Thailand's election and the rural debt trap

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Thailand's election and the rural debt trap

Ungelesener Beitragvon KoratCat » Mi Jun 29, 2011 4:57 pm

Thailand's election and the rural debt trap

Politicians are making grand promises ahead of national elections, stoking fears of surging public debt.

Thailand's politicians have been promising anything from 25% wage hikes to free laptops in a bid to woo voters in Sunday's general election. But behind the promises lies a system which experts say keeps many Thais heavily in debt.

Orapin Yaemyai wanted to start a small business frying fish balls to sell at market. She went to a local moneylender, and was soon caught in a cycle of rocketing interest payments.

"At the beginning I could pay them daily," said the 34-year-old mother of two.

"But customers got bored so I thought I had to create something new, so I borrowed more money. There was more and more debt - it got beyond me."

Ms Yaemyai should not have needed to go to moneylenders.

As a small-scale entrepreneur, she should have been able to benefit from the Village Fund - a system of funding for rural Thailand instituted by former Prime Minister Thaksin Shinawatra a decade ago.

The policy - which allocates 1m baht ($32,000; £20,000) to each of Thailand's almost 75,000 villages - helped bring him to power in 2001.

It is supported by the main opposition Pheu Thai party - which Mr Thaksin in effect controls from exile in Dubai. And the current government also supports the policy.

But there are problems. Ms Yaemyai found the paperwork required to get some of the funding too onerous, so went to the loan sharks instead.

Chuchart Doonyapapassorn, village head in Taai Ban Mai, Samutprakarn province, near Bangkok, says most people do not use money from the fund in a productive way.

"There are some good points with the fund, but not many," he said.

"It's good for anyone who has a business trade or who has had a financial accident. But the useless part of it is the people who borrow to spend it to pay back loans. And they spend it wastefully."

Mr Doonyapapassorn says the fund is called on most heavily at times of the English football FA Cup Final, so people can lay bets.

The fund was a revolutionary idea when Mr Thaksin first came up with policies directed towards the ordinary Thai, rural and urban.

The Village Fund

Implemented by then Prime Minister Thaksin Shinawatra in 2001
Allocates 1m baht to each of Thailand's almost 75,000 villages
Individual loans usually a few thousand baht (about $100)
One of the most quickly implemented micro-credit programmes in the world
No political party is aiming to end it


It has been supported, even expanded, by subsequent governments. A committee in every village administers the revolving credit, which people are supposed to pay back on set terms every year.

The government of Abhisit Vejjajiva is aware of the growing addiction to easy money, and his ministers have been desperately searching for a way to compete with the Thaksin legacy.

His government has enlisted state banks to buy up expensive debts, and refinance them at much lower rates of interest for repayment.

But this too has been open to exploitation. Some Thai villagers simply found a friend to act as a loan shark, and concocted fake debts that the state bank would then buy up.

Ammar Siamwalla, senior economist at the Thailand Development Research Institute, said the money from the Village Fund is useful in that it stays in the village, and can be reinvested.

But he said the system fails to solve larger problems.

"Politicians know that for the Thai government to increase technological, marketing and human resource is laughable, they haven't a clue," he said.

"But credit is easy. All you do is dish out money. This government is particularly bad at that."

He says elections have become part of the game, and Mr Abhisit's government finds itself at a disadvantage.

"They can't say 'we'll give you more'. Why didn't they give it in the first instance?" said Mr Siamwalla.

"Yes it is an auction. It's obscene. It's very contemptuous of the electorate."

BBC news
Es gibt nichts Gutes, ausser man tut es! Erich Kästner, 1899 - 1974

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