This chapter assesses the corporate governance framework of Thai SOEs and their alignment with the revised OECD Guidelines on Corporate Governance of State-Owned Enterprises. It assesses Thailand’s national practices relative to the chapters of the Guidelines; covering: (i) rationales for state ownership; (ii) the state’s role as an owner; (iii) state-owned enterprises in the marketplace; (iv) equitable treatment of shareholders and other investors; (v) disclosure, transparency and accountability; (vi) the composition and responsibilities of the boards of state-owned enterprises; and (vii) state-owned enterprises and sustainability.
OECD Review of the Corporate Governance of State‑Owned Enterprises in Thailand
Abstract
The state exercises the ownership of SOEs in the interest of the general public. It should carefully evaluate and disclose the rationales that justify state ownership and subject these to a recurrent review.
2.1.1. Articulating the rationales for state ownership
I.A. The ultimate purpose of state ownership of enterprise should be to maximise long-term value for society, in an efficient and sustainable manner.
Historically, SOEs in Thailand have served as a governmental instrument to achieve public policy goals that serve the economy and society. They are expected to achieve this by producing goods and services, safeguarding national security, and investing in large-scale infrastructure projects. While state ownership spans various industries in Thailand, SOEs are notably instrumental in executing crucial infrastructure initiatives and delivering essential public services, including public transport, electricity, and municipal water services. Profitable SOEs in Thailand are required to contribute dividends or income tax, thereby serving as a source of government revenue. The financial targets for SOEs are described in greater detail in Section II.F.3.
Thailand’s rationale for state ownership and public policy objectives of SOEs can be understood from several documents that specify policy priorities in the areas of state ownership and management. These include the Development of Supervision and Management of State Enterprises Act B.E. 2562 (2019) (hereafter referred to as the “2019 SOE Act”) and the Principles and Guidelines on Corporate Governance for State-Owned Enterprises B.E. 2562 (2019) (hereafter referred to as the “2019 Principles and Guidelines”).
The vision for state ownership is also reflected in Section 6 the State Enterprise Development Plan 2023-2027 (“SOE Development Plan”), which was established pursuant to Section 22 of the 2019 SOE Act and published in the Government Gazette on 29 November 2022.The SOE Development Plan specifies that SOEs should be viewed as public sector tools for advancing the goals of Thailand’s National Strategy (2018-2037). Furthermore, Section 7 of the SOE Development Plan sets out the main direction for SOEs in each field with the goal of enabling them to carry out support towards achieving the public policy objectives in Thailand’s 13th National Economic and Social Development Plan (2023-2027) (NESDC, 2023[1]).
Thailand’s National Strategy (2018-2037) defines the vision for SOE as vehicles for maximising the value for society, setting out the goals and purpose of SOEs as follows:
operating and providing public services to promote economic and social security from the national, social, community, and individual scales and addressing public service needs
enhancing Thailand’s competitiveness in terms of infrastructure, logistics, digitalisation, public-private partnerships, innovation, reduction of production process loss, enhancement of entrepreneurs’ capacity, and value add in agricultural, industrial, service, and tourism sectors
promoting the development of a high-capability and skilled workforce
fostering the economy structure which creates fairness and minimises disparities, and improves everyday quality of life
promoting environmental development and growth and adopting the Bio-Circular-Green Economy Model (BCG Model) for operation
rebalancing and developing the administrative system and orienting it to achieve people’s needs.
2.1.2. The ownership policy
I.B. The government should develop an ownership policy. The policy should, inter alia, define the overall rationales and goals for state ownership, the state’s and other shareholders’ role in the governance of SOEs, how the state will implement its ownership policy, and the respective roles and responsibilities of those government offices involved in its implementation.
The government’s state ownership policy is integrated in the 2019 Principles and Guidelines on SOE Governance and the 2019 SOE Act. SEPO developed the 2019 SOE Act as a guiding tool for setting direction for the 52 SOEs under its portfolio, and the Act serves as the government’s state ownership policy. The 2019 SOE Act outlines a development plan to determine goals, policies, and directions of SOE development that are in line with Thailand’s policy objectives. It further clarifies the roles and mandates of different institutions involved in the state ownership function. The principles of the 2019 SOE Act are developed based on the policies laid out in the Constitution of Thailand, Thailand’s National Strategy (2018-2037), and the 13th National Economic and Social Development Plan (2023-2027).
Notably, the 2019 SOE Act established the State Enterprise Policy Committee (SEPC), tasked with determining the guidelines for the responsible ministries on the policy framework of development of SOEs. Section 23 of the Act specifies that the SEPC shall determine the guidelines. SEPC was transformed into a “legal entity,” with SEPO functioning as its secretariat.
The composition of SEPC is outlined in Box 1.3. Qualified members of the SEPC have a term of office of four years with a maximum tenure of eight years.
As described above, in accordance with Sections 10, 22 and 24 of the 2019 SOE Act and a Cabinet resolution on 25 October 2022, the SEPC issued the SOE Development Plan. The purpose of the SOE Development Plan is stated as “to determine goals, policies, and directions of SOE development in line with the directive principles of state policies under the Constitution of the Kingdom of Thailand.” According to the 2019 SOE Act, the SOE Development Plan must also “take into consideration, at a minimum, the principle of the fiscal discipline of the nation, missions of SOEs in the changing context, and roles and responsibilities of SOEs toward national development.” The SOE Development Plan provides the main directional framework for SOE development aligned with achieving the objectives of the 13th National Economic and Social Development Plan.
In 2019, SEPO established Principles and Guidelines on SOE Governance aimed at guiding the management of state holdings in SOEs where the state is the sole or majority shareholder, or exercises control. This ownership policy was formulated collaboratively by SEPO and relevant line ministries holding ownership rights. It is notable that efforts were made to align this policy with international best practices, particularly by drawing inspiration from the SOE Guidelines. Consequently, the ownership policy encompasses key areas recommended by the SOE Guidelines. SEPO’s 2019 Principles and Guidelines have a binding effect on SOEs, despite lacking enforcement authority. Unlike the previous regime, these guidelines do not necessitate Cabinet approval.
I.C. The ownership policy should be subject to appropriate procedures of accountability to relevant representative bodies and disclosed to the general public. The government should review at regular intervals its ownership policy and evaluate its implementation.
The 2019 SOE Act was published in the Royal Gazette and is publicly available on the SEPO website, along with the 2019 Principles and Guidelines on Corporate Governance for State-Owned Enterprises. According to information provided by SEPO, the 2019 Principles and Guidelines are scheduled for review in 2024 to align with updated policy development goals and the newly revised 2024 OECD Guidelines on Corporate Governance of State-Owned Enterprises, Given that Thai SOEs are tasked with achieving important public policy objectives, the development and review of ownership policy aligns with Thailand’s National Strategy (2018-2037) as developed by the National Economic and Social Development Council (NESDC). The SEPO plans to conduct reviews and updates to the Principles and Guidelines on a regular five-year basis thereafter.
2.1.3. Defining SOE objectives
I.D. The state should define the rationales for owning individual SOEs and subject these to recurrent review. The rationales for ownership, and any public policy objectives that individual SOEs, or groups of SOEs, are required to achieve should be clearly linked to their main line of business, mandated by the relevant authorities and publicly disclosed.
The rationale for ownership of enterprises is set out in 2019 SOE Act and the 2019 Principles and Guidelines, the latter of which is subject to periodic reviews every five years. During the revisions, amendments are made to ensure the role of SOEs is in line with public policy objectives. The 2019 SOE Act was established to support the implementation of the National Strategy, the National Economic and Social Development Plan, National Reform Plan, and State Security Plan, aiming to achieve the goals set out by these respective plans as pertaining to SOEs.
Before approval, the 2019 SOE Act went through a hearing process with stakeholders such as line ministries, SOEs, and related public and private sectors in the same manner as required from other third-level plans in Thailand. As part of their objective-setting process, SOEs are required to implement the provisions of the 2019 SOE Act through the establishment of five-year enterprise plans and an annual action plan. Whereas SEPO through the Ministry of Finance is responsible for setting the direction for policy making of SOEs, the line ministries supervise SOEs and set regulations and guidelines for them.
As previously described, the SOE Development Plan was established in accordance with the mandate of the 2019 SOE Act. Its purpose is to define the goals, policies, and directions for SOE development. Serving as the primary framework for guiding SOE development in Thailand, the Plan enables SOEs to collaborate with their respective line ministries in setting objectives and directions (see Box 2.1).
PTT Public Company Ltd (PTT)
PTT Public Company Ltd. Works closely with SEPO and the Ministry of Energy as part of its objective-setting process and produces a five-year strategic plan, annual business plan and State Enterprise Assessment Model (SE-AM) KPIs. The 5-Year Strategic Plan and the Annual Business Plan are formulated according to the criteria set by SEPO such as alignment to the National Economic and Social Development Plan and the State Enterprise Development Plan, environmental scanning, PTT’s strategic directions. The Plans are subjected to approval by PTT Board and the Ministry of Energy before submitting to SEPO. The SE-AM KPIs are formulated with the alignment of the 5-Year Strategic Plan and the Annual Business Plan. Each year, PTT works closely with SEPO and Ministry of Energy to prepare the detail of SE-AM KPIs for Memorandum of Understanding. After the completion of the MOU, PTT SEPO and Ministry of Energy will sign the MOU to commit SE-AM KPIs for the performance management.
National Telecom Public Company Limited (NT)
The objective-setting process of National Telecom Public Company Limited (NT) involves aligning the company’s strategic objectives with the plans of the Ministry of Digital Economy and Society (MDES) and SEPO’s multi-year plans. For the future operational direction, NT has announced a business plan calls “the National Telecom Public Company Limited for 2023–2027”. The main objectives of this plan include aligning with state policies for digital transformation as a role of SOEs in the telecommunications sector, as well as streamlining the organisation. The company aims to decrease its expenses by reducing its workforce from the existing 14,000 employees in 2022 (ranking as the 7th largest SOEs in terms of employee) to 9 000–10 000 employees by 2025 and eliminating overlapping expenses within the organisation. Additionally, the plan focuses on expanding service coverage and maximizing the benefits of using NT’s telecommunications infrastructure resources.
Source: Information provided by SEPO and TDRI.
The state should act as an informed and active owner, ensuring that the governance of SOEs is carried out in a transparent and accountable manner, with a high degree of professionalism and effectiveness.
2.2.1. Simplification of operational practices and legal form
II.A. Governments should simplify and standardise the legal forms under which SOEs operate. Their operational practices should follow commonly accepted corporate norms.
State-owned enterprises in Thailand have two functional forms: statutory corporations and incorporated SOEs according to corporate law, taking the following legal forms:
limited liability companies (LLCs)
public LLCs, whose shares may be sold to the general public
autonomous agencies established by specific legislation or statute
SOE established by Decree issued under the Act on Establishment of Government Organisations, B.E. 2496 (1953)
SOE established by Cabinet resolution.
Some regulations governing SOEs may diverge from those applicable to private companies. This disparity can stem from their distinct legal structures, such as statutory corporations, or their status as entities of “special interest” to the Thai government, among other factors. Consequently, this results in a highly fragmented legal framework for SOEs (see Section 1.2.1). Over half (52%) of centrally-held state-owned enterprises (SOEs) are autonomous agencies formed by specific laws, allowing some administrative independence from the government. Another 18% are created by a decree under the Act on the Establishment of Government Organizations, B.E. 2496 (1953) and have separate legal entity status, typically performing public functions under government oversight. Only 8% are public limited companies, established by the Public Limited Companies Act B.E. 2535 (1992), with the ability to publicly trade shares; of these, just three are listed on the Thailand Stock Exchange. LLCs and Public LLCs structured as SOEs are regulated by corporate laws outlined in the Civil and Commercial Code and fall under the jurisdiction of the Ministry of Commerce.
Furthermore, as noted earlier in Section 1.2.1, due to the absence of a unified definition of what constitutes an SOE, laws and regulations are not uniformly applied. This inconsistency potentially creates legal ambiguities for the applicability of certain laws and regulations to SOEs and will also impact how board appointment procedures are governed (see Box 2.2). Section II.F.2 further outlines the board nomination process in Thailand.
Although Thai SOEs are not formally protected against insolvency or bankruptcy procedures, their state property cannot be seized as per section 1307 of the Thailand Civil and Commercial Code. While SOEs do not have an explicit budget guarantee from the government, some public utility SOEs such as those involved in electricity, water supply, and public transportation, are entitled to funding from the state in cases where their revenue is insufficient to meet specific expenses and no other source of funding is available.
Appointing procedure under the Development of Supervision and Management of State Enterprises Act B.E. 2562 (2019) (“2019 SOE Act”)
The Development of Supervision and Management of State Enterprises Act B.E. 2562 (2019) (“2019 SOE Act”) establishes the central framework for the appointment of supervisory board members. It is important to note that this central framework does not apply to SOEs in the form of Limited Liability Companies (LLC) and Public Limited Companies (PLC), in which supervisory board members are appointed in accordance with the Civil and Commercial Code or the PLC Act.
The 2019 SOE Act mandates the SEPC, chaired by the Prime Minister, to appoint the ‘Screening Committee for SOE Directors,’ consisting of officials from both the government and private sectors. The Committee includes two high-level SEPO officials, four members who have previously held positions such as the Permanent Secretary of the Ministry of Finance, Chairman of the National Reform Committee in Justice Process, Director of the Bureau of the Budget, and Director of SEPO. Additionally, it includes two private sector members who have demonstrated expertise in administration, corporate governance, or strategic planning. The appointment process for SOE directors is as follows:
1. The Screening Committee is responsible for establishing criteria and methods for selecting candidates to serve as SOE directors, and choosing suitable candidates from a list provided by an SOE supervisory board with a vacancy. The proposed list must include at least one-third of candidates with a business executive or commercial background.
2. According to the Section 36 of the 2019 SOE Act, once SEPO, acting as the secretary of the Screening Committee, receives the list of eligible candidates from the SOEs, it presents this list to the Committee. The Screening Committee then selects candidates who demonstrate the required ethics, skills, knowledge, and expertise, as stipulated by SEPO. Justifications for each selection must be submitted to the appointing authority, and the reasons for selection used by each member of the Committee must be documented to aid the appointment process. The Committee is obligated to consider candidates from both the proposed list and the Directors’ pool.
3. Upon approval by the SEPC chairperson, the SOE submits the candidate’s name to the Cabinet, line ministry or board of directors for appointment as a director on the supervisory board, in accordance with their respective establishment laws.
The criteria for appointing the board of an SOE include:
Legal Qualifications: Candidates must meet the qualifications stipulated by relevant laws. These include the Standard Qualifications of State Enterprise Directors and Employees Act, B.E. 2518 (1975) as amended, specific laws establishing SOEs, the Civil and Commercial Code for LLCs, and the Public Limited Companies Act for PLCs.
Skill Matrix: SEPO identifies four essential areas: accounting, finance, information technology, and Law. Additionally, each SOE may require other relevant skills related to its business operations, such as engineering, depending on its specific needs. Board appointments are considered on a case-by-case basis to ensure alignment with the unique needs of each enterprise.
Appointing procedure under the Standard qualifications for Directors and Employees Act B.E. 2518 (1975) (Amendment B.E. 2558 (2015)): Directors’ pool
According to the Act, at least one-third of the supervisory board members, excluding ex officio members, must be appointed from the directors’ pool. Other rules and procedures are defined by the Cabinet Rules, under which the Directors’ Pool Committee is established. Composed of government officials and experts appointed by the Cabinet, this committee is responsible for assembling the names in the pool, following these steps:
1. The Committee may acquire names through public recruitment, unanimous nomination, or proposals from government agencies.
2. The SEPO, acting as its secretary, will assess the qualifications of the candidates. Names acquired by the Committee are only included in the directors’ pool if they receive a three-fourths majority vote from the Committee.
3. The list in the directors’ pool should be reviewed, and it is publicly announced through a Ministry of Finance notification.
4. The candidates listed in the directors’ pool are considered concurrently with those proposed by the Screening Committee in accordance with the 2019 SOE Act (as described in Step [2] in the preceding part).
It’s worth noting that candidates from both paths must meet the skill matrix requirements. Despite being considered alongside candidates from the ordinary path, candidates from the directors’ pool may be more favourable since the Act mandates that the Screening Committee nominate at least one-third of the supervisory board members from the directors’ pool.
Appointing procedure for SOEs that are in the form of LLC and PLC
SOEs that take the form of LLC and PLC appoint their supervisory board members through the shareholders’ general meeting. Starting with the LLC, its governance is subject to the Civil and Commercial Code. Only the general meeting can vote, by a simple majority, to appoint board members. Once appointed, one-third of its members must resign annually. In cases where a member becomes bankrupt or legally incompetent, their office is immediately vacated. Since the company law prescribed in the Civil and Commercial Code is not deemed a matter of public order or good morals, SOEs structured as LLC may alter the procedures for appointing supervisory board members through their articles of association.
SOEs in the form of PLC are governed by the PLC Act B.E. 2535 (1992). Under the Act, supervisory board members must be natural persons, legally competent, and sui juris. Furthermore, a board member must not be, among other things, declared bankrupt, imprisoned by a final judgment for an offense involving bad faith regarding property, or have been expelled from government organisation or removed from public service duty for misconduct. Unless otherwise stated in the company’s articles of association, directors are elected at the general meeting in accordance with the rules outlined in the PLC Act B.E. 2535 (1992). Any individual who has served as a director is eligible for re-election. Interestingly, unlike LLCs, members of the board may be removed through a court order. Due to Thailand’s dual court system, where multiple courts exercise jurisdiction simultaneously in different subject matters), it should be clarified that the removal of a director falls under the jurisdiction of the Court of Justice.
Source: OECD Meetings with SOE stakeholders; Information provided by SEPO and TDRI.
2.2.2. Political intervention and operational autonomy
II.B. The state should clearly define owners’ expectations, allow SOEs full operational autonomy to achieve them and refrain from intervening in the management of SOEs. The state as a shareholder should redefine SOE expectations in a transparent manner and only in cases where there has been a fundamental change of mission.
According to Section 1 of the 2019 Principles and Guidelines, the roles and responsibilities of the government should be clearly divided into those of policymakers, regulators, producers, service providers and owner roles. Additionally, they stipulate that while the state should shape policies and operational directives for SOEs, it should avoid interfering in their day-to-day management.
The 2019 SOE Act also requires the government to develop five-year development plans which define the roles, responsibilities, and directions of SOEs, including mid-term goals, that account for changes in politics, economics, social aspects, environment, and laws. Through the Act, the government has also enhanced mechanisms to ensure that board members can fulfil their duties objectively. This includes further professionalising boards and making them more performance-oriented. [For further assessment see Box 2.2 and assessment under Guideline II.F.2].
Nonetheless, in practice, the Thai government influences the management of SOEs given that boards of directors often include ex officio members from ministries, and may be chaired by senior civil servants. Additionally, the authority to appoint directors in SOEs categorised as autonomous agencies, which are established by specific legislation or statute, remains with the Cabinet or the responsible minister, as specified by the relevant SOE establishment laws.
2.2.3. Independence of boards
II.C. The state should let SOE boards exercise their responsibilities and should respect their independence. The ownership entity should establish and maintain appropriate frameworks for communication with SOEs’ highest governing body, and typically through the chair.
