A matter of censorship

Overlooked, at times endorsed, a stifling of debate in Thailand’s media forums continues to affect the country’s stability 

Faced with government censure, prosecution for defamation or the consequences of discussing certain key issues, (self) censorship is an established practice in Thailand. Infrequently obvious, yet oblique and systemic, this is an old game. 

“The index does not reflect just government abuses but also abuses by armed militia, clandestine organisations and pressure groups. In Thailand, criminal networks, corrupt local politicians and armed groups are also partly to blame for this deterioration in the situation of journalists.” 

This letter, dated 2005, from then Secretary-General of Reporters Without Borders (RSF) Robert Ménard to former Prime Minster Thaksin Shinawatra conveys the concerns that many media channels still understand when reporting in Thailand. 

Though Thaksin’s military ousters swore to liberalize elements of the Press Laws and remove interference from state and private actors, Thailand has continued to slide. From 59 in 2004’s RSF Press Freedom Index (PFI), it has fallen almost one hundred places in just six years to 153 today. The World Bank’s ‘World Governance Indicators’ also reported a major deterioration in ‘Voice & Accountability’ this year, putting Thailand alongside Venezuela and Zimbabwe. 

The backdrop to this is the government’s monitoring and censorship operations, particularly of red shirt media and sites hosting comments deemed critical of Thailand’s revered monarchy. Encompassing several ministries, the armed forces, undisclosed budgets and new legislation, over 210,000 web pages have been blocked according to the most recent civilian estimates; the government no longer releases the figures. 

Thailand’s much discussed political risks are building, and an opaque forum for discussion of the realities facing the country only heightens the risks.

Record growth in the Stock Exchange of Thailand and the Thai Baht might seem to contradict risk concerns, but with western markets still fighting to recover, Asia is a natural investment destination and many are willing to overlook certain negative considerations; if they are aware of them. A scenario not without precedent. China has already demonstrated that an authoritarian system with strict controls can enjoy economic growth. 

Thailand undoubtedly remains an attractive investment destination with the government courting continued foreign direct investment. Awarded a world rank of 66 and 10 regionally by the Heritage Foundation’s 2010 Index of Economic Freedom, Thailand has also scored well in the World Economic Forum’s 2010-11 Global Competitiveness Report, down two at 36. 

Stability is investors’ paramount concern today and Thailand continues to promote this image. Yet strong undercurrents remain at all levels of Thai society that are not always conveyed in available media and political forums. This can create information gaps, fuelling market shocks and volatility when investors cannot plan ahead or become nervous. 

Yet government censorship, largely political, is also exacerbated by a pervasive self-censorship that quietens dissenting views and a criminal code manipulated to silence critics through defamation suits. 

The government and individual's pursuit of those seen to be critical of Thailand’s revered monarchy has also led to charges of lèse majesté being used to intimidate opponents, journalists and academics with a growing abandon. Web page administrators are now held accountable for comments posted in public forums and Meechai Ruchupan, former President of the Senate, veteran government legal advisor, and former President of the Council of the State recently indicated that this liability extends to owners of property similarly graffitied. 

For foreign media that have discussed taboo subjects, publications have been pulped or withheld by distributors, agencies have closed their offices to protect staff from public reprisals, others have subsequently transferred their reporters out of the country. 

The business sector is not immune from such public protestations.

In November 2009, Bloomberg found itself on the front line with the filing of a market report which speculated on the SET’s 2 - 3 per cent drop, on a day when the rest of Asia was up. Two traders who re-posted the article online in the closing hours and after the markets closed were subsequently arrested. Bloomberg was denounced, an official investigation launched, a Channel 9 expose on Bloomberg’s motives in publishing the information and accusations by yellow shirt leader Sondhi Limthongkul that it was trying to take down the country.* 

No charges were ever brought against the traders, but nor has the investigation been formally closed. A scenario repeated across a broad spectrum of individuals and institutions whom the authorities have investigated in past years. 

For media, Thailand is a minefield of grey areas. There are no clear red lines surrounding several taboo subjects and a country whose rhetorical intentions proclaim media freedom is too often contradicted by practical implementations.

In a region with such authoritarian governments as China, Myanmar and Vietnam, a senior Asia correspondent with an international news wire, speaking to Business Report Thailand, remarked, “There are only two countries that I cannot write on what I want, Singapore and Thailand.” 

