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E-COMMERCE IN THAILAND: A SLOW AWAKENING

by
Pascale Prud'homme and Hassana Chira-aphakul
E-Commerce, Telecommunications & Technology Group

Deregulation of the Telecommunications Sector

While Thailand has undertaken measures to liberalize its telecommunications sector by 2006 pursuant to WTO requirements, much remains to be done before business and end-users can benefit from market competition.

In November 1997, the Thai government adopted a comprehensive Master Plan for Telecommunications Development, which provides guidelines for:

the establishment of an independent and impartial regulatory body, the National Telecommunications Committee ("NTC");

the privatization of two state enterprises, the Communications Authority of Thailand ("CAT") and the Telephone Organization of Thailand ("TOT");

the conversion of existing Build-Transfer-Operate concessions into licenses; and

the opening up of the telecom market to competition through a step-by-step liberali-zation process.

Implementation was nearly completed, but due in principal to the local economic downturn, workers' resistance and, more recently, the election which took place early this year, it suffered delays.

Formation of the NTC

The Organization of Frequency Wave Allocation and Supervision of Radio Broadcasting, Television and Telecommunications Enterprises Act ("Frequency Law") was enacted on January 12, 2000 and paved the way for the creation of two government agencies--the NTC and the National Broadcasting Committee ("NBC").

Their creation, however, has been delayed due to criticism over the selection panel and lack of transparency in the selection method. Furthermore, the Telecommunications Business Operations Bill, which will provide guidelines and control the powers given to the NTC, has not yet been adopted. The controversial Bill, which will also repeal the Existing Telegraph and Telephone Act 1934, abolish the Post & Telegraph Department's monopoly rights in the market (rights which were transferred to CAT and TOT), and regulate the issuance of licenses to private operators, is now awaiting consideration by the Senate. It is likely that the contents of the Bill will be revised in order to clarify the role and powers given to the NTC and give better consumer protection.

When formed, the NTC and NBC will be powerful independent regulatory bodies in charge of overseeing the issuance of licenses and regulating the telecommunications, radio, and television sectors. It is hoped that the formation of the NTC will not suffer further undue delay as, pursuant to Section 80 of the Frequency Law, the issuance of new telecom licenses by TOT and CAT has been suspended until its creation.

Privatization of TOT and CAT

The two state enterprises are preparing to privatize their organizations and register as private limited companies early next year and public limited companies by the second quarter of the year. Pursuant to the State Enterprises Corporatization Act 1999, the State Enterprises Corporatization Policy Committee will decide which activities, rights, liabilities, responsibilities, and assets of the state enterprises should be transferred to the newly formed limited companies. Remaining assets and liabilities will be vested in the Ministry of Finance.

In addition, the Cabinet has just approved the State Investment Corporatization Bill, which will assist in speeding up the privatization of the state enterprises. Under the Bill, a State Investment Corporation is to be established with the duty, among others, of promoting the state enterprises to investors.

Privatization, however, may suffer further delays if the relevant parties to the existing BTO concessions awarded by CAT and TOT can not agree on a conversion scheme. The government and the private operators disagree on the method to be used for calculating the compensation payments to be made for each BTO concession. The government recently set up a new panel to come up with a new proposal by the end of this year.

With the coming privatization of CAT, it was asked to release its stake in Internet Service Providers ("ISPs"). Until now, ISPs have had to obtain their licenses from CAT, which requires a free 32% interest in a provider's capital stock. The ISPs have asked the Ministry of Transport and Communication to free them from CAT's control, thereby allowing them to freely compete in the market, especially with CAT becoming one of their competitors in the new deregulated market. A panel was set up by the previous government to study CAT's redemption of its stake in all ISPs. However, the process was put on hold with the recent election and may be stalled further until the new NTC becomes operational.

Luckily, the fierce competition between CAT and TOT has brought some of the costs down, benefiting end-users as both state enterprises slowly prepare to make their move for a competitive advantage before the market becomes fully deregulated and internationally strong competitors arrive in 2006.

Recent Developments

The government has been quite active recently in addressing Thailand's lack of adequate measures to support the development of electronic commerce.

In addition to addressing the lack of an adequate legal framework and the slow implementation of the Telecommunications Master Plan, the government is also working on increasing the number of IT specialists in Thailand. In that respect, the government will adopt measures to improve the IT education system and also open up the sector to highly skilled foreign IT specialists. With this in view, visa and work permit requirements for such specialists may be eased in the near future.

The Board of Investment ("BOI") recently announced its intention to increase existing incentives (tax and other incentives) for e-commerce businesses in order to encourage the establishment of regional offices in Thailand.

The upcoming adoption of the IT 2010 Policy drafted by NECTEC will also assist Thailand in moving towards an IT knowledge-based economy by focusing on five main issues: e-industry, e-commerce, e-government, e-edu-cation, and e-society. Finally, the government is also drafting an e-government master plan to provide guidelines for government departments and agencies as they develop their online services. Thailand's government is pointed in the right direction to ensure that Thailand's e-commerce will be on par with that of other countries. However, while other countries have charged forward in the protection and development of their e-commerce, Thailand has been plagued by one delay after another. Nevertheless, we should witness significant changes in the next few years with the new government's commitment to increasing Thailand's competitiveness in the IT sector.

Contact Person

Pascale Prud'homme, Head, E-Commerce, Telecommunications & Technology Group
(pascale@tillekeandgibbins.com)

Tilleke & Gibbins International Ltd.
Tilleke & Gibbins Building, 64/1 Soi Tonson
Ploenchit Road, Bangkok 10330, Thailand

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