Published on December 13, 2005

The Constitution of 1997, economic crisis of 1997 and election of 2001 began a new period in Thailand. Business owners who survived the 1997 crisis succeeded in capturing Parliament, building a strong party through mergers and acquisitions and winning a re-election landslide through populist policies.

Since 2001, companies on the Thai stock market with strong political links (especially those with some family members holding positions in the government) have increased their market value and market share more than companies with no such political links. Stock markets tend to respond favourably to companies with strong political links, because they anticipate that new policies will benefit the companies in question.

Thai researchers have observed that since 2001, many policies have benefited listed companies linked to politicians in high government positions, especially at the ministerial level. These policies include discretionary tax breaks, reductions of concession fees, restrictions on or discouragement of new entrants, delays in operationalising the anti-monopoly law and delays in liberalising certain industries properly.

This phenomenon is not confined to Thailand, but international studies show that Thailand has one of the highest rates of political linkages among all the stock markets in the world. Is the Thai Parliament the only one in the world that has proposed buying a real-time display of stock market prices for its lobby?

The methodology for establishing a link between politics and market valuations of shares is still being debated. But all of the studies suggest that the families of tycoons-turned-politicians are doing rather well, and it’s likely some of this wealth is being used to maintain their political and economic power.

Big businessmen everywhere seek to influence politics, in order to benefit their businesses. This is nothing new. But the phenomenon of the tycoon state is new for Thailand and a cause for concern. When businessmen and politicians are two relatively separate groups, there is some room for politicians to maintain autonomy, and there is more room for civil society to provide some checks and balances.

But when the two groups are one and the same, any sense of perspective about what is public good and what is private good can become very blurred. Attention paid to private good may easily take precedence over that paid to public good.

Suppose political power is being used to enable certain business groups to gain an unfair share of new opportunities becoming available in expanding sectors like telecoms, entertainment, property, hospitals and so on. The result may be that other businessmen who might be more efficient are being crowded out, and consumers end up paying inflated prices. Usually, one expects the forces of globalisation to erode this situation, but politicians in power may be able to delay liberalisation and screen out global competition.

Perhaps the most important consequences of the new era come in the area of the costs of corruption and their impact on society and politics. In more advanced societies, conflict of interest is a known problem. There are legal attempts to grapple with it, and there are also market mechanisms. In the US, when Enron Co was caught out in accounting fraud, it was punished immediately by the stock market, which reduced the company’s value to zero. Later, the company’s executives were punished through the legal process. What happens in Thailand? Well, the picnic goes on.

As a result, the only controls on conflicts of interest in Thailand at present are those exercised by the media and civil society. The costs incurred to stay in power and prevent getting found out are increasing. Reserves of both power and money are being used for these purposes, and the consequences are far-reaching. If the political temperature has risen so much lately, and the mercury has started falling, it is not because of the conflicting egos of a few prominent individuals, but rather because of the fundamental problem of conflict of interest.

Consider the extraordinary record of the past four or five years. Broadcast media have been swept clean of every programme with independent political commentary. Print media have been intimidated by manipulation of advertising budgets, politically motivated takeover attempts and a firestorm of defamation suits.

Academics and activists have also been deterred by lawsuits. Was it a coincidence that the first three of these were all in response to allegations of conflict of interest by three companies belonging to a certain business group? The independent bodies formed under the 1997 Constitution are in complete disarray. The Auditor-General’s Office is headless; the National Counter Corruption Commission blew itself up; the National Broadcasting Commission has become like a lost spirit, struggling desperately to be born.

Even developed countries face problems of conflict of interest. It may be argued that as long as capital accumulation takes place and a satisfactory rate of economic growth continues, conflict of interest may be tolerated. But many countries have decided other consequences are too dangerous and created new laws and new institutions to prevent it.

Even in the US, it was less than 20 years ago that strict regulations to prevent conflict of interest were put in place. We can anticipate that Thailand will have to adopt similar institutions in the near future.

But problems of media control and the withholding of information are much more serious and more difficult to address.

Prof Joseph Stiglitz, a Nobel prize-winner for economics, says efforts by politicians to withhold information and gag the media are not good for the workings of a market economy. They prevent people from responding to the market. A government that has more information than its citizens can take advantage of the citizens without them knowing. It may make wrong decisions but hide them from the public. Thus, it becomes a public duty to resist the efforts of a tycoon state to manipulate the media, obstruct freedom of expression and throttle civil society.

Chang Noi

The Nation

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