire economy, as studies have shown that our farmers are net-consumers peasants who buy rice at the marketplace. In that regard, I agree with removing the import ban. Rice will flow in, adding to the domestic supply and eventually pressing down the price a little bit - and hence the inflation, for rice is a big weigh in the CPI basket.

But now the problem kicks in. The government thinks they can do this supplying business better than anyone else. So they give import license to none but this Bulog -- widely known for its corrupt behavior back in the New Order. So, what can you expect? Nothing but rent-seeking. And days go by: we now knew that in fact, the imported bulks of rice are priced higher than the domestic price! Note that my support for import is based on total welfare concern (which admittedly consumer-biased). But if we in fact import at higher price -- not lower price, this line of argument breaks down. The only explanation left is the belief that stock is really inadequate. But again isn't this the same story as that in BBM fiasco? Only that, this is sort of the beginning.

Moreover, the import has been set without legal auction. Something is really fishy here. Who's there in Thailand smiling wide now?

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