EGAT privatization | 11.11.05

Thailand’s populist/nationalist factions cheered yesterday as the court postponed its ruling on whether the initial public offering of the Electricity Generating Authority of Thailand can go ahead as planned. The verdict has now been rescheduled for November 15, just one day before the long-planned IPO. Just another day in Thailand’s demagogical politics.

I must take a moment, however, to admire Rossana Tositrakul, director of the Federation of Consumer Organisations, for her candidness in this case (which, unfortunately, is not matched by the naming of her tax-exempt outfit of outfits):

Ms Rossana said the energy minister should coordinate with the relevant banks to stop the IPO launch on Nov 16-17, regardless of what the court ruling is.

That reminds me of a cartoon recently featured chez La Page Libérale:

“We are the law!”, a mob proclaims as it hammers a stone tablet that says, “Thou shall not kill, Thou shall not steal”. Frightened, the politicians wail: “Don’t be mad! We’re going to legislate [the way you want]!”

Fortunately, we have a different kind of politicians here in Thailand (although PM Thaksin is no stranger to tactical retreats, including earlier in this EGAT privatization controversy). It remains to be seen whether we have a kind of judge that will adjudicate according to the ochlocrats’ whim. Either way, it won’t matter one bit to Khun Rossana and her ilk.

Meanwhile, if The Economist hasn’t noticed that the Democrat Party has been an active — if opportunistic — part of this populist and nationalist coalition, at least one accountant does. Songdej Praditsmanont — the septuagenarian vice-president of the Institute of Certified Accounts and Auditors of Thailand and chairman of Ernst & Young (Thailand) — wrote about the Democrats’ sordid demagogy in the Bangkok Post’s Postbag last Friday (and about the mob’s misleading contention today).

Update For the record, the Democrats have announced their intention to renationalize EGAT when they return to power:

Meanwhile, the opposition made it clear to potential investors it had every intention to employ legal measures to “right the wrong” of the Egat privatisation if and when they return to power in the future. They did not give details.

Democrat party leader Abhisit Vejjajiva said it was only fair that investors were told in advance what to expect.

“Our party line has always been that when we reassume the country’s leadership, we will take Egat back,” he said, insisting the power grid must remain under government control to avoid a private monopoly as opposed to transferring it to the listed firm.

Always? Here is the Democrats’ party line the last time they were actually in power, at least as written by the obviously admiring Shawn Crispin (hat tip to my reader JW):

The outgoing government led by Prime Minister Chuan Leekpai had initiated an ambitious power-sector reform programme. Egat would be fully privatized, broken into eight mutually competitive generation companies. Transmission and system operations would be unbundled. A new independent regulatory commission would have the muscle and charge to guard against collusive-pricing behaviour. In crisis mode, Egat agreed that hard structural change was necessary and good. [Emphasis added]

Economically-literate Democrat optimists like Khun JW will argue that the Democrats are opposing PM Thaksin’s privatization plan because it doesn’t go far enough. Indeed, one would get that impression reading Mr. Crispin’s article from four years ago. Suffice it to say that that Panglossian scenario is very hard to square with Khun Abhisit’s current vow to “take EGAT back”.

The World Market Research Center has an even more explicit quote (again, hat tip to Khun JW):

Firing a shot across the bow of potential investors, Abhisit said, ‘If nationalising EGAT assets] means a loss to the firm or its shareholders, so be it. We will do it, and investors who buy the shares should be aware of the risks when they invest’.

This sort of rhetoric should be hugely popular with the formiddable “People Sector™”, which in turn is hugely popular with the press (from the Bangkok Post article):

The organisations — the Confederation of Consumer Organisations, Thailand (CCOT); Homenet; People Living with HIV/Aids, Thailand; Alternative Energy Project for Sustainability; Four Region Slum Network; Alternative Agriculture Network; and FTA Watch — are up in arms against the partial privatisation of the utility. [Link added.]

You bet your stock portfolio these guys are not saying the proposed privatization doesn’t go far enough. And where’s the the Syndicate of Patriotic Scrabble Players anyway?

PS See my definitive post: “Populism and nationalism in Thailand”.

20:29 ▪ politics

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1

Goat 12.11.05

There has been analysis in newspapers that whenever Thai Rak Thai looses Thaksin his party will sooner or later disolve. If or whenever Thaksin chooses to quit politics, will the democrats become the majority party in Thailand? How significant was the analysis in changing the Democrat’s strategies in Bangkok and Southern Thailand?

2

JW 13.11.05

Goat

Well that might depend who will replace Thaksin as the leader of TRT and who is the leader of the Democrats at the time. I think that Abhisit would have a good chance against a weak TRT leader. However, I don’t think Thaksin will be going anywhere soon.

