Business Groups in Thailand 9789814376082

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I5ER5 Institute of Southeast Asian Studies The Institute of Southeast Asian Studies was established as an autonomous organization in May 1968. It is a regional research centre for scholars and other specialists concerned with modern Southeast Asia. The Institute's research interest is focused on the many-faceted problems of development and modernization, and political and social change in Southeast Asia. The Institute is governed by a twenty-two-member Board of Trustees on which are representatives from the National University of Singapore, appointees from the government, as well as representatives from a broad range of professional and civic organizations and groups. A ten-man Executive Committee oversees day-to-day operations; it is chaired by the Director, the Institute's chief academic and administrative officer.

The responsibility for facts and opinions expressed in this publication rests exclusively with the authors and their interpretations do not necessarily reflect the views or the policy of the Institute or its supporters.

BUSINESS GROUPS IN THAILAND

by

Krirkkiat Phipatseritham and Kunio Yoshihara

Research Notes and Discussions Paper No. 41 INSTITUTE Of SOUTHEAST ASIAN STUDIES 1983

Published by Institute of Southeast Asian Studies Heng Mui Keng Terrace Pasir Panjang Singapore 0511 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the Institute of Southeast Asian Studies. ©

ISSN ISBN

1983 Institute of Southeast Asian Studies 0129-8828 9971-902-69-9

CONTENTS

Page PREFACE

v

INTRODUCTION PROFILES II

III

3

CHARACTERISTICS OF THE LARGE BUSINESS GROUPS

10

Chinese Dominance

10

Low Economic Concentration

13

Original Capital Accumulation through Trading

15

Prevalence of Shared Ownership

18

Groups Are Bangkok-based

20

Dependence on Foreign Capital and Technology

22

The Importance of Political Patronage

24

CONCLUSION

27

iii

Page

APPENDICES 1

2

29

Number of Companies and Total Assets of the Twenty Business Groups

29

Major Companies of Each Group and Main Activity

30

iv

PREFACE

Economic development and industrialization are progressing rather smoothly in the ASEAN countries. but 1 itt 1e is known of the indigenous people and organizations responsible for this economic transformation. This is because most past studies which dealt with actors in the industrialization process have concentrated on foreign enterprises. This is understandable s i nee they are more visible. Although a significant indigenous entrepreneurial class has emerged, most are publicity-shy and keep a low profile, and are therefore not much known. This paper, which gives the profi 1es of twenty of the 1arge Thai business groups and their characteristics. tries to fi 11 part of the research gap. Of course. more research on Thai business groups is needed. Much 1ess is known of such groups in the other ASEAN countries. If this paper leads to similar research in these countries, its purpose will have been served.

2 October 1983

Krirkkiat Phipatseritham Kunio Yoshihara

v

INTRODUCTION

In the process of dynamic economic growth in the past few decades, large business groups emerged in Thailand, but despite their importance as a politico-economic institution, they did not attract serious attention from scholars for a long time. Several years ago, one of the authors of this paper started research on these groups and recently published a monograph in Thai (Krirkkiat Phipatseritham, Vikoa Luksana Karnpenchaokong Thurakit Kanardyai Nai Pateth-Thai [An Analysis of Ownership Patterns in Big Business in Thailand], Faculty of Economics, Thammasat University, 1g82). This paper conveys the major findings of the study in English, and tries to put them in an international perspective.* The paper is organized as follows. Chapter I presents the profiles of the twenty major business groups chosen from the above study. Chapter II is a comparative analysis between the Thai business groups, the Japanese zaibatsu and Philippine

*

A few studies on Thai business groups are available in English. For example, Kevin Hewison discusses banking families in "The Financial Bourgeoisie in Thailand", Journal of Contemporary Asia 11, no. 4 (1981). peter Beal gives the profiles of 23 business groups in the Investor, February and March 1981. A fairly detailed work entitled A Study of the Ownership Structure of the Thai Corporate Sector (1980) deals with 36 business groups. Oeta i l s of each of the 36 groups are described in several sections, the first of which gives the profiles. The profiles of the 23 groups covered in the Investor are included in the study. This study sells for a few thousand dollars, and only a small number of copies are available and difficult to obtain.

1

business groups. It also discusses what we consider to be the major characteristics of the Thai business groups. In the last chapter we relate our findings to general development issues in Southeast Asia.

2

I

PROFILES

The study by Krirkkiat Phipatseritham lists ten financial and about sixty non-financial business groups. Since these are too numerous to include in this paper, the number was reduced to a more manageable size. Altogether twenty groups were chosen, comprising six financial and fourteen non-financial groups. The non-financial groups were selected from a list of thirty-one groups whose assets exceed one billion baht each. Below are the profiles of the twenty. The major companies of each group are listed in Appendix 2. 1. Bodhiratanangkura. Headed by Sukri Bodhiratanangkura, this is the biggest textile group in Thailand. It includes Thai Blanket Industry, Thai Cotton Mill , Thai Tricot, Thai Synthetic Textile, Thai American Textile, Thai Textile, Thai Melon Textile, Thai Melon Polyester, and Siam Dyeing & Printing. Thai Blanket Industry and Thai Cotton Mill produce cotton yarns and fabrics; Thai Synthetic Textile, Thai American Textile, Thai Textile, and Thai Melon Textile, synthetic yarns and fabrics; and Thai Melon Polyester, polyester fibres. Thai Tricot and Siam Dyeing & Printing are engaged in the finishing process. Thai Wuthipat acts as a holding company which also handles distribution for the group. 2. Boonsoong. In the southern pro vi nee of Phuket, the Boonsoong family originally made their fortune in tin-mining, and this is still the group's major activity. Boonsoong Tin Dredging and Cherng Talay Tin Dredging belong to the group. In Bangkok, the Boonsoong family set up a number of joint ventures with foreign companies. These are Reynolds Aluminium (Thailand), producers of various aluminium products; Isuzu Motor (Thailand), assembler of Isuzu commercial vehicles; Tri Petch Isuzu Sale, distributor of Isuzu vehicles; Nippondenso Thailand, manufacturer of automat i ve parts; and Thai Bri dgestone, producer of tyres. Except for Reynolds Aluminium (Thailand), all are joint ventures 3

with Japanese companies. Jootee Boonsoong, who headed the group until his death in late 1982, had a close affinity with Mitsubishi Corp., and had participated in various Mitsubishi projects in Thailand. In addition to the joint ventures mentioned, Boonsoong and Mitsubishi set up Thai Trading & Investment, which is engaged in indent business. Recently, the Boonsoong group diversified into the financial field, and became one of the major shareholders of Laem Thong Bank. 3. C.P. (Charoen Pokphand). This is the largest agri-business group in Thailand. Two Teochew brothers, Chia Ek Chaw and Chia Seow Whooy, founded the group, setting up at first a company called Chia Tai Seeds & Agricultural in order to sell seeds and fert i 1 i zer imported from China, and export pigs and eggs. Then in the mi d-1950s, they set up Cha roen Pokphand Feed Mi 11 to produce their own feed requirements. This feedmi ll and the trading company became the foundation of the integrated chicken-and-egg business of today. The group raises 1ayer and broiler chicken stock in co-operation with foreign companies, and pro vi des fi nanc i a 1 and other assistance to contract farmers who raise the chicken. The group then buys back the eggs and grown-up chicken, which is then processed and packaged, stored and transported to retail stores and other i nst i tut ion a 1 buyers. Some of the products are exported, especially to Hong Kong and the Middle East. Outside agri-business, C.P. Textile, which produces jute bags, is the largest company in the group. The group is also engaged in carpet production, paint manufacturing, and import trade. However, these have not become the major activities of the group. The founders have s i nee retired, and the group is currently headed by Dhanin Jiaravanont, the third son of Chia Ek Chaw. 4. Chinthanmitr. Also known as the Kwang Soon Lee group, this is the second biggest sugar group, after the Thai Roong Ruang group, which will be discussed shortly. The main activity of the Chinthammitr group is sugar-milling. This is undertaken by its sugar-mi 11 s, namely Tamaka Sugar Industry, New Kwang Soon Lee Sugar Factory, Khon Kaen Sugar Industry, Prachuab Sugar Industry, New Krung Thai Sugar Factory, and Thonburi Sugar Factory. Among these, Tamaka Sugar Industry had the largest sales in 1979 (ranking fifth among all sugar-mills). The group is also engaged in the transport of sugar, storage and trading through its companies, Thai Sugar Transport, Thai Sugar Terminal, Thai Sugar Warehouse, Thai Sugar Silo, and Thai Sugar Trading. However, not a 11 the companies in the group are engaged in the sugar business. One company, Thai Fermentation Industry, for example, produces a food seasoning, marketed under the brand-name, "Ve Wong". 4

