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Economists Warn Corruption on Rise in Thailand

Economists are warning that corruption in Thailand is on the rise, and may threaten the country's democratic development. An analyst's report has raised concerns that powerful businesspeople in the government may be directing public policy in their own interests.

Pasuk Pongpaichit, an economist with Chulalongkorn University's Center for Political Economy, warns that close ties between government and business are increasing the risk of corruption.

In a study issued this month, she notes that business executives have been given several major cabinet positions since Thai Prime Minister Thaksin Shinawatra came to power in 2001. She says these people now have a heavy influence on government policy.

"This paper is about the consequence of a new type of politics, which I call 'government by tycoon', which has happened since 2001," she says. "It appears that many policies are being pursued which benefit the business of the family business of the ministers or MPs (members of parliament) in the government."

Ms. Pasuk, in her paper, cites changes in tax rules for the telecommunications industry, which benefit companies such as those linked to the family of Prime Minister Thaksin Shinawatra. The report says that Export-Import Bank loans to Burma also benefited "the company of a major politician".

She says Thailand now has more publicly listed companies linked with politicians than any country other than Russia. She questions whether the resulting concentration of wealth is benefiting the country.

"The Thai economy has become more risky because public policy may not be for the public good, and it also raises this question of the political development: whether we are moving ahead with democratization, whether this kind of government is not so good for democracy," Ms. Pasuk says.

Prime Minister Thaksin's relatives are reportedly the wealthiest stockholders in the country. According to "Money and Banking" magazine, Mr. Thaksin's 22-year-old daughter is in first place with 480-million dollar worth of shares, followed by his wife and son.

Mr. Thaksin, who controls a multi-billion dollar telecommunications and media empire, came to power promising support for businesses hard hit by the Asian financial crisis of the late 1990s. A growing economy and populist policies helped him win re-election this year.

Mr. Thaksin has said he is confident corruption will fall soon, in part because the government has introduced an electronic auction system for bidding on government contracts. In addition, he says improved financial management systems for the government will help fight corruption.

Transparency International, the anti-corruption organization, says Thailand has lost ground in fighting corruption since 2001, a view supported by Robert Broadfoot, of Political and Economic Risk Consultancy in Hong Kong.

Mr. Broadfoot says studies of business executives' perceptions indicate that in general, corruption has lessened in Asia in the past year - except in Thailand and the Philippines.

"When we see perceptions deteriorating toward a particular country that sends up red flags - which is why we have flags now for the Philippines and Thailand," Mr. Broadfoot says. "But when we see perceptions improving in Indonesia, in China and India, these are the countries that are going to be getting a much more serious look by a lot of investors."

Mr. Broadfoot says businessmen believe authorities in "red flag" countries replace existing regulations and practices with arrangements benefiting certain businesses, many of which have close links with influential politicians.

The opposition Democrat party this week announced it would push toward holding a no-confidence vote, and called on the government to review its anti-corruption program. The party says it could withdraw the motion if the administration is seen to be addressing the issue.