Energy Industry Liberalization and Privatization (Thailand)
Encyclopedia
The management of energy in Thailand
has been in a process of liberalization and privatization which was initiated by the government of Anand Panyarachun
.
began the process of energy industry liberalization. Its reforms included:
continued Anand's policies, with Sawit Bhodivihok taking a leading role in industry reform. The reforms were fiercely attacked by members of the EGAT, MEA, and PEA unions. As a result, no significant changes in industry structure or ownership occurred during the government of Chuan Leekpai's term.
PTT swiftly became the largest company by market capitalization upon listing in the Stock Exchange of Thailand
(SET). PTT greatly profited from the global increase in worldwide oil prices following the 2003 invasion of Iraq
, and the rise in its stock price helped propel the SET to a boom. However, anti-Thaksin critics have claimed that PTT's bull run was due to manipulation by Thaksin.
(EGAT). One of the goals of the privatization was to raise THB 42 billion from an IPO and use the funds to invest in three new natural-gas powered power plants.
In early 2004, massive employee protests forced the EGAT governor to resign, thus delaying the planned privatization of the state enterprise. Governor Kraisri Karnasuta worked with employees to address their concerns about the privatization, and by December 2004, approximately 80% of employees supported privatization. Permanent protest stages and tents at the EGAT headquarters were taken down as the state enterprise returned to normalcy. After the Mahachon Party (the only party that was officially against privatization of state enterprises) won only 2 seats in the February 2005 parliamentary elections, the process towards EGAT's privatization was restarted. The agency was corporatized in June 2005, transforming it from the Electricity Generating Authority of Thailand to EGAT PLC. However, EGAT's privatization was abruptly delayed when some NGOs and some union members filed a petition with the Supreme Court a few days before the scheduled listing on the Stock Exchange of Thailand
(SET)..
On March 23, 2006, the Supreme Administrative Court ruled against the privatization of EGAT PLC, citing conflicts of interest, public hearing irregularities, and the continued right of expropriating public land. The court said that Olarn Chaipravat, a board member of PTT and Shin Corporation (both business partners with EGAT), was on a committee involved in the legal preparation for Egat's privatisation. The court questioned the neutrality of Parinya Nutalai, chair of the public hearing panel on the EGAT listing, because he was Vice Minister of Natural Resources and the Environment. It also ruled that insufficient opportunities were given for EGAT employees to make themselves heard - there was only one public hearing for employees during which only 1,057 attended. Lastly, EGAT PLC continued to have the right to expropriate public land to build power plants and transmission lines, a right reserved for the state. Two decrees were nullified: one ordering the dissolution of the status of EGAT as a state enterprise, and the other serving as a new charter for EGAT PLC.
Union leaders and anti-Thaksin protesters cheered the ruling, and called for the renationalization of other privatized state enterprises, such as PTT Exploration and Production (PTTEP) and Thai Airways International (both privatized in 1992), PTT PCL, TOT PCL, MCOT PCL, Thailand Post Co Ltd, and CAT Telecom PCL. Like EGAT, PTT also retained land expropriation rights after it was privatized. However, this was one of the grounds for the nullification of the EGAT privatization. Caretaker Finance Minister Thanong Bidaya has noted that the delisting and renationalization of PTT could force the government to borrow massively from foreign institutions.
Some criticized that the listing of PTT on the SET on the grounds that it represented a massive transfer of public assets for the benefit of few people. Though the government initially accepted over 100,000 first-time investors, there were reports that the majority of the shares for sale to retail investors had been reserved for politicians, the banks’ preferred clients and journalists, leaving many retail investors, who stood in long lines to wait, returning home empty-handed. A nephew of Suriya Juengrungruangkit, the minister of Industry overseeing PTT and TRT Party secretary general, for example, was reported to have acquired 22 times the maximum amount of PTT shares distributed to retail investors . Fears of this being repeated were often cited as the reason why EGAT's privatization was delayed indefinitely. Another key argument for delaying privatization was that privatization preceded the establishment of an independent energy regulatory authority. In international experience, there are no examples of successful monopoly utility privatization without regulatory oversight. Under pressure, Thaksin's government formed an interim electricity regulatory body, but some view that it currently lacks authority to force compliance, levy fines, or punish defaulters. EGAT employee concerns about employment security were also common. Some expressed concern that partial ownership of Thailand's largest electricity producer by foreign shareholders would impact national security and cause conflicts of interest.
