OECD Review of the Corporate Governance of State-Owned Enterprises in Thailand

State-owned enterprises (SOEs) play a crucial role in the Thai economy. The central government holds full or majority ownership in 52 SOEs, including three listed companies, and holds minority stakes between 10% and 49% in 6 listed companies. In 2023, these 52 SOEs had total assets worth USD 448 billion and over 300,000 employees. Their total revenue was USD 161 billion, equivalent to 32.7% of GDP. They dominate key sectors, particularly energy, telecommunications, transportation, and financial services.

Thailand's ownership structure follows a 'dual ownership' model with central government co-ordination. The State Enterprise Policy Office (SEPO), operating under the Ministry of Finance, oversees and co-ordinates the management of Thailand’s 52 SOEs. SEPO is responsible for the policy planning, direction, and operational performance of these enterprises, and ensuring their alignment with national economic development goals. SEPO collaborates with line ministries in exercising ownership rights, including board nominations, strategic decision-making, and oversight responsibilities. Line ministries formulate objectives and operational strategies for the SOEs within their respective portfolios.

Thailand significantly improved the framework for SOE ownership and corporate governance by establishing the State Enterprise Policy Committee (SEPC) in 2014, formalised as a legal entity in 2019, and by designating SEPO within the Ministry of Finance as SEPC's secretariat. These advancements were supported by the 2019 Development of Supervision and Management of State-Owned Enterprise Act (“2019 SOE Act”) and the 2019 Principles and Guidelines on Corporate Governance for State-Owned Enterprises (“2019 Principles and Guidelines”). Additionally, SEPO introduced the SOE Development Plan B.E. 2566-2570 in 2022, aligning strategic directions with national policies and refining performance evaluation. The government plans to regularly revise the 2019 Principles and Guidelines to align them with international best practices.

To further improve its SOE environment and better align with the OECD Guidelines on Corporate Governance of State-Owned Enterprises, this review has identified five key recommendations:

• Enhance the effectiveness of the state ownership function. The effectiveness of the state ownership function could be increased by enhancing SEPO’s oversight and enforcement powers over SOEs. Furthermore, the government should simplify and standardise legal forms of SOEs, incorporating them to the extent possible, and ensuring that the same corporate norms applicable to private companies apply to the economic activities of SOEs. Standardising the legal forms of SOEs would also enhance transparency.

• Establish a policy framework that ensures competitive neutrality. Economically significant SOEs are exempt from the Trade Competition Act, particularly concerning the public interest exemption. Collaboration between the competition authority and regulatory bodies should be enhanced to ensure policy coherence and avoid unintentional competition distortions. Furthermore, the government should grant the competition authority the necessary powers to effectively enforce actions against the anti-competitive behaviours of SOEs.

Moreover, regulations for managing SOEs, which are intertwined with government policy objectives, often blur the line between business operations and political authority. Regulatory powers should be entrusted to relevant state institutions and separated from any ownership functions to alleviate conflicts of interest and increase accountability and transparency.

• Enhance transparency and disclosure measures. The state should ensure full disclosure of any state support, financial assistance, or subsidies received by SOEs. This is essential for preventing potential distortions in markets where SOEs compete. When SOEs carry out public service obligations (PSOs), there is a need for more consistent separation of accounts between PSO and other activities in their reporting.

Although the Ministry of Finance has established internal audit standards, external independent audits are not required for unlisted SOEs. The 2019 Principles and Guidelines lack enforcement mechanisms, resulting in sporadic compliance. External independent audits should be mandatory for all SOEs, and state audit procedures should not be substitutes. The state should ensure systematic implementation and active monitoring of disclosure requirements by all SOEs. Additionally, there is a need to improve the monitoring and implementation of internal control and risk management measures of SOEs.

• Improve board autonomy and independence. Supervisory boards should be independent in decision-making regarding SOE operations. This includes clearly defining independent directors, increasing their proportion on boards, and reducing the overall number of directors. Criteria for independent directors should be standardised and specifying ex officio directors in legislation should be avoided. While SOE board performance is monitored and evaluated, results are currently for internal use only. To better align with the state's role as a shareholder, it is crucial that evaluation results inform future board nominations.

• Incorporate sustainability considerations into the ownership policy. Given that many Thai SOEs operate in sectors critical for reducing greenhouse gas emissions and the climate transition, ambitious sustainability goals for SOEs could be integrated in the state’s ownership policy.

Addressing these recommendations will improve the performance and accountability of Thai SOEs, enhance their contribution to the country's economic development, and help Thailand integrate further into global value chains.