5. Chirathivat. The principal activity of this group is retail trade. Central Department Store and Chidlom Department Store belong to the group. Tiang Chirathivat, the founder, was a restaurateur in Thonburi before the Pacific War, and shortly after the war ended, he opened the first reta i 1 business on New Road. Although small, the shop prospered because of his innovative ideas in merchandising (mainly handling a number of newly imported goods). In 1957, he opened a relatively large retai 1 store, which may be considered as the first department store of the group. Then in 1967, the Silom branch was opened, followed in 1974 by another branch on Ploenchit Road. A few years ago, the fourth store was opened at Thonburi, and about a year ago, the fifth one at Lard Prao. The Chirathivat family is also engaged in import trading through Central Trading, and garment manufacturing through Central Garment Factory. Both companies were set up to supply goods to the department stores. Recently, the Chirathivat family began diversifying into areas unrelated to the retail business. With the Techapaibul, PSA, and Saha Union groups, the Chirathivat group invested in the Central Plaza Hotel complex currently under construction. They also participated in the take-over of Siam City Bank which had been previously controlled by Mongkol Karnchanapas. 6. Hong Yiah Seng. Founded by Leo Keng Hu i (founder of the Leopa i ratana family) and Tae Kim Hong (founder of the Taepitsawong family), the major activity of this group is agri-business. The largest company in the group, Thanapornchai, is engaged in mi 11 i ng and exporting rice and other agri cu 1tura 1 products. Betagro, a feedmi ll, is another company in the group. In addition, the group owns poultry farms and warehouses. Outside agri-business, there are a few text i 1 e companies. These are Lian Thai Textile Industrial, Sara Buri Cotton Factory, and Saha Thunyapherch Sack Factory. The founders were originally text i 1e traders in Sara Buri , and from tract i ng, they went into production. Later, they also traded in rice, which became the basis for the group's agri-business. Today, agri-business has become a much more important activity. The group has also diversified into other areas, such as insurance, finance, and other manufacturing. It is currently planning to set up a petrochemical plant using natural gas from the Gulf of Siam. This plant is to be located at the Eastern Seaboard, an industrial zone being prepared by the government. 7. Laem Thong. Yongsak Kanathanavanich, the founder, was originally an exporter of rice and jute, and made money, especially by speculation. The main activity of the group today is agri-business. Laem Thong Corp., the largest company in the group, produces wheat flour and anima 1 feed; La em Thong Farm produces chicken and eggs; and Laem Thong Livestock Trading is a livestock processor. Laem Thong Industry, the second largest 5

company in the group, produces jute bags and other jute products. 8. Lamsam. Thai Farmers Bank, the third largest commercial bank in Thailand, is the main company in the group. Lams am is also engaged in other financial fields. Among these are Phatra Thanak it and TI SCO (Thai Investment & Securities), both finance companies; Sinkahakarn, a credit fancier; Muang Thai Life Assurance, a life insurance company; and Phatra Insurance, a non-1 ife insurance company. Organized in 1932, Phatra Insurance was the first venture of the Lamsam family in this field. At that time, it was called Lamsam Insurance. The Lamsam group is also active in non-financial fields. Tham Rang Yart, Thai Dairy Industry, and Loxley Trading are involved in the distribution of food and other consumer products. Loxley (Bangkok), the largest trading firm of the group, imports machinery and hardware products. The group is also involved in pineapple growing, canning, and juice production through Siam Food Products and Dole (Thailand). Real estate development is another field in which the group is involved; it owns the Rajprasong Shopping Center. At present, the group is managed by the third- and fourth-generation Lamsams, headed by Bancha Lamsam. 9. Metro. Trading, fertilizer production, and flour milling are the three major divisions in the Metro group. Metro Co., which handles trading for the group, was organized in 1966 In 1973, it established a as an importer of fertilizer. fertilizer plant called Thai Central Chemical. In 1974, Metro Co. merged with a few other trading companies, and began diversifying. As a result, the group came to be owned jointly by several families (Laohathai, Lim, Tangtrongsakdi, and others). In 1976, it acquired United Flour Mill and its subsidiaries (International Warehousing, and United Silo & Service). Today, the group is managed by Prasert Tangtrongsakdi, who founded the original Metro in 1966. 10. Osathanukroh. The Osathanukroh family was originally an importer and distributor of pharmaceutical products from China. In the post-war period, when the import-substitution policy was implemented, the family went into pharmaceutical production. Osothsapha (Teck Heng Yoo) became one of the biggest pharmaceutical manufacturers and distributors in Thailand. In the early post-war years, Osathanukroh entered the real estate field. He bought large tracts of rice fields in the outlying areas of Bangkok. This proved to be a sound investment because in the 1960s when Bangkok's residential areas began to expand to the suburbs, he converted this land into housing estates and made a sizeable amount of money. Also active in finance,

the group owns General 6

Finance &

Securities and General Credit Fancier. It also has a minority interest in Sanyo Universal Electric (the manufacturer of Sanyo electrical appliances), and Mass International Trading (a major distributor of Sanyo'' products). 11

11

11

11. PSA. The group's principal activities are in the fields of finance, distribution, insurance, and tourism (hotels in particular). Built up jointly by Paul Sithi-Arnnuai and Suti Nopakun, the group was initially involved in the distribution of consumer durables through Advance Products. In the financial field, it had Siam Credit Corp. Then, by taking over companies which were in difficulties, it diversified rapidly into a number of other fields. A few years ago, Paul and Suti decided to part ways. Sut i left the group and took with hi rn the hate l business and some other businesses acquired more recently. 12. Ratanarak. Chuan Ratanarak, the founder, originally operated a lighterage company, from which he diversified into other fields such as distribution and banking. The main company of the group is the Bank of Ayudhya, the country's fourth largest commercial bank. Other finance companies include Ayudhya Investment & Securities, Ayudhya Life Insurance, and Ayudhya Insurance (a non-life insurance company). Outside the field of finance, the group is active in flour milling (Siam Flour Mill), flour distribution (Siam Flour Trading), and warehousing (Siam Silo & Drying, and Ayudhya Warehouse). The Ratanarak family is also a major shareholder of Siam City Cement. 13. Saha Union. The group was formed jointly by Damri Darakananda and Thiam Chokwatana. Its primary activities are the distribution and production of textiles and household goods (such Saha as detergent, soap, toothpaste, cosmetics, and food). Union, Saha Pathanapibul, New City (Bangkok), International Cosmetics, Texport International, and Sampanthamitr are in the field of distribution; Bangkok Nylon, Union Pioneer Fabric, Union Thread Industries, Union Textile Industries, Union Yoshida Industries, and Thai Wacoal produce textiles and related goods; while Lion Fat & Oil (Thailand), Lion Dentifrice (Thailand), and Thai President Foods are involved in the manufacture of household goods. 14. Siam Motors. The driving force behind this group is Taworn Pornprapha. The group's major activities are the assembly and distribution of Nissan vehicles. These are handled by Siam Motors & Ni ssan, and Siam Motors. The group is also a producer of motor-cycles (Siam Yamaha) and batteries (Siam G.S. Battery). Recently, the group diversified into international trading (which enjoys the promotional privileges of the Board of Investment), mining, real estate development, and tourism, among others. 7

