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Part I: GENERAL PROGRAM GUIDELINES Summary of Master Plan Contents and Proposals

TABLE OF CONTENTS

Part I: General Program Guidelines
Purpose of the Master Plan
Background and Context for the State Enterprise Sector Reform Program
Overview of the Current State Owned Enterprise Sector
Definition, Goals, Objectives and Benefits of the State Enterprise Secto
Reform Program
Roles and Responsibilities of the Participants in the
Privatisation Process
The Future Role of the State
Legal Reforms
Regulatory Reforms
Forms and Methods of Privatisation
Use of Proceeds from Privatisation
Corporate Governance and Performance Monitoring
Social, Labour and Environmental Concerns
Public Information Plan

The table below provides a reference to each section of the Master Plan, the key issue(s) addressed in that section, the proposal to address the issue(s) and the requested SEPC action with respect to each proposal. Please refer to specific sections in Parts I and II of the Master Plan for additional detail on these issues and proposals.

Master Plan Section	Key Issues Addressed	Proposal	Requested SEPC Action
Part I: General Program Guidelines
1.Purpose of the Master Plan	What is the Master Plan	Guideline document updated with annual action plans	Approve annual updates and reviews of the Master Plan
2.Background and Context for theState Enterprise Sector ReformProgram	Why is reform being undertaken now	NA	NA
3.Overview of the Current State Owned Enterprise Sector	Description of the State Owned Enterprise Sector	NA	NA
4. Definition, Goals, Objectives and Benefits of the State Enterprise Sector Reform Program	What are the goals, objectives and scope of the Reform Program	Structural, financial and social objectives/benefits Scope includes sector reforms	Approve reform objectives Approve scope of program
5.Roles and Responsibilities of the Participants in the Privatisation Process	Need for a single body responsible for privatisation Need for transparent privatisation plan development and approval processes	Merger of SEPC and Corporatisation Committees Defined procedures for privatisation plan approval	Approve merger of Committees Approve defined procedures for privatisation plan acceptance
6. The Future Role of the State	What role will the state have in the future	Minimum share holdings The state will not be an active operator/service provider where the private sector can provide services	Approve view of future role of state
7. Legal Reforms	Legal obstacles for privatisation/reform	Draft law(s) on regulatory structure; and, amend regulations or laws impacting privatisation	Approve commencement of legal drafting and legislative and regulatory amendments
8. Regulatory Principles	Need for strong, independent regulators	Independent regulatory structures	Approve regulatory concept
9. Forms and Methods of Privatisation	What methods of privatisation will be used Requirements of privatisation plans	List of privatisation options and applicability Standardised criteria for privatisation plan development	Approve list of methods Approve standardised criteria and procedures
10. Use of Proceeds from Privatisation	How will proceeds from the sale of state assets be used	Follows Cabinet Resolution	NA
11. Corporate Governance and Performance Monitoring	Future governance of SOEs Improving performance measurement systems Improving MIS/reporting systems	Adopt commercial corporate governance system for SOEs Adopt balanced scorecard system for SOE performance measurement Integrated MIS system/database	Approve (in concept) move to commercial corporate governance system for SOEs Approve (in concept) performance measurement improvements
12. Social, Labour and Environmental Concerns	Ensuring consumer and social obligations are met during and after privatisation Addressing employee issues in privatisation	Privatisation plans to include analysis of and proposals for addressing social impact Create employee fund Public information	Approve inclusion of social, labour and environmental considerations in privatisation plans
13. Public Information Plan	Public awareness of privatisation program	Create public information secretariat at SERC Target and broadcast messages	Approve creation of responsible body at SERC for Public Information campaign

Part I of the Master Plan describes the principles guiding the overall Reform Program and the cross sectoral actions to be taken by the government in support of privatisation.

1. Purpose of the Master Plan

The purpose of the Master Plan for State Enterprise Sector Reform (Master Plan) is to provide the framework and guidelines for reforms to effectively increase private sector participation in the economy. The Master Plan shall serve as a reference document for the government, ministries, enterprises, investors, employees and the general public as SOE privatisation plans, and legal, regulatory and institutional reforms are prepared, approved and implemented in the years ahead.

