Special Thai report: Mega state holding company proposed

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SPECIAL REPORT
Mega state holding company proposed
NOPHAKHUN LIMSAMARNPHUN
THE NATION


Kulit

Corporation would be similar to Singapore's Temasek; move aimed at reining in populist poliicies

BANGKOK: -- THAILAND'S Bt12-trillion-plus state enterprise sector will undergo major reforms if new legislation to set up a holding company to consolidate ownership of an initial 12 major companies sails through the National Legislative Assembly in November.

The proposed National State Enterprise Corporation would be similar to Singapore's Temasek Holdings and would have PTT, Thai Airways International, TOT, CAT, Krungthai Bank, MCOT, Transport Co, Airports of Thailand, Thailand Post, Thanaluk Pattana Subsin, Bangkok, and Aeronautical Radio of Thailand under its umbrella in the first stage of implementation.

A portion of the state enterprises' annual investment budget would be allocated to a non-government public fund, which will be tasked with monitoring the state enterprise sector's reform process in a bid to avoid repeating previous political abuses and irresponsible populist policies. This was revealed by Banyong Pongpanich, a member of the state enterprise policy and supervisory committee, better known as the Superboard and chaired by Prime Minister Prayut Chan-o-cha.

Kulit Sombatsiri, director-general of the State Enterprise Policy Office, said the proposed legislation would cover 56 state enterprises whose combined assets were nearly equivalent to Thailand's gross domestic product while their combined revenues were Bt5 trillion and investment budgets Bt300 billion.

Boosting efficiency and preventing abuses are the main objectives of the structural reform effort, said Banyong, who is also chief executive officer of Kiatnakin Bank. "In terms of efficiency, we need to ensure that procurement in the state enterprise sector, which amounts to over Bt2 trillion per year, and implementation of the combined investment budgets, worth Bt300 billion to Bt400 billion, are more transparent," he added.

Regarding abuses by politicians, Kulit said the reform effort aimed to prevent the return of populist policies, which were not fiscally responsible. For example, when campaigning for votes political parties would have to take more responsibility for policies that would lead to the use of public funds like the rice-pledging scheme, which cost many billions of baht.

"In such a case, we expect the state-owned Bank of Agriculture and Agricultural Cooperatives [one of the 56 state units covered by the proposed legislation] to set aside a budget to pay for the rice-pledging scheme, or other sources of funds must be identified before the scheme can be implemented [to avoid a fiscal budget issue later on].

"For other public services such as free-of-charge city buses, the government will have to set aside a budget for the Bangkok Mass Transit Authority before ordering the heavily-indebted agency to provide free bus rides. BMTA's debts are now approaching Bt100 billion.

"Populist policies are fine, but politicians must be fiscally responsible. In terms of appointing board members for state enterprises, we expect more professionalism and board members must be evaluated according to their key performance indicators."

If the proposed legislation were approved by the Cabinet and the NLA, the shares of state enterprises held by the Finance Ministry would be transferred to the National State Enterprise Corporation, which would be operated based on a five-year plan approved by the national state enterprise policy and supervisory committee.

Banyong said the Superboard also had proposed giving 0.25-0.50 per cent of the state enterprise investment budget to a non-government agency, which would serve as the independent think-tank on public policy to help monitor the state enterprise reform process over the next several years. The focus would be on efficient use of public funds and counter-corruption practices.

The combined investment budget is estimated to be Bt300 billion to Bt400 billion so the proposed public fund would have Bt1.5 billion to Bt2 billion annually, while the value of shares to be transferred to the new state enterprise corporation would be about Bt750 billion and covering the initial 12 state units whose combined assets were around Bt5.9 trillion.

"Our model is similar to that of Temasek Holdings's first stage many years ago," Banyong said. "I think it's suitable for Thailand and the record shows that national assets in the case of Temasek have grown from US$270 million (Bt9.5 billion) 40 years ago to around $250 billion currently. Temasek has yielded an average 16 per cent return annually in the past years.

"Today, Temasek has shares in Singtel, Singapore Airlines and DBS, for example. In fact, we also studied other models, including the UK privatisation, the north European model and China's model, part of which is similar to Temasek."

In an effort to ensure continuity of the reform process, Banyong also proposed that the state enterprise corporation's first chairman have a fixed five-year term, with a part of the 10-person board vacating every two years.

Source: http://www.nationmultimedia.com/business/Mega-state-holding-company-proposed-30265763.html


-- The Nation 2015-08-03

[ratcatcher]

"BMTA's debts are now approaching Bt100 billion."

OMG

[Bob12345]

Boosting efficiency and preventing abuses are the main objectives of the structural reform effort, said Banyong, who is also chief executive officer of Kiatnakin Bank. "In terms of efficiency, we need to ensure that procurement in the state enterprise sector, which amounts to over Bt2 trillion per year, and implementation of the combined investment budgets, worth Bt300 billion to Bt400 billion, are more transparent," he added.

