Foreign, Thai groups to fight corruption

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Foreign, Thai groups to fight corruption 
Bangkok Post: 27 Sep 2010
Anti-corruption campaign

Businesses plan to draw up a collective action plan against corruption through an alliance with regulations, says Charnchai Charuvastr, president of the Thai Institute of Directors (IOD).

The IOD and the Thai Chamber of Commerce are collaborating with the Joint Foreign Chambers of Commerce in Thailand, the Listed Companies Association and the Thai Bankers' Association.

The Collective Action Coalition (CAC) is expected to be introduced in November, when Thailand will host the 14th International Anti-Corruption Conference. Members of the group will make a joint announcement against corruption or an "integrity pact" with the drafting of agenda and regulations likely to begin next month.

Companies wishing to join must pass a screening process including having a policy regarding corruption to create a standard for the industry.

"The private sector has to take leadership in tackling corruption as it has long been a lingering problem in Thailand," said Mr Charnchai. "Corruption occurs because we let it occur. If we can cut the supply from business operators, it should gradually help reduce the problem."

Corruption will be included in the IOD's assessment categories for its Corporate Governance Report of Thai Listed Companies next year.

The CAC will initially target members from the 200 listed firms that received top corporate governance ratings (four stars and above) from the IOD. In the early stages, the screening process may take at least three months.

The IOD is currently collecting data and opinions from a survey sent to more than 4,000 companies.

Mr Charnchai said more than 100 responses identified politics as the main cause of corruption.

"There's still a serious lack of corporate governance in our political sector. Politicians don't have to look any further than themselves. They can start by being role models in ethics," he said.

http://www.bangkokpost.com/business/economics/198341/anti-corruption-campaign
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Seeds of Doubt

Emergence of tiny no-name company as a big bid winner draws attention to the often murky practices associated with the government's rice sales.

No one knows when the next general election will be held, but everyone knows politics is an expensive business and politicians are always on the lookout for ways to fund their campaigns.

Storing and maintaining the government’s huge rice stockpiles costs taxpayers an estimated 800 million baht a month, which has lent a sense of urgency to the need for sales.

Whenever a vote draws near, ministers and politicians usually step up their efforts to push through spending projects of all kinds. The sceptical Thai public usually concludes that the real motivation is to stockpile money to buy MPs from other parties and for other campaign expenses.

Easy sources of funds can always be found in the form of contractors on state projects, influential businessmen, or importers and exporters whose operations rely heavily on state policy.

Rice has always been part of the cycle of corruption, especially when large amounts of the grain are in the hands of the government, to be disposed of by politicians.

The government is currently sitting on a huge stockpile of 5.6 million tonnes of rice, much of it the legacy overly generous pledging programmes by its predecessors. But pressure is mounting to sell the rice to cut down the 800 million baht in monthly storage expenses. The prospects of big sales deals are enticing for traders and politicians alike.

The longstanding practice has been to call bids and hold secret negotiations with winners for "under the table" money to be paid to politicians to ensure the bids would not be revoked.

Civil servants who want support for career promotion in the future from politicians turn a blind eye when exporters or bid winners breach their contracts, such as by selling rice in the domestic market instead of exporting it as stated in bidding condition. In other cases, the winner might not fulfil its commitment but the penalty is very light despite the damage that can accrue to the state budget.

One of the most notable cases occurred in 2005, when President Agri Trading won a bid for 2 million tonnes of rice from the Commerce Ministry. It failed to meet its commitment to export all the rice and it was unable to pay the debt to the ministry. It was declared bankrupt afterward.

Commerce Minister Porntiva Nakasai no doubt is aware of the President case, but traders and industry sources say history appears to be repeating itself this year. They allege that certain politicians and ministry officials have helped steer recent rice bids and have received millions of baht in kickbacks.

A source from the rice trading industry said a panel in charge of selling the government's rice stocks under the Commerce Ministry has approved as many as 4 million tonnes out of 5.6 million in government stocks through a new closed or "offer-to-buy" auction.

Under the offer-to-buy approach, companies that have secured foreign purchase orders are allowed to directly negotiate with authorities to buy stocks.

That amount approved included 1.6 million tonnes that won final consent from the national rice policy committee chaired by Deputy Prime Minister Trairong Suwannakhiri to sell to three large exporters _ Chaiyaporn Rice, Capital Rice and Asia Golden Rice.

According to a source, a Commerce Ministry panel later approved another one million tonnes to Chaiyaporn Rice, Capital Rice, Asia Golden Rice, Thai Hua and Ponglarp. It also approved 1.8 million tonnes to MT Centertrade.

And here lies a mystery. MT Centertrade registered only last month as a member of the Thai Rice Exporters Association, with shipments of only 43 tonnes of Hom Mali rice. Exporters are wondering whether the small company is a nominee of another much larger entity.

They are also sceptical about MT Centertrade's capacity to export huge volumes of rice by itself. Over the past few weeks, they say, the company has been trying to sell rice to other millers and exporters.

According to the Business Development Department, as of Sept 8 this year, MT Centertrade had a head office at 169/80-81 Ratchadaphisek Road, Din Daeng, Bangkok, with registered capital of 10 million baht, 99.99% of it held by Meng Tai International based in Ubon Ratchathani. As of the end of 2009, MT Centertrade reported total assets of 13.48 million baht and liabilities of 3.04 million baht. Meng Tai International, formerly ANC Capital Management owned by Chinese businessman, has registered capital of only one million baht and reported assets of just 985,000 baht at the end of last year.

A banking industry source said Meng Tai was also now engaged in a lawsuit with Siam Commercial Bank (SCB), which claims the company sold rice that it used as collateral for bank loans.

SCB suspended lending to the company after it breached the loan contract last year.

Attempts by the Bangkok Post to reach executives of MR Centertrade last week were unsuccessful.

Mrs Porntiva has defended the approval of a plan to sell 5.6 million tonnes of milled rice from government stocks is line with the government's offer-to-buy approach and the cabinet's guidelines.

"Qualified exporters have to show foreign purchase orders while negotiating to buy rice stocks with a panel in charge of selling rice chaired by the director-general of Foreign Trade Department," she said. "The panel would take into account mainly the buying prices offered as a top priority and require that the rice purchased would be slated only for export."

However, industry experts say purchase orders could be possibly in the form of memoranda of understanding, not actual purchase contracts, which make it difficult to trace later whether the rice was actually exported or just re-imported.

Some also questioned whether the small company has just bought a bill of lading from the real rice exporters to certify its qualifications for the bid.

Nonetheless, Mrs Porntiva insisted only 1.6 million tonnes won final approval from the national rice policy committee, which has not yet made a final decision on the remaining amount.

Dubious deals

2004: President Agri Trading fails to remove 1.7 million tonnes from Commerce Ministry warehouse after winning bid contracts. Government lost an estimated B2 billion because it had to accept lower prices in a bid three years later. The ministry said it would take legal action against the firm and seek compensation.

2007: President Agri accused of fraud and embezzlement related to "missing" 30,000 tonnes of rice that the Commerce Ministry paid the company to improve.

2008: President Agri subsidiary Siam Indica wins bid for 486,000 tonnes, part of a 2-million-tonne bid on which the government lost nearly B20 billion.

2009: Siam Indica wins a bid to buy 680,000 tonnes of rice, but the deal is cancelled after a dispute between the prime minister and commerce minister.

http://www.bangkokpost.com/business/economics/198335/seeds-of-doubt