Experts suggest loosening state control could save state enterprises

Experts have urged structural reforms to counter the lack of efficiency of Thai state enterprises, suggesting that a centralised ownership agency of state enterprises with less state control could be a solution.  

On Tuesday, 30 June 2015, the Faculty of Economics of Thammasat University organized a public forum on “State-owned Enterprise Reform: Methods and Challenges” at Thammasat’s Tha Prachan Campus.

The speakers at the forum were Banyong Pongpanich, the CEO of Kiatnakin Bank plc, Veerathai Santipraphop, an advisor to the Thailand Development Research Institute (TDRI), and Sakhon Waranyuwattana and Viroj Ali, lecturers at the Economics and Political Science Faculties of Thammasat University.

At the event, Banyong pointed that many state enterprises are huge in size and take a large share of resources from economic system, but still run with deficits.

State enterprises are incapable of competing. Only those with a monopoly in certain sectors make a profit while the others are less productive than private companies. Moreover, state enterprises do not focus on efficiency and transparency because there are many stakeholders from the political side, said the CEO from of Kiatnakin Bank.

Banyong urged Thailand to institute structural reform, so that state enterprises can efficiently sustain themselves and provide better public services.

Banyong noted that state enterprises are for providing public goods. Therefore, people’s representatives and politicians must be involved in their management, but there must also be rules and structures to prevent them from doing whatever they want.

Speakers at the public forum “State-owned Enterprise Reform: Methods and Challenges” at Thammasat’s Tha Prachan Campus on 30 June 2015. From left to right Veerathai Santipraphop, Banyong Pongpanich, Sakhon Waranyuwattana and Viroj Ali  

Veerathai added that complexity and disorder occur in state enterprises when policy makers, politicians, and bureaucrats are also in the position of regulating of the enterprises.

TDRI said that the state enterprises’ direction must be centralized. This means that state enterprises should work under a specific regulatory agency called the ‘ownership agency’. Government and ministries should only direct policies and check outcomes while the enterprises themselves would participate only in the market sector.

Veerathai proposed two owner agencies; the ‘National State Enterprise Corporation’ which will regulate the public or limited state enterprises and the ‘State Enterprise Policy Office’, which will take care of the enterprises that have a specific legal establishment and specialized financial institutions.

The owner organizations must consist of both specialists which the enterprises require and politicians. The organizations also have to be free from politics for effective regulation while still being under government supervision.

Veerathai concluded that transparency, efficiency, and public service are the core values that need to be considered. With more efficiency, better services to the public and economic sector are possible.

Moreover, policies also must be clear and viable. Clear policies will lead to correct calculation of costs and proper means, said the TDRI expert.

Sakhon, a Thammasat University economist, agreed that state enterprises need reforms. They are still needed, but they must be able to overcome competition in the market.

The economist from Thammasat said that he supported the proposal of creating a National State Enterprise Corporation as Veerathai mentioned. He added that reform can bring more income for the enterprises and will pave the way towards more investments, thus reducing the government’s budget burden.

However, he wondered who will take responsibility for the deficits of state enterprises if they are going to be less dependent on the government. He asked who, if enterprises make losses because of government policy, would compensate them for the losses.

Viroj said that state enterprises ‘suck’ and need a lot of improvement.

He said that Thailand’s main problem when it tries to reform something is its ideological confusion. It is not clear whether the nation should focus more on the economy or public service.

The political scientist added that he doubts if structural reform can be effective in reality.

He questioned if it can be structurally effective regardless of who is the leader. He also suggested that there be better ways to select qualified board members.

Viroj said that it seems easier to carry out this reform under the current military government because Gen Prayut Chan-o-cha, the junta leader and prime minister, is on the verge of a crisis since the country is now under pressure because of inefficient economic management. Therefore, this may be the way out of the tunnel.

Veerathai said after the forum that the draft reform will be presented to the board of the State Enterprise Policy Office (SEPO), the responsible department, in August and will be sent to the cabinet in September after SEPO has approved the draft.

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