The Master Plan is a strategic document which establishes the principles and practices to be followed in accomplishing reform objectives. For each infrastructure sector, it outlines the envisaged market structure, objectives and framework, and provides timelines for significant actions required in each sector to accomplish these objectives.

Though generally addressed herein, detailed sector market structures and enterprise timetables will be further defined in Sector Action Plans scheduled to be completed in November 1998 for most sectors. Upon initial completion, each October the government will publish an annual Reform Program Report and an annual Action Plan. The Program Report will review program performance against objectives for the previous year. The Action Plan will outline objectives and targets for the upcoming year.

Above all, the Master Plan makes firm and clear the governments commitment to improve the efficiency of the economy and increase the welfare of all Thai citizens.

2. Background and Context for the of State Enterprise Sector Reform Program

Privatisation efforts began in Thailand in 1961 and have been part of every subsequent national plan. In the past decade, the government has privatised more than 40 enterprises and reduced the number of state enterprises from more than 100 to 59. However, state enterprise reform has not heretofore been undertaken as part of a concerted, broad economic reform effort.

Though based on an established track record of privatisation, the current Reform (or privatisation) Program evolved as a result of the economic shock experienced in 1997. The floatation of the Thai baht and the subsequent domestic economic and financial crises ended almost 10 years of Thailand experiencing one of the worlds highest economic and industrial growth rates. In this context, and with negative economic growth projected for the short-term, the privatisation program is seen as one of the key drivers to restore economic vitality in the Kingdom.

The Reform Program addresses growing constraints in the:

Governments ability to subsidise sectors and/or enterprises
Ability of the Thai economy to become more efficient
Ability of enterprises to attract capital, management know-how and technology
Ability to rapidly reduce the debt burden of government
Ability to restore confidence in Thailand, its capital markets, and Thai companies.

With the free floatation of the baht, the government sought and obtained assistance from the IMF in the form of a US$17.3 billion standby loan. In the First Letter of Intent with the IMF, the government agreed as a medium-term goal to increase private participation in key commercial and infrastructure sectors dominated by the state. The government also agreed to review and improve the legal framework for private sector participation, including preparation of a law on corporatisation. In subsequent Letters of Intent, the government has reiterated its commitment to reform the state enterprise sector and has further defined its objectives with respect to the overall Reform Program.

The agreements with the IMF have accelerated reforms already contemplated by the government, working toward the objectives of:

Increasing the role of private participation

Freeing up public resources

Reducing the public debt

Promoting competition

Promoting increased productivity

Ensuring higher labour welfare.

To achieve these objectives and ensure that reform efforts have a solid foundation and framework in the months and years ahead, the government has established the State Enterprise Policy Commission (SEPC); identified and begun divestiture of fast-track enterprises; appointed privatisation advisors; and, prepared this Master Plan.

3. Overview of the Current State Owned Enterprise Sector

There are currently 59 state enterprises which can be broadly categorised into five major sectors: telecommunications; water; energy; transport; and, other (including enterprises in the industrial, social and technology, commercial and service, agriculture, and financial sectors).

These state enterprises typically dominate the commercial activity in the four infrastructure sectors, while also acting as the primary sources of employment and earnings in each. A number of these enterprises are well run and compare favourably by most measures of performance with regional SOEs. However, many also enjoy monopoly or quasi-monopoly powers, require substantial capital investments or operating subsidies, and due to their dominance of each sector, inhibit open and free competition.

Figure 1 below shows the book value of key SOE assets in the four infrastructure sectors.

