Thailand: Catch-22: Communications Liberalisation And Democracy In Thailand

2001

Andrew Scarvell

Thaksin Shinawatra, Thai telecommunications tycoon, and leader of the Thai-Rak-Thai (TRT) Party (or Thai-Love-Thai Party), has become the leading force in the new Thai government. But Thaksin still has strong linkages with the communications empire he founded, and telecommunications deregulation (or reregulation) is one of the hottest policy topics in Thailand at the moment. So what will the TRT’s true agenda be during its term in government? Will it be driven by Thaksin’s strong business interests in telecommunications deregulation and the privatisation process?

While TRT has a near majority in parliament, it has formed a coalition with the Chart Thai, New Aspiration and Seri Tham parties to ensure that it has sufficient numbers to avoid the possibility of censure motions (which require the support of two fifths of parliament). The new Thai cabinet includes many old faces, such as former Prime Minister General Chavalit Yongchaiyudh (Minister for Defence), who steered Thailand into the 1997 economic crisis. It also includes other cabinet members with strong links to the communications and media industries. It does not paint a rosy picture for the future of Thai communications policy.

Perhaps Thailand will need to be renamed Thailand Communications Incorporated?

Recent History

Thailand has committed to full deregulation and privatisation of the telecommunications industry by 2006, and has been moving towards this goal with behemoth-slow speed over the past decade or so.

Unfortunately, deregulation and privatisation of telecommunications in Thailand has been characterised by quick-fix solutions, often involving the simple transference of power from government agencies to private concerns. This has not resulted in significant benefits to consumers, nor to the efficient development of communications infrastructure in Thailand. This situation is unlikely to change until the commercial linkages between the government, the army, and the communications industries are separated. Good telecommunications policy requires the attentions of a stable and socially responsible government, but the evolution of democracy in Thailand over the past 20-30 years has been a long and painful process, and has not lent itself well towards the development of robust communications policies. This has created a “Catch-22” situation, because effective communications are strongly linked with the building of education, wealth and democracy in developing countries.

The Chart Thai government of 1988-1991 was somewhat liberal, and recognised the importance of telecommunications infrastructure development. In furthering this, it took steps to reduce the military dominance over the government owned cash-cow monopolies of the Communications Authority of Thailand (CAT) and the Telephone Organisation of Thailand (TOT). It was during this period that Shinawatra’s Advanced Information Services (AIS) and United Communications (UCOM) lobbied for and received generous concessions from the government on licences for mobile networks.

Obviously, the military were not happy with such change to their arrangements, as it reduced their access to this income earning potential. This contributed to the military’s decision to stage the successful coup in 1991, removing the civilian government. Ironically, the “Black May” democracy protests that led to democratic government being reinstated in 1992 were highly successful because, even though government and military controlled radio and television broadcasters ignored or misrepresented the events of “Black May”, protesters were able to communicate the truth and organise themselves by using their mobile phones.

The Anand government of 1992-1994, which was installed subsequent to “Black May”, recognised the inevitability of market liberalisation. This realisation led to the development of the Telecommunications Master Plan, a strategy for liberalisation that was eventually approved, in principle, in 1997. This strategy would allow for a progressive liberalisation and privatisation of the communications industry in Thailand, with full competition due by 2006. Although legislation has been developed, and finally passed the Lower House in government in mid 2000, it is yet to be passed by the Senate and is awaiting the attentions of the new, TRT controlled, Senate.

The development of this key piece of legislation has been influenced by the fear that local companies would be over run by foreign competitors, a perception that was fanned by protests from private sector operators such as Shinawatra’s Shin Corp. Over the past decade these carriers have lobbied for – and often received - generous fixed line, mobile and satellite concessions. Their reasoning was based upon nationalistic and protectionist rhetoric rather than sound economic reasoning, arguing that if they did not have sufficient market strength then they would not survive the introduction of foreign competition.

All players in Thailand’s communications industry, including Thaksin and his associates, are very interested in the impending implementation of the Telecommunications Master Plan, as it promises to dramatically change the communications landscape in Thailand.

