ABSTRACT
By the early 1990s, Thailand had achieved an unprecedented level of economic success. Along with relative abundance of labour and natural resources, Thailand’s liberal economic policies, which encouraged private competition and trade and investment openness while preserving fiscal conservatism, pushed growth rates to double-digit levels. Parallel to this economic advancement was the transition to democracy. After the 1992 ‘Black May’ crisis that led to a clash between the military and anti-government protestors, democracy flourished and civilians were elected as prime ministers, boosting investor confidence in the Thai economy.2 The kingdom looked set to become another Asian ‘tiger’. Yet there were increasing signs of weaknesses in the policy management of
various sectors, especially among state-owned enterprises (SOEs). The government deliberately protected them from private competition, insolvency and takeover at taxpayers’ expense. When the 1997-98 financial crisis unexpectedly struck, they became net drawers on the government budget, rather than net providers. The crisis highlighted the need for public enterprise reform in Thailand. Introducing reforms for SOEs has been an integral part of the liberalization
process initiated since the crisis. In the December 1997 letter of intent to the International Monetary Fund, the government proposed a fast-track programme of privatization, which became the core principle of the 1998 Master Plan for State Enterprise Reform thereafter. Along with energy and telecommunication, transport stood out as a likely target for privatization, but so far little progress has been made. Resistance to privatization from unionized labour within these enterprises, as well as political interests involved in the control and management of SOEs, have successfully protected public transport from privatization. Even if the Thai transport sector remains in government hands, regulatory
reforms are much needed.3 It is increasingly obvious that the existing regulatory structure does not meet either the efficiency or equity aims of the regulation, leading to an annual nine-digit loss in dollars for some operators. A key explanation for this failure is that the government regards passenger transport as a ‘welfare’ service and keeps fares at an un-operationally low level.
For this reason, most SOEs chronically run at a loss, require subsidization, and therefore have no incentive to contain costs. Given that intervention in the sector is inevitable, the important question is not the extent but the quality of such intervention. The next section provides an overview of the operations of the SOE-
dominated Thai passenger transport sector, and highlights signs of organizational inefficiency in the current setting. Such problems can be explained by the top-down approach to policy development in Thailand, which has led to conflicts of interest in the regulatory framework governing passenger transport. The overlapping authority in the sector’s regulatory decision-making is also inconsistent with the characteristics of ‘good’ regulation. The chapter outlines the most important regulatory challenge in the sector – balancing economic and social ends. The Thai regulatory authorities have not succeeded in achieving this. The final section discusses the appropriate future direction of Thai passenger transport regulation. This includes increasing the independence and productivity of the transport regulators.
