The Nation (Bangkok) | 26.09.2006
Thaksin regime’s business networks
An extensive study by a Chulalongkorn University economy lecturer has established what could be complete picture of the extensive network of business empire of the Shinawatra family.
Phasuk Pongphaichit, the lecturer, gave a lecture on money politics in a seminar held by Economic Politics Center of Chulalongkorn late last year.
Her study has found that ousted prime minister Thaksin Shinawatra has created wealth for him, his relatives and his political affiliated during the past five years by practicing corruption in the policy level, such granting business privileges, reducing taxes and concession fees for his affiliates and getting rid of business rivals as well as trading national interest with their groups’ business interest. They also set up firms to bid and win state projects and use the stock market as tools to increase the values of their firms.
Excerpts of her lecture:
Since Thaksin took office as prime minister in 2001, his government issued several economic policies, which directly benefited listed firms with close connections to the prime minister and Cabinet members. The policies also benefited and protected businesses of the politicians and their affiliations. Such policies included tax privileges, deduction of concession fees, blocking new business rivals to enter market, and delaying policies which could affect businesses of the Thaksin network.
Businesses, which are taking part in the operation to eat up the country in all possible means, include businesses belonging to Shinawatra family and relatives, Mahakijsiri family, Jungrungreangkit family, Maleenon family, Chearavanon family, and Asavabhokin family. All of the families are on the top list of richest families in Thailand.
Shin Corp receives a lot of benefits
During the past over five years, the Thaksin government issued several policies and measures to benefit and protect telecom businesses of Shin Corp in several cases:
First, the issuance of excise decree on telecom businesses was a tool to protect the businesses of Advanced Info Services and other firms in the same type of businesses from competitions. That is, the decree requires new operators to pay the excise taxes in full while current telecom operators can deduct their concession fees from the amount of excise taxes they have to pay. The question is which law the government invoked to exempt the current telecom operators from having to pay excise taxes in full.
Second, the government allowed AIS to deduce the expenses of roaming services before sharing its revenue with the state. This allowed AIS to share less revenue with the state. AIS was also benefited from the amendment of its contract with the TOT Plc by allowing AIS to pay only 20 per cent of its revenue from prepaid phone services instead of 25 per cent to TOT. All of these caused the state to lose its revenue by over Bt1.6 billion. AIS also benefited from the reduction of import tariff on mobile phones from 10 per cent to 0 per cent. The government cited regulations of the World Trade Organisation to provide the tax reduction. Moreover, the government amended its regulations to allow permanent officials from C8 to C11 to reimburse their phone expenses up to Bt4,000 a month, compared with Bt1,000 in the past. There are about 40,000 officials who enjoy the benefit.
Third, the exemption of Shin Satellite from paying taxes on its revenue worth Bt16.349 billion generated from its foreign customers of its IP Star satellite was unjustifiable. This is because the exemption did not lead to any investment in Thailand and Thai people did not receive any benefit. Only the foreign customers and share holders of Shin Satellite received the benefits.
Fourth, the government transferred the business risks of Shin Satellite from the firm to the Finance Ministry by having the Export-Import Bank of Thailand grant a 12-year-term soft loan of Bt4 billion to the Burmese government. The loan was used by the Burmese Post and Telecom Ministry of Burma to buy telecom equipment to link with IP Star to use the satellite’s services to provide mobile phone and broadband Internet services. The government had the Finance Ministry guarantee the loan of of the Ex-im Bank, instead of Shin Satellite.
Fifth, the Thaksin government tried to protect its telecom businesses by not opening up the telecom industry in the country. Instead, it opened up other sectors in exchange for liberalization of services which would benefit businesses of government politicians. An example could be seen in the free trade agreement between Thailand and Australia. The Thaksin government opened up the cattle indusry in Thailand in exchange for telecom and auto spare parts industries in Australia. This allowed Shin Satellite and businesses of the Jungrungreangkit family to benefit at the harship of Thai cattle farmers.
IP Star will also benefit from FTA agreements with India and China. Analysts of the Stock Exchange of Thailand said Shin Satellite’s revenues would tremendously increase once India and China use transponders of IP Star. It was expected that IP Star’s service fees from the two countries would be worth about Bt15 billion.
Sixth, the government helped Tele Info Media, which changed name from Shinawatra Directories, to increase its business chances from phone number inquiry services by exempting from contract’s requirement to print White Pages phone books.
Seventh, the Thaksin government helped AIS and Shin Satellite by failing to enact a competition act to prevent monopoly and regulate merger.
