The administration of Prime Minister Prayut Chan-ocha has endorsed a bill to establish a holding company that will have 12 major state-owned enterprises under its wing.

The endorsement is a step forward toward the reform of state-run companies lagging behind private businesses in efficiency and the transparency of management. The government envisions drastically reforming the corporate governance of national enterprises to pave the way for improving their earnings.

The bill, presented to the cabinet by the Ministry of Finance, is expected to come into effect after its passage through the National Legislative Assembly, Thailand's interim parliament by the end of this year. As the government's plan to introduce the legislation has been delayed for more than six months, the reform of state-owned companies will finally make headway while holding moves by labor unions and other anti-reform forces in check.

The bill envisages the establishment of a holding company wholly owned by the ministry and the transfer of the government's shareholdings in 12 state-run companies to it.

The 12 companies include oil and gas producer PTT, Thailand's biggest company in terms of market capitalization, as well as Thai Airways International, telecommunications companies TOT and CAT Telecom, and Krung Thai Bank. Some of them are listed on the Stock Exchange of Thailand and therefore have nongovernmental shareholders.

Need for improvement

Bangkok Post reported on Aug 22 that investment assets held by all state-run enterprises in Thailand, including the 12 companies, now equals 75% of the nation's gross domestic product, up from 25% over the past decade, according to the government's internal research. But the ratio of sales to GDP has risen to only 44% from 24%.

The government has been looking to address state-owned companies' low efficiency of investment and other flaws.

In the case of TOT, which is often criticized as a symbol of inefficient state-owned businesses, sales per employee are said to be less than one-tenth those of Advanced Info Service, the biggest private telecom company in the country.

People involved in the preparation of the bill refer to TOT and other inefficient national companies in order to stress the importance of reform. The planned holding company and the government would have the 12 companies adopt clear management objectives and thoroughly disclose financial and other information. They would also call for the 12 companies to introduce clear rules for the appointment of board members.

Source: ASEAN Inter-Parliamentary Assembly (AIPA)