Page 2 of 2 ASIA
HAND Dismantling Thailand's
Shin Corp By Shawn W Crispin
investor confidence, not only in
its economic management but, more crucially, in
its ability to protect foreign investments
legally.
"It would represent the last
straw," said one senior hedge-fund manager, who,
like many foreign portfolio investors,
ill-received the junta's December 19 surprise move
to impose capital controls on certain types of
short-term foreign investments as well as its
planned nationalistic
amendments to the Foreign Business Act, which are
scheduled to take effect this month.
Dampened foreign sentiment is arguably
already taking an adverse toll on the Thai
economy. Some foreign investment banks have
recently downgraded their economic-growth
forecasts below 4% for this year, because of
stagnant new private investment, declining
domestic consumption, and signs that the
bureaucracy has been slow to disperse fiscal
stimulus measures. According to Phatra Securities,
a local investment bank, nearly $1 billion worth
of capital flowed out of Thailand in January
because of the 30% non-interest-bearing reserve
requirement on foreign investments included in the
capital controls.
That increasingly puts
the junta between a rock and a hard economic place
in its apparent pursuit of dismantling Thaksin's
commercial legacy. Yet there are a number of other
legal avenues the junta could pursue against Shin
Corp, including possible charges of tax evasion,
subversion of the judicial process, and
constitutional transgressions, that would present
a more genuine veneer of legal impartiality -
while allowing the junta to accomplish the same
political ends.
Never tried
charges Shin Corp and its subsidiaries were
widely recognized throughout their corporate
histories as some of Thailand's best-managed
companies. Yet there are a handful of
controversial episodes that under Thaksin's
political tenure were arguably under-investigated,
but through new independent probes might cast the
company's tightly managed image of good governance
into doubt - or worse.
One strongly
alleged - but never investigated nor tried in
court - tax-evasion case stands out in particular.
A lightly circulated October 2003 research report
by Pyramid Research, a US-based consulting firm,
raises hard questions about possible tax evasion
related to AIS's use of the 1800 bandwidth
frequency acquired in its purchase of the Digital
Phone Company (DPC) in 2000 from Samart PCL and
Telekom Malaysia.
The well-reasoned report
contends that AIS, then facing a serious capacity
crunch, was systematically underreporting the
number of post-paid customers it was roaming on to
DPC's network, in effect allowing AIS to avoid
paying the higher concession fees DPC
contractually owed the state. Under the DPC's
operating concession, it was required to pay 32%
of its revenues to the state-owned
operator-cum-regulator TOT; AIS's concession, on
the other hand, only required it to pay 24%.
Moreover, the report made compelling
thitherto-unexplored allegations that under
Thaksin's government the TOT and AIS had entered
into a de facto "strategic partnership" that gave
AIS an edge over its local competitors. The report
noted one particular example of AIS selling its
loss-making pager company in 2002 to TOT for
255.78 million baht (about $7.75 million at the
current exchange rate), a generous amount
considering the state agency already legally owned
the assets and previously had not paid anything
for other decommissioned pager companies. [1]
There are also the unresolved tax-evasion
allegations lodged against Shin Satellite by an
opposition politician, who based his charges on
information he had received from a former company
customs employee who apparently had access to
documents related to the import of expensive
capital equipment. That case's proceedings were
thrown into a tailspin when the witness was shot
and killed in 2003 by masked assassins while he
was riding on his motorcycle in the northern
province of Chiang Rai.
There has arguably
never been a proper official investigation into
the circumstances surrounding the former Shin
Satellite employee's death. When this
correspondent inquired about the situation in an
interview with Shin Satellite CEO Dumrong Kasemset
in January 2006, he immediately broke off the
one-on-one interview.
At the very least,
there is a compelling case for the military
government to open an independent probe into both
the mysterious murder and the original tax-evasion
charges - neither of which has ever been given
proper official treatment. It could also look into
the circumstances behind the eight-year tax
holiday worth $400 million the Prime Minister's
Office-run Board of Investment granted Shin
Satellite in 2003, representing the first, and
apparently only, time the foreign-investment
promotion agency made such an award to a
Thai-owned company.
The government could
also have pursued a more damning case involving
iTV on charges that Thaksin violated
constitutional press-freedom guarantees through
his government's alleged manipulation of the
station's news coverage to his political party's
advantage. Unfortunately, the junta is in no
position to take the moral high ground on
press-freedom issues because of its abolition of
the 1997 constitution and its own heavy-handed
policies and overt censorship of the broadcast
media.
Instead, the junta's handling of
Shin Corp seems set to mirror its stumbling ways
in prosecuting the other charges it has leveled
against Thaksin and his associates to justify last
year's coup. The government's enduring failure to
nail down with hard corroborating evidence the
corruption and political crimes Thaksin allegedly
committed risks losing the support of the Bangkok
elite and middle class that initially strongly
backed the military intervention. Should the
junta similarly be perceived to mishandle its
pursuit of charges against the Shin Corp, perhaps
even more dangerously, it risks further
undermining already waning foreign-investor
confidence in its leadership, bringing on a
destabilizing economic meltdown.
Note 1. See John
Barrett's "AIS: De Facto Dual-Band Network",
Pyramid Research, Asia Pacific Perspective,
October 3, 2002.
Shawn W Crispin
is Asia Times Online's Southeast Asia editor.
(Copyright 2007 Asia Times Online Ltd. All
rights reserved. Please contact us about sales, syndication and republishing.)
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