I have serious trouble with reading this article as almost everything mentioned in it goes against common knowledge:

A large conglomerate of unrelated government companies will be more efficient? Since when do governments get more efficient when their size/budget increases?
A large conglomerate of unrelated government companies will be less likely to be abused? Since when are governments less likely to be abused when uncontrolled power is in the hands of fewer people?

A large conglomerate of unrelated government companies will be more transparent? Since when do governments more transparent when they grow bigger?

It seems the consolidation of power in Thailand is about to take the next step. Let me guess who they want to lead this new huge company (its probably themselves, and nobody else).

Edited August 3, 2015 by Bob12345

[does]

A very good idea, if only because is will reign in the power of future politicians.

Edited August 3, 2015 by does

[bamnutsak]

they wear green

I don't think this is the plan. Certainly some Military types would be on the board of this proposed "Holding Company", but the goal is for a small group of "Good People" to control the budget by wresting it away from "politicians".

The Junta created a "Superboard" early on, mostly to 'manage' the ailing State enterprises. This latest proposal seems to be an attempt to remove any potential public participation/oversight?

'Superboard' to coordinate state units

http://www.nationmultimedia.com/business/Superboard-to-coordinate-state-units-30237296.html

Edited August 3, 2015 by bamnutsak

[Bob12345]

A very good idea, if only because is will reign in the power of future politicians.

Your hatred of the current (and previous) politicians clouds your judgement.

So you think it is better to have a small group of insiders controlling billions of baht for the coming hundreds of years, or a rotating group of people who represent the actual owners of the companies (elected politicians who represent the Thai people as the Thai people are still the ultimate owners of these companies since it has all been set up with their tax money).

Edit: spelling error

Edited August 3, 2015 by Bob12345

[Bob12345]

they wear green

I don't think this is the plan. Certainly some Military types would be on the board of this proposed "Holding Company", but the goal is for a small group of "Good People" to control the budget by wresting it away from "politicians".

The Junta created a "Superboard" early on, mostly to 'manage' the ailing State enterprises. This latest proposal seems to be an attempt to remove any potential public participation/oversight?

'Superboard' to coordinate state units

http://www.nationmultimedia.com/business/Superboard-to-coordinate-state-units-30237296.html

Agree (sorry, I just edited the "they wear green" part out right before I saw you reacted to that part).

It just one of many steps to nuter the political process in Thailand and move all power to "good people" wihout oversight.

[Thaddeus]

Belgium.

It worked perfectly well for a very long time with any politicians.

[Ricardo]

I'm not convinced that adding an extra layer of management would improve decision-making or accountability in these important large companies & businesses ?

And imagine the power concentrated in the hands of the board of such a mega-state-holding-company.

I won't bother to dig out or quote what that Roman general had to say, about management reorganisations being a common political response to problems, rather than getting stuck-in and taking hard decisions to fix things, but I suspect this might be a good example.

[timendres]

A very good idea, if only because is will reign in the power of future politicians.

Your hatred of the current (and previous) politicians clouds your judgement.

So you think it is better to have a small group of insiders controlling billions of baht for the coming hundreds of years, or a rotating group of people who represent the actual owners of the companies (elected politicians who represent the Thai people as the Thai people are still the ultimate owners of these companies since it has all been set up with their tax money).

Edit: spelling error

"State owned enterprise" -- oxymoron

These are difficult animals to control. On the one hand, you have companies that provide services that the state wishes to have a hand in. On the other hand, governments rarely make wise business decisions. The US Postal Service is a perfect example. They actually made a profit for many years, but the government would raid their budget and leave them with a debt!

Centralizing the power to a board with experience has some benefits, but the board must be answerable to the people. If you let the government appoint the directors, then politics will creep in. If you do not, then the board no longer has to answer to the people.

Possibly the best compromise is a board that is 50% appointed by the companies overseen, and 50% appointed by the government - similar a bit to the US Federal Reserve's appointment process.

[DaiHard]

On the other hand they could privatise them whilst keeping a 'golden share', create an overseeing board of public servants to make sure they don't rip off the public and create a sovereign wealth fund for emergencies.

[tomacht8]

The larger the conglomerate, then it is more in- transparent.

The losses can be booked so quickly back and forth between the companies.

Then it will give a central procurement department for contracts to external companies?

Guess that will be the (unofficial) highest-paid position in the conglomerate.

[Thai at Heart]

The only hope to remove the corruption is to privatise them.....

[sammygood]

why not privatice everything ? it worked so well for the western countries (noooooooooooooooooooooooooooooooot)

better governement = less governement

if the people in place & paid would actually do their job, but everybody busy with "side" businesses & special interests

conflict of interest, not a word in a thai dico

[Thai at Heart]

why not privatice everything ? it worked so well for the western countries (noooooooooooooooooooooooooooooooot)

better governement = less governement

if the people in place & paid would actually do their job, but everybody busy with "side" businesses & special interests

conflict of interest, not a word in a thai dico

How does one get less government without eventually privatising it?

[JAG]

Sort of gold plated perpetually refilling trough with mink napkins!

Just imagine the patronage that will give to whoever runs the show!

Edited August 5, 2015 by JAG