Eighth, after Shin Corp held stakes in iTV, the television was allowed to pay much less concession fee or only Bt150 million per year for 20 years. This caused the sate to lose its revenue for Bt17.43 billion. The government also allowed iTV to change its programme content to have more entertainment programmes than news and documentary programmes, and thus allowing it to have more income from commercial advertisement.
Ninth, the government’s open sky policy allowed Shin Corp to invest in Air Asia, which is a low-cost airline. The government allowed Air Asia to open new domestic and international routes in overlapping of the routes o Thai Airways International. This allowed Air Asia to see income growth worth Bt3 billion at the end of 2005, compared with the shrinking income of THAI. THAI reduced its domestic and international flights and cancelled some of its route although the routes were profitable for the airline, amid allegations that it was forced by the government to make way for Air Asia.
Tenth, the government launched real estate development projects to benefit daughter companies of Shin Corp. For example, the Bangkok Boulevard project of SC Assets Plc on Ram Intra-Ring Road-Navamin roads benefited from the a Cabinet resolution on July 4 2003 to cut a new road from Ratchadapisek to Ram Intra at the kilometre marker No 4.5 The new road immediately increased the value of the plot of SC Assets, turning it from a plot with no access to a golden plot.
It is known that Pojaman Shinawatra, the wife of Thaksin, likes to buy up land. Moreover, she managed to buy land at cheap prices. For example, she bought a 33-rai plot opposite from the Korean embassy near Thailand’s Cultural Centre from the Thai Assets Management Corporation at the price 50 cheaper than its market price. This caused the state to lose Bt715 million from what it should have received for the land price. The plot was sold at the price Bt700 million lower than the price offered in the first round of bidding and the government did not received land transfer fee worth Bt15 million. She also owns Alpine Golf Course worth Bt747million, which Thaksin bought at very low price amid allegations that he cheated a temple out of the plot.
Moreover, Shin Corp also expanded its business to personal finance business by setting the Capital OK and providing personal loans. The firm uses customer database of AIS and obtains fund from DBS Singapore.
Thaksin’s son, Panthongtae Shinawatra, also set up an advertisement agency to take up a Bt90 million-worth concession in the compound of subway system.
Members of Shinawatra-Wongsawat families expand businesses to take all
Thaksin’s close relative, who became rich overnight, included his sister, Yaowapha Wongsawat. She set up M Link or M Link Asian Corporation Plc, which is a main business of her family. The firm generated annual revenue worth several billions of baht for the Wongsawat family.
M Link has expanded its businesses by buying stakes in several firms, and thus allowing the Wongsawat family to expand its business empire to other businesses on top of mobile phone selling business. Key firms, whose major shares had been bought by the Wongsawat family, are companies which compete for government projects.
The M Link empire of Yaowapha set up several more daughter companies, including Telemax Asia Corporation, M Shop Mobile Ltd and Trunk Radio, which won a project worth Bt226 million from the Aeronautical Radio of Thailnd Ltd. M Link also invested in Portal Net Co Ltd to bid for telecom projects from government agencies and private firms.
Among key projects it has won was a project to lease computers and software solution worth Bt3.192 billion to Provincial Electricity Authority and a project to provide public telephones with coin and debit card slots to TOT Plc.
The Wongsawat family also bought stakes of Win Coast Industrial Park, which operates logistics business and receives support from the government.
Moreover, the Wongsawat family also joined hand with Wilailak family, the owner of Samart Group. The two families bought 50 shares of ASCON Construction Plc, which announced its policy to bid for government’s mega projects. It aims to win electric train project worth several hundreds of billions of baht and a Bt24 billion worth project of the Treasury Department to build a government centre in Chaeng Wattana area. ASCON is also interested to be a sub-contractor of Shino-Thai to build the Airport Rail Link worth Bt12 billion.
Beside, Shinnisha Wongsawat, a daughter of Yaowapha, and Phayup Shinawatra, the brother of Thaksin, received quotas to buy shares worth Bt500 million from Strip Mill, a major steel maker of Somsak Leesawattrakul. Strip Mill received a hair-cut debt reduction worth Bt56.55 million from its debt burden of Bt63.857 billion by the Assets Management Corporation, and bringing down its debt to only Bt7.3 billion after it provided shares subscription quotas Shinnisha and Phayup as well as selling shares at cheap prices to relatives of Thai Rak Thai politicians.
The Wongsawat family also bought shares of Traffic Corner, a media content firm which bids for projects from government agencies. Eventually, the Wongsawat family sold a part of its Traffic Corners shares to the Wilailak family.
