Thailand’s post-coup crackdown

Publication | September 2014

Introduction

Corruption has long been a problem for Thailand. According to Transparency International Index, it has slipped from 80th in the Corruption Perceptions Index in 2011 to 102nd in 2013. The situation became worse last year when the House of Representatives passed an amnesty bill to discharge certain individuals from criminal offences linked to corruption. Although the bill was rejected by the Senate, the political unrest is not resolved. In May 2014, the National Council for Peace and Order (NCPO) was formed by the Thai armed forces to assume control of national administration from the then government. NCPO’s goals are to solve the unrest and reform the country in various ways – including with anti-corruption measures – before a national election, expected to be held in late 2015.

Since its establishment, NCPO has worked with the National Anti-Corruption Commission (NACC) (and other agencies) to take an integrated approach in tackling corruption. The major anti-corruption investigations making headlines in Thailand have been into the previous government’s rice pledge scheme; various financial transactions with suspected links to corruption; drug trafficking and money-laundering; and certain mega-infrastructure projects. NCPO has also ordered the Office of Public Sector Anti-Corruption Commission (PACC) to tackle corruption in state agencies, state enterprises, local administration organisations and the armed forces. In particular, PACC was asked to investigate areas of encroachment on national forest reserves and national parks, budget embezzlement by local administration organisations, abuse of state budgets designated for victims of natural disasters, and improper issue of national identification cards.

NACC and PACC serve as the two principal independent anti-corruption commissions in Thailand. NACC investigates allegations of corruption involving high-ranking public servants and elected officials. PACC concentrates on allegations involving lower-ranking public servants.

The rice pledge scheme

The rice pledge scheme was a subsidy policy implemented by the former government to help farmers. Unlimited supply could be pledged by farmers to the government at a price that was higher than the market price. The mechanism was that the market price of the rice would increase because of the decrease of supply to the market because of the pledge scheme. Subsequently, farmers could redeem the pledge to sell the rice in the market, when the market price was higher than the pledge price. However, as the pledge price has never been lower than the market price, no farmers redeemed the pledge. As a result, the government owned all pledged rice at very high cost (including the costs of storage, administration and logistics). As rice is always deteriorating, the quality of rice stored under the pledge scheme was also a problem.

There were also rumours that criminal groups had smuggled rice from Myanmar or Cambodia and mixed it with Thai rice or put it in the rice pledge scheme. This problem would affect the quality and also the reputation of Thai rice.

There have been press reports that estimate a loss to the former government from the current rice scheme at Baht 500,000 million. Amidst the general lack of transparency on how the scheme is being run and rumours that hundreds of tonnes of rice have gone missing, NCPO has launched an investigation into the rice-pledge scheme, starting with inspections of pledged rice stored at 1,800 warehouses and 137 silos nationwide. The inspections will verify the quantity of the pledged rice, which according to official figures stands at 18 million tonnes, and the quality of the pledged rice via DNA tests (to verify the origin of the rice) and quality tests. 100 rice inspection teams have been deployed, comprising officials from various government ministries and the Thai army. The inspections are expected to finish by mid-September 2014 but these may be delayed.

In July 2014, NACC unanimously found that the former Prime Minister Yingluck Shinawatra had been negligent in overseeing the loss-making and allegedly corruption-ridden rice-pledge scheme. This charge carries a maximum penalty of 10 years’ imprisonment. Subsequently, NACC has asked the Office of the Attorney-General to prosecute the former Prime Minister in the Supreme Court's Criminal Division for Politicians.

There have been two other recent high profile convictions relating to the rice-pledge scheme. In early June 2014, the Chaiyaphum Provincial Court found the owner of a rice mill and nine rice farmers guilty of falsifying official rice-pledging documents and stealing 750 tonnes from the mill’s stockpile and re-pledging the rice to the same mill. The owner was sentenced to 20 years’ imprisonment and the farmers were each fined and given six-month jail terms which were suspended for two years. Also in June this year, the Samut Prakarn District Court sentenced the president of a rice trading company to six years’ imprisonment for embezzling 20,000 tonnes of rice, worth Baht 200 million, in 2007.

New rules for reporting financial transactions to NACC

NACC will issue a new regulation requiring financial institutions to report all major financial transactions involving politicians and government officials. Financial institutions will be required to report to NACC all cash transactions of more than Baht 500,000 and transactions which involve assets or property worth more than Baht 1 million and involve any politicians and government officials obliged by law to periodically declare their assets and liabilities. These include politicians and government officials at both the national and local levels.

Under the current reporting requirements, financial institutions are required to report to the Anti-Money Laundering Office (AMLO) financial transactions involving at least Baht 2 million. The new reporting requirements will place additional burdens on financial institutions, as they will be required to report to both AMLO and NACC, and the volume of reports is expected to increase due to the lower reporting threshold.

Mega-infrastructure projects under review

In June 2014, NCPO ordered a review of 28 mega-infrastructure projects worth Baht 40 billion which were initiated or proposed by the previous government. The projects under review may be subject to cancellation or downsizing if found to be not transparent, too expensive or not in the interest of the public. Any findings of irregularity will also be forwarded to the NACC and the Auditor-General's Office. Two out of the 28 projects under review will probably be cancelled, including the proposal by the Royal Irrigation Department to build a reservoir in the central region and the project of the Education Ministry which provides free tablet computers to elementary school students.

NCPO has also ordered state enterprises to seek approval in respect of any project (and certain transactions) with a value of more than Baht 100 million. Such projects must first be submitted to the Ministry of Finance and subsequently to NCPO for final approval.

Restructuring and purging benefits

NCPO has ordered the boards of 56 state enterprises to review the privileges accorded to their members and to submit proposals to the Ministry of Finance to cut benefits. For instance, the Thai Airways International board, currently chaired by an NCPO deputy, has decided to cut generous free flight benefits for its board members and members of their families. This followed the resignations of leaders of several state enterprises (including chairmen of PTT, PTT affiliate Thai Oil and Airports of Thailand) after the coup. State enterprises were also asked to make changes in line with NCPO’s policy of streamlined and efficient operations, accountability and good governance.

Recent developments

The interim Constitution of Thailand B.E. 2557 (A.D. 2014) received Royal Assent in late July. It contemplates the establishment of a National Legislative Assembly (NLA). 200 members of the NLA were appointed on August 31,2014 and the inaugural meeting of the NLA was held on 7 August. A majority of the members of the NLA are either retired or active members of the Thai armed forces. Several academics have also been appointed, as well as diplomats and prominent businessmen. After the establishment of the NLA, NCPO is expected to propose several bills for approval by the NLA in relation to anti-corruption and money-laundering. These include draft bills to amend the Penal Code (to remove the prescription period to bring claims for corruption offences by governmental officers), the Anti-Money Laundering Act and the Anti-Corruption Act. The proposed change to the Anti-Money Laundering Act includes moving AMLO from within the Ministry of Justice to become an independent agency, outside the influence of politicians.

Currently, NACC has the power to investigate only civil servants and politicians suspected of corruption. NACC has proposed an amendment to the law which would allow it to investigate private enterprises suspected of being involved with corruption in the public sector and take legal action against their executives, if appropriate. NACC will also propose changes to the Anti-Corruption Act to streamline its operations. NACC intends to adopt an inquisitorial system (instead of its current adversarial system) in investigations of future corruption cases.


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