Thailand’s Messy Telecom Loan to Burma Returns

Thai Prime Minister Samak Sundaravej has cleared the way to pay the remainder of a controversial US$120 million soft loan by the Export-Import Bank of Thailand to the Burmese government that played a role in the political demise of Samak’s predecessor, ousted premier Thaksin Shinawatra.

Samak's order clearing the release of the remaining funds came one day after his return from a March 15 meeting with Burma's top leader, Senior General Than Shwe, in the Burmese capitol Naypyidaw.

Noppadon Pattama, Thailand’s foreign minister and former lawyer for Thaksin, said the loan was revived because "political wrangles" should not get in the way of building ties with neighbors. "Thailand's internal problems have no effect on the right of Burma to get the money," he said.

Thailand's Assets Examination Committee alleges that Thaksin abused his powers in increasing the loan in order to benefit Shin Satellite, a subsidiary of his family business, Shin Corp. Following the 2006 coup that ousted him, the loan was suspended due to allegations that Thaksin's business interests would profit from the loan.

In addition to the potential profit Shin Corp – now owned by Singapore’s Temasek Holdings ‑ may receive out of the renewed loan, the new Thai government seems keen on assisting Burma's military rulers any way they can. The clearance for the loan followed comments by Samak that Burma was a country at peace because it is run by a regime of meditating Buddhists and that, "killings and suppression are normal there." Noppadon, during a visit to the United States, furthered stepped up Thailand's engagement policy with Burma by telling reporters,

"We have to help Burma and engage them," he told reporters following a meeting with US Secretary of State Condoleezza Rice in which he reportedly said US sanctions against Burma would achieve nothing and encouraged the US to engage in multinational talks instead.

The assets body is set to rule on Monday whether Thaksin will have to stand trial for his involvement in the soft loan to Burma. Sak Korsaengruang, the assets panel chairman, said he would recommend that Thaksin be tried as the sole defendant. The committee had previously agreed to press criminal charges against Thaksin in August 2007.

The loan is one of four charges laid against Thaksin for abuse of authority during his time in power. The charges are all related to alleged concealment of shareholdings in Shin Corp and his administration's alleged favoritism towards what was then the family telecoms empire. Together the charges carry the possibility of 26 years of imprisonment. Shin Corporation was sold to Temasek Holdings of Singapore in January 2006. Whether the sale of Shin Corp was improper is one of the charges being investigated by the AEC and US$2.1 billion of the $2.3 billion Thaksin's family gained from the sale has been frozen.

The investigation into the Burma loan centers on Thaksin's alleged role in ordering the Exim bank to lend an additional $28.8 million on top of $96 million already loaned to the Burmese government to improve its telecommunications infrastructure. According to the asset committee’s secretary, Kaewsan Atipho, the loan came with the condition that Burma buy materials and services from Shin Corp's subsidiary, Shin Satellite Plc, a satellite, broadband internet and fiber optic firm.

Thailand's Matichon newspaper reported in August 2004 that Burma's Ministry of Posts and Telecommunications had requested funding for three telecommunications projects worth over $30 million as a part of the Exim Bank's loan. The reportedly used the loan to buy telecom equipment to link up with the iPSTAR satellite owned by Shin Satellite and used the satellite's services to provide mobile phone and broadband internet services.

Thaksin's role allegedly not only allowed Shin Satellite to profit from the purchase of goods and services by the Burmese government, but also transferred any business risk from the project to the Finance Ministry. The Finance Ministry is legally responsible for risk surety on loans made by the Exim Bank and the AEC estimates that the deal caused $3.2 million in damages from the interest subsidy paid by the Finance Ministry to make the loan available.

Following the loan agreement, Shin Satellite leased satellite services for broadband internet and telephone services to Bagan Cybertech Ltd. in 2004. The company was nationalized and placed under the control of Mynamar Post and Telecommunications in 2005 after its owner, Ye Naing Win, son of deposed Prime Minister Khin Nyunt, was jailed on corruption charges.

Although Thaksin and his lawyers maintain that the former premier had nothing to do with the loan, former Deputy Prime Minister Surakiart Sathirathai told the assets committee on April 30 2007 that Thaksin himself gave the order to lend Burma the money. Surakiart, who was Thaksin's foreign minister at the time, claims the loan was given over his objections that the funds were going to be used by the Burmese for leasing satellite transmission signals from a satellite owned by Thaksin's family. He also claimed that Thaksin not only ordered the approval of the loan but for the Exim Bank to increase the loan by $28.8 million so Burma could buy extra telecoms equipment and services from Thailand.

The loan proposal was reportedly approved in February 2004 and an agreement was signed with the Myanmar Foreign Trade Bank (MFTB) in June 2004. The soft loan was granted at special interest rates of 3 percent per annum with a five year grace period on payment of the principal. The money was to be used by the MFTB to allocate loans to various Burmese agencies to purchase capital goods and services from Thailand. The original loan was for road construction and infrastructure improvement and the Exim Bank argued the loan would create jobs and income for 16 Thai export firms as well as boost ties with a neighbor.

Thaksin sued the assets committee in August 2007 for defamation, accusing the spokesperson for the committee of telling reporters that Thaksin ordered the loan increase. The papers allege that this caused the public to falsely believe Thaksin ordered the increase for personal gain. The suit claims the loan was based on a contract between the Exim Bank and the Burmese government and Thaksin had no power over the decision. Thaksin has asked for compensation of $45 million with interest

What remains unclear is how much of the Bt4 billion (US$126.9 million in current dollars) remains unpaid. Noppadon has said that only $32 million has been given so far. The Exim Bank, however, said in a September 2007 statement that all but $11 million had already been given.