Thai Prime Minister Thaksin Shinawatra is facing a major political test over plans to privatize the country's electricity authority. The government says the sales are necessary to raise capital, but state sector unions are calling for a halt, fearing higher electricity charges and job losses.

The Thai government is facing stiff resistance from state enterprise unions that oppose plans to privatize the state-owned electricity generating authority or EGAT.

Recent demonstrations by thousands of EGAT workers and supporters have stalled government efforts to start the privatization process and sale of shares on the Thai stock exchange later this year.

Prime Minister Thaksin Shinawatra, known for his CEO style of leadership in government administration, says he remains determined to press ahead with the program despite heavy resistance.

The EGAT share sale is worth an estimated $1.8 billion, with other major state enterprises to follow, including the Mass Communications Organization of Thailand (MCOT).

The privatization of 59 state-owned enterprises was a key recommendation of the International Monetary Fund's rescue package to Thailand after the 1997 financial crisis.

But while some progress was made among smaller state sector entities, union resistance has stalled privatization among the larger enterprises. Now Mr. Thaksin is seeking to have another try.

In recent weeks state enterprise unions have staged rolling demonstrations with tens of thousands of protesters.

The protests have led Mr. Thaksin to call for a short delay to ensure the legal and procedural groundwork for the EGAT share sale. He believes the almost $2 billion are needed to lift efficiency and investment to meet rising electricity demand.

Anusorn Tamajai, a Bangkok economist, said while privatization may mean better public services, implementation is the key.

"It can be bad if not transparent and can lead into more corruption or just the transfer of monopoly power from state to the large corporation," he said.

Labor and trade union groups remain determined to halt the share sales fearing state enterprise job losses and higher electricity charges.

Protesters are calling for the privatization to be scrapped and the repeal of associated laws which they say Mr. Thaksin had promised to carry out in early 2003.

Junya Yimprasert, a coordinator with the Thai Labor Campaign, said there is now a lack of trust between the government and unions.

"I think at the moment the union doesn't trust and doesn't agree with the moves of the government, is not to solve the problem or not to listen to the union, its just to delay the process," said Mrs. Junya. "That doesn't mean it not come back."

Both the government and unions have set entrenched positions. Mrs. Junya said the government is underestimating the demands of the union.

"I think it will be a long battle," she said. "The government underestimates the demand and the seriousness of the demands of the workers of the state enterprise unions."

State enterprise unions are among the strongest in the labor movement in Thailand and represent one of the most significant challenges to Mr. Thaksins government since it came to power in 2001.

Human rights lawyers believe both sides now need to be careful to avoid the threat of violence. Sunai Phasuk, from the rights group Forum Asia, says the political atmosphere could become highly charged.

"The matters can become highly politicized and as it is highly politicized it will become very unpredictable," he said. "If both sides refuse to step just one step backward and try to establish a channel of communication it is hard to prevent unnecessary violence to happen."

But Bob Broadfoot, managing director of Political and Economic Risk Consultancy in Hong Kong, believes Mr. Thaksin will be more cautious with general elections just 12 months away.

"I don't think you are going to want to see Thaksin really stir up a hornets nest in terms of pushing privatization in these industries like EGAT which can mobilize real opposition to him," commented Mr. Broadfoot. "I think his politics are going to say back off on this issue."

Economists are calling on the government to proceed with caution including a public referendum and debate on the policy.

But senior government ministers, including Energy Minister Prommin Lertsuridej, remain steadfast. Mr. Prommin says the protesters need to drop unconditional demands for talks to occur and that the focus will be on post-privatization issues such protection of the public interest and keeping energy prices fair.