Privatization of the Port Authority of Thailand hits brick wall - again

Union wins round one in a new bout.

Fresh from the successful management shake-up at Airports of Thailand Public Company Limited during October (see last week's article), Transport Minister Suriya Jungrungreangkit last week turned his attention to the Port Authority of Thailand (PAT) and promptly hit a brick wall - at least for now. Successive Thai governments have tried to reform the PAT in order to uproot corruption, improve efficiency and prepare this highly profitable state enterprise for eventual privatization. Yet to date all of these attempts to reform the PAT have failed, and in the short-term the Thaksin government appears headed for the same outcome.

In Thailand the first step in privatizing a state enterprise involves transforming each entity into a public limited company, which is referred to as 'corporatisation'. Basically, this means restructuring the board of directors, articles of incorporation etc to put the state enterprise on par with private sector companies as much as possible.

However, opposition from PAT's labour union to the privatization process remains as strong as ever, as Minister Suriya found in early November when protests by PAT workers forced him to indefinitely postpone the state enterprise's 'corporatisation,' which at least for now means that its privatization is on hold as well.

Strong opposition to change from PAT's union. PAT's labour union managed to pull out all the stops in order to block the corporatisation process, which its membership views as a first step on the slippery slope towards privatization. Approximately two-thirds of the PAT's 4,200 employees are union members, and its leadership claims that 98% of its members are opposed to corporatisation. Their opposition is so solid that the union recently threatened to stage a series of strikes in order to make their views heard.

Strikes by state enterprise unions in Thailand are illegal, but earlier this month this did not stop PAT's union leadership from threatening to organize coordinated work stoppages with unionized employees at Thai Airways International Public Co Ltd (THAI), the State Railway of Thailand (SRT), and at electric power utilities such as the Electricity Generating Authority of Thailand (EGAT). While there were no indications that the labour unions at these other state enterprises were ready to join a strike call, the threat was powerful enough to have its desired impact.

And no doubt PAT's union got its inspiration for such a protest from the recent dock workers' strike at West Coast ports in the United States during the summer months that only ended when President George Bush intervened with a federal back-to-work order.

Privatization goals. Last week Minister Suriya tried to explain to PAT's rank-and-file that privatization is aimed at improving efficiency, raising the quality of management and upgrading the competitiveness of the Thai economy. He also pledged that PAT employees would retain their existing salaries and benefits (including their pensions) after corporatisation and privatization are completed. However, the union remains unconvinced, saying that privatization will involve selling off state assets to foreigners, which in turn would likely result in eventual job losses.

In response, Minister Suriya said that the main intent of privatization is not to sell off PAT's assets to non-Thais, but rather to make funds available for upgrading Thailand's ports in terms of technology and logistics. Of course, the unspoken reason for much of PAT's opposition to privatization is the fear that the opportunity for graft and corruption will be curtailed, thus cutting into the "extra" incomes of port employees and management alike. And on this point no amount of promises or written guarantees are likely to overcome the union's resistance.

Veiled threats to undercut the PAT's franchise. As a warning to PAT and its staff, in early November Minister Suriya announced that the Thaksin government is giving consideration to inviting the private sector to invest and develop new and existing port facilities in Thailand, including in Bangkok and at Laem Chabang along Thailand's Eastern Seaboard. The implication of such statements is clearly that if the PAT does not come around soon to the government's policy on privatization, then it may be necessary to examine alternative methods of improving the competitiveness of Thailand's ports.

At some stage it is conceivable that this could involve setting up new ports with private sector money that are completely outside PAT's jurisdiction. While the Thaksin government is not yet willing to consider such extreme measures today, we are quite certain that PAT has got the message that it cannot resist pressure to change for too much longer.

Rear guard action by PAT. Recognizing that its reputation for service quality and transparency are already badly tarnished, PAT's management is moving quickly to come up with stopgap measures to upgrade its technology. In late October PAT management approved a pilot project backed by funding from the European Commission (EC) to create an advanced electronic supply-chain information network at Thailand's ports.

PAT and the EC will each invest the paltry sum of Bt6 million to cover the cost of new equipment and the services of consultants from Belgium and Ireland. The goal is to get approximately 120 companies to join this computerized supply-chain network management system over the next 12 months. In our opinion, efforts such as this have little chance of forestalling the need for real reform at PAT.

So while PAT's union may have won round one, Minister Suriya is clearly not giving up entirely on his goal of privatizing this state enterprise just yet.

Danial Nielsen is an analyst for the Brooker Group. For more information about the Brooker Group please click here.

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