Widespread Corruption In Thailand Undermining Business, Causing Companies To Invest Money Elsewhere

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Widespread corruption undermining business, causing companies to invest money elsewhere

By Pravit Rojanaphruk

The Nation

Few firms caught for bribery and illegal acts, researcher tells panel; fears for impact on development

Bribery, red tape and corruption have to be reduced before Thailand becomes non-competitive and unsuitable for many corporations, which would seek to invest elsewhere, a roundtable on corporate good governance concluded last week.Building a climate of good governance will take years and will also require the government to be less corrupt than it is, said the panellists at the seminar organised by Krungthep Turakij, a sister daily of The Nation.

Big multinational corporations with their own codes of conduct may claim they no longer bribe politicians or bureaucrats. But if the climate is such that it demands bribes or bribes are offered by their competitors, these corporations may lose out given the lack of a level playing field, warned Deunden Nikomborirak, a specialist in economic governance at the Thailand Development Research Institute.

"If the demand [for bribes] continue, it's either you leave or you comply," Deunden said. "There can be no level playing field if competitors do not stick to integrity."

Deunden's recent research revealed that out of the more than 200 cases of illegal practises by firms listed on the Stock Exchange of Thailand from 1999-2010, those punished were just slightly over 5 per cent.

Many of these cases involved fraud worth Bt3 billion-Bt4 billion, and given the low rate of punishment and fines, which on average amounts to Bt500,000-Bt1 million, it all seems worth the risk to break the law, she said.

If offenders are not punished, the economy will find it hard to thrive, as laws and regulations fail to stem the violations, fraud and corruption.

On the other hand, in many instances governments tend to pass regulations for bidding on contracts or concessions that clearly favour a certain well-connected corporation.

"It means in this country, there is no genuine free competition," she said.

Such a situation ensures that more firms will have to seek illegal shortcuts to win contracts with the state or lose out on work.

"This is troubling because it undermines the overall economic outlook," she said.

As long as there is no political will among politicians and the country as a whole, the problem will fester. Just having a prime minister with a good image is not good enough.

"The reform that would address corruption must come from a sense of ownership [by society] and not from outside, otherwise no one will buy in," she said.

Participation is also needed.

Corrupt politicians would naturally resist reform but many more preventive measures can first be introduced, especially related to conflict of interest.

"Nobody will be jailed yet but it will have an impact," she said. "There's still a huge amount of problems relating to transparency and conflict of interest in the public sector."

It's still legal for a minister here to endorse a contract with a bidding firm that is owned by the minister's son or daughter, she said.

Another key measure would be to strengthen access to news and information by the population. In South Korea, where fighting corruption and instilling good governance practices have made impressive inroads, the broadband Internet penetration rate is 90 per cent. This combined with affluence among most people ensures that corruption and bad governance is becoming more of an exception rather than the norm in South Korea, she added.

Hilde Tonne, deputy head of Telenor Group, which runs the DTAC cellular company, said broadband penetration here is a dismal 10 per cent.

"And there's a reason for that," she said.

Ready and speedy access to news and information is crucial for the anticorruption drive, she added.

Pisawan Achanapornkul, president of Shell Thailand, was more optimistic.

Gathering from what Deunden said, it appears that at least there is an understanding as to what is the root of the problem that Thailand is facing. "It's good. That would be crucial," she said.

Business leaders and all Thais should think about how to move forward effectively by asking themselves a few questions, she said.

"Would you like to see Thailand as a backward country? Even at the Southeast Asian level? Is this how we like to see Thailand?"

If the situation continues, Thailand runs a real risk of seeing foreign investors leave due to the lack of a level playing field.

"We're not alone and just competing with ourselves. We have to compete with other nations," she said.

If the government continues to lack political will, perhaps the public should be mobilised to pressure the government to come up with the will, she added.

Manu Sawangchaeng, country manager for Pfizer, the American producer of Viagra, said corporations and business leaders who care about the issue must try to lead the way and put the issue on the political agenda within a year or two. Organisations can help, such as the Institute of Directors, which supports good governance in business and politics.

"We should be able to see some results in two years," he said.

-- The Nation 2011-05-02

[Thaddeus]

"We're not alone and just competing with ourselves. We have to compete with other nations," she said.

Well spotted.

"We should be able to see some results in two years," he said.

By which time................

