Thailand-Indonesia Dispute is Building Over Rice Deal

Posted September 27th, 2011 at 2:15 am (UTC-5)
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A diplomatic dispute is building between Thailand and Indonesia as the government in Bangkok prepares to boost prices for Thai rice farmers.

Thai Commerce Minister Kittiratt Na Ranong told reporters this week he will not sign off on a tentative deal to sell 300,000 tons of rice to Indonesia because the price is too low. The deal was negotiated by the previous government shortly before Kittiratt's Pheu Thai party took office in August.

Kittiratt said he expects Indonesia to understand the decision. But officials in Jakarta say they have not been informed that the deal has been canceled and they still expect the rice to be delivered.

They say they are still waiting for Thailand to respond to a letter asking about progress on the contract.

The dispute could be a sign of what to expect as Thailand implements a 50-percent increase in the guaranteed price it will pay to paddy farmers for their rice. The increase was one in a series of populist promises that helped propel Prime Minister Yingluck Shinawatra to victory in a July election.

Critics say the price rise will be crippling for Thailand's treasury unless it is able to get higher prices for its exports. Thailand is the world's largest rice exporter, with major customers including China, Bangladesh, the Philippines, South Africa and Nigeria.

Analysts say rice prices are already rising as Thai farmers hold back their crop waiting for the new prices to take effect in October. Rice is the staple food for more than 3 billion people, about half the world's population.