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Thailand steps up anti-corruption drive

Tue, 6 Sep 2011 12:03 GMT

Source: Content partner // Thomson Reuters Accelus

A bank employee counts Thai baht notes at Kasikornbank in Bangkok 12/10/2010 REUTERS/Sukree Sukplang

Thailand has amended its anti-corruption act to require greater cooperation from banks in providing information on transactions involving government-related projects. The revised law seeks to eradicate corruption in the country, starting with government procurement projects, which will require greater transparency on the part of government officials and contractors involved, Vichai Assarasakorn, secretary-general of the board of trade at the Thai Chamber of Commerce (TCC), told Thomson Reuters.

Government procurement projects, a focus of the amended law, have been identified as rife with corruption. According to Vichai, approximately 30 to 40 percent of the total value of government procurement projects had gone into corruption, amounting to more than 100 billion baht of annual wastage. "This 100 billion baht could have been used for a better cause, like building schools. Instead, the money has gone into a handful of people who put the money outside Thailand and are enjoying their life," he said.

Full disclosure and transparency

Under the amended National Anti-Corruption Commission (NACC) Act, all government procurement projects — from infrastructure developments to procurement of computers for schools — with budgets exceeding half a million baht would have to be declared. This new requirement, according to Vichai, is a landmark change, as it provides no leeway for government officials, vendors or contractors to inflate the cost of any projects. "All government related projects above 500,000 baht will come under scrutiny by all parties in the private sector and we will have participants [in projects] to make the disclosure," he added.

The amended law also requires vendors and contractors undertaking government projects to maintain a separate bank account and balance sheet detailing the expenses and cashflow on those projects. Furthermore, any disbursements over 30,000 baht to contractors and vendors would have to come in the form of a cheque rather than cash, as was the practice in the past. The revised NACC Act will be implemented on January 1, 2012.

Sirimas Watanachoti, deputy secretary general of the Thai Bankers' Association (TBA), said the NACC Act now requires all bank accounts and reports on government procurement projects to be submitted to the Department of Revenue upon project completion. "This is to ensure that there is full disclosure and transparency. Because contractors and vendors will be required to disclose expenses incurred on those projects, any under-table money to government officials will eventually show in the accounts," she added.

Reward and protection

Another significant amendment made to the NACC Act is the protection and reward accorded to government officials who step forward to report suspected acts of bribery. "This will encourage government officials to come forward and testify. Whereas under the old law they could be charged and would be found guilty as well," Vichai said.

That all government procurement projects would undergo an investigation process means that corruption would be harder to carry out, Vichai noted. "With the amended Act, corruption cannot be carried out so easily. Unscrupulous businessmen will have nothing to gain. This new [amended] law is comprehensive and very practical. We believe that it will be effective," he said.

Industry observers have, however, raised questions about how banks should balance between maintaining confidentiality of clients' information, in this case, information on vendors and contractors, while ensuring that they comply with the amended NACC Act. Sirimas said the NACC would step in and seek information from banks on suspicion of corruption.

"We try to avoid coming to this scenario. According to the law, the NACC can find evidence from the bank accounts maintained by contractors and vendors. We want to avoid a big burden on banks because, in the past, banks were not obliged to disclose clients' information to third parties. But we tell them that this is the kind of business now required by the law. We have to protect consumers as well. Maintaining a separate bank account for government-related projects will be a big problem for contractors and vendors. This is a big change for our society," she said.

The TBA has also started a number of campaigns and educational initiatives targeted at compliance officers at banks, as well as auditors. "We have asked them to keep their eyes open on their working procedures and to report cases to the regulators if corruption is suspected. We have also carried out a number of financial literacy programmes for our bank members and we are also promoting greater awareness of anti-corruption in schools," she said.

Stronger voice from the private sector

Industry players said the amendments to the NACC Act were timely, coinciding with a series of anti-corruption campaigns from the Anti-Corruption Network (ACN), a private sector-led group backed by a group of Thai businessmen and 30 industry associations.

Dusit Nontanakorn, chairman of the TCC, has been the main force behind the anti-corruption drive led by the private-sector group. The 30 industry associations include the TCC, the TBA, the Federation of Thai Industries, the Stock Exchange of Thailand (SET) and the Thai Listed Companies Association, among others.

Indeed, ACN now plays an instrumental role in the anti-corruption drive in Thailand, including supporting the NACC. Vichai said the main impetus to set up ACN came from the rise in bribery in the country.

"Corruption has been the main root of many problems. In the last few years we saw a lot of demonstrations. We thought that they were political movements. If we put aside the politics, a lot of poor people from the countryside wanted to say something. They are saying enough to corruption. We see the severity of the problem. Given that about 30 to 40 percent of government-related projects have gone into corruption every year, if we allow this process to persist, it will be a disaster for the country," he said.

Wichet Tatinavich, vice chairman of the Capital Market Academy, the training arm of the SET, pointed out that Thailand has to stop corruption in part to prepare for the ASEAN Economic Community, which will take shape in 2015. "Corruption has a cost. If we don't stop it, the cost [of corruption] will be passed on to consumers. When the ASEAN Economic Community formally establishes in 2015, ASEAN will become a borderless market. If we do not solve the problems on corruption, it will be at our disadvantage in terms of competition," he said.

The newly sworn in Phue Thai government recently included combating corruption at the top of its agenda. Vichai said ACN has begun discussions with a number of government officials, including the director-general of the Ministry of Finance. The stronger voice now from the private sector, however, further demonstrates that Thailand can no longer wait for the government to solve the deep-seated problem on corruption.

"If we continue to do business like this, everything is going to go down the drain. If we leave it to the government, we are doubtful if the problem can be solved as quickly. Meanwhile, the NACC does not have enough resources and needs help from everyone," Vichai said.

Weak enforcement

Industry experts said the NACC's lack of resources and expertise has, up until now, rendered its enforcement efforts ineffective. Justice, according to Vichai, was either delayed or denied. One of the remits of ACN is to provide support to NACC, an independent body formed under the Thai constitution but not considered a government agency.

"We were told that because the NACC is weak in enforcement, the law became useless. Being businessmen, we can see from a management point of view that the NACC needs help. The NACC may have people from the judiciary and academic field, but they are not so strong on management. If you want to do something, there is a time element, people and processes. Because they are not strong in management, they cannot see all these. The [enforcement] process sometimes takes too long," Vichai explained.

Vichai said ACN now meets the NACC at least three times a week to address issues on corruption in the country. One of the high-profile events organised by ACN took place on June 1 when more than 1,400 executives from across all industries turned up for the "grand national movement" by declaring war against corruption.

Although each of the 30 associations currently runs its own anti-corruption programmes, the individual effort was deemed insufficient to create an impact on the country. The grand national movement, said Vichai, sought to raise awareness of corruption in the country. Timothy Tong, commissioner of Hong Kong's Independent Commission Against Corruption (ICAC), was the keynote speaker for a seminar that ran alongside the grand national movement. "The ICAC is a successful model that we want to learn from," he added.

Vichai said ACN would stage a peaceful walk on September 25 during which the new Prime Minister Yingluck Shinawatra, the former Prime Minister Abhisit Vejjajiva and the speakers of the senate and the house of law would be among those invited to the event.

(US$1 = 29.4124 baht)