Stage set for ‘regulatory guillotine’

In his capacity as a member of the junta’s committee tasked with a legal overhaul, he explained that several laws were not actively enforced but posed obstacles to business activities. 

Notably, there are 1,544 licences in Thailand that businesses need to apply for if they want to invest in respective regulated areas. In the real-estate sector alone, a developer needs to win 17 licences to develop a project.

“As we all know, the process to obtain licences takes time and opens opportunities for bribery,” he said while joining a discussion at a Thailand Development Research Institute conference last week.

According to the TDRI, 191 royal acts were enacted from 2011 to 2015, boosting the total number to about 900. During that period, 661 ministerial regulations were announced in the Royal Gazette, boosting the total to nearly 18,000. 

In the past five years, more than 620 royal executive decrees were issued, along with 1,015 announcements and other kinds of written rules. It is estimated that more than 100,000 of them are in existence, putting control on all aspects of activities.

“It is time to use the regulatory guillotine, like what South Korea did years ago,” Banyong said. “This is institutional reform to unlock the system.”

Sorachon Boonsong, a partner at the law firm Baker & McKenzie Thailand, supported the review. Some penalties should be raised, for example, as the rates set decades ago are not applicable to the present conditions and encourage companies to breach laws.

However, he said the focus should be on enforcement and dissemination of information to foreign investors, if foreign investment is the goal of this move.

Referring to conversations with his peers in Asean, all countries are abolishing all barriers except those for the sectors vital to national security, like telecommunications and broadcasting. In Thailand, the main stumbling block is the Foreign Business Act’s foreign-ownership clause. 

“Foreign investors fear that one day nominee investigation may be launched against them under the law,” Sorachon said. 

Elsewhere, the authorities open the gates and ensure that once foreign investors are involved in the domestic market, they do not embark on any activities that would take advantage of other business players or consumers, he said. 

“In contrast, our Anti-Competition Act has been on the books for 16 years but it has rarely been enforced,” he said.

Meanwhile, Thailand lacks an effective one-stop shop to answer questions on Thai laws.

“A foreign company contacted us, saying that a few years’ talks to set up a super-yacht port with a government unit yielded no success. Indeed, Thailand supports the investment through incentives by the BOI,” or Board of Investment, he said.

 

Ease control 

Axing regulatory complexities is being highlighted after success stories in other countries. 

According to TDRI research, South Korea embarked on the painful task after the financial crisis that slashed its gross domestic product by 16 per cent in one year. In the process, of 11,125 rules and regulations, about 5,000 or 48.8 per cent were abolished, with 21.7 per cent revised and only 29.5 per cent were left intact. The number of licences was also cut from 800 to 280.

Opening its doors to foreign investment, Vietnam also axed 8.8 per cent of 5,500 laws and revised 77 per cent, leaving only 14.2 per cent unchanged.

Duenden Nikomborirak, TDRI research director, said Thailand suffered from an overwhelming number of laws because of poor regulatory-impact assessment. 

“The government should avoid enacting unnecessary rules to broaden its power, particularly when no regulatory-impact assessment is thoroughly carried out prior to that,” she said.

In an article on Thaipublica.org, Banyong said that on September 8, 2015, a Royal Decree was enacted demanding that ministers review laws in their respective areas every five years. He acknowledged that this would not immediately change things but would serve as a good beginning. 

He also urged the public to monitor progress, to ensure the effectiveness of regulatory-impact assessment.

Banyong said a legal review was necessary as some rules were enacted with good intent, but they may be obsolete or too costly. Some state enterprises try to boost efficiency but in vain, given regulatory stumbling blocks. 

Yet despite foreseeable advantages, this review will encounter resistance.

“There are always losers. In this case, they are people and some businesses that have benefited from bad regulations. Success depends on public understanding and the determination of those in power,” he said.