However, the anti-privatization petitioners (including the Confederation of Consumer Organisations, People Living with HIV/Aids, Alternative Energy Project for Sustainability, Free Trade Area
Watch, and the Four Region Slum Network) have been harshly criticized by both Thai and international investors, who accuse them of using corrupt tactics in delaying the listing. They also point to the public mandate of the 2005 election, during which the only anti-privatization party suffered a near complete loss. International power sector governance experts from Harvard University, University of Delaware, and the World Resources Institute lauded the successful repeal of EGAT privatization as an important step towards increased accountability and transparency in the Thai energy industry.
Thailand
Thailand , officially the Kingdom of Thailand , formerly known as Siam , is a country located at the centre of the Indochina peninsula and Southeast Asia. It is bordered to the north by Burma and Laos, to the east by Laos and Cambodia, to the south by the Gulf of Thailand and Malaysia, and to the...
has been in a process of liberalization and privatization which was initiated by the government of Anand Panyarachun
Anand Panyarachun
Anand Panyarachun was Thailand's Prime Minister twice, between 1991–1992 and once again in 1992. He was effective in initiating economic and political reforms, one of which was the drafting of Thailand's "Peoples' Constitution", which was promulgated in 1997 and abrogated in 2006...
.
Electricity generation and transmission
The government of Anand PanyarachunAnand Panyarachun
Anand Panyarachun was Thailand's Prime Minister twice, between 1991–1992 and once again in 1992. He was effective in initiating economic and political reforms, one of which was the drafting of Thailand's "Peoples' Constitution", which was promulgated in 1997 and abrogated in 2006...
began the process of energy industry liberalization. Its reforms included:
- Allowing private companies (Independent Power Producers, IPPs) to build and operate power generation plants, selling all of their output to the Electricity Generating Authority of Thailand (EGAT)
- Allowing smaller private companies (Small Power Producers, SPPs) to build and operate small power generation plants (mostly co-generation plants), selling a portion of their output to EGAT
- Delegating to the National Energy Policy Organization (NEPO) the task of developing a master plan for the privatization of EGAT. Piyasawat Amranand, head of NEPO, designed a plan which would closely replicate the English power pool, break EGAT up into several smaller companies, and privatize the smaller companies.
Electricity generation and transmission
The subsequent government of Chuan LeekpaiChuan Leekpai
Chuan Leekpai was the Prime Minister of Thailand from September 20, 1992 to May 19, 1995 and again from November 9, 1997 to February 9, 2001. A third-generation Thai Chinese, Chuan was born in Trang province in a grass-roofed house. The walls of his family's house were woven from strips of...
continued Anand's policies, with Sawit Bhodivihok taking a leading role in industry reform. The reforms were fiercely attacked by members of the EGAT, MEA, and PEA unions. As a result, no significant changes in industry structure or ownership occurred during the government of Chuan Leekpai's term.
Refining and pipelines
In September 2001, the National Energy Policy Office (NEPO) approved the partial listing of PTT, the state-owned oil and gas company.PTT swiftly became the largest company by market capitalization upon listing in the Stock Exchange of Thailand
Stock Exchange of Thailand
The Stock Exchange of Thailand is the national stock exchange of Thailand. It is located in Bangkok. As of 31 December 2007, the Stock Exchange of Thailand had 541 listed companies with a combined market capitalization of $280 billion. The indices of the stock exchange are SET Index, SET50 Index...
(SET). PTT greatly profited from the global increase in worldwide oil prices following the 2003 invasion of Iraq
2003 invasion of Iraq
The 2003 invasion of Iraq , was the start of the conflict known as the Iraq War, or Operation Iraqi Freedom, in which a combined force of troops from the United States, the United Kingdom, Australia and Poland invaded Iraq and toppled the regime of Saddam Hussein in 21 days of major combat operations...
, and the rise in its stock price helped propel the SET to a boom. However, anti-Thaksin critics have claimed that PTT's bull run was due to manipulation by Thaksin.
Electricity generation and transmission
Like Chuan, Thaksin Shinawatra has repeatedly attempted to privatize the Electricity Generating Authority of ThailandElectricity Generating Authority of Thailand
The Electricity Generating Authority of Thailand , , is a state enterprise that owns and manages the majority of Thailand's electricity generation capacity, as well as the nation's transmission network.EGAT is managed by the Ministry of Energy....
(EGAT). One of the goals of the privatization was to raise THB 42 billion from an IPO and use the funds to invest in three new natural-gas powered power plants.
