Thursday, March 8, 2007

Asia Times: Shawn Crispin Deconstructs the Thai Junta's Systematic Dismantling of Shin Group


Dismantling Thailand's Shin Corp

By Shawn W Crispin

BANGKOK - With this week's takeover of iTV, Thailand's new military rulers have made their first move toward dismantling the telecommunication and media empires that once provided the behind-the-scenes financial firepower for ousted prime minister Thaksin Shinawatra's once powerful, now diminished, political juggernaut.

iTV represented a small part of the Shin Corp's corporate expanse, which currently includes major holdings in telecoms, satellites, aviation, property development, consumer finance and the Internet. Its mobile telecoms subsidiary, Advanced Info Services (AIS), provides the lion's share of the conglomerate's profits and catapulted Thaksin to billionaire status before he divested his shares to family members when he took up the premiership in 2001.

The company's profits soared during Thaksin's political tenure, padded by his government's policies aimed at pumping up domestic consumption through aggressive state-bank lending and assorted cheap-credit schemes. With Shin Corp's share price near a record high, and popular political pressure mounting against Thaksin, in January 2006 his family sold the company to Singapore's state-run Temasek Holdings in a controversial US$1.9 billion transaction.

The company has been under political assault ever since the military seized power from Thaksin in a bloodless putsch last September. A Thai court last year ruled that iTV had breached the terms of its original 1995 build-transfer-operate concession with the Prime Minister's Office and imposed more than $2.2 billion in fines, fees and owed interest payments. The station failed to meet a recent payment deadline and the military junta rescinded its operating concession and is in the process of determining which assets it can legally repossess.

To some market watchers, the highly anticipated move represents a form of forced nationalization of a foreign-held asset. Shin Corp's shares fell 2.6% the day after iTV's closure and so far Temasek has remained mum about the losses it will incur because of the station's demise. In part, that's because iTV was the only perennial loss-maker among the Shin Corp's otherwise profitable stable of companies.

But iTV's nationalization likely represents the first of a series of controversial moves to dismantle and then redistribute to politically preferred players the Shin Corp's various communications assets operated under state concessions. Coup leader General Sonthi Boonyaratklin has in recent weeks stated the junta's intention for national-security interests to seize three communications satellites that Temasek now majority-owns through Shin Corp subsidiary Shin Satellite.

The potentially bigger blow will come if and when the junta follows through on its apparent plans to rescind AIS's operating concession. Pridiyathorn Devakula, the interim military government's finance minister and deputy prime minister for economic affairs until last week, in January told a private meeting of foreign analysts gathered to discuss amendments to the Foreign Business Act that it was "only a matter of time" before they rescinded AIS's build-operate-transfer concession, according to an analyst who was in attendance and who spoke to Asia Times Online on condition of anonymity.


I feel vindicated. Mr. Crispin actually supports my conspiracy theory concerning the punishment of Singapore and the nationalization of the Shin Group companies.

But why do foreigners keep pumping billions into the Thai economy when there is no rule of law and the state can capriciously confiscate their assets?

This is not the old days when the British or French could send a warship up the Chao Phaya to protect their assets when Thais started to play their petty political games.

And once iTV and the rest of Shin Corp has been taken over by the state, into whose hands will these assets go? I'm sure there will be a few generals and their civilian backers who will become very rich.

I agree with mostly everything in this report.

I have a feeling, however, that even with all the information that is out there the Thais will get away with this scam.

In other words, nobody is going to get punished except Singapore and the Thais will have the last laugh at the expense of the dopey foreigners who trusted them.


hobby said...

Again I must say 'caveat emptor'.

Acquisition due diligence done by the purchaser must surely have noted these skeltons in the closet, but I suspect they were prepared to gamble on Thaksin staying in power and keeping a lid on it.

Are you suggesting that past wrongdoings should just be ignored by the Thai government?

If Temasek think there has been any deceit or breach of contract, they should be asking the Thai authorities to freeze Thaksin's family bank accounts pending possible action they could be taking against them.

Fonzi said...


From a business perspective, I agree with you.

But you can't ignore the politics.

Or do you think the junta is acting in the best interests of public and this nothing has to do with their own business and political interests?

Also, if the government seriously enforced this law outside Temasek-Shin, many conglomerates would be destroyed.

The reality of enforcing the letter of law in every circumstance is not an attractive option for the Thai economy.

It has to be dealt with. And I hope the new FM does something about it.

hobby said...

I agree politics should not play a part, and I would not like to see the generals being given favorable treatment as that would just be replacing the beneficiaries of corruption from Thaksins cohorts to the generals and their cohorts.
However, Blind Freddy knows that Thaksin rorted the system to give favorable treatment to his companies wherever possible, and if that can be undone by the junta (legally), I'm all for it.

The proceeds should go to the Thai state and eventually the people via better services, health care, infrastructure projects, welfare etc (not to generals and their associates).

I was particularly interested that Crispin raised the tax evasion allegations against AIS & Shin Satellite - they deserve to be fully investigated.

As to Singapore (Temasek), well they should have weighed up the risks - It's a bit difficult when it involves stock market transactions, but they may even have an indemnity clause in some agreements which would enable them to make a claim against Thaksin for contingent liabilities.

It all gets back to risk & return when it comes to investment especially if it involves flouting the intention of laws/shady concession deals etc - all foreign investors will have had to make those decisions.

Thats why it's much better to have clear cut, transparent rules, because there are numerous examples where big business will turn a blind eye to things that they know would be wrong in their own countries, if they think they can get away with it in another country.

Anonymous said...

Hobby, hi.

I am certain they did their due diligence. They will have been promised the golden road to welth and riches by Thaksin, who at that time was still riding high and seemed unssailable. he had s juge ajority and the Singaporeans (including their Government) will have recognised the kind of blurred line between government and business that they are used to. The weighed it all up and figured this:

1. Thaksin was unassailable and would be in govt for long enough for a handsome ROI to be had.
2. The inflated price for the group was acceptable in the light of promised preferntial treatment by the Thai govt in the future years.
3. Thaksin was known to be manoevering himself to become Thailands forst president when the King dies and he (Thaksin) is carried to power on an overwhelming popular vote given the prevailing sentiment about the Crown Prince.

Note that since the coup, the Crown Prince has been the beneficiary of an extraordinary PR campaign in a bid to to reverse his current unpopularity.

It may aso be the case that the senior Princess is also now making a media offensive of her own.

Anonymous said...

sorry about the typos on the last post

Anonymous said...

Come on... it's not as if iTV ever made money for Shin Corp. The only reason Thaksin bought it is because SCB and the Crown Property Bureau "asked" him to. It never made any money while it was managed by the hypocrites at Nation Multimedia. And it kept on loosing money even after the sale.

A royal road to riches iTV was NOT.