Singapore’s comparison is unexpected, perhaps, yet warranted. 

Both countries have strong defamation laws which can be and have been manipulated to silence critics, particularly in government. Singapore, now at 136 in the RSF PFI, has maintained an average position of 141 since the index’s 2002 inception, the same year that Thaksin sued the Far Eastern Economic Review; the first salvo in a legacy of foreign and domestic media attacks. 

In October, Pasit Sakdanarong, Secretary to the Constitutional High Court, fled to Hong Kong, two days before videos he is alleged to have recorded of illegal lobbying for the court to rule favourably in the Democrat party’s pending dissolution case were made public on Youtube (a site the government controversially blocked in 2007). Domestic media has quickly picked up the story, but questions remain. Why had he felt it necessary to flee the country and why did he not turn to domestic media to break the story first? The government has sought his return to face charges under the Computer Crimes Act, introduced in 2007 by the coup government and identified by opponents as a keystone in censorship practice. It seems that critical voices, however intentioned, are not yet permitted. 

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Powering Up - Industry and communities go head to head

Round one to industry at Map Ta Phut, but Thailand takes note 

"Whilst the government is investigating and evaluating the effects on local communities, attention is also beginning to turn to 1,700 factories outside the industrial estates."

After a year long suspension, hundreds of billions baht and tens of thousands of jobs lost, 74 projects in Map Ta Phut got the green light from the Central Administrative Court in September to resume operations. Two petrochemical projects have been included in the list of 11 harmful activities, which means the companies can only regain their operating licenses once they pass new Environment and Health Impact Assessments (EIA/HIA). The court verdict and new environment guidelines, whilst offering businesses clarification after a long dispute, leaves government agencies to try and regain investors’ confidence in Thailand once again.

There is likely to be a positive legislative ending to the Map Ta Phut impasse, but local residents and activists are still voicing their opposition. They consider the list of 11 harmful activities endorsed by the government, reduced from 18, as based on the best interests of the businesses and not the communities who have fought to improve the environmental health and living conditions in the local area. Today, they continue to fight, requesting a revision of the list, and say that they will appeal to the Supreme Court unless the government agrees to their proposals.
Prime Minister Abhisit Vejjajiva has called for local residents to await the study on Map Ta Phut’s capacity that will focus on buffer zones and green areas between industry and the communities. Yet Abhisit and other government ministers concede that poor law enforcement in the past has been and may yet remain a root problem of the current dispute. 

Map Ta Phut is said to have already exceeded its capacity limit. However, the Board of Investment (BoI), which governs the numerous projects applying for BoI promotions and privileges, expects operations to expand following the government’s clarifications. 

As might be expected, community representatives have demanded no further increases in Map Ta Phut operations and assert that petitions for acceptable public hearings be held on the resumption of all halted operations. They underline, however, that they have no problem with industrial developments, but the environmental costs borne by the communities. 

NGOs and a four-party panel (comprised of academics, government, private sector and public representatives) have stressed the importance of implementing new environment regulations and town plans to include green buffers and the proper delineation of industrial zones. Enforcing stricter construction and environmental codes has also been touted in order to prevent any future incidences, including excavating 100,000 cubic metres of silt from the Charkmark River estuary, the building of a dyke to block contaminated silt and enforcing a 2km distance between petrochemical factories and residential areas. 

Government agencies and business representatives, however, firmly insist that construction and environmental codes in Map Ta Phut are already on a par with international standards.

But whilst the government is investigating and evaluating the effects on local communities, attention is also beginning to turn to 1,700 factories outside the industrial estates in line with the Federation of Thai Industries (FTI) plan to promote the development of eco-friendly industry nationwide.
Looking at the history of industrial development, Thailand could take lessons, anti-pollution measures and technology from Japan's city of Kawasaki, once polluted by heavy chemical industries. After an almost-two-decade legal battle, investors acknowledged their responsibility for any 'leakage or accident.’ Petitions were dropped and Japanese investors kept their word. Could Thailand do the same? Indicators, though preliminary, are yes.
Five Tigers of Map Ta Phut’s big investors - PTT Group, SCG, Dow Chemicals, Glow and Banpu - recently set up a community partnership centre with the budget of THB 100 mn for an initial 3-year operation to address critical issues and share information between industry and local communities. Although academics agree with the initiative, they note it needs to be more that just corporate social responsibility or a public relations phenomena.
Following the court ruling, government agencies and related organisations are all gearing up to support investors, and to ensure the country's and future economic growth and competitiveness. 