[OZEMADE]

Better start with the Politions now as they have already started bribing the Thai voters with Holidays and Bus trips for weekends fully paid for for a vote.

Do people still pay the POLICE, IMMIGRATION and the list goes on.

[kumsamut]

to those who hate taksin, i just wanna know after reading this news or news from other newspaper, do you still find the democrat does not corrupt? are you that innocent?

Edited May 2, 2011 by kumsamut

[pogal]

They need a researcher to state the Bleed'in obvious in Thailand! 55555555 (LOL)

And what really makes me laugh in this article is the Country manager for Pfiefer spouting off about corruption! 555555 Pot calling the kettle black. Its well known that throughout the world drug companies are not only corrupt but immoral, deceptive and totally against free competition. What a joke and an insult to even have his comment listed!

[asdecas]

In other news, the sun rose AGAIN this morning.

[ginjag]

Better start with the Politions now as they have already started bribing the Thai voters with Holidays and Bus trips for weekends fully paid for for a vote.

Do people still pay the POLICE, IMMIGRATION and the list goes on.

Quote

It's still legal for a minister here to endorse a contract with a bidding firm that is owned by the minister's son or daughter, she said.

More or less in hundreds of towns thoughout Thailand the voted in person is the one that is reaping the BIG rewards, most have HIGH connections, so no one can touch them. As for blaming outsideforeign companies amongst others is a bit real. This smell starts at home, but no one wants to see it.

[rreddin]

They need a researcher to state the Bleed'in obvious in Thailand! 55555555 (LOL)

And what really makes me laugh in this article is the Country manager for Pfiefer spouting off about corruption! 555555 Pot calling the kettle black. Its well known that throughout the world drug companies are not only corrupt but immoral, deceptive and totally against free competition. What a joke and an insult to even have his comment listed!

He is quoted as saying "corporations and business leaders who care about the issue must try to lead the way and put the issue on the political agenda within a year or two". Now you can read what you like into that, but I see it as a neutral statement that does not commit either his company or him to anything.

Foreign corporation came to Thailand knowing of the endemic corruption. They have factored it into their costs. I do not expect any of them to leave until they find another more accommodating country where they can do even more profitable business.

[tourismtiger]

There is no need to ask the government or big business to take action. All they have to do is 'carry on as usual'.<br><br>The Arab Spring uprising was initiated by poor people who could no longer bear the rising cost against a backdrop of officially condoned corruption.<br>It has little to do with ideology. They want a democratic system (not necessarily our flawed version) that will ensure them of good governence that does what government is meant to do.<br><br>Recently in India a renowkned religious leader underwent a hunger strike pushing for the implementation anti-corruption laws, stalled by politicians for the past 20 years.<br>The government acted within 14 days and they are now introducing an anti-corruption body that is NOT manned by politicians.<br> <br>Last weekend's May Day labour marches throughout southeast and other parts of Asia (as well as in Europe) provide a wake up call for all governments. Dictatorships, crony capitalism and corruption, all of which impact the cost and quality of living for the man in the street must go, or those who support them will.<br><br>There is an growing anger amongst the middle and lower income groups about the fact that the recent economic crisis has made the rich (who started it) richer, and the poor, poorer. The foxes, far from being shot, have been given subsidies to remain in charge of the chickens.<br><br>With food and fuel prices absorbing 60% of household salaries amongst the lower income groups in southeast Asia, and no political will to address the problem in sight, we are farst approaching the tipping point.<br><br>The more visionary corporations are well aware of the pending explosion.They are rushing to develop their images through CSR (corporate social responsibility programes) that they believe will help them dissasociate themselves from their slower acting competitors.<br><br>Demand for tree saplings by those wishing to replant forests under their CSR programmes has risen dramatically in the past 4 months. The big question is will these trees grow tall enough to provide the cover they need when the man in the street cries "Enough! ".<br><br><br>

[toenail]

Corrupton in Thailand will be its development quicksand in swallowing up its future progress. Look at the Phillipines when back in the 70's its standard of living was above Thailand. Now it is just another corrupt backward country that is going no where.

[hardy1943]

Better start with the Politions now as they have already started bribing the Thai voters with Holidays and Bus trips for weekends fully paid for for a vote.

Do people still pay the POLICE, IMMIGRATION and the list goes on.

