Compttitiveness: A “Mixed Grill” of structural problems in Thailand’s international trade laws

by Pooky, Thai Intel’s economic journalist

If I remembered correctly, in the final year of the Taksin administration, before the 2006 coup, Taksin set up a high level panel to “Modernize Thailand’s Law” appointing, Ransak Vinyarat, the person behind Thailand’s drive into SMEs, Knowledge Based Economy and Creative Economy-and chairman of Taksin‘s personal adviser group-to head that high level panel.

Sadly to say, Pansak reported that Thai Law was greatly out-dated and the panel’s would take at lest 2-3 years to complete that study to over-hall Thailand‘s legal system. And thus, Pansak made a great deal of progress as he reported to the Thai press, but the Coup of 2006-and what happened afterwards-saw all interest in the “Modernization of the Thai Legal and law system” halted-as no subsequent governments picked up on where Taksin left off.

Pansak himself, was subsequently, became the subject of a “Witch Hunt” relating to his idea about the “Thailand Design Center” where he was accused of a great many corruption and the coup government going after him with accusations after accusations. Finally, the Thai anti-corruption agency-found no corruption.

Pansak told Thai Intel personally, that he had to spend most of his time fighting the corruption charges and thus he subsequently, had no time to modernize the Thai legal system-even that the election after the coup saw Taksin’s political party back in power.

The following are “Some Examples” of how the Thai legal system, is grossly out-dated. The problem is that this grossly out-dated Thai legal system-is going to have to hold the weight of the global trend towards Free Trade Agreements-on its back.

The bottom-line is that both the World Economic Forum and World Bank have found Thailand’s competitiveness to have tanked-and the Thai corruption is rated the worse in its history currently.

Globally Renowned Chatuchak Quagmire

Business Jurisdiction Law?

Chatuchak week-end market sits on land that is owned by the Thai Railroad unit, but is rented to the Bangkok Administration to re-rented out to the retailers. That rental is based on a government resolution made some 30 years ago and now the railroad unit wants to take over Chatuchak market and do the rental business directly, cutting out the middle man being the city of Bangkok. The current administration is in a quagmire of what to do-with the city of Bangkok saying the government resolution some 30 years ago still sticks. Matichon head-line the article “Thai PM orders to clear Chatuchak mess.”

Banned from Politics Nevin, Highly Active in Politics

International Business & Corruption Law?

Nevin is a Thai politician and businessman, with global ambitions and connection, that by law is banned from politics. The military pressured Nevin with an offer to lift all the corruption investigation into Nevin’s family of those corruption, inside a military camp, if he would take his fraction and help make the current government possible. Nevin, after winning a recent by-election, have put up huge “Bill-Board” with his picture where his fraction had won the that by-election, in promoting himself and one of his very successful business, which is a soccer team. That soccer team is in his wife’s name and is promoted throughout Thailand-with extremely strong linked to Nevin. Many Thai legal expert are saying that Nevin has broken the law in banning him from politics and banning politicians from mixing business with politics. Thai Newspapers headline the billboard of Nevin as “Nevin Consolidates By-Election Wining.” Nevin, while his status as a politician is un-clear in legal terms, is trying to build a local empire-with and interest of going global-having see a key supporter of his-grabbing a UK Premier League team.

Medicine, EU Free Trade  and the “Information Blockade”

Transparency Laws?

Thailand is negotiating with the EU on a Free Trade Area and one of the industry that will be hit is the medical supply industry-where medicine patent laws are highly complicated. So Matichon reported, quoted an NGO, that the current negotiation between Thailand and the EU is like some sort of top-secret, with most of the Thai NGO working in the health area “With No Information” on the negotiation. What information had come out-looks bad for the Thai public-with the NGOs predicting doubling or tripling medicine prices.

Thai SMEs Complain of Out-Dated Thai Laws

Uncompetitive Business Laws?

Thai SMEs have been complaining about the out-dated Thai laws that is hurting their business-ahead of the opening up of Thailand to the ASEAN Free Trade Area agreement. Most Thai SMEs are saying that the legal structure in the entire ASEAN region is under-going changes to ready their markets for free competition, however, Thailand have made little progress in the area. Thai Rath head-line the article with “Private Sector Rattled.”

Democrat Party and ITC Ministry Helps True Move

Net-work Above the Law?

