Energy Industry Liberalization and Privatization (Thailand)
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Thailand's energy industry has been in a decade-long process of liberalization and privatization since the government of Anand Panyarachun.
Contents |
[edit] Industry structure prior to the 1990s
[edit] Fuel exploration and production
[edit] Refining and pipelines
[edit] Electricity generation and transmission
The state-owned Electricity Generating Authority of Thailand (EGAT), had an absolute monopoly over electricity generation and high-voltage transmission.
[edit] Electricity distribution
[edit] Industry liberalization under Anand Panyarachun
[edit] Fuel exploration and production
[edit] Refining and pipelines
[edit] Electricity generation and transmission
The government of Anand Panyarachun 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 output to EGAT
- Allowing smaller private companies (Small Power Producers, SPPs) to build and operate small power generation plants (mostly cogeneration plants), selling a portion of output to EGAT
- Delegating to the National Energy Policy Organization (NEPO) the task of developing a 10-year 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.
[edit] Electricity distribution
[edit] Industry liberalization in the 90s
[edit] Electricity generation and transmission
The government of Chuan Leekpai 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 second half of the 1990s.
[edit] Industry liberalization in the Thaksin Shinawatra government
[edit] Refining and pipelines
On September 2001, the National Energy Policy Office (NEPO) approved the partial listing of PTT, the state-owned oil and gas company[1].
PTT promptly became the largest company by market capitalization upon listing in the Stock Exchange of Thailand (SET). PTT greatly benefited from the global increase in world-wide oil prices following the invasion of Iraq, and the rise in its stock price helped propel the SET to a boom in 2003. However, anti-Thaksin critics have claimed that PTT's bull run was due to manipulation by Thaksin[2].
[edit] Electricity generation and transmission
Like Chuan, Thaksin Shinawatra has repeatedly attempted to privatize the Electricity Generating Authority of Thailand (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 corporatization and privatization of the state enterprise. New Governor Kraisri Karnasuta worked with employees to address their concerns about the privatization, and by December 2004, approximately 80% of employees supported privatization[3]. 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 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[4].
On 23 March 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[5][6]. The court said that Olarn Chaipravat, a board member of PTT and Shin Corporation [7] (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 protestors cheered the ruling, and called for the renationalization of other privatized state enterprises[8][9], like PTT Exploration and Production (PTTEP) and Thai Airways International (both privatized in 1992[10][11]), PTT PCL, TOT PCL, MCOT PCL, Thailand Post Co Ltd, and CAT Telecom PCL[12]. Like EGAT, PTT also retained land expropriation rights after it 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[13].
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 a relative few. Though the government initially targeted 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, banks’ preferred clients and journalists, leaving retail investors who stood in long lines to return 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 [14]. Fears of this being repeated were often cited as the reason why EGAT's privatization was delayed. 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, the Thaksin administration formed an interim electricity regulatory body, but some view that it currently lacks authority to force compliance, levy fines, or punish defaulters. [15] 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.
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[16]) have been harshly criticized by both Thai and international investors, who accuse them of using underhand 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 power sector.
[edit] 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.
