Royal Wealth (continued)
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- Date: Fri, 06 Apr 2007 17:37:12 +0800
Royal Wealth (continued)
Our Correspondent
01 March 2007
The Crown Property Bureau and How it Got That Way:
Centuries of Thai history have solidified into massive property ownership by the
Thai monarchy
Part One: How Thailand?s Royal Manage to Own All the Good Stuff
The history of the land owned by the Thai monarchy, and thus the Crown Property
Bureau, can be traced as far back as the Buddhist kingdom of Sukothai in the
13th century, as traditionally in Thailand the king owns all the land.
In the 1800s, the monarchy set up the Privy Purse to use the profits from royal
trading to pay the royal household, and it was later used to finance overseas
education for royals. At least five percent of government revenues were
transferred into the Privy Purse each year. In 1890, it became the Privy Purse
Bureau (PPB), acting as the monarchy?s investment arm, according to ?A History
of Thailand? by Chris Baker and Pasuk Phongpaichit.
The government funds flowing into the PPB increased to about 15 percent of state
revenues and the money was used to invest in rice mills, property developments,
shops and provincial markets.
?As roads were built the price of land increased, and this attracted the elite
and the PPB to invest in land and land related business such as market places
and row houses,? wrote Porphant Ouyyanont, an economist at Thammasat University,
in an academic paper. ?A survey of land prices in Bangkok in the first decade of
the 20th century shows that the price of land was highest in the areas where
roads were cut.?
During this time many Chinese families who prospered through royal patronage
formed banks and shipping companies to export rice. But a series of poor
harvests from 1904 to 1908 led to a financial crisis.
The monarchy, meanwhile, had set up Siam Commercial Bank with capital from
government revenues, allowing it to survive that economic downturn. SCB extended
loans to the Chinese merchants, who survived for a little while longer before
the monarchy?s bank seized their assets when they defaulted on loans.
By 1910, the PPB was the country?s largest property owner, with about one-third
of all land in central Bangkok. It held investments in railways, tramways,
electricity, banking, cement, coal mining and steam navigation. In addition to
reclaiming land through bad debts, it was able to occupy public land, and could
directly buy land from whomever it wanted.
The bureau ?always had the advantage in terms of obtaining information on road
cutting, the price of land, the advantage of land location and so on,? wrote
Porphant. ?In this way the PPB acquired many plots of land established at good
locations and commercial centres.?
Often the PPB would buy a plot of land to build houses, and then demand that the
government build a road nearby to increase the prices of land and properties.
?The linking of Bangkok's administrative structure with royal interests produced
both a physical and economic stamp on Bangkok which has had an enduring effect
on the city's development,? Porphant wrote.
Absolute Monarchy Ends
Some people are just born luckyAlthough in 1932 a coup ended the absolute
monarchy, the putsch leaders wanted to keep the monarch in a symbolic position
to help control the masses. In bargaining over his diminished role, King
Prajadhipok, or Rama VII, at one point threatened to sell many royal
possessions, including palaces, shrines and even the Emerald Buddha, which sits
in the Grand Palace to this day.
The new government passed laws transferring control of the Privy Purse Bureau to
the government, and subjecting the king to an inheritance tax. Unsurprisingly,
King Prajadhipok failed to sign the legislation.
After the king abdicated in 1935, the Privy Purse was divided into Prajadhipok?s
personal property and the Crown Property Bureau, which fell under the Ministry
of Finance. That year, a New York Times story said the king?s property yielded
500,000 pounds sterling annually, or about 6.5 million baht at the time. An
unskilled laborer in Bangkok at the time would make about one baht for a day?s
work, meaning he would have to work for 17,808 years to amass as much as the
palace made in 12 months.
In 1936, the Royal Assets Structuring Act declared that all Crown Property
Bureau income was tax exempt, although the king must still pay taxes on his
personal fortune. ?National assets are exempted from tax, so therefore the
king?s assets are exempted, because they are the same as national assets,?
section eight of the law says.
Thawiwong Thawalyasak, educated in Cambridge and a page to Rama VI, persuaded
the government to recognize the palace?s ownership of property that fell into
private hands after Prajadhipok was gone, according to Paul Handley?s book, ?The
King Never Smiles.? Thawalyasak made tens of thousands of residents on this land
start paying rent to the Crown Property Bureau, and began evicting those who
wouldn?t pay. He even tried to evict the parliament, but the lawmakers refused.