As described above, SOEs are vulnerable to political interference despite the principle that the board nomination process should remain independent. Although Thailand has made efforts in improving board independence, notably by establishing screening mechanisms for prospective board directors, some concerns still prevail. This is largely due to the close affiliation between policymakers and SOE boards of directors. For instance, in principle, the board has the authority to terminate the employment of CEOs through standardised employment contracts overseen by the SEPO for CEOs of SOEs. However, in practice, the appointment and dismissal of CEOs often still require government approval, even when a significant number of government representatives sit on the board.
Furthermore, although one-third of board directors are required to be independent, there are varying definitions of independence. The Principles and Guidelines on Corporate Governance of SOEs and the Qualifications and Scope of Work of the Audit Committee B.E.2558 (2015) provide varying criteria for classifying “civil servants of government officials from other ministries” as independent directors, leaving considerable room for interpretation. Moreover, listed SOEs are required to comply with the Regulations of the Ministry of Finance, as well as the Qualifications and Scope of Work of the Audit Committee established by the SET and SEC, which do not limit the proportion of ‘civil servants or government officials from other ministries’ serving on boards. Additionally, the Chair of the SOEs does not typically act as the primary point of contact between SEPO and the board.
The assessment team learned that during the board appointment process, there may be negotiation between SEPO and the line ministry responsible for appointing the board. According to information provided by SEPO, the Ministry of Finance encourages SOEs to appoint more independent directors and acknowledges the need to increase the number of independent board members.
2.2.4. Centralisation of the ownership function
II.D. The exercise of ownership rights should be clearly identified within the state administration and be centralised in a single ownership entity. If this is not possible, relevant ownership functions should be co-ordinated by a designated body with a clear mandate to act on a whole of-government basis.
Thailand’s ownership structure incorporates elements of a ‘dual ownership’ model. State ownership functions are primarily split between SEPO and respective line ministries. As described previously, within this framework, the Ministry of Finance, through SEPO, exercises a special role as a coordinating body responsible for determining the expected level of return for SOEs and assessing their performance.
The SEPO, an agency under the Ministry of Finance, along with individual line ministries, jointly exercises ownership over 52 central SOEs. SEPO establishes policy and planning direction, oversees the operational performance of these enterprises, sets remuneration, and approves bylaws and capital injections. Line ministries formulate objectives and operational strategies for the SOEs within their respective portfolios. For board appointments for statutory corporations and unincorporated entities, which represent a majority of central SOEs, SEPO and the line ministry discuss and propose the names of potential directors using Skills Matrix to the Screening Committee, consisting of government officials and private sector representatives. These appointments are further subject to approval by the responsible ministry or the Cabinet. SEPO’s primary responsibilities are as follows:
1. recommending policies, plans, regulations and measures in coordination with line ministries and relevant agencies together in the management of SOEs
2. supervising, monitoring, evaluating, and developing SOEs so that their operations are consistent with policies, plans, laws, and measures pertaining to the administration and development of SOE
3. providing technical assistance for management and organisational development to SOEs
4. managing procedures relating to PPP projects.
The Council of Ministers also exercises control and oversight over SOEs through the following bodies: (1) the SEPC, which sets out policies and provides recommendations to the Council of Ministers; and (2) the National Economic and Social development Council (NESDC), which approves SOEs budgets and overall investment frameworks.
Line ministries, which supervise SOEs under their respective portfolios, rely on the Principle and Guidelines on Corporate Governance for SOEs and the National Economic and Social Development Plan to set public policy objectives for SOEs. The Budget Bureau is responsible for budget allocation to SOEs to contribute to public development tasks, and the Public Debt Management Office (PDMO) is responsible for public debt consideration and management, including in case SOEs require financing through loans. Importantly, performance evaluation of SOEs is conducted by SEPO.
2.2.5. Accountability of the ownership entity
II.E. The ownership entity should have the capacity and competencies to effectively carry out its duties and be held accountable to the relevant representative bodies. It should have clearly defined and transparent relationships with relevant public entities.
In essence, SEPO and line ministries overseeing SOEs are held accountable through a combination of audits, parliamentary oversight, legal compliance and performance evaluation mechanisms.
SEPO and line ministries are subject to audits conducted by the SAO. These audits assess the effectiveness of their oversight activities concerning SOEs. The SAO reviews financial records, compliance with regulations, and the overall management of public funds allocated to SOEs. Audit findings and reports are submitted to the Parliament and relevant oversight committees. These reports highlight any discrepancies or non-compliance issues found during the audit process.
Parliamentary committees, such as the Committee on State Enterprises and Budget Allocation, also play a crucial role in overseeing SEPO and line ministries. They review audit reports, hold hearings with SEPO officials and ministry representatives, and inquire about SOE performance, financial management, and adherence to government policies. Committees may make recommendations based on their findings to improve oversight practices or address any issues identified during their scrutiny. SEPO and line ministries are required to comply with laws, regulations, and government policies governing their supervision of SOEs. Non-compliance or violations may result in corrective actions, sanctions, or further scrutiny by oversight bodies and regulatory authorities.
SEPO and line ministries conduct regular evaluations of SOE performance against established goals, KPIs, and strategic objectives. These evaluations are critical in assessing the effectiveness of their supervision and identifying areas for improvement. Evaluation results and performance reports are shared with oversight bodies, including the Parliament and SAI, to demonstrate accountability and transparency in SOE management.
While there are mechanisms in place to hold the SEPO and line ministries accountable for overseeing SOEs, there are several challenges that can impact the effectiveness of these accountability measures. Political influence can sometimes affect the independence of SEPO and line ministries in their oversight roles. The governance of SOEs in Thailand often involves multiple stakeholders, including SEPO, line ministries, boards of directors, and other regulatory bodies. Coordinating and aligning efforts across these entities can be challenging, leading to gaps or overlaps in oversight responsibilities. SEPO and line ministries may face limitations in terms of staffing, expertise, and financial resources dedicated to SOE supervision. Insufficient resources can hinder their ability to conduct thorough audits, implement robust oversight mechanisms, and address emerging issues promptly.
Ensuring that SEPO and line ministries possess the necessary skills, knowledge, and capabilities to effectively oversee diverse sectors of SOEs is crucial. Continuous training and professional development are essential to enhance their capacity in financial analysis, risk management, and governance practices.
Access to accurate and timely information from SOEs is vital for effective oversight. However, transparency issues, such as incomplete or delayed reporting by SOEs, can hamper SEPO's and line ministries' ability to perform comprehensive audits and evaluations.
2.2.6. The state’s exercise of ownership rights
II.F. The state should act as an informed and active owner and should exercise its ownership rights according to the legal structure of each enterprise and depending on its respective degree of ownership or control. Prime responsibilities of the ownership entity include:
II.F.1. Being represented at the general shareholders meetings and effectively exercising voting rights.
The Ministry of Finance, through SEPO, assumes the role of the owner/shareholder of SOEs on behalf of the Thai government. Accordingly, the Minister of Finance exercises its ownership rights in accordance with relevant laws and regulations and is represented in the same manner as other shareholders. As a shareholder, the Ministry of Finance participates in business and human resource decisions within SOEs. Typically, an executive-level officer is nominated to represent the Ministry of Finance at shareholder meetings. These representatives are tasked with voting on behalf of the government in accordance with the strategic objectives and policies set by SEPO. The extent of SEPO’s representation and voting rights can vary based on the government’s degree of ownership or control in each SOE, as well as the legal structure and governance practices of each enterprise.
II.F.2. Establishing and safeguarding well-structured, merit-based and transparent board nomination processes, actively participating in the nomination of all SOEs’ boards, and contributing to gender and other forms of board and management diversity.
The board nomination process in Thailand aims to be transparent and merit-based, emphasising the skills and qualifications of prospective directors. The process is informed by the Standard Qualifications for Directors and Employees Act, B.E. 2518 (1975), and the 2019 SOE Act. After being deemed eligible, a director can be appointed through one of two paths: (1) the 2019 SOE Act, or (2) the Directors' Pool path under the Standard Qualifications for Directors and Employees Act B.E. 2518 (1975). Section 5 of the Standard Qualifications for Directors and Employees Act specifies the requirements and prohibitions for prospective directors. The authority to appoint directors is governed by the law establishing the SOE. Once the selection process is complete, the candidate's appointment is announced in accordance with each SOE's establishment law.
Importantly, this central framework does not apply to SOEs structured as LLC and PLC, where supervisory board members are appointed through the shareholders’ general meeting in accordance with either the Civil and Commercial Code or the PLC Act. SOEs in such legal forms may also alter the procedures for appointing of supervisory board members through their articles of association (See Box 2.2). In most cases, the Thai government publicly announces the candidate’s appointment through the Cabinet resolution, while SOEs falling under the scope of LLCs and PLCs make their own announcements.
Board nomination process
The nomination process follows specific criteria to ensure that eligible directors meet the required qualifications. The director's pool consists of individuals who meet these qualifications, and SOEs, SEPO and responsible ministries discuss and select candidates based on a skills matrix that includes mandatory skills in finance, accounting, IT and legal, with additional skills specified as needed by each SOE. The 2019 SOE Act established a Screening Committee responsible for setting the criteria and methods for director selection and evaluating eligible directors. The appointment process begins with SOEs nominating a ‘long list' of candidates, which is then submitted to the Screening Committee. The Committee, comprising of government officials, ex-government officials and private sector representatives, selects qualified candidates based on several rules according to the Notification of Screening Committee on Criteria and Procedures for Appointing Board Directors of SOEs B.E. 25661 dated 8 November 2023. These include:
Expertise: Directors must have expertise as per the Board of Directors’ Skill Matrix.
Conflicts of Interest: Candidates must not have any direct or indirect conflict of interest with the SOE.
Directors’ Pool: One-third of non-ex officio directors must come from the Directors’ Pool. Another third of the directors must have prominent business sector experience. After applying these rules, the Screening Committee provides a list of qualified candidates with a clear written rationale, which is then submitted to the cabinet or responsible minister for final appointment.
Significant selection power now lies with the Screening Committee, in addition to the Cabinet and responsible ministers. However, the predominant presence of former government officials on the Screening Committee and the negotiations between SEPO and the respective line ministry during board appointments may also influence the transparency and independence of the process. Directors can serve two terms without a cooling-off period between re-appointments. The government recognises that there is room for improvement and plans to increase the proportion of directors from the Directors' Pool as well as individuals with business experiences from one-third to a larger percentage in the future.
Gender and diversity considerations
Efforts have been made to promote diversity in board composition. For example, as described in Section 1.3.6, the board nomination and composition processes of large SOEs like PTT and NT require non-discrimination based on gender, race, ethnicity, nationality, cultural background, or religious beliefs. However, despite these efforts, only 19% of board directors in the 10 largest SOEs in Thailand are female.
While Thailand's board nomination process for SOEs is structured to be transparent, and skill-oriented, with efforts to ensure diversity in board composition, the low representation of women and the potential for political influence highlight areas for further improvement. Enhancing the proportion of directors from diverse backgrounds and minimising political interference would strengthen the integrity and effectiveness of SOE governance in Thailand.
II.F.3. Setting and monitoring the implementation of broad mandates and expectations for SOEs, including on financial targets, capital structure objectives, risk tolerance levels and sustainability consistent with the state’s rationales for ownership.
SEPO is responsible for the supervision, monitoring, evaluation, and development of SOEs to ensure that their operations are consistent with policies, laws, and measures pertaining to the administration of SOEs. For SOEs, objective setting involves close co-ordination with SEPO and the respective line ministry to produce a 5-Year Strategic Plan, Annual Business Plan and KPIs according to the State Enterprise Assessment Model (SE-AM).
According to Section 36 of the State Fiscal and Financial Disciplines Act, B.E. 2561 (2018), SOEs that are structured as unincorporated entities are not required to pay corporate income tax are required to allocate net profits as dividends to the Treasury at the rate not lower than the corporate income tax rate. The Act also specifies that the Ministry of Finance is entitled to require State Enterprises to allocate net profits or accumulated profits as dividends to the Treasury in the case where it is deemed appropriate. The corporate Income tax rate for financial SOEs ranges between 35%-45%, while for non-financial SOEs it is between 20%-50%.
Further, SEPO included sustainability-related goals for SOEs in the 2019 Principles and Guidelines and the SOE Development Plan. Section 5 of the 2019 Principles and Guidelines pertains to sustainability and innovation, specifying that the boards of directors should establish policies and operational plans for SOEs that prioritise sustainable operations and have a responsibility towards society and the environment. Furthermore, the SOE Development Plan, which sets out a five-year development plan for SOEs in line with Thailand’s National Strategy and Thailand’s National Economic and Social Development Plan, also includes sustainability-related expectations for SOEs.
II.F.4. Setting up reporting systems that allow the ownership entity to regularly monitor and assess SOE performance, and oversee and monitor their compliance with applicable corporate governance standards, including by making use of digital technologies.
State-owned enterprises (SOEs) are mandated to adhere to the Guidelines for State Enterprise Information Disclosure, dated 7 August 2019, ensuring they provide comprehensive information to stakeholders. These disclosure standards are aligned with those observed by companies listed on the Stock Exchange of Thailand (SET).
The 2019 SOE Act specifies that SEPO is responsible for evaluating performance of SOEs in accordance with the criteria developed by the State Enterprise Policy Committee (SEPC). These criteria encompass:
1. actions carried out to achieve the mission of the SOE
2. long-term and annual action plans of the SOE
3. criteria and methods for the assessment of SOE directors
4. financial positions and stability of the organisation;
5. efficiency and effectiveness of operations
6. compliance with principles of good governance
7. risk management practices
8. sustainable development initiatives
9. stakeholder satisfaction and public information dissemination, including economic condition
10. industry-specific challenges and competitive landscape
The 2019 SOE Act further specifies that SEPO is responsible for determining the methods and procedures for the assessment and is required to report to the SEPC on the annual assessment of SOEs performance. It appears that there is no requirement for the annual assessments to be made publicly available. The assessments include the principles and measures with which the SOEs must comply.
Additionally, Section 25 of the 2019 SOE Act mandates SOEs to prepare a five-year plan and an annual action plan, with SEPO responsible for reporting on the implementation of these plans to the SEPC. The SEPC has established the State Enterprise Assessment Model (SE-AM) framework, focusing on key performance areas, particularly corporate governance, to evaluate the effectiveness of SOEs.
II.F.5. Developing a disclosure policy for SOEs that identifies what information should be publicly disclosed, the appropriate channels for disclosure, and mechanisms for ensuring quality of information.
As mentioned in the preceding section, the State Enterprise Assessment Model (SE-AM) system, established by the SEPC, mandates the disclosure of both financial and non-financial information. SOEs are required to disclose information in their annual reports that must be complete, accurate, on-time and reliable. Information such as the structure of business groups/shareholders, financial position analysis, major changes in performance, good governance, risk management, etc., is required to be disclosed in these reports. Furthermore, SOEs are required to disclose financial and non-financial information through their websites. This should include the statement of organisation’s policy direction by high-level executive officers, good governance policies, significant plans and investment projects, information concerning procurement, and financial and non-financial performance metrics.
II.F.6. When appropriate and permitted by the legal system and the state’s level of ownership, maintaining continuous dialogue with external auditors and specific state control organs.
The State Fiscal and Financial Disciplines Act, B.E. 2561 (2018), permits dialogue between state ownership entities and external auditors, as well as state control organs, through regular meetings and reporting. This dialogue encompasses discussions on audit findings, financial performance, strategic plans, and compliance issues. However, it is important to note that not all SOEs are subject to external independent audit. Regarding the requirements for external independent audit, the assessment under Guideline V.D provides more context. External audit can be performed by relevant audit companies or the State Audit Office. The assessment team was not provided detailed information regarding SEPO’s dialogue with external auditors or state control organs in practice.
II.F.7. Ensuring that ownership rights are exercised on a co-ordinated basis when these are allocated to several ownership entities acting in concert.
As described in the section 2.2.4, SEPO, an agency under the Ministry of Finance, collaborates with individual line ministries in overseeing 52 SOEs including three listed companies where the government holds full or majority ownership. SEPO plays a role in setting policy and strategic direction, monitoring operational performance, determining expected returns, approving bylaws, and managing capital injections. Concurrently, line ministries formulate specific objectives and operational strategies tailored to their respective SOEs. For statutory corporations and unincorporated entities, which constitute a majority of central SOEs, board appointments involve SEPO and line ministries jointly proposing potential directors using a Skills Matrix to the Screening Committee. This committee comprises government officials and private sector representatives and finalises appointments pending approval from the responsible ministry or the Cabinet.
However, limited information is available on the governance arrangements of seven listed companies in which the government holds minority stakes ranging from 10% to 49%. This area warrants further exploration in the future.
II.F.8. Establishing a clear and transparent overarching remuneration policy for SOE boards that fosters the long- and medium-term interest of the enterprise and can attract and motivate qualified professionals.
The State Enterprise Labour Relations Act, B.E. 2543 (2000) governs the employment conditions of SOE staff. Implementation falls under the jurisdiction of the Ministry of Labour, in cooperation with SEPO for financial matters, while the State Enterprise Labour Relations Committee establishes minimum standards and employment conditions.
SEPO devises standard compensation schemes for most SOEs on behalf of the Ministry of Finance. Based on the prevailing structure of SOE employee remuneration, rates are categorised as follows:
Flexible remuneration: SOEs have the discretion to set their remuneration rates upon approval from their board of directors, predominantly utilised by listed companies.
Semi-flexible remuneration: State-owned financial institutions and major SOEs can establish their remuneration rates with approval from the State Enterprise Labour Relations Committee and the Cabinet.
Fixed remuneration: Other SOEs must adhere to remuneration levels determined by the State Enterprise Labour Relations Committee and the Cabinet.
Consequently, many large SOEs may lack the flexibility to offer competitive remuneration. According to information provided by SEPO, most of SOEs with public service obligations fall into the third category of fixed remuneration, wherein remuneration must comply with rates established by the State Enterprise Labour Relations Committee and the Cabinet. SOEs may also participate in an incentive scheme for their directors and employees devised by the Ministry of Finance. This scheme ties the annual bonus to an SOE's profits, primarily based on its financial performance. It has been noted that this incentive scheme may disproportionately disadvantage individuals working for SOEs with public-service or universal-service obligations, often provided at a loss, while favouring profitable SOEs due to their monopoly power (OECD, 2020[2])
It is notable that the guidelines for renumeration of the boards of directors was determined by the Cabinet resolution dated 24 April 2019. According to the Cabinet resolution, the performance, size, directors’ responsibilities, accountability, and the scope of public policy obligations should be taken into account when determining renumeration levels for directors.
Further, Principle 3.4 of the Corporate Governance Code for Listed Companies 2017 notes that when proposing renumeration for approval to the shareholders, the board should consider whether the renumeration structure is “appropriate for the directors’ respective roles and responsibilities, linked to their individual and company performance, and provide[s] incentives for the board to lead the company in meeting its objectives, both in the short and long term.” Insofar as the Corporate Governance Code is applicable to both private companies and SOEs, the renumeration of board members of SOEs in Thailand should in principle be aligned with those of the private sector. However, the principal SOE ownership policy documents – the 2019 SOE Act and the 2019 Principles and Guidelines – do not include a clear renumeration policy for SOE boards. According to Section 33(5) of the 2019 SOE Act, the Principles and Guidelines should include the criteria for directors’ renumerations, but details of such measures are unclear.