15. Sophonpanich. Centred around Bangkok Bank, the largest bank in Southeast Asia, the group a 1so inc 1 udes a number of companies in investment finance, underwriting, consumer finance, and insurance. The companies in these fields are Asia Credit, Bangkok Nomura International Securities, Bangkok First Investment & Trust, Commercial Trust, Bangkok First Tokai, Asia Securities Tract i ng, Bangkok Home, Asia Credit Fonc i er, Bangkok Insurance, Bangkok Life Assurance, and Wilson Insurance. Although the group is involved mainly in finance, there are also non-financial companies. Since Chin Sophonpanich, the founder of the group, started as a rice trader, some companies in the group are still engaged in trading (in rice, rubber, maize, and other products) and related activities. The companies are Huay Chuan, an exporter of rubber; Thai Trang, an exporter of rice; Huan Chuan Rice, an exporter of rice, maize, and some other agricultural products; and Bangkok Warehouse, a warehousing company. Other companies in the group include a soft-drink manufacturer, Green Spot. It also has a minority share in a textile company, Thai Melon Polyester, a joint venture with the Bodhiratanangkura family. 16. Srifuengfung. The Srifuengfung family, earlier a major sha reho 1der of Bangkok Metropo 1 it an Bank, so 1d a 1arge part of the holdings in the mid-1970s and resigned from its board of directors. Today, this group includes a company in the field of finance and securities (Cathay Trust Co.) and some 1arge manufacturing companies such as Thai Textile, Thai Asahi Glass, Thai Asahi Caustic Soda, and Goodyear (Thailand). 17. Tarnvanichkul. The main company in the group is Asia Trust Bank. Other companies active in the financial and insurance fields are Sincere Trust, Natheethong Finance & Securities, Asia Financing & Trust, and Asia Trust Insurance. The group a 1so inc 1 udes a cement company, Ja 1aprathan Cement; a company operating a television station (Bangkok Entertainment); and a real-estate developer, Thepharak Land. The real-estate company has constructed a number of condomi ni urns in Bangkok and Pattaya. 18. Techapaibul. The rna in company in the group is Bangkok Metropolitan Bank. In addition to banking, there are insurance and various kinds of finance companies in the group. For examp 1e, Thai Fi nanc i a 1 Syndicate, Siam Commercia 1 Trust, Thai Oversea Trust, Thai -Mitsubi shi Investment, and Sri nakorn Pattana Credit Fancier belong to this group. The major non-financial companies are mostly food producers. For example, Thai Amarit Brewery produces "Kloster" beer, which is distributed by Kloster (Thailand). In liquor production, the group has Thai Thurn Distillery and Suramaharas. The latter produces "Mekong", a very 8

popular Thai whisky. Mahaguna Sugar Industry, a sugar-mill, is also a member of this group. 19. Thai Roong Ruang. Founded by Suree Assadathorn, a mechanic who used to repair machinery and equipment in the sugar-mills, this group has come to own several sugar-mills, including Thai Roong Ruang Industry, the country's largest. In 1978-79, the group accounted for about a third of the total sugar production in the country. In addition to sugar milling, the group undertakes warehousing, production of mo 1asses, and engineering. 20. Wanglee. One major branch of the group's activities is finance, which includes a bank (Wanglee Bank); two insurance companies (Thai Commercial Insurance and Wanglee Insurance); and one finance company (Poonphipat Finance & Securities). Outside the field of finance, the group is active in the processing and distribution of agricultural products (rice, maize, and tapioca). It is also involved in construction and real-estate development.

9

II

CHARACTERISTICS OF THE LARGE BUSINESS GROUPS

Chinese Dominance

One general characteristic of the business groups listed in Chapter I is that the families which own them are Chinese. During the past several centuries, the Chinese came to Thailand as traders, labourers, and artisans, and soon occupied a dominant position in the commercial sector of the economy. In the mid-nineteenth century, the Bowring Treaty was signed. This plunged Thailand into the midst of the international trading network. At that time, there must have been Thai bureaucrats or peasants who saw opportunities for material advancement created by trading goods within the region or between regions, and became part-time or full-time traders. But it was the Chinese who have been most visible as traders in the past century and as industrialists in the past few decades.l In the mid-twentieth century, the Thai Government wanted to promote Thai entrepreneurship in the modern sector of the economy. But the Chinese had built up an infrastructure biased against the Thais, so that the latter found it extremely difficult to embark on commercial or industrial ventures. They were at a disadvantageous position in securing a source of supply for the goods they wanted to handle, in finding customers for such goods, and in obtaining loans on favourable terms, because

1

We define the Chinese as those who were born in China or those who have ancestors who were immigrants from China in the past few generations and who have retained Chinese culture to some extent. It should be noted that all the Chinese families discussed in this paper have Thai citizenship. 10

major financial Chinese. Thus, the Thais enter entrepreneurship dominance, the investor. As a up.

and trading institutions were monopolized by the the government undertook various measures to help the commercial and industrial fields. But Thai was slow in forthcoming, and to counter Chinese government was forced to become an active result, a number of state enterprises were set

Although the population was increasing rapidly at that time, there was no strong need for the Thais to become traders or artisans or to work as labourers, because there was enough land to support them and food was p1ent ifu 1 • Thais from the rura 1 areas preferred to become government officials if they moved to Bangkok. The Chinese, on the other hand, had come from southern China where the population density was high and famine not uncommon. These may have been partly the reasons behind their willingness to work hard. Besides, the Chinese came to Thailand primarily to make money and were keen on exploiting any opportunities for profit. Thus, when such opportunities came with the Bowring Treaty, it was mostly the Chinese who took advantage of them. It is not unique to Thailand that the Chinese dominate the modern sector of the economy. In Malaysia and Indonesia, "the sons of the soil" are hardly visible too. Many live in the countryside as peasants, and those in the cities are either bureaucrats or labourers. If there are large indigenous enterprises, they are usually owned by the state. However, the case of the Philippines is somewhat different from Thailand. In the Philippines, Spanish Filipinos, such as Ayala and Elizalde, played a prominent role in developing its modern sector. Furthermore, indigenous Filipinos were important participants in commerce and industry. For example, Puyat, Marcelo, Floro, Lirag, Aguinaldo, Montelibano, and Silverio are non-Chinese and non-Spanish. In the late 1960s, they owned many commercial banks and about a third of the top 250 corporations in the manufacturing sector (another third were owned by the Chinese and the remaining third by foreign groups).2 Why is indigenous entrepreneurship less important in Thailand than in the Phi 1 i ppi nes? One reason seems to be the fact that there are proportionately more Chinese in Thailand than

2

See Kunia Yoshihara, Philippine Industrialization: Foreign Domestic Capital (Kuala Lumpur: Oxford University Press, forthcoming), chapter 3.

and

11

in the Philippines. In about 1850, according to one estimate, out of a total population of 6 million, 1.5 million (or 25 per cent) were Chinese.3 About a century later, the estimates varied from 10 to 17 per cent.4 More recently, in the mid-1970s, one study estimated the Chinese population to be between 4 and 5 million (or about 10 per cent of the population).5 In the Philippines, the proportion has been historically much smaller. In 1950, it was about 1. 2 per cent. 6 Such a large difference in the Chinese population between the two countries came about because the Philippines, under both Spanish and American rule, restricted Chinese immigration, whereas Chinese immigration to Thailand was relatively free up to the early 1950s. In the Philippines, the Chinese population was too small to take advantage of every opportunity opened up by commercial expansion which started in the mid-nineteenth century. Government pol icy may be partly responsible for the difference. Although the Thai Government imposed some restrictions on Chinese activities during the Phibun regime, it gave them considerable freedom in general and tried to make the best use of their talents and initiatives. On the other hand, the Philippines strongly encouraged the indigenous people and discriminated against the Chinese in various ways, especially after independence. Among the most severe di scri mi nations was the Retail Nationalization Law, which restricted retail trade (which was later interpreted by the court to include various wholesale activities) to companies fully owned by Filipinos or those with Philippine citizenship. At the time this law was passed, most of the influential Chinese (and their children,

3

This

is

Palegoix's

estimate,

quoted

in

James

Economic Change in Thai 1and 1850-1970 (Stanford: University Press, 1971), p. 7.

Ingram, Stanford

4

The upper ceiling (17 per cent) was Skinner's estimate, quoted in Jacque Amyot, The Manila Chinese: Familism in the Philippine Environment, IPC monographs, No. 2 (Ateneo de Manila University, 1973), p. 2. The lower ceiling (10 per cent) is given in James Blaker, "The Chinese in the Philippines: A Study of Power and Change" (Ph.D. thesis, Ohio State University, 1970), p. 3.

5

This is a study made by a government agency, quoted Kenichi Fujishima, Thai ni okeru Kakyo [The Chinese Thailand] (Bangkok: Kokusai Insatsu, 1975).

6

Amyot, op. cit., p. 2. 12

in in

because of the citizenship criteria of jus sanguinas) did not Aggravating the problem was the have Philippine citizenship. difficulty in becoming naturalized because there were many This and other discriminatory barriers to naturalization. Chinese of potential the reduced considerably measures Since the mid-1970s, however, businessmen in the Philippines. has Marcos, President under Government, Philippine the liberalized its Chinese policy, and their influence seems to be increasing, but there are still a large number of influential non-Chinese business families.

