ARGC Task Force on Corporate Governance of SOEs The Case of Thailand

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ARGC Task Force on Corporate Governance of
SOEsThe Case of Thailand
Dr. Pallapa Ruangrong

• State Enterprise Policy Office, Ministry of
  Finance, Thailand
• 20 May 2005

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CONTENT
I. Thailand Economic Outlook II. The Roles of
SOEs in Thai economy III. SOEs Financial Snap
Shot IV. SOEs Governance Structure in Thailand V.
Future Governance Structure of SOEs
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I. Thailand Economic Outlook
Thailand Real GDP Growth, GDP and Public Debt

• Thailand GDP is represented approximately
  157,000 M.USD in 2004 that increasing at average
  5 during 1999-2004
• Real GDP Growth in 2004 is 6.3,slightly
  decreasing from previous year.
• Public debt is approx. 75,000 M.USD in 2004 that
  slightly increasing about 0.8 per year since
  1999
• The proportion of Public Debt and GDP is 47.67
  in 2004 that reduce from 62.5 in 1999 since Thai
  government has released the Fiscal sustainability
  Obligation to keep this rate not exceed than 50.

of GDP
Million USD
Source NESDB, BOT, SEPO Real GDP
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II. The Roles of SOEs to Thai Economy
After Thailand economic recovery began in 1999,
State Owned Enterprises (SOEs), One of the
economic stimulator, has performed as the key
role for Thai government to recover its economy.
Apparently, the developing SOEs performance has
become one of economic development strategy as a
substantial provider for the fundamental economic
infrastructure in order to regain the prosperity
of Thai economy, to contribute the
competitiveness for private sector and to ensure
the sustainable in Thai economy.
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II. The Roles of SOEs to Thai Economy
SOEs are now playing the important roles to
contribute both minimizing damage from economy
recession and maximizing prosperity of Thai
economy. Thus the roles of SOEs have many several
issues as followed 1. Providing fundamental
economic infrastructure such as Transportation,
Energy, Water Supply and Telecommunication. 2.
Contributing for the country competitiveness
provide the basic strength for private sector and
real sector productivities with both economic and
social values. 3. The Source of Funds for
supporting fiscal budget Both remittance and
income tax from SOE is contributed for the
sustainable prosperity of fiscal budget. 4. The
enormous source of employment approximately
280,000 employees represented as 12 of total
government employees.
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III. Thailands State Owned Enterprises Structure
MOF
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Energy
Transportation
Infrastructure
Telecomm.
Industry
Agriculture
Service
Social Technology
Financial

• There are 9 sectors and 60 SOEs with 6 Listed
  companies in 4 sectors
• State ownership is classified into three
  categories
• Full ownership (100)
• Majority Shareholder (more than 51)
• Minority Shareholder (less than 51)/Portfolio
  Investor

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III. SOEs Financial Performance
Asset and Debt in 1999-2004
Million USD

• SOEs Asset value 135,000 M.USD. in 2004,
  increasing at average 7 per year since 1999
• SOEs Debt value 103,000 M.USD. in 2004,
  increasing at average 5 per year since 1999

Revenue ,Expense and Net Income in 1999-2004
Million USD
Million USD

• SOEs Revenue value 45,000 M.USD. in 2004,
  increasing at average 8 per year since 1999
• SOEs Debt value 38,000 M.USD. in 2004, increasing
  at average 8 per year since 1999
• SOEs Net Income value 4,300 M.USD. in 2004,
  increasing at average 4 per year since 1999

Source SEPO
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III. Thailands State Owned Enterprises listed
companies
Thailand SOEs Privatization History

• There are 6 SOEs listed in Stock Exchange of
  Thailand (SET)
• SOEs Portfolio represented 25,000 M.USD. or 21
  of Thailand Stock market Capitalization (110,000
  M.USD) at the end of 2004

• TOT (Telecom)
• CAT (Telecom)

• Thai (Transport.)
• KTB (Bank)
• PTTEP (Energy)
• BCP (Energy)

• MCOT (Telecom)

• AOT (Transport)

• PTT (Energy)

• Source SEPO
• , TOT CAT are planning to distribute shares
  in 2005
• BCP status is no longer SOE

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III. Thailands State Owned Enterprises listed
companies

• PTT is Thailands fully integrated oilgas and
  petrochemical complex, with a fully-fledged
  operation covering upstream (exploration and
  production), midstream (refining and production
  of olefins feedstock) and downstream (retail oil
  distribution).