Kasikorn Research Centre (KRC) has forecast that the end of the Map Ta Phut conflict will be a factor buoying domestic investment in the years to come, with Thailand's investment growth at 8.1 to 8.8 per cent this year, and 7.5 to 9.3 in 2011. Impressive economic growth it may be, but decisions concerning the environment and public health are no longer in the hands of a few. 

Transparency remains the key to sustainable investment in Thailand. No one can claim that industry or the Thai government are not cognizant of the matter, but both need to prove they have turned away from past trends of concealing information until a problem arises. In parallel, investors are demanding clear policy and less corruption, and they will certainly look very closely at the issues before taking the future investment plunge into Thailand. 

August’s protests on the tropical island of Samui, long famed for its five and six star luxury resorts popular with foreign and domestic tourists, against offshore adjacent oil platforms are symptomatic of a far more assertive Thai society that has emerged in the last ten years. One which will continue to fight industry to protect its resources and communities.  BRT

This article was first published in Business Report Thailand, Issue 1, October 2010

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China On Track

Proposed Chinese investments in the Thai rail network offer lucrative returns, but can Thailand get on board? 

"Moving things forward, as Korn conferred when speaking at Bangkok’s FCCT in August, means taking SRT out of the equation." 

Thailand’s recent decision to proceed with a rail connection to China shows a firming of its logistics and hub ambitions, but some all too enduring problems remain.
The Thailand-China negotiation framework will be submitted for consideration by Parliament, Thai Prime Minister Abhisit Vejjajiva said in early September. Neither he nor government websites have elaborated much on details leading to very different accounts circulating about what the deal actually entails.
Discrepancies that get noticed are money – from how much it will actually cost (somewhere between THB 300 and 350bn), the controversial role of Chinese labour in building it, how a decision will eventually be made and the timetable for it being built.
A proposed MoU is set to be signed by year’s end and Beijing believes construction can be done within three years.
Thailand’s track record might suggest that this is a tad ambitious.
The crux issue of whether it is conventional, bullet or high-speed, in this case 200 kmph, is also unresolved. But this is perhaps moot point given an average speed of 60kmph on Thailand’s railways today.
The general assumption is that three dual-track lines will be developed, with China principally interested in routes running from  Nong-Khai - Bangkok (624 km on the current State Railway of Thailand map), and Bangkok to Padang Besar (which according to the SRT is 874 km south of Bangkok although the Southern border with Malaysia is further still at 1143 km). A third line connecting Bangkok to Rayong on the Eastern Seaboard has also been touted, though China’s involvement in this line is not yet certain, despite its engagement with the SRT and Bangkok’s skytrain and metro systems. China’s offer to share technological expertise does however make it a attractive partner and Bangkok Mass Transit System (BTSC) is already pondering linkages with China’s Changchun Railway Vehicles Co (CRC), to develop projects outside Thailand.
The returns for China though far exceed contracts for its own businesses and industry. Once connected at Nong Khai to a conventional railway China is building from Kunming in South Western Yunnan province across Vietnam and Laos, once these ‘missing links’ are in place, China opens up industry in its western provinces long isolated from its eastern ports.
Don’t doubt that this is a major piece of infrastructure, one with big strategic implications in a way that has never been done before.
It’s the first major infrastructure project in recent memory proposed outside the golden arc of Bangkok and the Eastern Seaboard. It not only binds Thailand to China and both of them to South East Asia, but connects Thailand’s hinterland to the heart of its modern industry. The project is tacit recognition of the country’s long neglected need for stronger internal links as well as a future strongly tied to the Chinese market.
But if ever there is a symbol of China’s reach and the hegemony it is building within Southeast Asia, this is but one. China is touting direct rail links from its borders to warm sea ports in Pakistan, Bangladesh and Myanmar.
But once connected, if built, what will it move? Projections abound, each revealing contradictions and raising more questions, but leaving the big one – how and where will money be made – unanswered.
Thailand is said to be focused in the preliminary stages on passenger traffic, but is there the traffic and enough people to pay modern fares? Thailand’s migrant labour travels on the cheap. Tourists and business travelers want speed, which, in the context of a two-week holiday or business meetings and golf, currently means flying.
The government’s own Office of Transport and Traffic Policy and Planning (OTTPP), in its own planning of upgrades and development of the SRT’s four main lines (north, north-east, east and southern) thinks so, projecting growth in passenger traffic from 128,000 in 2019 to 192,000 by 2031. Two-thirds of this, incidentally, travels on the Nong-Khai to Bangkok and Bangkok to the Deep South route – whichever way it goes.
One of the biggest problems here well might be consumer resistance. State Railways of Thailand which runs the country's existing rail network at a massive loss, is highly politicized, prone to strikes, historically opposed to any attempts at privatization and changing their monopoly isn’t going to go down well.
Thai finance minister Korn Chatikavanich said recently on negotiations with China, “If there is any delay, I suspect it will be at our end, not theirs.”
Moving things forward, as Korn conferred when speaking at Bangkok’s FCCT in August, means taking SRT out of the equation. This does indeed seem to be the government’s plan.
As for cargo, OTTPP doesn’t even mention it. Yet in planning vernacular this is a project ultimately justified by freight and cargo needs reliability over high speeds, unless its value added. Sorting out what exactly the line will move whilst trying to connect realistically to the current and future needs of Thailand’s industries remains an onerous task.
Another headache is financing. The Thai Cabinet has rejected purchasing Chinese Export Credits worth THB 12.47bn, usually conditional on accepting Chinese labour, but it seems China is still keen to provide support in manpower, training and technology transfer, building on existing SRT relations.
Then there is the vexed issue of Private-Public Partnerships (PPPs). The government, aware of a flaky record, has been keen to promote the fact that it is actively looking for private sector buy-in on its national infrastructure blueprints.  Yet they also admit that in order to be truly effective reform is also needed. Explaining Thailand’s mixed record, Pradit Phataraprasit, the Deputy Finance Minister acknowledges that success has been held back by, “the current PPP law of 1992, and the absence of a champion within government to drive PPP projects.”
The government has sought to bridge this gap by proposing a variety of PPP arrangements, including Build-Own-Operate-Transfer, Build-Own-Operate, Build-Transfer-Operate and Build-Operate-Transfer. But with feasibility studies pending and agency jurisdictions yet to defined, the private sector remains deservedly cautious.
Whether Thailand utilizes the proposed railway for passengers, its own industries or serves as a transit point for Chinese goods, the returns are lucrative enough for Thailand to push forward in its reforms. Getting to the point when there will be smooth train services between key points in Thailand, the rest of the region and China looks to be a long, bumpy but necessary journey.
The hardest task of all might be starting the project. BRT