Low Economic Concentration The second characteristic of the major Thai business groups is In that the concentration of economic power is not very high. Japan, although the zaibatsu had a fairly long history, it was not until the 1920s that their influence began to be particularly Characterized by the ol igopol istic structure, heavy felt. industry made great strides during this decade, and the competitive structure of light industry receded into the Furthermore, the government's stringent po 1 icy background. during this time and the financial crisis of 1927 caused a number of banks to go bankrupt. These two deve 1opments, coupled with the military buildup and the formation of government-imposed carte 1s to contra 1 the economy in the next decade, increased the power of the zaibatsu, which were also better managed, had good access to the capital market, and maintained close relations with By the end of the Pacific War, in terms of the government. paid-up capital, the share of the four largest zaibatsu had increased to 50 per cent in the area of finance, 32 per cent in heavy industry, and 11 per cent in light industry. The share of the ten largest amounted to 53 per cent in finance, 49 per cent in heavy industry and 17 per cent in light industry.? Although economic power gradually became concentrated during the past few decades, the Thai economy is more fragmented, compared with Japan in the latter part of the pre-war period. One reason for this is that the period of accumulation is It is true that commercial opportunities relatively short. expanded with the signing of the Bowring Treaty, but because Thailand neither produced crops then nor had mineral resources

7

Hadley, Anti-Trust in Japan E. University Press, 1969), chapter 3. 13

(Princeton:

Princeton

which were in great demand in the West, the pace of progress was much slower compared to Indonesia, Malaysia, and the Philippines. In the mi d-1930s, Bangkok, being still not on the route of rnaj or shipping lines, was a rather sleepy town compared with bustling Surabaya, Singapore, and Manila. Besides, the nationalistic measures of the Thai Government in the 1930s and from the late 1940s to the late 1950s imposed some restrictions on Chinese activities, and became a barrier to capital accumulation. It was only after General Sarit came to power a little over two decades ago that the Chinese were given virtually complete freedom in economic activities, and the pace of economic progress (development of financial institutions, expansion of commercial opportunities, and industrialization) quickened. A large portion of the capital held by the business families discussed in the previous chapter was accumulated in this period. The other major reason for the lower concentration in economic power in Thailand is capital flight. This is related to the fact that all of the families behind the groups discussed in this paper are Chinese. Up to the Communist Revolution in 1949, the Chinese in Thailand sent remittances to their families in China, and these are estimated to have amounted to a considerable sum. According to one estimate, from 1890 to 1941, 1,250 million baht were sent back to China. This is a large sum compared to the total amount of government capital expenditure including projects financed by foreign loans in roughly the same period, which was only about 380 million baht.8 With the Communist Revolution in China, remittances dwindled, and are today ins i gni fi cant. But this was not the end to capital outflow. It is not only the Chinese who take money out of the country when they become wealthy. Other wealthy business families do the same in Southeast Asia. The Japanese, on the other hand, invested practically all their wealth in Japan, and the problem of capital flight was almost non-existent. In Southeast Asia, wealthy families have much less confidence in the future of their countries, and the pace of capital accumulation is slower to that extent. When Indochina fell to the communists, there was a sort of panic in Thailand s i nee it was possible that the country would be the next to fall, and a considerable amount of capital seems to have flowed out of the country. The Indochina crisis was short-lived, but because of the lack of confidence in political stability, capital had moved out

8

Ingram, op. cit., p. 204. 14

every year even before that and continued to do so thereafter. The basic problem today is not the possibility of the leftists' take-over of the country, but whether the present economic policy based essentially on capitalism (private property and free enterprise) can be maintained. Economic dynamism in the past few decades benefited a small segment of the population, but the rest of the people were basically unaffected, thus creating a wide gap in income and wealth distribution. By itself, this disparity in income would not affect the basic economic policy, but in Thailand, the destabilizing factor is a possible clash between the military and business sector. As one rises in the ranks of the military, one is brought into the establishment, and ceases to be an unstabilizing factor. But a pass i bi l ity exists in the military that Young Turks may usurp power and nationalize big businesses. The likelihood that such an event will happen in Thailand is much stronger than in some other countries with a military government (for example, Indonesia). This is because discipline is stronger in the Thai military due to frequent border incidents along Cambodia and sporadic skirmishes with communists in the countryside. Furthermore, the Thai military have become familiar with the problem of poverty in the countryside where they stay as it afflicts those who help them fight. Furthermore, because they are Thai (immigrants and their children are not allowed to enter Thai military academies), they may nationalize big businesses as a nationalistic or anti-Chinese measure, if they usurp power. On the other hand, in Indonesia where the military also holds power, because of the proliferation of state enterprises, big businesses are less developed, and the likelihood of "Young Turks" seizing power and nationalizing the big businesses seems less.9

Original Capital Accumulation through Trading Some entrepreneurs were originally successful in handling export products, mainly rice, but later diversified into other fields. Chin Sophonpanich, for example, first established his reputation as a rice exporter. Shortly afterwards, to facilitate his rice business, he set up a firm to transport rice from various provinces in the Centra 1 Va 11 ey to Bangkok. Then he became a

9

On the aborted coup in 1981 by the Young Turks, see Chai-Anan Samudavanija, The Thai Young Turks (Singapore: Institute of Southeast Asian Studies, 1982).

15

compradore of a foreign commercial bank. This got him interested in banking. Wanglee and Lamsam, who are also in the banking field, established themselves first as exporters of rice, just like Chin Sophonpanich. Most large rice exporters did not, however, go into banking: instead, they remained largely in fields related to their original businesses. For example, Leopa i ratana and Taepitsawong, founders of the Hong Yi ah Seng group, went from rice-milling and trading to general trading, and then to agri-business. It was only recently that they entered into other kinds of manufacturing. Other entrepreneurs who started from trading were distributors of imported goods. Those who belong to this category are Taworn Pornprapha (of the Siam Motors group), Damri Darakananda (of the Saha Union group), Sukri Bod hi ratanangkura, Osathanukroh, Chia Ek Chaw and Chia Seow Whooy (of the C.P. group), Viriya Prapaikit, Tiang Chirathivat, and Prasert Tangtrongsakdi (of the Metro group). In the case of Taworn Pornprapha, his father was in the hardware business before World War I I. During the early post-war years, Taworn went to Japan, and became interested in distributing Nissan Motor's cars in Thailand and obtained its dealership franchise. By entering into contracts with sever a 1 Japanese manufacturers, he set up distribution and manufacturing firms. Today, he heads the Siam Motors group of companies. Sukri Bhodhi ratanangkura started his career as an assistant to his father, who was a small-scale distributor of textiles and other genera 1 merchandise, purchasing his supp 1 i es at Sampeng and then taking them upcountry by boat. During World War II, Sukri opened a small shop at Sampeng named Kim Yong Nguan and became an estab 1i shed text i 1e merchant. His venture into production started in the early 1950s. In 1950, a Hong Kong-Shanghai group set up a spinning mill called Bangkok Cotton Mill. This firm went bankrupt a few years 1ater, and Sukri 1eased the factory on favourab 1e terms. Then from the 1ate 1950s, he set up severa 1 large-scale textile factories usually in the form of joint ventures with foreign, especially Japanese, textile companies. Tiang Chirathivat was operating a small restaurant in Thonburi before World War I I. Then in the early post-war years, he opened a small retail shop on New Road, and traded in a number of newly imported goods. The expansion of this retail business came when his eldest son, Samrit, took over. The small shop became Centra 1 Department Store, one of the two 1argest department stores in Thailand today. As the business grew, the family went into various other businesses, as discussed in the preceding chapter. One of Samrit's sisters is married to U Chuliang's son, and through this relationship Chirathivat is closely linked to Techapaibul (of Bangkok Metropolitan Bank).

