Army gives up cash cows
Business profits to go into Treasury coffers
The army has struck a deal with the Finance Ministry's Treasury Department on the management of its commercial welfare projects and its commercial use of state land to ensure transparency and regulation compliance.
The memorandum of understanding (MoU) signed on Monday will pave the way for the transfer of state land and commercial businesses to the Finance Ministry and allow most of their revenue to go into state coffers.
Among the assets under the MoU were more than 100 petrol stations, retail shops, flea markets, boxing stadiums, golf courses, horse racing tracks and hotels -- located on army land leased to it by the Treasury Department.
The Treasury Department is also expected to step in to tackle problems of encroachment on 700,000 rai of army land by the public. The illegal occupants will be allowed to continue to use the property but be required to pay rent under a three-year contract.
Speaking at a press conference after the signing, army chief-of-staff Gen Teerawat Boonyawat said the MoU paves the way for the discussions about how these commercial entities will be managed going forward.
"The army is aware the land is state-owned and any transactions must be in line with regulations," he said.
Gen Teerawat said its management of such commercial welfare projects is not unusual, citing the US army which has 160 golf courses.
According to Gen Teerawat, a portion of the revenue from these welfare projects goes into the army's welfare programme and which includes education subsidies and welfare benefits for low-ranking officers.
He insisted that existing welfare benefits for army personnel and their families would not be affected by the MoU.
"What we are doing here is establishing transparency and accountability," he said.
When asked how many billions these commercial entities generate each year, he said it could be less than a billion baht as these businesses were run for internal welfare purposes rather than as profit-making enterprises.
Finance permanent secretary Prasong Poontanate said under the MoU the army would hand over land used for commercial welfare projects back to the Treasury Department for commercial development with some of the revenue going into the state coffers.
He said the revenue-sharing would be in line with the Treasury Department's regulations while noting that it would vary depending on the types of businesses and their locations. For example, the army would likely receive between 2.5%-5% for the petrol stations while for some businesses the rate could be 7.5%.
Asked how many rai of land the Treasury Department would take over, he suggested it might be as much as 1 million rai including plots rented by the public, boxing stadiums, golf courses and hotels.
Mr Prasong noted that the army would not get the money from certain businesses and its personnel would get benefits in form of discounts. In cases of surplus, the money will go into the army's central welfare programmes.
"I still don't know how much the commercial entities in the army are worth. It will take time to transform them into commercial welfare businesses fit for management by professionals. We have to make sure that service fees are proper when compared with the competitors," he said.
He said the army also asked the Treasury Department to regulate the illegal occupants of army land covering 700,00 rai and allow them to pay rent under a three-year contract.
Gen Teerawat added the army's commercial operations were divided into two main types: commercial welfare assets such as hotels and boxing rings where civilians make up 50% or more of customers which will come under the department; and other internal welfare operations such as the army club which will remain with and run by the army. He said initially 40 commercial welfare businesses would come under the programme.
"We currently operate them as internal welfare. If they become commercial welfare businesses, improvements must be made to them. After all, we're not professionals [at running these businesses]," said Gen Teerawat.
After the Nakhon Ratchasima mass shooting on Feb 8, the motive of which is believed to be over a housing loan which was part of the army's welfare programme, Gen Apirat pledged reform and more transparency.