This article was first published in Business Report Thailand, Issue 1, October 2010

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Potash Politics

The valuable mineral could be a game-changer for Thailand but disputes over whether to mine it have become a test for the industry in the kingdom

"The northeast of the country is sitting on a fortune in potash, catapulting Thailand from nowhere in the potash reserves world league to number three behind Canada and Russia."

News that Anglo-Australian mining giant BHP Billiton is prepared to pay north of US$40 billion for control of Canada’s Potash Corp has thrust the unexciting but profitable mineral back into the limelight in Thailand.
The northeast of the country is sitting on a fortune in potash. Lying (not far) beneath the surface of the Korat plateau, the Udon potash deposit has some 1.4 billion metric tons - at today’s prices worth US$525 billion - catapulting Thailand from nowhere in the potash reserves world league to number three behind Canada and Russia
Everyone has known it was there for a generation but getting it out and to market has proven one of those Thai stories that so frustrate foreign moneymen with their Harvard business school cash flow models. Thailand maybe different, of course, although the potash saga is depressingly same-same - a familiar mix of politics and local interest (and even a whiff of sabotage) that has ensured that not one bag of the stuff has ever reached the market, despite tight global supply and soaring demand, particularly from nearby China.
Potash is the catch-all term for salts of potassium. The most useful compound, potassium chloride, or sylvinite, makes up the most part of the Udon deposit. Meanwhile another potassium salt, carnallite, is found both in Udon and to the west under Chaiyaphum.
Potash has a range of traditional uses from the manufacture of soaps, glass, ceramics and dyes, but its most common function is as a fertilizer - one of the three major plant and crop nutrients after nitrogen and phosphate. About 95 per cent of all potash production goes to agriculture.
Demand has risen sharply in recent years with China a big and important market. It is no less important to the Thai farmer but, despite sitting on tons of the stuff, all is currently imported.
There have been two major projects attempted. The first, the ASEAN Potash Mining Company, established by the 21st meeting of ASEAN economic ministers in 1989, holds the concession to mine the largely carnallite deposits of Chaiyaphum. The original idea was that all ASEAN nations of the time would chip in for developments costs for the benefit of farmers across the region. After a year and small pilot mine, as well as widespread community support, interest seems to have dwindled and funding dried up. It remains to this day on hold.
To the east, the Udon deposit - which is in fact two deposits: one to the south in the Korat basin and the Sakhon Nakhon basin to the north - is commercially much more attractive but has proved more difficult to access.

