The Public Warehouse Organisation is to cancel an agreement with GGF Thailand to lease silos in 10 provinces from the joint-venture company for storing 2 million tonnes of rice.The agreement was signed in September last year.

The PWO will send an urgent note to inform GGF Thailand after Commerce Minister Porntiva Nakasai ordered the deal's immediate cancellation, said Viwat Lauhapoonrungsi, chairman of the PWO board.

He has advised the PWO's director to discuss the cancellation with the organisation's legal officials to prepare for court action should GGF bring the case to the court, he added.

In his view, the agreement did not commit the PWO to leasing the silos from GGF Thailand so the company will be unable to demand compensation.

Commenting on a report that the Malaysian-Thai joint venture firm has invested heavily in the silo project and might file a damages suit, he said the PWO had a duty to investigate how much work the company had done.

He insisted that the board had acted legally in giving a green light to the PWO to sign an agreement with GGF.

The PWO board had the authority to implement the project, despite its massive scale, because Thailand requires investment in rice silos, he said.

In his view, the leasing project will enable the PWO to generate revenue to keep it afloat after the government cancels the pledging scheme for farm products.

A court ruling is due to settle the issue of whether the joint-venture firm is merely a nominee for a foreign company, he said.

But he added the board did not approve the signing of the memorandum of understanding between the PWO and GGF that enabled the venture to act as a trader selling 2 million tonnes of rice.

This issue is under scrutiny by authorities to see whether the acting PWO director abused his authority, he said.

Under the leasing agreement, PWO will lease silos in Sukhothai, Nakhon Sawan, Phichit, Chai Nat, Suphan Buri, Roi Et, Surin, Nakhon Ratchasima, Saraburi and Ratchaburi to store the rice.

The company also has a two-year deadline to complete construction of the silos.

The Malaysian-Thai joint venture had earlier backed off from the original plan by telling the Commerce Ministry it had cancelled a memorandum of understanding - involving the company, its Malaysian parent GGF Golden House Sdn Bhd and the PWO - which would have enabled the venture to act as a trader selling 2 million tonnes of Thai rice. The deal has attracted criticism from local rice traders concerned about the potential market power the new venture might have over the industry.

Source: Bangkok Post