The consolidation of property under the CPB allowed the monarchy to slowly
rebuild its fortune. By the 1960s, Siam Cement, the majority palace-owned
industrial conglomerate, as well as Siam Commercial Bank (SCB), were growing
with the strong economy.
The palace became the ideal joint venture partner. Its land was used to build
major hotels like the Siam Intercontinental, the Erawan and the Dusit Thani. It
held investments in insurance, agribusiness, tires, and textiles. By the late
1960s, Handley writes, the CPB had 500 staff members to oversee its investments
and property holdings.
In 1970, Thawiwong died, and the ensuing decade saw failed investments like Air
Siam, an airline meant to rival Thai Airways, and other challenges to the CPB
empire.
In one case noted by Handley, the bureau ordered slum dwellers at Mu Ban
Thaepprathan to vacate the premises so it could be commercially developed. ?The
very public fight against eviction generated comparisons between the CPB and
officials who evicted poor farmers from degraded state forests,? he wrote. ?When
student activists got involved and likened the palace to a landowning feudalist,
the embarrassed palace halted the project.?
In the late 1970s, the Communist Party of Thailand had launched an offensive
against the monarchy, criticizing its extravagance. At one point, the communists
broadcast comments saying: ?The more powerful the monarch becomes, the poorer
the people become, and the more the monarch?s income from land rental, his
shares in commercial companies and his bank savings increase.?
Prem brings stability
By the early 1980s, the communists had suffered a series of setbacks, and many
took up an amnesty offered by former army chief Prime Minister Prem
Tinsulanonda, who now heads Bhumibol?s 19-member privy council. Under Prem?s
watchful eye, royal projects funded by CPB revenues greatly expanded, along with
the enforcement of lese-majeste laws, ensuring that criticism of the palace came
to a halt.
In 1988, the CPB held stakes in about 40 companies, and the stock exchange was
booming. Its holdings in Siam Cement and SCB alone were worth more than $600
million, not to mention the value of its 40,000 acres of land, including 13,300
in Bangkok.
The bureau?s burgeoning wealth put it on the radar screen of the foreign press,
and the Far Eastern Economic Review wrote a cover story on the CPB in June 1988
called ?The King?s Conglomerate.? In it, Chirayu Isarangkun Na Ayuthaya, the
longstanding CPB director who had only been on the job a few months, said the
bureau is neither public nor private.
?We are a little of both,? he told the magazine. ?Our charter appears to
highlight the image of a public entity. But we also enjoy flexibility similar to
[but not totally on a par with] a private enterprise.?
The article added that the CPB?s operations are ?supervised? by a five-man
committee headed by the finance minister. The king is supposed to be consulted
on important matters, the article says, ?but actual royal involvement is rare.?
The story made no mention of the hybrid company?s unfair advantages, and didn?t
question the legal gray area the CPB operates in. For instance, if the CPB gets
so many state privileges and operates under the Ministry of Finance, why is its
annual report only for the eyes of the king?
A former Finance Ministry official familiar with budgets says that although the
government technically runs the CPB, in reality the decisions are made by the
monarchy.
?Actually the king is supposed to play a symbolic role,? he told Asia Sentinel.
?But this is Thailand.?
The king?s personal fortune sits with the Privy Purse. Although the palace gets
a stipend from CPB revenues, the rest of the money goes to support the
institution of the monarchy, including the many royal projects and propaganda
activities. But the details of who gets what are not for public consumption.
Handley argues that the royal projects, along with low rents and media
campaigns, were an orchestrated effort by the palace to win political support
for the throne. This could be seen from the many villagers who petitioned the
king directly to help them.
?Details about these petition cases remain a closely held secret of the palace,
with the secrecy enhancing the very mystery of the king?s wisdom and ability to
improve the lives of his subjects,? he writes. ?The cases divulged a greater
truth, though: the more the king?s works were advertised by Prem at the expense
of the government?s, the more the people looked beyond the government to their
king for escape from misery.? Without funds from the CPB, this would be
impossible.
Rapid expansion
Things only got better for the palace business conglomerate in the early 1990s.
Chirayu aggressively sought deals with developers that would give the CPB a
return of share rentals and equity. It put more money into small restaurants,
luxury condominiums, shopping complexes, hotels and office space. The new leases
substantially increased CPB income and the king?s personal wealth. In 1990,
Handley writes, dividends to the Mahidol family (Bhumibol was the son of Prince
Mahidol of Songkhla and the grandson of King Chulalongkorn) reached US$30 to $40
million per year tax-free, and the holdings of the royal family were worth more
than $1 billion. Estimates now put Bhumibol?s personal wealth at between $2
billion and $8 billion.