Which is frustrating for those involved as, in global mining terms, the higher grade sylvinite is all but lying on the surface. The deposit is about 350 metres underground, about a third of the average 1,000 metres of deposits in other countries such as Canada.

The world class Udon deposits first came to the attention of Asia Pacific Potash Corporation, then a subsidiary of Canada-based Asia Pacific Resources, in 1993 when it signed a survey and production agreement with the Department of Mineral Resources for what would have been the first large-scale underground mine in Thailand.
While exploration was promising, the project ground to a halt around 2003 as the company sought to test Thailand’s new Minerals Act that allowed mining below 100 metres without surface property owner’s consent - up from 350 metres laid down by the 1967 Act. To this day, a production licence has never been issued in the face of opposition from NGOs and local farmers.
By 2006, the Canadians, facing funding pressures, had had enough and sold out to Italian-Thai Development chairman Premchai Karnasutha for US$80 million. News of progress since then has been sparse and Khun Premchai tight-lipped, although industry insiders say work continues on the project.
But hostility to the project by NGOs remains formidable and the activists have made sure farmers have also remained vocal in their opposition to the project, leaving many in the mining industry bewildered.
“There are a range of technological solutions to rehabilitation,” says one. “The opposition just doesn’t make any sense. It is a perfect solution to providing funding for the northeast, the poorest part of the country, and benefits to farmers across Thailand who would not have to rely on imported fertilizer.”
The apparently inexplicable opposition to the project has led many in the industry to suspect spoiling tactics by competitors. Several senior Thai mining company executives pointed to the vast commercial advantages the Udon deposit would have to the more expensive to obtain and further to travel Canadian deposits.
“With our potash so near the surface and so close to China, there would be enormous price advantages,” said one who believes the NGOs were set up, if not funded, by competitors.
While none can provide a shred of evidence to support their suspicions, that such conspiracy theories have become so widespread across the industry, speaks to the level of bewilderment that such a valuable resources that would benefit the whole country can remain unutilised.
Some point to the ASEAN Potash project and the widespread support it receives from locals. This has played to the cynic many miners reveal when they view the inevitable opposition to their plans. “How can one area fully support the project while next door there is opposition. But then one is government-run with little money available for compensation and the other is a private concern and a big fat cow to be milked,” one suggests.
For its part, the anti-potash camp claims that the mine will cause salination on the surface and a range of other problems that must be addressed in a new Environmental Impact Assessment (EIA) that is now needed. The industry claims to have met all concerns and the area will be entirely rehabilitated. APPC says that salt emissions will be less than half Canadian standards
And so that is where the matter now stands.
But the implications for the project go far beyond the potash itself. The world’s greatest mining companies are watching the Udon potash project closely as a test case for whether there is a future in Thailand for international standard mining projects.
Whether one accepts skulduggery among the NGOs and commercial opponents of the Udon potash project or not, Thai politics has unquestionably not helped matters. Since ITD took over APPC in 2006, the political landscape in Thailand has not been what anyone would suggest as stable. Nor has there been a surfeit of politicians in that time willing to put the national interest first.
What is needed is perhaps suggested by the currently defunct Chaiyaphum project, which shows that local consensus and support can be reached if there is a will and national government backing. Set against that, only a satirist likely to suggest a visit by Prime Minister Abhisit Vejjajiva to Isaan, the heart of red-shirt country, to persuade north-easterners that the government was acting in their interests would go anything but badly.
So, until such time as a leader does emerge who can convince the protesters that they will not be disadvantaged, Thailand looks set to miss out on the billions in exports revenue while continuing to import 500,000 tons of potash a year at a cost of US$175 million. BRT

This article was first published in Business Report Thailand, Issue 1, October 2010

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Terrorism, Strike, Riot or Civil Commotion?