Quote

It's still legal for a minister here to endorse a contract with a bidding firm that is owned by the minister's son or daughter, she said.

More or less in hundreds of towns thoughout Thailand the voted in person is the one that is reaping the BIG rewards, most have HIGH connections, so no one can touch them. As for blaming outsideforeign companies amongst others is a bit real. This smell starts at home, but no one wants to see it.

Lets face it corruption been always part of their culture and always will and so is discrimination

[Mugg]

Building a climate of good governance will take years and will also require the government to be less corrupt than it is, said the panellists at the seminar organised by Krungthep Turakij, a sister daily of The Nation.

They have to just find that happy medium with the rest of the world...Bribery and Lobbyist are these diametrically opposing functions.

Edited May 2, 2011 by Mugg

[Bakseedaa]

to those who hate taksin, i just wanna know after reading this news or news from other newspaper, do you still find the democrat does not corrupt? are you that innocent?

The Democrats Do Not run this country, A coalition government, headed by a Democrat Prime Minister runs this country... that coalition in itself breeds corruption.. Abhisit was voted in by a majority of the MPs.. PTP are a big part of this coalition... All are corrupt in this particular government or nothing would ever get done.. But don`t worry, if Thaksin gets in he is going to expel many many farangs from Thailand...beware .. soon to be no more visas longer than one month... What was that Abba song again....Money Money Money.....!!!

[bluebluewater]

I've got money that I could invest into Thailand . . but I won't as the subject of the article suggests

[WatersEdge]

Ah, Now we are getting somewhere.

Openly acknowledging that corruption is draining the lifeblood from a country blessed with natural situation.

I have experience in this issue.

I could bring evidence to any investigator who wants to know.

I have lived in Thailand nearly seven years and am preparing to leave.

I have talked this over with all my Thai business associates.

I have taught the topic as an essay assignment for my students.

All agree that it is a wreckage, but they also despair that it is part of being Thai.

Wow, Where do we start in dealing with a system that is embedded into the life structure of the entire nation?

It is such a cancer that to cure the disease would kill the patient.

To fix corruption would cause such instability.

You'd have to dismiss the majority of public officials.

The police force would be a skeletal remnant.

If you started at a low level, you'd run into blockage at the medium and high levels.

If you started at a high level, you'd encounter hatred from the lower levels.

Little people's lives literally depend on continued corruption.

There is structure entwined with flesh in these twisted arrangements.

Real People who succeed in changing one place will be murdered, count on it.

May I suggest, The perspective is reversed.

Thailand is not in danger of becoming a backward country.

To become backward you must have at one time been straightforward.

I offer my own United States as an example, becoming more corrupt by the day.

Quoting Pisawan Achanapornkul, president of Shell Thailand,

"Would you like to see Thailand as a backward country?

Even at the Southeast Asian level?

Is this how we like to see Thailand?"

Thailand's enormous natural wealth is strangled and squandered already.

Thailand already IS a backward country.

Comparing to other Southest Asian countries is hardly the standard to achieve.

There is no future danger of companies backing away from doing business here,

it's already happened, and is happening at this moment.

Time and Opportunity have already bypassed Thailand.

I have three nice project proposals that would be well suited to Thailand's capacity,

but I have to be straightforward with the potential investors,

to say that corruption ruins all hope of profit.

Not being one to despair in the face of adversity,

I propose a small case solution.

Show me one Amphur anywhere in this nation where corruption is ruled out.

Arrange it as a special demonstration case, a Corruption Free Zone.

Let it be known that special intensity will be applied to any report of hindrance in that small place.

Apply the full authority of the federal government in investigating and prosecuting large and small cases in that place.

I assure you, that one Amphur will prosper.

It will be the Shenzhen of Thailand,

I'm referring to the sleepy little border village in China,

transformed in just 20 years by special economic zone status

to a bright and sparkling center of commerce and technology.

It wouldn't rip the country apart if one Amphur was sacrificed to be totally clean.

OK, let's reduce my claim to one Tambon

While I don't despair in the face of adversity,

I'm also not given to delusion.

Is there a man who will truly be a man in Thailand?

Is there a woman who will stand tall in the absence of men?

I'd like to meet them.

[OZEMADE]

Corrupton in Thailand will be its development quicksand in swallowing up its future progress. Look at the Phillipines when back in the 70's its standard of living was above Thailand. Now it is just another corrupt backward country that is going no where.

