ASIA HAND Trial by fire in Thailand By Shawn W Crispin
BANGKOK - Two weeks after then-prime minister Thaksin Shinawatra's government
introduced in early 2003 a new excise tax regime for telecom operators, aimed
ostensibly at leveling the competitive playing field before World Trade
Organization mandated market liberalization, his cabinet enacted a resolution
that allowed local operators to deduct the tax from their contractual
obligations to the state.
Critics at the time claimed the tax policy, which the government could have
raised arbitrarily as high as 50% on prospective new foreign operators, in
actuality deterred foreign competition from entering the market and allowed
incumbents - including Thaksin's family-owned Advanced Info Services (AIS) - to
save cash and
consolidate their positions over a four-year period that market analysts now
refer to as a "golden age" for Thai telecoms.
When the tax was implemented in January 2003, mobile phone penetration rates in
Thailand hovered around 35%; when the tax regime was abolished in 2007, soon
after Thaksin's government was toppled in a military coup, the usage percentage
had climbed to 84%, representing high growth and profits that were captured by
a small handful of politically connected domestic players while foreign
operators shied from the market with the new regulatory uncertainty.
The alleged policy corruption, implemented, critics say, specifically to
benefit Thaksin's family-owned businesses at the expense of their contractual
obligations to the state, rests at the heart of the closely watched court case
in Bangkok that recently concluded hearings and which many expect will result
in the permanent seizure of 76.6 billion baht worth (US$2.3 billion) of the
exiled premier's and family's assets now frozen in Thai banks. The highly
anticipated February 26 verdict has already weighed against political stability
and could trigger volatile new street protests in the weeks ahead.
Former information communications and technology minister Sittichai
Pookkaiyaudom, who served under the 2006-07 coupmaker-appointed government,
estimated in his testimony last week that Thaksin's excise tax policy cost the
state around 60 billion baht in lost revenues. He did not offer any statistical
analysis to back that calculation. Combined with the 16.5 billion baht tax
exemption Thaksin's government handed to his family-owned Shin Satellite on
foreign-earned profits, the alleged corruption tally conveniently equates to
the 76.6 billion baht in question.
Thaksin's defense has throughout maintained that the charges are politically
motivated and legally invalid. His lawyers have argued that both the excise tax
policy, implemented through executive decree, and the cabinet resolution that
allowed operators to deduct the tax from their concession payments to the state
were deemed legal by the Constitutional Court while Thaksin was in power and
that those rulings should be considered final. They've also argued preemptively
that if Thaksin is found guilty of corruption, the court has no legal basis for
seizing all of his assets because much of the money was earned legitimately
before he took the premiership in 2001.
Those funds are believed to be the bulk of the former telecom tycoon's still
substantial holdings. In a recent interview with the Times of London, Thaksin
said that he still held between US$100 million and $200 million offshore and
was currently investing in gold mines in Africa. Thaksin has consistently
denied bankrolling anti-government protests, including last April's riots in
the capital city when from abroad he called for a "revolution", but many
analysts believe that future stability in Thailand is contingent largely on
Thaksin's access to funds.
The Thaksin-aligned, red-shirted United Front for Democracy Against
Dictatorship (UDD) contends it is fighting for equality and democracy on behalf
of the country's poor grassroots population. But the protest movement has in
recent weeks ramped up its criticism of perceived double standards in the
justice system, conspicuously coinciding with Thaksin's asset-case verdict. The
exiled former leader cryptically said this week in a Thai-language message to
his supporters that "there can be no peace in a society without justice".
Questioned earlier this month about the post-February 26 security situation,
Prime Minister Abhisit Vejjajiva told foreign reporters on January 14 that he
expects Thaksin and his supporters "will try to up the game" and that "we can't
rule out attempts at violence". One of Abhisit's top policy advisors speculated
in a January 14 conversation with this correspondent that Thaksin could try to
"purchase" a coup among disgruntled soldiers to pre-empt an expected guilty
verdict.
The advisor cast the warning the same night that unknown assailants launched
M79 grenades at the Defense Ministry and army commander-in-chief General
Anupong Paochinda's offices. UDD spokesman Sean Boonracong said before the
protest group's self-hyped "million man" rally planned but abruptly cancelled
for the capital city in late November that protestors would be organized to
surround army headquarters, which he said the UDD perceived as the "center of
power" of Abhisit's government.
This week, the UDD announced plans - in the spirit of its double standards
campaign - to hold a rally in front of Bangkok's international airport, raising
fears of a repeat of the devastating eight-day occupation and closure of the
facility by a rival, anti-Thaksin protest group, the People's Alliance for
Democracy (PAD), in November-December 2008. The UDD has carped that PAD leaders
have not been prosecuted for the crime while the UDD leaders were arrested and
charged after the April riots.