Communications Industry Liberalisation and Privatisation

The Telecommunications Master Plan’s implementation should be finalised soon, now that the TRT government has been formed. The passage of legislation through the Senate was postponed until the formation of the new government. Last year, electoral fraud problems and subsequent by-elections hampered the legislation’s passage through the Senate. This delayed the Senate from meeting for months, until it was necessary to wait until after this year’s general election.

Two new independent regulatory bodies, the National Telecommunications Commission (NTC) and the National Broadcasting Commission (NBC), will be set up under the Plan. The NTC will have the core authority for telecommunications policy and development planning, managing the liberalisation and privatisation process, as well as having the authority to issue licences. The NTC will have a seven-member committee, notionally independent, chosen from different industries and professions. The committee will be chosen by the Senate from a shortlist of nominees.

The imminent arrival of the NTC has not, however, prevented the TOT and CAT from consolidating their market share and strategic position prior to the introduction of foreign competition. Despite (or perhaps because of) the looming privatisation, both the TOT and CAT have committed to huge expansions in infrastructure spending, licensing of new carriers and partnerships with foreign companies. In mid-late 2000 TOT announced its 10 Billion Baht ($US241 million) fibre-optic backbone project, a joint venture with CAT to build a 1900 Mhz band cellular network, and a 200,000 telephone line rural expansion. These projects went ahead despite receiving much criticism from the National Economic and Social Development Board (NESDB). CAT has also sought to expand its cellular network, and is doing so through a partnership deal with Hong Kong company Hutchison Whampoa worth $US 338 million.

TRT’s clear dominance over the Thai government does have a potential silver lining – that perhaps it will bring some consistency in communications industry policy development. Thailand’s government instability, characterised by a political web of frequently shifting alliances, has resulted in a haphazard approach to telecommunications liberalisation in Thailand. The result is an odd collection of laws and regulations, with the industry neither wholly privatised nor government owned. Both the CAT and TOT issue communications licences for the same markets, which is both confusing and illogical. Indeed, the two agencies are usually competing with each other rather than cooperating.

Currently there is little incentive for private investment in the communications industry, except in partnership with the TOT or CAT, as private sector carriers still cannot truly own their own infrastructure. They must set-up their networks on a build-transfer-operate basis through either the TOT or the CAT, which then have the right to take over the infrastructure assets at the end of the concession period. Although it is understood that the network assets will be handed over to the carriers upon liberalisation of the telecommunications industry, this is little comfort especially when government stability is an issue and timeframes are prone to long extensions. In addition to this, the communications enterprise must then hand over a cut of 22% of revenue received during the concession period to the relevant government agency.

Internet service providers (ISPs) face a similar problem, in that they must operate under licence from the CAT (although TOT has been trying to undercut CAT’s monopoly recently). All ISPs must hand over 33% of their equity to CAT, and a further 2% to CAT employees, for nothing in return. Essentially, every ISP must earn an extra 35% on top of a normal business model in order to survive, as they must give 35% of their earnings to CAT. The only two ISPs exempt from this are Internet Thailand (joint venture of CAT, TOT and NECTEC) and CS Internet (a joint venture of CAT and Shinawatra Satellite). Thailand faces a huge problem with the efficiency of its Internet industry, with consumers facing costs of around 3-4 times the regional average. This has severe implications regarding the growth of Internet penetration (currently at around only 2% of the population), the enabling of democracy by way of freedom of information and the country’s general economic growth.

Democracy Thai-style

The shadow over TRT and the stability of the future government is that Thaksin Shinawatra, leader of TRT party and the Prime Minister elect, faces charges of corruption from the National Counter Corruption Commission (NCCC). The NCCC indicted Shinawatra on a number of issues, the main one being that he failed to properly report on his assets when he was the Deputy Prime Minister in 1997. Mr Thaksin is accused of concealing his assets, immediately before becoming Deputy Prime Minister, by transferring his shares into the names of his household staff and 22 year old son. The case must now be judged by the Constitutional Court. If the Constitutional Court also finds him guilty of concealing his assets, he would be banned from political office for 5 years.

