Privatizing Public Utility In Thailand

However, EGAT staff rebutted the accusation and argued that the main reason the privatisation process went relatively smoothly was because they didn’t want to protest against the Cabinet decision since it has become a law. The deal offered during the long protests, they claimed, was much more lucrative than the current one. At that time general staff were offered salary increase of up to 21 per cent, plus shares in the corporation. As such, it was not about the benefit received, but more about respecting the law.

As a result of the Cabinet decision it is now not a question of whether EGAT should be privatised, but how the process will affect consumers in Thailand. The Government claims that the privatisation would benefit Thai consumers as it would improve efficiency and theoretically enable EGAT to provide better services at more reasonable prices, as well as ensure a suitable power supply. Moreover, the Government hopes the privatisation would allow it to detach itself from the debts incurred by state enterprises, in this case EGAT, which have tied up huge amounts of capital. The argument is that such a move would help reduce the Government’s financial liability.

However, one must remember that the Finance Ministry will still hold a large majority stake of 70 per cent in EGAT, as only 25 per cent of the six billion shares will be floated for public offering. This essentially means the Government will still guarantee the large outstanding debts of the enterprise even after privatisation.

The Thai Government intends to have EGAT Plc. listed on the Stock Exchange of Thailand by November 2005, with a registered capital of Baht 60 Billion (approx USD1.5 Billion). The Initial Public Offering is expected to raise Baht 40 Billion (approx USD 1 Billion), which will be used to finance EGAT’s expansion. The company will have a total asset of Baht 424.7 Billion and Baht 226 Billion in liabilities. (Source: The Nation, May 12, 2005)

The privatisation of EGAT will not allow the market entry of competitors. It will thus not lead to an external pressure that enhances effectiveness and efficiency. Instead the public monopoly will be made into a private monopoly. Despite the benefits cited by the government, the public remains skeptical and critical. It is particularly worried whether the privatisation would lead to an increase in electricity cost and whether the Government could remain committed to initiating and implementing a regulatory mechanism to protect consumer rights. Once funds are raised from the private sector it would be necessary to enact a new law to empower the state to protect consumers in regard to prices and service charges. Also an independent regulatory body will have to be established to regulate the power sector to comply with the law.

Finally the Government’s claim that the privatisation would create transparency and efficiency remains questionable, since there is no guarantee the privatisation of EGAT would be free of political intervention. The case of the privatisation of the Petroleum Authority of Thailand is an immediate example that illustrates excessive political interference. The question then becomes – can efficiency and transparency problems prevalent within state enterprises be solved as long as politicians in Government interfere?