A Thai State Telecom firm, have reversed its early attempt to take back Hutch that has a limited 3G network back to itself, and with government support is now planning to sell that Hutch business to True Move. Apart from that, a fraction of frequency belonging to that Thai state telecom firm is being catered out to True Move to up-grade its previous allotment of frequency into a 3G system. True Move belongs to the CP Conglomerate that exclusively makes political donation to the Democrat Party. Matichon headlines its analysis that “Democrat Party, ICT and that state telecom firm, help set up True Move take-over of Hutch.”

Public Attorney at State Enterprise in Conflict of Interest

Public Interest Laws?

Thai state enterprise and quisi-state enterprise plays a significant role in the Thai economy-that impacts multi-nationals in Thailand on many levels. An example is the Thai Mail, which is now involved in SME lending. The Thai anti-corruption agency proposed to the government that both civil servants and public attorneys refrain from sitting on state enterprise because state enterprise are there for public interest and not the interest of the state enterprise themselves. However, the law has loop-hold that have allowed public attorneys and high-ranking civil servants to sit on state enterprises. Several Thai press says “Benefits vs Independence of Attorneys.”

Thailand’s World Expo Gets Internal Competition

Fair Competition Law?

Thailand is competing to stage the 2020 World Expo with several Thai proving competing. Several Thai newspaper said the problem is that the competition is mainly between Phuket in Southern Thailand, Chiang Mai that is aligned with the opposition party and a few other province of other political parties. Some Thai newspaper are speculating that Phuket would likely be getting a major push by the government since the Shianghai Expo generated an income of nearly US$6 billion and the Democrat Party would likely push for Phuket to benefit. No Thai legal expert have made a comment on this situation.

Thai  BOI Promotion Hurting Thai Firms

Discrimination Laws?

Thailand is in the grips of Nationalism, where foreigners are shunned-across the board-except when they bring in loads of money to invest. The BOI helps promote investments in Thailand, however, Thai Rath noted that for the past 6 years about 7,000 firms received the benefit, mostly being foreign Thai joint venture, when overall in Thailand there are massive numbers of businesses, particularly Thai SMEs that have no access to the BOI promotions. Thai Rath headed up the head-line with “Time for BOI is Over.”

AIS says “Double Standard” as D-Tac and True Move Escaped Prosecution

Politicized Legal System?

AIS president said through Matichon that it is unfair that the government is going after AIS for public losses relating to the transformation of its contract with the state-as D-Tac and True Move, who also did a similar contract transformation is not under a similar legal quagmire. AIS is still seen as being related to Taksin, even when it was sold to Temasek ,the Singaporean sovereign fund. AIS said  it will seek legal remedies for all its difficulties. Matichon says, “AIS Pissed at Being Singled Out.”

Massive Corruption Net-work in Government Agriculture Income Guarantee

Implimentation of Laws?

Thailand continues to be the World’s largest rice exported and one of about 10 countries world-wide that is a net exporter of agricultural products. However, the Thai agricultural sector have been struggling against the likes of Vietnam for example. The Thai government has guaranteed the income of rice growers with all they have to do is prove they are rice farmers with the amount of land dedicated to growing rice. That leaves a great big loop-hole for corruption and a newspaper quoted a Ministry of Interior official as saying the corruption is a major racket in Thailand. “We do not know what to do with the rice farmers involved because it involves rackets with connection to politicians,” said the official.

Samui Land Scam Involves Key Government Minister

Procedural Effectiveness of Laws?

Samui is an island that is very popular with foreign tourist, but land on the island are being encroached to set up tourist related businesses. The Thai anti-corruption agency has ruled that there is a land scam in Samui-where the Philippines is trying to convert many of its island into a Samui-like environment. A few of Thailand’s land Department officials helped a land owner encroached on land in Samui island. That land ended up in the hands of the son of Suthep, the Democrat Party MP in-charged of security for the Abhisit government. The corruption trail have found fault with those Land Department officials. Several legal expert said the corruption trail would probably end at the Land Department officials because of politics. “The fault would likely stop there and the Thai Attorney General would likely not take the case to the level ha it involves the son of Suthep,” said one newspaper.

Land for Condo Development Sees Stock Market Firms Get Advantage

Competitive Laws?

A significant number of buyers of Thai property are foreigners-who falls in love with Thailand. Many condo in Thailand, for example, are targeted exclusively to foreigners and also foreigners have bough many Thai condo as properties for investment in a mini-rental business. Thai Rath reported that most of the condo development is now in the hands of the Stock Market listed firms (about 50,000 units from a total of 80,000 units). The situation is made worse by the Central Bank-where it is fears that the central bank would pass more regulations to trim the real estate business from over-heating. According to Thai Rath, that had pushed SME property developers to smaller plot of land that is not very attractive, leaving the prime area to big operators-who has better bank backing.

