Changing ownership

20 06 2014

This is a long post that PPT had hoped to find time to edit and make a commentary, but we have limited capacity at present. Essentially we ask one question: has the military dictatorship begun a process of regaining control over cash cows that it once controlled in order to re-establish the off-budget wealth of the military and its leaders? The answers may well be seen in the following reports:

At the Wall Street Journal:

Thailand’s military junta is moving to extend its control over the nation’s powerful state-owned enterprises, a formidable economic sector that has been a crucial arena for Thailand’s power struggles in recent years.

The nation’s generals, who took power in a coup last month, have stopped short of an outright seizure of the nation’s 56 state-owned companies, which include Thai Airways International THAI.TH +0.64% PCL and oil-and-gas producer PTT PTT.TH -1.34% PCL. But they have put public pressure on the heads of these firms to resign, and many have begun to comply.

Voravidh Champeeratana, the chairman of Krung Thai Bank PCL, KTB.TH -3.33% stepped down on Monday, following the resignation over the weekend of PTT’s chairman. The heads of the Government Lottery Office and the Airports of Thailand AOT.TH -2.76% PCL also have resigned since the coup. So far, none have been replaced.

The state sector has long been a battleground in the clash between Thailand’s two competing political factions, which culminated in the army’s takeover last month.

There is a lot at stake: These firms have combined assets of $360 billion and they spend more annually on investment than the government does. Thailand’s listed public companies and their subsidiaries account for a fifth of the local stock-market capitalization.

Politicians have fought to control these companies, whose revenues are a source of financing for government projects. Analysts said it is common for administrations in Thailand, whether military or civilian, to put allies in charge either as a reward for loyalty or as a way to exert control over spending.

“If we’re talking about investment projects to boost the economy, state enterprises are more important than the government,” said Niphon Poapongsakorn, an economist at the Thailand Development Research Institute, a think tank.

Thailand’s military junta says its intention is to make state enterprises more efficient.

“If we have to make any change, we will find good people who can contribute to the country and put them to work,” Air Chief Marshal Prajin Juntong, the junta’s economic policy czar, said after the coup.

Former Prime Minister Thaksin Shinawatra, a telecom tycoon, moved many of his allies into state companies following his ascent to power in a popular vote in 2001. That upended decades in which Thailand’s traditional royalist elite, which has close ties to the military, kept tight control over government and the state sector.

Mr. Thaksin tried to privatize some state enterprises to boost liquidity and listings on Thailand’s stock exchange, and sold stakes to the public of some companies including PTT, Airports of Thailand PCL and telecommunications provider MCOT PCL. But the military deposed him in a 2006 coup, cutting short his privatization plans.

The struggle since then between Mr. Thaksin’s backers and Thailand’s establishment has created a revolving-door dynamic at state enterprises. Mr. Thaksin’s sister, Yingluck Shinawatra, led her party to power in elections in 2011 and set about restoring control over the state sector, facilitating the appointment of allies to head PTT and MCOT.

A Thai police choir performed in Bangkok’s Lumpini Park on June 15. Zuma Press

In other sectors, the establishment was able to keep some influence in an uneasy balance with Ms. Yingluck’s allies. Most board positions are selected by company committees, typically a rubber stamp for the government’s choice, former directors say.

Army chief Gen. Prayuth Chan-ocha, who led the military’s grab for power in May and heads its new ruling council, has sat on the board of TMB Bank PCL since before the coup. Mr. Prajin, the junta’s economic czar, has been on the board of Thai Airways from before the army’s seizure of power.

The Government Lottery Office, which runs the nation’s monthly state lottery, has had a number of bosses in recent years. The office made 2.7 billion baht ($83 million) net profit in 2012 on 61 billion baht in revenue, the latest available figures.

Much of the profits go to fund government programs. The office also can print tickets for special lotteries to raise additional funds for specific government projects.

Since the coup, the office’s former director-general, Attagrit Tharechat, who was appointed by Ms. Yingluck, has stepped down. Mr. Attagrit denied the junta had pressured him to resign.

“In order for the organization to move forward, I should open the door for the new administration,” he said.

Chaiwat Pasokpuckdee, another former director-general of the lottery under Mr. Thaksin, said most board members of state-owned companies are politically appointed and lack knowledge about operations.

Wanchai Surakul, director-general of the office under the establishment government of former Democrat Party prime minister, Abhisit Vejjajiva, said it was normal for heads of state firms to resign when governments change to “make room for new people.”

The military has long tried to control many state enterprises for the wealth they generate for the military as an institution and for the military brass who alsways end up with consider and unusual wealth.

At the Bangkok Post:

The National Council for Peace and Order (NCPO) is planning to order the national broadcasting and telecom regulator to remit to the central government tens of billions of baht in revenues it obtained from the auction of digital TV spectrum.

