Session 2.1: Thailand and Malaysia's Incentive and Regulatory Design For SOE Performance by Pornchai Wisuttisak
Session 2.1: Thailand and Malaysia's Incentive and Regulatory Design For SOE Performance by Pornchai Wisuttisak
Session 2.1: Thailand and Malaysia's Incentive and Regulatory Design For SOE Performance by Pornchai Wisuttisak
views or policies of the Asian Development Bank Institute (ADBI), the Asian
Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no
responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.
PORNCHAI WISUTTISAK
DEAN OF FACULTY OF LAW, CHIANG MAI UNIVERSITY,THAILAND
EMAIL: PORNCHAI.W@CMU.AC.TH
Policy Workshop Reforming State-Owned Enterprises (SOE) in Central Asia: Challenges and Solutions
26–27 September 2019 Bishkek, Kyrgyz Republic
OUTLINES OF PAPER PRESENTATION
•Flexibility
•Efficiency
•Benefit to the SOEs
•Benefit to Social Economy
1.INCENTIVES FOR SOE PERFORMANCE
Source:https://www.focus-economics.com/countries/thailand
Picture Source:https://www.pinterest.com/pin/338755203191521843/
PRIVATISATION AND LIBERALIZATION POLICY IN
THAILAND
Source: Chulajata, Issariyaporn, 2006, Policy transfer in privatisation : Thailand's experience with telecommunications
PRIVATISATION AND LIBERALIZATION POLICY IN
THAILAND
• The development of privatisation policy in parallel with the establishment of SOEs
(1961 to 1997)
• Thai during 1960s adopted the World Bank’s economic strategy for initiating private involvement in
industry and trade.
• In 1961, its first National Economic and Social Development Plan (NESDP), the government ruled
out direct competition with the private sector and promote private sector investment in the
industrial sector
• Thai Ministry of Finance declared that Thailand first developed privatisation and encouraged private
sector participation in 1961 as mentioned in the first National Economic and Social Development
Plan (NESDP)
• Parallel promotion of SOEs and of the private sector and by privatisation coming onto the
government’s policy agenda
Source: Chulajata, Issariyaporn, 2006, Policy transfer in privatisation : Thailand's experience with telecommunications
PRIVATISATION AND LIBERALIZATION POLICY IN
THAILAND
The development of privatisation policy in parallel with the establishment of SOEs
(1961 to 1997)
• Despite the increased strength of the private sector, some bureaucrats were still able to
mobilise allies to prevent major private sector encroachment into SOE territory.
• SOE employees were particularly willing to aid the bureaucrats in this political campaign. The
analysis of academics concerning the ‘bureaucratic polity’ between 1930s and 1980s supports
the notion that elements of the Thai bureaucracy blocked significant attempts at reforming
SOEs
Source: Chulajata, Issariyaporn, 2006, Policy transfer in privatisation : Thailand's experience with telecommunications
PRIVATISATION AND LIBERALIZATION POLICY IN
THAILAND
The implementation of privatisation policy (1998-2006)
• Peak Privatisation implementation with many SOEs had been commercialized and privatized
• The Asian Financial Crisis of 1997. This hit Thailand particularly hard, resulting in unemployment, the
collapse of businesses, a shortage of capital and reduced economic growth.
• Responding to the financial crisis, Thailand opened up policy space and allowed radical policy initiatives
• In the two decades prior to the financial crisis, Thailand was reluctant to privatise SOEs that earned
profits
• As a result of the 1997 Asian Financial Crisis, the Thai government accelerated the privatisation
programme, and improve the legal framework for private sector participation in the economy,
including the law on corporatisation
Source: Chulajata, Issariyaporn, 2006, Policy transfer in privatisation : Thailand's experience with telecommunications
PRIVATISATION AND LIBERALIZATION POLICY IN
THAILAND
The implementation of privatisation policy (1998-2006)
• In addition to reforms already required by the 1997 Constitution, the IMF imposed
further reforms such as privatisation, to signify Thailand’s commitment to market
liberalisation.
• Under letter of intend from Thaland to IMF
• the Thai government set out a concrete and specific agenda for privatisation, including:
• establish regulatory capacity with cabinet approval
• set up a timeframe and stages for the corporatisation and divestiture of selected SOEs responsible for
energy, telecommunications, water and railways
• establish divestiture strategy for selected SOEs through ‘full or partial privatization through joint ventures,
private placements or public offers.
PRIVATISATION AND LIBERALIZATION POLICY IN
THAILAND
The implementation of privatisation policy (1998-2006)
• 1998 was a significant year for privatisation, as the Ministry of Finance (assisted by the World
Bank) drew up a Master Plan for State Enterprise Reform (or the Privatisation Master Plan, PMP)
(Royal Thai Government, 1998c), outlining the objectives and 8-year timetable for the reform
programme.
• It also classified 59 SOEs under 5 main ministries covering 5 sectors: telecommunications, energy,
transportation, water and others (industrial, commercial, agricultural, social and research).
• The government regarded the Master Plan as a strategic document, that determined the
direction and timing for implementing privatisation policy, and described steps towards the
increasing role of the private sector in SOEs.