The crown also had big plans. Its media arm sought to buy Thai-language dailies
and a television station, as well as build a film production studio and tourist
attraction to rival Universal Studios. The CPB had subsidiaries involved in
advertising, cable television, financial services, construction, cinemas,
insurance, hospitals, and petrochemicals, among many others.
During this time, a few questionable deals surfaced. In 1996, the government
investigated when Siam TV & Commercial, a joint venture between the CPB and SCB,
won a concession to run a commercial television station, iTV. The company won
the 30-year contract with an offer of 120 billion baht in royalties, even though
a rival company offered royalties of 625 billion baht. The results of the
investigation were never reported.
Also in 1996, the CPB sought to acquire a 15 percent stake in rehabilitated
First Bangkok City Bank from the central bank for 8.50 baht a share, even though
the market valued them at 22.50 baht per share. The deal was arranged by Finance
Minister Surakiart Sathirathai, who is married to Suthawan Sathirathai, a niece
of Queen Sirikit. The successor for Surakiart, who also served in Thaksin?s
administration, canceled the order, saying ?the fund stands to lose too much.?
Crash
When the government floated the baht on July 2, 1997, the Crown Property Bureau
was devastated. Its media arm, already struggling before the crash, quickly went
bankrupt. Siam Cement and SCB were also shaken, and Chirayu took over as board
chairman of both companies. Siam Cement had not hedged US$4.2 billion in foreign
debts, resulting in a $1.2 billion foreign exchange loss in 1997. Siam
Commercial Bank was worse off, as loan collateral didn?t even cover half of the
loans given out. The bureau?s total liabilities hit six billion baht.
By 1998, Chirayu said it was time to ?bite the bullet.? The CPB announced that
it was cutting 143 billion baht worth of new projects and adopting the king?s
?sufficiency economy? approach. It would now focus on its core investments in
Siam Cement and SCB, as well as try to extract more money from its leases.
?We're told not to be greedy,? Chirayu told reporters. ?Our problem in the past
when the economy was in good shape was that we received many investment
invitations and we agreed. From now on, we need to be careful and our investment
policy will hinge on the macroeconomic prospects. We must not invest in risky
projects.?
Getting a ?fair return?
The bureau received a large amount of help post-crisis, although its earnings
reportedly dropped 80 percent in 1998. Honda Motor raised capital in its
struggling local unit partially owned by the CPB and offered to sell the stake
back to the bureau at book value in 10 years. At the same time, Chirayu insisted
that the government help bail out SCB, even though it was strictly a commercial
enterprise.
The government proceeded to inject $1 billion to bail out SCB and agreed to sell
back its stake to the bureau in the coming years. The CPB did so in 2004 when it
traded a piece of land near Victory Monument to the Finance Ministry, which
technically oversees the bureau, for a 13 percent stake in SCB.
After the financial crisis, Thaksin also helped the palace out when he paid $60
million for SCB?s stake in iTV, which for a brief period was the only
independent television station in Thailand. ?With little likelihood of ever
recovering the investment, Thaksin was effectively bailing out the bank and the
palace,? Handley wrote.
The CPB also set a goal in 2000 to increase revenue from rents from 300 million
baht per year to one billion baht by 2005. It would raise rents across the
board, including for the cash-strapped government agencies that supposedly
controlled the bureau.
?We will focus on both areas and try to maximize benefits from our assets,?
Chirayu said. ?We also have no plan to invest in any new projects.?
Having learned its lesson, the CPB restructured in 2001. Chirayu announced that
the CPB would shed its ?antiquated? way of doing business to get a ?fair return?
on its holdings. The bureau created CPB Equity to look after its equity
investments and joint ventures, and CPB Property to look after its land
holdings.
Things suddenly got much better the following year, and the halt on investments
was lifted. Helped by a team that prominently featured American business
consultant Michael David Selby, the Crown Property Bureau announced that it
repaid its debts from the financial crisis and was ?now financially strong,?
according to executive Yos Euarchukiati.
In fact, its plans, as the ensuing years have shown, were bigger than ever.
