The Thai Monarchy and Its Money

http://www.nytimes.com/2015/12/04/opinion/the-thai-monarchy-and-its-money.html?ref=opinion&_r=1

By TOM FELIX JOEHNK, DEC. 3, 2015 

BANGKOK — The Crown Property Bureau, which manages the Thai royal family’s properties and investments, controls assets that may amount to as much as 1.9 trillion baht, about $53 billion. It is the biggest corporate group in the country and one of the biggest landholders in the capital. It is also one of the more mysterious arms of the Thai government.

The agency was created in 1936 and remained under civilian supervision until 1948, a period of ascendancy for royalists, when control was handed to the crown. Little is known about how it spends its money. It does not make its financial statements public. Six of its seven managers are appointed by the king. Although the finance minister chairs its board, the government exercises no oversight over its operations.

The Crown Property Bureau’s annual returns today probably near $840 million (assuming its portfolio is managed according to best investment practices, with one-third held in low-risk assets such as cash, bank deposits, bonds and government securities). It holds more than 21 percent in Siam Commercial Bank, Thailand’s oldest and most influential bank, and 30 percent in Siam Cement Group, the country’s biggest industrial conglomerate. Its equity wing has a controlling stake in the luxury hotel group Kempinski and minority stakes in the Thailand-based subsidiaries of Honda and other Japanese manufacturers, as well as in domestic firms that run shopping malls, hotels, insurance businesses and fast-food chains.

By law, the Crown Property Bureau’s annual income may be disposed of “at the king’s pleasure.” Its returns are tax-exempt.

In other words, the Crown Property Bureau is an antiquated institution of entrenched privilege that operates largely in secret beyond the purview of the government.

This is inconsistent with a modern society. The agency must be reformed, for the sake of both the country and the monarchy itself. With Thailand increasingly paralyzed by a political struggle between liberal and reactionary camps, modernizing the Crown Property Bureau would distinguish the palace as an agent for progress.

The agency’s prestige and market power make it a formidable broker of economic opportunities, especially in Bangkok and among traditional elites like the military, big business and the royalists. It owns five square miles of prime real estate in the capital. But it rents out 93 percent of these properties below market rates, suggesting that it treats these transactions as special favors. The United States government, for example, is said to pay the equivalent of a single ticket for a Broadway play in monthly rent for a lavish residence in central Bangkok.

Such practices must change. For starters, the Crown Property Bureau should publish annual reports detailing its investments, land holdings and other assets, as well as its earnings from these assets, the use to which it puts those earnings and its operational costs. The agency should be placed under the control of officials appointed by an elected government.

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As is the case in Britain, Norway, the Netherlands and other constitutional monarchies, the agency would be funded solely through the annual budget approved by Parliament. The government, in conjunction with the palace, would decide the level of that financial support. It should also decide how to spend the Crown Property Bureau’s dividends.

The agency’s earnings should be partly reinvested and partly handed over to the Thai treasury. None should remain directly at the disposal of the royal family. Consistent with the law that applies to firms in Thailand, these earnings should be subject to tax.

The Crown Property Bureau’s ostensible goal today is to make investments that support Thailand’s development. This, too, must be abandoned; it is an objective best left to the government.

Instead, the agency should aim to achieve high returns at an acceptable risk, meaning that it should diversify its assets rather than make investments that broker opportunities for the monied classes. The agency’s excessive shareholdings in banking and industry must be gradually reduced, say, to 5 percent.

Lifting the secrecy that shrouds the operations of the Crown Property Bureau and placing it back under the control of the government would signal that the Thai monarchy is serious about transparency. Such a reform would send an important message of accountability to the military, politicians and businesspeople, and pave the way for an open economic system, the only kind that is truly compatible with democracy.

Tom Felix Joehnk is a Bangkok-based journalist