BANGKOK – In the rubble of the 1997-98 Asian financial crisis, as many as 1-2 million Thai laborers lost their jobs as thousands of Bangkok-based factories and service companies went bankrupt, forcing many workers to return to their countryside homes.
Then, Thailand’s rural sector provided a much-needed safety net for the unemployed masses, with many returning to their agrarian family roots.
Fast forward to the Covid-19 crisis and an estimated seven million Thais will become unemployed as Bangkok and provincial cities impose lockdowns to slow the pandemic’s spread and economic devastation awaits on the other side.
The looming Covid-19 economic crisis has triggered a similar diaspora to rural areas, but this time the kingdom’s rural safety-net has big gaping holes which many will inevitably fall through into poverty.
“In 1998 agriculture was a good safety net but now it isn’t because most agricultural households in fact now depend on non-farm employment,” said Nipon Poapongsakorn, distinguished fellow at the Thailand Development Research Institute, a private think tank.
Back in 1997-98, an estimated 50% of rural household incomes came from farming, while 45% came from non-farm activities such as services and remittances from relatives who had migrated to Bangkok and other urban centers to work in the formal and informal sectors.
In today’s Thai economy, 65% of rural household incomes come from non-farm activities, said Nipon. “So those who are now unemployed come back to the villages to eat up 35% of the income,” he said.
Many are returning to parched economic prospects. Thailand has experienced two years of drought, which on top of low global commodity prices means that revenue from traditional cash crops like rice, sugar, tapioca and rubber has been in decline.
“Agriculture has not improved so people are living on the brink of survival, and then having more people return to the village – that’s hard,” said Buapun Promphakping, associate professor at the Social Development Department of Khon Kaen University in Thailand’s northeastern region.
Many of the urban returnees have resorted to picking up their hoes again, albeit with diminished farming skills, according to anecdotal reports. Planting of Thailand’s main rice crop usually begins in May, with the advent of the rainy season, but no one expects better crop prices.
“This year the cultivation area is going to be more, because so many people have moved back to the countryside,” said Charoen Laothamatas, president of the Thai Rice Exporters Association, a trade group.
“But it doesn’t mean we can export more, because our price is still $70-$80 per ton above the competition because of government subsidies, so we will accumulate another huge stockpile,” he predicted.
At the onset of the Covid-19 scare, some Asian countries were fearful of domestic shortfalls. Vietnam, one of Thailand’s main rivals in rice exports, announced a halt on its rice exports but quickly rescinded the ban when fears subsided.
India and China, which both have huge stockpiles of rice, have rejoined the export market with China already undermining Thailand’s competitive advantage in Africa, a major importer of Thai par-boiled rice, Charoen said.
Prime Minister Prayut Chan-ocha’s former coup-installed regime (2014-2019) was widely credited for selling down a huge 18 million ton rice stockpile accumulated under the rule of former prime minister Yingluck Shinawatra.
Her Peau Thai Party, later overthrown in a Prayut-led coup, rose to power partly on a platform of promising to buy “every grain of rice” grown by Thai farmers at prices that ended up being 40% above global market rates.
The boondoggle populist scheme undermined Thai rice exports, lowered rice quality, lost the state billions of dollars and was plagued by charges of corruption that helped the military to justify the May 2014 coup.
Prayut’s coup regime attempted to reform the rice sector by encouraging farmers to shift to other crops and create larger-scale rice cooperatives, while at the same time continuing to subsidize rice prices to keep farmers content.
Both schemes largely failed because Thai rice farmers don’t like pooling their land plots and enjoy the financial stability that comes with state subsidies, analysts say.
“The evidence is that a large number of farmers who applied for the diversification program opted out of it, and stayed in rice because the subsidy from the rice program is higher than what you get from restructuring and diversifying your crops,” said Nipon, who sits on the government’s rice committee.
Prayut’s elected government, which came to power in 2019, has continued to heavily subsidize rice and other commodity crops. But this won’t likely be enough to bolster the rural safety net and prevent a jump in poverty, which was already on the rise under Prayut’s previous military regime.
According to a recent World Bank report, Thailand’s poverty rate grew from 7.21% in 2015 to 9.85% in 2018, rising from 4.85 million to more than 6.7 million people. That figure is expected to skyrocket this year due to the economic disruption caused by Covid-19.
A government program to pass out 5,000 baht (US$154) checks for three months to people hardest hit by the pandemic, expected to draw 9-10 million people, instead attracted 27 million applicants, or 38% of the 70 million population and 79% of the 34 million labor force.
After distributing the largesse to about 4 million people, and prompting at least one suicide attempt by one disqualified recipient, the government has now pledged to pass out relief funds to between 15-16 million people.
That desperate demand highlights the lack of a safety net in Thailand, especially for those in the informal sector, i.e. anyone who is not a civil servant or company employee entitled to social insurance schemes and pension programs.
“We have to build a social safety net for this informal sector, which is about 14-15 million now,” said TDRI’s Nipon. “Otherwise if we are hit by another crisis the government has to use the fiscal budget to pay for more unemployment, like this time – 5,000 baht for three months, which is a huge amount of money.”
Covid-19 and the exodus of millions of Thais to the countryside has underscored the need to enhance Thailand’s provincial economies. To do so, observers say, will require a revival of abandoned decentralization policies outlined in the previous liberalizing 1997 constitution.
That now shredded charter gave provincial and village elected leaders greater say over local budget distribution, undermining the powers of centrally appointed provincial governors.
“Decentralization originally started in the late 1990s and continued through to the 2014 coup,” said Chris Baker, a historian and co-author of numerous books on Thailand’s politics and economics.
“Now (under Prayut) the governor is back. He runs everything … We are back basically to a colonial system of governing the provinces that was borrowed from colonial India and Java,” Baker said.
“This Covid-19 crisis could change the tenor of development,” academic Buapun said. “If we don’t need to stay together in the big cities and we need to spread out [for social distancing] I think that would be a good opportunity for Thailand to build on that.”