16

Although most entrepreneurs made their money initially in trading, some made their original capital in other fields. wallop Tarnvanichkul of Asia Trust Bank and Paul Sithi-Amnuai of the PSA group started their careers as assistants to Chin Sophonpanich, but later set up their own firms. The first generation of the Techapaibul family made money in the production of liquor from rice and also in running an opium house. Under Udane, the second generation went into the lumber and import business, and later into banking and insurance. Suree Assadathorn was a mechanic operating a workshop to repair machinery and equipment in sugarmills before he entered the sugar business. Chuan Ra tanarak was operating a lighterage company before he took over the Bank of Ayudhya. Boonsoong made money originally in tin mining in the South, but later moved to Bangkok, and went into manufacturing and trading. Compared

with

the

evolutionary

pattern

of

the

Japanese

zaibatsu, the importance of trading in Thailand as the source of the original accumulation of capital is particularly striking. Sumitomo was engaged first in mining and later diversified into related areas. Mitsubishi started out in the shipping business, and then went into ship-repairing, mining, and banking. Mitsui's case is somewhat similar to the typical Thai pattern, but even in this case, non-trading, especially mining, was an important source of capital accumulation. In the Thai case, Boonsoong is the only one who started out in mining. This may be related to the fact that Japan was more abundantly endowed than Thailand with mineral resources in the early phase of industrialization. In the Philippines, trading was a much more important source of original capital accumulation than in Japan, but seems to have been less so than in Thailand. Almost all the wealthy Chinese Filipino families of today made money first in trading, but among the non-Chinese families, the sources of original accumulation are more diverse. To name a few, Ayala and Tuason laid the foundation for today's wealth in real estate, Soriano in beer manufacturing and mining, Puyat in furniture production, Marcelo in steel production, and Cojuangco in agriculture. Even in the case of Elizalde, who started from trading, much of the capital which was invested in post-war ventures came from sugar-milling and mining.lO Why is there a difference between the Philippines and Thailand? The major reason is that the mercantile sector of the economy in Thailand has been dominated by the Chinese, but their

10

Yoshihara, op. cit., chapter 6.

17

importance in the Philippines has been much 1ess. The Chinese came to Thai 1 and to make money and hoped to eventually return home for retirement. Thus, their time horizon in business was shorter, and they were reluctant to keep reinvesting their profits in fixed assets, as, for example, Soriano did in beer production and mining. Furthermore, because their families were poor, they cou 1d not comprehend the camp 1ex ity of modern technology, and thus were not interested in setting up large-scale factories. Their children were, of course, better educated, but unt i 1 the 1 ate 1950s when the economic environment changed dramatically v1i th the establishment of the Sarit regime, the business culture of the first generation held a firm grip on the Chinese community in Thailand.

Prevalence of Shared Ownership In the Japanese zaibatsu before the Pacific War, the major shares of the companies in a group were owned by one family. For example, Mitsubishi Bank, Mitsubishi Heavy Industries, Mitsubishi Mining, and other Mitsubishi companies were owned mainly by the Iwasaki family. It was not until the 1930s that some of these companies invited public subscription. Even then, the shares which the Iwasaki farni ly did not own were spread over numerous shareholders, and therefore the family's dominance in the Mitsubishi zaibatsu remained unchallenged. The Thai ownership pattern is quite different from that of the Japanese. Several groups, such as PSA, Saha Union, Metro, and Hong Yiah Seng,are jointly owned by two or more families. Even in the case of a group named after a family, its key company is sometimes jointly owned. For example, Bangkok Metropolitan Bank of the Techapaibul group used to be owned jointly by the Techapaibul, Srifuengfung, and Uahwatanasakul (U Chul iang) families, although the Techapaibul family was the principal shareholder. Recently, the Srifuengfung family sold its holdings, but the Uahwatanasakul family still remains a principal shareho 1der. In the case of Bangkok Bank, the Ministry of Finance and the Metro group are important shareho 1 ders, but the share owned by the companies in the group does not amount to more than 40 per cent. The Sophonpanich family does not have complete control over some of the companies which hold the shares of Bangkok Bank. There are several ways in which shared ownership came about. In the case of the shared ownership of key companies (such as Bangkok Bank, and the holding company of the Metro group), it seems that the pooling of the resources of different families was

18

considered advantageous, and somehow this was successfully arranged. For ex amp 1 e, when Chin So phon pan i ch set up Bangkok Bank, he did not have capital, public trust, and enough contacts to make it a successful bank, so he solicited assistance from his business associates and political patrons. In the case of the Metro group, in order to keep growing and avail itself of the monopolistic advantages which accrue to big business, it was important to increase capital, but Prasert Tangtrongsakdi, who owned the original Metro Co., could not do it alone. Some companies be 1 ong to two groups. In such cases, one group is usually bank-centred and the other, industry-centred. The latter group would have needed a commercial bank to complement its activities while the former, on the other hand, needed customers. The tie-up of the Sophonpanich group with the Metro and Bodhiratanangkura groups is an example of this arrangement. This is the pattern also observed in the non-zaibatsu groups in Japan today (Daiichi-Kangin, Fuyo, and Sanwa groups). The third group of companies in which ownership is shared are joint ventures with foreign companies. As will be discussed later, there are a number of joint ventures in the Metro, Srifuengfung, Boonsoong, Bodh i ratanangkura, Saha Union, and Siam Motors groups. Spreading the risk must be one of the reasons for shared ownership to some extent. When a project is large (relative to the amount of capital one family has) and in a new field, the investment by one family can be too risky, for failure can deal the family a severe blow. The Chirathivat family built up the Centra 1 group 1 arge ly on its own, but recently it seems to have changed its business phi 1 osophy. At present, it is bui 1ding the Central Plaza Hotel jointly with other groups. In this case, it seems that committing large resources to the hotel business, which is new to the group, was considered too risky. One wonders why Japanese zaibatsu families do not share ownership with other families, or why Thai business families are more willing to share ownership. The main reason seems to be that the family is a more important institution in Japan than in Thailand. In Japan, before the Pacific War, inheritance was based on primogeniture, and thus, the accumulated wealth was handed over to the eldest son in its entirety. Thus, a family could hope that the family line would continue for a long time in the future. Therefore, there was a wi 11 i ngness not on 1y to save more but a 1 so to invest or p1 an for future generations. On the other hand, in Thailand, inheritance is divided equally among the children. If there are many children in the Thai family, a large fortune can soon become fragmented. Under such circumstances, to

19

invest or build something for the future is not very meaningful. Thus, instead of maximizing the growth of family wealth over generations, Thai business families tend to maximize wealth accumulation in the present generation. Therefore, tying-up with other families or foreign companies becomes more acceptable than investing alone, if it means earning more profits.

Groups Are Bangkok-based Large business groups tend to concentrate on the capital city. For example, Tokyo and Manila are the headquarters of large business groups in Japan and the Philippines, respectively. It is not surprising, therefore, to find that in Thailand, many large groups, including all those discussed in this paper, are based in Bangkok. But in the Thai case, the concentration is carried to the extreme. In other countries, the situation is different. For example, among the four largest zaibatsu in pre-war Japan, Sumitomo, and among the smaller zaibatsu, Nomura and Iwai, were based in Osaka. Most of the large companies in textiles, which was the vanguard of industrialization up to the 1930s, also had their headquarters in Osaka. In the Philippines, there is a greater concentration in Manila than in Japan, but it is not as pronounced as in Thailand. In the pre-war period, Iloilo was the centre for the distribution of sugar produced in the region, and many wealthy sugar families resided there. In the same way, Cebu has been the centre of di stri but ion for abaca and copra, and Lu Do & Lu Ym and Aboitiz are still based there. Why is there, then, a much greater concentration in the capital of Thailand? The answer can be found in the geography of the country. Bangkok is located at the mouth of the Chao Phraya River, which had been the major transportation route until railroads and highways were built in more recent years. Rice, which had been the dominant export for many years, was grown in the Central Valley, the alluvial plain of the Chao Phraya River, and was brought to Bangkok for export through the River and its tributaries. Teak, which grows in the North, was the next most important export in the pre-war period. Chiang Ma i became its distribution centre in the region and functioned as a commercial outpost for Bangkok. The teak brought to Chiang Ma i was taken via the Chao Phraya River to Bangkok. Bangkok became the centre of not only export but also import. The ships which took away rice and teak brought textiles, machinery, and other industrial products. Even today, 20

