Guillotine is ready, but is the executioner?

Regulatory reform drive has made the country look good in World Bank rankings, but how sustainable will it be? By Calvin Wilkinson

Before the blood dries from the first phase of Thailand’s “regulatory guillotine” project, which has been credited with raising the country’s World Bank Doing Business ranking from 48th in 2017 to 26th in 2018, the government is already looking to begin its second phase.

The reason for the rush is not difficult to discern: an election is coming in February and the government is under pressure to demonstrate what progress it has made over the past four years. However, question arise about whether and how the next stages of the guillotine project might proceed after the election.

The regulatory guillotine is an initiative of the FastAction Law Reform Committee within the Office of the Prime Minister. The first phase, which deals with a review of laws and regulations relating to ease of doing business, will provide a number of recommendations for consideration by the cabinet.

The second phase will focus on reviewing laws and regulations relating to redundant licences affecting efficient business activity and economic development. The third phase will focus on reviewing laws and regulations relating to investment, trade and social issues.

While the pursuit of law reform is a laudable goal in and of itself, and there are undoubtedly numerous regulations and licences that impede business and ought to be simplified or removed entirely, the process by which this guillotine project is and will continue to be implemented raises serious questions about its sustainability.

TICKING THE BOXES

The first concern is whether this project is truly aimed at achieving lasting and genuine law reform, or simply a box-ticking exercise intended to secure a short-term rise in the country’s international rankings.

The fact that the stated aim of the project is to move into the top 20 on the 2019 Doing Business table seems to point towards the latter.

Further underlining this point is NCPO Order No.21/2560, which brought the initial doing business reforms in 2017 to the Civil and Commercial Code, the Labour Protection Act, the Public Limited Companies Act, the Social Security Act and the Bankruptcy Act. It was quite transparent in its short-term objective of raising the country’s ranking by making changes in compliance with the World Bank report.

While rankings are a useful tool for assessing a country among its peers, Thailand’s progression from 48th in one year to 26th in the next reflects little more than its unique ability to address the criteria set out by the World Bank through a streamlined legislative process, which has been made remarkably easier by the fact that the country is ruled by a military junta.

The second problem is the manner in which these reforms are promulgated into law. Even the World Bank, which supposedly promotes good governance practices, appears to have missed the irony in an article it published that highlights Thailand’s progress. It quotes a Thai government official praising the role of Section 44 of the interim constitution in enforcing the reforms, which is dictatorial in its nature in that it grants absolute power to the junta leader.

PROCESS OVER OUTCOME

The concern for sustainability relates to the assertion of the relative importance of processes over outcomes. Whether we like or dislike a particular law or policy objective, or believe it is the “correct” one, it is important that when a decision affects the public, the process by which it is made is transparent and by consent.

The third issue is future sustainability. The law reform committee is just one of 11 that the junta put in place after taking power in 2014. The outcomes of these committees are supposed to be incorporated into the 20-year national strategy that future governments will be obliged to follow, pursuant to the 2017 constitution, under threat of being impeached.

Yet a number of leading politicians have indicated that the strategy is excessively costly and impractical, and that they would seek to amend the constitution in order to prevent their government from being bound to implement it.

The foregoing paints a bleak picture for the prospects of achieving sustainable and lasting legal reform in Thailand’s business sector.

Calvin Wilkinson is a partner in the Corporate Services Department at ICR. Please send comments to calvin. wilkinson@icr.co.th

Whether we like or dislike a particular law or policy objective, it is important that the process of making a decision is transparent and by consent.