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THAILAND Reform on The Rocks Resistance to the dissolution of one of the country`s most lucrative monopolies, whisky distilling, is symptomatic of the entrenched power of vested interests both in business and the bureaucracy -------------------------------------------------------------------------------- By Shawn W. Crispin/BANGKOK FEER - Issue cover-dated March 15, 2001 -------------------------------------------------------------------------------- CHAROEN SIRIVADHANABHAKDI is not Thailand`s most celebrated monopolist because he gives Thai consumers a good deal. Rather, until recently, it`s because Charoen`s Sura Maharas company held the only government-granted concession to produce downmarket white whisky, the spirit of choice for most provincial Thai revellers. And though Charoen definitely delivers what the people demand--Thais guzzled over 55 billion baht ($1.3 billion) worth of his product last year--the whisky baron`s brand of business conduct is not necessarily what`s best for the country`s future economic health. Charoen`s 15-year monopoly over white-whisky production is a product of Thailand`s past development model, where politicians hand-picked concessionaires who dutifully lined their pockets for the privilege. But when Thailand`s economic crisis hit in 1997, the many market distortions and skewed investment incentives that grew from such patronage politics came to light. Still in the reform spirit, in 1999 new competition laws were passed in an attempt to level Thailand`s tilted playing fields. It was hoped that freer competition would make Thailand`s markets more efficient and spread business opportunities more liberally across the less-politically-connected small and medium-sized enterprises while giving Thai consumers a better deal. Nice in theory, difficult in practice. Charoen has launched a campaign of resistance to liberalizing the local whisky market. Because of high new barriers to entry imposed by the bureaucracy and Charoen`s flooding the market with his whisky, nobody has dared challenge the whisky baron`s dominance. His resistance is the most glaring example yet of a broader backlash against proposed liberalization measures for many of Thailand`s still-captive domestic markets. Judging by the vested business interests lined up behind the new government, that process will likely slow further. Hopes that the economic crisis would lead to greater economic democracy are fading. "The macro-view is that Thailand is moving backwards," says Bob Broadfoot, managing director of the Economic and Political Risk Consultancy in Hong Kong. "Since the crisis, Thailand had only a brief experiment with opening its markets--it announced a lot of opening measures but really only implemented a few." That`s because money and political power still trump the law. Of the few Sino-Thai tycoons still financially sound, Charoen probably still has the most of both. Charoen is plowing his monopoly profits into an empire of properties and industrial holdings of pre-crisis proportions. He has expanded his Imperial Group of hotels, most recently opening the posh Athenee Hotel in central Bangkok in addition to his recent purchase of the five-star Plaza Hotel in New York. His acquisition of the financially troubled Pantip Plaza, Thailand`s leading computer retail and software centre, has given Charoen a low-risk foothold into Thailand`s new economy. Hedging his liquor business, Charoen has expanded aggressively into beer, launching his own low-grade Chang beer while holding a major stake in the local distribution of Carlsberg. He successfully won the bidding for all 12 of the previously government-held whisky distilleries. Charoen uses his wealth wisely. His influence and patronage flow to the very apex of Thailand`s power pyramid. For example, former Prime Minister and chief Privy Councillor Prem Tinsulanonda sits on the company`s board. Charoen has been known to make grants to foreign universities on behalf of the royal family. When the nation mourned the passing of King Bhumibol Adulyadej`s mother in 1996, Charoen contributed to the funeral ceremonies. That loyalty has won Charoen bureaucratic protection. When a local commentator from Puujatgahn, a daily Thai newspaper, aired an unflattering radio report about Charoen, including allegations of tax evasion, the military-controlled station pulled the plug on the programme. Tullaya Sirikulpipat, managing editor of Puujatgahn, says Charoen`s clout has grown immensely since the crisis because he has rescued hundreds of politically connected debt-ridden Thai companies and projects. Most notably Charoen bought the financially troubled Pantip Plaza from his former tax collector and liquor-industry regulator, Chalermchai Vaseenont, former director general of the Ministry of Finance`s excise department. "These deals are patronage in exchange for returned favours," says Tullaya. There are indications of bureaucratic paybacks. After the official announcement of liberalizing the market, a