Other countries such as China, Vietnam, Cambodia and the Phillipines are as corrupt as Thailand, in some cases even more so, as they will do the work even cheaper through corruption and that is why companies move to other countries.

[Travelman868]

Bribery is part of the problem but the laws/rules governing a start up business are ridiculous.

If a Farang wishes to start a business that will employ Thai people he 1) has to have a Thai partner or 2) Two Thai Directors.

In the case 1, The Thai partner, who may not have any money can run up debts etc and the Farang is legally responsible. While partnerships are simular in the west there are ways to control irresponsibility. This does not seem to be the same here.

Case 2. The Thai directors must have full access to the bank account.

While I trust everyone !! it makes the whole idea untenable, even if the partner is the wife.

[drdoom6996]

to those who hate taksin, i just wanna know after reading this news or news from other newspaper, do you still find the democrat does not corrupt? are you that innocent?

This is a little off topic as you Taksin supporters seem to need to turn anything into the pro Taksin Debate. Taksin was THE MOST CORRUPT POLITICIAN we have had as PM in the 24 years I have been in Thailand. This is to include Suchinda. I am encouraging my Thai family too vote. When someone came with money for a vote, I simply doubled it and told them to vote their minds.

FYI, We have no color and all the colors are the corruption.

[drdoom6996]

Corrupton in Thailand will be its development quicksand in swallowing up its future progress. Look at the Phillipines when back in the 70's its standard of living was above Thailand. Now it is just another corrupt backward country that is going no where.

Other countries such as China, Vietnam, Cambodia and the Phillipines are as corrupt as Thailand, in some cases even more so, as they will do the work even cheaper through corruption and that is why companies move to other countries.

In the 70's when PI was so powerful economically I recall a man named Marcos and the the billion shoe lady. I think that PI in the late 20th century might (1970 to 2000)have been a poor example.

[drdoom6996]

Bribery is part of the problem but the laws/rules governing a start up business are ridiculous.

If a Farang wishes to start a business that will employ Thai people he 1) has to have a Thai partner or 2) Two Thai Directors.

In the case 1, The Thai partner, who may not have any money can run up debts etc and the Farang is legally responsible. While partnerships are simular in the west there are ways to control irresponsibility. This does not seem to be the same here.

Case 2. The Thai directors must have full access to the bank account.

While I trust everyone !! it makes the whole idea untenable, even if the partner is the wife.

What are the laws in the country you are from? In the US it is very strict for a foreigner to own land or work with out tonnes of paperwork and time delays and partnerships. Employee's must be from the US unless you can prove that the position requires an expat.

[vahack]

to those who hate taksin, i just wanna know after reading this news or news from other newspaper, do you still find the democrat does not corrupt? are you that innocent?

first of all i dont care who runs LOS as long as the dollar improves. corrupt govt seems to improve the dollar. under Taksin the dollar went to 45b. now under the incorruptible Abhisit, it is under 30b.

now, that said, if the leader can't set a good example, then no one else will follow. this corruption boom started with taksin. there was always corruption, but it was only about 5 years ago that every single Thai got in on it.

i dont know any govt worker that doesnt take side money. teachers included.

[saroq]

to those who hate taksin, i just wanna know after reading this news or news from other newspaper, do you still find the democrat does not corrupt? are you that innocent?

first of all i dont care who runs LOS as long as the dollar improves. corrupt govt seems to improve the dollar. under Taksin the dollar went to 45b. now under the incorruptible Abhisit, it is under 30b.

now, that said, if the leader can't set a good example, then no one else will follow. this corruption boom started with taksin. there was always corruption, but it was only about 5 years ago that every single Thai got in on it.

i dont know any govt worker that doesnt take side money. teachers included.

No, no, no! This guy didn't just blame the declining US dollar on Thai politicians and Thai corruption, did he? Beggars belief.

[dale8]

Corruption in Thailand? Now they will want to get 3G phones too. Cheers

[teddy_bare]

Difficult to change behaviours and mindset, when you read the most thais accept corruption as long as people prosper. i am referring to a survey posted 6 months ago on this forum. the moral compass of this country is truly amazing.

