A Question of Conflict of Interest

On March 10, Sorayut Suthasanajinda, the host of the current events talk show ถึงลูกถึงคน, posed this question to care taker prime minister Thaksin Shinawatra:

Prime Minister, do you think it was a mistake, in hindsight, that you transfered [Shin Corporation] shares to your son… instead of… transfering them to a blind trust [as outlined in article 209 of the constitution], completely severing yourself of all ties?

Mr Thaksin evaded the question, saying that the related laws for the constitutional provision was not yet enacted at the time. Veteran Matichon journalist Prasong Lertratanawisute disputes his chronology, saying that the law in fact was available before Mr Thaksin's share transfers.

This is all in hindsight of course, but I think Mr Thaksin foes and allies alike would say that he'd made the wrong decision. Allegations of preferential treatment arising from the conflict of interest inherent in his family's holding in Shin Corp have continued to dog every decision his government has made on the telcom industry, from BOI tax breaks for ShinSat to excise tax reduction for AIS. His family's decision to sell Shin Corp has allowed his critics to galvanize their forces and call for mass street protests that are about to cumulate today.

It's all in the past you may say, but hindsight in this case provides an interesting lesson to the future. If Mr Thaksin survives this political crisis (which I forsee), he will have to pose Sorayut's question again to himself. His family is still the majority owner of the SET-listed SC Asset and critics have already started to question the dealings the BVI-listed Win Mark Co Ltd. Would he ask his family to transfer these asset to a blind trust?

It would be a good political move, a real answer to his critics that he's sincerely moved beyond his ties to business – something that he intended perhaps for Temasek deal. Plus, Mr Prime Minister, this transaction will have no tax issues involved.

13 responses to “A Question of Conflict of Interest

  1. I think we’ve moved a little beyond that, don’t you think?

    His democracy-loving critics won’t shut up until someone has given them a place in the sun. If they can’t claim Thaksin’s scalp, then they will have to be bought off some other way.

    Thaksin can do whatever he likes; for them, he’s discredited.

  2. Poststaffer: What you’re saying is true to some extent; the Prachatai editorial quotes Sondhi as saying in regards to Thaksin “เสือไม่มีทางกินมังสวิรัติ”. His hardline followers do believe that, essentially, a tiger can’t change its stripes.

    However, not everyone out criticizing this government is a hardliner out to bring him down. Though they are drowned out by the noise of the PAD masses, they do offer constructive criticism that they wish the government would listen to.

    Even if we’ve “moved beyond that” at this point, I’m certain the passion of the mob will cool down and that the country will need to move on. If Thaksin is still there by that time, he’s got to move towards reconcilation in some sense.

  3. Well, if I was one of his mainstream critics, I would want to keep my head down at the moment. Not only do you risk being drowned out by the ugly masses at Sonthi’s rally, but you risk being associated with this hardline group’s hateful rhetoric and bullying tactics.

    Thaksin is not the issue at present; that will be decided at the election. The real question is what these so-called democracy-lovers want (power, influence, without bothering to stand for election to get it), and whether Thais are supine enough to let them have it.

  4. Speaking of which, Thaksin has just offered Chamlong and Sonthi a place at a proposed government of national unity after the election – though he maintains they will have to register as a political party along with anyone else.

    Still, how can you reserve a ‘special quota’ of seats at the cabinet table for parties who may only muster a piddling percentage of the vote? Bizarre.

  5. Yeah – the PAD roped in a whole bunch of mainstream anti-Thaksin critics onto their stage for a while. A few of them are perhaps regretting it now.

    Perhaps I was looking too far ahead. To me Thais have already decided not to go for the PAD – 25 March is another deadline missed, and it’s likely to go down hill from there for them.

    Thaksin’s latest move is quite shrewd. If Chamlong and Sonthi join they risk being branded by their supporters as being co-opted by the ‘Thaksin regime’. The PAD coalition will liekly splinter. If they don’t, Thaksin will be all over them for not being constructive when they had the chance.

  6. The only thing that matters now is the election, and what happens after it.

    Thaksin is worried about the legitimacy of his government after that date, if no one else has fielded candidates, and few have voted. Without those things, his will be a lame duck government, and he is wasting his time.

  7. Naphat: In hindsight, Thaksin made the wrong decision in regards to Shin. The question over whether his actions were legal or illegal are a different issue, but politically I have no doubt it was the wrong decision.

    Now, having said all that I am not convinced it would have mattered at the end of the day. I am not convinced a blind trust is the answer and as in come cases the person does find out what assets they own – Senator Frist is a case in point. Politicans can always then hide behind the blind trust saying they know nothing about their assets when that is not always the case.

    Do you think when it came out (it would surely be leaked) that a politician owned a large percentage of a company which was managed through a blind trust and this company gained some large government contract/redu that anyone would believe the the politician when they said they didn’t know? There would surely be no requirement to disclose the assets of a blind trust so if a politican knew, but the public didn’t, the public would have to rely on leakers to know who owns what.

