Thailand's excess laws and red tape

Thailand's excess laws and red tape

The Commerce Ministry is Red Tape Centre, where new businesses have to register - and to start paperwork that seems never to end, although it often repeats. (Photo by Pattarapong Chatpattarasill)
The Commerce Ministry is Red Tape Centre, where new businesses have to register - and to start paperwork that seems never to end, although it often repeats. (Photo by Pattarapong Chatpattarasill)

Only six years ago in 2009, Thailand was ranked 13th in the world (out of 181 countries) for ease of doing business and fourth in Asia behind only Singapore, Hong Kong and Japan. Since then, our ranking has steadily slipped. In the most recent report published last year, our ranking was a dismal 49th, well behind Malaysia (18th), Taiwan (11th) and South Korea (4th).

Despite various criticism surrounding the methodology used in calculating the ranking, there is no denying that our domestic rules and regulations do not accommodate businesses as they did in the past, or that other countries have undergone regulatory reforms to cut red tape while we have done nothing.

For example, there is no shortage of complaints about how many times we have to produce and sign a photocopy of our ID card, house registration, marriage certificate, birth certificate, etc, over and over even for the most menial procedure. Does "digital economy" not mean that we should get rid of such cumbersome paperwork?

The scandal surrounding the huge backlog of applications for a factory operating licence (Ror Ngor 4) for solar rooftop panel installations in 2013 is another case in point.

The mayhem that it created prompted the current government to pass the Licensing Facilitation Act 2015 in order to prevent the re-occurrence of such episodes in the future. The law requires all licensing agencies to provide a specific timeframe in which the licence/permit applied will be issued.

While such a move is indeed well intentioned, it does not tackle the root problem. It has been estimated that there are roughly 1,500 licences in Thailand. Perhaps it would be better to review whether those licences are at all necessary.

In times of economic stagnation, there is one business that remains stronger than ever. That is the business of producing new laws and regulations. According to Jacobs, Cordova & Associates, a global player in the regulatory reform consultancy market, the number of pages published annually in the Federal Register increased from roughly 50,000 per annum in the 80s to about 80,000 per annum since the year 2000.

The number of restrictions imposed by these laws and regulations as indicated by the presence of words such as "shall", "may", "must" or "require" also jumped exponentially.

While state regulation may be necessary to protect the public interest, it is uncertain whether all the laws and regulations promulgated were justified. That is why many countries introduce a "regulatory impact assessment" scheme in order to assess the cost and benefit of the proposed laws and regulations.

But the scheme only helps screen new regulations while leaving existing ones that may be imposing significant costs to businesses and society untouched. Thus, several countries have undertaken a major review of all or selected laws and regulations in force.

A good example is South Korea. When the country was hit by the Asian financial crisis in 1997, it reviewed over 11,000 regulations, got rid of roughly half of them and simplified another quarter in an attempt to revive the economy.

It is therefore no surprise that the ease of doing business ranking for South Korea improved markedly from 22nd in 2009 to 4th in the world in 2015. Vietnam also went through a similar exercise and got rid of about 2,000 laws and regulations.

Thailand has approximately 8,000 laws that are acts and statutes and tens of thousands more subordinate laws such as Royal Decrees, Ministerial Regulation, Notification, Orders, etc. There are many regulations that most people do not know exist, until unintentional violations occur.

For example, how many foreigners that have been invited to speak at a conference in Thailand know that, by law, they have to obtain a work permit? How many Thai businesses are aware that since 1999, we have a Trade Competition Act but that the Trade Competition Office has not yet been able to bring anyone to court in the last 16 years? How many people realise that we have a law that prohibits a majority foreign equity holding in all service businesses but from casual observation one sees the prevalence of foreign firms in many Thai service businesses?

The answer to all these questions is "not many" because these laws are rarely enforced in practice. If so, why do we bother having them?

I think it is high time that Thailand, like South Korea and Vietnam, undertakes a comprehensive law and regulations review.

Cutting red tape and cumbersome administrative procedures can be a much less costly and more effective means to attract foreign investment than the conventional tax incentives that cost the country dearly each year.

Many surveys of multinational companies reveal that regulatory predictability trumps tax incentives when it comes to making investment decisions.

It seems odd that we should put so much effort into inviting foreign investors into our home with various tax incentives and yet, once they come in, we bombard them with all sorts of administrative burdens.

Getting rid of or amending bad laws is not rocket science. There are international experts that can help set up such a scheme in a short period of time with tangible results in a few months. All that is needed to kick off this very important process is political will and commitment.

In September 2015, the government passed a Royal Decree on Review of Law which stipulates that each line ministry is to take stock of the laws and regulations under its purview within one year and review them every five years in order to propose those that need to be amended or eliminated.

While the move is certainly laudable, leaving the implementation in the hands of line ministries that are the keepers of the laws and regulations is unlikely to yield desired results.

Large-scale reform of our laws should be driven by a non-interested third party with the necessary expertise in this particular field.

But as a beginning, the government may boost the country's legal transparency simply by requiring all laws and regulations in force to be registered and make the registry easily accessible to the public.

Those that are not registered will be void. Only with such a scheme can we hope to have a complete database of the highly complex laws and regulations in Thailand.


Deunden Nikomborirak, PhD, is research director for economic governance, Thailand Development Research Institute (TDRI). Policy analyses from the TDRI appear in the Bangkok Post on alternate Wednesdays.

Deunden Nikomborirak

TDRI Research Director

Deunden Nikomborirak, PhD, is research director for economic governance, Thailand Development Research Institute (TDRI). Policy analyses from the TDRI appear in the Bangkok Post on alternate Wednesdays.

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