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Private Participation in State Undertaking Act B.E. 2556

The demand for up-to-date and diversified infrastructure and public services are increasing which mainly comprise of large projects that require high-value investments. The public sector, imposed with the duty to provide adequate infrastructure and public services for the needs of its people, is thus required to establish efficient infrastructure at a minimum of expense. Hence, the plan to allow private sectors to jointly operate in State undertakings for providing infrastructure and public services has been established.

Prior to 1992, Thailand did not provide laws directly regulating the granting of concessions or rights to jointly invest with the State. In most cases, a single authority, whether an individual or an institution, would be empowered to consider approval while important matters would be under the discretion of the relevant Minister. Such approval process failed to regularly develop concrete criteria and fostered widespread corruption. Therefore, in 1992, the Private Participation in State Undertaking Act B.E. 2535 (1992) (“PPSU Act 1992”) was enacted to clearly set out criteria in approving a private party to jointly operate a State undertaking.

Regardless of instigating the PPSU Act, ambiguity across multiple facets remained prevalent in practice, e.g. scope of applications, procedures and institutions with authority to approve each project, partnerships between public and private sectors, timeframes in the approving process, etc. The Council of State received numerous requests for interpretation in these regards. In response, the National Economic and Social Development Board, as the responsible organization, drafted an amendment of the PPSU Act which was approved by parliament in 2012. The amended Act was enacted as the Private Investment in State Undertaking Act B.E. 2556 (2013) (“PISU Act 2013”), published in the Royal Gazette and entered into force on 4 April 2013.

The PISU Act 2013 consists of 72 sections with the material contents as follows:

  1. For private sectors to jointly invest with public sectors, the fiscal discipline must be duly considered (Section 6). The fiscal discipline regulates the government’s current and future public expenditures and financial obligations to keep in balance with the government’s revenue-raising capacity.
  2. The granting of concession under the Petroleum Act and the granting of operation permit under the Minerals Act are not subject to the PISU Act 2013.
  3. The Policy Committee of Private Investment in State Undertaking (“Policy Committee”) shall be established (Section 8) to consider and approve projects that private sectors can jointly invest in. To create a more transparent process, the Policy Committee will consist of the Prime Minister as Chairman and political officials, civil servants and independent experts as committee members. The projects to be considered and approved by the Policy Committee must be of at least 1 Billion Baht in value (Section 23).
  4. The State Enterprise Policy Office (“SEPO”) is responsible for administrative work of the Policy Committee, e.g. drafting the Strategic Plan for proposition to the Policy Committee, studying and analyzing each project to give suggestions to the Policy Committee and gathering information about all joint investments (Section 18).
  5. There shall be a strategic plan for private sectors jointly investing in State undertakings (“Strategic Plan”) covering 5 years to set a policy on investment in different State undertakings, including the types and characteristics of undertakings fit for private investments. The Strategic Plan must be in accordance with the provisions of the Thai Constitution and the National Economic and Social Development Plan (Section 19). In principle, a project subject to the PISU Act 2013must be a joint investment with value of at least 1 Billion Baht. However, if a project is specified in the Strategic Plan, it will be subject to the PISU Act 2013 even if its value is less than 1 Billion Baht (Section 58).
  6. Reports analyzing the projects subject to the PISU (“Analytical Report”), irrelevant of its value, must be completed by advisors with the qualifications defined by the Policy Committee. The SEPO shall make a list of qualified advisors (Section 25).
  7. The responsible governmental institution of each project must propose an Analytical Report to the relevant Minister for review. The Minister shall review the Analytical Report within 60 days of submission and pass it on to the Policy Committee for approval (Section 26).
  8. A Compliance Committee shall be established to oversee and monitor undertakings so that they comply with the joint investment agreements, suggest solutions to problems that might occur and report on results, progress, problems and solutions of undertakings to the relevant Minister for acknowledgement and consideration to amend the joint investment agreements, etc. (Sections 43 and 44).
  9. The Compliance Committee oversees and controls major and minor amendments of agreements and the entering into new agreements (Section 47).
  10. The Private Investment Promotion Fund (“Fund”) shall be established (Section 49). The money and properties of the Fund comprises of governmental subsidy or annual budget, official fees from the sale of auction documents, money or properties obtained from the operation of the Fund and interest of money or properties of the Fund (Section 50) which shall be used for the purpose of information survey and creation or amendment of the Strategic Plan, hiring advisors and to cover management and operation expenses of the Fund (Section 51).
  11. Members of the Policy Committee or the Compliance Committee that violates the principle to prevent conflicts of interest or the prohibition on conflicts of interest shall be subject to penalty of not more than 3 years of imprisonment or a maximum fine of 600,000 Baht, or both (Section 66).

Currently, however, no ministerial regulations or secondary laws have been enacted to support the enforcement of the PISU Act 2013. Consequently, the PISU Act 2013 is not yet able to fully enforce. In this regard, the Ministry of Finance, estimates that approximately 16 ministerial regulations will be promulgated within 6 months of the PISU Act coming into force.

It can be seen that the current PISU Act 2013 has specified more concrete criteria in considering the approval of projects regarding process and timeframe from the stage of project proposals to compliance with the monitoring stage. Nonetheless, the 16 ministerial regulations to be enacted to support the enforcement of the PISU Act 2013 must be carefully observed as to whether they will facilitate joint investments with public sectors with more convenience, speed and fairness or rather the contrary.

By Rawat Chomsri (Partner), Panisa Suwanmatajarn (Associate), and Arpon Tunjumras (Associate) © July 2013
Khun Rawat can be reached at Rawat@siampremier.com
Khun Panisa can be reached at Panisa@siampremier.com
Khun Arpon can be reached at Arpon@siampremier.com