    As I pointed out in a comment on my blog, I understand that that Thai law allows for a Minister to own 5% of a company’s shares. For the moment, I am convinced this is the better way to go. As long as there are effective disclosure laws and you have provisions extending it to family members (possibly then with family members, you have a maximum of 10%) as well as to nominees then the public can make up their own mind.

  8. JW, I didn’t see your comment here so I posted to your blog in reply to that comment. I think aside from disclosure, perhaps we can do more to actively manage conflicts of interest when they do happen (for that legally-allowed 5% maybe).

  9. Pingback: Global Voices Online » Blog Archive » Thailand: Dodging the Question·

  10. The problem with setting some arbitrary level of permissible ownership is that it doesn’t address the issue of conflict of interest at all. What’s the difference between a 10% holding in a 100 million Baht company vs. a 1% holding in a billion Baht company? Nothing. Does owning 4% of a company magically erase the conflict while owning 6% guarantee a conflict? Of course not. It’s certainly an easier way to go as it absolves having to do any thinking, but simple thoughtless solutions are rarely useful.

    Conflict of interest is about whether the prospect of personal gains impede impartial public decision making. Since that is the issue, then that should be the criteria, not a shareholding allowance. Yes, this is a subjective determination – this is why there is a judicial system, to make judgements; and why we have prosecutors and defense attorneys, to present different sides of the case. The law is full of vague criteria like “preponderance of evidence” and “beyond a reasonable doubt”, and they are problematic. But so is overly delineating that which cannot be quantified, like conflict of interest.

    When there is even the appearance of conflict of interest, the regulator or policymaker with integrity recuses himself from the decision. Not doing so is a mark of either arrogance, ignorance, corruption, or pure stupidity.

    And dismissing blind trusts by pointing out how Bill Frist may have broken the law is a pretty silly argument – like saying traffic laws don’t work because some people run red lights.

    -h

  11. H – Sorry I haven’t taken time to reply to you – just want to say I broadly agree with your points. I wish Thai politicians would take err on the side of caution and make a point to do more than the law requires and prevent any appearance of conflicts of interest that will reduce their own effectiveness at the end.

    I think the Bill Frist case reminds us that even you still need a pretty good framework of regulation even after most politicians divest into blind trusts. In the US the SEC has jurisdiction as the regulator of the trusts and they are able to investigate any potential wrongdoing. In Thailand, the law seems to be emulating the US example, but it’s unclear how it will work out when a politician actually sets of one of these trusts.

  12. Naphat – thanks for the reply, it’s nice to see well-reasoned discussion about pertinent issues, especially as that’s in rather short supply with all the finger pointing going around. I do believe the real questions we should be discussing is what policies and directions are good for the country and the people. At fundamental levels – free & open markets, independent judiciaries, functioning checks & balances – these items are pretty much the same regardless of country, though of course modifications are needed to suit local conditions.

    As an American living and doing business in Thailand, with a background in political science and economic development, the comparisons between how the Thai and American political systems are evolving are fascinating to me. Whereas it was once hoped that globalization of trade would lead to an “evolution” of political systems in emerging markets to a “Western” system of freedom and civil rights (as problematic as the assumptions underlying that hope are), my current opinion is that the process is working in reverse: the US is slipping into a feudal structure through well-placed elites controlling the real source of political power, information, through media ownership.

    There is lots to be said about this, but focusing on asset ownership and conflict-of-interest in particular, I believe the blind trust system is a necessary but not sufficient solution. The trusts themselves need to be adequately monitored, or else you get a Frist scenario – it’s simply not enough to have a law if you don’t enforce it. Selective enforcement of laws are quite common in Thailand from what I’ve seen and experienced. Indeed, it seems that the real purpose of law here is to enable official harassment if you cross someone. A sitting Deputy Commerce Minister once told me over lunch that the list of industries where foreigners were not allowed to participate didn’t really mean anything!

    But getting back to conflict of interest, one thing that never ceased to amaze me is how the Thai tax authorities don’t manage to nail more corrupt folks. In the US, the IRS (tax authority) routinely caught spies and other crooks when the police had trouble. Aldrich Ames, the Soviet mole in the CIA, was nailed because he was living beyond his means. Al Capone was convicted of tax evasion. When you have career civil servants and military officials living on large estates and driving luxury cars, it’s not hard to see that something warrants investigation.

    Of course, it’s not so easy to investigate vested interests, especially when bullets are cheap. It’s worthwhile to look at the experience in reducing corruption in places where it has been reasonably successful – Singapore and Hong Kong. For Thailand, I would suggest a general amnesty so we don’t continue the endless finger pointing, followed by giving civil servants living wages (their current salaries only push them towards corruption), and creating a serious tax and audit bureau.

    -h

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