Consistent with the rationale for state ownership, the legal, regulatory and policy framework for SOEs should ensure a level playing field and fair competition in the marketplace when SOEs engage in economic activities.
2.3.1. Separation of functions
III.A. There should be a clear separation between the state’s ownership function and other state functions that may influence the market conditions for state-owned enterprises, particularly with regard to market regulation and policy making.
The persisting challenge lies in the ambiguous boundaries between sectorial policies and the state’s role in SOEs, which are significantly influenced by specific governing laws. Both line ministries and the SEPO handle ownership and regulatory responsibilities in accordance with the guidelines of the 2019 SOE Act. However, the existence of these distinct legal frameworks presents hurdles in effectively implementing the governance directives outlined in the 2019 SOE Act.
At the same time, supervisory boards of SOEs structured as statutory corporations often include a dominant presence of representatives from responsible line ministries, which typically possess both policymaking and regulatory powers. Notwithstanding these hurdles, the SEPC actively seeks practical remedies to enhance governance within these entities. This approach involves documenting any deviations from the prescribed governance principles and contemplating a comprehensive review of existing laws and regulations to ensure their alignment with the desired governance framework.
However, despite the oversight mechanisms in place for SOEs, the laws establishing SOEs confer upon them full authority for their operations. The absence of a distinct legal framework separating the state’s ownership responsibilities from its other functions has resulted in overlapping duties between entities responsible for ownership roles and those managing the day-to-day operations and finances of individual or groups of SOEs. This overlap presents challenges in ensuring a clear and effective governance structure within these entities.
The instances involving the Port Authority of Thailand (PAT) and the State Railway of Thailand (SRT) represent clear examples of the blending of operational and regulatory functions within an SOE. This convergence has the potential to lead to conflicts of interest and impede market competitiveness within the respective sectors operated by these SOEs (See Box 2.3). The government recognises these concerns and aims to advance work on levelling the playing field with other remedies, including by having the Marine Department set tariffs comparable to PAT and reviewing legislation that would allow private operators to access SRT infrastructure and compete nationwide.
Port Authority of Thailand (PAT)
According to the Port Authority of Thailand Act, B.E. 2494 (1951) as amended by Port Authority of Thailand Act (No. 5), B.E. 2543 (2000), the Port Authority of Thailand (PAT), an SOE that operates the country’s major ports under the oversight of SEPO, has ownership of the ports and the authority to set regulations and tariff rates within the port premises. This includes setting tariffs for port usage, services, and facilities, as well as issuing regulations regarding the payment methods for these charges. Article 6 of the Act specifies that PAT is permitted to conduct business activities in its ports that are relevant or ancillary to port operations, as well as undertake port activities in the public and state interest. Furthermore, Article 9 provides PAT with the power to directly manage port services.
In accordance with the Act, PAT assumes control of the operations previously managed by the Port Office of Bangkok under the Department of Transportation, Ministry of Communications (currently, Ministry of Transport). The PAT also engages in other activities directly or indirectly related to port operations. PAT holds the authority to undertake various tasks in line with its objectives, including the construction, procurement, acquisition, leasing, and operation of port equipment, services, and facilities.
Contrastingly, as per the Regulations of the Ministry of Transport regarding permissions for seaport operations, which impact public safety and tranquillity as outlined in section 3 (9) of Declaration of Revolutionary Council No. 58, B.E. 2565 (2022), private ports are obligated to obtain approval from the Marine Department to establish charges due to licensing requirements. Conversely, public ports are bound by strict regulations governing service charges for external entities. These guidelines stipulate that if a public port provides services to third parties, the fees must adhere to the rates specified in their license. However, PAT is exempt from adhering to this regulation. This potential convergence of PAT's regulatory and operational roles could result in conflicts of interest. For instance, PAT's authority to establish service prices within the port area might impede private operators from offering competitive lower prices to enhance their market presence.
State Railway of Thailand (SRT)
Pursuant to the Railways and Highways Act of 1944 (B.E. 2487) and the State Railway Act of 1951 (B.E. 2494), the State Railway of Thailand (SRT) oversees the entirety of railway transportation in Thailand, encompassing track construction, infrastructure management, train operation regulation, and service provision. This implies that Thailand operates on a vertical integration model, where the same company manages both the infrastructure and the transport service. As a vertically integrated entity, serving as both the operator of the rail network and the sole freight transport service provider, SRT might be inclined to hinder competitors and prioritize its own transport services, potentially leading to anti-competitive behaviour. This could include obstructing potential rail transport service providers from utilizing its railway infrastructure.
This monopoly poses challenges concerning service quality and non-competitive fare rates due to limited alternatives. For instance, SRT could impose unjustified prices for crucial services like track allocation or access to energy supply. This situation may stem from a historical era when both rail network management and rail transport services were overseen by public authorities. Additionally, there's a noticeable absence of explicit criteria for permitting private entities to participate in train operations. Despite the legal framework enabling this, determining the cost of implementing an Access Charge remains an ongoing challenge.
Source: OECD mission team meetings with stakeholders; TDRI;OECD (2020[3]), OECD Competition Assessment Reviews: Logistics Sector in Thailand, https://doi.org/10.1787/a2dc2db0-en.
2.3.2. Stakeholder rights
III.B. Stakeholders and other interested parties, including competitors, should have access to efficient redress through unbiased legal, mediation or arbitration processes when they consider that their rights have been violated. SOEs’ legal form should allow SOEs to initiate insolvency procedures and for creditors to press their claims.
Legal framework and dispute resolution for SOEs
Stakeholders, including creditors, employees, and competitors, can pursue legal action if they believe their rights have been infringed upon. Despite some SOEs being designated as “administrative agencies" under the Act on the Establishment of Administrative Courts and Administrative Court Procedure, B.E. 2542 (1999), Thai law does not confer any special dispute resolution privileges upon them.
The primary dispute settlement mechanism for stakeholders of SOEs is the Civil Court, operating under the Civil Procedure Code, which ensures the principle of equality of arms. Moreover, as there is no legal restriction in Thailand confining SOEs solely to the Civil Court, stakeholders are free enter into arbitration if a valid arbitration agreement exists between them and the relevant SOE. Many disputes are resolved through arbitration, and if an arbitration award is not complied with by the SOE, stakeholders can bring the award to the Civil Court for enforcement. SOEs are not exempt from the civil execution process.
In summary, for SOEs that the Supreme Administrative Court does not deem related to "public security," no legal immunity is granted in commercial matters. The law treats them as commercial entities, allowing stakeholders and other interested parties to seek efficient redress through various processes. While the scope of "public security" in this context remains unclear, it is relevant to note that the Supreme Administrative Court consistently rules that any services, aside from those related to public security and law-designated services, are considered commercial services. The Court affirms this precedent even in cases involving electricity and water.
Insolvency procedures for SOEs
In Thailand, the ability of SOEs to initiate insolvency procedures and for creditors to press their claims varies based on whether the SOEs are corporatised or unincorporated. Corporatised SOEs, governed by company law, are subject to the Bankruptcy Act, B.E. 2483 (1940), which allows them to initiate insolvency proceedings and enables creditors to file claims. For SOEs converted into public limited companies, the Public Limited Companies Act, B.E. 2535 (1992), along with the Bankruptcy Act, governs their insolvency processes, with creditors following standard procedures for public limited companies.
Unincorporated SOEs in Thailand generally do not follow the same insolvency procedures as corporatised SOEs or private companies. Their ability to initiate insolvency proceedings and for creditors to press their claims is typically governed by specific legal frameworks and administrative processes, rather than standard bankruptcy laws. Creditors dealing with unincorporated SOEs may need to navigate government procedures and engage with relevant authorities to resolve financial claims. Historically, financial difficulties of unincorporated SOEs have often been resolved through government intervention rather than formal bankruptcy proceedings.
2.3.3. Identifying the costs of public service obligations
III.C. Where SOEs carry out public service obligations, they should be transparently and specifically identified, allowing for an accurate attribution of costs and revenue. In particular:
III.C.1. High standards of transparency and disclosure regarding their costs and revenue must be maintained.
The current legal regulatory framework for SOEs in Thailand exhibits gaps in transparency and disclosure regarding the costs and revenue associated with public service obligations (PSOs). According to the Ministry of Finance Regulation on State Enterprises Financial and Accounting Standards, B.E. 2548 (2005), there is a lack of consistent structural separation between the public service obligations and economic activities within SOEs. The practice of segregating accounts for these activities is not regularly implemented.
Although many SOEs are mandated to undertake activities serving public interests in compliance with government directives, it is important to note that not all activities deemed in the public interest qualify as PSOs. PSOs are specifically those activities that are mandated by the state to serve a broad public benefit and often require financial support or subsidies due to their non-commercial viability. The clear demarcation between these PSOs and their commercial operations is often hindered by the absence of precise government guidance.
However, the Prime Minister's Office Regulation on State Enterprise Public Service Subsidies B.E. 2554 (2011) provides an exemption. This mandate requires SOEs seeking financial aid from the government to maintain a dual accounting structure, separating their records into commercial accounts and public service accounts. According to information provided by SEPO, the Regulation necessitates that SOEs requesting subsidies must prepare a pro-forma PSO account and a request proposal. The pro-forma PSO account, along with the expected subsidy amount and KPIs, must be sent to the PSO committee to assess the reasonableness of the requested subsidy compared to the proposed quality and amount of service. Upon approval, SOEs must provide a Public Service Account along with the operating results to the PSO committee for reimbursement, which occurs twice a year. If the performance of public service is lower than the agreed KPIs, the PSO committee can deduct subsidy amount accordingly. This initiative aims to establish a clear division between business-related activities and public service obligations undertaken by these enterprises. The regulation adheres to the "Avoidable Costing" method which isolates costs directly associated with public service projects eligible for grants and compares these to the operational costs that would be incurred otherwise, ensuring that subsidies are targeted and do not inadvertently subsidise commercial operations, thereby maintaining compliance with competition rules. Additionally, SOEs may use the cost data from public services over the past five years for these comparisons. However, challenges remain in the uniform application of these principles across all SOEs, with some sectors showing expenditure overlaps with private enterprises. Also, it is unclear whether this regulation is consistently complied with in practice.
While the government provides subsidies to SOEs primarily to support public policy objectives rather than commercial competitiveness, there is evidence of significant financial support, as seen in the budget allocations for Fiscal Year 2022. In 2021, the Cabinet approved a budget of USD 65.46 billion for public service subsidies in Fiscal Year 2022. This budget was determined by considering projected revenues and anticipated expenses for the upcoming fiscal year, covering various costs averaged over three years. Expected revenue from public services was estimated at USD 55.53 billion. However, the anticipated expenses amounted to USD 121 billion, resulting in a deficit that required subsidies of USD 65.46 billion to fulfill public service obligations.
Public policy objectives refer to the overarching goals set by the government to guide the operation of SOEs in ways that benefit society, such as environmental sustainability or economic stability. Public service obligations, on the other hand, are specific tasks that SOEs are required to perform to ensure that essential services are available to all citizens, such as transportation and utility services in remote areas. This distinction is crucial to understanding how subsidies are allocated and managed. The substantial subsidies aimed at covering deficits in SOEs, particularly in the transportation sector, highlight a potential area of concern where financial support might cross the line from public service compensation into commercial advantage. Such scenarios can potentially lead to market distortions if not carefully managed, as they may provide an unfair competitive edge under the guise of fulfilling public service obligations.
III.C.2. Net costs related to carrying out public service obligations should be separately funded, proportionate and disclosed, ensuring that compensation is not used for cross-subsidisation.
As described previously, despite the Prime Minister's Office Regulation on State Enterprise Public Service Subsidies B.E. 2554 (2011), which requires SOEs seeking financial aid from the government to maintain a dual accounting structure, separating their records into commercial accounts and public service accounts, the practice of maintaining separate accounts for these activities is not regularly implemented. The assessment team was informed that typically, SOEs do not disclose specific costs pertaining to carrying out public service obligations.
Structural issues, particularly in the transportation and electricity sectors, further complicate the clear identification and separation of public service obligations from economic activities (See Box 2.4). Improvements in regulatory compliance and more explicit guidance are necessary to meet the high standards of transparency and disclosure required for SOEs carrying out public service obligations. Additionally, there is a need for more consistent implementation of regulations requiring dual accounting structures and regular reporting of public service accounts.
Transportation sector
Additional challenges include the government’s provision of subsidies to SOEs to promote operations and encourage service utilisation in the transportation sector. For instance, in 2018, the Bangkok Mass Transit Authority (BMTA) secured around 65.79 million USD to maintain cost-free passenger bus services, aiming to address financial deficits due to low government-imposed fare rates. It is notable that, despite operating at similar fare levels, private operators did not receive this financial support. The State Railway of Thailand (SRT) also receives subsidies for public service obligations, such as the Free Train Project involving third-class and short-distance urban trains. It received a 6.25 million USD (224.66 million baht) subsidy in 2023 to cover the discrepancy between revenue and operational costs. The subsidy aimed to enable the SRT to continue providing services at controlled prices, focusing on operational sustainability without fare increases.
According to SEPO, there are currently no cost-free passenger bus services or free train services available. It has further clarified that when the government provides subsidies for capital loss compensation to SOEs offering public services, these subsidies are based on the difference between the service prices set by the government or those set by SOEs with ministerial approval, excluding costs not incurred for public service purposes.
Electricity sector
In the electricity sector, structural issues within Thailand’s Enhanced Single Buyer Model impede the efficient transmission of electric energy to end-users (OECD, 2023[4]). The Electricity Generating Authority of Thailand (EGAT) sells electricity to the Metropolitan Electricity Authority (MEA) and the Provincial Electricity Authority (PEA), which distribute and collect fees from end-users. Subsidies for electricity usage in certain cases are drawn from the Electricity Development Fund. Both entities have segments that involve public service obligations. The extension of power lines to remote areas incurs high costs, making the provision of this service economically challenging. Regional electricity authorities allocate funds to expand electricity coverage for households without electricity, providing a subsidy of up to 1,418 USD per household as a one-time payment. However, recent estimations suggest that the allocated funds may not suffice for the electricity expansion efforts, leading to residents bearing expenses exceeding the allocated amount.
This situation presents varied burdens on urban and rural communities. While local government bodies are responsible for supporting basic infrastructure in their areas, the allocated funds may not be sufficient to bridge the disparity among communities. Consequently, local government entities differ in their capacity to provide varying levels of subsidies, resulting in the inability to uniformly support these allocated subsidies. Hence, these obligations to provide public services might not always be explicit or clearly mandated, and subsidies for state-owned entities might be sought based on the expectations of the owners, occasionally requested on an ad hoc basis, or might not be distinctly identifiable due to ambiguous arrangements.
Source: Information from SEPO and TDRI; OECD (2023[4]) OECD Economic Surveys: Thailand 2023,https://doi.org/10.1787/4815cb4b-en.
2.3.4. Funding of public policy objectives
III.D. As a general rule, state-owned enterprises should not be used to subsidise or grant advantages to other commercial undertakings. If SOEs are used to allocate support measures in line with their public policy objectives, care should be taken to ensure that: (i) support measures are consistent with applicable competition and trade rules; (ii) support measures and their funding are clearly defined and publicly disclosed; and (iii) support measures do not cause unfair disadvantages to other commercial undertakings.
In Thailand, SOEs occasionally play a role in subsidising or granting advantages to other commercial undertakings. For instance, in the energy sector, entities such as PTT Public Company Limited, previously known as the Petroleum Authority of Thailand, occasionally offer subsidies or favourable pricing to private companies. This could include preferential access to energy resources or infrastructure. The decision to offer such preferential access is typically governed by a set of criteria that aims to align with national economic and energy policies. These decisions are influenced by strategic goals such as promoting energy security or supporting domestic industries critical to the economy. The process often involves assessments of market conditions, consultations with government bodies, and alignment with broader public policy objectives.
Similarly, SOEs involved in infrastructure development, such as the State Railway of Thailand (SRT) or the Electricity Generating Authority of Thailand (EGAT), could provide infrastructure at below-market rates or prioritise private developers for projects. In telecommunications, despite significant privatisation, SOEs like National Telecom Public Company Limited (NT) may provide subsidised rates or favourable terms for private telecom operators, giving them a competitive edge. In financial services, SOEs such as the Government Savings Bank (GSB) or the Bank for Agriculture and Agricultural Cooperatives (BAAC) sometimes extend preferential loans or financial services to specific commercial ventures in line with government policies aimed at supporting particular industries or regions.
Under the State Fiscal and Financial Disciplines Act, B.E. 2561 (2018) and the Office of the Prime Minister’s Regulation on Public Service Obligations of State Enterprises, B.E. 2554 (2011), SOEs with public service obligations are required to disclose government subsidies and financial statements in their annual reports and on their websites. Conversely, SOEs without PSOs are not required to disclose such information because their operations are considered commercially driven, but they must still adhere to general financial reporting standards. Nonetheless, sporadic compliance and inconsistencies in accounting and reporting standards across different SOEs complicate the assessment of whether all support measures are as clearly defined and publicly disclosed as required. Public disclosure of support measures and their funding sources is crucial to ensuring accountability and safeguarding against potential market distortions.
2.3.5. General application of laws and regulations
III.E. The state should not exempt SOEs, when engaging in economic activities, from the application and enforcement of laws, regulations and market-based mechanisms, and should ensure tax, debt and regulatory neutrality to prevent undue discrimination between SOEs and their competitors.
Section 4 of the Trade Competition Act B.E. 2560, enacted in 2017 stipulates that it shall not be applicable to the operations of SOEs, public organisations, or other government agencies, provided they conduct their activities in accordance with the law or resolutions of the Cabinet, which are deemed necessary for the preservation of national security, public interest, societal welfare, or the provision of public utilities. This law, revised from the Trade Competition Act B.E. 2542 (1999), previously excluded the enforcement of regulations on SOEs as per the budgetary procedures law. These exemptions are extensive, given that many services, including transportation services, could be construed as “public utilities,” thereby rendering the Act unenforceable for many SOEs.
The 2017 Trade Competition Act currently lacks a clear definition or clarification of the scope regarding “national security, public interest, societal welfare, or the provision of public utilities.” Additionally, it grants the Council of Ministers the authority to determine whether a business should be exempted under Section 4(2). Further, Trade Competition Commission Thailand (TCCT) within the Ministry of Commerce lacks effective enforcement mechanisms to address anti-competitive behaviours by SOEs. Furthermore, according to Section 4 of the 2017 Trade Competition Act, many SOEs may be excluded from the overarching competition law as they operate within regulated sectors. Consequently, they are often governed by distinct competition provisions outlined in the regulations of their respective sectors. Also, several SOEs, even when structured as limited companies, function as market regulators themselves. In other words, these SOEs actively participate as players in markets that they regulate, thereby creating a potential conflict of interest. One prominent example is evident in the operations of Transport Company Limited. Under this setup, other bus companies are obliged to operate within a “concession contract” framework on specific routes. Consequently, this practice serves as a barrier to market access. Apart from trade competition, the taxation law regime also imposes differential treatment on SOEs. Non-corporatised SOEs established by act or decree are excluded from the definition of “tax unit” under the Revenue Code. For instance, Article 17 of the Port Authority of Thailand Act, B.E. 2494 (1951), as amended by the Port Authority of Thailand Act (No. 5), B.E. 2543 (2000), stipulates that PAT is exempt from taxes and duties outlined in the Thailand tax code, encompassing its unleased buildings and land. This tax exemption extends to all revenue, land, and buildings (excluding leased ones), even for activities competing with private operators, potentially granting PAT a competitive edge over private companies providing similar services. This provision may stem from PAT’s earlier status as a government agency before 2000 (OECD, 2020[3]).
