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Thailand: Prime Minister Mixes Business and Politics

by Shawn W. CrispinFar Eastern Economic Review
December 11th, 2003

Bangkok - Thai Prime Minister Thaksin Shinawatra vowed to bring "CEO-style management" to government upon winning office in early 2001. Now, almost three years into the tycoon-turned-politician's term, the line between big business and government has, indeed, blurred. But not necessarily by instilling a sense of corporate efficiency to the business of government, as candidate Thaksin promised.

Thaksin has pursued expansionary economic policies and easy credit to revive Thai businesses, pump up the stockmarket and set a new property boom in motion. The resulting surge in growth has put Thailand back on foreign investors' radar screens, helping drive the Stock Exchange of Thailand up as much as 85% since January.

That economic success has earned Thaksin unprecedented political popularity, and most political analysts believe that he and his Thai Rak Thai party will score another huge victory during upcoming general elections, which must be called by January 2005. But the way in which Thaksin appears to be using that strong mandate is worrying to some. They believe that the closer ties he has encouraged between big business and politics often create the appearance of conflicts of interest.

At the same time, Thaksin has vigorously suppressed criticism of his government, pressuring opposition politicians and democracy groups with the threat of libel suits, and manoeuvring to win favourable press with the offer of advertising from state enterprises and politically connected private companies.

Such moves are prompting critical comparisons between Thaksin's administration and one-party-dominant governments in Malaysia and Singapore. Former prime ministers Mahathir Mohammad of Malaysia and Lee Kuan Yew of Singapore used democratic mandates to tame the press, quash political opposition and direct economic development.

"The stronger [Thaksin] gets, the more he sees the interests of the Thai people as one and the same with the interests of his friends' and family's growing business empires," says Sirichoke Sopha, a member of parliament for the opposition Democrat Party.

Thaksin's cabinet includes several former leaders of big businesses. While the Thai constitution required them to personally divest all holdings when they entered government, their families have retained interests in everything from entertainment and media to finance and telecoms. For example, while Education Minister Adisai Bodharamik, founder of telecoms firm Jasmine International, no longer has a personal stake in the company, his family still owns a majority stake. Deputy Interior Minister Pracha Maleenont's family owns BEC World, Thailand's biggest multimedia company.

Thaksin and his supporters argue that business-minded politicians can better manage the economy than the career politicians in the previous Democrat Party-led government. They have recent performance on their side. Thailand is on track to grow 6.4% this year and Thaksin predicts the economy will grow 8% next year and 10% in 2005.

"With a high tide, all boats rise," says Suranand Vejjajiva, spokesman for Thai Rak Thai. "Our government has opened opportunities for many people, like [small and medium-sized enterprises] and farmers." He notes that it isn't just big business that benefits from the strong economy.

Still, some opposition politicians and democracy groups are crying foul about what they perceive to be increasing conflicts inherent in cosy ties between public and private interests.

They point to the recent move by Thaksin's family, which mainly consists of ownership by his wife and son, into the residential-property market, a sector which Thaksin's government has supported with an array of incentives for developers and buyers. As a result, new housing purchases are expected to grow 30% this year, an upbeat trend that the family hopes will benefit its SC Asset Co.

The family-controlled Shin Corp.'s recent joint venture with AirAsia to establish Thailand's first budget airline is cited as another potential conflict of interest. Earlier this year, Thaksin unveiled plans to transform the northern city of Chiang Mai, in his home province, into a regional aviation hub. AirAsia intends to use Chiang Mai as a base for flights into China.

Meanwhile, Shin Satellite, another company in which Thaksin's family holds a majority stake, recently won an eight-year tax holiday worth 16 billion baht ($401.5 million) for its soon-to-be-launched IPSTAR broadband satellite system from Thailand's Board of Investment. The tax break raised eyebrows because it represented the first time the state agency, historically charged with attracting foreign investment, had offered such incentives to a Thai-owned company.