about 95 per cent of imports pass through Bangkok. In earlier years, the goods imported were distributed by the same route through which rice and teak were brought, that is, the Chao Phraya River system. Recently, however, railroads and highways have gained more importance, especially in connecting Bangkok with provincial cities outside the Chao Phraya River basin. As Bangkok became the centre of international trade, trading companies and banks and other supporting businesses located their headquarters there. All major Western and Japanese trading companies have been based in Bangkok; a 11 foreign banks which came to Thai 1and operate only in Bangkok; and major Thai trading companies, which grew up as purchasing agents for Western and Japanese trading companies or as distributors of imported goods, have also been based in Bangkok. Then, in the past few decades when import-substitution industrialization was promoted, manufacturing industries also came to be concentrated in Bangkok and its suburbs. This was because a11 imported machinery, raw materials, and parts had to come to Bangkok first since there was no other commercial deep seaport, and the trading and financial network was concentrated there. Such economic concentration, coupled with the concentration of political power in the capital, made it difficult for large business groups to emerge in provincial cities. In order to grow, fami 1i es which had accumu 1ated capita 1 in the provinces had to move to Bangkok. The Boonsoong family made their money originally in Phuket as a tin producer, and then went into distribution in that region. The second generation moved to Bangkok and went into banking and manufacturing. In the case of the Hong Yi ah Seng group, it was started by Leo Ken Hu i (founder of the Leopairatana family) and Tae Kim Hong (founder of the Taepitsawong family), who were rice and texti 1e traders in Sara Buri. The second and third generations of these families, however, moved to Bangkok and went into finance, text i 1e production, international trade, insurance, and agri-business. In the South, where tin and rubber are produced, it was geographically possible for a commercial centre to emerge, but economically, the region was a part of the Singapore-Malaya economic zone. Tin was shipped to Malaya for smelting and refining, and rubber was sent to Singapore. Such dependence on Malaya and Singapore is understandable s i nee the former was a much bigger producer of tin and rubber, and processing facilities were developed there and in Singapore. However, the personal ties of the producers in the South with Singapore and Malaya were also a significant reason why the development of processing facilities (and, thus, other supporting businesses) was retarded in the region. Major producers of tin and rubber in the South were also mostly Chinese who had migrated from Malaya and Singapore. 21

Dependence on Foreign Capital and Technology Dependence on foreign capital and technology is particularly common among industry-centred groups, but companies in the financial field are largely wholly Thai-owned. A few exceptions in the financial field are Wanglee Bank and some investment and finance companies. In the mid-l970s, Citicorp acquired a 40 per cent interest in Wanglee Bank, Sophonpanich set up investment houses with the Japanese companies, Nomura Securities and Toka i Bank, and Techapaibul went into joint venture with Mitsubishi Bank and also set up an investment house. An American company (Bankers International Corp.) has a majority share in TISCO of the Lamsam group, one of the biggest finance companies in the country. Manufacturing companies, especially those set up under the import-substitution policy, depend heavily on foreign capital and technology. In the Metro group, the two largest manufacturing companies are joint ventures with foreign capital: United Flour Mill with overseas Chinese, and Thai Central Chemical , with a Japanese company, Central Glass. The Sri fuengfung group's glass and caustic-soda manufacturing companies are joint ventures with In the Boonsoong group, the a Japanese company, Asahi Glass. companies producing cars, tyres, and automat i ve parts are joint ventures with Japanese companies, and the aluminium company is a joint venture with an American company, Reynolds. In Sukri Bodhiratanangkura's textile group, the three companies set up from the late 1950s to the early 1960s are joint ventures with Shikishima Spinning and Nomura Trading. More recently, the group set up a synthetic fibre factory with a French company, Rhone Poulenc. The only major company in this group which is not dependent on foreign capital is Thai American Textile. The foundation for the Saha Union group was also laid by joint ventures with Japanese companies. Its textile group originated from a joint venture with Yoshida Kogyo to produce zippers for garments, whereas its toiletry business started with a joint venture with lion Fat & Oil . The present group is the result of diversification into related areas from these two joint ventures. The development of the Siam Motors group has been more dependent on joint ventures with Japanese companies than that of any other group. Taworn Pornprapha first accumulated his wealth by importing Nissan Motor's vehicles and then assembling and distributing them in Thailand. More recently, he went into motor-cycle and automotive parts production, again in partnership with Japanese companies. The

typical

pattern

of

the

22

entry

of

distributors

into

manufacturing has been to enter into partnership with foreign manufacturers. In such joint ventures, the Thai partner usually handles marketing and liaison work with the government, while the foreign partner takes care of production. This seems to be an ide a l set-up, s i nee the Thais know how to market the products but are quite ignorant of the technology necessary for production. The main reason for encouraging foreign companies to set up joint ventures with Thai entrepreneurs is to encourage the Thais to learn the technology and other know-how from their partners so that industrialization can be promoted later without depending too much on foreign capital. Unfortunately, however, not much of this has taken place in Thailand. The groups discussed above seem to be perpetually dependent on foreign capital, and there are no clear signs that they will become technologically self-sufficient in the near future. It is sometimes said that this is because the entrepreneurs who founded such groups were initially traders and still maintain their commercial mentality. But this does not seem to be the major reason. If businesses are to keep expanding, they have to be innovative and flexible. Foreign technology is expensive, but it seems that Thai technology has not reached the 1eve 1 required for many products so that foreign technology is still needed. Thus, the problem is not so much that of commercial mentality, but rather the lack of technological know-how in Thailand. The entrepreneurs are, however, not completely free from the charge that they are not interested in research and development. Given the availability of superior technology abroad and the trade barriers erected by the import-substitution policy, it was undoubtedly more profitable to set up joint ventures with foreign companies, but instead of concentrating on one industry, they ventured into many industries by tying up with foreign companies. Of course, the blame falls mainly on the import-substitution policy which made production of certain goods in the country attractive when it was not technologically quite ready. But the fact that some groups (such as the Tanin group, although they did not become as large as those discussed in this paper) developed their own technology proves that there have been alternative paths for corporate deve 1opment. In a way, the groups discussed in this section grew large by becoming compradores of foreign capita 1 and acted as a major deterrent to independent technological development.

23

The Importance of Political Patronage In Thailand, if a business family wants to prosper, it is essential to have patrons in the government. This is particularly noticeable in the case of banking families. Chin Sophonpani ch had close relations with Police Genera 1 Phao Sriyanond, who formed the triumvirate in the Phibun regime of the 1950s. This relationship was indispensable for the Bangkok Bank to tide over the crisis it faced in 1952 and its expansion later. When General Sarit came to power in 1957, however, Phao, who was Sarit's political rival, had to flee the country, and this made it necessary for Chin to go abroad (he stayed in Hong Kong for a few years). Whi 1e he was away, Chin 1eft the management of the bank to Boonchu, who cultivated close relations with Field Marshal Prapass Charusat i en and succeeded in bringing him in as the chairman of the board of the bank. Prapass formed the second echelon in the power hierarchy in the Sarit regime and, after Sarit died in 1963, ruled the country with Thanom until 1973. The Lams am family of the Thai Farmers Bank also had close relations with the government. Churin Lamsam was particularly close to Phibun, but when Phibun was ousted, Churin got into trouble in the same way as Chin Sophonpanich, and since then, the family has not established close ties with any particular individual, although they maintain close relations with the government, particularly with the Royal Family. Wallop Tarnvanichkul of Asia Trust Bank, an immigrant from Shanghai after the communist take-over of main 1and China in the late 1940s, started his career in Thailand as the "right-hand man" of Chin Sophonpanich, and was later placed in charge of the Asia Trust Co., one of Chin's financial firms, which handled remittances from Thailand to China. Then, when Chin was in Hong Kong during the Sarit regime, Wallop acquired the company from him, and several years later succeeded in obtaining a banking licence from the government. In this, he was helped by Police General Prasert Ruchi rawongse, who had been sitting on the board of the company as its chairman, and Panthip Boriphat, a member of the Royal Family. Panthip later became chairman of the board of the bank. Ratanarak had close relations with Field Marshal Prapass Charusatien. The lighterage company (Bangkok Lighters), in which Ratanarak had accumulated his original wealth, appointed Prapass as chairman of the board. In about 1960, when the Bank of Ayudhya got into financial trouble, Ratanarak, together with Prapass, acquired its controlling interest. Dependence on people with political clout is not confined to banking families. For example, Srifuengfung and Sukri 24

Bodhiratanangkura forged an early link with Major-General Pramarn Pramarn Adireksarn (who is presently Deputy Prime Minister). belongs to a powerful group. His father-in-law is Marshal Phin Choonhavan, who participated in the coup of 1947 which restored Phibun Songgram to power, and became Commander-in-Chief of the Army in 1948. Major-General Chartichai Choonhavan (presently the Minister of Industry) is his son, and Police General Phao Sriyanond is his son-in-law. Sukri also has close relations with the Royal Family and one of his daughters is married to a son of Poonperm Krairiksh, the Director of Crown Property Bureau. One might argue that it is not only in Thailand that good relations with the government are important for a business to become large, for the government has the authority to approve or disapprove certain projects, it is an important source of funds, it can use the power of taxation at its discretion, and it has In Japan, for example, the information valuable to business. zaibatsu tended to cultivate close relations with the government and became a politico-economic institution. In the Philippines, too, as Frank Golay argues, successful entrepreneurs have to possess political skill.11 Dependence on the government has been, however, stronger in This can be best Thailand than in Japan or the Philippines. understood by conceptualizing Thailand as a patrimonial state.12 Unlike in Japan, which started modernization from feudalism and which inherited the tradition of decentralization and rule by law, in Thailand power was concentrated in the top echelon of the hierarchy, who ruled the country in a highly personal manner. Thus, not only was the influence of the government on the Thai economy very pervasive, but there was also a great deal of discretion on the part of government officials in interpreting So, wnereas it was possible for some rules and regulations. zaibatsu (for example, Sumitomo) to grow without establishing close relations with the government, in Thailand it was very unlikely for a business to become big without entering into a patron-client relationship with those in power. In the case of the Philippines, which also did not go through the feudal period,

11

Economic and Underdevelopment al., et Golay Frank Nationalism in Southeast Asia (Ithaca: Cornell University Press, 1969), p. 451.