The NBTC’s headquarters in Phaholythin Soi 8. The high-profile group has been controversial almost since its inception, with particularly strong criticism of bringing 3G service to Thailand. (File photo)

The move follows the Office of the Attorney-General’s (OAG) finding that the National Broadcasting and Telecommunications Commission (NBTC) is unable to manage the money efficiently under the law.

The military junta also looks set to revamp some sections of the 2010 Frequency Allocation Act (FAA) to help TOT Plc regain its concession revenue to help the state telecom enterprise’s ailing financial status, and eliminate loopholes in the law.

Thakorn Tantasith, secretary-general of the NBTC, confirmed the NCPO wants to overhaul the NBTC’s budget and revenue structure to improve transparency and public accountability.

Mr Thakorn said the act applies only to the auctions of telecom spectrum, not the auctions of broadcasting spectrum.

This has allowed the NBTC to keep the proceeds from the broadcasting spectrum auctions in its Broadcasting and Telecommunications Research and Development Fund for the Public Interest and allocate the funds to develop broadcasting services.

“The NCPO wants the NBTC to transfer the proceeds from the auctions of broadcasting spectrum to state coffers instead,” he said after meeting the NCPO’s legal sub-committee.

A source said the NCPO’s move to review the NBTC’s financial gains stemmed from an OAG probe.

According to the probe, the massive sum of money, particularly the revenues from the auction of digital TV frequencies worth 50.8 billion baht, is managed on an off-budget basis which is not in line with the spirit of the constitution.

The NBTC independently manages the proceeds without any scrutiny by state experts such as the Budget Bureau and the National Economic and Social Development Board.

This deviates from the state’s fiscal disciplinary framework, the probe found.

The state auditing agency also questioned the criteria and qualifications which the NBTC uses in recruiting its board members, which has raised questions over whether these people are qualified to manage the money or oversee telecommunications and broadcasting affairs.

As a result, the OAG has recommended that the NCPO take back the sum, particularly the gains from the digital TV spectrum auction, to state coffers.

Another important legal loophole which needs amending is Section 84 of the FAA, which stipulates that TOT, which is a state telecom enterprise, cannot book any revenue related to concessions in its financial statements.

The law has required the state firm to pass this revenue to state coffers since Dec 20, 2013.

This rule has hurt TOT’s financial status as the state enterprise is bracing for a hefty operating loss of 10 billion baht this year after posting a loss of 1.7 billion baht in the first quarter.

TOT reported a profit of 4.3 billion baht in 2013. It received 20 billion baht in revenue from its operations last year, a little lower than its total expenditure.

Its salary payments and benefits for 22,000 employees account for 48% of total fixed costs annually.

Earlier, TOT asked the NCPO to allow it to keep the concession revenue until the contract with its concessionaire expires.

Leading mobile telephone service provider Advanced Info Service (AIS) pays TOT about 16 billion baht in concession revenue a year under an agreement to provide the 2G mobile service on the 900-megahertz spectrum.

AIS’s concession is scheduled to expire in September 2015.

Mr Thakorn said an amendment to Section 45 of the FAA, which limits the NBTC to allocating frequencies via an auction process only, is also necessary to ensure efficiency.

Col Settapong Malisuwan, the NBTC’s vice-chairman, said the section has hindered the country’s telecom and broadcasting development as “unlicensed regimes” have been gaining momentum internationally.

Allocations of some spectrum ranges like spectrum for taxi radio and satellite frequencies do not need an auction to comply with international practices, he said.

Col Settapong said he personally believed that more than half of the 95 sections under the FAA should be amended to eliminate legal disputes and promote local telecom and broadcasting industries.

Sections that need to be revamped include the NBTC’s management structure, the number of commissioners which might need to be reduced from the present total of seven, and the selection process for commissioners.

Mr Thakorn also said he believed the NCPO will order the amendment before the auctions of 4G spectrum takes place.

Army secretary Maj Gen Polapat Wannapuk said yesterday Col Settapong has represented the NBTC in submitting documents to explain the details of the digital TV coupon subsidy, worth 25 billion baht, which is among the NBTC projects that have been suspended by the NCPO.

The NCPO has put the brakes on three critical broadcasting and telecommunications megaprojects to examine the transparency and functioning of the regulator.

The suspension of the three projects worth a combined 85 billion baht has drawn criticism from mobile and digital TV operators, which say it could damage the overall industry.

The suspended projects are two spectrum auctions to provide 4G services, worth 40 billion baht; the digital TV coupon subsidy worth 25 billion baht; and the universal service obligation fund to provide basic telecommunications infrastructure nationwide worth 20 billion.

What a neat idea! Billions into the junta’s coffers, all in the name of anti-corruption! You’d be a dunce to believe them.


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