Although SOEs are required to transfer their profits to the Ministry of Finance in an amount equivalent to corporate income tax, the calculation mechanism differs, resulting in discrimination between SOEs and private corporations [See assessment under Guidelines II.F.3]. The State Fiscal and Financial Disciplines Act, B.E.2561 (2018), dictates that SOEs must adhere to the regulations specified in their establishment legislation when transferring profits. Typically, these laws delineate a distinct calculation method from that of corporate income tax outlined in the Revenue Code. Under the SOEs’ method, income undergoes initial deductions for costs, followed by further deductions for compulsory reserve funds, charitable expenditures, and Cabinet-approved investments. Consequently, this results in a potentially lower base amount for calculating corporate income tax, which is the sum mandated for transfer to the Ministry of Finance.
Although SOEs transfer profits to the Ministry of Finance equivalent to corporate income tax, their calculation method differs from that of private corporations. This approach reflects SOEs' dual role in serving public interests and operating commercially. As a result, despite contributing similarly to the government financially, the tailored calculation method for SOEs leads to perceived discrepancies in tax treatment compared to private corporations.
Essentially, SOEs enjoy increased flexibility in their tax arrangements due to this legal advantage, giving them a notable competitive edge over their counterparts in the market, as their operational costs are effectively reduced. This evaluation concerns the overarching framework of tax regulation outlined in the Revenue Code, with additional tax regulations addressed in Section 2.3.6.
Another advantage exclusive to SOEs lies in labour relations. As outlined in the State Enterprise Labour Relations Act, which prohibits employees from striking, SOEs hold a position unattainable by their private competitors. SOE employees have less bargaining power compared to employees in the private sector.
In summary, procedural laws treat SOEs no differently from private entities. Substantive laws of Thailand, however, employ forms of discriminatory treatment in favour of SOEs. These forms of discrimination can be categorised under one theme: to increase competitors’ operating costs.
2.3.6. Market consistent financing conditions
III.F. SOEs’ economic activities should face market consistent conditions including with regard to debt and equity finance. In particular:
III.F.1. All business relations of SOEs, including with financial institutions, should be based on purely commercial grounds.
Access to funds through debt securities/ loans with state guarantees
According to the Public Debt Management Act B.E. 2548 (2005), the Ministry of Finance, upon approval of the Council of Ministers, shall have the exclusive power to loan or guarantee in the name of the Government of the Kingdom of Thailand. State agencies other than the Ministry of Finance shall not loan or provide guarantees, unless such power is specifically provided by law.
However, each fiscal year, the Ministry of Finance shall guarantee loans not exceeding 20 percent of the existing annual budgetary appropriation and the additional budgetary appropriation. Section 9 of the Act specifies that if an SOE without a status of a legal person needs to raise loans for its operations, its respective line Ministry, with the approval of the Minister, has the authority to do so. However, in cases where raising of loans is for investment purpose, such SOEs must submit its investment plan to the National Economic and Social Development Board for prior approval. An approval of the Council of Ministers is needed if the amount of loan raised exceeds 50 million baht (around 1.3 million USD).
Moreover, the Ministry of Finance does not guarantee or extend loans to SOEs unless they are public utility service providers which have operated at a loss for three consecutive years. An exception is made when a resolution is passed by the Council of Ministers to dissolve such an SOE, and loan guarantees or on-lending of money to them occur during the dissolution process. Further, as per Section 21 of the Act, the Ministry of Finance is authorised to raise loans in Thai baht under the following conditions: (1) up to 20 percent of the current annual expenditure budget and any additional expenditure budget; and (2) up to 80 percent of the expenditure budget designated for principal repayment when there are budget deficits or when expenditures exceed revenues in any given fiscal year.
Thus, various SOEs have raised funds by issuing debt securities. In cases where these enterprises are facing operational losses, the Ministry of Finance has stepped in to provide guarantees for interest and principal repayments on these securities such as, Islamic Bank of Thailand, Government Savings Bank and Export-Import Bank of Thailand. This initiative aims to instill confidence among investors and prevent an excessive rise in interest costs. In addition, certain SOEs have obtained loans backed by government guarantees totaling more than 13,266 million USD with the SRT receiving the highest proportion of these government guarantees, as indicated in Figure 2.1.
Source: Public Debt Management Office (2023).
Provision of financing from state-owned financial institutions
As the majority of profit-oriented SOEs operate in Thailand, the bulk of non-commercial aid is directed toward specialised financial institutions, particularly those involved in the rehabilitation of SOEs. This aid comprises low-interest financing for state projects, subsidised interest rates for specific borrowers, and compensation for losses these institutions may face while executing government-assigned projects. It encompasses occasional injections of capital to stabilise financial setbacks or to support expanded lending capabilities when these institutions encounter instability or require a larger capital base. For instance, the Bangkok Mass Transit Authority (BMTA) obtained a loan to settle maturing debts and secured an additional 124.8 million USD (4.5 billion baht) in the fiscal year 2021 via a loan auction system. The Government Savings Bank proposed the lowest interest rate of 0.05% per annum for this transaction.
III.F.2 SOEs’ economic activities should not benefit from or provide any direct or indirect financial support, that confers an advantage over private competitors, such as preferential debt or equity financing, guarantees, lenient tax treatment or preferential trade credits.
SOEs enjoy specific tax privileges, providing them a competitive advantage over private counterparts. Firstly, non-corporatised SOEs, categorised as “government organisations,” are exempt from the standard 20% corporate tax, as previously mentioned. Despite this exemption, these SOEs are obliged to contribute financially to the state based on their profits, investment requirements, and governmental revenue needs.
Secondly, in accordance with the Signboard Act of 1967 (B.E. 2510), SOEs such as PTT gas stations are exempt from signboard taxes imposed by local authorities for displaying their logos. This exemption became a contentious issue following the company’s partial privatisation and stock market listing. Cumulatively, these tax benefits represent financial assistance provided to SOEs.
Another significant financial advantage for SOEs is facilitated by the Public Debt Management Act, B.E. 2548 (2005). Under this Act, for the purposes of public debt management, the Ministry of Finance is authorized to settle SOEs’ loans. Essentially, the Ministry of Finance assumes the debts on behalf of SOEs, becoming the creditor. While the debts technically exist, the Ministry of Finance may not actively pursue repayment since SOEs are essentially subsidiaries of the Government. Consequently, it can be observed that the Government acts as a financial safety net for SOEs, whereas private entities must manage financial risks independently. Additionally, the Act permits the Ministry of Finance to guarantee SOEs’ debts.
Moreover, in government procurement, SOEs sometimes receive preferential treatment. The Ministry of Finance’s Regulation on the procurement of supported goods B.E., 2563 (2020) outlines a list of goods eligible for preferential treatment, including some SOEs’ products such as petrol and petroleum-related items from PTT Public Limited Company. Government agencies are typically mandated to procure petrol from PTT unless they publicly announce their procurement and undergo a bureaucratic bidding process. This preferential treatment in government procurement places SOEs at an advantage over their private competitors.
III.F.3. SOEs’ economic activities should not receive or provide in-kind inputs such as goods, energy, water, real estate, data access, land or labour or arrangements (such as rights-of-way, or concessions) at prices or conditions more favourable than those available to privately owned competitors.
In accordance with Section 54 of the Trade Competition Act B.E. 2560 (2017), there are prohibitions against practices such as fixing purchase or sale prices, imposing limits on the quantity of goods or services produced, and manipulating conditions to unduly influence the outcomes of auctions or bids. Specifically, these regulations are designed to ensure that SOEs in Thailand do not receive unfair competitive advantages over private companies, particularly in terms of receiving or providing in-kind inputs such as goods, energy, water, real estate, data access, land, or labour, or special arrangements like rights-of-way or concessions, at more favourable prices or conditions. Nonetheless, in certain instances SOEs can play a role in subsidising or granting advantages to commercial undertakings, particularly in energy and infrastructure development. Section III.D. describes such cases in greater detail.
III.F.4. SOEs’ economic activities should be required to earn sustainable rates of return that are comparable to those obtained by competing private enterprises operating under similar conditions, except with respect to the carrying out of public service obligations.
Currently, SEPO does not set specific rates of return (ROR) expectations (for example as expressed in the form of return on investment, equity or assets) for SOEs’ economic activities. However, SOEs’ ROR will be impacted by other state regulations that pertain to profit distribution and dividend policy, as described below.
Profit allocation for SOEs is regulated by the Finance Ministry's Regulation regarding SOEs Financial Management in 2548. This regulation outlines that annual net profits can only be allocated in particular scenarios: (1) rewarding bonuses to directors and staff, (2) distributing dividends or sending funds to the government as state revenue, (3) utilising reserves at specified legal rates, and (4) paying corporate income tax. Approval from the Finance Ministry is necessary for the first two scenarios.
SOEs do not allocate their entire revenue to the state Treasury; instead, they are required to allocate their net profits to the Treasury. This practice aligns with the State Fiscal and Financial Disciplines Act, B.E.2561 (2018), Section 3, Financial Discipline, which specifies that SOEs shall allocate their net profits to the Treasury in accordance with the provisions outlined in their establishment regulations. Furthermore, in cases where SOEs are not liable for corporate income tax, they are obligated to allocate their annual net profits to the Treasury, not less than the rate of corporate income tax. The process of transferring revenue to the Treasury adheres to two fundamental principles: firstly, the minimum rate must not be lower than the corporate income tax rate, and secondly, the authority to allocate additional profits lies with the Ministry of Finance for SOEs.
For instance, the Electricity Generating Authority of Thailand Act B.E. 2511 (1968) stipulates in Article 45 that the revenue obtained in a particular fiscal year, after deducting expenses, shall be transferred as state revenue. Moreover, the rate of net profit allocation for SOEs in various sectors in the fiscal year 2022 is presented in Table 2.1.
Source: Information provided by SEPO.
2.3.7. Public procurement procedures
III.G. When SOEs engage in public procurement, whether as bidder or procurer, the procedures involved should be open, competitive, based on fair and objective selection criteria, promote supplier diversity and be safeguarded by appropriate standards of integrity and transparency, ensuring that SOEs and their potential suppliers or competitors are not subject to undue advantages or disadvantages.
Prior to 2017, SOEs adhered to a distinct public procurement regulation issued by the Office of the Prime Minister. Since 2017, procurement within SOEs must adhere to the Government Procurement and Inventory Management Act B.E. 2560 (2017), aimed at establishing a standardised framework for procurement and resource management within state entities. The objectives include promoting fair competition and transparency across all agencies, while ensuring cost-effectiveness by considering the intended use of resources. A significant aspect of this law is the inclusion of an Integrity Pact, a mutual agreement between SOEs and bidding contractors pledging to refrain from corrupt practices during procurement. This pact allows for independent observers to monitor procurement projects, serving as a check and balance mechanism (Box 2.5).
While SOEs are now required to adhere to the general framework outlined in the Public Procurement and Supplies Administration Act, B.E. 2560 (2017), they retain the ability to establish their own procurement regulations for “flexibility and efficiency in operations.” These regulations must be approved by the Public Procurement and Supplies Administration Commission, which includes representation from the Ministry of Finance. Moreover, Section 7 of the Public Procurement and Supplies Administration Act exempts SOEs engaged in commercial activities from public procurement regulations, contingent upon the issuance of a Royal Decree. Despite the enactment of the Government Procurement and Inventory Management Act B.E. 2560 (2017), the level of competition in state procurement projects has not significantly improved. In the fiscal year 2018-2019, 18% of state procurement projects still exhibited minimal differences of less than 1% between budget and contract values, suggesting potential collusion or competition issues during pre-auction stages, such as setting qualifications or classifying contractors in a way that hinders competition. (TDRI, 2023[5])
With regard to transparency issues in the state procurement process, instances arise where management authority is transferred from public entities to SOEs without competitive bids from private companies. For example, Airports of Thailand Public Company Limited (AOT) acquired management rights for six airports from the Department of Airports without a competitive bidding process, with plans for the transfer of additional airports.2 Such transfers without open competition could potentially raise concerns about fair market practices. The Department of Airports clarified that the transfer plan does not constitute bid rigging, as it does not involve the transfer of state property to the SOE. Rather, it simply assigns management responsibility to AOT without a competitive auction or solicitation of bids. Moreover, AOT is required to pay rent to the Treasury Department for the management rights. According to the information provided by SEPO, the decision for AOT to manage and administer the airports was based on strategic suitability aligned with the development of the national airport system and aims to improve efficiency of airspace utilisation and the overall airport network in Thailand.
The Integrity Pact approach was introduced in 2015 by the Anti-Corruption Organisation of Thailand (ACT) with the goal of increasing citizen engagement in exacting accountability in the process of public procurement. SEPO made an announcement on the Integrity Pact and a letter of confidentiality and no conflict of interest according to the Public-Private Partnership Act B.E. 2562 (2019). The oversight mechanism consists of three key components. Firstly, SOEs must disclose information at every stage of public procurement procedures to bidders and publish procurement awards on the Comptroller-General’s Department’s information network system for public scrutiny. Secondly, private companies involved in bids must avoid providing undue advantages to government agencies and consent to independent observers scrutinizing the process. Lastly, citizens acting as independent observers must have access to all relevant information and promptly report any irregularities observed to relevant government agencies or related entities.
The presence of observers from ACT was also requested during the bidding process for large-scale infrastructure projects. The ACT granted permission for observers to oversee and witness the bidding process and established an Integrity Pact, which involves a multi-party agreement between the procuring public body, companies interested in bidding, and a third-party organisation, such as a civil society organisation. The Integrity Pact aims to ensure that compliance is monitored throughout the procurement process and requires all parties to refrain from corrupt practices such as offering or taking bribes, or collusion between state officers and bidders. The bidder who wins the contract is required to disclose all the information necessary for ensuring the transparency and accountability.
However, in recent years the effectiveness of the Integrity Pact mechanism has decreased. In 2021, the cabinet decided to expand the use of the Integrity Pact to PPPs and adapt the essence of the Integrity Pact as SEPO saw appropriate. This resulted in alterations in the Integrity Pact framework; namely, independent observers must not necessarily be from ACT and observers being present only during the bidding process. These alterations leave room for corruption; for instance, in recent years, the procurement processes of projects within SOEs have encountered undue favouritism and protections for individuals with influence. Reportedly, there have also been instances of altering project operations beyond the defined scope outlined in the Terms of Reference (TOR), which results in benefits exceeding initial projects by 30-40%. No action was taken to address these issues when ACT brought this to the attention of corruption-related agencies and other relevant bodies.
Source: TDRI; Prateeppornnarong, (2021[6]), Holding Public Procurement Socially Accountable: The Adoption of the Integrity Pact Approach and the Role of the Independent Observers, National Institute of Development Administration, https://doi.org/10.1080/10999922.2021.1958563.
III.H. When SOEs’ economic activities affect trade, investment or competition they should conduct all business, other than carrying out public service obligations, in accordance with commercial considerations. They should conduct all business according to responsible business conduct and high standards of integrity.
Issues concerning SOEs’ economic activities’ impact on trade, investment or competition
The corporate governance framework for SOEs in Thailand, particularly concerning their economic activities' impact on trade, investment, and competition, presents a nuanced picture. As noted earlier, SOEs benefit from broad exemptions under Section 4 of the Trade Competition Act B.E. 2560, particularly in sectors deemed crucial for national security or public utilities. While these exemptions support SOEs in fulfilling essential public service obligations, they can also create competitive advantages not afforded to private entities, potentially market-distorting. Box 2.4 further describes the challenges of identifying and separating public service obligations from economic activities in the transportation and electricity sectors.
Sector-specific regulations often govern SOEs, ensuring tailored oversight and standards that align with sector-specific needs while also raising concerns about competitive neutrality. For example, differential tax treatment under laws like the State Fiscal and Financial Disciplines Act B.E. 2561 grants SOEs tax exemptions, reducing SOE operational costs compared to private companies.
Responsible business conduct and integrity
Thailand has established a framework through constitutional provisions and legislative acts to ensure SOEs conduct their business activities with integrity and responsibility. In accordance with the Constitution of Thailand adopted in 2017, the government is mandated to establish rigorous ethical standards. Section 76 of the Constitution stipulates that ethical standards must be formulated for state agencies, ensuring they uphold integrity levels that exceed minimum ethical requirements. Section 6(2) of the Ethical Standard Act B.E. 2562 reinforces this mandate by assigning the SEPO the responsibility to promulgate a Code of Ethics governing executives and employees of SOEs.
Following the enactment of the Ethical Standard Act, SEPO introduced the Code of Ethics, setting forth stringent criteria to guide the conduct of SOE personnel. The 2019 Principles and Guidelines further underscore the commitment of SOEs to uphold ethical and responsible business practices. For instance, Section 4.6 emphasises the importance of fair competition, advocating against anti-competitive behaviours and promoting ethical conduct in business operations.
Where SOEs are listed, or otherwise include non-state investors among their owners, the state and the enterprises should recognise the rights of all shareholders, including minority and foreign shareholders, and ensure shareholders’ equitable treatment and equal access to corporate information.
2.4.1. Ensuring equitable treatment of shareholders
IV.A. The state should strive toward full implementation of the G20/OECD Principles of Corporate Governance when it is not the sole owner of SOEs, and of all relevant sections when it is the sole owner of SOEs. Concerning shareholder protection this includes:
IV.A.1. The state and SOEs should ensure that all shareholders are treated equitably.
The Securities and Exchange Act B.E. 2535 (1992) specifies that non-state shareholders must have the same legal rights as shareholders in other companies and that all shareholders must be treated equitably. Furthermore, according to authorities, the government does not have priority shares such as “golden shares” or any other mechanisms that allows the state to exercise control beyond its ownership stake.
Public Companies Limited Act B.E. 2535 (1992) lists provisions related to the equitable treatment of shareholders. The Act sets out the regulatory framework for public limited companies and protects shareholder rights through granting them voting power, participation in general meetings, and access to relevant information, enabling them to hold the board accountable.
Moreover, the Principle 8 of Corporate Governance Code for Listed Companies 2017 includes provisions related to equitable treatment of shareholders, noting that the boards should ensure that shareholders have the opportunity to participate effectively in decision-making involving “significant corporate matters”. Notably, section 8.1.2. outlines that the boards of should “support participation of all shareholders through reasonable measures” including through (1) establishing criteria that allow minority shareholders to propose agenda items for shareholders’ meetings and consider shareholders’ proposals to be included in the agenda; and (2) establishing criteria for minority shareholders to nominate persons to serve as directors for the company. The Code also emphasises that the board should ensure that shareholders’ meetings are held as scheduled and conducted properly and to ensure inclusive and equitable treatment of all shareholders.
