Royal Wealth (continued)

The history of the land owned by the Thai monarchy, and thus the Crown Property Bureau, can be traced as far back as the Buddhist kingdom of Sukothai in the 13th century, as traditionally in Thailand the king owns all the land.

In the 1800s, the monarchy set up the Privy Purse to use the profits from royal trading to pay the royal household, and it was later used to finance overseas education for royals. At least five percent of government revenues were transferred into the Privy Purse each year. In 1890, it became the Privy Purse Bureau (PPB), acting as the monarchy’s investment arm, according to “A History of Thailand” by Chris Baker and Pasuk Phongpaichit.

The government funds flowing into the PPB increased to about 15 percent of state revenues and the money was used to invest in rice mills, property developments, shops and provincial markets.

“As roads were built the price of land increased, and this attracted the elite and the PPB to invest in land and land related business such as market places and row houses,” wrote Porphant Ouyyanont, an economist at Thammasat University, in an academic paper. “A survey of land prices in Bangkok in the first decade of the 20th century shows that the price of land was highest in the areas where roads were cut.”

During this time many Chinese families who prospered through royal patronage formed banks and shipping companies to export rice. But a series of poor harvests from 1904 to 1908 led to a financial crisis.

The monarchy, meanwhile, had set up Siam Commercial Bank with capital from government revenues, allowing it to survive that economic downturn. SCB extended loans to the Chinese merchants, who survived for a little while longer before the monarchy’s bank seized their assets when they defaulted on loans.

By 1910, the PPB was the country’s largest property owner, with about one-third of all land in central Bangkok. It held investments in railways, tramways, electricity, banking, cement, coal mining and steam navigation. In addition to reclaiming land through bad debts, it was able to occupy public land, and could directly buy land from whomever it wanted.

The bureau “always had the advantage in terms of obtaining information on road cutting, the price of land, the advantage of land location and so on,” wrote Porphant. “In this way the PPB acquired many plots of land established at good locations and commercial centres.”

Often the PPB would buy a plot of land to build houses, and then demand that the government build a road nearby to increase the prices of land and properties.

“The linking of Bangkok's administrative structure with royal interests produced both a physical and economic stamp on Bangkok which has had an enduring effect on the city's development,” Porphant wrote.

Absolute Monarchy Ends

Although in 1932 a coup ended the absolute monarchy, the putsch leaders wanted to keep the monarch in a symbolic position to help control the masses. In bargaining over his diminished role, King Prajadhipok, or Rama VII, at one point threatened to sell many royal possessions, including palaces, shrines and even the Emerald Buddha, which sits in the Grand Palace to this day.

The new government passed laws transferring control of the Privy Purse Bureau to the government, and subjecting the king to an inheritance tax. Unsurprisingly, King Prajadhipok failed to sign the legislation.

After the king abdicated in 1935, the Privy Purse was divided into Prajadhipok’s personal property and the Crown Property Bureau, which fell under the Ministry of Finance. That year, a New York Times story said the king’s property yielded 500,000 pounds sterling annually, or about 6.5 million baht at the time. An unskilled laborer in Bangkok at the time would make about one baht for a day’s work, meaning he would have to work for 17,808 years to amass as much as the palace made in 12 months.

In 1936, the Royal Assets Structuring Act declared that all Crown Property Bureau income was tax exempt, although the king must still pay taxes on his personal fortune. “National assets are exempted from tax, so therefore the king’s assets are exempted, because they are the same as national assets,” section eight of the law says.

Thawiwong Thawalyasak, educated in Cambridge and a page to Rama VI, persuaded the government to recognize the palace’s ownership of property that fell into private hands after Prajadhipok was gone, according to Paul Handley’s book, “The King Never Smiles.” Thawalyasak made tens of thousands of residents on this land start paying rent to the Crown Property Bureau, and began evicting those who wouldn’t pay. He even tried to evict the parliament, but the lawmakers refused.

The consolidation of property under the CPB allowed the monarchy to slowly rebuild its fortune. By the 1960s, Siam Cement, the majority palace-owned industrial conglomerate, as well as Siam Commercial Bank (SCB), were growing with the strong economy.