In early 2004, massive employee protests forced the EGAT governor to resign, thus delaying the planned privatization of the state enterprise. Governor Kraisri Karnasuta worked with employees to address their concerns about the privatization, and by December 2004, approximately 80% of employees supported privatization. Permanent protest stages and tents at the EGAT headquarters were taken down as the state enterprise returned to normalcy. After the Mahachon Party (the only party that was officially against privatization of state enterprises) won only 2 seats in the February 2005 parliamentary elections, the process towards EGAT's privatization was restarted. The agency was corporatized in June 2005, transforming it from the Electricity Generating Authority of Thailand to EGAT PLC. However, EGAT's privatization was abruptly delayed when some NGOs and some union members filed a petition with the Supreme Court a few days before the scheduled listing on the Stock Exchange of Thailand
Stock Exchange of Thailand
The Stock Exchange of Thailand is the national stock exchange of Thailand. It is located in Bangkok. As of 31 December 2007, the Stock Exchange of Thailand had 541 listed companies with a combined market capitalization of $280 billion. The indices of the stock exchange are SET Index, SET50 Index...
(SET)..
On March 23, 2006, the Supreme Administrative Court ruled against the privatization of EGAT PLC, citing conflicts of interest, public hearing irregularities, and the continued right of expropriating public land. The court said that Olarn Chaipravat, a board member of PTT and Shin Corporation (both business partners with EGAT), was on a committee involved in the legal preparation for Egat's privatisation. The court questioned the neutrality of Parinya Nutalai, chair of the public hearing panel on the EGAT listing, because he was Vice Minister of Natural Resources and the Environment. It also ruled that insufficient opportunities were given for EGAT employees to make themselves heard - there was only one public hearing for employees during which only 1,057 attended. Lastly, EGAT PLC continued to have the right to expropriate public land to build power plants and transmission lines, a right reserved for the state. Two decrees were nullified: one ordering the dissolution of the status of EGAT as a state enterprise, and the other serving as a new charter for EGAT PLC.
Union leaders and anti-Thaksin protesters cheered the ruling, and called for the renationalization of other privatized state enterprises, such as PTT Exploration and Production (PTTEP) and Thai Airways International (both privatized in 1992), PTT PCL, TOT PCL, MCOT PCL, Thailand Post Co Ltd, and CAT Telecom PCL. Like EGAT, PTT also retained land expropriation rights after it was privatized. However, this was one of the grounds for the nullification of the EGAT privatization. Caretaker Finance Minister Thanong Bidaya has noted that the delisting and renationalization of PTT could force the government to borrow massively from foreign institutions.
Some criticized that the listing of PTT on the SET on the grounds that it represented a massive transfer of public assets for the benefit of few people. Though the government initially accepted over 100,000 first-time investors, there were reports that the majority of the shares for sale to retail investors had been reserved for politicians, the banks’ preferred clients and journalists, leaving many retail investors, who stood in long lines to wait, returning home empty-handed. A nephew of Suriya Juengrungruangkit, the minister of Industry overseeing PTT and TRT Party secretary general, for example, was reported to have acquired 22 times the maximum amount of PTT shares distributed to retail investors . Fears of this being repeated were often cited as the reason why EGAT's privatization was delayed indefinitely. Another key argument for delaying privatization was that privatization preceded the establishment of an independent energy regulatory authority. In international experience, there are no examples of successful monopoly utility privatization without regulatory oversight. Under pressure, Thaksin's government formed an interim electricity regulatory body, but some view that it currently lacks authority to force compliance, levy fines, or punish defaulters. EGAT employee concerns about employment security were also common. Some expressed concern that partial ownership of Thailand's largest electricity producer by foreign shareholders would impact national security and cause conflicts of interest.
However, the anti-privatization petitioners (including the Confederation of Consumer Organisations, People Living with HIV/Aids, Alternative Energy Project for Sustainability, Free Trade Area
Free trade area
A free trade area is a trade bloc whose member countries have signed a free trade agreement , which eliminates tariffs, import quotas, and preferences on most goods and services traded between them. If people are also free to move between the countries, in addition to FTA, it would also be...
Watch, and the Four Region Slum Network) have been harshly criticized by both Thai and international investors, who accuse them of using corrupt tactics in delaying the listing. They also point to the public mandate of the 2005 election, during which the only anti-privatization party suffered a near complete loss. International power sector governance experts from Harvard University, University of Delaware, and the World Resources Institute lauded the successful repeal of EGAT privatization as an important step towards increased accountability and transparency in the Thai energy industry.
External links
- Greacen, Chuenchom and Chris Greacen (2004) “Thailand's electricity reforms: privatization of benefits and socialization of costs and risks.” Pacific Affairs 77(4)
- Governance in Thailand: Benchmarking Best Practice and Promoting Accountability in the Electricity Sector. (PDF, 1.2 MB). Health Systems Research Institute, King Prajadhipok's Institute, Thailand Environmental Institute, Federation of Consumer Organizations, Palang Thai. 30 March, 2006.