Figure 1 SOE Book Value of Assets

Figure 2 shows employment levels for the ten largest SOEs. Figure 2 Employment Levels of Top Ten SOEs (1997)

Ten Largest State-Owned Enterprise Employers	No. of Employees *	% Contributed to Total Thai Employment
The Electricity Generating Authority of Thailand (EGAT)	32,459	0.11
The Provincial Electricity Authority (PEA)	30,619	0.10
Telephone Organisation of Thailand (TOT)	26,383	0.09
The Communications Authority of Thailand (CAT)	26,346	0.09
Thai Airways International Co., Ltd. (TG)	24,070	0.08
The Bangkok Mass Transit Authority of Thailand (BMTA)	22,753	0.07
The State Railway of Thailand (SRT)	21,160	0.07
Krung Thai Bank (KTB)	16,252	0.05
Bank for Agriculture and Agricultural Co-operatives	13,299	0.04
The Metropolitan Electricity Authority (MEA)	12,813	0.04
Total Top 10 SOE Employers	226,154	0.73
Total SOE employment	319,731	1.04
National employment	30,820,000	100
Note: (*) includes number of temporary workers Source: The Comptroller-Generals Department, Ministry of Finance

4. Definition, Goals, Objectives and Benefits of the State Enterprise Sector Reform Program

The privatisation program is more accurately described as a reform program, encompassing structural, institutional and legal changes in addition to the fundamental privatisation processes. The government has specific objectives with respect to its Reform Program as well as specific benefits it is expecting to achieve. These, together with a description of the methods of reform, are summarised in Figure 3 below.

Figure 3 Definition, Goals, Objectives and Benefits of the State Owned Enterprise Reform Program

Goal

The goal of the governments Reform Program is to increase the efficiency of the economy in
order to provide a sound basis from which Thai companies can compete internationally and
to ensure quality goods and services are available to the Thai public at the least cost. The
privatisation program is the means by which necessary structural reforms will be undertaken
to achieve this goal.

Privatisation

Privatisation is defined as any measure that increases private sector participation in sectors
where government enterprises presently operate, including divestiture of state owned enterprises
or assets (ownership transfer), concession arrangements, joint ventures, management contracts,
leasing, outsourcing, contracting services, deregulation which increases competition, creation
of needed regulatory bodies, and introduction of new competition.

Objectives of the Program Expected Benefits Methods of Reform

The specific objectives of the privatisation program are as follows:


Structural Objectives

Stimulate and provide a basis for renewed economic growth by attracting needed investment and know-how (foreign and domestic)

Improve economic efficiencies of all sectors of the economy

Improve the quality and availability of services for Thai people at reasonable prices



Financial Objectives

Reduce the financial burden on government resources (e.g. subsidies, loan guarantees)

Provide capital for needed infrastructure investments

Stimulate, broaden and deepen Thai capital markets





Social Objectives

Facilitate the creation of new and better job opportunities for the Thai people

Provide resources for needed social services, retraining, and education

Ensure expanded provision of quality services at reasonable prices to the public

The government expects specific benefits to result from the privatisation program and will monitor the program and its results for these benefits. These include:
Structural Benefits

Improvements in the economic efficiency of sectors as measured by decreases in costs of production and/or price of services

Improvements in quality of service, including choice of services for consumers

Completion of needed infrastructure investment projects

Attraction of higher value-added services to Thailand, and of needed technology and management systems

Financial Benefits

Reduction in subsidies to enterprises

Reduction in loan guarantees to enterprises

Private rather than government financing of needed infrastructure services

Proceeds from sales of enterprises for reinvestment in the economy and social sector

Strengthening of the capital markets in Thailand

Contribution to confidence in Thailand, the Thai financial sector and the Thai economy

Social Benefits

Improved and/or expanded services

New employment opportunities

Greater ability of the government to invest in social and public services

The privatisation program is designed to strengthen the Thai economy and provide a basis for Thailands continued growth in the coming age of global knowledge-based businesses. There are six key aspects to implementing the program.

Legal reform: providing the legal basis for reform including revisions to laws to enable private enterprises to effectively compete in sectors formerly dominated by state enterprises; creating new regulatory structures and provisions; and, creating more transparent and efficient means for private sector participation in the economy.

Regulatory reform: creation where appropriate of independent regulatory bodies to ensure fair and open competition in sectors, limit the powers of monopolies, enforce transparency in pricing and enterprise operations, and be accountable to the public for their actions

Divestiture: transparent and open transfer through sale, lease or other means, of state operations/assets which may be more efficiently managed in the private sector.