Empty talk
Behind the scenes, a dialogue mediated by a Swedish parliamentarian
interlocutor between the military, palace and Thaksin's camp has after several
months failed to make headway towards reconciliation, according to a European
diplomat familiar with the process. He believes that the back-channel
discussions were likely initiated to hold Thaksin at bay and hopeful that he
might recover his assets through a Thai-style compromise, while the military
and its preferred Democrat Party-led coalition government instead consolidated
their power.
Some others see significance in the fact that the UDD has now resumed its
criticism of King Bhumibol Adulyadej's royal advisory Privy Council, including
public allegations that former army commander and military appointed prime
minister General Surayud Chulanont illegally owns land in a state forest
preserve. The UDD had earlier attempted to drive a wedge between the highly
revered and now ailing 82-year-old Bhumibol and his top advisors, a tactic that
has broken past taboos against criticizing privy councilors and potential
destabilizing implications for the royal succession. (See
Thailand mulls royal succession Asia Times Online, October 17, 2009.)
Beyond the spin, threats and grievances, the prosecution in the trial has made
perhaps the strongest legal case yet against Thaksin - arguably more so than
the 2008 criminal conviction for a shady land deal between his government and
former wife that drove him into exile. Apart from the excise tax policy
charges, the state prosecution has also focused on the unusual eight-year tax
holiday given in November 2003 by the Prime Minister's Office-run Board of
Investment (BOI) to Thaksin's family-owned Shin Satellite to promote its
overseas operations.
Critics of the policy have questioned why the government felt compelled to
assist the private company's expansion when, by the terms of its state-granted
operating concession, it was obligated by law to launch satellite services.
They've cited claims made in the press by Shin Satellite's chief executive
officer that its IPSTAR satellite was 30 times more efficient than conventional
satellites, raising questions about why the BOI needed to support the company.
Thaksin was the BOI's chairman when the estimated 16.5 billion baht tax break
was first announced in November 2003, but he was absent from the meeting where
the waiver was decided.
Court-called witnesses have said that those and other alleged preferential
policies caused Thaksin-linked companies - including AIS, Shin Satellite, Shin
Corporation, iTV and Thai Military Bank - to outperform the stock market
average in 2003 by 141%, as investors cashed in on what market analysts then
referred to as the "Thaksin premium". The five companies accounted for nearly
two-thirds of the total 320 billion baht market capitalization gains recorded
on the Thai bourse that year. The Shin Corp famously sued a media activist for
$10 million in damages after she said in a Thai language newspaper report that
the company had directly profited from Thaksin's policies.
An August 2008 academic paper distributed by Japan's Hitotsubashi University's
Institute of Economic Research and entitled "Big Business Owners in Politics"
confirms with hard data those claims. [1]
Using advanced statistical methods, the data-based research found that after
Thaksin took political office in 2001, his family's businesses achieved greater
market valuation than other firms. The research also found evidence to suggest
that weak institutions in Thailand were "unable to stop" Thaksin and other
politicians from channeling "various forms of government support to firms owned
by their families" and that "these policies appear to have side effects that
further distort[ed] market structure".
While the UDD complains about judicial double standards, some say it is ironic
that Thaksin's lawyers are in his defense relying chiefly on the sanctity of a
previous Constitutional Court decision that was handed down while he was still
in power. It was the same group of judges that ruled in 2001 to overturn a
National Counter Corruption Commission decision that Thaksin had intentionally
concealed his assets in a disclosure statement legally required of elected
officials when he listed millions of baht worth of personal funds in the names
of his maid and driver. In the run-up to his acquittal, exemplifying the same
legal double standards that the UDD is now campaigning against, Thaksin
effectively admitted his guilt by saying his false disclosure was "an honest
mistake".
Then as now, Thaksin's supporters put pressure on the legal proceedings through
threats of chaos and street violence should the ruling go against him.
Significantly, Abhisit and his top deputies have stood firm by rule-of-law
arguments in settling the case, despite the UDD's and Thaksin's apocalyptic
threats.
Abhisit's advocates note that he has allowed members of his coalition
government, including from his own Democrat Party, to fall on their swords over
recent corruption scandals that through public disclosure and media attention
have tainted his administration's image and credibility. He has also stood by a
Forestry Department order issued on Wednesday that royal advisor Surayud must
vacate the forest preserve land he apparently illegally owned.
With those rule-by-law precedents now in place, it seems likely and just that
Thaksin and his billions will be next in line.
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