Regulations related to the equitable treatment of shareholders are also included in the 2019 Principles and Guidelines which encourage SOEs across all legal forms to adhere. The document outlines the rights of shareholders of SOEs, the most notable of which include that: (1) each shareholder is considered the owner of the SOE and has fundamental rights equally in all respects as stipulated by law; (2) shareholders have the right to appoint a board of directors to represent them and participate in decision-making on important matters by voting meetings; and (3) shareholders should have the right to access accurate, sufficient, and timely information for decision-making.
According to the 2019 Principles and Guidelines, boards of directors should facilitate equal opportunities for shareholders to exercise their rights, including through establishing criteria for shareholders to propose additional agenda items for meetings and disclosing these criteria in advance. This includes facilitating convenience for shareholders to express their opinions and ask questions during the meeting, and that appropriate and sufficient time should be allocated towards this.
Finally, in accordance with Section 74 of the Constitution, officials and employees of SOEs are obligated to safeguard the public interest and adhere to principles of good public governance. Moreover, the Constitution establishes that an SOE possesses legal status and is accountable for the actions or negligence of its officials or employees. Consequently, individuals, businesses, and communities retain the right to initiate legal proceedings against SOEs and to lodge complaints with the ombudsman (OECD, 2020[2]). According to information provided by Thai authorities, if any minority shareholders consider that their rights have been violated in accordance with the provisions outlined above, they have the freedom to take legal action.
IV.A.2. [Concerning shareholder protection this includes:] SOEs should observe a high degree of transparency, including equal and simultaneous disclosure of up-to-date information, towards all shareholders.
Several Thai laws include provisions and mechanisms to ensure transparency. These provisions can be observed in the 2019 Principles and Guidelines and the 2019 SOE Act.
The 2019 Principles and Guidelines stipulate that, in an effort to ensure transparency, the boards of directors should support the presence of independent individuals as vote counters or scrutineers during shareholder meetings, and disclose voting results for each agenda item, indicating approvals, disapprovals, and abstentions, making this information known to shareholders in meeting reports. Furthermore, the document recommends that the boards of directors consider disclosing information in both Thai and English through various channels, such as the company website, and ensure that the information is up-to-date and presented in a fair manner.
Transparency and equal disclosure of information is also necessitated by the 2019 SOE Act. According to Section I on policy and supervision, SOEs are “encouraged to operate with efficiency and transparency under the principle of good governance and with a continuous performance assessment Section V of the Act covers good corporate governance of SOEs, mandating that they “operate with responsibility, transparency and that they achieve their objectives.”
The Public Limited Companies Act B.E. 2535 (1992), which sets out the regulatory framework for public limited companies, also includes requirements for financial reporting, disclosure, and shareholder rights. Concerning SOEs, the Act becomes applicable when SOEs are transformed into public companies or subsidiaries. The Act prioritises transparency through mandatory financial reporting and audited statements, ensuring an accurate representation of the company’s financial situation. Related party transactions must also be disclosed to prevent potential conflicts of interest. Concerning the rights of shareholders, the Act enforces an annual general meeting, where shareholders can discuss company performance, approve financial reports, and elect directors. Non-compliance is met with penalties, ensuring shareholder interests are protected and encouraging responsible corporate behaviour.
IV.A.3. [Concerning shareholder protection this includes:] SOEs should develop an active policy of communication and consultation with all shareholders.
In Thailand, standards for communication and consultation are addressed by the 2019 Principles and Guidelines. The boards of directors of each SOE are required to organise regular shareholder meetings and address important issues. To that effect, the boards of directors are also required to send notices of shareholders meetings with “accurate, complete, and sufficient information for shareholders to exercise their rights” and “shareholders should receive this information within a reasonable time frame to allow for adequate consideration before attending shareholder meetings.” It is the responsibility of the boards of directors to ensure that addition of the meeting agenda items that have not been notified in advance should not be supported, especially for “critical agenda items that require shareholder to spend time studying information before making final decisions,” thereby requiring that shareholders be adequately prepared for meetings. The document encourages boards of directors to promote the use of technology in shareholder meetings to ensure “efficient, accurate, precise, and verifiable proceedings.”
Thailand’s Corporate Governance Code for Listed Companies (2017) includes engagement and communication with shareholders as one of its principles. According to the Code, the boards have the responsibility to ensure that shareholders have the opportunity to participate effectively in decision-making involving significant corporate matters. They should also ensure that the shareholders’ meetings are held as scheduled and are conducted properly with transparency and efficiency. Additionally, they should ensure accurate, timely and complete disclosure of shareholder resolutions and preparation of meeting minutes. Importantly, because the Code applies only to listed companies, only 3 out of 52 Thai SOEs follow the Code.
IV.A.4. [Concerning shareholder protection this includes:] The participation and exercise of voting and other rights of all, including minority, shareholders in shareholder meetings should be facilitated so they can take part in fundamental corporate decisions such as board election. General shareholder meetings allowing for remote shareholder participation should be permitted by jurisdictions as a means to facilitate and reduce the costs to shareholders of participation and engagement. Such meetings should be conducted in a manner that ensures equal access to information and opportunities for participation of all shareholders.
The Thai regulatory framework allows for the participation of minority shareholders in shareholder meetings, including remote participation. However, the effectiveness of these provisions in practice be further evaluated.
According to Thai authorities, minority and non-state shareholders are fully entitled to participate in voting at the general meetings of SOEs. Section 2 of the 2019 Principles and Guidelines on the Rights and Equality of the shareholder mandate that all shareholders must enjoy equal rights under the law, recognising all shareholders as owners of the enterprise. It further stipulates that SOE boards should promote the use of technology in shareholders’ meetings to ensure the swift and efficient proceedings, and to ensure that they are accurate, precise, and verifiable.
The Principles and Guidelines also dictate that the boards of directors should facilitate shareholder engagement during meetings, ensuring that shareholders have the opportunity to express their opinions and pose questions in accordance with the meeting’s agenda. It is imperative that shareholders exercise their fundamental rights as owners, including participating in critical decision-making processes such as the election of the board of directors. The boards are further obligated to uphold and prioritise these rights, treating all shareholders equitably.
Additionally, the Public Limited Companies Act, B.E. 2535 (1992), reinforces these principles by providing mechanisms to protect minority shareholders, especially in fundamental corporate decisions. The Act includes punitive measures for violations affecting the rights of minority shareholders. Specifically, Section 129(4) of the Act authorises the Registrar – the Director General of the Commercial Registration Department or a designated delegate – to investigate business operations if there is reasonable suspicion of actions disadvantaging minority shareholders.
IV.A.5. [Concerning shareholder protection this includes:] Transactions between the state and SOEs, and between SOEs, should take place on market consistent terms.
In Thailand, there are no specific laws ensuring that transactions between the state and SOEs, as well as between SOEs, must take place on market consistent terms. Nonetheless, the Securities and Exchange Act, B.E. 2535 (1992) includes provisions against market manipulation and insider trading.
Section 82 of the Act specifies restrictions against false statements and failure to disclose essential facts. The Act includes provision for penalties for other similar acts that could unfairly influence the market. The Act forbids insider trading, which prevents the exploitation of non-public information to obtain unfair benefits, providing a level playing field for all investors. It also puts rules on related party transactions to avoid conflicts of interest and maintain fairness in transactions between the firm and its directors or large shareholders.
2.4.2. Adherence to corporate governance code
IV.B. National corporate governance codes should be adhered to by all listed SOEs, and to the extent possible unlisted SOEs.
In Thailand, only listed SOEs follow the Thailand Corporate Governance Code for Listed Companies (2017), however this is not required of unlisted SOEs. The principal guiding document on corporate governance for SOEs (listed or not) is the 2019 Principles and Guidelines. The document outlines corporate governance provisions, including the role of the government, rights of shareholders, committee guidelines, role of stakeholders, guidelines for sustainability and innovation, data transparency, risk management and internal control, ethics, and performance monitoring scheme.
2.4.3. Disclosure of public policy objectives
IV.C. Where SOEs are required to pursue public policy objectives that may have a material effect on the enterprise’s performance, results and viability, adequate information about these should be available to the public and non-state shareholders at all times.
The current legislative framework does not mandate specific requirements for SOEs to disclose information related to public policy objectives to non-state shareholders. The existing legislation focuses primarily on financial reporting and general disclosure requirements but does not extend explicitly to the transparency of public policy objectives.
According to Section 40 of the 2019 SOE Act, SOEs are obligated to prepare an operational report and submit this along with their annual financial statements and auditor’s report to the SEPO within 150 days following the end of the financial year. However, this requirement does not specifically address the need for disclosing information on how public policy objectives influence the operational decisions, performance, results, or viability of SOEs.
2.4.4. Joint ventures and public private partnership
IV.D. When SOEs engage in co-operative projects such as joint ventures and public-private partnerships, the contracting parties should ensure that contractual rights and obligations are upheld and that disputes are addressed in a timely and objective manner.
SOEs in Thailand can engage in contractual relationship with private parties under the Public Private Partnerships Act B.E. 2562 (2019) (the “PPPs Act”). Among stipulations listed in Section 6 of the Act it is noted that partnership between the State and private parties must be made in a fair manner; that transparency and accountability in the preparation and operation of partnership projects and decision-making processes concerned must be observed; and that rights and benefits of those receiving services from partnership projects must be ensured.
According to the PPPs Act, there must be a Supervisory Committee for each PPP project, the main role of which is to supervise and monitor performance of that project according to the PPP contract. In cases where disputes arise from any party to the PPP contract, the Supervisory Committee has the authority to consider and make suggestions and directions for resolving problems to the project owner. In cases where a PPPs contract requires any amendment, the project owner must propose reasons and issues for the amendment, as well as its potential impacts, to the Supervisory Committee, the Office of the Attorney-General, the line minister, the PPP Commission and the Cabinet for consideration before making an approval.
Source: OECD calculations based on data provided by SEPO
State-owned enterprises should observe high standards of transparency, accountability and integrity and be subject to the same high-quality accounting, disclosure, compliance and auditing standards as listed companies.
2.5.1. Disclosure standards and practices
V.A. SOEs should report and disclose all material matters regarding the enterprise, in line with high quality, internationally recognised accounting and disclosure standards, which may include areas of significant concern for the state as an owner and the general public. Channels for disseminating information should provide for free and timely public access. With due regard to enterprise capacity and size, examples of such information include:
Legal framework
Section 56 of the Constitution, Section I of the Public Information Act, B.E. 2540 (1997) and 2019 SOE Act collectively mandate that SOEs must provide public access to information, except where such disclosure could compromise public security, safety, personal data, or protected interests. Pursuant to Section 40 of the 2019 SOE Act, SOEs must prepare annual reports on operations, alongside annual financial statements and auditor’s reports, within 150 days after the end of the financial year, submitting these documents to the SEPO. They are also required to adhere to the Guidelines for Disclosing Information of SOEs, as stipulated in the SEPO document number GorKor 0805.1/W123, dated August 7, B.E. 2566 (2023).
Financial reporting standards for SOEs are outlined in the State Fiscal and Financial Disciplines Act, B.E.2561 (2018), and the Accounting Act, B.E. 2543 (2000). Section 68 of the State Fiscal and Financial Disciplines Act specifies that SOEs must prepare comprehensive accounts and fiscal reports in accordance with “generally recognised accounting standards”. The 2011 Cabinet decision extends compliance requirements for non-listed SOEs to Thai Financial Reporting Standards (TFRS), aligned with International Financial Reporting Standards (IFRS). Non-compliance with disclosure obligations can impact SOE performance evaluations.
The State Fiscal and Financial Disciplines Act, B.E.2561 (2018) further mandates that SOEs submit annual financial statements and audit reports to the State Audit Office, Ministry of Finance, Budget Bureau and their respective line ministries. The Ministry of Finance establishes the standards and regulations governing internal audit and risk management within SOEs. The Public Limited Company Act, B.E. 2535 (1992) extends this requirement to the provision of balance sheets, audit reports, and annual reports to shareholders.
Voluntary guidelines
The 2019 Principles and Guidelines assign SOE boards of directors the responsibility to oversee the establishment and disclosure of both financial and non-financial information, ensuring compliance with legal standards.
The Corporate Governance Code for Listed Companies, B.E.2560 (2017), encourages SOEs to disclose financial statements and reports on financial and non-financial performance across current and previous years. The Code mandates that companies’ websites must disclose essential information including vision, values, business nature, board composition, financial statements, reports, shareholding structure, major shareholders, group structure, government policies, codes of conduct, and contact details for companies and investor relations.
Despite these regulatory measures, compliance remains uneven and often lacks rigorous enforcement mechanisms. Reporting for non-listed SOEs' adherence to disclosure standards is currently limited to quarterly updates to SEPO on the progress of implementing the five-year SOE development plan. This fragmented approach to disclosure obligations across various legislative documents complicates enforcement and monitoring, posing administrative challenges and potentially obscuring the full impact of SOEs' public service obligations on their financial and operational performance.
V.A.1. [With due regard to enterprise capacity and size, examples of such information include:] A clear statement to the public of enterprise objectives and their fulfilment, including any mandate expected by the state ownership entity.
The information on SOE objectives, including those mandated by the state may be found in a combination of disclosure made by the SOEs themselves, as well as relevant government documents. Research by the assessment team found that SOEs tend to include information on their mission and values on their company websites and/or in their annual reports, which are also made available on their websites. For instance, the websites of PTT, GSB, EGAT and Airports Authority of Thailand include the description of the companies’ strategic vision and mission. These SOEs also publish their annual reports, which include information on the companies’ operational direction and policies and provide an update on the fulfilment of key objectives.
As for relevant government documents, the objectives for SOEs are delineated in the State Enterprise Development Plan 2023-2027, officially published in the Government Gazette on November 29, 2022. This Plan is mandated by the 2019 SOE Act to provide a strategic framework every five years, setting forth specific goals, policies, and direction for the development of SOEs in alignment with the directive principles of state policies. It encompasses the following goals of SOE development: enhancing national security; boosting national competitiveness; strengthening human capital; fostering social cohesion and justice; promoting eco-friendly growth; and rebalancing and developing public sector.
This strategic framework is closely integrated the National Development Strategy (2018-2037), the Master Plan Under National Strategy B.E. 2561-2580 (2018-2037), and the 13th National Economic and Social Development Plan.
Moreover, the Corporate Governance Code for Listed Companies, B.E. 2560 (2017), mandates that SOEs disclose their objectives and values on their websites. This transparency initiative, aimed at enhancing public accountability, is reinforced by the 2019 Principles and Guidelines.
V.A.2. [With due regard to enterprise capacity and size, examples of such information include:] Enterprise financial and operating results, including where relevant the costs and funding arrangements pertaining to public service obligations.
As noted in the previous section, SOEs must adhere to financial and non-financial disclosure requirements that meet internationally recognised standards, such as IFRS, along with a number of additional disclosure obligations.
In particular, SOEs with public service obligations are mandated to disclose information on government subsidies and financial statements in their annual reports and on their websites, as stipulated by Section 29 of the State Fiscal and Financial Disciplines Act, B.E. 2561 (2018), and the Office of the Prime Minister’s regulation on Public Service Obligations of State Enterprises, B.E. 2554 (2011).
Nonetheless, sporadic compliance and inconsistencies in accounting and reporting standards across different SOEs complicate the assessment of whether the costs associated with public service obligations are as clearly defined and publicly disclosed as required.
V.A.3. [With due regard to enterprise capacity and size, examples of such information include:] The governance, ownership, and legal and voting structure of the enterprise or group as well as any significant subsidiaries, including the content of any corporate governance code or policy and implementation processes;
The 2019 Principles and Guidelines specify that SOEs may refer to the Corporate Governance Code for Listed Companies 2017, which requires boards of directors to formulate a board charter or governance policies outlining their responsibilities and to review the document annually. However, it does not specify that this document should be disclosed to the public. The Corporate Governance Code for Listed Companies further specifies that the minimum information disclosed on company websites should include the nature of the company’s business and operations, the list of board of directors and executives, and the direct and indirect shareholder structure. Additionally, the information disclosed on company websites should encompass:
1. The company’s group structure, including subsidiaries, affiliates, joint ventures, and special purpose enterprises/vehicles;
2. Direct and indirect major shareholders holding at least five percent of paid-in capital with voting rights;
3. Direct and indirect shareholdings in the company held by directors, major shareholders, and key executives;
4. Invitation letters to the shareholders’ ordinary and extraordinary meetings;
5. The company’s regulations, memorandum, and articles of association; and
6. The company’s corporate governance policy and related policies.
While the 2019 Principles and Guidelines encourage SOEs to refer to the Corporate Governance Code for Listed Companies, adherence is voluntary and there is no specified requirement that the disclosure and transparency practices for non-listed SOEs mirror those of listed entities on the SET. This lack of clarity creates opportunities for loopholes in disclosure and transparency practices by SOEs.
For example, the website of Airports of Thailand Public Co., Ltd. includes information on shareholding and shareholding meetings. The websites of PTT Group and Government Savings Bank (GSB) include information about the company structure but lack details on shareholdings held by directors in the company, corporate governance policies, invitation letters to the shareholders’ meetings and the company’s regulations, memorandum, and articles of association. Similarly, the website of National Telecom Public Company Limited provides information about the organisational structure, company mission, and list of directors, but does not meet other disclosure criteria.
V.A.4. [With due regard to enterprise capacity and size, examples of such information include:] The remuneration of board members and key executives.
There is no requirement for the disclosure of remuneration of SOE board members or key executives in existing disclosure frameworks applicable to SOEs. However, according to SEPO, SOEs typically disclose directors’ remuneration in their annual reports submitted to SEPO, but often do not disclose the remuneration of key executives. While this information, could not be fully verified, it is notable that major Thai SOEs like PTT Public Co., Ltd. and the Government Savings Bank (GSB) publish their annual reports online, which include sections dedicated to executive remuneration.
Despite there being no explicit requirements for the disclosure of remuneration of board members and key executives, Section 33(5) of the 2019 SOE Act mandates the SEPC to establish guidelines on good corporate governance for SOEs, including criteria for directors’ remuneration. For SOEs listed on the SET, Principle 3.4 of the Corporate Governance Code for Listed Companies, B.E. 2560 (2017) stipulates that the board must propose director renumeration to shareholders’ meetings ensuring it aligns with their roles and responsibilities, and performance, and incentivises both short- term and long-term company objectives. Moreover, Section 6 of the 2019 Principles and Guidelines emphasises that boards of directors should ensure accurate, reliable, complete and timely disclosure of critical information concerning SOEs and their stakeholders.
V.A.5. [With due regard to enterprise capacity and size, examples of such information include:] Composition of the board and its members, including board member qualifications, selection process, board diversity policies, roles on other company boards or in the state and, if applicable, classification as independent.
SOEs are not explicitly required to disclose the composition of their boards of directors, including member qualifications, selection processes, board diversity policies, roles on other boards, and classification as independent. Disclosure of this information by SOEs is sporadic and subject to the decision of SOEs. For example:
The Airports of Thailand Public Co., Ltd. website lists board members and their completion of training courses.
MCOT, NT and PTT websites include lists of directors with their education qualifications. MCOT and PTT specify which directors are independent, but this information is absent from the Airports of Thailand and NT websites.
The Government Savings Bank website provides information on the qualifications of its directors and specifies which directors are independent.
