As many global and local press, perhaps blinded by their hatred of Thailand’s rice scheme and Yingluck, and associate the scheme difficulties to the scheme being “Wrong and No Good”, the credit rating agency Standard & Poor, just linked one aspect of the the scheme problems to politics.
Thailand’s finance minister, Kittirat had been attempting to raise funds to pay farmers, and one of the ways was to get bank to lend funds to buy bonds, for use to pay farmers. The result was a bank run on the Government Savings Bank.
However, as many, including the press, perhaps went on an “Hate Offensive” saying Kittirat’s plan “Zapped Savers Confidence” causing the bank run, Standard and Poor said “The bank run was politically motivated.” That “Politically Motivated” bank run, alarming, can serious hurt Thailand’s financial system.
The recent surge in cash withdrawals from a government-owned bank in Thailand suggests the currently weak political environment is starting to affect the country’s financial system, Standard & Poor’s said in a statement yesterday.
Again, the ratings agency sees the incident as politically motivated, rather than signs of a loss of confidence in any bank.
The Government Savings Bank (GSB) reported saw a net 60 billion withdrawn from its deposit accounts in just three days. The amount was 3% of its deposit base.
“GSB was caught in the crossfire. The run on the bank was limited in nature and is unlikely to have a contagion impact on the banking system,” said Standard & Poor’s credit analyst Deepali Seth. “But the incident has exposed the vulnerability of the financial system.”
“Our base-case expectation is that the Thai banking sector remain stable, but the risks have increased. We don’t expect political issues to be resolved any time soon, and that means further vulnerability for Thai banks,” said Standard & Poor’s credit analyst Geeta Chugh.
A continued surge in withdrawals would have tested the support framework for government-owned specialised financial institutions (SFIs). The government fully guarantees GSB’s deposits, but the current caretaker government could have found it difficult to take immediate action to support them.
Rice Scheme: A Politicized Situation?
Local press reports a convoy of about 500 farm vehicle, with about 1,000 to 2,000 farmers is heading to Bangkok to protest (Up-Date: They made a u-turn and went back, after assurance they will get money owed to them, but said they will return if did not get fund (End).
Most noted that from the picture of the convoy, the convoy is being lead exclusively by farmers driving 10s of Kubota tractors. News is this Thai group of farmers is being lead by a former minister of the people, of a non Pheu Thai Party affiliated. News is the MP says this group of farmers represents farmers from the central plains and are non political. Kubota tractors, is made in Thailand by a xxxxxx linked company. All these farm vehicle also sports the Thai flag, which has become the symbol of Fascist Suthep’s movement to topple Yingluck.
The Yingluck care taker government is having a difficult time, meeting payments to rice farmers under its farm subsidy program.
Prachachart Turakij, Thailand’s best business newspaper, reports “Total Chaos” with the Yingluck care-taker government trying to raise funds to pay rice farmers, and the latest is to issue bonds to small investors (Source). Prachachart says the care-taker government is un-able to secure funds from banks for bond purchase, such as the Government Savings Bank. Other reports say one after another unit, of state related businesses, have refused to buy the bonds.
Currently, the Thai establishment, is attempting to block the care-taker government from securing funds to pay the rice farmers, as a way to create an up-rising with the millions of rice farmers throughout Thailand, as a way to pressure the care-taker government, to cut a deal with the establishment, in allowing for a suspension of democracy, for a so called “Neutral Government.” As a seed to that move, the establishment have called into protest, rice farmers under its control, to protest the government. The seed laying so far, have been able to galvanize about 3,000 rice farmers to protest in Bangkok, such as the Commerce Ministry and reports of future protest at Suwanabhume Airport.
The establishment, in blocking fund to the rice farmers, have mainly done this through a combination of using protest threat from fascist Suthep, of units that agree to offer loan to the care taker government and using its net-work, of mostly labor unions, most of which have long been infiltrated and control by the establishment. Then there is the population.
