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.
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
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.
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
--social obligations
--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
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