"We are concerned about growing indications of policy corruption among senior politicians and the companies that their families own and manage," says Akapol Sorasuchart, a member of parliament and former spokesman for the Democrat Party.

Thaksin denies allegations of conflicts of interest, according to a spokesman for the Thai Rak Thai party. Surathian Chakthranont, president of the family's property company, also dismisses the criticism, saying Thaksin plays "no role" in the company. And Shin Corp. Chairman Boonklee Plangsiri says Thaksin had "no role whatsoever" in Shin's recent move into the budget-airline business.

Thailand's 1997 constitution included provisions to prevent conflicts of interest between elected officials and big business, including an unprecedented bar on politicians holding shares in companies. Such provisions were seen as necessary to avoid a repeat of the corruption in previous governments that greatly contributed to Thailand's 1997 financial collapse.

Indeed, on taking office, Thaksin and other former businessmen in his camp divested shares in the companies they owned. But loopholes remain, including the fact that the Thai constitution doesn't bar family members of politicians from owning shares in companies that do business with the government. Critics note that the spouses of several serving ministers have reported big increases in their wealth in recent disclosure notices.

For example, Justice Minister Pongthep Thepkanchana, formerly Thaksin's personal lawyer, has seen his family's wealth increase 21% in the past year to 2.84 billion baht. Thaksin's own family enjoyed a 2-billion-baht windfall upon listing a 20% stake in its property company last month.

Thailand's historically vocal print media has been notably restrained in reporting allegations of government corruption or conflicts of interest. One reason, some media executives contend, is that Thaksin's family's companies have withheld advertising from publications perceived to be critical of the government. Similarly, some of Thailand's biggest state-owned enterprises--often key advertisers--seem to steer clear of publications critical of Thaksin.

For a while that put the financial squeeze on the local print media, many of which still carry big debts left over from the 1997 financial crisis and rely heavily on large Thai advertisers.

Family members of Industry Minister Suriya Jungrungreangkit, a trusted Thaksin lieutenant and secretary-general of the Thai Rak Thai party, recently bought about 20% of Nation Multimedia's shares, making the Jungrungreangkit family the largest shareholder of what has been a fiercely independent media firm. Dow Jones, parent of the REVIEW, owns 7.54% of Nation Multimedia.

Press Freedom

Editors at The Nation newspaper say that their editorial freedom will not be curbed by the purchase. But independent media watchdogs are concerned. "Politicians are trying to monopolize and control the press," says Supinya Klangnarong, secretary-general of the Campaign for Popular Media Reform, a Bangkok-based advocacy group.

Supinya contends, for example, that since Shin Corp. bought a majority stake in iTV, formerly Thailand's only independent television station, the network now broadcasts only pro-Thaksin programmes. It is a criticism many other political and media analysts have noted. ITV's ratings, particularly for its news programmes, have declined precipitously since Shin Corp. purchased the station.

Fears of lawsuits may also have contributed to quieting dissent. Shin Satellite, for example, has filed criminal and civil charges against opposition politician Sirichoke Sopha for allegations he made in parliament that the company evaded taxes on capital equipment it imported. The case is still being tried.

Shin Corp., meanwhile, recently sued activist Supinya for comments she made about a possible conflict of interest involving proposed telecoms-industry rules that would give private mobile-phone operators, including Shin's Advanced Info Services, billions of baht worth of tax relief.

Thaksin himself recently filed criminal charges against opposition politician Jutti Krailert for making conflict-of-interest allegations in parliament. A senior Democrat Party member says Thaksin has filed a string of libel suits against opposition parliamentarians, and that many of the party's star legislators now spend more time defending themselves in court than scrutinizing policies in parliament.

The government's moves to squelch criticism and seemingly inhibit the free flow of information are worrying to some foreign investors. That's particularly significant as the government plays a bigger role in deciding how financial resources are distributed throughout the Thai economy.

"The government keeps saying everything is coming up roses," says a Bangkok-based executive with a multinational company, requesting anonymity. "But its getting harder to know what's really happening out there."





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