THAILAND Country Profile

Public Procurement and Contracting

Business Corruption

According to the US Department of State 2009, corrupt relationships are common between government officials in charge of public tendering and the private sector. Companies have stated that the need to make unofficial payments is a major constraint when bidding for government contracts. Public contracts, especially in relation to public land, are prone to corruption. The US Department of State 2009 also states that procurement requirements are sometimes altered in order to favour well-connected companies over others. As a result, collusion between potential bidders is not uncommon. In what is called bid-rigging, which was being described by online news The Nation in 2006, companies agree on which one of them should win the contract by presenting the lowest bid, while the rest will submit higher bids. As a result of these corrupt practices, the government is often forced to pay overprice for projects because the winning bid will include the cost of paying off the other bidders or the cost of bribing government officials. Global Integrity 2007 describes procurement processes in Thailand as 'very weak'. Companies are generally recommended to use a specialised public procurement due diligence tool in order to mitigate corruption risks in relation to public procurement in Thailand.

Read more on public procurement under 'Public Anti-Corruption Initiatives' in the Initiatives section.

Political Corruption

One of the main reasons for the high level of corruption within public procurement in Thailand is the government-business relations, which were especially close under the former ruling TRT party and Thaksin government, but continue to exist. The collusive practices between government officials and companies sustain the lack of transparency in bidding and contract procedures. One example noted by several sources such as Global Integrity 2007, is the irregularities found in connection with the procurement of 90 million rubber saplings that led to a former Minister of Finance and a former Deputy Minister of Agriculture being charged with corruption in 2008. Another example, according to International Herald Tribune, is that of irregularities in the procurement of fire trucks, which led to the resignation of the Governor of Bangkok and of the ex-Governor Samak, who also served as Prime Minister for a short period in late 2008.

According to the Transparency International National Integrity Systems 2006, the government is able to grant monopoly concessions in certain areas of public contracting. This fact can represent a huge incentive for companies to engage in corrupt practices, such as offering high-level officials and politicians illicit sums of money - typically fixed as a given percentage of the total value of the contract. The same report also states that public contracts are considered the primary channel for government officials, bureaucrats, politicians and companies to engage in medium to large scale corruption.

UN Thailand Country Report 2005 states that under government regulations, two government officials must conduct independent investigations into the appropriate pricing of the materials to be procured. A common practice is that the two investigators secretly agree in collusion with the vendor to arrange that they submit their valuations at inflated prices, after which they take a kickback. Another method of corrupt practice is to set bidding conditions so strictly that it excludes most bidders (e.g. small companies, new companies etc.).

Read more on public procurement under 'Public Anti-Corruption Initiatives' in the Initiatives section.

Frequency

World Economic Forum: The Global Competitiveness Report 2009-2010:
- Business executives give the diversion of public funds to companies, individuals, or groups due to corruption a score of 3.5 on a 7-point scale (1 being 'very common' and 7 'never occurs' and the mean of the results of the 133 surveyed countries being 3.8).

- Business executives give the favouritism of government officials when deciding upon policies and contracts a score of 2.9 on a 7-point scale (1 being 'always show favouritism' and 7 'never show favouritism' and the mean of the results of the 133 surveyed countries being 3.3).

The Nation: Thaksin-Era Corruption 'Cost State Bt 400 Bn', 1 October 2006:
- According to Supannee Chai-Amporn and Sirinthip Arun-Rue, National Institute of Development Administration, corruption in connection with large government projects are estimated to be between 5% and 30% of the costs of the projects.