3

JW 13.11.05

Tom

On one point, the international media have been quite supportive of Thaksin’s efforts to reform EGAT.

I am also a bit confused about the Democrat Party and their current EGAT policy. I must say I have not followed the privatisation of EGAT that much, however, I thought the Democrats had been previously supportive of privatisation. For example,

The outgoing government led by Prime Minister Chuan Leekpai had initiated an ambitious power-sector reform programme. Egat would be fully privatized, broken into eight mutually competitive generation companies. Transmission and system operations would be unbundled. A new independent regulatory commission would have the muscle and charge to guard against collusive-pricing behaviour. In crisis mode, Egat agreed that hard structural change was necessary and good.

Source: Shawn W Crispin. Far Eastern Economic Review. Hong Kong: Sep 27, 2001

The above process to me sounds ideal and much better than listing EGAT on the sharemarket. However, from what I have been able to digest so far on Democrat policy is the following quote from Abhisit on 4 Nov

If nationalising EGAT assets means a loss to the firm or its shareholders, so be it. We will do it, and investors who buy the shares should be aware of the risks when they invest

That seems a big change of policy and I can’t find specifically what Abhisit dislikes about the EGAT sharelisting. If he is supportive of the previous policy from 2001 then I would suggest he come and say specifically what he dislikes about Thakin’s plans for EGAT. While listing EGAT on the sharemarket is better than the status quo, too me it does not go far enough - at least the Democrats’ previous proposal sounded better. It seems more of a half measure.

Also, Tom just a small point. I would hardly call it privatisation when the government still owns the majority of shares and controls the entire company.

Finally, when will Thaksin get around to TOT and CAT. Dealing with the TOT on getting a refund for my telephone deposit took 8 months, many phonecalls, and a hour of waiting around in the office after being told that my refund was ready to collect. They seemed the most disorganised Thai government entity I have dealt with (and that is saying a lot!).

4

JW 13.11.05

Tom

Would be interested in your response to The Nation’s editorial

The PM’s implausible explanations for the violence in the South seem increasingly detached from reality. Even at this advanced stage of the armed struggle against the Thai state by separatists in the predominantly Muslim deep South, Prime Minister Thaksin Shinawatra still manages to find the time and energy to engage in a daily spin-doctoring of the escalating regional violence. On Tuesday, the PM claimed that the insurgency that had turned the restive provinces of Yala, Pattani and Narathiwat into a war zone had nothing to do with separatism and everything to do with a coordinated attempt by his “enemies” to discredit him and undermine his leadership.

5

Tom Vamvanij 14.11.05

JW:

On one point, the international media have been quite supportive of Thaksin’s efforts to reform EGAT.

Really? Any links, please? I would love to see the international media support a Thaksin policy for a change.

If this Fortune report of another controversial IPO is any guide, however, I’ll have to dream on:

Thai Exchange, Protesters at Lagerheads

Thailand has a reputation as a hedonist’s delight, a land where the women are beautiful, the beaches beckon, and the beer never stops flowing. But not all Thais delight in that image. Certainly not the 10,000 Buddhist monks, social activists, and students who marched on Thailand’s stock exchange in July. Led by Chamlong Srimuang, whose protests toppled the last military dictatorship in 1992, their target this time wasn’t an army general but a captain of industry—Charoen Sirivadhanabhakdi, Thailand’s biggest beer baron. When Charoen applied to list his company, Thai Beverages, Chamlong marshaled his forces, dubbing his coalition the Dhamma Army. “We lose so many lives because of alcohol,’’ says Chamlong, who urged exchange officials to reject the listing on moral grounds.

Of the private companies slated to list on the Stock Exchange of Thailand (SET) this year, Thai Beverages is the most anticipated. Its $731 million IPO would be the biggest in the SET’s 30-year history. Punters want a taste of the firm because its Chang beer and its Mekong and Saengsom whiskies are dominant brands in Thailand. Economic planners, including Prime Minister Thaksin Shinawatra, were counting on the IPO to inject some fizz into a market that’s been flat for the past year and a half. For a Prime Minister whose poll numbers are inextricably linked to economic good times, a bear market is bad politics. Thaksin’s approval rating has plunged to 47%, a three-year low.

To make the SET one of the premier exchanges in Asia, as Thaksin wants to do, he will have to boost market capitalization, now only $113 billion, to levels comparable to South Korea’s or Singapore’s. One way to get there is to privatize and list state enterprises, a strategy that has run into opposition from unions. So Thaksin is courting large private firms with profit potential to go public.

The granddaddy of business magazines is relishing the religious fanatics’ effort to block an IPO just because (it thinks) Thaksin wants it. Surreal.