New entry: ensuring transparent and efficient means for greater private sector participation in sectors of the economy previously dominated by the state.

Introduction of international best practices for those enterprises remaining in state hands, including management accountability.

Performance monitoring/measurement: for the Reform Program itself, as well as for state and newly privatised enterprises. Performance monitoring and measurement systems for SOEs will be enhanced, and greater information provided to the public.

5. Roles and Responsibilities of the Participants in the Privatisation Process

The government recognises the need to create efficient, streamlined and transparent processes for the implementation of the Reform Program. This section of the Master Plan describes the administrative machinery to be put in place to co-ordinate and oversee the privatisation program.

Privatisation Committee Structure

To ensure expedient and effective oversight of the Reform Program, the government intends to merge the responsibilities of the SEPC and the Corporatisation Committee to be formed under the Corporatisation Act. The newly created commission, the State Enterprise Reform Commission (SERC), will have as its secretariat the Office of State Enterprises (OSE) at the Ministry of Finance and the NESDB.

Figure 4 below depicts the institutional structure for oversight of the Reform Program.

Figure 4 Reform Program Institutional Structure

Roles and Responsibilities of Relevant Parties in the Privatisation Process

Figure 5 below summarises the roles and responsibilities of the participants in the privatisation process. Clear delineation and demarcation of roles and responsibilities is key to the success of this program.

Figure 5 Roles and Responsibilities of Relevant Parties in the Privatisation Process

Agency / Actor	Roles and Responsibilities
State enterprise	To develop and propose plans for increased private sector participation and commercial viability consistent with sector strategy and development.
Line ministry	To set policy direction and oversee sector privatisation strategy. To review and approve SOE plans.
State Enterprise Reform Commission (SERC)	To review SOE and ministry privatisation plans and ensure consistency with overall Reform Program goals and objectives. To approve or request amendments to plans. To forward plans to Cabinet for approval. To oversee implementation.
Secretariat (MOF Office of State Enterprises/NESDB)	To conduct technical reviews of all plans on behalf of the SERC, co-ordinate all SERC efforts and oversee program implementation for SERC.
Cabinet	To review and approve or request amendments to plans proposed by SERC.
Investor	To develop plans for investment in existing SOEs, or in new projects, and to propose plans to SOEs, the line ministry or SERC as appropriate.

Investor Led Projects and Investor Information Services

The government encourages the presentation of innovative proposals by the private sector. To facilitate submission of such proposals, and consistent with the charter for the SERC, investors may submit such proposals to the SOE to which they relate, the respective line ministry or directly to the OSE.

The government will establish a privatisation program information clearinghouse, under the direction of the OSE, either at the OSE or at the Board of Investment. The purpose of this office will be to ensure information is equally available to interested investors relative to the proposed timing, form and conditions of divestiture of specific state enterprises.

6. The Future Role of the State

Consistent with Article 87 of the Thai Constitution, the primary role of the state shall be as a policy maker and regulator, not as an operator, in commercial sectors. As a rule, the state will seek to exit from enterprise operations which can be more efficiently and effectively performed by the private sector. The state will maintain an operating role only in specific enterprises that may be strategic, socially obligatory or non-commercial in nature, or those that are otherwise deemed necessary for the quality of life of Thai citizens. These may include the provision of certain health or education services.

The state may also retain a minority interest in certain essential enterprises, where the corollary voting rights of such holdings would permit the government to exercise veto power over significant actions, e.g. amendments to the corporate mission or changes to the fundamental operation of the enterprise.

7. Legal Reforms

Certain laws and regulations may impede effective implementation of the Reform Program. Figure 6 below highlights select laws, relevant issues of concern and proposed methods of addressing these issues.