But then, corruption is nothing new to Thai politics and all major parties have had major accusations levelled at them recently, including fraud charges against senior members of Chuan Leekpai’s Democrat Party and apparent kickbacks to Chart Pattana on a large subway contract. Money politics is a fact of life, and it could be argued that politicians not engaging in the activity would not last long in the game. Vote buying is certainly not new, and there is direct evidence that TRT and other parties’ officials in rural provinces have been buying local votes – often with little more than 100 Baht (about $4 Australian) and a T-shirt as incentives. Despite the Electoral Commission finding such evidence, and holding a revote in 62 seats on 29 January 2001, no substantial action has been taken against the parties themselves.

Thailand is facing a major problem in that democracy is still evolving in the country. That a culture of corruption is accepted by ordinary people is evidenced by Thaksin’s TRT landslide win against “Mr Clean”, Chuan Leekpai, in the face of widespread evidence of TRT vote buying and the charges currently against Mr Thaksin.

The future economic development of Thailand will depend heavily on government stability, and upon Thaksin himself. If the constitutional court upholds the NCCC corruption findings against Thaksin then the popular leader of the TRT will be unable to take office, leaving a vacuum that is not easily filled by ready candidates. There are even fears of a conservative backlash, which could open the possibility of military intervention.

So the Constitutional Court faces a real dilemma – if it upholds the NCCC ruling, fighters of corruption will be satisfied but the stability of the country will be jeopardised. If it overturns the ruling, then it will strongly underline that Thailand has turned a blind eye to corruption reform and will not bode well for reform in key areas such as communications and electoral corruption.

Forward or Backward?

Thaksin is a mixed bag of pros and cons for Thailand. He is a highly successful businessman, and it is expected that he can bring that acumen to good use for the country. But he also has substantial business interests, however disguised, particularly in communications and media. Shin Corp, which was founded and effectively owned by Thaksin Shinawatra, is probably the biggest player in the Thai telecommunications industry, at least after the monopoly advantages of the CAT and TOT.

Telecommunications deregulation and liberalisation, which is due for completion by 2006, would include the privatisation of the CAT and TOT. The process is currently at a vital turning point, and Thaksin will surely seek to gain advantage to his own business interest through his influence over the process. The final decision on board members for the new and notionally independent National Telecommunications Commission and National Broadcasting Commission, the agencies which are to have the primary role in the deregulation, privatisation and liberalisation processes, will probably be influenced heavily by the TRT.

In fact, Shin Corp will stand to benefit even if the current status of industry regulation is merely maintained. It is currently the dominant operator in both the fixed line and mobile markets, and Shinawatra Satellite is the only operator in the Satellite market. Shin Corp also owns about 40% of iTV, Thailand’s only “independent” television station (Bangkok Entertainment Ltd has a clear controlling interest in Channel 3, the only other private station), and there are indications that the station’s independence has been seriously compromised. Shin Corp also has significant business interests in Myanmar, Laos and Cambodia. So, liberalisation can only realistically be expected to proceed so long as these business interests are looked after.

Other members of the new Thaksin’s government also have a stake in the communications industry liberalisation process, and call into doubt whether the government will really have the country’s interests first and foremost. Thaksin has appointed several politicians with strong links to the communications industry into his cabinet, including Mr Pracha Maleenond, Chairman of Channel 3 to the post of Deputy Minister for Communications. Mr Maleenond’s family also has a controlling interest in Bangkok Entertainment Ltd, which operates Channel 3, and the family has been recently accused of interfering with political news stories. Another concerning appointment is that of Mr Adisai Potharamik as Minister for Commerce, as his family has business interests in international telecommunications.

Effective and transparent communications systems are a key enabler, not only of education and economic growth but also of good democratic process. The “Catch-22” is that it is difficult to achieve one without the other. Thaksin’s influence over communications liberalisation should be watched closely, as his motivations are likely to diverge from merely the economic and democratic development of Thailand. But who will be left to watch him, and how can they tell anybody? Of the country’s six national television stations, two are controlled by government agencies, two are controlled by the army, and the remaining two privately owned stations (Channel 3 and iTV) are substantially compromised by their links to senior government politicians with related portfolio interests. Shin Corp’s control over satellite transmissions also

Thais seem to accept that corruption and politics go hand in hand, that all politicians are corrupt, and have voted for TRT and Thaksin Shinawatra in droves d

WATCHPOINT: Democratic development in Thailand usually takes one step backward for every two steps forward – will history note the 2001 election as a huge step backwards?

 

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