Making it out of the maze

Making it out of the maze

The private sector is calling for the government to tackle outdated or unnecessary laws that are hobbling Thailand's competitiveness

A worker cleans the floor near a TV assembly line at a Bangkok factory. Outdated laws are hampering competitiveness. REUTERS
A worker cleans the floor near a TV assembly line at a Bangkok factory. Outdated laws are hampering competitiveness. REUTERS

When starting a business in Thailand, many people find themselves in a maze of regulatory procedures and licences, not to mention conflicting legal interpretations by different state agencies.

Such complications discourage some from even starting a business, while those who decide to jump in may end up facing unnecessary costs and time-wasting through a string of legal requirements.

Despite a push by some in government to address the problem, more could be done to deal with the issue in the eyes of the private sector.

Thailand Development Research Institute (TDRI) suggests efforts be scaled up to tackle outdated or unnecessary laws, known as regulatory guillotine, otherwise Thailand will find it difficult to boost its competitiveness or return to strong economic growth.

Regulatory guillotine is not a new concept. The Japanese government made it one of three core policies to shore up the sagging economy under the Shinzo Abe administration in 2012, which subsequently eased the process of doing business for foreign investors as well as domestic investment in healthcare and farming.

The move may be increasingly necessary now as Thailand is gearing up for economic recovery in the wake of the pandemic.

UNFAIR COMPETITION

Marisa Sukosol Nunbhakdi, president of the Thai Hotels Association (THA), said a lot of work needs to be done to improve hotel-related laws and regulations.

There are various types of accommodation, such as rafts, tents and shared houses, that have not been regulated, resulting in unfair competition as those operators do not have to pay taxes similar to licensed hotels.

However, while waiting for those rules to be amended, the government has to consider other methods that force operators to list their properties properly, she said.

For instance, the government can introduce regulations on advertising that requires the licence number from operators.

Operators that want to sell their lodging via online platforms must show their registered status, said Mrs Marisa. By doing this, customers can be assured of the safety standards as the Hotel Act and Building Control Act compels operators to strictly follow safety measures.

"Covid-19 gives us an opportunity to set things straight, so the government needs to respect and protect hotels that are operating legally," she said.

Meanwhile, conflicting interpretations given by different bodies can create havoc for those who intend to apply for a licence.

Thienprasit Chaiyapatranun, vice-president of THA, said even though the current regulations under the Interior Ministry allow old buildings to be converted into hotels, these buildings must receive approval from the Public Works and Town and Country Planning Department before proceeding to the licence process with the Department of Provincial Administration.

The two departments regularly see things differently, which makes it hard for operators to come to a conclusion, he said.

For instance, regulations allow old buildings' main ladders to be used as fire escapes if their fire-resistant walls can withstand a conflagration for half an hour, said Mr Thienprasit.

But provincial authorities interpret this guideline another way and decline to approve licensing for such structures, he said.

Even though the government is poised to enact regulations that allow other types of accommodation to register for a hotel licence within this year, they will face the same problem if authorities cannot come to a mutual understanding on this process, said Mr Thienprasit.

Thirayuth Chirathivat, chief executive of Centara Hotels and Resorts, said hotel operators have to abide by the Hotel Act, which prioritises safety, such as the construction of fire escapes.

The law has to ensure fair play for hoteliers, while authorities should crack down on illegal operators who convert their apartments or rooms for tourists, which could violate safety standards for guests, he said.

A hotel worker disinfects day beds at an outdoor pool. The Thai Hotels Association demands authorities treat all kinds of accommodation equally. Chanat Katanyu

GUILLOTINE FALLS SLOWLY

The Federation of Thai Industries (FTI) is worried the attempt to revoke outdated laws is making little progress, causing Thailand to lose an opportunity to revitalise the economy.

"We have not seen any clear direction in the regulatory guillotine," said FTI chairman Supant Mongkolsuthree.

Kobsak Pootrakul, former deputy secretary-general to the prime minister for political affairs, was earlier assigned to lead a subcommittee working on the regulatory guillotine, but who chairs the committee remains unknown, said Mr Supant.