12

For the application of the concept of a patrimonial state to without Modernization Jacobs, Norman see Thailand, Development: Thailand as an Asian Case Study (New York: Praeger Publications, 1971). 25

power tended to be concentrated more at the centre than in Japan, but a fairly long period of experiment with democracy made it possible for big business families such as Ayala and Soriano to pursue business without being too dependent on the government. The structure of political patronage in Thailand is somewhat different from that in other countries. One source of patronage is the military, which has ruled the country for much of the time during the past several decades. Until the Thanom-Prapass regime fell in 1973, some generals and other high-ranking officers sat openly on the board of directors of a number of companies. In most cases, ho;1ever, the patrons could not be easily identified, and contributions to the military for their patronage flowed behind the scene. Another source of patronage is the Royal Family to whom both the people and the military owe allegiance and who has some influence over government decisions.

26

III CONCLUSION

In Southeast Asia, entrepreneurship usually came from the Chinese. In Singapore, where most of the population are Chinese, this is not unexpected. However, in countries where the Chinese are a minority, they are also dominant in the economy. In Malaysia, for example, although the Chinese do not form the majority of the population as in Singapore but are a large minority group, they dominate the private sector, and the Malays are hardly visible except in the public sector of the economy. Even in Indonesia, where the Chinese account for only a few per cent of the population, the situation is the same. In Thailand, indigenous response to commercial opportunities has been much better, as ha_s been demonstrated in the increase of rice and other agricultural production in the past several decades, but in the modern sector of the economy, the entrepreneurs are predominantly Chinese. This is clearly demonstrated in the fact that all twenty groups discussed in this paper were founded by immigrants from China or their immediate descendants. The dependence of many of the business groups on foreign capital and technology makes one wonder how genuine Thai economic development and industrialization have been. The businesses grew by becoming the compradores of foreign capita 1, and instead of deve 1 oping independent techno 1 ogy and know-how, they tended to maximize short-term profits. If industrialization is to be the driving force of economic development, it has to be largely autonomous, but the industrial groups discussed in this paper, which can be taken as the vanguard of industrialization up to this point, depend heavily on foreign capital and technology, and thus cannot develop fully the industrial potential of the country. Technological progress in such groups was largely the transplantation of foreign technology under foreign supervision. Such "progre$s" cannot lead to cumulative progress which has been the characteristic of the industrialization of developed countries. Furthermore, such foreign-dependent growth wi 11 add

27

to political instability especially when economic growth stops or slows down and cannot meet the general expectation of the public, for they may blame it on the foreign-dependent groups, by reasoning that such poor economic performance is the result of allowing the country to be exploited by foreign capital.

28

APPENDICES

APPENDIX 1 Number of Companies and Total Assets of the Twenty Business Groups

Group Bodhiratanangkura Boonsoong C.P. (Charoen Pokphand) Chinthammitr Chirathivat Hong Yiah Seng Laem Thong Lams am Metro Osathanukroh PSA (Paul Sithi-Amnuai) Ratanarak Saha Union Siam Motors Sophonpanich Srifuengfung Tarnvanichkul Techapaibul Thai Roong Ruang Wanglee

Number of Companies

Total Assets, 1979 (in million baht)

14 16 39 18 20 28 17 61 17 28 45 30 79 49

7,155 7,598 2,809 3,037 1,426 2,541 1,441 38,602 9,055 3,011 6,078 22,629 6,747 6,895 121,734 4,482 9,473 44,691 2,550 2,594

77

28 15 92 12 31

29

APPENDIX 2 Major Companies of Each Group and Main Activity

Main Activity

Company

1.

Bodhiratanangkura

Siam Textile Chemical Teijin Polyester Thai American Textile Thai Blanket Industry Thai Cotton Mill Thai Melon Polyester Thai Thai Thai Thai Thai 2•

Manufacturing Manufacturing Manufacturing Manufacturing Manufacturing Manufacturing fibres) Manufacturing Manufacturing Manufacturing Manufacturing Commercial

Melon Textile Synthetic Textile Textile Tricot Wuthipat

(textiles) (textiles) (textiles) (textiles)

Boonsoong

Boonsoong Tin Dredging Cherng Talay Tin Dredging Isuzu Motor (Thailand) J.B. Jootee Trading Nippondenso Thailand Nippondenso (Thailand) Sale Nonghoi Mine Reynolds Aluminium (Thailand) Sombat Thai Bridgestone Thai Pure Drinks Thai Trading & Investment Tri Petch Isuzu Sale 3.

(textiles) (textiles) (textiles) (textiles) (textiles) (synthetic

Mining (tin) Mining (tin) Manufacturing (car assembly) Commercial Commercial Manufacturing (automotive parts) Commercial Mining (tin) Manufacturing (aluminium products) Holding company Manufacturing (tyres) Manufacturing (soft drinks) Commercial Commercial

C.P. (Charoen Pokphand) Agriculture (chicken breeding)

Arbor Acres (Thailand) 30

APPENDIX 2 (Continued) Major Companies of Each Group and Main Activity

Company

Ma i n Act i vity

Bangkok Farm

Agriculture (chicken and eggs) Commercial Manufacturing (textiles) Manufacturing (animal feeds) Manufacturing (fertilizer)

C.P. Inter Trade C.P. Textile Charoen Pokphand Feed Mill Chia Tai Seeds & Agricultural

4.

Chinthammitr Khan Kaen Sugar Industry New Krung Thai Sugar Factory New Kwang Soon Lee Sugar Factory Prachuab Sugar Industry Tamaka Sugar Industry Thai Fermentation Industry Thai Sugar Silo Thai Sugar Terminal Thai Sugar Trading Thai Sugar Transport Thai Sugar Warehouse Thonburi Sugar Factory United Sugar Terminal

5.

Manufacturing (sugar) Manufacturing (sugar) Manufacturing (seasonings) Warehousing Warehousing Commercial Transportation Warehousing Manufacturing (sugar) Warehousing

Chirathivat Central Department Store Central Garment Factory Central Inter Patana Central Plaza Hotel Chidlom Department Store Tiang Chirathivat

6.

Manufacturing (sugar) Manufacturing (sugar) Manufacturing (sugar)

Commercial (retail) Manufacturing (textiles) Real estate Hotel Commercial (retail) Holding company

Hong Yiah Seng Insurance Manufacturing (animal feeds)

Bangkok Union Insurance Betagro 31

APPENDIX 2 (Continued) Major Companies of Each Group and Main Activity

Company

Main Activity

Cathay Finance & Securities Centago Farm

Finance Agriculture (chicken and eggs) Holding company Manufacturing (textiles) Manufacturing (plastics) ColllTiercial

Leopairatana Enterprises Saha Thunyapherch Sack Factory Thai Petrochemical Industry Thanapornchai 7.

Laem Thong

Laem Thong Corp. Laem Thong Farm Laem Thong Food Product Laem Thong Industry Laem Thong Livestock Trading Laem Thong Warehouse 8.

Manufacturing (animal feeds) Agriculture (chicken and eggs) Manufacturing (food) Manufacturing (textiles) Manufacturing (chicken processing) Warehousing

Lamsam

Credit Fancier Sinkahakarn Dole (Thailand) Lamsam Import Loxley (Bangkok) Loxley Trading Muang Thai Life Assurance Phatra Insurance Phatra Thanakit Siam Food Products Sombat Lamsam Thai Dairy Industry Thai Farmers Bank Thai Investment·& Securities Thai Securities Tham Rong Yart 32

Finance Manufacturing (canned pineapples) Commercial Commercial Commercial Insurance Insurance Insurance Manufacturing (canned pineapples) Real estate ColllTiercial Finance (commercial bank) Finance Securities trading Commercial

APPENDIX 2 (Continued) Major Companies of Each Group and Main Activity

Main Activity

Company

9.

