ECONOMY: Thai Power Utility Privatisation Awaits Court Ruling

By Marwaan Macan-Markar Reprint | | Print |

Marwaan Macan-Markar

BANGKOK, Nov 10 2005 (IPS) - A master plan that the Thai government has drawn up to privatise the country’s state-run power utility faces its litmus test in a Bangkok court room next week.

The administrative court is due to deliver its verdict on Tuesday in a legal battle, initiated by a coalition of anti-privatisation campaigners against the executives of the Electricity Generating Authority of Thailand (EGAT).

A ruling on Nov. 15 in favour of privatisation would mean that the plans to list EGAT on the Thai stock exchange on Nov. 30 could go ahead.

According to EGAT’s executives, there will be an initial sale of 1.2 billion shares, of which 622.5 million shares will be available for retail investors and the rest divided between local and foreign institutional investors.

The government of Prime Minister Thaksin Shinawatra has been hoping to raise 1.8 billion US dollars by registering EGAT as a public company on the stock exchange.

Yet, the case currently being heard in the court brings into relief the many criticisms that have dogged this privatisation initiative, among which has been a growing mistrust of the Thaksin administration.

”The public uncertainties and scepticism over state enterprise privatisation remain as strong as ever,” the ‘Bangkok Post’ newspaper commented in an editorial on Thursday. ”What is evident is that Mr. Thaksin and his government have failed to convince the public that state enterprise privatisation is truly in the country’s best interests.”

According to Rosanna Tositrakul, director of the Confederation of Thai Consumers Organisation, the court offers the last chance to expose the ”illegal” measures pursued by the government to proceed with the privatisation of EGAT. She was referring to the two decrees that gave the licence to transform EGAT into a public company.

”We have to fight to safeguard public benefits for the people,” Rosanna, whose group brought the current case to court, said in an interview. ”The government has not listened to the objections against this privatisation revealed during the protests and the social movements in the past.”

Thai economists critical of the deal, have reminded the government of the fact that EGAT has enjoyed a good record of efficiency and is one of the more profitable state-run public utilities.

”The government wants to privatise EGAT because it would easily pave the way for other state enterprises to be privatised,” Sirichai Mai-ngam, head of the State Enterprises Workers Relations Confederation, a leading national labour union, told IPS. ”The prime minister knows how significant this deal is.”

In February 2004, the Thaksin administration was buffeted by an outpouring of public protests, led by EGAT’s trade union and the labour activists from Thailand’s other state enterprises. These protests, which continued for weeks, compelled the government to go slow on its privatisation drive.

The plans to privatise EGAT are part of the Thaksin administration’s vision to hand over nine leading state enterprises to the private sector. Among the public utilities destined for such change are the Metropolitan Electricity Authority, the Metropolitan Waterworks Authority and the Government Pharmaceutical Organisation.

The pressure on the Thai government to sell its state enterprises comes from the conditions imposed on Bangkok by the International Monetary Fund, as part of the bailout package in the wake of the 1997 financial crisis.

The concern that the public stands to lose when the state-run power monopoly is transformed into a private-sector monopoly is compounded by the government’s reluctance to establish an independent regulatory body to monitor the deal and prevent abuse by the new company.

”Right now there is no mechanism to prevent excessive profit making or manipulation of share prices in this planned privatised power monopoly,” Chuenchom Sangarasri Greacen, an energy researcher, said during an IPS interview. ”This is very scary and is a licence for abuse.”

By contrast, in other Asian nations like the Philippines and South Korea, where state-run public utilities have been transformed into private companies, regulatory bodies have been part of the equation. ”This is normally the case and you find it in Europe, in the United States and in South America,” added Chuenchom.

Such worries are with reason, given the questionable ways in which shares were sold when the country’s lucrative petroleum authority was privatised. A privileged few bought all the shares in some 70 seconds in October 2001, the first year of the Thaksin administration.

In the past three years, according to researchers, the privatised petroleum authority has seen profits increase by 500 percent. Yet, the consumers have had to shoulder mounting bills due to rising oil prices and the Thai tax payer had to bear the burden of the government’s oil subsidy.

”We made a big mistake with the privatisation of the petroleum authority. The government has still to appoint an independent regulator,” says Chuenchom. ”We cannot afford to repeat this error a second time with EGAT.”