Figure 6 Select Legal Constraints to Privatisation

Law (s)	Issue	Proposal
1. Competition Laws	The privatisation of divisions of large SOEs may oblige said divisions to compete on unequal terms with the remaining SOE structure.	Sector regulators must be empowered to protect new entrants and other enterprises from abuse of monopoly power by SOEs, particularly in the transition period.
2. Alien Business Law	Under NEC 281 foreigners are not allowed to hold more than one-half of the total shares of privatised SOEs.	Exemption from NEC 281 should be granted by the Cabinet or the Registrar of Trade Registration Department.
3. Taxation Law	Corporate income tax, value added tax, special business tax, transfer fees, and stamp duties shall be borne by the privatised SOE when there is a capital gain from the conversion of assets into shares at corporatisation.	Tax exemption could be granted to SOEs during corporatisation by the MOF or the Revenue Department.
4. Intellectual Property Laws	Difficulties of enforcement and excessive delays in the pursuit of justice may discourage investment.	Further study is required to solve those impediments.
5. Land Law	Where foreigners hold more than 49% of the shares in a privatised SOE it can no longer own land.	All land should be returned to the government which subsequently may rent the land to privatised SOEs on a long lease (e.g. 60 years) basis. A waiver, by provision in the State Owned Enterprise Reform Law, should be granted from Section 540 of the Civil and Commercial Codes.
6. Employment Law	Severance pay could impose a financial burden on privatised SOEs.	Implementation of early retirement programs or employee retraining and assistance programs before or during the process of privatisation.
7. Private Sector Participation Law	Private sector participation under the Private Sector Participation Act B.E. 2535 could conflict with long-term and broad-ranging privatisation under the Master Plan.	The Corporatisation Act should be amended to allow the SERC to ensure that private sector participation projects fall within the aims and objectives of the privatisation program.
8. Corporatisation Law	The draft Corporatisation Act allows the transfer of rights and privileges of SOEs to the corporatised SOEs for a limited period of time. Regulators must be established to exercise and enforce said rights and privileges to avoid a regulatory vacuum. The corporatisation and privatisation processes could be delayed due to the existence of two jurisdictional bodies: i.e. SOE Capital Policy Committee and the SEPC.	Regulatory bodies should be established to issue and enforce licenses to privatised SOEs and other enterprises. Merge the two into one single commission (i.e. SERC) with the membership and authority of SEPC.
9. The Constitution-Section 49	Privatised SOEs may lose privileges to use private land or government infrastructure for the purpose of business.	When there is a need to use land for commercial purposes, the Cabinet may issue a Resolution on expropriation of land that requires the SOE to construct with its own expenses while renting the land.
10. Company Law  Golden Shares	Golden shares are not envisaged under Thai Law.	To reserve the governments holding in some corporatised SOEs, the government may maintain 33.4% of the total shares of a private company and 25.1% of a public company.
11. Securities Laws	Acquisition or holding of 25% or more of the total shares in a public company is deemed a take-over, and a tender offer is therefore required.	If privatisation is undertaken by means of a private placement or acquisition of a strategic partner, an SOE should be corporatised as a private company.

In addition to existing legislation, there is a need to create the legal basis for effective regulatory regimes and bodies. An omnibus State Enterprise Sector Reform Law is proposed as the primary legislation for the creation of such bodies. This law will define the following:

Scope of authority of the regulatory body
Appointment procedures
Conditions of termination
Dismissal procedures
Tenure
Complaints procedures
Determination of criteria to grant licenses
General privileges and conditions set out in the licenses
Determination of the regulators right to impose charges, fees, investigative powers, disciplinary procedures, and penalties for breach of licensing conditions
The granting to the regulators of the authority to decide upon corporatisation:

the extent that SOE laws should remain applicable to the enterprise
the extent that real property assets of SOEs should be retained by the state
the extent that legal restrictions on ownership or trading of securities and assets of the company should be applicable

The determination of a regulatory framework for dispute settlement procedures
The waivers of certain laws, e.g. Section 540 of the Civil and Commercial Codes.

8. Regulatory Reforms

In many sectors the roles and responsibilities for policy making, regulation and operation are overlapping or unclear between ministries, agencies, departments and SOEs. Clear regulatory regimes and regulators do not yet exist to provide confidence to investors and stability to markets and consumers.

Clear separation of policy making, regulation and operation is a critical component of the Reform Program and a requirement for the development of transparent, competitive markets. Figure 7 below shows the proposed separation of policy, regulatory and operating functions.

