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Prem Calls for “Optimum Benefits” from Military Budget

The Bangkok Post’s front page lead story from 24 November, 2015, highlighted a speech given the previous day by General Prem Tinsulanonda, Thailand’s elder statesman, President of the Privy Council, and most influential non-royal Thai. Specifically, General Prem Tinsulanonda “has advised the army to spend its budget well, because it is not rich… the force is not wealthy so must strive to deliver optimum benefits from the budget it is given.” The Bangkok Post highlighted this speech in a box in a piece on the Rajabhakti Park debacle.

Rajabhakti Park is a billion baht Royal Thai Army-led theme park featuring the statues of seven of Thailand’s greatest monarchs, with two more to come, making a total of nine, an auspicious number. The main accusation of graft centers on a ‘commission’ of 10% extracted by a ‘broker’ from five foundries, each responsible for one 40 million baht statue, thus a total bribe of 20 million baht. That this actually happened was admitted by Deputy Defence Minister and former army chief Gen Udomdej Sitabutr, who at the time was overseeing the park’s construction. The perpetrator of the bribery-seeking, an amulet trader, has apparently fled the country. Buddhist amulets, by the way, are small, fungible, and at the high end, worth more than their weight in gold. The second main complaint appears to center on palm trees worth 100,000 baht each, though the only figure seen for their possible true worth is 30,000 baht, implying a markup rate of over 200%.

Every major media outlet in Thailand is running with this story and the attempts by the National Anti-Corruption Commission and the pro-business Anti-Corruption Organization of Thailand, not to mention the Royal Thai Police, to investigate just what occurred, despite Army commander Theerachai Nakvanich’s initial assurances that there is no corruption at the Park, based on a military inquiry, and that the affair is over because the military returned the bribe to the foundries, which then returned it to the military as an extraordinarily public-spirited donation.

The story is consequential both because previous military regimes have been brought down over corruption scandals and because the scandal is so close symbolically to the Thai monarchy. This is, therefore, seen as a test of the sincerity of the RTA in its fight against corruption as part of the NCPO, which is at present running a large anti-corruption campaign in the Thai media and at Thai schools via the 12 Core Values of Thai People, in cooperation with a variety of NGOs and the UNDP. Graft is covered by multiple core values, including:

Core Value 2: Honesty, patience, and good intentions for the public.

Coe Value 6: Morality and sharing with others.

Core Value 8: Discipline and respect for the law and elders.

Core Value 11: Physical and mental strength against greed.

Core Value 12: Concern about the public and national good rather than self interest.

As such, Deputy Prime Minister Prawit Wongsuwon has publicly welcomed an NACC probe, and in a rapid about turn following General Prem’s speech, the Defence Ministry has ordered a new probe to be headed by Defence permanent secretary General Preecha Chan-ocha, the Prime Minister’s brother – a sign of the recognition of the sensitivity of the matter. Moreover, in what may be an unrelated coincidence but which is an interesting development, Major General Suchart Prommai, former aide to former army chief Gen Udomdej Sitabutr, has been accused of lèse-majesté in connection with the ‘Bike for Mom’ event, specifically the case of Col Khachachart "Seh Jo" Boondee, who has fled the country.

Despite the fact that this second probe is likely to at least investigate why the amulet trader was not immediately arrested, the Thai military are at this moment looking particularly exposed, especially in the international context, with Transparency International ranking it as among the least transparent militaries in the world in terms of spending, as recently covered in this Prachatai article. Of course, it is a military government, which automatically leads to its score dropping down the ranks, specifically to ‘Band E’ (“very high risk”), placing it in the same company as China, Pakistan, Saudi Arabia, and Pakistan, but at least above ‘Band F’ countries such as Iraq, Syria, Myanmar, and Cambodia. Unfortunately, three ‘Band D’ countries - the Philippines, Indonesia, and Malaysia - are Thailand’s direct competitors in ASEAN, and while Singapore was not ranked in this survey, it was seen in the 2014 TI Corruption Perceptions Index as the 7th cleanest place in the world to do business and is thus in a whole different league.