Metro Manufacturing Manufacturing Commercial Manufacturing Manufacturing Commercial Warehousing

Bangkok Steel Industry Chonviriya Steel Metro co. Thai Central Chemical United Flour Mill United Flour Trading United Silo & Service 10.

(chemicals) (flour)

Osathanukroh General Credit Foncier General Finance & Securities Lom Dum Ri Osathanukroh Osothsapha (Teck Heng Yoo) Premier Marketing Premier Products Suvit &Saree

11.

(steel) (steel)

Finance Finance Holding company Holding company Manufacturing (pharmaceuticals) Commercial Commercial Holding company

PSA (Paul Sithi-Amnuai} Advance Products Bangkok Food & Beverage Equity Development (Thailand) The Interlife PSA Rama Tower Siam Credit Corp. Sithi-Amnuai Holdings Thai-Land & Housing Tour Royale Viscount International

33

Commercial Manufacturing (soft drinks) Real estate Insurance Holding company Hotel Finance Holding company Finance Service Finance

APPENDIX 2 (Continued) Major Companies of Each Group and Main Activity

Company

12.

Main Activity

Ratanarak Ayudhya Insurance Ayudhya Investment & Securities The Ayudhya Life Insurance Ayudhya Warehouse Bangkok Broadcasting & TV Bank of Ayudhya C.K.R. Ratanarak Siam City Cement Siam Flour Mill Siam Flour Trading Siam Silo & Drying Siam Silos & Warehouse

13.

Insurance Finance Insurance Warehousing Service Finance (commercial bank) Holding company Holding company Manufacturing (cement) Manufacturing (flour) Commercial Warehousing Warehousing

Saha Union Bangkok Nylon Cocksec Chemical Industry Chokwatana Darakananda Far East Advertising International Cosmetics International Laboratories Lion Dentifrice (Thailand) Lion Fat & Oil (Thailand) New City (Bangkok) Saha Marketing Saha Pathana Investment Saha Pathanapibul Saha Thaipathanaphant Saha Union Sampanthamitr Texport International Thai President Foods Thai Wacoal Union Pathana Investment

Manufacturing (textiles) Manufacturing (insecticide) Holding company Holding company Service Commercial Manufacturing (cosmetics) Manufacturing (toothpaste) Manufacturing (detergent) Manufacturing (textile) Commercial Holding company Commercial Commercial Commercial Commercial Commercial Manufacturing (food) Manufacturing (textiles) Finance 34

APPENDIX 2 (Continued) Major Companies of Each Group and Main Activity

Company

Main Activity

Union Pioneer Fabric

Manufacturing (rubber products) Manufacturing (plastic products) Securities trading Manufacturing (textiles) Manufacturing (textiles) Manufacturing (Scotch tape) Manufacturing (textiles) Manufacturing (zippers)

Union Plastic Manufacturing Union Union Union Union Union Union 14.

Securities Spinning Mills Textile Industries Thai-Nichiban Thread Industries Yoshida Industries

Siam Motors

Prince Motors (Thailand) Phornprapha Trust S.M. Investment S.M. Trust Siam Daikin

Commercial Finance Holding company Finance Manufacturing (air-conditioners) Manufacturing (batteries) Commercial Manufacturing (car air-conditioners) Commercial Manufacturing (car assembly) Manufacturing (machinery parts) Manufacturing (motor-cycles)

Siam G.S. Battery Siam International Siam Kiki Siam Motors Siam Motors & Nissan Siam Riken Industrial Siam Yamaha 15.

Sophonpanich

Finance Finance Finance Finance Warehousing Finance (commercial bank)

Asia Credit Asia Credit Fancier Asia Investment Asia Securities Trading Asia Warehouse Bangkok Bank 35

APPENDIX 2 (Continued) Major Companies of Each Group and Main Activity

16.

Company

Main Activity

Bangkok First Investment & Trust Bangkok First Tokai Bangkok Home Bangkok Insurance Bangkok Life Assurance Bangkok Nomura International Securities Bangkok Warehouse Commercial Trust Green Spot Huay Chuan Huay Chuan Rice Lila Finance & Securities Trading Siam Life Insurance Sophon Investment Thai Melon Polyester Thai Trang Thaksin Finance Union Finance Wilson Insurance

Finance

Warehousing Finance Manufacturing (soft drinks) Commercial Commercial Finance Insurance Holding company Manufacturing (textiles) Commercial Finance Finance Insurance

Srifuengfung Boonthrong Cathay Trust Co. Goodyear (Thailand) Thai Asahi Caustic Soda Thai Asahi Glass Thai Glass Thai Plastic & Chemical Thai Polyplastic Industry Thai Textile

17.

Finance Finance Insurance Insurance Finance

Holding company Finance Manufacturing (tyres) Manufacturing (chemicals) Manufacturing (glass) Commercial Manufacturing (chemicals) Manufacturing (chemicals) Manufacturing (textiles)

Tarnvanichkul Asia Financing & Trust Asia Trust Bank

Finance Finance (commercial bank) 36

APPENDIX 2 (Continued) Major Companies of Each Group and Main Activity

18.

Company

Main Activity

Asia Trust Insurance Bangkok Entertainment Jalaprathan Cement Natheethong Finance & Securities Sincere Trust T.T. Holding Tarnvanich Thepharak Land Tipawan

Insurance Service Manufacturing (cement) Finance Finance Holding company Holding company Real estate Real estate

Techapaibul Holding company Finance (commercial bank) Commercial Real estate

Asia Holder Bangkok Metropolitan Bank Kloster (Thailand) Land Development Industry of Thailand Mahaguna Sugar Industry Overseas Investment Siam Commercial Trust Srinakorn Pattana Credit Fancier Suramaharas Techapaibul Thai Amarit Brewery Thai Financial Syndicate Thai-Mitsubishi Investment Thai Oversea Trust Thai Thum Distillery Woravat 19.

Manufacturing (sugar) Holding company Finance Finance Manufacturing (liquor) Holding company Manufacturing (beer) Finance Finance Finance Manufacturing (liquor) Commercia 1

Thai Roong Ruang Manufacturing Manufacturing Manufacturing Manufacturing Manufacturing

Chonburi Sugar Factory Kanchanaburi Sugar Industry Krung Thai Sugar Sriracha Sugar Factory Thai Identity Sugar Factory 37

(sugar) (sugar) (sugar) (sugar) (sugar)

APPENDIX 2 (Continued) Major Companies of Each Group and Main Activity

20.

Company

Main Activity

Thai Thai Thai Thai Thai Thai

Manufacturing Manufacturing Manufacturing Manufacturing Warehousing Manufacturing

Multiplication Industry Roong Ruang Industry Roong Ruang Molasses Ruam Charoen Sugar Ruam Toon Warehouse Sugar Industry

(sugar) (sugar) (sugar) (sugar) (sugar)

Wanglee Poonphipat Finance & Securities Poonphol Thai Commercial Insurance Wanglee Bank Wanglee Insurance Wanglee Investment

Finance Commercial Insurance Finance (commercial bank) Insurance Finance

38

THE AUTHORS KRIRKKIAT PHIPATSERITHAM is Associate Professor and Dean of the He has written Faculty of Economics, Thammasat University. extensively on contemporary economic problems in Thailand. His best known work is Vikoa Luksana Karnpenchaokong Thurakit Kanardyai Nai Pateth-Thai (An Analysis of Ownership Patterns in Big Business in Thailand), published by Thammasat University in 1982. KUNIO YOSHIHARA is Associate Professor at the Center for major His University. Kyoto Studies, Asian Southeast publications on Southeast Asia are Foreign Investment and

Domestic

Response:

A Study

of

Singapore

Industrialization

Japanese 1976); Press, Universities Investment in Southeast Asia (Honolulu: University Press of Foreign and Hawaii, 1978); and Philippine Industrialization: Oxford University Press, Domestic Capital (Kuala Lumpur: forthcoming). Among his writings on Japan, the most recent is the Vanguard of the Japanese Economy (Tokyo: Sogo Shosha: Oxford University Press, 1982). (Singapore:

Eastern