The government intends to create effective regulatory regimes in each of the infrastructure sectors of telecommunications, water, transport and energy. The specific proposals and timelines for each sector are found in Part II of this Master Plan. However, regulatory regimes and bodies will be founded on the principles outlined below.

Regulatory Principles

Fair and open competition is the best economic regulator. However, where competition alone is not strong enough to protect the interests of consumers, economic regulation is important to both consumers and to firms who are seeking a fair basis for access and operation in the sector. Consumers need to be assured that their interests are being protected, while investors need assurance that they may expect a reasonable return on their investment. Regulators must also help ensure that the sector is viable, and that sufficient investment is being made in infrastructure maintenance and renewal.

The characteristics of the regulatory system for each sector are described in Figure 8 below.

Figure 8 Characteristics of the Regulatory System

Characteristic	Description	Means to Accomplish
Clarity of roles and objectives	A clear division of responsibility between regulators and policy makers (i.e. line ministries) is required to give regulators clear and accountable responsibilities.	State Enterprise Reform Act or sector regulatory acts or regulations
Adequate resources	This includes adequately trained staff and sufficient budget to undertake responsibilities.	Initial government funding Levy on operators in sector Training programs
Reasonable degree of autonomy	Regulators must have authority to oversee firms in their sectors and to enforce their rulings while avoiding undue political pressure.	State Enterprise Reform Act Appointment and dismissal procedures
Consistency	Regulators need to provide consistency and ensure fair treatment of all players.	Regulatory mandate Associations and joint training of regulators
Accountability	Regulators must be held accountable to the public and the regulated firms for their actions. Transparent dispute resolution processes will be needed, including appropriate appeals processes. Public confidence and investment will depend largely on accountability and transparency in decision making.	State Enterprise Reform Act Established transparent appeals process Public hearing process

Roles, Responsibilities and Functions of Regulators and Policy Makers

The functions of the regulators in each sector will include the responsibilities outlined below:

Licensing: regulators will draft licensing terms and requirements and issue licenses (and subsequent modifications).
Compliance monitoring and enforcement: regulators will monitor compliance with licensing conditions, social obligations and price controls.
Reviewing and setting tariffs: regulators will review tariffs and set tariff limits to ensure efficiency and adherence to social obligations.
Regulating service quality: explicit targets and penalties will be defined in secondary legislation establishing the regulatory authorities and responsibilities in each sector.
Network access regulation: regulators will determine the overall framework for network access.

Competition regulation: regulators will ensure fair and transparent competition where several operators exist in addition to ensuring that barriers to entry are not inefficiently constructed.
Consumer relations: regulators will address consumer complaints and consult with consumer groups/bodies.
Advisors: regulators will play the role of advisors to the government on issues related to their sector.

The Cabinet, through line ministries, will primarily remain in a policy-making role, but may also be involved in appeals processes. The policy-making roles will include:

Setting long-term goals and objectives for the sector
Defining social obligations in the sector consistent with government policy and goals
Drafting enabling legislation and facilitating development of the sector consistent with approved development plans
Establishing funding levels for sectors, including financing for sector development and targeted subsidies
Determination of the extent of private sector participation and liberalisation through sector licensing and operating controls
Establishing broad tariff policies (tariff setting will be the function of the sector regulator).

Clear definition and separation of roles and activities will ensure that regulators operate to protect consumers and to promote competition and efficiency. It is expected over the short-term that regulatory functions may be implemented by existing structures until legislation has been passed to define clear roles for newly created or strengthened regulatory structures.

Organisation and Staffing

A commission structure is anticipated for regulatory bodies. A regulatory study, scheduled to be completed in November, 1998, will identify the proposed number of commission members, and member qualifications, terms and remuneration. Staff members will include lawyers, policy analysts, economic, financial and accounting specialists, industry/sector specialists and administrative staff.

Funding for the regulatory bodies may ultimately be derived primarily from a levy on operators in the sector. Until such levies are established and implemented, funding will be provided from the budget.