Terrorism prosecutions have left businesses without insurance and the government scrambling for a compromise

Photo: Siam Square retailers salvage goods from their shop adjacent to the
Siam Theatre gutted by fire on May 19, 2010 (Business Report Thailand)

"Proposed test cases for affected businesses outside the ‘red zone’ may yet provide precedents, but liability remains contentious." 

Following events leading up to the military crack down of May 19 that left 38 buildings damaged or gutted  across Bangkok’s central business districts, the government has become embroiled in a legal dispute with insurance companies, international re-insurers and unrest-affected businesses. A dispute that has made little progress in four months and seems unlikely to be resolved in the coming year, or years.

With acts or incidents of terrorism specifically excluded from standard insurance policies in Thailand without the purchase of additional coverage, businesses have found their claims for compensation denied by insurance companies on the instruction of their international re-insurers - backers of over 90 per cent of the Thai insurance industry.

This has thrown the government into a protracted fight to try and win, or force, insurance companies to pay compensation to businesses. Sympathetic, but citing Thai law, the insurance market is standing firm.

Stemming from Abhisit’s first reference to terrorism two days after armed ‘black shirts’ confronted Thai troops on April 10th, public disputes have arisen on whether the incidences should in fact be defined as terrorism at all.

Without the government’s cry, incidences would have been narrowed down to standard definitions of strike, riot or civil commotion. Under standard Industrial All Risks (IAR) policy, incidences of strike and riot are covered, while civil commotion is excluded. However, many policies have a civil commotion extension, which means they might also be covered. Yet, in a further twist, this can also exclude ‘uprisings against government.’ 

Not all companies would have IAR policies, but with Thai insurance companies reined in by their international backers, the chance of a negotiated settlement remains remote and insurers say they are still facing pressure by the government to pay. 

Chairing a panel to provide assistance to unrest-hit businesses and individuals, Prime Minister’s Secretary General Korbsak Sabhavasu accused insurance companies in July of exploiting the ambiguity of the term terrorism to avoid payments. Sentiments that Secretary-General Komkai Busaranot of the Office of the Insurance Commission (OIC), the state regulatory body under the Ministry of Finance, seemed to support when prompting businesses to seek compensation from insurance companies through the Right and Freedom Protection Department. Industry insiders also speak of being called to meetings at the OIC - whose stated priority is to compensate unrest hit businesses - with discussions left off the record.

Resolute, Thai insurance companies say they are merely obeying the law and section 33.10 of the Thai Insurance Act 2535 BE (1992 CE) forbids the payment of any benefits outside of a policy. 

The deadlock has left even partially state-backed insurers hanging. Dhipaya Insurance, which insures state enterprises, has reportedly been unable to meet claims by the Metropolitan Electricity Authority, following objections by its re-insurers. In contrast to Central Pattana’s terrorism-insured Central World complex that is currently being rebuilt, the MEA building on Rama IV remains a charred shell.

The cabinet, in an effort to break the deadlock, has proposed tax breaks for the insurance companies, enabling them to write off payments that they make to claimants. Sound in theory, but the precedent in future liabilities leaves the industry wary of such an initiative and though ongoing, the cabinet has yet to pass the necessary resolution.

Against this, Thailand’s insurance industry is projected to grow 18 per cent this year. Within the industry, companies paint a different picture with domestic and foreign re-insurers creating cash reserves in case of future court rulings against them. 

The nature of the incidents can now only be decided by the Thai courts, but faced with damage to its credibility and the ongoing prosecution of red shirt leaders arrested in May, an about face by the government on the incidents’ definitions looks unlikely and the time line of such a ruling is hotly disputed. 

Government officials say that Administrative and Consumer Courts can rule on a case-by-case basis, which could then be settled within a year. The insurance industry, however, speaks only of the Supreme Court with a timeframe of seven years or more speculated in conversations with Business Report Thailand. How this process may be affected by the progress of ongoing separate criminal trials, or indeed a change in administration that might seek to quash or overturn charges of terrorism, remains a wildcard factor.

