corruption and agricultural market intervention
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Corruption and Agricultural Market Intervention. Sirilaksana Khoman Chair, Economic Sector Corruption Prevention National Anti-Corruption Commission (NACC). - PowerPoint PPT PresentationTRANSCRIPT
Corruption and Agricultural Market Intervention
Sirilaksana KhomanChair, Economic Sector Corruption PreventionNational Anti-Corruption Commission (NACC)
Presented at the course: MORS D68 Ethics and Executive Leadership, Sasin Graduate Institute of Business Administration, Chulalongkorn University, Wednesday 30 October 2013
Types of governance issues Straight-forward, petty corruption Complex and sophisticated networks,
plundering the nation’s resources• Example: Rice pledging scheme
Paddy Pledging Scheme: Policy evolution Original Paddy pledging scheme at warehouse – provided
credit to farms of 80-90% of market price to delay sale by farmers (like pawning)
1993-4 started use of pledging ‘receipt’ 2000-2001 Thaksin increased pledging price above market
price – increased budget – transforming scheme into price support scheme
2001-2002 increased coverage to off-season rice crop 2006-2007 Surayudh government decreased price to close to
market price 2008 Samak government increased price to highest level at
14,000 Baht for off-season rice In spite of rapid fall in price, Somchai and Abhisit
governments maintain pledging price above market price: main crop 2008-09 at 12,000 Baht and off-season crop 2009 at 11,800 Baht
Comparison of pledging price and market price of jasmine rice
Pledging price higher than market price for the first time 01/02
Study period 2005/6
Loss for 2005/06 crop; 5.2 million tons paddy
44.832.6
-19.1
-20-1001020304050
รายจ่าย รายรับ ขาดทุน
พนัล้านบาท
Agencies involved and quantities of paddy in the process
90 per cent of pledges not redeemed.
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‘Rent-seeking activities’ and corruption
₋ inflation of registered production₋ increase acreage for rice/reduction of
other crops₋ substitution of rights of other farmers₋ increased number of crops to 7-8 crops/2
years₋ put pressure on governments to continue
program
P differentialRent Seeking
Farmers
₋ higher cost₋ greater
pollution₋ competition
for water resources
₋ Capacity expansion/Silo to 90 million tons paddy Increased investment from 0.8 million Baht to 1.6 m per mill during 1987-2005
₋ Lobbying to be included/pledging across district
₋ siphoning of rice for illicit sale₋ substution of farmers’ rights/ using rice
from Cambodia, Myanmar and Laos
Milling profitsFree rice to siphonRice mill
• Rice mills in the program no longer know how to compete
Consequence
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‘Rent-seeking activities and corruption
₋ lobbying/kick-backs₋ collusion
Bid price lowerthan export price
exporters₋ unfair
advantage of large exporters
₋ huge investments in warehouse construction/ return in 2 years
₋ illicit sale of rice₋ exchanging low quality for
high
Siphoning of riceInflated rentWarehouse ₋ excess
warehouse capacity
consequence
“Surveyors”Govt official
Corruption and benefit-sharing
(1) Collusion in bidding among exporters
(2) Contracts favouring those in the scheme:
5-6 months after bidding to pay
(3) Contract amendments between Govt Warehouse and President Agri Trading, winner of the export contract on 6 May 2004; standard clause: 5% deposit changed to 1%
(4) At time of export, govt paid another $20 per ton to ‘prepare rice for export’
(5) Amendment of contract No. คชก.ขข.02/47 ลว. 18 May 2004 removing export requirement
(6) Policy change that favoured one export company that became the largest exporter
Innovation in corruption policy In early 2004 President Agri
Trading, a newcomer, won the bid to buy 1.68 million tons of rice from the govt at prices above market price, thereby possessing the largest amount of rice of all the exporters: 2.2 million tons
A few months later, the govt announced the pledging price for the new season paddy at 10,000 Baht (higher than market price)
Consequently market price shot up – other exporters could not compete with PAT. Many had to buy rice from PAT
Evidence of probable insider information
13
2005-2006 loss of 19 billion Baht: Distribution of economic rent:
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Farmers 37.3%
Rice mills (323 mills)
18.1%
Warehouse + surveyor
4.2%
17 exporters 23.4%
Government budget
13.7%
Deadweight loss 2.7%
Recipients
Consumers’ and
taxpayers’ loss of 19.13
Billion Baht
Source: Nipon (2010)
1414
Beneficiaries are mostly well-to-do farmers in irrigated areas in the Central and lower Northern regions
Richest 10% of farmers received 20 % of the benefits
Poorest 10% received 1.7 % Farmers with pledges above 200,000 Baht