The Joint Standing Committee on Commerce, Industry and Banking joins the FTI in urging authorities to speed up the task of removing outdated laws.

Such rules, including burdensome mandatory requirements related to licences and permits, caused 134 billion baht in unnecessary expenses, according to a study by TDRI.

Faster implementation of the regulatory guillotine is needed to help entrepreneurs better control their operating costs and become more competitive, said Mr Supant.

"This is an easy way to help the economy without spending the state budget," he said.

The government has launched many stimulus packages to increase people's spending during the pandemic, but these efforts are not enough to help Thailand get through the economic crisis, FTI vice-chairman Kriengkrai Thiennukul said.

A state-private initiative to remove unnecessary laws marks a good start, but officials need to maintain the momentum, he said.

In 2019, TDRI found up to 1,026 or 85% of 1,094 legal procedures could be amended or abolished completely.

The concept of a regulatory guillotine was pushed when economic supremo Somkid Jatusripitak was deputy prime minister.

"The government at that time was pushing ahead with the regulatory guillotine to shorten legal procedures and drive the economy forward," said Mr Kriengkrai.

But no significant progress has been made and the private sector continues to bear unnecessary burdens at work, he said.

DIFFICULT TASK

Deputy Prime Minister Wissanu Krea-ngam, who is in charge of the government's legal affairs, said the government remains committed to reducing unnecessary or obsolete laws and regulations, but he admits it is quite difficult to rescind many laws because most ministries still insist that their laws remain essential.

"Regulatory reforms are afoot," said Mr Wissanu.

"The cabinet approved in November last year plans that require state agencies to revise and update their regulations every five years to keep abreast of the changing environment, particularly those enforced before Nov 27, 2019."

A source from Government House who requested anonymity said the secretariat of the cabinet informed ministers and heads of state agencies in December 2020 that the government required state agencies to cut 84% of their existing laws that are considered obsolete and hinder the ease of doing business within this year, following suggestions by the World Bank.

Regulatory reform will be carried out this year to evaluate the efficiency of state agencies' performance, the source added.

REAMS AND REGULATIONS

Several government agencies are pushing for regulatory revision to ease the burden shouldered by businesses. This includes the Securities and Exchange Commission (SEC), which pledged to continue to revise capital market regulations under the regulatory guillotine programme to enhance the competitiveness of the private sector and reduce the investment burden shouldered by individuals.

The SEC's goal is to complete the task by 2023, working on 88 regulatory projects that could reduce operating costs of the private sector by as much as 231 million baht per year, which amounts to 137,000 working hours and 2 million sheets of paper.

The SEC said its regulatory revision is transparent and low-cost, with participation from all stakeholders.

Secretary-general Ruenvadee Suwanmongkol said as of the end of 2020, the SEC is on track for its goal, revising a total of 15 sub-projects covering all aspects of the capital market.

Some projects already completed include no longer requiring firms to submit a summary of an auditor's report, reducing the frequency of financial statements by venture capital management companies to once a year, and dropping the number of categories of registration statements for debt instruments from 32 to 13 types.

Other projects include the reduction of paper usage by creating an electronic system for prospective mutual funds to submit documents for licence approval, and supporting electronic filing for SEC operations and for most filings.

The new leaner regulations also improve the operational control guidelines for non-debt brokers and dealers by removing redundant regulations and streamlining the applications for clearinghouses or securities depositories, except in cases where approval of the Capital Market Supervisory Board is not required, such as amendments to regulations or regulations that must comply with the Securities Law.

These changes have reduced the burden and operating costs for the associated private sector by 153 million baht per year, cutting the implementation time by 48,210 hours per year and paper use by 1.65 million sheets per year, said Ms Ruenvadee.

The SEC plans to continue revising the remaining rules and regulations until 2022.

The 15 sub-projects that were completed in 2020 included five intermediate business and market projects, four investment management projects, three funding projects, two audit supervision and financial reporting projects, and one digital technology and organisational efficiency project.

Nuntawan Polkuamdee

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