Thailand Eyes Up-Market Tourist But Hurt by Poor Environment

Environmental Law?

According to Prachachart Turakij, Thailand is eyeing the up-market in tourism-with special promotional packages from the Thai tourism promotion units doing up-market trade shows in Europe. However, several in the tourism business said that the European travellers are highly sensitive and favorable towards “Econ Friendly Hotels.” Only a handful of Thai hotels are eco-friendly and the government needs to promote this immediately by giving tax incentives to eco-friendly operators or slap penalties on those that does not.

Japanese Food in Thailand Trashed

Protectionism Laws?

The Thai government is concerned about the Thai Japan FTA on the aspect that more and more Japanese restaurants are heading into Thailand-where Japanese food is very popular here. Tharn Setakij, quoted a Thai government official saying that Thai restaurant is being hurt significantly by the Japanese restaurants. It is unclear, but the newspaper says that the government is planning to propose laws and regulations to control the restaurant business-such as anyone wanting to open restaurants in Thailand must under-go training and get a license. At the same time the government plans to promote Thai food. There are about 3,000 Japanese restaurant in Thailand accounting for about 10% of the business.

CP Targets 60% of Investment Globally

Social Responsibility Laws?

The CP group that is close to the Thai government is targeting to invest about 60% of its 2011 investment outside of Thailand. CP is a major investor in the Thai agricultural business, exporting close to US$1 billion in agricultural products last year. The Thai government is promoting for Thai business to invest abroad as the Thai currency, Baht, has hardened and Thailand is a small market. Business Thai said the CP move bodes ill for Thailand since Thailand needs strong investment in its agricultural sector to increase yield and productivity-but leading conglomerates are taking advance Thai technology to invest abroad.

Rich Thais Investing in London Properties

Favoritism of Laws?

Rich Thais are being encouraged to invest in London properties as the recession there has seen price fall by 50%, but local developers says the move comes with a price to Bangkok property prices. Matichon reported that several wealthy Thai are fast buying up property in London, that includes the Thai liquor tycoon, Charoen-who had been hot on property development in Bangkok. The Thai Central Bank has made several regulations that makes transferring larger amounts of money out of Thailand by Thais easy. Many have taken advantage of the regulations. Charoen, for example, after being highly active in Bangkok, have been quiet since the regulations were passed.

A US$20 Billion Investment On Top of a 30% Corruption Cut

Corruption Laws?

Thailand’s construction business is extremely happy, according to Tharn Sethakij, with the government pumping about US$20 billion into Thailand’s infrastructure development in the next 1-5 years. That would be a happy news also for global level construction firms that are extremely active in Thailand. But the problem is that the Thai Chambers of Commerce found, in surveying a large number of Thai business people, that on average, Thai public officials would ask for a 30% corruption of projects in Thailand. The Thai government responded by saying “show us the receipt of the corruption, and we will do something about it.” Late last year, there was a global level anti-corruption meeting in Thailand, where the same government that is now asking for receipt, said it was setting up a population based corruption watch-to help stem the corruption in Thailand. The meeting hailed that speech by the Thai prime minister as a great idea.

Tutoring School to Feed MNEs with Top Entry Employees

Education Laws?

Foreign MNEs in Thailand have a reputation of hiring the crem of the crem of Thai graduates and leaving Thai firms with the rest. But how do those top graduates get to be top graduates? In Thailand, it is the business of Tutoring School-a business that is booming-even with global level tutoring school coming to Thailand. Well, the profit is huge and for a few years now, the Thai government have been looking at the profit of these Tutoring Schools-because under Thai regulations they are non-taxable-since they serve the education industry. So there have been proposal to tax them. The discussions has been going back and forth, as the government says, teachers in good school makes the best tutors and so these best teachers/tutors have been leaving school to tech at tutoring school. So to fix the problem, the government has decided to give a bonus to the best teachers around Thailand-some 120,000-with a 10,000 baht bonus. Several press are having a field day with the whole thing,-with Thai Rath-saying it is stupid to give bonus-but the money should g to teachers that improves their own quality-with further education or  research. Most agree that the 1,200 billion baht pay-out is nothing but a one time election related event-that will do little to keep good teachers teaching and does not help improve teachers quality.