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The dangers of equating reform with stricter control

Publication Date : 12-08-2014

 

Siam Cement Group's latest TV commercial is worth watching.

Featuring children from all 10 Asean nations, it shows what our younger generation expects from technology. A Vietnamese boy hopes that one day a house will be able to generate electricity on its own. A Thai girl foresees medical advancements. A Myanmar girl dreams of clean food. Yes, all this requires technological development - which fits SCG's vision of itself as an innovative organisation. Importantly, it also fits its ambition to be a truly Asean company ahead of regional economic integration next year.

PTT chose a similar theme for its recently launched TV commercial. In it, the camera pans across Bangkok skyscrapers as a man's voice asks, "Do you know what technology can bring?" (Well, I have to say that every time I hear his voice, I say "yes".)

The ad also fits well with the company's actions over the years, which includes the opening recently of the Rayong Advanced Institute of Science and Technology. The dream of using technology to create value-added products was initiated by former PTT president and CEO Prasert Bunsumpun and has been carried on by his successor, Pailin Chuchottaworn. Armed with degrees from Japan, Pailin knows well how technology can transform an economy.

Caught any ads for Thai Airways International recently? The latest one I saw aired during Wimbledon and offered a tour of the new cabins, highlighting Thai-style onboard service that's becoming a thing of the past as low-cost airlines take control of the skies. At the time, the airline had no president.

A TV commercial reflects the incumbent corporate leaders' views on the company's future. And their commitment to that vision is an assurance of that future.

PTT Group and SCG have been named among the top five employers of choice in a survey of young adults by Aon Hewitt and CareerVisa Thailand. Proctor and Gamble, Unilever and CP Group are the other three. There are two main reasons for their popularity among job-seekers: The fact they are large and successful corporate groups, and their world-class products and services. Those characteristics are a strong feature of PTT and SCG.

In contrast, what is left at THAI, except for the logo and 20,000 employees whose average age is over 40? Without strong characteristics and a world-class product/services, THAI looks set to struggle in the competition to lure new talent necessary for the busier skies.

In June, the NCPO established the 17-member State Enterprise Policy Commission, or "Superboard", as part of its agenda to reform state enterprises. I support this plan, as some state enterprises are poorly run, but I fear that the streamlining process to follow could hurt some state enterprises which have been doing well.

Thailand currently has more than 60 state enterprises. Most are supervised by the Finance Ministry, but others are controlled by various ministries, including Defence, Agriculture and Transport. While the Finance and Transport ministries wrestle over the supervision of headline-making THAI, other state enterprises that are poorly run fail to gain much public attention.

Most state enterprises were established after World War II to boost the economy. All of them provide jobs and help the government carry out necessary projects. But as the decades have passed, some have become obsolete. Among them are the Defence Ministry's Battery Organisation of Thailand and the Leather Tanning Organisation. The government was right to axe both these organisations in 2007, forcing the ministry to secure military supplies with its own budget. Before that, the two organisations' loans were backed by the Finance Ministry.

According to the State Enterprise Policy Office, from 2008 to 2013 only five state enterprises failed to add to state coffers - the State Railway of Thailand (SRT), Mass Rapid Transit Authority of Thailand (MRT), Bangkok Mass Transit Authority (BMTA) and Aeronautical Radio of Thailand.

Those tasked with reforming state enterprises shouldn't make profitability the only focus. The reasons they were first established must be also considered, as well as the transparency of their operations. Though showing no profit, Aeronautical Radio is necessary as it oversees Thailand's airspace. Meanwhile, the BMTA's primary task is not to make money but to provide Greater Bangkok with an efficient electrified rail network. We need to recognise that the services of the SRT and BMTA can be improved a great deal with more private-sector participation, though with the state's regulatory role remaining intact.

Topping the revenue repatriation chart for state enterprises are the three electricity-related agencies, with the Electricity Generating Authority of Thailand most profitable. It is worth noting that through all these years, they have never failed in their mission. Power brownouts are rare now, when decades ago some areas didn't even have access to electricity.

Efficiency can be boosted by several means, not just stricter control. Privatised in 2001, PTT Group today reaps annual revenue of over Bt2 trillion. Yet, there is some criticism of its governance, though several of its units are globally recognised for proficiency in this area.

For these better-governed and profitable enterprises, detailed reports to the Superboard should suffice, enabling directors and executives to be held accountable for poor decisions. Direct interference in the boardroom should not be necessary.

The example of SCG shows the wisdom of encouraging creativity by giving executives a free hand, though with full acknowledgement of the need to stick to the company's mission and all codes of conduct.

Too much state control can backfire. Progress will be held back if the Superboard seeks to extend its influence beyond its areas of expertise and then makes hasty decisions on business plans.

 

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