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Regulatory Reform and Competitiveness in Thailand
By: Sakda Thanitcul
(a) Communication Sector
The communication sector comprises telecommunications, postal and broadcasting activities. In each of these sub sectors large state owned enterprises i.e., the Telephone Organization of Thailand (TOT), Communication Authority of Thailand (CAT), and the Mass Communication Authority of Thailand (MCOT), retain operational and regulatory roles and responsibilities. While current statutes preserve the monopoly structure in these industries, the pressing need for infrastructure investment in high growth are (such as telecommunications) over the last decade has led to increased private sector participation. Under a series of Build Transfer Operate (BTO) concession contracts, private companies have entered into a wide variety of product markets, creating in practice a form of embryonic competition for several core communication services. However, these markets are unlikely to be truly competitive in the absence of cost based pricing, open access regimes, transparent interconnection arrangement and independent regulatory regime.
Regulatory Reform The sectoral plan calls for the creation of an independent regulator. It recognizes that the independent regulatory regime is critical for the promotion of competition and consumer benefits. The proposed independent regulatory body for telecommunication to be set out in the new Telecommunication Act should provide the necessary framework on which competition, consumer, technical and legal safeguards will be based. Similar individual sub sector regulators or agencies are envisaged for both the postal service and broadcasting although the actual regulatory model proposed for these services has not yet been detailed. While the MOTC plan discusses how the independence of the regulatory bodies will be maintained and their scope of authority (as distinct from government ministries), the plan may be deepened to address the relatively pro-active or passive roles regulators can play in areas such as dispute resolution, pricing, technology selection and infrastructure planning.
Privatization International experience in communication privatization suggests that the existence of a clear market structure and framework before privatization and the liberalization of markets will result in greater investor confidence and expedient sector
development. In light of this, the current proposals enabling the rapid corporatization and privatization of SOEs may not be entirely consistent with an effective move toward open competition and a sustainable longer-term industry structure. The clear articulation of policy and resolution of key issues, such as the conversion of current concession agreements, interconnection arrangements and universal service obligations, should be resolved before privatization commences. While industry restructuring will necessarily impact the sector's labor force and management, the MOTC plan attempts to ease this process via the introduction of a transitional period in which the current SOEs are protected from open market forces. This is a sound approach if there is serious commitment to corporatization with TOT, CAT and MCOT in the absence of competition. An ex ante framework for the future telecommunications market is necessary to comple such reform. In this instance, the potential for effective competitive markets in the future will drive coropratization
Timeframe This sector plan envisages a transitional market structure with restricted competition for 2-5 years. The open competition regime, with more products and a functional market, will commence from 2002-2005. This proposed timetable could enable Thailand to meet its commitments under the Fourth Protocol to the WTO up to four years ahead of schedule (2006).
(b) Water Sector
Water supply and distribution systems in Thailand are mostly covered by three state-owned enterprises. The Metropolitan Waterworks Authority (MWA) produces and distributes tap water for urban areas, while the Provincial Water works Authority (PWA) treats and distributes tap water for rural areas. The Waste Water Management Organization (WWMO) treats waste water. There are also municipal and private water companies.continued increases in demand for water within the MWA's jurisdiction. This increase in demand has led to a concomitant increase in water mains pressure, putting greater strain on the system.
A particularly critical issue with respect to MWA operation is water loss stemming from the deterioration of capital works. Such losses have increased to over 40%, worth approximately baht 4.6 by per year. Trends in many performance areas have been worsened by the recent financial crisis, and problems have been further exacerbated by
Regulatory Reform It is proposed that an independent regulator be established to provide oversight of the water industry in order to provide certainly to private sector participants and set customer safeguards in the areas of tariffs, quality of service and dispute resolution
Within the context of the models/options for private sector participation, the role of the regulator would be to provide certainty with regard to the:
--interpretation of contracts or concession agreements
--regulation of established tariff structure
--customer service standards
--arbitration of disputes which might occur between the contracting agency and the private sector providers.
As the regulator will seek to safeguard the interests of consumers, there is a
need to ensure that the current, cross-subsidised tariff structures are replaced by targeted subsidies in government budgets. The provision of water services has an inherently social dimension and all citizens may be provided services through these targeted subsidies.
(c) Transportation Sector
The transportation sector is comprised of 14 SOEs which are categorized in three major transportation modes or sub-sectors: land (road, rail and mass transit) ; water; and air transportation. Private sector involvements is currently extensive through a series of concession and licensing agreements. However, this sector currently functions as a mixed economy, with complex interactions among government department, ministries, SOEs, and the private sector that affect policy formulation, regulatory development, infrastructure planning, project implementation processes, as well as the provision of quality, reliable integrated and cost-effective services.
Regulatory Reform The conceptual outline below aim's at a more systematic and uniform network of policy and regulatory linkages among unites involved in the Thai transportation sector. The basic principle is to separate and clarify the policy, regulatory, planning and operating functions described below.
Policy Making and Planning The Ministry of Transport and Communication (MOTC) will bear primary responsibility for overall transportation policy. The non-transport ministries (i.e., the Ministry of the Interior, Office of the prime Minister and Ministry of Defence) with an interest in transportation policy will direct their concerns to the MOTC. The MOTC will formulate and articulate policy, with input from other ministries where appropriate, and assign responsibilities for filling in finer policy details and carrying through these policies to the line departments or modal administration within the Ministry. The SOEs under these non-transport ministries may maintain a reporting relationship with their current line ministry. However, a more effective coordinating and implementation arrangement will be created, and the regulatory functions currently performed by all line ministries will be transferred to the new regulatory authority or body in accordance with the future sector structure.
Regulatory Independent regulators will be established in accordance with the guidelines of the Master Plan. These bodies will draw extensively on existing government departments, agencies and SOEs. By separating regulatory functions from policy responsibilities exercised by line government agencies, potential conflicts of interest will be restricted and enforcement and regulation will foster rather than inhibit industry growth objectives.
Transportation Authorities The transit authorities are administrative units which could be set up by legally transforming SOEs that match the authorities' mandates into these units. The merger of two transit SOEs could be accomplished either by creating a new unit, or the absorption of one SOE by an other and its subsequent rebirth as a