PS I prefer requests for commentary in my mailbox, but since I always have a hard time keeping up with what few requests I get, go ahead and post them in the comment section if you want. This way, at least someone else may pick up where I slack off.

6

Tom Vamvanij 14.11.05

JW:

I am also a bit confused about the Democrat Party and their current EGAT policy. I must say I have not followed the privatisation of EGAT that much, however, I thought the Democrats had been previously supportive of privatisation.

I’m more confused by you actually. After all the demagoguery and opportunism that you, unlike many of my less fortunate compatriots, have witnessed and registered, you still believe that the Democrats have real principles and policies. Take it from me, my dear reader: they don’t.

Read this post about Trirong Suwankhiri. That’s all you need to know about the Democrats.

7

JW 15.11.05

Tom

Well, Prachai and his ilk weren’t big fans of the Democrats when they were in government until Jan 2001. In fact, many of them were hopeful of what a Thaksin govt would offer given the signals coming from Thaksin on his debt management plan and his anti-IMF stance - which you have referred to previously as Thaksin flirting with the dark side. Opposition parties like to oppose things just for the sake of it. On this issue, I am willing to give the Democrats the benefit of the doubt as I am not sure of their actual plans for EGAT and other state-owned enterprises. I mean there could actually be good grounds to oppose it, ie as they don’t think it goes far enough - see the quote from FEER above about Chuan’s plan for EGAT.

you still believe that the Democrats have real principles and policies

Politicans have principles?

I actually didn’t think the policies of the Chuan led Democrats between 97-01 were that bad (at least they were much better than the Barnharn and Chavilit governments of the previous 2 years). Now, I was not completely satisified with the Democrat Party policy for the 05 election, but I haven’t lost all hope for them for the next election.

I also have a number of issues with Thaksin, on his conservative social policy, his incoherent policy for the Southern Border Provinces, some aspects of foreign policy, his micromanaging of almost every aspect of government etc.

8

JW 15.11.05

On one point, the international media have been quite supportive of Thaksin’s efforts to reform EGAT.

Really? Any links, please? I would love to see the international media support a Thaksin policy for a change.

Perhaps, supportive wasn’t the right word. The international media are generally supportive of Thaksin’s plan to privatise state enterprises, including EGAT .That article you link from Fortune doesn’t to me appear to oppose IPOs for say, it is more reporting of news as oppposed to an editorial. Both FEER and the Economist are supportive.

FEER were disappointed that Thaksin didn’t go through with the partial privatisation plans last year.

Anonymous. Far Eastern Economic Review. Hong Kong: Mar 18, 2004.Vol.167, Iss. 11; pg. 8 (full text is below)

“THEY HAVE TO STOP [the] privatization. If they just postpone it now, it could still happen next month, or next week.” That bit of candour came from Sirichai Maingam, head of the labour union at the Electricity Generating Authority of Thailand. The state-owned utility had been planning a late-April initial public offering, in a partial privatization that would see shares traded from May 12. But as Mr. Sirichai noted, all this is now delayed. (See related article on page 21.)

Prime Minister Thaksin Shinawatra doesn’t often back down. But this is one of those times we’d have preferred it if he’d stayed the course. Sure, the Egat plans already were running late when the government missed a March 1 deadline to corporatize the utility, a step towards the IPO that was hoped would raise 70 billion baht ($1.8 billion).

But surely a government that prides itself on its can-do attitude could have sped along the process? Mr. Thaksin pleads over-optimism about the IPO deadline, but many will credit the delay to Mr. Sirichai’s union, which has staged daily protests since February 23. Mr. Thaksin should have taken the protests head-on.

The union says it is concerned that privatization will lead to higher power rates. Yet it isn’t as though higher rates will mean fewer buyers for electricity, in turn hurting utility jobs. Leaving the lights on isn’t like discretionary spending on luxury goods. And moreover, a new regulatory body will be charged with overseeing prices. Then, there’s the union’s attempt to raise the bogeyman of foreign control, which flies in the face of the bracing effect foreign investment has had on the Thai economy. And besides, the government would still hold at least 75% of a listed Egat. All these are nonissues.

We suspect what really worries the union is something far from enlightened altruism, and concerns pure self-interest. A listed company will need to pay more attention to profitability and therefore must squeeze out increased efficiency. What’s got the union nervous is the prospect of layoffs, as well as possible changes to workers’ benefits. Then, there is the accusation we hear that workers want a higher slice of IPO share allocations.

Unions shouldn’t be allowed to hijack privatization efforts. Other state-owned firms in Thailand soon will be on the block. The union troubles Egat is encountering aren’t setting healthy precedents.