The credit rating agency, Fitch, said even with the recent bank run, on the Government Savings Bank, by mostly Abhisit supporting Southern Thais and Bangkok Thais, overall Thai financial institutions are resilient. Fitch said however, the risk to Thai financial institutions is increasing, with the rice scheme loan adding un-known to the financial institutions, if they lend to the care taker government.
That unknown, perhaps, relates to if a continued surge in withdrawals would have tested the support framework for government-owned specialised financial institutions (SFIs). The government fully guarantees GSB’s deposits, but the current caretaker government could have found it difficult to take immediate action to support them. “SFIs, such as GSB and BAAC, operate under different regulations to commercial banks. Accordingly, the central bank, Bank of Thailand, is not the lender of last resort for SFIs, which collectively form about 20% of Thailand’s financial system. As such, the SFIs would be dependent on the interbank market or support from other institutions. The funds from these sources often dry out in a crisis. “Nevertheless, SFIs can resort to collateralised overnight borrowing from the central bank to meet critical funding needs.
The care taker government, apart from current funding blockade by the establishment, fundamentally, is having a difficult time meeting its obligations to the rice farmers stemming from limited power associated with being a care-taker government.
While most of the protesting rice farmers are currently “Politicized Rice Farmer” the reality of the situation is that many rice farmers are suffering greatly, even with many, seeing this hard-ship, adding to other hardship, resulting in a string of suicide by rice farmers. Yingluck went on TV, and asked for understanding from the rice farmers, that the funding situation is difficult as it had been politicized.
World Bank said the rice scheme succeeded in raising farmers income and stimulate the economy, but caused damaged in not being able to sell the stock-pile of rice, that was bought from the farmers at higher than global price. Most neutral observer, says the massive dirty local and global news attack on the scheme, by old stake-holders and the press, such as intentionally destroying Thai rice quality with non-factual propaganda, and other such dirty attack, have hurt the government’s attempt to sell rice globally, mostly to friendly government. In fact, even with that dirty attack, the government succeeded in selling enough rice, for Thailand to be the globe’s largest rice exporter, in terms of value exported.
Many neutral observers are curious, with massive farm subsidy going on globally, why so much focus on Thailand’s farm subsidy. However, other neutral observer says, apart from the politics, old stake holders, and bad journalism, there is the question about the poor of the globe. Rice is a commodity consumed by most of the poor globe over. These neutral observer says, the Thai government rice scheme, same with other farm subsidy globally, raised the price of food, and in this Thai case of rice, it hurts the globe’s poor people. Yet other argument says, the Thai government responsibility, lies with the Thai people, and rice farmers have been exploited for decades, and remain relatively poor. Then there is a question about rice, as an investment commodity.
(Up-Dated 1) Earlier, local press reports a convoy of about 500 farm vehicle, with about 1,000 to 2,000 farmers is heading to Bangkok to protest. They made a u-turn and went back, after assurance they will get money owed to them, but said they will return if did not get fund. The Election Commission free a large chunk of funds to pay the farmers, as large group of farmers began targeting the commission for protest. The commission however, placed a great deal of condition attached to the OK on funds. The problem is, The government is starting to un-load rice, with large order from China, and other friendly governments and also through the free market. The EC condition, however, means less flexibility for the government to negotiate for better price. Also Fascist Suthep, have lead a group of rice farmers under its control, to lodge cases against the government. Also, again, Standard & Poor said the risk to Thailand’s financial system, as related to the recent bank run, is not because of the rice scheme planned borrowing funds from banks, causing financial risk, but the risk are from politics. Lastly, Fascist Suthep today, went to the Chinese embassy to protest China’s close relation to Yingluck, as China plans to buy about 1 million tonne of Thai rice. This and other sales, is expected to cut the book loss, from holding a large stockpile of rice)
(Up-Dated 2) As the critic of the Yinghluck populous policies, including the rice scheme, say the scheme is hurting Thailand’s economic fundamentals, both Fitch and Moodys continue to give Thailand’s out-look as stable, pointing to politics as risk. Most neutral observer local or global, points to the elite Bangkok establishment, as the cause of continued Thai political crisis.