Holding company to control state enterprises stakes being considered

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Holding company to control state enterprises stakes being considered
By Achara Deboonme
The Nation 2011-06-18

The State Enterprise Policy Committee is considering setting up a holding company to control stakes in commercially oriented state enterprises to enhance their competitiveness.

Somchai Sajjapongse, director-general of the State Enterprise Policy Office (SEPO), said the idea was to have the Finance Ministry own the holding company and exercise the major shareholder rights.

It would have a say in the appointment of professional directors as well as chief executives of state enterprises. SEPO would then limit its oversight only to state enterprises involving social services.

Somchai was speaking at a seminar entitled "National Agenda on Thailand's Competitiveness" hosted by Krungthep Turakij, the Federation of Thai Industries and the Thai Chamber of Commerce,

"We're taking a step similar to the one by China, Singapore and Malaysia. Through this, we can have oversight of the appointment of directors. Currently, we're simply a rubber stamp," he said.

"The Bank of Thailand can intervene in distressed financial institutions, but SEPO can do nothing. Now we have no legal tools to allow us to intervene in state enterprises prior to their demise."

He envisioned a more efficient and smaller group of state enterprises, of which today there are 57. Aside from establishing the holding company, SEPO plans to reduce stakes in six listed firms to the minimum levels prescribed by Cabinet resolutions, such as 50 per cent in Thai Airways and 70 per cent in MCOT. Somchai said the cuts in holding levels depended on market prices.

A SEPO proposal on the qualification of a director should also help improve state enterprises' efficiency. Under the proposal, directors should complete their terms and this should result in higher efficiency for state enterprise investment. Somchai admitted that state enterprises involved in transport, energy and infrastructure showed huge potential in terms of investment.

State enterprises will also shrink as part of a process of "privatisation", which will not involve listing on the bourse, but rather the relinquishing of government power to the private sector. In this regard, the public-private partnership draft law awaiting parliamentary approval could help.

"Listing will involve only state enterprise subsidiaries. Privatisation is, however, the means to improve efficiency, which could involve more private investment or management contracts," he said. "The fewer state enterprises, the better. It's better to leave this to private companies."

SEPO is also ready to help state enterprises work round regulatory obstacles and increase efficiency through their own methods, including a THAI proposal to have the Finance Ministry lower its stake to below 50 per cent and relinquish state enterprise status.

Nitinai Sirismatthakarn, senior executive vice president of business development and marketing at Airports of Thailand (AOT), noted that state enterprises were conflicting by nature. Constitutionally, they are allowed to compete against private companies only in some areas, but commercially they are required to make profits while shouldering some social burden.

He suggested the government take full control of public services while letting state enterprises compete freely in terms of commercial operations.

"We can't compete with global players. The best we can do is tackle 'supply constraints' like regulations concerning the rental of AOT land plots or the future of Don Mueang Airport," he said.