State enterprises in need of reform
The Nation May 6, 2009 12:00 am
Bureaucracy, political intervention and mismanagement are all to blame for the poor performance of public-sector organisations
While new investment in the private sector has slowed down, the government is set to play a more prominent role by increasing public investment to boost economic sentiment. Unfortunately, a number of state enterprises are not in a strong position, financially. Their unsatisfactory performance is mainly a result of mismanagement, excessive red tape and political intervention that has crippled several of them for years.Although the overall revenue of all state enterprises increased from Bt3.06 trillion in 2007 to Bt3.55 trillion last year, the profits of these state enterprises were reduced by almost half from Bt204.19 billion to Bt122.333 billion over the same period. The drop in profit is mainly attributed to fluctuating energy prices, which have adversely affected agencies like PTT and the Electricity Generating Authority of Thailand. Areepong Bhoocha-Oom, director-general of the State Enterprise Policy Office, told Thai Rath newspaper that the drop in state enterprises' income had adversely affected the government's fiscal stance because it directly affects the revenue that state enterprises submit to the government. Areepong told Thai Rath that so far this year only Bt85 billion was assured of being submitted to the government, compared to the Finance Ministry's original target of Bt93 billion. Last year, state enterprises submitted a combined Bt101.43 billion to the government. It was not so worrying to see competitive agencies such as PTT, which is usually profitable, encounter unexpected external factors such as a fall in fuel prices. But the real concern for many state enterprises is that their poor performance is a result of chronic problems, the worst being several years of mismanagement. These state enterprises need immediate reform and an overhaul of their operations. For instance, the Bangkok Mass Transit Authority and the State Railways of Thailand require an immediate restructuring programme to turn around their performance. Thai Airways International Plc's financial problems are exacerbated by the fluctuation of oil prices and the global economic meltdown. However, some state enterprises don't have much capacity or flexibility to overhaul their operations in the changing economic environment. The long-standing bureaucratic culture of several state enterprises has made them inefficient and uncompetitive in the modern global economy. Several of them have a high staff count and many of their employees may be unable to adapt to a new business environment. A number of state enterprises have hired thousands of employees even though they allocate several work functions to concessionaire companies.Moreover, several state enterprises face the problem of political intervention. The top managers of these agencies tend to execute projects that serve politicians who with short-term goals. A number of state enterprises are involved in transport and logistic work. But they have barely achieved anything in the past few years because of external political bickering or internal conflicts. Their failure means less national competitiveness compared to our neighbours. On the other hand, some state enterprises are seen as gold mines for corrupt politicians because they are charged with overseeing projects in which millions, sometimes billions, of baht are involved. Many projects have become a source of controversy because they are not carried out in a transparent manner. Politicians also tend to select their cronies to sit on much-coveted state enterprise boards. Thus, some board members of are not properly qualified to make important decisions that will help direct the future of those state businesses.Many state enterprises have been able to continue doing business like this for decades, without much pressure to change. But this is likely to end soon.The current economic recession, coupled with the public's increasing enthusiasm for political participation, will put more pressure on the government agencies to produce measurable results to ensure that public money is well spent. Fiscal constraints will also force the government to examine these enterprises' performance more closely to prevent the waste of taxpayers' money. State enterprises receive funding from the government to manage public-service projects for transport, energy or logistics. And taxpayers are now more eager to learn if their money is spent wisely.These enterprises must be overhauled by setting out clear directions for the next five or 10 years, in the same way that corporations do. The senior managers of the agencies should be properly qualified to maintain their competitiveness in the future. Obsolete enterprises must go, instead of wasting the public's money.Clear and sound policy directions will help protect state enterprises from short-term political intervention because the management will have good reasons to defend their business plans. For, instead of driving the course of economic development, some state enterprises have been hindering the country's progress instead.
EDITORIAL