Appointment Procedures

Each regulatory body will be comprised of sector specialists to be drawn from both the public and private sector through a standard process designed to preclude conflicts of interest. Appointments and dismissals shall be undertaken in accordance with generally accepted principles of transparency and accountability. As applied, these will include:

Nomination of multiple candidates for consideration by the Prime Ministers Office
Approval of the selected candidates by the Cabinet
Definition of dismissal guidelines and procedures approved by Cabinet
Definition of procedures for addressing complaints against members of regulatory bodies to be approved by the Prime Ministers Office and the Cabinet.

9. Forms and Methods of Privatisation

Privatisation refers to all facets leading to the creation and development of fully competitive markets, including divestiture, deregulation, and licensing of private sector participants. This section describes the basic forms and methods of privatisation to be implemented, defines the various methods of crafting and selecting an SOEs privatisation plan, and the criteria by which privatisation plans/proposals will be evaluated. Privatisation plans may be submitted by both public and private entities, and will be considered and selected based on stated criteria and appropriateness to a given SOE.

While a clear objective of privatisation is to raise needed capital at minimal cost, the government will balance this objective with other objectives, such as: social obligations and concerns, privatising expeditiously, reducing financial burdens on the state, securing technical or managerial expertise, recapitalising an SOE, or other stated objectives.

The primary forms and methods of privatisation are listed below:

Public Offerings

Private Placements and Joint Ventures with Strategic Partners (trade sales)

Management Buy Outs (MBOs)

Asset Liquidation

Debt for Equity Swaps and Debt Buy Backs

Convertible Bond Offerings

Coupons/Options

Management Contracts

Leasing

Concession Contracts

Build, Operate, Transfer (BOT)

Build, Own, Operate, Transfer (BOOT)

Build, Own, Operate (BOO)

Build, Transfer, Operate (BTO)

Competition, Regulation, Deregulation

Privatisation plan development will follow a typical path as shown in Figure 9 below. The SERC will have the responsibility to approve plans and to oversee their transparent and expeditious implementation (as described in Section 5).

A key measure of the privatisation programs success will be the ability of the government to divest its SOE holdings according to the overall Master Plan and the plan for each enterprise. The ability to achieve this is based directly on the demand for such assets. Particularly considering the current state of the financial markets in Thailand and the region, a number of factors will need to be assessed closely to ensure that privatisation plans clearly consider market realities, including consideration of the:

Target market and investor capacity to absorb issues
Attractiveness of the terms and conditions of specific privatisation plans to targeted investors
Clarity of the regulatory regime under which the enterprise will operate
Degree of current and expected competition in the sector
Government intentions with respect to investment, promotion, and infrastructure build-out in the sector
Demonstrated government commitment to implement the stated reforms in each sector
Clarity and expediency of the process.

10. Use of Proceeds from Privatisation

Privatisation proceeds are an important benefit of the privatisation process. Where proceeds are earned directly by the government, they will be used in accordance with the Cabinet Resolution of May 19, 1998. This Resolution stipulates that 50% of all proceeds be used to fund needed social services (i.e. education, public health, labour welfare and agriculture), with the remaining 50% allocated to the Financial Institutions Development Fund. Proceeds from the sale of SOE subsidiary shares may be used by the SOE according to the terms stipulated in the May 19, 1998 Resolution, or according to future Resolutions.

The government is preparing to create a central employee fund. The central employee fund will be used to ensure that all employees displaced through privatisation receive the severance payments to which they are entitled in accordance with Thai labour law.

11. Corporate Governance and Performance Monitoring

Improved corporate governance and performance monitoring of state enterprises are essential to achieving the overall objectives of the Reform Program. This is true of both enterprises in transition as well as those which will remain state owned.

Figure 10 below depicts the relationship between performance improvement, corporate governance and management information systems. The notes in italics identify the actions being evaluated by the government to improve SOE performance and accountability.

The government intends to revise the present SOE corporate governance system and adopt a system largely consistent with that of commercial enterprises formed under the Public Limited Company Act. In this system, board members will be selected by the shareholders and chief executives appointed by the board. Board membership and terms will mirror commercial standards of independence and qualification, as will appointment and dismissal procedures.

