Rural Debt Drives Thais to Foreign Fields

By Marwaan Macan Markar 27 December 2013

BAN LAO YAI, Thailand — When Buala Laopom, a rice farmer, left his village in July, it was to find relief from an expanding household debt trap. The 39-year-old had set his sights on Sweden. His first trip abroad was to pick blueberries over three months during the Scandinavian summer.

It was a well-worn path for many from Thailand’s rural northeast. Buala was among 6,000 migrant workers who departed in July for a tempting prospect: earn in three months what they would normally reap from a year’s work in the paddy fields. This annual journey came a month after the monsoon rains had helped farmers in villages like Baan Laoyai prepare their fields through June for a fresh rice crop.

But his plans were not to be. A month after harvesting the foreign fruits, Buala had not been paid. By mid-September he had joined a protest in Umea, a city in northern Sweden. It was staged by hundreds of the estimated 500 Thai blueberry pickers deprived of the promised wage. The target of their ire was M-Phoenix Enterprise, a Thai labor company, which had signed the contract with the migrant workers.

In early October, the ashes of Buala’s cremated body were flown back to this village, which has the familiar array of Thai-style houses on stilts by the side of shimmering green paddy fields. He had hanged himself in a public toilet in Umea during the middle of the protests.

“He couldn’t sleep after realizing that the payments were not being made,” Rattana Seetang, his wife, said in a soft, halting voice. “He told me over the phone he was worried that he will have nothing after three months in Sweden. He felt cheated.”

Buala’s fate and the plight of the unpaid berry pickers have prompted an investigation by Thailand’s Department of Special Investigations (DSI). In their crosshairs is M-Phoenix Enterprise. “The workers are paid based on the weight and price of the fruits they collect,” trotted out Tongtip Hongkannan, a representative of the Thai labor recruiter, to explain company policy. “This year the price of berries is low.”

It is a view that hardly impresses Thai labor rights activists, who normally have their hands full exposing abusive practices inflicted on the over two million migrant workers from Myanmar, Laos and Cambodia laboring in Thailand.

“The Thai labor company has tried to cheat the migrant workers,” says Patchanee Kumnak, director of the Thai Labour Campaign, a Bangkok-based activist group. “Minimum wages have to be guaranteed, such as the 80,000 baht (US $2,600) per month that Thai farmers working as berry pickers in Sweden have been promised.”

Such wage guarantees are now part of the formal process that covers most Thais laboring in foreign countries. Last year saw some 103,400 Thais seek jobs abroad, swelling the number of Thai migrant workers to about 385,130, according to the Department of Labor. Sweden, Finland and Israel are magnets for those drawn to the agriculture sector. Taiwan, South Korea and Singapore attract those seeking employment in the manufacturing sector.

This story of abuse has also exposed another troubling reality of rural Thai life. Many of the berry pickers who flew to Sweden had, like Buala, taken loans to secure the contract and initial expenses for foreign employment. That amount—close to 80,000 baht—added to other household debt they were already grappling with. “They take loans from the formal or the informal sector since it is such a big amount,” says Patchanee.

It is a risk that has paid off in the past, says Somsak Saameusap, a farmer. During a stint as a berry picker in Sweden three years ago, he returned with 150,000 baht ($5,000) as his saved income. “I earned that in three months and it helps pay off my debts,” the 37-year-old said.

The promise of such earnings has prompted many debt-ridden farmers to become migrant workers, notes Dusadee Ayuwat, a professor at the faculty of social science at Khon Kaen University, in Thailand’s northeast. “Rural debt has increased and farmers expect to find a quick solution by going abroad as migrant workers.”

Borrowings are not limited to pay for farming expenses, ranging from fertilizer and pesticides to fuel. Changing lifestyles across the Khorat Plateau, Thailand’s northeastern rice bowl, is also driving up the household debt burden. This trend toward becoming more semi-urban has precipitated a rising demand for cars, refrigerators, televisions, computers and mobile phones.

“It means they want to have a more comfortable life,” Dusadee told The Irrawaddy. “Yet, this debt has become a big problem in villages.”

Such a burden in Southeast Asia’s second-largest economy is raising alarms in some quarters. In October, Standard & Poor’s, the global ratings agency, warned that household debt in Thailand had hit 77 percent of the gross domestic product in 2012, up from the 55 percent in 2008. In Indonesia, the region’s largest economy, the household debt burden hovers well below 20 percent of the GDP.

Homes in rural Thailand account for the greatest share of debt. It stood at an estimated 168,000 baht ($5,600) per household in 2012, according to official statistics. Loans for household expenses made up 33 percent of the borrowings, while agriculture-related debt accounted for 15 percent.

Currently, a solution rolled out by former Prime Minister Thaksin Shinawatra when he began his first term in 2001 is still available. It is the micro-credit “Village Fund” program aimed at offering debt relief for each of the country’s 75,000 villages. Governments that succeeded Thaksin—who was driven out of power by a 2006 military coup and now lives in self-imposed exile to avoid a jail term for corruption—have strengthened the initiative. This fund, which offers villagers loans of up to 20,000 baht ($660), is now worth an estimated $7.2 billion.

Yet, the presence of this fund and the formal banking sector has not stopped rural communities from turning to loan sharks for easy credit. The less cumbersome procedure to borrow from moneylenders remains a draw, despite the usurious rates they charge. Some offer credit that demands an interest of two percent every day for a 24-day period. Accounts of villagers being charged three percent interest daily also abound—compelling the borrower to fork out 1,095 percent in interest payments alone for an entire year.

“People have become trapped in this debt cycle,” says Jose De Luna Martinez, senior financial economist at the World Bank’s Thai office. “The loan sharks are quite aggressive about getting their loans back, and sometimes the debtor feels obliged to borrow from another moneylender to pay for an existing loan.”