PRIVATISATION AND LIBERALIZATION POLICY IN
THAILAND
The implementation of privatisation policy (1998-2006)
• The government also established the State Enterprise Policy Commission under the Office
of State Enterprise and publicly announced Sectoral Plans in telecommunications, energy,
transport and water.
• The MOF separated the functions of policy maker, regulator and operator in 1998,
developing a more systematic and centralised government regulatory structure for SOEs in
which the Cabinet became the highest decision-making body for SOE policy and
management
PRIVATISATION AND LIBERALIZATION POLICY IN
THAILAND
The public criticized about implemenetation 2006-2018
• The political economy in Thailand is unstable due to political unrest
• Elected government under Prime Minister Taksin was critisised as a corrupted government.
• The Implementation of privatization and liberalization were directed to benefit interest groups not
the public
• The lack of structureal and efficiency reforms in SOEs create a bias ideas of privatization and
commercialization
• The implementation of privatization policy is halted but governments still maintain ideas of Private
Public Partenership in order to draw investments toward infrastructure development
Picture Source: http://www.econnews.co.th/ปฏิรูป-รัฐวิสาหกิจไทย/
THAILAND EXPERIENCE
• Liberalisation and Privatization - Energy
• Liberalisation and Privatization-
Telecommunication
• Liberalisation and Privatization- Airlines
LIBERALISATION AND PRIVATIZATION - ENERGY
• The initial step of electricity liberalisation occurred in 1992 with the introduction
of private participation of independent power producers (IPPs) and small power
producers (SPPs) in the electricity sector.
• Electricity Generating Authority of Thailand Act B.E. 2511(1968) amendment No. 5(1992).
IV: Competitive
III: EGAT as the
wholesale power
central supplier
I: Reform of II: Using EGAT pool /
of power, with
Electricity as the primary introduction of
gradual
Supply Industry power purchaser retail
introduction of
(ESI) (1998-2001) competition
competition.
(From year 2003
(2001-2003)
onward)
Source: Wisuttisak (2013) ‘Competition law and the development and regulation of the Thai Electricity Sector’, UNSW Thesis
Failure of Implementation;
Supreme Administrative court decision on EGAT
corporatisation and privatisation
Provincial Metropolitan
Electricity Authority Electricity Authority Distribution sector
(PEA) (MEA)
Consumers in Consumer in
Provincial Areas Metropolitan areas Retail sector
LIBERALISATION AND PRIVATIZATION-
TELECOMMUNICATION
NBTC
Spectrum
Telecom Broadcasting
Management
Current Market structure of Mobile phone providers in Thailand
Source: https://www.focus-economics.com/countries/malaysia
Picture Source: https://www.worldatlas.com/webimage/countrys/asia/my.htm
PRIVATISATION AND LIBERALIZATION POLICY IN
MALAYSIA
.
PRIVATISATION AND LIBERALIZATION POLICY IN
MALAYSIA
• By the implementation of the policy, a Privatisation Committee (in the earlier days
known as the Privatisation Special Task Force) was established by the Government
• The Economic Planning Unit of the Prime Minister's Department (EPU, PMD) was the
secretariat to the Privatisation Committee, which in turn is made up of various agencies
working towards finalising and confirming the proposals on privatization for the
Ministers' Council's approval.
• In 1985 the Government produced a Guideline On Privatisation which detailed out the
objective of the policy, method of privatization, as well as the implementation mechanism.
• In 1991 the Government produced a Master Plan on Privatisation to explain the policy
and strategy for privatization.
Source: Shankaran Nambiar, 2009, Revisiting Privatisation in Malaysia: Institutional Process, Asian Academy of Management Journal,Vol. 14, No. 2, 21–40
PRIVATISATION AND LIBERALIZATION POLICY IN
MALAYSIA
• The Malaysia government adopted the Privatisation Action Plan (PAP),a two-year
rolling plan to facilitate privatiation implementation. The PAP was reviewed
annually as to pin point measures to expedite the implementation of the
programme and to determine the entities to be privatised in the following two
years.
• The PAP was guided by a study undertaken by private consultants who were
commissioned by the government to review the advisability of privatising
government-owned entities (GOEs).
• Created local conglomerate companies which are successful and competitive such as the Tenaga
Nasional Berhad (National Electricity Board) and Telekom Malaysia Berhad;
• Provided employment opportunities in the private sector apart from producing a professional
work force, especially amongst the Bumiputra; and
• Since the introduction of the privatization programme from 1983 to April 2009, about
500 privatised projects have been implemented throughout the country.
• The Government has benefited through savings in the form of capital expenditure
amounting RM161 billion and annual management expenditure (operations) amounting
to RM7.79 billion (or an estimated RM25 billion in a 25 year period).
• The burden of the Government's administrative expenditure was successfully reduced
following the privatisation of 58 Government agencies which involved the transfer of
113,440 government employees to the private sector.
• This savings has enabled the Government to redistribute its limited development
resource to more needy sectors such as the education, health and poverty eradication
programme.