received 59.7% in 2008-9 season Farmers with pledges below 40,000 Baht
received 2.7% in 2008-9 season
15
Top 2 largest exporters received economic rent of 2.641 billion Baht
(for one crop) • Collusion becomes easy
59
Remaining13%
20% # 3 and # 4
59% Largest two exporters
Rice production, export and estimated domestic consumption in 2009
Possible profit of 25 billion Baht (conservative estimate)
Flows of Network Relationships in Thailand
B
B1 B2
B1.1 B1.2 B1.3 P1.1 P1.2 C3
C or P
C4
C1 C2 P3
N1.2.1 N1.2.2
P2.1 P2.2 P2.3
N2.2.1 N2.2.2
Bureaucracy Politicians
Notes: B = bureaucracy, C = capitalists, P = politicians, N = non-politicians
Rivalry between Clans/ ‘Puak’ or Sub-Clans, Choosing Clan Affiliation
Fighting each other to control the resources or to be promoted
higher in the clan Providing resources to the client in his own sub-clan
Clan A
A1 A2
Clan B
B1 B2
Providing services and political support to the patron in the sub-clan
The poor and the under-privileged who are not accepted into any clan
are left without resources and protection
People choose clans according to the perceived benefits which could depend on
member size and resources of the clan
choose choose
People with independent source of power
In a nutshell: the 6 C’s
Constitution Concentration of political power Crisis of 1997 deCentralisation Civil Service reform Corruption
What can be done?
Membership of the WTO’s GPA? Ratification of the UNCAC; membership in
OECD Anti-Bribery Convention? Integrity pacts with private sector,
encouraging integrity pacts among professional and business associations, eg. medical suppliers, construction, supply chain, involving civil society.
Pro-active, pre-emptive anti-corruption action – intercepting questionable projects
Targeting corruption-friendly policies, measures, practices
Intervention schemes in agricultural markets
Targeting creation of artificial monopolies Licensing requirements, registration
practices, permits, encouraging use of technology to reduce
contact, promoting competition Evidence-based transparency index
Vigilance on conflicts of interests
Data base Disclosure requirements
• More positions included• Use of technology• Streamlining forms• Business associates
Recommendations regarding appointments of officials and prosecutors to state enterprise boards
Strengthening legislation?
Amendment of anti-corruption law
• Clarification and penalties• Provincial offices• Whistle-blower protection• Anti-money-laundering powers• Plea bargaining• Statute of limitations• Public procurement
requirements/procurement legislation
NACC ACT 2011: Article 103(7),(8): procurement Publication of reference prices and
method of calculation Disclosure of accounting statements
for contracts designated by the NACC Monitoring by the NACC
Design of anti-corruption measures taking into account the structure of patron-client networks/creation of monopoly rent
Strengthening of conflict of interest laws?
Incentives to make whistle-blowing worthwhile?
Direction
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NACC Preventive investigation at the policy formulation stage
Mega projects• ‘NGV’ buses• 3G telecommunication• 350 billion Baht flood prevention
project• Suvarnabhumi airport, second phase• Transport infrastructure 2 trillion Baht
Agricultural intervention policy• Rice, longan, cassava, natural rubber,
sugar cane and sugar, milk
More aggressive measures “unusually rich” Asset disclosure
• MPs removed from office
Greater reliance on technology
Asset disclosure – database linkage Encouraging use of technology in
government agencies – business registration, licensing and permits, etc. (greater convenience for business and reduces opportunities for corruption)
Monitoring of monopoly elements Role of regulator and operator Initiatives regarding procurement
Civil Society:• Freedom of information• Public hearings of draft laws • Monitoring by media/NGO’s• School Curriculum
Good and CleanGovernment
Competition & EconomicFreedom:• Competitive restructuring of monopolies• Regulatory simplification
Public Administration and Public Finance: • Meritocratic civil service, codes of conduct • Transparent, monetized, adequate remuneration • Accountability in expenditures (Budget, Audit, Procurement)• Perception index of good service by agency/service
Measures for Good Government and Transparency
Accountability of Political Leadership:• Disclosure of parliamentary votes • Transparency in party financing• Asset Declaration, Conflict of Interest Rules
Checks and Balances:• Independent and effective judiciary• Independent and effective specialized anti-corruption agency/unit• Decentralization with accountability?
Private Sector Partnership:. CSR, codes of conduct. Anti-corruption pact
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