Proposed test cases for affected businesses outside the ‘red zone’ may yet provide precedents, but liability remains contentious. Though some facilities such as Central World were deliberately targeted - whether by angry protesters or on specific instructions remains uncertain - others may yet have been caught up in opportunistic destruction.  Moreover, in the final military assault, was all damage to buildings caused by red shirts or their sympathizers?  

Four months after the incidents government officials admit, “All the facts are not yet clear.”

Though larger businesses and corporations whose properties were damaged or destroyed on May 19th, accounting for approximately THB 12bn of the THB 15bn (USD 1.2bn) in estimated damages, have terrorism or all risks insurance, the current impasse has predictably hit smaller tenant businesses hardest. The government reported 403 insurances of THB 500,000 or less not covered for terrorism in June and the its committees have approved funds worth THB 8.6 bn to compensate businesses affected by the attacks in May. 

Whilst the government has appealed to insurers’ sense of national reconciliation to expedite payments, many smaller insurance firms cannot afford the outlays without government or re-insurance backing. Larger Thai firms, faced with the prospect of potentially losing large premiums and clients, may yet decide to cover some of the claims. Legally, however, these could not be disbursed under existing policies and the firms would need to absorb the loss.

That these incidents are largely unprecedented in Thailand and that terrorism insurance only debuted on the market six years ago goes some way to revealing the legal issues behind the impasse. The ramifications are not just immediate. Insurance premiums for terrorism coverage in Thailand is now reportedly two to three percent of the insured properties’ value. Globally, the market average is 0.5 per cent. Other international re-insurers are refusing to back new policies until the current issue and legal definition is resolved.  

This poses its own problems. 

Quizzed whether insurers are expecting further violence and claims, one country manager’s response - “Definitely" - was unequivocal.  Yet it seems unlikely that this will be on a par with May’s events. 

Sworn off large scale confrontations, the Red Shirts’ demonstration on September 19th, marking four years since the coup and four months since the crackdown, though large and noisy, was over by 8pm. 

But as explosions continue across Bangkok, the government has little cause to change its views leaving smaller unrest-affected businesses dependent on government hand outs and loans. BRT

This article was first published in Business Report Thailand, Issue 1, October 2010

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Thailand's 3G Debacle

Thailand does not have commercially available 3G right now and nor does the foreseeable future portend a good 3G service. 

"At the same time that the NTC was conducting an international roadshow to attract interest, it was also proposing foreign dominance regulations which would restrict investors’ ability to put its own people into the management of their investment."

3G enters markets with much hype at the best of times. The subsequent reality is usually sobering, but it is nevertheless a technology (although expensive and now with successor technologies which do more) which works.

Thailand does not have commercially available 3G right now and nor does the foreseeable future portend a good 3G service. Don’t believe the claims you read to the contrary!  Unless the appeal decision is somehow overturned, Thai Courts have ruled that the current regulator, the NTC, does not have power to issue new spectrum which would support 3G. Accordingly, the country is left to use 3G on existing, issued spectrum or wait for the new regulator. This is a long way off. 

Some say the whole situation in Thailand is a widely orchestrated conspiracy; others that it is the product of many vested interests acting for their own ends with no overriding, co-ordinating vision or the political will to underpin it. 

What is clear from the debacle is that critical steps were missed in the industry’s development and in the lead up to the auction.

First, Thailand didn’t do its homework and did not implement the essential and planned changes that were staring us in the face. Directly, this has less to do with 3G at all.  

Telecoms started in most countries with government departments managing networks and providing telephony services.  The sector reformed, moving into more competitive structures. In Thailand we started to do that, but did not get far. Various vested interests blocked the way.  In the 1990’s and early in the new millennium, mobile services in Thailand were started by concessions. These were issued to retail providers on different terms. As technology, access to information, society and expectations evolved, it was clear that the unequal and rent-seeking nature of concessions locked in value and also needed to evolve. Thailand had to move to a level playing field, but, today, ‘free and fair competition’ is still an unachieved constitutional requirement. What happened? – As part of the industry’s evolution, the SOEs (CAT and TOT) were allowed to develop the mindset that concession revenue (the income stream moving the enterprises into overall profitability) was some kind of right, and a right which is fiercely clung to under the mantra of acting in the best interests of the enterprise.  