I can’t find an editorial from the Economist supporting the EGAT privatisation specifically, but there is this

Mr Thaksin has not initiated nearly enough of the deregulation, privatisation or opening to foreign competition that Thailand needs to assure its longer-term future

The Economist. London: Feb 5, 2005.Vol.374, Iss. 8412; pg. 11

This certainly suggests the Economist is supportive of privatisation plans for EGAT although I can’t find those specific words in an editorial.

9

Tom Vamvanij 15.11.05

JW:

Many thanks for the FEER article. It cheers me up that an international media outfit for once gets something right about Thailand.

The Economist article, however, is a different story. I quoted that very passage in my post about privatization and also wrote a letter to the editor to respond to that very editorial. Defying belief, The Economist blames Thaksin and his “well-defined nationalist and populist party” for not enough economic reforms and hail the Democrats who have been obstructing those reforms as “technocratic and progressive”.

Although the Democrats have been sending quite a few different messages about privatization, you’ll see in my privatization post that there’s no if or but in the written policy of non-privatization that they were peddling in the last general election.

PS Please note that the original post has been updated

PPS To quote multiple paragraphs, just add another period to the bq. so that it becomes bq.. (note two periods). Then when you want to return to a normal paragraph, begin it with p. (only one period suffices). See this demo here.

10

JW 15.11.05

Tom

Although the Democrats have been sending quite a few different messages about privatization, you’ll see in my privatization post that there’s no if or but in the written policy of non-privatization that they were peddling in the last general election.

I did say that I was not happy with this aspect of the Democrat’s policy for the 05 election, but surely you would concede that before 01 the Democrats had a different policy on privatisation. Their change of policy and lack of focus in 05 didn’t help them. Surely, hoping that the Democrats, the largest Opposition party, have an economically sound policy (like pre-2001), isn’t a bad thing?

I have to agree with the Economist to some extent and for the first 2 years of Thaksin’s government I wasn’t sure where Thaksin stood on many economic issues. Given his previous statements pre-2001, I don’t think that position was unfair. However, Thaksin did start to show his hand in 2003 - probably because he knew he had the political strength with a better economy to overcome the oppostion.

Similiarly, on the issue on privatisation of EGAT, he folded in 2004 only to bring up the issue in 2005 - although this was probably for electoral. I agree with the Economist and that “Mr Thaksin has not initiated nearly enough of the deregulation, privatisation or opening to foreign competition that Thailand needs to assure its longer-term future”. I can understand your annoyance about the Economist’s description of the Democrat’s, but I generally agree with their description of Thaksin. I am just hoping that he will implement the right economic reforms over the next 3 years.

PPS To quote multiple paragraphs, just add another period to the bq. so that it becomes bq.. (note two periods).

Duly noted.

P.S

From today’s Nation quoting Abhisit

“The opposition is not aiming at scrapping all forms of privatisation but we are attacking a hasty move by the government to rush the Egat privatisation before ensuring readiness,” he said.

As the government has failed to lay down ground rules to regulate the electrical supply, the privatisation would be tantamount to handing over a state monopoly to a select group of private investors, he said.

He said the government should have formed an independent regulatory body for the power industry and blocked private ventures from gaining possession of state property.

The first 2 and a half paragaphs are ok. The second part of the last sentence is just pure rubbish by Abhisit and I would expect him to know better.

11

Joint Kiki 17.11.05

“The democrats supportive of privatization.”
5555!!! Your wrong bud. They have never been supportive. Thailand has been trying to privatize state enterprises for decades only to be downed by democrats, various interest groups, etc. The only reason why state enterprises were privatized was because and only because of the IMF. And no nation comparable to Thailand in terms of economy would be in their right mind to fully privatize their energy firm all at once!!

“Opposition parties like to oppose things just for the sake of it”

12

KCUS KCID 17.11.05

^That was the stupidest thing I’ve ever read!

Second stupidest thing: “Mr Thaksin has not initiated nearly enough of the deregulation, privatization or opening to foreign competition that Thailand needs to assure its longer-term future”
What the fucking hell. What about all the free trade agreements. Thailand’s EGAT is one of finest examples of an efficiently operating state energy company. Who cares about foreign competition when we have adequate domestic competition in certain areas? That statement was quite odd and unspecific, I must add. And when you add this “to assure its longer-term future”
It too me says FUCK America!

“The opposition is not aiming at scrapping all forms of privatization but we are attacking a hasty move by the government to rush the Egat privatization before ensuring readiness,”
Just EGAT! Dude it doesn’t take much to privatize a state enterprise! One minute they want transparency another minute they don’t. Undoubtly, there is nothing wrong with this privatization unlike PTT.

“As the government has failed to lay down ground rules to regulate the electrical supply” Their afraid energy prices will rise? What makes them think that they won’t if it wasn’t privatized? Jeez what IDIOTS!