• 1965, Central Electricity Board (CEB) of the Federation of Malaya was renamed as the National
Electricity Board of the States of Malaya (NEB).
• two pieces of legislation were passed to replace the existing Electricity Act, and to provide for the
establishment of a new corporation – TENAGA NASIONAL BERHAD (TNB), purposefully replacing
the NEB (Successor Company Act).
• On 1 September 1990, Prime Minister Dato Seri Dr. Mahathir bin Mohamad officially proclaimed TNB
as the heir and successor to NEB. TNB became a private company wholly-owned by the government;
on the same day, Tan Sri Dato Haji (Dr) Ani bin Arope was appointed Chairman.
Source: https://www.tnb.com.my/about-tnb/history
After privatisation, TNB has introduced a number of measures to improve
customer services. They include:
• Establishing outlets
• Providing a dedicated national hotline
• Minimising estimated reads through the use of telescopic devices.
• Installing meters with a transparent casing
• Providing a minor repair service to customers at a nominal charge
• Offering advice to customers on power quality, demand side management
and energy efficiency.
Source: https://www.metering.com/regional-news/asia/privatisation-of-the-power-sector-a-malaysian-
success-story/
• Privatisation Liberlisation and Reform
• Governments no longer see themselves as wholly responsible for this and are encouraging the private
sector to be involved as much as possible
Source: ISIS Malaysia. (2014). Reforming Peninsular Malaysia’s Electricity Sector: Challenges and Prospects. KualaLumpur:
Ins tute of Strategic and Interna onal Studies (ISIS) Malaysia.
LIBERALISATION AND PRIVATIZATION- AIRLINES
• Malaysia Airlines (MAS) was incorporated as Malaysia’s flag carrier in 1971
following the breakdown of Malaysia-Singapore Airlines partnership
• Under the Government’s privatisation plan, MAS became the first
governmental agency to go partly private in 1985.
• The Government sold 40 per cent to the public and Brunei Investment
Agency, while keeping total 60 per cent in the hands of Malaysian Central
Bank Negala and local Governments.
• 1998,MAS lost $70 million and reported more loss in the next fiscal year
due to the Asian economic crisis
• Government tightly control and manage efficiency of the MAS
• ASEAN Open Sky policy create competition in Air
transport market for MAS
• MAS tends to face with financial loss but receive funding
from government as to maintain its operation and business.
Source: Lee, Cassey & Wilson, Fiona & Secretary, Centre. (2002). Telecommunications Reforms in Malaysia.
LIBERALISATION AND PRIVATIZATION-
TELECOMMUNICATION
• After the privatization of TMB, the government continued to liberalize the
telecommunications market despite having substantial shareholding
interests in the incumbent firm
• Between 1993 and 1995 five additional licenses to operate in the fixed line
market were approved
• Despite the increase in the number of participants in the fixed line market,
the incumbent’s (TMB) market share remained unchallenged
Source: Lee, Cassey & Wilson, Fiona & Secretary, Centre. (2002). Telecommunications Reforms in Malaysia.
LIBERALISATION AND PRIVATIZATION-
TELECOMMUNICATION
• The cellular phone services market compared to the fixed-line market
meant that the issuance of new licenses in the former introduced new
competitors in the market.
• Aside from market entry via the issuance of licenses, technological change
has been an important contributing factor to the intensification of
competition in the cellular phone service market.
LIBERALISATION AND PRIVATIZATION-
TELECOMMUNICATION
Source: https://www.thestar.com.my/business/business-news/2015/11/21/fight-for-supremacy/
KHAZANAH NASIONAL BERHAD-
GOVERNEMNT INVESTMENT FUND
• Issariyaporn Chulajata & Mark Turner, 2009, What Happens When Policies Are Transferred? The Privatisation Of The Telephone Organisation Of Thailand,
IJAPS Vol. 5, No. 1, 33–53, 2009
• ISIS Malaysia. (2014). Reforming Peninsular Malaysia’s Electricity Sector: Challenges and Prospects. KualaLumpur: Institute of Strategic and International
Studies (ISIS) Malaysia.
• Moran M., Prosser T.,1994, Privatisation and Political Change in Europe ,Open University Press, Buckingham.
• Wisuttisak, P., Regulation and competition issues in Thai electricity sector, (2012) Energy policy, Vol 44 , Issue, 185–198
• Wisuttisak, P., Liberalisatioin of Thai Energy sector: a consideration of competition law and sectoral regulation , (2012), Journal of World Energy
Law & Business,Vol 5, Issue 1, 60-77.
• Wisuttisak, P.,(2014), EU competition law on electricity sector liberalization, International Journal of Public law and Policy
• Wisuttisak, P., 'The rise of PPPs and big government in ASEAN utility infrastructure market: the consideration on the ASEAN market governance
under competition law and policy' (Paper presented at the New Approaches to Building Markets in Asia, Lee Kuan Yew School of Public Policy,
Singapore, 2011)
Thank you
Спасибо
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Pornchai Wisuttisak*
Dean of Faculty of Law, Chiang Mai University, Thailand
PhD in Business Law and Taxation, UNSW
Email: pornchai.w@cmu.ac.th