In a globalised industry, we cannot avoid looking at experience elsewhere. Such experience tells us that SOEs need government leaders (not management or other vested interests) to set policy direction, and the government leaders should feel the pressure of user groups wanting better and more cost effective services. Over many years, Thai telecom SOEs have built up a network of supplier and other relationships such that they appear to be locked in at individual levels. How can a state-owned enterprise act to upset the policy direction of the government, which is charged with managing and developing the organs of the state? Unless directed otherwise, the enterprise will surely act in its own selfish best interest and that of its management, and that is precisely what has happened.

Second, for an industry that works in layers, its development has been hampered in terms of both access and culture. There should be cost-based ways in which infrastructure layers are accessible to others who do not want to build their own physical networks. But the push to make this happen has always been weak, and the resistance strong. Furthermore, change of this scale requires the acceptance that not everyone will agree with every move or get a seat at the front table in negotiations. In a society in which the overriding and commanding interests should be those of the economy and the country as a whole, protecting the management interests of some SOEs does not make sense.

Thirdly, Thailand rushed it. Its telecoms sector was nowhere near ready structurally for 3G and there was policy confusion. Was it rushed because some NTC commissioners were due to retire at the end of September and the spectrum needed to be issued while there was still a full deck, were there other intentions

or was it because of the imminent passage of the new frequency legislation (which would establish a merged regulator, the NBTC, and require the regulator to follow policy)? Who knows exactly. The situation was, however, rife with confusing and conflicting policy messages. At the same time that the NTC was conducting an international roadshow to attract interest, it was also proposing foreign dominance regulations which would restrict investors’ ability to put its own people into the management of their investment.

Fourthly, there has been a dearth of investment in the people, businesses and organs of state to fulfill the roles under new terms. Rushed, tick-in-the-box, compliance mentality approach to public hearings does not cut it. Ad hoc and token public hearings are no way to get the kind of industry and citizen education needed to understand and support new systems.  

And finally, there was no-one demonstrably in charge of, and who understood, the whole game. The Prime Minister acknowledged the NTC’s independence (it reports to the Senate), and no-one in cabinet ensured that the necessary steps were taken. The NTC and the SOEs played their own game. The private operators had to do as they were told, within set constraints. 

Yet for all the hype, 3G, a data-based mobile broadband technology and the next evolutionary step from 2G, is not the answer to the nation’s broadband requirements. It is just one technology. The answer lies in a combination of wireline and wireless technologies, with a fixed backbone, and future planning. 

3G does allow greater bandwidth usage, greater interactivity and is in some cases a broadband solution for its areas of coverage. 

In the 3G grouping there are enhancements, such as those dubbed 3.5G. These are an industry standard, and with a base station’s downlink (download if you like) rated at 42 Mbps, effective user rate might be around 4-5 Mbps. However, coverage is generally a subset of 2G and ‘3.9G’ looks like a marketing gimmick to make Thailand look more advanced than it is. 

And whilst Thailand dithers with 3G, many are moving to 4G. Yet the proposed 3G spectrum issuance here does not provide an evolutionary path to 4G. Should we forget about 3G and skip straight to 4G? The answer is about development relativities – will Thailand be able to get ready, turn all the stakeholders around, will handsets be available, will other countries with 3G and 4G support Thai out-roamers? Overall, skipping 3G is not the best solution. Thailand should now be focused, as the overriding priority, on structural changes such as concession conversion, and in making sure that there is a firm path to the development of 4G in parallel with other fixed line and nomadic wireless service technologies, such as WiFi.

Thailand seems to be rushing to enable TOT to provide 3G via some virtual mobile network operators (MVNOs) and locking in the powerful positions of both SOEs. TOT has no 2G service of its own, no 2G roaming agreement and no usable interconnect. Thus its users do not currently have any means to do what is generally expected of a mobile service. Will TOT be allowed to do all this? And largely outside any regulatory environment?  As the Thai parliament continues to argue over the revised frequency bill, (where China was able to wrest something similar from its military and implement over ten years ago), moves to create new monopolistic broadband structures, ostensibly relying on trends toward government largesse, are, it seems, still being pursued.

Unfortunately, the vision of a competitive telecoms sector, providing useful and advanced services for business, individuals, government and most importantly, for a more meaningful role in the economy, is far from being realized. As is a good 3G service. BRT

This article was first published in Business Report Thailand, Issue 1, October 2010

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