PTT Public Limited Company (PTT)

• Thai Airways International Public Company
  Limited is the national carrier. It operates
  domestic, regional and intercontinental flights
  radiating from its home base in Bangkok.

Thai Airways International (THAI)

• Airport Authority of Thailand is the operator of
  national airports of Thailand. There are 5
  airports under AOT, locating in Bangkok, Chiang
  Mai, Hat Yai, Phuket and Chiang Rai.

AOT Public Limited Company (AOT)

• MCOT is a mass communication operator. Its
  service include Television operators, Global
  television network, radio and news
  entertainment.

MCOT Public Limited Company (MCOT)
Krung Thai Bank Public Limited Company (KTB)

• Krung Thai Bank is financial assistance service
  provider.

• PTT Exploration and Production Company Limited
  or PTTEP, has the mission to explore, develop,
  and produce petroleum reserves to maximize
  Thailands highest possible benefit from energy
  resources.

PTTEP Public Limited Company (PTTEP)
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III. Thailands State Owned Enterprises listed
companies
Holding by PTT
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IV. Current Governance Structure
Ministry of Labor

• These entities exercise state ownership through
  different laws and registrations governing them.
• There are three areas of monitoring
• Employment
• Finance and Accounting
• Management

Budget Bureau
SOEs
Line Minis try
MOF
Audit Office
NESDB
Committee

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IV. Current Governance Structure Rules and
Regulations

• (Full Ownership)
• Employment
• Act on Standards Qualifications for Directors and
  Employees of State Enterprises
• Act on State Enterprise Labour Relations
• Act on Offense of Employee in State Organization
  or State Agency
• Cabinet Resolutions
• Finance and Accounting
• Act on Public Debt Management
• Organic Law on State Audit
• Regulation on Accountency and Finance of State
  Enterprise
• Regulation on State Enterprise Investment Policy
• Regulation on State Enterprise Internal Audit
• Cabinet Resolutions

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IV. Current Governance Structure Rules and
Regulations

• (Full Ownership)
• Management
• Law on State Enterprise Establishment
• Act on Private Participation
• Regulation on Procurement
• Regulation on the Disposal and Purchase of
  Shares of the Government
• Cabinet Resoultions

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IV. Current Governance Structure Rules and
Regulations

• (Majority Shareholder)
• Continue to follow some of the State Enterprise
  Laws and Regulations such as Organic Law on State
  Audit, Act on Standards Qualifications for
  Directors and Employees of State Enterprises,
  Regulation on State Enterprise Investment Policy,
  etc.
• Comply with Corporatization Act and Commercial
  Act
• SEC Rules and Regulations
• (Minority Shareholder)
• Follow Commercial Act and SEC Rules and
  Regulations

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IV. Current Governance Structure Roles of
Ministry of Finance

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V. Future Governance Structure

• We are studying the possibility of establishing a
  State Holding Company to centralize decision
  making process.
• Controlling SOEs with more efficient and
  effectiveness, (there are different objectives of
  SOEs)
• Achieving of synergies through integration within
  a given sector or activities
• Being as the tangible arm-length management of
  SOEs
• Increasing financial returns to governments
  investment in SOEs
• Entrusting the task of rescuing loss-making SOEs
• Increasing general public ownership in SOEs
• Undertaking the states representative in SOEs
  until their divestiture to private owners

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V. Future Governance Structure

• The government has ranked good governance as its
  top priority agenda.
• Thailand has conducted Report On Standard and
  Codes (ROSCs) self-assessment Questionaire on
  Fiscal Transparency issued by IMF.
• Good Governance will be used as one of the
  criteria of selection for SOE Awards Night .

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Thank You