September 28, 2010 / 5:48 AM / in 9 years

Analysis: Thailand struggles against tide of corruption

BANGKOK (Reuters) - From minor bribes to dubious multi-billion-dollar procurement deals, corruption is as endemic as ever in Thailand despite the fastest economic growth in 13 years and a government led by an Oxford-educated technocrat.

Thailand's Prime Minister Abhisit Vejjajiva speaks during a news conference after a cabinet meeting in Bangkok August 31, 2010. REUTERS/Chaiwat Subprasom

British-born Prime Minister Abhisit Vejjajiva, a 46-year-old economist, signaled zero-tolerance for graft when he took power in December 2008 with fellow a Oxford University alumnus, Finance Minister Korn Chatikavanij. But corruption indicators show graft remains deeply rooted two years into Abhisit’s administration.

The reason lies in one of the fundamental weaknesses of his premiership — he holds on to power only with the support of networks of politicians, generals and bureaucrats whose reputation for probity does not match his own, and who epitomize the patronage politics that has long bedeviled Thailand.

“The regulatory framework in Thailand is quite good but whether it is put into practice is a different issue,” said Kanokkan Anukansai, Thai programme manager of anti-corruption watchdog Transparancy International.

“The lack of stability makes it hard to make tough, potentially politically damaging decisions.”

Corruption allegations have shadowed a $42-billion government-spending plan to rescue Thailand from recession. Questions were raised over procurement projects involving security forces, while abuse-of-power complaints against police and provincial officials remain a staple of local media reports.

Abhisit faces an uphill struggle if he is to get his fractious coalition government under control, rally popular support and challenge his backers to achieve much-needed reforms.

UNHOLY ALLIANCES

To form a government, Abhisit has been forced into uneasy alliances. A case in point is Bhumjai Thai, a party whose support is crucial to Abhisit in his six-party coalition government.

The party’s de facto leader Newin Chidchob is famed as one the country’s most skilled practioners of patronage politics, but is banned from parliament due to past alleged infractions.

Official Bhumjai Thai leader Chavarat Chanvirakul oversees the Interior Ministry where he has been accused of auctioning off provincial governor posts to the highest bidder.

He’s also accused of orchestrating construction deals to benefit his family and helping to manipulate district chief examinations in northeastern Thailand to help allies. He has denied all allegations, calling them politically motivated.

The Thai military, whose more than 1,000 active generals outnumber those in the U.S. military which is at least three times its size, is also a perennial source of cost overruns and corruption allegations.

The army budget has doubled since a 2006 military coup removed a government led by former premier Thaksin Shinawatra, who was accused of corruption and later convicted in a Thai court of breaking conflict of interest laws while in office.

Recent army procurement deals have raised questions of whether military corruption has worsened since the coup.

These include a 350 million baht ($11.4 million) purchase of a leaky surveillance blimp last year and more than 700 UK-made GT200 bomb detectors that turned out to be an embarrassing scam — they are lumps of plastic with no working mechanical parts.

The military said in July it would keep the airship if its U.S. manufacturer paid for repairs. It initially insisted the bomb detectors, which cost 900,000 baht ($29,360) each, worked fine until weeks of public outcry brought an admission they had flaws. But they said the purchase was above board.

“Cases like these are hard to pin down because there is no serious investigation into who was accountable. It is usually taken as an honest mistake and the blame is on manufacturers. The procurement side gets off lightly,” said Nuannoi Trirat, an economist at Chulalongkorn University who studies governance.

INDIRECT BRIBES

A 2010 survey by Hong Kong-based Political and Economic Risk Consultancy Ltd showed Thailand was perceived as the fifth-most corrupt of 16 Asia-Pacific economies.

“Prescribed comment periods for new legislation and regulations are sometimes not honored,” said The Economist Intelligent Unit, blaming transparency problems on a “complex hierarchical system of laws, decrees and regulations.”

The World Bank’s Governance Indicators suggest corruption worsened between 2005 to 2008, with the indicator falling from 54.4 out of 100 to 43.5. It improved in 2009 to 51.

Foreign investors say they largely factor corruption into their investments but that it remains a source of risk.

One executive at a foreign luxury property developer said companies usually budget for direct and indirect bribes, sometimes to circumvent loosely worded regulations.

“As long as it doesn’t become unpredictable, it’s just a cost of doing business” said the executive, who declined to be identified because of the sensitivity of discussing bribes.

While there is no exact figure that measures how much corruption undermines Thailand’s competitiveness, economists said worsening perception certainly hurts confidence.

“Many investors are used to this and it’s not their biggest concern (compared to political instability). But there appear to be more complaints in recent years especially in the construction and procurement businesses and this certainly eats into growth,” said Poramet Tongbua, an economist at Tisco Securities.

“It is something businesses keep an close watch on and would seriously consider if it gets worse.”

Months into Abhisit’s $42-billion three-year government stimulus programme, two government ministers resigned in scandals linked to abuse of the funds. Allegations ranged from irregularities in the procument of hospital equipment and school supplies to rigged bidding process on construction projects.

“Opportunities for graft and mismanagement remain high,” said Danny Richards, senior Asia editor of the Economist Intelligence Unit. “While trying to push through spending programmes as quickly as possible, there does not appear to be any great priority placed on ensuring quality control.”

Complaints lodged against low-level administrators are also on the rise, according to the National Counter Corruption Commission’s Pakdi Pothisiri. Nearly 3,000 cases were filed last year against police officers and more than 2,000 were against local administrative authorities, he said.

Editing by Jason Szep and Andrew Marshall

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