Part One: How Thailand?s Royal Manage to Own All the Good Stuff
Related Story: Long Live the King
Comments (12)
Show/Hide comments
.... : patiwatp
To Leopold,
Lèse majesté didn't really originate with Sarit, although he might have signed a
specific organic law related to it. Legal provisions for lèse majesté go all the
way back to 1932.
Under Thailand's first constitution, the one signed by King Prajadhipok in June
1932 less than a week after the Revolution, the monarchy was not held to be
infallible, and he had only a limited degree of immunity.
Several months later, in the 10 December 1932 constitution, the king made
himself "sacred and inviolable." This is the clause that allowed lèse majesté
laws to be enacted, and it had more or less been retained in all subsequent
constitutions.
March 15, 2007
Lese Majeste invoked : PP
The lese Majeste law was invoked today on a Swiss national who sprayed black
paint on pictures of the King. He was cuffed, dressed in an orange jumpsuit, and
thrown in front of criminal court and public prosecutors.
He faces 10 years.
March 14, 2007
"I graduated from MIT" : patiwat's real self
Stop spreading misinformation, Patiwat, especially on wikipedia. You clearly
have an agenda.
March 10, 2007
..... : .... : http://siamvoice.wordpress.com
It's dangerous case for Thai people to talk about this story because the lese
majeste laws
March 9, 2007
Reply to JB : patiwatp
JB's logic is "simple", but incorrect. The CPB's assets do *not* belong to the
government - the government has little oversight over the CPB's activities. As
this article notes, the CPB reports to one man and only one man: His Majesty the
King.
March 9, 2007
Story blocked : Tonsils
Thai police have blocked this story.
Please copy it and email it to friends in Thailand as it's the only way they
will see it now.
March 7, 2007
.... : Leopold : http://bkkdaggerz.blogspot.com/
Actually, I'm understand that lese majesty cannot be exercised by the royal
family. It has to be filed to the authority by others who are NOT royalties.
I've read it from somewhere that this law was introduced during Sarit
Thanarattra's era, and it was used as a political tool to destroy his political
opponents.
This law should be evoked long ago, but it seems that every governments (even
the elected ones) love to use this law against their opponents too.
March 7, 2007
.... : JK
What I meant by "missing the point" is that if you criticize any Royal dam, any
Royal initiative, the Sufficiency Economy, or whatever to a normal Thai person
on the streets, you would probably get lynched. As with law enforcement,
criticism is not defaming, and they themselves should allow that.
March 7, 2007
.... : .....
JB we don't missed the point. We heard the king saying that all the time but the
Les mejesty law that enforce us not to critcize the monachy. It looked nice and
seemed fair when he gave speech but the reality wasn't like that at all. The
best thing is we need to get rid of that kind of law. Perharps we might have
more confident to criticize without fearing that we might be thrown in jail.
March 5, 2007
.... : JB
I'm not saying the monarchy is perfect. It is certainly flawed, especially with
the veil of secrecy and "divinity." I, for one, do not believe in any sort of
Royal divinity. In fact, I vouch that one day we will separation of the State
and religion.
The strange thing is that the King himself, following the death of the Princess
Mother, has said that he must be able to be criticized. I don't understand why
that has not happened. Criticism is not disrespect, most Thais seem to miss this
point.
March 4, 2007
.... : .....
JB is right but as a Thai I'd like to make a point that most of Thais live in
the most ridiculous life under the kingdom which tell only one side of the story
as well. And Thais are not allowed to question anything concerning the monarchy,
JB I'd rather prefer to read something from Paul Handley's book really. It won't
be like this if the monachy bend down a little bit, let thai poeple talk about
them, criticize them and just put that God immage away. Eventhough most of Thais
love thier king, but something in thier heart still have a question, atleast
one.
March 4, 2007
.... : JB
This article was excellent until it mentioned Paul Handley--a sensationalist
rumor mong.
Simple logic dictates that after the 1932 coup and the establishment of the
Crown Property Bureau, essentially the assets of the crown was transfered to the
government, and is therefore independent of the Crown. Officials in the CPB have
been bureaucrats and have been incompetent. The palace has generally been seen
as separate from the CPB, as in the case of other parliamentary democracies.
Queen Elizabeth gets a dividend payment from the government, even though it,
technically, from her assets.
Surely people like Paul Handley have better things to do than try to relate
every single event in Thailand (which is a bit ridiculous, really) to the
monarchy?
Handley is an outsider who has chosen to view only the side of the coin he
likes.
March 3, 2007
asiasentinel
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