Currently, two performance evaluation systems are used for SOEs: the Good Enterprise System (GES), and the Performance Agreement System (PAS). The government is evaluating the adoption of a single system which will integrate the best aspects of PAS and GES under a balanced scorecard evaluation methodology. Such systems use comparative performance indicators for key enterprise stakeholders and operations (e.g. customers, shareholders, employees, and internal operations). Changes in the performance measurement organisation structure will be made to streamline decision making and evaluation procedures.

The government will establish an integrated management information system to collect and report standardised enterprise information and to reduce the multiple reporting requirements of SOEs.

12. Social, Labour and Environmental Concerns

The government recognises that such a significant reform effort may entail dislocation of and disruption to some segments of society. It is the governments objective to minimise such dislocations while adhering to its Reform Program. To this end, the privatisation program is designed to address concerns as follows.

Privatisation Plans  all enterprise privatisation plans will be required to include measures of their social, labour and environmental impacts. As a rule, the government shall favour those plans which best address these issues.

Enforcement of Existing Measures  programs presently exist to provide employees with specific benefits if they are terminated due to privatisation. The government intends to ensure such benefits are received by employees.

Adoption of Additional Measures  the government will create a central employee fund. Such a fund will be used to ensure that labour receives legally entitled employee severance.

Public Information  the government recognises that employees and the public need regular, reliable information on the objectives, benefits and timetables of privatisation.

13. Public Information Plan

The government recognises the need for clear, factual and frequent information on the nature, activities and outcomes of the Reform Program. The following are the guidelines for the governments public information plan.

Objectives

To create a systematic internal communications environment among government officials involved in the privatisation program
To strengthen the government officials capacity to effectively communicate the objectives and status of the privatisation program, including to non-participating government officials through regular and streamlined intra-governmental communications
To establish communication channels that can be effectively accessed and reached by stakeholders, thus encouraging two way communications
To create awareness and knowledge of privatisations core purposes
To develop appropriate messages and consistently disseminate them to effectively eliminate the release of inaccurate information
To enhance the transparency and accountability of the privatisation process being undertaken by the government.

Audiences

Primary audiences include all stakeholders directly or indirectly affected by the privatisation process, including:

General public/consumers
SOE employees at all levels
Representatives of SOE labour organisations
Representatives of government, non-government, academic and other organisations that influence public opinion
Local and international media
Domestic and international investors.

Communications Strategies and Guidelines

To create transparency and ensure the accountability of information through the establishment of a central office or secretariat at the SERC responsible for dissemination of all information
To identify and address the concerns of various stakeholders in order to build understanding of and support for the privatisation process
To regularly communicate/disseminate information through a variety of channels regarding the specific objectives of and rationale for privatisation, as well as the benefits to be derived from this process
To manage the flow of information and disseminate key messages to target audiences
To regularly provide updates on the privatisation of SOEs and the progress being made by the SERC to target audiences
To identify suitable communications tools for each target audience
To co-ordinate dissemination of information for SERC at special functions (e.g. road shows, international conferences)
To monitor news, comments and feedback from the various stakeholders, identify issues of concern and prepare direct responses
To respond in a time sensitive fashion to needs and requirements for more information on specific issues as the privatisation program proceeds.

Immediate Actions

SERC Website

To reach the general public and investors alike, SERC will establish and maintain a website containing both general information on privatisation and sector-specific details. The site will be attached to the existing MOF domain.

Bi-monthly Newsletter

The SERC will publish a bi-monthly newsletter to deliver progress reports on privatisation in each of the various sectors. The newsletter will be disseminated to SOEs and interested parties inside and outside the government. The newsletter may contain an open commentary section where audiences may send their comments to the editor.

Public Seminars

In accordance with the timetable for implementation of the Master Plan, SERC will organise a series of public forums to explain the Master Plan and its contents to the public and to elicit public feedback and comment. Public seminars will be held in major provincial centres and will be publicised in advance through appropriate media to encourage attendance.

14/09/98