The palace became the ideal joint venture partner. Its land was used to build major hotels like the Siam Intercontinental, the Erawan and the Dusit Thani. It held investments in insurance, agribusiness, tires, and textiles. By the late 1960s, Handley writes, the CPB had 500 staff members to oversee its investments and property holdings.

In 1970, Thawiwong died, and the ensuing decade saw failed investments like Air Siam, an airline meant to rival Thai Airways, and other challenges to the CPB empire.

In one case noted by Handley, the bureau ordered slum dwellers at Mu Ban Thaepprathan to vacate the premises so it could be commercially developed. “The very public fight against eviction generated comparisons between the CPB and officials who evicted poor farmers from degraded state forests,” he wrote. “When student activists got involved and likened the palace to a landowning feudalist, the embarrassed palace halted the project.”

In the late 1970s, the Communist Party of Thailand had launched an offensive against the monarchy, criticizing its extravagance. At one point, the communists broadcast comments saying: “The more powerful the monarch becomes, the poorer the people become, and the more the monarch’s income from land rental, his shares in commercial companies and his bank savings increase.”

Prem brings stability

By the early 1980s, the communists had suffered a series of setbacks, and many took up an amnesty offered by former army chief Prime Minister Prem Tinsulanonda, who now heads Bhumibol’s 19-member privy council. Under Prem’s watchful eye, royal projects funded by CPB revenues greatly expanded, along with the enforcement of lese-majeste laws, ensuring that criticism of the palace came to a halt.

In 1988, the CPB held stakes in about 40 companies, and the stock exchange was booming. Its holdings in Siam Cement and SCB alone were worth more than $600 million, not to mention the value of its 40,000 acres of land, including 13,300 in Bangkok.

The bureau’s burgeoning wealth put it on the radar screen of the foreign press, and the Far Eastern Economic Review wrote a cover story on the CPB in June 1988 called “The King’s Conglomerate.” In it, Chirayu Isarangkun Na Ayuthaya, the longstanding CPB director who had only been on the job a few months, said the bureau is neither public nor private.

“We are a little of both,” he told the magazine. “Our charter appears to highlight the image of a public entity. But we also enjoy flexibility similar to [but not totally on a par with] a private enterprise.”

The article added that the CPB’s operations are “supervised” by a five-man committee headed by the finance minister. The king is supposed to be consulted on important matters, the article says, “but actual royal involvement is rare.”

The story made no mention of the hybrid company’s unfair advantages, and didn’t question the legal gray area the CPB operates in. For instance, if the CPB gets so many state privileges and operates under the Ministry of Finance, why is its annual report only for the eyes of the king?

A former Finance Ministry official familiar with budgets says that although the government technically runs the CPB, in reality the decisions are made by the monarchy.

“Actually the king is supposed to play a symbolic role,” he told Asia Sentinel. “But this is Thailand.”

The king’s personal fortune sits with the Privy Purse. Although the palace gets a stipend from CPB revenues, the rest of the money goes to support the institution of the monarchy, including the many royal projects and propaganda activities. But the details of who gets what are not for public consumption.

Handley argues that the royal projects, along with low rents and media campaigns, were an orchestrated effort by the palace to win political support for the throne. This could be seen from the many villagers who petitioned the king directly to help them.

“Details about these petition cases remain a closely held secret of the palace, with the secrecy enhancing the very mystery of the king’s wisdom and ability to improve the lives of his subjects,” he writes. “The cases divulged a greater truth, though: the more the king’s works were advertised by Prem at the expense of the government’s, the more the people looked beyond the government to their king for escape from misery.” Without funds from the CPB, this would be impossible.

Rapid expansion

Things only got better for the palace business conglomerate in the early 1990s. Chirayu aggressively sought deals with developers that would give the CPB a return of share rentals and equity. It put more money into small restaurants, luxury condominiums, shopping complexes, hotels and office space. The new leases substantially increased CPB income and the king’s personal wealth. In 1990, Handley writes, dividends to the Mahidol family (Bhumibol was the son of Prince Mahidol of Songkhla and the grandson of King Chulalongkorn) reached US$30 to $40 million per year tax-free, and the holdings of the royal family were worth more than $1 billion. Estimates now put Bhumibol’s personal wealth at between $2 billion and $8 billion.

