Corruption

In Thailand institutions do not always work as they should, and personal contacts are what get things done. A cultural propensity to forgive bribes as a normal part of doing business and to equate cash payments with finders' fees or consultants' charges, coupled with the low salaries of civil servants, encourages officials to accept illegal inducements. American executives with experience in Thailand often advise new-to-market companies that it is far easier to avoid corrupt transactions from the beginning than to stop such practices once a company has been identified as willing to operate in this fashion. American firms that comply with the strict guidelines of the Foreign Corrupt Practices Act are able to compete successfully in Thailand.

Recent Thai administrations have stated publicly their intention to improve transparency in the evaluation of bids and the awarding of contracts. Despite recent improvements, both foreign and Thai companies continue to complain about irregularities in the Thai Customs Department. Increasing media scrutiny of public figures has raised political pressure to curtail favoritism and corruption. However, convictions against public officials on corruption-related charges are rare, and the legal system offers inadequate deterrence against corruption.

The democracy constitution of 1997 was designed to make the Thai government less corrupt as well as more honest and responsive to the people. In the elections of 2001 the Thai Rak Thai (TRT) party of cell phone billionaire Thaksin Shinawatra won a majority of seats. The problem was that Thaksin governed like an autoorat. To maintain his dominance he took control of ever larger segments of the press and television, and rendered increasingly ineffective the independent commissions designed to control corruption and vote buying.

In October 2008, the Supreme Court's Criminal Case Division for Persons Holding Political Positions set up under the 1997 and 2007 Constitutions handed down a two-year jail sentence against Thaksin who lived in exile in the UK on the charge of corruption. The court ruled that Thaksin was guilty of conflict of interest by helping his wife get discounted price for her purchase of a larger area of land in one of the Bangkok business districts.

In 2009 the ‘parliament of the streets’ became dominated by the red shirts. Thaksin rallied his supporters by cell phone from abroad, where he had remained to avoid serving a court imposed jail sentence for corruption. During 2009 and 2010 street demonstrators became ubiquitous.

The Thai Supreme Court on 30 September 2009 handed down suspended jail terms to three officials from the Thaksin administration for their role in a lottery scheme deemed illegal, though they were not convicted on separate charges of financial corruption/benefitting from the lottery. The court acquitted most of the Cabinet members named in the case and scheduled a November reading against four other defendants who did not appear in court. Any potential judgment against Thaksin will be held in abeyance until his return, since he was not present in country when legal proceedings began. The lottery decision dropped the most serious charges but found evidence that the officials, at Thaksin's direction, had knowingly broken existing laws on lotteries in setting up the two and three digit lottery schemes in 2003. Thaksin had launched the lottery scheme to create a government slush fund which he could use to fund not only populist schemes like scholarships but also pet projects off the books for personal and political gain, without any accountability.

On 26 February 2010, the Supreme Court of Justice's Criminal Division for Persons Holding Political Positions (SCCDP) issued its verdict in the 76 billion baht ($2.38 billion) asset confiscation case against former prime minister Thaksin Shinawatra, ordering 46 billion baht ($1.44 billion) to be confiscated on abuse of power grounds. Thaksin appealed the verdict on March 26. On August 11, the court ruled in favor of the prosecution, closing the case. Some sources indicated Thaksin still had 240 billion baht ($7.3 billion) overseas.

A July 2009 warrant for the arrest of Thaksin continued in force, and the SCCDP case against him regarding the Export-Import Bank of Thailand's loan to Burma of four billion baht ($125 million) remained suspended. Thaksin continued to reside outside the country. Thaksin's wife, her brother, and her secretary were sentenced in 2008 to prison terms ranging from two to three years for tax evasion. They were released on bail and appealed their sentence in 2008; the appeal continued to be examined at 2010 end.

The press features frequent allegations of irregularities in public contracts, most notabl yover the use of public lands, procurement favoritism (e.g., revising requirements so that a preferred company wins over its competitors), and police complicity in a variety of illegal activities. In January 2010, the Thai press widely reported news of the U.S. Department of Justice indictment of a former Thai tourism minister accused of taking bribes from an American couple seeking to do business in Bangkok. In December 2009, the Minister of Public Health and Deputy Minister of Public Health resigned over allegations of corruption in a medical supplies procurement deal.

Thailand has several laws to combat corruption. The independent National Anti-Corruption Commission (NACC) coordinates official efforts against corruption and hasbroad investigatory authority. In addition to the NACC, the Thai Constitution alsoestablished other independent agencies, including the Office of the Ombudsman, the Constitutional Court, the Election Commission, and the Human Rights Commission. In December 2003, Thailand became a signatory to the U.N. Convention Against Corruption but has not yet ratified the convention. In April 2005, Thailand endorsed the ADB-OECD Anticorruption Action Plan for Asia and the Pacific, and assigned the Ministry of Justice to implement the Action Plan. The Office of Public Sector Anti-Corruption Commission, under the Ministry of Justice, was established to assist the NACC by investigating cases of lower ranking government officials.

The status and powers of the National Counter Corruption Commission (NCCC) have been enhanced, giving it independence from all branches of government. The members of the Commission sit on the NCCC for a term of nine years with no renewal, and report to their own chairperson. Individuals holding high political offices, and members of their immediate families, are now required to list their assets and liabilities before taking office and upon leaving office. It appears that there is an increasing will to enforce transparency in government procurements. However, the autonomy and transparency of the NCCC has not truly been tested; the appointment of individual commission members and accusations of conflicts of interest are still being publicly questioned in the Thai media.

Police corruption is common. Corruption remains widespread among members of the police force. There were numerous incidents of police charged with sexual harassment, theft, and malfeasance. There were reports that police tortured, beat, and otherwise abused detainees and prisoners, generally with impunity. Police officers were arrested for drug trafficking, were reportedly involved with intellectual property rights violations, and were convicted on extortion charges.

In Thailand, police have been known to guard brothels and even procure children for prostitution. Sex tourism is a very lucrative industry that spans the globe. In 1998, the International Labour Organization reported its calculations that 2-14% of the gross domestic product of Indonesia, Malaysia, the Phillipines, and Thailand derives from sex tourism. In addition, while Asian countries, including Thailand, India, and the Phillipines, have long been prime destinations for child-sex tourists, in recent years, tourists have increasingly traveled to Mexico and Central America for their sexual exploits as well. Child sex tourism makes its profits from the exploitation of child prostitutes in developing countries. Many children are trafficked into the sex trade. In Thailand, for example, Burmese girls as young as thirteen are illegally trafficked across the border by recruiters and sold to brothel owners.

Corruption, including bribery, raises the costs and risks of doing business. Corruption has a corrosive impact on both market opportunities overseas for U.S. companies and the broader business climate. It also deters international investment, stifles economic growth and development, distorts prices, and undermines the rule of law.