The Bangkok Mass Transit Authority website does not disclose information about the qualifications or training of its directors.
V.A.6. [With due regard to enterprise capacity and size, examples of such information include:] Any material foreseeable risk factors and measures taken to manage such risks.
Insofar as Thai SOEs are in compliance with requirements to Thai Financial Reporting Standards (TFRS), aligned with International Financial Reporting Standards (IFRS), they are expected to report on material risk factors as per IFRS standard reporting practices. According to the 2019 Principles and Guidelines, the boards of directors of SOEs must possess knowledge and understanding of significant risks in SOE operations and are required to formulate a risk management policy, ensuring that it is aligned with the mission and objectives of the SOE. The boards are also required to review these risk management policies at least once per year. This requirement is also reflected in Principle 6.1 of the Corporate Governance Code for Listed Companies, which states that boards ensure companies have “effective and appropriate” risk management and internal control systems.
V.A.7. [With due regard to enterprise capacity and size, examples of such information include:] Any direct or indirect financial assistance, including guarantees, received from the state and commitments made on behalf of the SOE, including contractual commitments and liabilities arising from public-private partnerships or participation in joint ventures.
Thailand’s ten largest SOEs by revenue generally provide some level of financial disclosure on their websites. PTT Public Co., Ltd., Government Savings Bank (GSB), and EGAT provide comprehensive financial statements and annual reports that include detailed information on various commitments and financial assistance received from the state. Provincial Electricity Authority (PEA), Metropolitan Electricity Authority (MEA), Government Lottery Office, National Telecom Public Co., Ltd. (NT), Bank for Agriculture and Agricultural Cooperatives (BAAC), Government Housing Bank (GHB), and Tobacco Authority of Thailand also maintain sections on their websites dedicated to financial reports, typically including relevant financial disclosures. However, while they generally comply with disclosure requirements, the detail and accessibility of information on state guarantees and specific PPP commitments vary, and these details are not always explicitly outlined.
Furthermore, it is notable that some important SOEs do not provide information on the financial assistance received from the government. For example, Bangkok Mass Transit Authority (BMTA), which has received substantial financial assistance from the government, does not publish its annual reports and does not provide information about financial subsidies on its website.
V.A.8. [With due regard to enterprise capacity and size, examples of such information include:] Any material transactions with the state and other related entities.
In Thailand, SOEs of all legal forms are required to disclose material transactions with the state and related entities. This requirement is aligned with international standards, such as IAS 24, which mandates the disclosure of related party transactions to ensure transparency and accountability.
The 2019 Principles and Guidelines also specify that board of directors should ensure “accurate, sufficient, reliable, consistent, and legally compliant disclosure of crucial information’” aligning with financial reporting standards.
For SOEs listed on the stock exchange, regulations exist under the Announcement of the Board of Governors of the Stock Exchange of Thailand: Disclosure of Information and Operations of Listed Companies on Connected Transaction, B.E. 2546 (2003) Furthermore, the Corporate Governance Code for Listed Companies 2017 stipulates that the boards of directors of listed SOEs should “prevent the inappropriate use of corporate assets, information, and opportunities, including inappropriate transactions with related parties”. Furthermore, the Code mandates that boards implement sufficient systems and controls to ensure compliance with applicable laws and standards, including those governing related party transactions.
These regulations aim to disclose connected transactions and establish mechanisms to prevent abusive related party transactions. However, the extent to which SOEs comply with these disclosure requirements and make these disclosures available to the public vary among SOEs. This inconsistency can sometimes make it challenging to assess the full scope of financial interactions and obligations involving SOEs.
V.A.9. [With due regard to enterprise capacity and size, examples of such information include:] Information on material liabilities such as debt contracts, including the risk of non-compliance with covenants.
SOEs are required to disclose financial information, including details on material liabilities such as debt contracts and the risk of non-compliance with covenants, as per the standards and regulations governing their financial reporting. Moreover, Section 6 of the 2019 Principles and Guidelines specifies that boards should ensure accurate and reliable disclosure of crucial information following financial reporting standards and the Corporate Governance Code for Listed Companies 2017, to which non-listed SOEs are also encouraged to adhere, stipulates minimum information that should be disclosed on the companies’ websites.
The extent and detail of these disclosures can vary among different SOEs. While some enterprises, like PTT Public Co., Ltd., EGAT, and the Government Savings Bank (GSB), provide detailed financial statements and annual reports that include information on various commitments and state assistance, others may not explicitly outline such details on their websites. This inconsistency can make it challenging to assess the full scope of financial risks and liabilities associated with these enterprises.
V.A.10. [With due regard to enterprise capacity and size, examples of such information include:] Sustainability-related information.
According to Section 5 of the 2019 Principles and Guidelines, boards are responsible for ensuring sustainability reporting as appropriate and aligned with nationally or internationally recognised reporting frameworks. SOEs may refer to the Corporate Governance Code for Listed Companies 2017, which mandates that boards ensure appropriate sustainability reporting. The board is also tasked with ensuring that the disclosed information is “significant and demonstrates practices that contribute to the company’s sustainable value”. Reporting on sustainability-related information by SOEs is assessed in greater detail in Section 2.7 on SOEs and sustainability (Box 2.9).
2.5.2. Risk management and audit functions
V.B. SOEs should have risk management systems to identify, manage, control and report on risks. Risk management systems should be treated as integral to the achievement of objectives and thus embody a coherent and comprehensive set of internal controls, ethics and compliance programmes or measures.
SOEs are required to adhere to the Handbook for Risk Management and Internal Control based on the Criteria and Guidelines for Risk Management and Internal Control B.E. 2555 (2012), the Handbook for Internal Audit for State Enterprises, Revised Edition B.E. 2555 (2012), and the Regulation of the Ministry of Finance on Audit Committees and Internal Audit of State Enterprises B.E. 2555 (2012). Section 7 of the 2019 Principles and Guidelines emphasises that SOE boards must possess knowledge and understanding of significant risks, formulate an annual risk management policy, and establish an ongoing risk management system aligned with the SOEs’ missions, objectives, strategies, and risks.
Furthermore, the 2019 Principles and Guidelines specify that SOEs should establish a dedicated risk management committee and assign responsible units to evaluate and supervise risks. However, there is a lack of monitoring and enforcement of compliance with these requirements in SOEs.
V.C. SOEs should establish an internal audit function that has the capacity, autonomy and professionalism needed to duly fulfil its function. It should be monitored by and report directly to the board and to the audit committee or equivalent corporate organ where existing.
Under the State Fiscal and Financial Disciplines Act, B.E. 2561 (2018), SOEs are required to establish an Internal Audit function. SOEs are also required to form audit committees composed of a chairperson and between two and four committee members. These requirements operate in alignment with the Corporate Governance Code for Listed Companies B.E. 2560 (2017).
Members of the audit committee must be board members and must not possess prohibited characteristics. Specifically, they must not hold any position as a civil servant, employee, consultant, or recipient of salary, wages, or compensation. Additionally, they must refrain from involvement in the administration of government agencies.
The responsibilities of these committees include evaluating the effectiveness and efficiency of internal control processes, oversight procedures, and risk management practices. Furthermore, the audit committee is entrusted with auditing and ensuring the financial accuracy of SOEs. It also verifies that SOEs’ operations adhere to laws, regulations, rules, working procedures, Cabinet resolutions, announcements, and relevant orders.
The committee is obligated to disclose its annual performance report and auditor remuneration details in SOEs’ annual reports, among other duties. The Internal Audit function within SOEs reports directly to the Audit Committee. More details on the composition and mandate of the audit committees can be found in the Section 2.6.8.
V.D. An annual external audit should be conducted by an independent, competent and qualified auditor in accordance with the internationally recognised auditing, ethical and independence standards in order to provide reasonable assurance to the board and shareholders on whether the SOEs’ financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework. Specific state and audit control procedures do not substitute for an independent external audit.
SOEs in Thailand are obligated to adhere to universally recognised accounting standards and submit annual fiscal reports to the State Audit Office (SAO) and the Ministry of Finance. They are also required to provide audit reports to the SAO, Ministry of Finance, Budget Bureau, and their respective line ministries. The Ministry of Finance establishes standards and regulations governing internal audit and risk management within SOEs.
While SOEs undergo audits by the SAO, for unlisted SOEs there is no mandatory requirement for an annual external audit conducted by independent auditors. The State Fiscal and Financial Disciplines Act, B.E. 2561 (2018), allows SAO to authorise external auditors, but in practice, not all SOEs undergo external independent audits. When conducted, these audits typically focus on financial aspects and must adhere to Thai Standards on Auditing (TSA), which align with International Standards on Auditing (ISA). Compliance and performance audits of SOEs are exclusively within the purview of the SAO.
The SAO is constitutionally independent, reporting directly to the Parliament of Thailand and submitting annual reports. While the SAO investigates financial anomalies, corruption matters are deferred to the Thai Anti-Corruption Commission under the State Audit Act.
Despite these measures, there is no specific disclosure of SOE audit results by the SAO. The Comptroller General’s Department (CGD) of the Ministry of Finance sets auditing standards and evaluates internal audit quality in SOEs every five years, drawing from international practices like the Institute of Internal Auditors (IIA).
According to the 2019 Principles and Guidelines, SOE boards are responsible for ensuring robust systems for accounting, financial reporting, risk management, internal controls, and internal auditing. The Corporate Governance Code for Listed Companies 2017 also includes guidance for boards of directors (and audit committee) to play a role in the review and selection of the independent auditor for shareholder approval.
Source: OECD Secretariat based on information from Thai authorities.
2.5.3. Aggregate annual reporting on SOEs
V.E. The ownership entity should develop consistent reporting on SOEs and publish annually an aggregate report on SOEs, on material issues, including information related to sustainability, governance aspects, as well as on the achievement of public policy objectives. The information should give a full, clear and reliable picture of the SOE portfolio and be high quality, comparable, concise and accessible publicly, including through digital communications.
Since 2013, SEPO has been publishing annual evaluations of SOEs on its website, as mandated by the 2019 SOE Act. The evaluations are based on general principles approved by the SEPC and utilise the State Enterprise Assessment Model (SE-AM), implemented since fiscal year 2020. The reports comprehensively cover financial and non-financial aspects of SOE performance, presenting data in both quantitative and qualitative formats.
Specifically, the reports detail SOEs' financial performance metrics such as revenue generation and sectors with highest net profits, alongside non-financial indicators. They provide insights into the status and performance of SOEs across major sectors like energy, finance, public utilities, and transport, accompanied by recommendations derived from the assessment framework. For instance, the 2022 report addressed challenges posed by technological advancements following the COVID-19 pandemic, emphasising the need for SOEs to enhance risk and crisis management protocols and adopt robust data management systems for performance monitoring and scenario forecasting. However, the current reports do not include information on dividends, equity-to-asset ratios, or the achievement of public policy objectives.
The state should ensure that boards of SOEs have the necessary authority, competencies and objectivity to carry out their functions of strategic guidance, risk management oversight and monitoring of management. They should act with and promote integrity, and be held accountable for their actions.
2.6.1. Board mandate and responsibility for enterprise performance
VI.A. The boards of SOEs should be assigned a clear mandate and ultimate responsibility for the enterprise’s performance. The role and duties of SOE boards should be clearly defined in legislation, preferably according to company law. Board members should act on a fully informed basis, in good faith, with due diligence and care, and act in the best interest of the enterprise and the shareholders, taking into account the interests of stakeholders.
Section 3 of the 2019 Principles and Guidelines mandates that the board of directors perform their duties with “fiduciary responsibility” and ensure that all directors, management, and employees perform their roles with accountability, diligence, and loyalty to the organisation in order to maximise benefits. It outlines SOE board responsibilities as follows: (1) establishing the organisational vision, goals, and shared values in alignment with the state missions and policies; (2) formulating strategic plans, operational policies, annual plans, and managing critical resources for effective achievement of objectives; (3) ensuring robust accounting systems, financial reporting, risk management, internal control frameworks, and adequate internal audit mechanisms; and (4) supervising, evaluating, and overseeing performance reporting. The Corporate Governance Code for Listed Companies B.E. 2560 (2017) to which unlisted SOEs are also encouraged to adhere, emphasises the board’s understanding of relevant laws, standards, risks, and the business landscape. It requires the board to create a charter outlining their roles and responsibilities, serving as a guiding document subject to annual review. The board should understand its scope of authority, delegate management powers to the executive team, and actively oversee the delegated responsibilities to ensure proper execution. The distribution of responsibilities between the board and management can be outlined as follows:
Establishing and maintaining explicit business objectives and goals, while fostering an organisational ethos firmly grounded in ethical behaviour, is paramount. This involves effectively selecting, developing, defining, and evaluating senior executive compensation, as well as formulating a motivational remuneration structure to ensure that employee practices align with the organisation's fundamental goals and objectives.
Collaboration with management involves managing risks and internal controls, strategic planning, defining and evaluating objectives, strategies, and annual plans. It also involves allocating suitable mandates in accordance with the management’s obligations. This encompasses establishing policies regarding information technology, budgetary matters, resource allocation, and development.
Refraining from intervening in critical matters such as procurement, hiring, daily management decisions, and ensuring reliable financial and non-financial disclosures, effective monitoring and assessment of operations.
Formulating governance policies for subsidiary companies, covering board appointments, managerial and control positions. This includes establishing internal controls, delineating duties, and disclosing financial positions, related parties, asset acquisitions or divestitures, significant transactions, capital changes, and subsidiary closures. Maintaining confidentiality and outlining the chairman's supervisory responsibilities are critical. Board must also nurture an ethical culture, foster constructive dialogue, promote impartial assessments, and cultivate positive rapport among executive and non-executive board members, as well as with management.
Principle 1.3 of the Corporate Governance Code further specifies that the boards of SOEs should ensure that “all directors and executives perform their responsibilities in compliance with their fiduciary duties, and that the company operates in accordance with applicable law and standards.” Further, the Securities and Exchange Act B.E. 2535 (1992) provides guidelines related to fiduciary duties (See Box 2.6).
Additionally, the following laws define qualifications, responsibilities, and prohibited actions concerning personnel within SOEs:
The Standard Qualifications of State Enterprise Directors and Officials Act, B.E. 2518 (1975), delineates the eligibility criteria and prohibited traits for directors, executives, and employees within these enterprises. It also sets a maximum cap on the number of directorships an individual can hold in different SOEs (up to three) and outlines the method for appointing top executives through the creation of a "Directors' Pool."
The Offences of Officials in State Organisations or Agencies Act, B.E. 2502 (1959) outlines offenses related to corruption, abuse of authority, or unauthorised actions for personal benefit within state organisations.
The Act on Tortious Liability of Officials, B.E. 2539 (1996) mandates that state entities are responsible for compensating individuals harmed by the actions of their officials while performing their official duties.
The Act on Prevention and Suppression of Corruption B.E. 2561 (2018) details effective measures and mechanisms for auditing assets, investigating, and adjudicating corruption offenses committed by officials.
The Ethical Standards Act B.E. 2562 (2019) requires government entities and SOEs to adhere to ethical standards. It aims to ensure that state officials conduct themselves ethically and uphold principles while executing their duties.
Section 89/7. In conducting the business of the company, a director and an executive shall perform their duty with responsibility, due care and loyalty, and shall comply with all laws, objectives, the articles of association of the company, the resolutions of the board of directors and the resolutions of the shareholders’ meeting.
Section 89/8. In performing duty with responsibility and due care, a director and an executive shall act in the similar manner as an ordinary person undertaking the business under similar circumstances. Any matter proven by the director or executive that, at the time of considering such matter, his decision has met the following requirements shall be deemed that the said director or executive has performed his duty with responsibility and due care under the first paragraph:
decision has been made with the honest belief and reasonable ground that it is in the best interest of the company
decision has been made in reliance of information honestly believed to be sufficient
decision has been made without the interest of the director, whether directly or indirectly, in such matter.
Section 89/9. In considering whether each director or executive has performed their duty with responsibility or care, the following factors should be taken into account:
position in the company held by such person at that time
scope of responsibility in the position of such person in accordance with the laws or as assigned by the board of directors
qualification, knowledge, capability, and experience including purposes of appointment.
Section 89/10. In performing duty with loyalty, directors and executives shall:
act in good faith for the best interest of the company
act with proper purpose
not act in significant conflicts with the interest of the company
Section 89/11. Any actions resulting in financial benefits beyond usual entitlements for board members, executives, or related parties, or that significantly harm the company's interests, may be considered contrary to the company's best interests.
2.6.2. Setting strategy and supervising management
VI.B. SOE boards should effectively carry out their functions of reviewing and guiding corporate strategy and supervising management based on broad mandates and expectations set by the shareholders. They should have the power to appoint and remove the CEO. They should align executive remuneration levels with the longer term interests of the enterprise and its shareholders.
As highlighted previously, the 2019 Principles and Guidelines outline the responsibilities of SOE boards in devising strategic, operational, and annual plans while efficiently managing resources. The boards are also guided by the 2019 SOE Act which sets out government priorities for SOEs, also in relation to other strategic policies outlined in the constitution, the National Strategic Plan, the National Economic and Social Development Plan, and specific sector-focused development initiatives.
Additionally, it specifies that the board should create a panel to appoint top executives and define criteria and procedures for selecting competent individuals for high-ranking managerial roles. This involves supervising the establishment of a hierarchical managerial framework, outlining job scopes and suitable qualifications for these positions, establishing evaluation standards for top executives, and ensuring their assessment of senior management. Furthermore, it includes examining remuneration and assessing the compensation system for both managerial staff and employees. Recruitment procedures are governed by internal regulations and may differ between various SOEs.
While in principle the board of directors has the authority to appoint and remove the CEO from office, the process of appointing and dismissing CEOs requires government approval, despite the presence of many government representatives on the board. For unincorporated SOEs, the CEOs are generally appointed by the supervisory board with approval from the Cabinet or the line ministry, depending on their establishment law. Once a candidate is hired as the CEO, their legal relationship with the SOE is governed by contract. The supervisory board may remove the CEO from office by a three-fourth majority vote. However, the decision to remove a CEO also needs to be approved by the Cabinet and line minister in accordance with established law. The procedure for appointments of executive management of SOEs is described in greater detail in Section 1.4.5.
2.6.3. Board composition and exercise of objective and independent judgment
VI.C. SOE board composition should allow the exercise of objective and independent judgment. All board members, including any public officials, should be nominated based on qualifications relevant to the enterprise’s sector of activity and business profile, and have equal legal responsibilities.
As mentioned in Sections 1.4.3. and 2.2.6, the appointment of supervisory board members will be in accordance with the Standard Qualifications for Directors and Employees of State Enterprises Act, B.E. 2518 (1975), and the 2019 SOE Act which stipulate that board directors should be selected based on their qualifications, capabilities, and criteria for independence. The qualifications and composition of the board vary according to the legal status of SOEs, categorised into two groups:
1. LLCs and Public LLCs: The board must meet the qualifications specified in the Public Limited Companies Act, B.E. 2535 (1992) and the Civil and Commercial Code, as well as the Skill Matrix of the respective SOE.
2. SOEs with other legal forms: The board must meet the qualifications specified in the Establishment of Government Organisation Act, B.E. 2496 (1953), including regulations, guidelines, and the skill matrix of the respective SOE.
