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Thailand has been abuzz regarding the Shin-Temasek deal on 24 January 2006 in which Temasek Holdings - a company owned by the Singapore government - purchased 49.59 per cent of shares in the Shin Corp, which is owned by the Shinawatra-Damapong clan, for a phenomenal sum of US$1.87 billion. The plot has recently thickened because, though the firm now belongs to Singapore, the government of Thaksin Shinawatra is doing all it can to protect Shin Corp's interests - most noticeably those of iTV.
The Shin Corp deal is still plagued by the technicality whereby Thai law stipulates that foreigners are prohibited from holding more than 49 per cent of shares in a Thai telecommunications company, unless they are able to obtain a Board of Investment (BOI) promotion or obtain an Alien Business Licence or are a manufacturing company. Furthermore, the Central Administrative Court has ruled on 9 May 2006 that iTV must pay a penalty to the state totalling as much as US$1.99 billion. This marks the first legal case that Shin Corp has had to face after its business was taken over by Temasek.
Thaksin Shinawatra's caretaker government has made every endeavour to protect iTV's interests. On 4 July, it appointed Rongpol Charoenpan, deputy permanent secretary of the Prime Minister's Office, as Cabinet Secretary. He replaced Bovornsak Uvanno who had resigned from his position and was ordained as a monk. It also appointed Pol. Maj. Gen. Peeraphan Prempooti, who is an advisor to the Prime Minister, to replace Rongpol as permanent secretary of the Prime Minister's Office. At the same time, Newin Chidchob, Caretaker Minister in the Prime Minister's Office, was delegated the responsibility of overseeing the Mass Communications Organization of Thailand.
All three persons are directly involved in the problem of iTV's US$1.99 billion penalty and there is a tendency to side with the private sector on this issue. Rongpol Charoenpan has previously expressed his desire to see iTV comply with the decision of the Central Administrative Court while at the same time the Office of the Permanent Secretary of the Prime Minister's Office has stated that if iTV failed to make a full payment within 45 days it would have the full authority to cancel the TV station's contract as stipulated by the law.
The fact of the matter is that now Rongpol has been transferred, and Peeraphan and Newin are devoting all their energies to scrutinizing the contract so as to perhaps find a loophole in the law - such as an error on the part of the staff of the Office of the Permanent Secretary of the Prime Minister's Office that would allow iTV to pay a penalty at a vastly reduced rate of only 230 million baht. This outcome is highly possible since Thaksin has been shrewd enough to make use of two of his most loyal aides to undertake the task. Peeraphan himself was a Thaksin classmate at the police academy and once held the position of Secretary General of the Anti-Money Laundering Office. He previously earned favourable points for his role in the seizure of the assets of several of the Thai Rak Thai Party's political opponents. Newin, on the other hand, is Thaksin's right-hand man. It is he who adeptly created the network of staunch Thaksin supporters amongst taxi driver and motor cyclists, while assembling the 'caravan of the poor' all the way from the provinces into Bangkok; and, finally organizing astrological rites as a way to improve the Prime Minister's ill fortune during the time he was besieged by protestors both within Bangkok and in the provinces.
From the time Thaksin belonged to the Palang Dharma Party and entered politics in the early 1990s, Newin has enjoyed a close personal relationship and has been a close political ally. Thaksin has frequently been a guest at Newin's Buriram residence on his trips to the province including on a recent visit that attracted strong criticism from the People's Alliance for Democracy. One could surmise that there are two reasons why Thaksin has entrusted the iTV case into the hands of 'trusted people' like Peeraphan and Newin despite the fact that it now, in effect, belongs to the Singapore government. The first might be a result of the 19 June 2006 Forbes article, 'Tribulations of Two Emerging Democracies' in which Singapore's senior statesman compared the political crises faced by Thailand to those of Iraq with claims that Thaksin amended Thai law in order to legalize his family's sale of its 49 per cent stake in the telecom technology company Shin Corp to Singapore's Temasek Holdings. Since then, only Deputy Minister of Commerce, Preecha Laohapongchana, has made a rebuttal saying that Thailand is well aware of how it should deal with its current economic and political crises. Thaksin, on the other hand, has kept mum and has chosen instead to appoint 'trusted people' to deal with iTV's problems.
Secondly, the problem required a strong and highly trustworthy hand because it was deemed that the crisis could escalate and ultimately prove to be detrimental to the Thaksin administration since it is highly likely that Temasek, iTV's new owner, had a guarantee clause in its Shin Corp. buy-out to cover a situation in which one or more of the Shin subsidiaries face financial or legal claims.
One must not forget that Shin Corp is the root cause of Thaksin's current political crisis, which started in January 2006. Not only has he not been able to extricate himself from it, it may also prove to be the stumbling block that could signal the final downfall of Thaksin and his Thai Rak Thai Party.
WATCHPOINT: All we can do is to wait and see whether if eventually iTV pays a smaller sum than what was deemed by the Central Administration Court. Ordinary Thais would find this unacceptable as the public purse would lose a huge amount of money.
About our company:
AFG Venture Group is an Asia and Australia based corporate advisory and consulting firm with over 20 years experience in creating alliances, relationships and transactions in Australia, South East Asia and India; including a 15 year history of corporate and equities advisory in Australia, undertaking merger, acquisition, divestment, fund raising and consulting for private and public companies.
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