Thai government's $7 billion efforts to help rural economy fall flat

BANGKOK (Reuters) - Billions of dollars in government spending aimed at revitalising Thailand’s ailing rural economy have failed to reach farmers hit by weak commodity prices and drought, fuelling disaffection with the military government ahead of elections expected next year.

Somnuek Hongthong, 67, rides his motorbike pass a rice field in Sing Buri Province, Thailand, February 1, 2016. REUTERS/Athit Perawongmetha

Loss of income and rising costs mean farmers are feeling the pinch in Southeast Asia’s second-largest economy, where rural areas have been in recession for over a year.

The junta, which took power in 2014, had pledged to wean farmers off expensive subsidies used by the government it overthrew, including a rice scheme that cost billions.

But it changed its tune as the rural economy contracted for five straight quarters.

Over the past five months the government has announced measures worth around 258 billion baht ($7.26 billion) to help rural Thailand, which accounts for half of the population.

That included $1 billion in October for rice farmers, many of whom voted for ousted former Prime Minister Yingluck Shinawatra in her 2011 general election victory.

Thailand’s agricultural labour force has been a key battleground in a bitter divide that has seen the country split along north-south political lines since the ouster of Yingluck’s brother, former prime minister Thaksin Shinawatra, in 2006.

On one side is the Bangkok-based royalist-military establishment, supported by parts of the south, which sees former telecommunications billionaire Thaksin as a threat.

On the other are the Shinawatras’ rural supporters in the north and northeast.

The junta has cracked down on political activity and sought to reconcile the deeply splintered society. But critics say divisions are as sharp as ever and will re-emerge when the country moves back towards democracy. Prime Minister Prayuth Chan-ocha has said an election will take place in 2017.

The junta also has had to try to appease rubber farmers, who typically support the Bangkok-based establishment but demanded help after their incomes collapsed with a slowdown in demand from China. So far, rubber farmers have avoided direct confrontations with the junta, which has banned gatherings of more than five people for political reasons.

Farmers whom Reuters spoke to said the support schemes have not worked and payments have been slowed by bureaucracy.

“The scheme is a failure,” said Saksarit Sriprasart, a farmers’ leader in southern Trang province, referring to a $152 million plan to buy rubber from farmers to support prices.

The expected return of Thailand as the world’s top rice exporter is cold comfort to farmers at the other end of the country. They saw prices fall to eight-year lows in late 2015.

“The government is so late with disbursement. What are they doing?” said Chalerm Sanaedee, 60, in the northeastern province of Udon Thani.

A failure to solve rural problems was eroding any confidence in the junta, said Kan Yuenyong, an analyst at the Siam Intelligence Unit think-tank.

“The honeymoon period is over and people are less forgiving with the junta,” Kan told Reuters. “These problems are really damaging their legitimacy.”

Lack of personnel to oversee projects and disbursement is hampering efforts to get aid to rural areas quickly, said Manas Jamveha, head of the Comptroller General’s Department, which oversees public expenditure.

The state-owned Bank for Agriculture and Agricultural Cooperatives (BAAC), which approves loans for farmers, said it took time to process applications properly.

“It takes time to check farmers’ eligibility and some of them aren’t eligible,” said assistant manager Supat Eawchai.

Desperate farmers say the measures are simply not helping.

“Loans and subsidies don’t solve our problems,” said Mayom Wongsawa, 61, in Singburi, 142 km (88 miles) from Bangkok.

“Instead, reduce our costs and raise market prices.”

Additional reporting by Pilaiporn Promsompan; Writing by Amy Sawitta Lefevre; Editing by Simon Webb and Kim Coghill