As noted in section 1.4.3, Thailand employs a two-tier board system for SOEs structured as statutory corporations. Regardless of the board structure, SOEs are commonly headed by a CEO or a managing director, overseen by a supervisory board with a maximum of 13 members. This board typically includes representatives or public officers from relevant ministries, such as the line ministry and ministries related to the mission of the SOE, industry experts, and ex officio directors. According to Section 17 of Standard Qualifications Act, each SOE must have at least one representative from the Ministry of Finance, with the SEPO formally appointing these directors on behalf of the Ministry. Furthermore, the board must include a minimum of one-third independent directors, selected from the pool of directors.
It is worth noting that while Section 6 of the Standard Qualifications Act stipulates that “A State enterprise shall have not more than 11 directors in total,” it grants discretionary power to the government regarding board appointments by further stating that “Where the SOE necessarily requires more than 11 directors, the Minister in charge may seek the specific approval of the Council of Ministers for such SOE, provided that the total number of directors shall not exceed 15.” It has been observed that the majority of Thailand’s major SOEs have 13 board members (see section 1.4.3). According to SEPO, SOEs requiring more than 11 board members must provide sufficient justification to the cabinet to show the necessity of having more directors and are granted approval on a case-by-case basis. Typically, the cabinet grants such approvals for large SOEs or those with diverse missions requiring various skillsets from additional board members.
Some SOEs specify a significant number of directors as ex officio directors. For example, the Expressway Authority of Thailand (EXAT) designates six out of a total of 11 members based on position. The ex officio members include representatives from the Ministry of Finance, the Ministry of Transport, the Budget Bureau, the Office of the NESDC, the Treasury Department, and the CEO of EXAT. In addition to these SOEs, there are other SOEs that also specify ex officio members, as illustrated in Table 2.3.
Source: Based on information provided by Thailand Development Research Institute (TDRI).
It is evident that the selection of board members for certain SOEs may be based on occupying specific positions rather than solely on qualifications and suitability. To maintain board independence, it is advisable to avoid specifying ex officio directors in legislation, thereby reducing potential conflicts of interest. A significant number of ex officio members, typically government officers aligned with the policies of the ruling party’s policies, can compromise the autonomy of SOEs in making management decisions. Although some SOEs attempt to address these issues by ensuring line ministry representatives do not come from regulatory units, challenges regarding independence persist, especially in industries with ambiguous regulatory boundaries, such as transportation. Moreover, it is observed that certain SOEs, in addition to legal specifications restricting board members by position, provide additional guidance on board composition through regulations or guidelines. For instance, the Electricity Generating Authority of Thailand (EGAT) stipulates in Regulation No. 402 concerning business supervision that the board must include a representative from the Ministry of Finance and another from the Ministry of Energy.
Despite the presence of a Screening Committee tasked with selecting capable and suitable board members, its authority is typically limited to screening and appointing members who are not ex officio. This applies only to SOEs governed by the Establishment of Government Organisation Act, B.E. 2496 (1953).
2.6.4. Independent board members
VI.D. An appropriate number of independent board members should be on boards and on specialised board committees.
Definition and role of independent directors
The 2019 Principles and Guidelines provide directions for the structure of SOE boards. They recommend determining the appropriate number of directors based on the nature of the SOE's operations and suggest that at least one-third of the directors should be independent.
The guidelines define an independent director as someone who is free from the influence of management, major shareholders, groups of major shareholders, government agencies, or any individuals that could compromise independent decision-making. An independent director must be able to make decisions and oversee the SOE’s operations in alignment with its mission, objectives, and the interests of stakeholders. However, SEPO does not prescribe specific qualifications for independent directors, leaving the definition broad and open to interpretation challenges.
Interpretation challenges
The broad definition of an independent director leads to the interpretation that qualified directors are considered independent. The Standard Qualifications of State Enterprise Directors and Employees Act B.E. 2518 (1975), Section 12/1, specifies that, "In appointing directors other than ex officio directors in any SOE, the appointing authority shall consider appointing from individuals listed in the directory of directors prepared by the Ministry of Finance, not less than one-third of the number of other directors of that SOE." This establishes the use of the Director’s Pool, prepared by the Ministry of Finance, for appointing directors. However, this may be interpreted as individuals listed in the directory being considered independent directors. Interpreting the definition of independent directors as merely qualified directors poses challenges, particularly when government officials are appointed as qualified directors, leading to potential conflicts of interest. Moreover, while state representatives sitting on the board as representatives of the SOE’s parent ministry are required to come from a part of the ministry without regulatory functions relating to the concerned SOE, there are still risks for conflicts of interest.
Comparison with guidelines applicable to listed companies
The Corporate Governance Code for Listed Companies 2017 define the board structure of limited companies and the meaning of independent directors, particularly when the chairman and CEO roles are not clearly separated. The Code stipulate that the majority of the board should be non-executive directors, who exercise objective and independent judgement.
The qualifications for independent directors are outlined in Notification of the Capital Market Supervisory Board No. Tor Jor. 39/2559. Nine key criteria are highlighted, including shareholding in the company, business relationships, familial ties with other directors, and involvement in competing businesses.
2.6.5. Mechanisms to prevent conflicts of interest
VI.E. Mechanisms should be implemented to avoid conflicts of interest preventing board members from objectively carrying out their board duties and to limit political interference in board processes. Politicians who are in a position to materially influence the operating conditions of SOEs should not serve on their boards. Former such persons should be subject to predetermined cooling-off periods. Civil servants and other public officials can serve on boards under the condition that they are nominated based on merit and conflict of interest requirements apply to them.
The Standard Qualifications of State Enterprise Directors and Officials Act B.E. 2518 (1975) specifies that political officials, except those mandated by law to occupy such positions, and persons holding any positions in or being officials of a political party, cannot serve on a board of directors. Additionally, as described in the previous chapter of this review, some SOEs establish their own qualifications in addition to those prescribed by the Act. For example, the Electricity Generating Authority of Thailand (EGAT) prohibits its supervisory board members from having conflicts of interest in any contract in which EGAT participates or is one of the parties. SOE boards of directors can include ex officio members from ministries, and some can be chaired by civil servants.
Measures to prevent conflicts of interest
Thailand’s SOEs are subject to several measures to prevent conflicts of interest:
Disclosure requirements: Directors must disclose information about assets, liabilities, and family businesses to the public.
Code of conduct: A code of conduct provides a framework for ethical conduct in the workplace.
Post-employment regulations: Regulations govern the conduct of former government employees to prevent the misuse of confidential information and privileges after leaving their positions. This includes an enforcement mechanism such as an oversight committee to ensure compliance. This committee must possess sufficient independence to conduct fact-finding investigations and follow-up measures for any violations.
Anti-corruption regulations: The Organic Act on Anti-Corruption B.E. 2561 (2018) prohibits board members from engaging in contracts with state entities or having vested interests in such agreements (Box 2.7). This extends to holding shares in companies involved in these contracts or benefiting from them, as well as serving in any capacity in private enterprises. This rule also applies to individuals who have left government roles within the past two years. Additionally, the Criminal Code specifies penalties for overseeing businesses for personal gain or benefiting others. The Civil Service Act B.E. 2551 (2008) explicitly forbids using one's government position for personal gain and engaging in actions that undermine fairness or damage the reputation of their role.
Despite the legislation and operational guidelines designed to mitigate conflicts of interest, Thailand's political landscape continues to exert significant influence over board composition, and may be further impacted by electoral cycles. For example, in 2023, following a change in government, board members of over 20 SOEs, including the Government Savings Bank, Electricity Generating Authority of Thailand, and PTT, resigned (Thansettakij, 2023[7]). The primary reason for these resignations was to allow for the appointment of new board directors aligned with the policies of the new government, which may suggest that Thai SOEs may not be entirely independent from political influence.
Section VI: Conflict of Personal and Public Interests
Section 126: Public officials, including Board/Commission/Committee members and those in independent agencies, cannot:
a) Engage in contracts with state agencies where they have supervisory or prosecutorial roles;
b) Hold shares in companies contracting with state agencies they oversee, except for minor shares in limited companies;
c) Obtain concessions from the state or hold shares in entities with state concessions, except for minor shares in limited companies; and
d) Be involved in private entities under their supervision if it conflicts with public interest of their duties.
These rules also apply to the spouses of these officials, including common-law spouses. Officials must resolve any conflicting interests within 30 days of taking office.
Section 127: High-ranking officials and those in political positions cannot engage in conflicting activities under Section 126(4) for two years after leaving office.
Section 128: Public officials are prohibited from accepting assets or benefits unless legally entitled or ethically acceptable, except from family members or relatives. This rule applies for two years after leaving office.
Section 129: Violating these provisions is considered malfeasance.
Source: Website of the Office of the National Anti-Corruption Commission, Organic Act on Anti-Corruption B.E. 2561 (2018), https://www.nacc.go.th/download/article/article_20190401140617.pdf
2.6.6. Role and responsibilities of the Chair
VI.F. Good practice calls for the chair to be independent with a role separate from that of the CEO. The chair should assume responsibility for boardroom efficiency and, when necessary, in co-ordination with other board members, act as the liaison for communications with the state ownership entity.
The 2019 Principles and Guidelines and the Corporate Governance Code for Listed Companies B.E. 2560 (2017) emphasise the importance of distinct roles for the board chair and the CEO. This separation aims to ensure effective governance and reduce conflicts of interest.
Despite the intended separation, there can still be conflicts of interest. As noted earlier, the definition of independence allows for board members to hold the title of independent director while having other roles within government or other state entities. This also applies to the board chair, noting also chairperson may be directly appointed by the government and not the board. As noted earlier, ex officio members who are government officials make up the majority of board members, potentially making it difficult for the chair to maintain an independent stance and for the chair and/or directors to effectively exercise their fiduciary duties.
It is worthwhile noting that the chairperson is not allowed to participate in any board committees in accordance with the 2019 Principles and Guidelines and the Section VI of the Organic Act on Anti-Corruption B.E. 2561 (2018) (Box 2.7). CEOs can also sit on supervisory boards, and in these cases, they usually exercise voting power unless explicitly restricted by the enterprise's bylaws or specific regulations.
2.6.7. Employee representation
VI.G. Where employee representation on the board is mandated or commonplace, mechanisms should be developed to guarantee that this representation is exercised effectively and contributes to the enhancement of the board skills, information and independence.
In Thailand, regulations relevant to SOEs do not mandate employee representation on the board. Instead, employees are permitted to participate solely in board discussions focused on issues specifically related to the workforce. However, the format and regularity of employee participation in board discussions are unclear. The State Enterprise Labour Relations Act, B.E. 2543 (2000), requires the formation of committees such as the Labour Relations Committee, Business Relations Committee, and Labour Union. These committees serve as advocates for employees, working to ensure fair benefits, safeguard their rights, and engage collaboratively with employers to improve workplace practices – however these committees do not fit into the board structure.
2.6.8. Board committees
VI.H. SOE boards should consider setting up specialised committees, composed of independent and qualified members, to support the full board in performing its functions in particular the audit committee – or equivalent body – for overseeing disclosure, internal controls and audit-related matters. Other committees, such as remuneration, nomination, risk management or sustainability may provide support to the board depending upon the SOE’s size, structure, complexity and risk profile. Their mandate, composition and working procedures should be well defined and disclosed by the board which retains full responsibility for the decisions taken. The establishment of specialised committees should improve boardroom efficiency and should not detract from the responsibility of the full board.
The 2019 Principles and Guidelines specify that the board should establish relevant committees to support their work. An example of the types of board committees and their objectives is shared in Table 2.4.
The committees are required to establish annual criteria and evaluation methodologies for both collective and individual performance assessments, similar to those used by the board.
It is notable that, according to Ministry of Finance’s regulation on Audit Committee and Internal Audit Unit of State Enterprise. B.E. 2555 (2012), each SOE is mandated to establish an audit committee, consisting of a chairperson, no fewer than two committee members, and an internal audit unit supervised by a designated director. All directors on the audit committee must be independent directors. These requirements operate in alignment with the Corporate Governance Code for Listed Companies B.E. 2560 (2017). The Regulations of the Ministry of Finance on standards and criteria for internal audit operations for government agencies B.E. 2566 (2023) (No. 4) species that members of the audit committee must be board members and must not possess prohibited characteristics. These prohibited characteristics include not being a civil servant, employee, consultant, beneficiary of salary or other forms of compensation from, or involved in the management of, government agencies.
The responsibilities of the audit committee encompass ensuring comprehensive financial reporting, validating the adequacy of internal control and audit mechanisms, ensuring adherence to relevant legal frameworks and standards, assessing the independence of the internal audit unit, and approving key decisions related to the internal audit function. The committee also identifies and recommends to the board independent auditor candidates, oversees their compensation, and conducts annual meetings without management to maintain independence. The actual decision on the selection of the auditor is made by the shareholders at the annual general meeting. It is important to recall, as noted in Section V, for the majority of Thai SOEs independent external audit is conducted by the state audit authority and not accredited external audit firms.
Source: Electricity Generating Authority of Thailand's Regulation No. 402 on Corporate Governance based on the Principles and Guidelines on Corporate Governance for State Owned Enterprises B.E. 2562 (2019).
However, there are no requirements for the board to disclose the mandate, composition, and working procedures of the specialised committees. Not all SOEs make information about their specialised committees publicly available on their websites. For instance, PTT publishes information on its organisational structure and specifies the board director members and duties of its five specialised committees (Audit Committee; Corporate Governance and Sustainability Committee; Nominating Committee; Enterprise Risk Management Committee; and Remuneration Committee). The websites of GSB and Airport Authorities of Thailand specify the specialised committees and their composition but do not describe the mandates of each committee.
2.6.9. Board evaluation
VI.I. SOE boards should, under the chair’s oversight, regularly carry out a well-structured evaluation to appraise their performance and efficiency, and assess whether they collectively possess the right mix of background and competences, including with respect to gender and other forms of diversity.
In Thailand, several mechanisms are in place to conduct performance evaluation of members of the supervisory board of SOEs. SEPO under the Ministry of Finance is required to conduct evaluations of SOE board members' performance, taking into account factors such as financial performance, adherence to corporate governance principles, and the achievement of strategic objectives. Additionally, many SOEs implement internal self-assessment processes where board members evaluate their own performance and that of their peers, focusing on areas such as board composition, effectiveness, and individual director contributions.
However, the current evaluation framework does not explicitly mention the frequency of these evaluations particularly with regard to periodic reviews by external evaluators. While PAC's establishment and the use of SE-AM for SOE evaluations demonstrate a structured approach to performance assessment of SOEs, it is important to ensure that these evaluations are conducted regularly and comprehensively. Under the chair's oversight, these evaluations should appraise the board's performance and efficiency and assess whether the board collectively possesses the right mix of background, diversity and competencies, among other areas.
2.6.10. Risk management
VI.J. SOE boards should actively oversee risk management systems. Boards should ensure that these systems are reassessed and adapted to the SOEs’ circumstances with a view to establishing and maintaining the relevance and performance of internal controls, policies and procedures.
As described previously, the 2019 Principles and Guidelines specify that SOE boards should possess knowledge and understanding of significant risks to formulate risk management policies, and establish internal control systems aligned with the mission, objectives and strategies of SOEs. To that end, boards are required to establish a risk management committee and ensure that independent individuals or agencies develop or evaluate the effectiveness of the risk management system.3
SOEs are further required to adhere to the Guidelines for Risk Management and Internal Control, B.E. 2555 (2012), outlined in the Risk Management and Internal Control Handbook, as well as the revised State Enterprise Internal Audit Operations Manual, B.E. 2555 (2012). Principle 6 of the Corporate Governance Code for Listed Companies (2017) further specifies that the boards of directors should ensure that companies have effective and appropriate risk management and internal control systems.
While these frameworks offer guidance for SOEs on establishing and monitoring internal control systems, there is room for improvement in their implementation and oversight. As previously described, the 2019 Principles and Guidelines operate on a comply-or-explain basis, which allows SOEs some discretion in adopting the specified guidelines into their practices.
The corporate governance framework should provide incentives for state ownership entities and SOEs to make decisions and manage their risks in a way that contributes to SOEs’ sustainability and resilience and ensures long-term value creation. Where the state has sustainability goals, the state as an owner should set concrete and ambitious, sustainability-related expectations for SOEs, including on the role of the board, disclosure and transparency and responsible business conduct. The ownership policy should fully recognise SOEs’ responsibilities towards stakeholders.
2.7.1. Setting sustainability goals
VII.A. Where the state has set sustainability goals, they should be integral to the state’s ownership policy and practices. This includes:
VII.A.1. Setting concrete and ambitious sustainability-related expectations for SOEs that are consistent with the ownership policy and practices. In doing so, the state should respect the rights and fair treatment of all shareholders.
As described previously, the state ownership policy of Thailand is embodied in the 2019 Principles and Guidelines and the SOE Development Plan, which establish sustainability-related goals for SOEs.
The 2019 Principles and Guidelines include several sustainability-related goals for SOEs. Section 5, which focuses on sustainability and innovation, specifies that the boards of directors are required to establish policies and operational plans for SOEs that prioritise sustainable operations and have a responsibility towards society and the environment. It also mentions that SOEs may refer to Sustainable Development Goals (SDGs) of the UN and the Corporate Governance Code for Listed Companies 2017, which stipulates that boards should ensure that management allocates and manages resources efficiently and effectively. This includes considering the impact and development of resources throughout the value chain to achieve sustainable objectives. Further, the Code states that boards should prioritise and support innovations that demonstrate responsibility towards society and the environment. However, if is notable that specific sustainability targets, such as reducing greenhouse gas emissions or promoting clean energy in the transport sector, are not explicitly outlined in the 2019 Principles and Guidelines.
The government has also included several sustainability goals for SOEs in the five-year SOE Development Plan. For instance, under Milestone 3, which focuses on developing Thailand’s vehicle manufacturing base, the Plan sets goals for preparing infrastructure and establishing industrial estates to support the electric vehicle industry. Similarly, under Milestone 10, which aims to establish a circular economy and low-carbon society, the Plan includes goals for SOEs to minimise greenhouse gas emissions by 20-25 percent by 2030 and ensures that the eco-efficiency assessment results of the SOEs align with the plan.
It also specifies that estates and seaports operated by the Industrial Estate Authority of Thailand (IEAT) should minimise greenhouse gas emissions, and that SOEs in specialised financial institutions issue sustainability bonds or green bonds to promote loans for environmental projects. Under Milestone 11, which addresses mitigating risks and impacts of natural disasters and climate change, the Plan includes the objective that all SOEs develop a Business Continuity Management Plan to be prepared to cope with natural disasters and climate change. Table 2.5 describes Milestones 3, 10 and 11 in greater detail. The climate-related Milestones outlined in the 2019 Principles and Guidelines and SOE Development Plan reflect the priorities listed in Thailand’s National Economic Development Strategy (2018-2037) and Nationally Determined Contribution (NDC), last updated in 2020, which was submitted to the United Nations Framework Convention on Climate Change (UNFCCC).
While the NDC and the National Economic Development Strategy (2018-2037) do not specifically set sustainability goals for SOEs, many of which operate in hard-to-abate sectors, they place significant emphasis on GHG emissions reduction, developing climate-resilience and integrating climate-change adaptation into plans for agriculture, public health, water resource management sectors and promotion of the shift from conventional automotive industry to electric vehicle industry. These commitments correspond with Milestones 3, 10 and 11 in the SOE Development Plan (see below).