The crown also had big plans. Its media arm sought to buy Thai-language dailies and a television station, as well as build a film production studio and tourist attraction to rival Universal Studios. The CPB had subsidiaries involved in advertising, cable television, financial services, construction, cinemas, insurance, hospitals, and petrochemicals, among many others.

During this time, a few questionable deals surfaced. In 1996, the government investigated when Siam TV & Commercial, a joint venture between the CPB and SCB, won a concession to run a commercial television station, iTV. The company won the 30-year contract with an offer of 120 billion baht in royalties, even though a rival company offered royalties of 625 billion baht. The results of the investigation were never reported.

Also in 1996, the CPB sought to acquire a 15 percent stake in rehabilitated First Bangkok City Bank from the central bank for 8.50 baht a share, even though the market valued them at 22.50 baht per share. The deal was arranged by Finance Minister Surakiart Sathirathai, who is married to Suthawan Sathirathai, a niece of Queen Sirikit. The successor for Surakiart, who also served in Thaksin’s administration, canceled the order, saying “the fund stands to lose too much.”


When the government floated the baht on July 2, 1997, the Crown Property Bureau was devastated. Its media arm, already struggling before the crash, quickly went bankrupt. Siam Cement and SCB were also shaken, and Chirayu took over as board chairman of both companies. Siam Cement had not hedged US$4.2 billion in foreign debts, resulting in a $1.2 billion foreign exchange loss in 1997. Siam Commercial Bank was worse off, as loan collateral didn’t even cover half of the loans given out. The bureau’s total liabilities hit six billion baht.

By 1998, Chirayu said it was time to “bite the bullet.” The CPB announced that it was cutting 143 billion baht worth of new projects and adopting the king’s “sufficiency economy” approach. It would now focus on its core investments in Siam Cement and SCB, as well as try to extract more money from its leases.

“We're told not to be greedy,” Chirayu told reporters. “Our problem in the past when the economy was in good shape was that we received many investment invitations and we agreed. From now on, we need to be careful and our investment policy will hinge on the macroeconomic prospects. We must not invest in risky projects.”

Getting a “fair return”

The bureau received a large amount of help post-crisis, although its earnings reportedly dropped 80 percent in 1998. Honda Motor raised capital in its struggling local unit partially owned by the CPB and offered to sell the stake back to the bureau at book value in 10 years. At the same time, Chirayu insisted that the government help bail out SCB, even though it was strictly a commercial enterprise.

The government proceeded to inject $1 billion to bail out SCB and agreed to sell back its stake to the bureau in the coming years. The CPB did so in 2004 when it traded a piece of land near Victory Monument to the Finance Ministry, which technically oversees the bureau, for a 13 percent stake in SCB.

After the financial crisis, Thaksin also helped the palace out when he paid $60 million for SCB’s stake in iTV, which for a brief period was the only independent television station in Thailand. “With little likelihood of ever recovering the investment, Thaksin was effectively bailing out the bank and the palace,” Handley wrote.

The CPB also set a goal in 2000 to increase revenue from rents from 300 million baht per year to one billion baht by 2005. It would raise rents across the board, including for the cash-strapped government agencies that supposedly controlled the bureau.

“We will focus on both areas and try to maximize benefits from our assets,” Chirayu said. “We also have no plan to invest in any new projects.”

Having learned its lesson, the CPB restructured in 2001. Chirayu announced that the CPB would shed its “antiquated” way of doing business to get a “fair return” on its holdings. The bureau created CPB Equity to look after its equity investments and joint ventures, and CPB Property to look after its land holdings.

Things suddenly got much better the following year, and the halt on investments was lifted. Helped by a team that prominently featured American business consultant Michael David Selby, the Crown Property Bureau announced that it repaid its debts from the financial crisis and was “now financially strong,” according to executive Yos Euarchukiati.

In fact, its plans, as the ensuing years have shown, were bigger than ever.

Part One: How Thailand’s Royal Manage to Own All the Good Stuff

Related Story: Long Live the King