Traffic Corner won a concession from the Public Relations Department to produce TV programmes for NBC cable TV channel, which is aired free of charge for the first six months. The department regards that NBC is a trial channel. Traffic Corner also won concessions of three cable channels from Channel 9 as well.
Traffic Corner also won a concession from the Tourism Authority of Thailand to install advertising media on airport trolleys in four airports for three years. The project is worth about Bt100 million.
In short, during the term of the Thaksin government, the Wongsawat family has depended on the political power to expand its business empire to have major shares in nearly all of business sectors, like what Shin Corp had done.
Phayup Shinawatra, Thaksin’s brother, is another Shinawatra family member, who joined the operations in taking over Thailand. Phayup is often suspected of manipulating share prices and the Securities and Exchange Commission always keeps a close watch on him. Shares of firms, which he has bought, often saw irregular movements of their prices while he was holding the shares. Such firms included Picnic, Eastern Wire and EMC.
Phayup was suspected of helping share prices of firms with political affiliations to go up higher, compared with shares of firms without political affiliations.
Mahakijsiri-Jungrungreangkit receive debt-tax reduction
A group of businesses owned by Prayuth Mahakijsiri, a financier of Thai Rak Thai, also received a lot of benefits from the government. Thai Film Industry of Mahakijsiri family bought the stakes of Thai Copper Industry, which benefited from debt restructuring approved by the Assets Management Corporation. It was given a debt reduction worth Bt9.377 billion from the total amount of debt worth Bt11.833 billion, leaving a debt of only Bt2.456 billion.
Moreover, the government’s policy to increase the price of cold-rolled steel from Bt88 per kilogramme to Bt105.94 per kg allowed the firm to have a profit worth Bt1.395 billion in 2003, compared with its previous loss of Bt1.233 billion.
Thai Nox Co Ltd of Mahakijsiri family also benefited from the government’s policy when the Thaksin administration increased the import tariff of cold-rolled stainless steel from five to 15 per cent. The tariff hike prevented foreign rivals from competing in Thailand and allowed Thai Nox, the only manufacturer of cold-rolled stainless steel, to benefit from the sale in the country.
In 2005, Prayuth Mahakijsiri became one of the top ten businessmen with highest values of share prices under ownership. The share prices of his firms shot up by 76 per cent with a total value of Bt3.194 billion.
Meanwhile, the Jungrungreangkit family has become rich from holding stakes in PTT Plc and from holding stakes in firms which saw their prices climbing up fast, such Picnic and Eastern Wire.
The Jungrungreangkit family carries out businesses of making parts for vehicles and motorcycles. The Jungrungreangkit family together with the Jurangkoon family enjoyed benefit from the government’s policy to turn Thailand to Detroit of Asia. The Jurangkoon family has a lot of businesses under its group, including Thai Summit, which produces parts for Toyota.
Following the inking of FTA contract between Thailand and Australia, the automobile and parts manufacturing business of the Jungrungreangkit family was the second group to benefit after the telecom empire of Thaksin. And the group, which stands to lose most, is the group of over 300,000 cattle farmers for whom the Thaksin government did not provide any measure to help them at all.
Asavabhokin family becomes richer
Anant Asavabhokin, president of Land and House Plc, is another financier of the Thai Rak Thai. He is a close friend of Boonklee Pungsiri of Shin Corp since the two studied in the Chulongkorn University’s Faculty of Engineering.
During the term of Thaksin govenment, Anant became one of the richest businessmen in term of values of shares in the stock market. Anant became richer by Bt2.588 billion or 21 per cent compared with 2003 and the Asavabhokin family climbed up to the second richest family after the Shinawatra family in term of share prices.
The Asavabhokin family was a graphic example that share prices of firms with connections to politicians in power would see their value increased.
Anant also received a license to operate the Land and House Bank. Moreover, Anant was entrusted by the government to sit on a committee to supervise power pricing and policy after Shin Corp became interested in investing in electricity businesses by setting nominal firms to invest in such businesses.
The Chearavanont family benefited from the government’s cover-up of bird-flu spread in Thailand, allowing the family to continue its chicken meat exports for a while. But the cover-up caused the spread to worsen, causing deaths among Thais.
Businesses of the Chearavanont also expanded a lot as allies of the businesses of politicians in the Thaksin government. For example, UBC was allowed to have advertisements and chicken and prawn exports were also benefited from FTA contracts. The family also won concessions to provide seedlings, such as rubber seedlings, to the Agriculture Ministry. Beside, the telecom business of the family expanded a lot especially after Shin Corp was sold to Temasek Holdings of Singapore.