Just how corrupt are individuals in the Thai military alleged to be? As can be seen from this 2013 Bangkok Post article citing a University of the Thai Chamber of Commerce survey, the typical graft rate in the government sector is 25%, rising to 40% in particularly crooked deals. The TI report on corruption in the Thai military is within this range, roughly a 30-40% increase in the procurement process from the list price. However, the matter is complicated, as TI points out, by the Thai military not publishing an annual defence budget, by a complete lack of legislative oversight, and by an opaque system of internal audit which seems to believe all is well if expenditure equals income. Nonetheless, TI ranks procurement at 21%, above political oversight (17%), financial oversight (18%), and operational oversight (20%), but well below personnel oversight of 42% - making an average of 24%. This is how the 21% in procurement breaks down (skip table if not thinking of investing in Thailand):

 

No.

Question

/5

57

Does the country have legislation covering defence and security procurement and are there any items exempt from these laws?

1

58

Is the defence procurement cycle process, from assessment of needs, through contract implementation and sign-off, all the way to asset disposal, disclosed to the public?

1

59

Are defence procurement oversight mechanisms in place and are these oversight mechanisms active and transparent?

0

60

Are actual and potential defence purchases made public?

2

61

What procedures and standards are companies required to have - such as compliance programmes and business conduct programmes - in order to be able to bid for work for the Ministry of Defence or armed forces?

1

62

Are procurement requirements derived from an open, well-audited national defence and security strategy?

1

63

Are defence purchases based on clearly identified and quantified requirements?

2

64

Is defence procurement generally conducted as open competition or is there a significant element of single-sourcing (that is, without competition)?

1

65

Are tender boards subject to regulations and codes of conduct and are their decisions subject to independent audit to ensure due process and fairness?

1

66

Does the country have legislation in place to discourage and punish collusion between bidders for defence and security contracts?

0

67

Are procurement staff, in particular project and contract managers, specifically trained and empowered to ensure that defence contractors meet their obligations on reporting and delivery?

1

68

Are there mechanisms in place to allow companies to complain about perceived malpractice in procurement, and are companies protected from discrimination when they use these mechanisms?

2

69

What sanctions are used to punish the corrupt activities of a supplier?

2

70

When negotiating offset contracts, does the government specifically address corruption risk by imposing due diligence requirements on contractors? Does the government follow up on offset contract performance and perform audits to check performance and integrity?

0

71

Does the government make public the details of offset programmes, contracts, and performance?

0

72

Are offset contracts subject to the same level of competition regulation as the main contract?

0

73

How strongly does the government control the company's use of agents and intermediaries in the procurement cycle?

0

74

Are the principal aspects of the financing package surrounding major arms deals, (such as payment timelines, interest rates, commercial loans or export credit agreements) made publicly available prior to the signing of contracts?

0

75

Does the government formally require that the main contractor ensures subsidiaries and sub-contractors adopt anti-corruption programmes, and is there evidence that this is enforced?

0

76

How common is it for defence acquisition decisions to be based on political influence by selling nations?

2

   

21%

 

 

As can be seen, doing business with the Thai military looks a bit like walking into the proverbial lion’s den, especially since multiple ASEAN countries offer better prospects for doing business in the defence sector, particularly for countries with Foreign Corrupt Practices acts such as the US and UK, which penalize companies for engaging in graft in third party countries. Moreover, the fact that Thailand is run by a military government means the near-total lack of a regulatory framework for military procurements may bleed over to the civilian administration the military is at present overseeing. In general, civilian governments have better frameworks for procurements and demonstrate less arbitrary behavior than military governments, especially when considering Thailand’s Article 44, and thus offer better prospects for inwards investment, partly explaining Thailand’s economic slowdown. Nonetheless, the Thai military as an institution, according to the TI Global Corruption Barometer, is – or at least was in 2013 - seen as less corrupt than the Royal Thai Police, with only 23% seeing the military as corrupt or extremely corrupt, compared to 71% for the RTP. Thus, the mind boggles at what a TI profile of the RTP would look like.

Finally, what is striking regarding the statues is that the commission demanded was in fact extremely low compared to both the University of the Thai Chamber of Commerce survey and the TI standard graft rate for the Thai military. The reason for the very low commission rate for the statues may be due to the proximity of the project to symbols of the monarchy especially because of ongoing anti-corruption efforts centering on lèse-majesté claims against individuals close to the monarchy who are alleged to have exploited the monarchy for personal gain. The alleged markup rate of 200%+ for the trees could then be explained by the fact that trees are less prestigious than statues of Thai kings. This raises the likelihood that some areas of the Kingdom of Thailand, namely those closest to the monarch, including the Royal Household, the Crown Property Bureau, and the Privy Council, are in fact completely corruption free – a utopian vision which should serve to inspire the Thai military and all those agencies engaged in fighting corruption in Thailand.