[Dukeleto]

Foreign companies understand the "situation" in third world corrupt countries where labour is inexpensive and there are loads of legal loopholes where they can save money. They factor in the corruption. Once this becomes too expensive to maintain a healthy profit they move out to the next third world nation who is crying out for the opportunity to get it's ruling elite rich off the spoils via corruption.

The problem with becoming a first world developed nation is becoming competitive, as you no longer have the cheap labour and bureaucratic loopholes of a third world system. So one has to ask yourself. If the cost is the same for a company at home who wants to manufacture goods, why manufacture them in Thailand? Thailand's success is due to it's third world status, bureaucratic loopholes, cheap labour force and unfortunately corruption, which allows business practices which are not possible elsewhere.

Personally, I think the first stop in getting Thailand to progress is education. They need to get this right first.

[luckizuchinni]

Bribery is part of the problem but the laws/rules governing a start up business are ridiculous.

If a Farang wishes to start a business that will employ Thai people he 1) has to have a Thai partner or 2) Two Thai Directors.

In the case 1, The Thai partner, who may not have any money can run up debts etc and the Farang is legally responsible. While partnerships are simular in the west there are ways to control irresponsibility. This does not seem to be the same here.

Case 2. The Thai directors must have full access to the bank account.

While I trust everyone !! it makes the whole idea untenable, even if the partner is the wife.

What are the laws in the country you are from? In the US it is very strict for a foreigner to own land or work with out tonnes of paperwork and time delays and partnerships. Employee's must be from the US unless you can prove that the position requires an expat.

You need to read the laws before spouting off here. While some states have foreign ownership laws, mostly having to do with farmland and the size of a farm, there are no real federal laws about foreigners owning land. There are some laws as to foreigners logging and such on federal land, but nothing as far as owning a house or land.

As far as working, yes a work visa is a hassle, but not impossible. There are many, many foreigners legally working in the US. As a sad proof of this, about 10% of the 911 victims were foreigners.

This thread is about corruption in Thailand, not about US land ownership laws, and even then, it would be better if you got your facts straight.

[zthyadat]

to those who hate taksin, i just wanna know after reading this news or news from other newspaper, do you still find the democrat does not corrupt? are you that innocent?

Of course they are corrupt - otherwise the democrats would have no coalition partners. The difference is that this is a schoolyard free for all, and I very much doubt that Abhisit is participating in the corruption, whereas Thaksin was conducting the corruption orchestra.

But that fact that this government is also corrupt doesn't suddenly make Thaksin an angel. People who hate him mostly do so not so much because of his corruption, but because of his despotic nature. If he hadn't been thrown out he'd be like Joe Stalin or Mao Tse Tung by now. That is what he was working towards - total dominance over the military, government, bureaucracy and judiciary. He had nearly secured the first three and was working on the fourth. The man had a lust for power that Abhisit does not.

[CPT]

It is a cultural problem and will take a lot of hard work and time to fix. Starting at the bottom, Thais are quite content to pay bribes to police, for example, as they save on the actual legal fine. Police are open to being bribed because they receive such a small salary. People who make it into positions of power buy their way in because of the rather significant amount of money they can make through corruption.

Thais have to start viewing corruption as a bad thing at the lowest levels. The lower level of officialdom has to start paying enough that corruption isn't necessary and be policed by higher level officials. Higher level officials have to be held accountable by the electorate. The problem now is the masses don't see corruption as a particularly big problem (culturally acceptable) and that likely stems from the hope that they or a family member may someday be in a position to benefit from it.

Regarding foreign companies: some are willing to play by the local rules and pay bribes but such actions are often illegal in their home countries and can lead to prosecution (the FCPA has started being rather vigorously enforced in the US). This clearly discourages companies based in countries such as the US from becoming involved in industries here that are dominate by well connected, corrupt Thai companies as they compete at a severe disadvantage.

[Markaew]

These are just election talking points which we should all know will vaporize after the elections just like the typical and regular "crackdowns" that we get. We have heard again and again Thais want to preserve their "Thai Culture" where we know that compulsive lying and corruption is deeply rooted in all Thais and is considered normal. So to expect a change from this would be ridiculous because it can never happen. These talking points are for the outside world where they are gullible enough to believe that these talking points are even remotely being considered.<br>

Edited May 2, 2011 by Markaew

[exbelg]

thailand is good in exporting rice (that's about it for exports) and importing sex tourists, while prostitution is illegal ...