01/07/2011 (World Crop) - Thais head to the polls on 3 July for the eagerly awaited general election. The business community especially is hoping for a smooth and painless vote.

Despite two years of political upheaval, the economy has been resilient. The incumbent government recently posted robust export data for Q1 2011, with a 24.6% increase in revenues compared to last year. Thai agricultural exports have surged in value by over 30%, boosted by soaring commodity prices and led by rubber, which has gained in value by almost 85% since the end of 2010.

Despite deep seated differences, the ruling Democrat Party, led by current Prime Minister Abhisit Vejjajiva, and the main opposition Pheu Thai Party have made strikingly similar pre-election promises. Both have pledged to raise farmers’ incomes by an average 25% through fertiliser subsidies and financial guarantees for farm production. But the Pheu Thai party, with its traditional power base in the rural north, has gone a step further by promising to buy rice direct from farmers at a guaranteed price of Thai Baht 15,000/tonne ($487/tonne). This is around 80% more than the current market price. It may just be one of those idle promises made before an election, quietly dropped if the party actually gains power. But it would seriously hinder the competitiveness of Thai rice on the export market, according to Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association. Thailand is the world’s top exporter of rice and aims to ship 9.5 million tonnes this year.

Thailand has also been producing a lot of sugar. Its forecast of a record 9.5 million tonnes sugar output for 2011 helped trigger a downturn in sugar futures in New York. Stung by domestic shortages of palm oil earlier this year, and a recent price hike in soyoil, the government is holding back a larger than expected 2.8 million tonnes of sugar for domestic consumption. The incumbent administration has also pledged to double the production of ethanol after the election; if realised, that will certainly reduce the volume of sugar exports from the country.

Food security will remain a hot political issue after the election, in a country where 60% of GDP comes from export revenues. There are widespread calls for the new Thai government to end its wholesale price controls on a number of basic commodities, such as sugar, palm oil, soybeans and eggs. It might help control inflation, but this policy artificially boosts demand, and it discourages business expansion.

Sharp divisions remain in the country, between the rural and urban areas, North and South, and pro and anti-monarchists. Whatever the outcome these divisions will not be resolved – which is a nagging worry for any government leading a country that is so heavily dependent on the agri-sector.