Finally, Thailand’s 2021-2027 Bio-Circular-Green (BCG) Action Plan aims to promote sustainable and quality through balancing conservation and utilisation to promote sustainable biological resources; strengthening communities and the grassroots economy using resource capital, identity, creativity and advanced technology; enhancing sustainable competitiveness of Thai BCG industries; and building resilience to global changes. Key priorities under the 2021-2027 Action Plan are aligned with Milestone 10 of the SOE Development Plan, which aims to involve SOEs in achieving these aims.
Source: Submissions provided by the SEPO
Milestones pertaining to sustainability-related expectations for state-owned enterprises
Milestone 3: Thailand is the world’s important electric vehicle manufacturing base
Under Milestone 3, the main direction for SOE development focuses on the electric vehicle (EV) industry. This involves preparing infrastructure to support the transition to EVs, including the integration of public EV charging stations and quick chargers, with a target of 1,376 chargers installed by PTT Public Company Limited (PTT), Electricity Generating Authority of Thailand (EGAT), Metropolitan Electricity Authority (MEA), and Provincial Electricity Authority (PEA). The initiative also aims to replace existing passenger vehicles with EVs through the efforts of the Bangkok Mass Transit Authority (BMTA) and The Transport Company Limited. The initiative also includes establishing industrial estates for EV manufacturing investments and encouraging SOEs to use EVs internally. Supportive operations include enhancing transportation with diesel-electric locomotives by SRT and adopting EVs in postal services by Thailand Post. This approach seeks to stimulate the broader EV ecosystem without directly involving SOEs in the manufacturing process and create supportive environment for private sector participation.
Milestone 10: Thailand is a circular economy and low-carbon society
Under Milestone 10, the development of SOEs focuses on implementing the BCG (Bio-Economy, Circular Economy, Green Economy) model for sustainable economic growth, reducing greenhouse gas emissions by 20-25% by 2030, and promoting clean energy in public transit systems. This includes increasing renewable energy production, improving wastewater management to ensure treated water meets standards, and supporting projects through Sustainability and Green Bonds. Key goals under Milestone 10 are aligned with the 2021-2027 Action Plan, involving all SOEs in these efforts to achieve environmental and economic sustainability.
Milestone 11: Thailand can mitigate risks and impacts of natural disasters and climate change
Under Milestone 11, the focus is on ensuring business continuity and public service stability in the face of natural disasters and climate change. This includes developing Business Continuity Management Plans for all SOEs, promoting the sustainable conservation and rehabilitation of natural resources, and providing investment funds to help natural disaster victims recover quickly. Additionally, it involves supporting farmers with risk management tools such as natural disaster and climate insurance, aiming for 94% of Bank of Agriculture and Agricultural Cooperatives (BAAC) customers to have insurance access annually from 2023 to 2025. All SOEs are involved in these initiatives to enhance resilience and sustainability.
Source: NESDC, (2023[1]), The Thirteenth National Economic and Social Development Plan, https://www.nesdc.go.th/article_attach/article_file_20230615134223.pdf
VII.A.2. Communicating and clarifying the state’s expectations on sustainability through regular dialogue with the boards.
Currently, there appear to be no clear mechanisms for communicating and clarifying the state’s expectations on sustainability through regular dialogue with the boards. According to the 2019 Principles and Guidelines, the government should engage with the boards in developing performance agreements for SOEs that align with their goals and operational scopes. State’s expectations on sustainability are reflected in several sustainability-related indicators that are included in the performance evaluation of SOEs through SE-AM, which assesses eco-efficiency, reflecting the economic and environmental efficiency of SOEs. The SE-AM includes a component on evaluation of SOEs based on their sustainability and innovation initiatives, and timely and consistent preparations of sustainability reports. Sustainability indicators, notably reporting on sustainability-related activities through SOEs’ annual reports, are also found in Section 4 of SE-AM. The directors are expected to guide SOEs to achieve the agreed-upon results in the performance evaluations.
VII.A.3. Assessing, monitoring and reporting on SOEs’ alignment with sustainability-related expectations and performance on a regular basis.
As described previously, Section 5 of the 2019 Principles and Guidelines specifies that the boards of SOEs are required to ensure sustainability reporting and, where appropriate, align with nationally or internationally recognised reporting frameworks. Furthermore, the Corporate Governance Code for Listed Companies 2017 mandates that the board ensures sustainability reporting as appropriate. Requirements concerning reporting on sustainability-related information are described in Table 2.5 and Box 2.9.
Principles and Guidelines on Corporate Governance for State-Owned Enterprises B.E. 2562 (2019)
Section 5: Sustainability and innovation
SOEs also may follow the Corporate Governance Code for Listed Companies 2017, which states that the board should ensure sustainability reporting as appropriate.
1) The board should evaluate the suitability of disclosing compliance with laws, code of conduct, anti-corruption policy and fair treatment of employees and stakeholders, including human rights, and social and environmental responsibilities. This should align with recognised national or international reporting frameworks. The information can be included in the annual report or as a separate document, as appropriate for the company.
2) The board should ensure that the disclosed information is significant and demonstrates practices that contribute to the company’s sustainable value.
Corporate Governance Code for Listed Companies 2017
Principle 7.4: The board should ensure sustainability reporting, as appropriate.
7.4.2. The board should ensure that the company’s sustainability reporting reflects material corporate practices that support sustainable value creation.
In principle, SOEs are required to report on all aspects of their operations to SEPO, which may include sustainability-related activities. Consideration of sustainability-related expectations is also taken into account during the evaluation of SOEs by SEPO through the SE-AM. SOEs are required to submit operational data to SEPO through SE-AM, based on the criteria specified within the model. Section 3.3.1 of the SE-AM Guide notes that SOEs should carry out tracking and evaluation according to specified guidelines and include comprehensive components in their tracking and evaluation reports. Furthermore, according to Section 3.3.1 of the Guide, SOEs are rewarded for reporting on operational results of relationship building with stakeholders at the organisational/departmental level, which includes sustainability-related reports.
However, the assessment and monitoring mechanisms for SOEs’ alignment with sustainability-related expectations and performance are not yet comprehensive. Although the boards of directors are required to ensure sustainability reporting, there appears to be limited reporting and disclosure requirements for SOEs, as well as for SEPO, the ownership entity, to specifically monitor SOEs’ alignment with sustainability-related expectations. While the state's expectations on sustainability are reflected in several indicators included in the performance evaluation of SOEs through SE-AM, these indicators only cover partial aspects of environmental protection and do not address broader aspects of sustainability, such as responsible business conduct and human rights. Nonetheless, because SOEs may adopt the 2019 Principles and Guidelines on a “comply-or-explain” basis, the degree of monitoring compliance by SOEs with these reporting requirements is unclear.
2.7.2. Incorporating sustainability-related risks
VII.B. The state should expect SOE boards to adequately consider sustainability risks and opportunities when fulfilling their key functions. The following prerequisites are essential for ensuring effective sustainability management at enterprise level:
VII.B.1. SOE boards should review and guide the development, implementation and disclosure of material sustainability-related objectives and targets as part of the corporate strategy.
According to the 2019 Principles and Guidelines, SOE boards are responsible for ensuring that management formulates policies and operational plans that consider sustainable operations and social and environmental responsibilities. This includes using innovations to improve work processes and service delivery. The Corporate Governance Code for Listed Companies 2017 further specifies that boards should ensure efficient resource management to achieve sustainable objectives.
However, while the boards are tasked with considering the impacts and values of different business models and maintaining ethical responsibility, it is unclear to what extent they review and monitor the implementation and disclosure of material sustainability-related objectives and targets. The current guidelines and codes provide a foundation, but the extent of board oversight and monitoring needs clarification.
VII.B.2. SOEs should integrate sustainability considerations into their risk management and internal control systems, including by conducting risk-based due diligence.
The 2019 Principles and Guidelines specifies that boards of directors of SOEs are responsible for overseeing operations and ensuring that the presence of adequate and appropriate systems for accounting, financial reporting, risk management, internal controls, and internal auditing. The boards should formulate a risk management policy and ensure ongoing risk management system that is aligned with the missions, objectives, strategies and risks associated with SOEs. They should also have a robust understanding of risks. Further, these guidelines encourage SOEs to align with the Corporate Governance Code for Listed Companies 2017, which states that boards should possess a thorough knowledge and understanding of risk factors, laws, standards, and other relevant obligations.
Despite these provisions, the existing regulatory framework in Thailand does not extend to requiring the incorporation of sustainability considerations into the risk management systems of SOEs.
VII.B.3. SOE boards should consider sustainability matters when assessing and monitoring management performance.
According to the 2019 Principles and Guidelines, the SOE boards are mandated to ensure sustainability reporting and, when applicable, alignment with nationally or internationally recognised frameworks. These guidelines stipulate that boards evaluate the adequacy of disclosures related to compliance with laws, codes of conduct, anti-corruption policies, and fair treatment of employees and stakeholders while upholding human rights and social and environmental responsibilities. The Corporate Governance Code for Listed Companies 2017 reinforces this requirement, emphasising that disclosed information must be “significant and demonstrate practices that contribute to the company’s sustainable value.”
However, that there are no explicit formal requirements compelling SOE boards to consider sustainability matters when assessing and monitoring management performance. Thus, while boards may take sustainability into consideration, the frequency and depth of such considerations are not well-defined or well-measured by SEPO using their existing SE AM monitoring and evaluation system.
2.7.3. Disclosure and transparency of sustainability-related practices
VII.C. The state should expect SOEs to be subject to appropriate sustainability reporting and disclosure requirements, based on consistent, comparable and reliable information:
VII.C.1. Sustainability reporting and disclosure should be aligned with high-quality internationally recognised standards that facilitate the consistency and comparability of sustainability-related disclosure across markets, jurisdictions and companies;
As described previously, Section 5 of the 2019 Principles and Guidelines specifies that the boards of SOEs should ensure sustainability reporting is appropriate, and aligned with nationally or internationally recognised reporting frameworks, such as the Global Reporting Initiative (GRI). According to information provided by SEPO, SOEs also include sustainability-related information, such as social and environmental responsibility practices, business conditions, plans and strategies pertaining to sustainability, in their annual reports. Further, certain non-listed SOEs such as the Government Savings Bank (GSB), the Metropolitan Electricity Authority (MEA), the Provincial Electricity Authority, the Electricity Generating Authority of Thailand, and the TANARAK Asset Development Company Limited prepare and publish sustainability reports. The themes of these reports vary; for instance, GSB’s 2022 sustainability report details the Bank’s commitment to reducing environmental impact, allocated profits towards missions pertaining to eco-efficiency and the circular economy. On the other hand, MEA’s 2022 sustainability report details the company’s efforts towards GHG reductions, the acquisition of electric vehicles for organisational use, and the promotion of renewable energy consumption through significant projects. Nonetheless, the practice appears sporadic, and compliance is at the discretion of specific SOEs.
VII.C.2. Phasing in of requirements for annual assurance attestations by an independent, competent and qualified attestation service provider, in accordance with high-quality internationally recognised assurance standards should be considered.
As described previously, SEPO assesses and monitors SOEs through SE-AM, which mandates that each SOE submit operational data in accordance with predefined criteria, including in the area of sustainability reporting.
SEPO has established a sub-committee, appointed by the Performance Assessment Committee (PAC) specifically responsible for evaluating SOEs’ ability to meet certain sustainability metrics in line with ISO requirements. Despite these requirements, the current framework lacks provisions for independent assurance attestations of the sustainability reports.
2.7.4. Responsible business conduct
VII.D. The state as an owner should set high expectations for SOEs’ observance of responsible business conduct standards together with effective mechanisms for their implementation, should fully recognise SOEs’ responsibilities towards stakeholders and should request that SOEs report on their relations with stakeholders. Such owner’s expectations should be publicly disclosed in a clear and transparent manner. In particular:
VII.D.1. Governments, state ownership entities and SOEs should recognise and respect stakeholders’ rights established by law or through mutual agreements. Where stakeholder interests are protected by law, the workforce and other stakeholders should have the opportunity to obtain effective redress for violation of their rights at a reasonable cost and without excessive delay.
In Thailand, current regulations and mutual agreements do not establish specific rights for stakeholders within SOEs. Generally, there are no special provisions for employee board representation or mandatory consultations with stakeholder groups.
Section 4 of the 2019 Principles and Guidelines emphasises the importance of all stakeholder groups to operations of SOEs. The 2019 Principle and Guidelines mandate that boards of directors specify the significance of stakeholders in their decision-making and are encouraged to develop stakeholder participation. Boards are required to disclose their stakeholder policies and engagement in annual reports.
The 2019 Principles and Guidelines further outline the responsibilities of SOEs towards customers, business partners and more broadly, the community. Responsibilities towards customers include adherence to laws and standards that impact health, safety of products and services, customer information security, sales conduct, and after-sales services. SOEs are also expected to measure customer satisfaction continually. With regard to business partners, the 2019 Principles and Guidelines call for fair procurement and contracting, access to training, potential development, and enhancement of production and service standards that comply with applicable laws and standards. Importantly, SOEs must ensure that their business partners adhere to human rights and social and environmental responsibilities.
Additionally, some sector-specific laws in Thailand aim to engage stakeholders at the decision-making level of SOEs. For example, the Sports Authority of Thailand Act, B.E. 2558 (2015), specifies the composition of the Sports Authority of Thailand Commission, which is tasked with policy imposition and general supervision of the Sports Authority of Thailand (SAT) activities. Its members include high-level government officials, representatives of national and regional sports associations, and qualified members, ensuring a broad representation of stakeholder interests.
While the 2019 Principles and Guidelines attempt to integrate stakeholder considerations into the operational framework of SOEs, the lack of specific legal provisions for stakeholder rights and inconsistent implementation across sectors highlights significant areas for improvement. Enhanced legal frameworks and clearer guidelines could better secure stakeholder interests and facilitate more effective redress mechanisms for rights violations, aligning with international best practices for stakeholder engagement in SOEs.
VII.D.2. SOEs should develop and encourage meaningful stakeholder engagement in advancing sustainability and ensuring a just transition, particularly from persons or groups that may have an interest in or could be impacted by an enterprise’s activities.
Although there are no specific requirements for SOEs to encourage meaningful stakeholder engagement in advancing sustainability and ensuring and just transition, SOEs are required to establish policies and guidelines for stakeholder management as part of the SE-AM evaluation system. Stakeholder engagement and management are considered during the evaluation of SOEs. Further, SEPO notes that SOEs develop long-term strategic plans for stakeholders, which involves mapping stakeholders’ needs and expectations, and establishing governance frameworks or guidelines related to stakeholder management.
Upon the approval of the strategic plan by the board of directors or a specially designated sub-committee, SOEs are required to integrate these long-term strategic plans into their annual action plans. The boards of directors are tasked with tracking the progress of these strategic plans on a quarterly basis. However, the extent to which SOEs comply with this requirement is unclear. Additionally, it is uncertain to what extent mechanisms for stakeholder engagement, specifically on sustainability-related goals, are incorporated into these strategic plans.
VII.D.3. Mechanisms for employee participation should be permitted to develop. Where employees and other stakeholders participate in the corporate governance process, they should have access to relevant, sufficient and reliable information on a timely and regular basis.
As described previously, in Thailand, there are no regulations or mandates for ensuring employee representation on boards. Employees are only able to participate in board discussions pertaining specifically to the workforce. Further, as previously described, the State Enterprise Labour Relations Act B.E. 2543 (2000) requires the formation of committees to facilitate employee participation and protect their rights, including the Labour Relations Committee, Business Relations Committee, and Labour Union. With regard to social and employee-related aspects, the Ministry of Labour handles labour issues for all employees of SOEs, covering wages, welfare, and medical expenses. Importantly, employees are governed by regulations from the Ministry of Labour, the State Enterprise Labour Relations Act B.E. 2543 (2000), and the Occupational Safety, Health and Environment Act, B.E. 2554 (2011), while boards of directors are governed by the State Enterprise Act. The 2019 Principles and Guidelines also emphasise that policies and procedures for running SOEs should cover, among other priorities, responsibilities to employees, staff, and workers. This includes treating them fairly, upholding their human rights, providing fair compensation and benefits, and ensuring that welfare meets legal requirements.
VII.D.4. State ownership entities and SOEs should take action to ensure high standards of integrity in the state-owned sector and avoid the use of SOEs as conduits for political finance, patronage or personal or related-party enrichment.
According to the information provided by SEPO, SOEs in Thailand are prohibited from making financial contributions to political campaigns or being used as vehicles for financing political activities. SOEs must comply with general ethical guidelines in accordance with the Ethical Standard Act B.E. 2562 (2019) and submit annual reports to the Ethics Standards Committee (ETC). Despite these guidelines, there are no SOE-specific laws or regulations that explicitly prevent SOEs from making contributions to political campaigns.
References
[1] NESDC (2023), The Thirteenth National Economic and Social Development Plan (2023-2027), https://www.nesdc.go.th/article_attach/article_file_20230615134223.pdf.
[4] OECD (2023), OECD Economic Surveys: Thailand 2023, OECD Publishing, Paris, https://doi.org/10.1787/ad2e50fa-en.
[3] OECD (2020), OECD Competition Assessment Reviews: Logistics Sector in Thailand, OECD Publishing, Paris, https://doi.org/10.1787/a2dc2db0-en.
[2] OECD (2020), OECD Competitive Neutrality Reviews: Small-Package Delivery Services, OECD Publishing, Paris, https://doi.org/10.1787/77fb3159-en.
[6] Prateeppornonarong, D. (2021), “Holding Public Procurement Socially Accountable: The Adoption of the Integrity Pact Approach and the Role of Independent Observers”, https://doi.org/10.1080/10999922.2021.1958563.
[5] TDRI (2023), การศึกษาปรับปรุงกฎหมายการจัดซื้อจัดจ้างภาครัฐเพื่อสร้างความโปร่งใสเป็นธรรม คุ้มค่า และเอื้อต่อการพัฒนาอุตสาหกรรมก่อสร้างไทย, https://tdri.or.th/2023/11/revising-the-public-procurement-act/.
[7] Thansettakij (2023), https://www.thansettakij.com/business/economy/580508.
← 1. https://www.sepo.go.th/directorpool/uploads/document/file/1dbf2728a00081cc3ae3476b596cb5c1.pdf
← 2. As of 2023, AOT operates six airports, namely Suvarnabhumi Airport, Don Mueang International Airport, Chiang Mai International Airport, Mae Fah Luang International Airport in Chiang Rai, Phuket International Airport, and Hat Yai International Airport. These airports are large-scale facilities providing both domestic and international flight services. Suvarnabhumi Airport, in particular serves as the main gateway for the country, generating significant revenue and benefits for AOT. Additionally, the Department of Airports plans for AOT to assume responsibility for three additional airports: Udon Thani International Airport, Krabi International Airport, and Buri Ram Airport.
← 3. The 2019 Principles and Guidelines refer to independent individuals or agencies as those who are not influenced by executives, significant shareholders, shareholder groups, government entities, or any other parties that could potentially undermine their impartial decision-making autonomy.