string of tough new environmental regulations for constructing new plants was passed by the industry and finance ministries, making it prohibitively expensive for new players to enter the market. Sura Maharas won the bidding for all 12 of the previously government-held distilleries it ran on concession, allowing it to avoid the new regulations. The minutes of a January 11 meeting of the Senate`s Economic, Commercial and Industrial Committee seen by the REVIEW say "[Excise Department officials] have received allowances and special rewards from the monopolistic firm [Sura Maharas]" and that "the new regulations are clearly meant to help and protect" Charoen`s interests. Incoming Industry Minister Suriya Juengrungruangkij has promised a review of the new regulations. Potential competitors are crying foul. "We cannot build a new factory with these conditions," says Chutchai Wiratyosin, senior deputy manager of Boon Rawd Brewery in Bangkok. "The bureaucracy has tried to stop us at every step," says Kasemsant Weerakun, managing director of United Winery and Distillery, who hopes to enter the white-whisky market later this year. The barriers are high. Charoen has pulled out all his old-style, anti-competitive stops, jamming the provincial liquor-distribution network with his products to deter new entrants. In the third quarter of 2000, Charoen`s ramped-up whisky production bumped the national manufacturing production index by nearly 6%, making enough whisky to supply and, if necessary, to drive away new competition by dumping his product on the market at below cost for the next four years. Thanit Thamsukati, principal adviser to Sura Maharas, admits as much: "Everyone knows we have a large stock and so newcomers are scared to come into the market." After Charoen tied sales of his whisky products to his new Chang beer--distributors were required to take eight cases of beer for every case of whisky--potential competitor Boon Rawd cried foul and took their plea to the untested Fair Trade Commission last October. And though the commission found that Sura Maharas` actions were "inappropriate," it ruled in favour of Charoen on a legal technicality. Insiders say outgoing Commerce Minister Supachai Panitchpakdi, future head of the WTO, remained silent during the closed-door deliberations in which there was neither a vote nor consensus on the decision. Boon Rawd has filed an appeal, alleging political interference in the decision. Sura Maharas denies the charges. "We have no political influence at all," retorts adviser Thanit. "They know they cannot win the market--that`s why they are crying." Analysts point to a structural flaw in that the commission is overseen by the Commerce Ministry, not the Justice Ministry and that many of the commissioners represent major industrial groups that have vested interests in protecting their own market dominance. For instance, the commission`s chairman at the time, Suchai Jaovisidha, worked closely with the food-processing giant CP Group. Meanwhile Federation of Thai Industries President Tawee Butsuntorn worked for years as former executive vice-president of Siam Cement, another market-dominating Thai conglomerate. BAD PRECEDENT That seemingly collusive precedent worries pro-reformers. "Many business interests are already trying to abolish the law because it will interrupt their old business practices," says Sutee Supanit, a professor of economic law at Thammasat University who was instrumental in drafting the 1999 free-competition law. "The Sura Maharas case was sensitive because so many Thai companies maintain their monopoly power through their distribution systems." Thanit insists Sura Maharas is "helping the nation" through its annual 20 billion baht tax payment. Local economists beg to differ, claiming the bureaucracy`s emphasis on protecting big business abandoned the interests of the average consumer and entrepreneur decades ago. "Who really advocates free competition in this country? I can`t think of anyone," says Deunden Nikomborirak, an economist at Thailand`s Development Research Institute, a Bangkok-based think-tank. "People are afraid to be pro-liberalization as though it were some kind of moral issue," she adds. That moral misses the economic point. "If the domestic Thai economy is not based on principles of free competition, then we won`t be able to compete in the future in international markets," says Thammasat`s Sutee. "Many of our industries are not improving because they expect to be protected by the government." Without a fundamental change in bureaucratic culture, the playing field in Thailand will remain tilted in favour of tycoons like Charoen. So long as that`s true, the rich will get richer, while the country`s future economic prospects just get poorer and poorer |
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| aus der Diskussion: | Waste or make money in Thailand |
| Autor (Datum des Eintrages): | BodyG (13.03.01 08:35:52) |
| Beitrag: | 504 von 611 (ID:3086450) |
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