Hopewell saga reveals true cost of political corruption

[webfact]

Hopewell saga reveals true cost of political corruption

By The Nation

 

 

Thai taxpayers have been robbed of Bt11.88 billion, in what should be a lesson for the future

 

When politicians and bureaucrats are corrupt or incompetent or both, taxpayers are the ones who suffer most. This was  amply demonstrated by the Supreme Administrative Court’s latest ruling that the State Railway of Thailand (SRT) must pay Bt11.88 billion in compensation plus interest to the Hong Kong-based Hopewell Company.

 

This long-running saga started in 1990 when the Chatichai Choonhavan government signed a 30-year concession contract with the private firm to build an Bt80-billion elevated road and train system in Bangkok to ease the city’s traffic congestion.

 

The 60-kilometre Hopewell project was controversial from the start because of contractual weaknesses and other issues, prompting the following government of Anand Panyarachun to launch a comprehensive review of the scheme.

 

From 1992 to ’96, the project ran into financial and liquidity problems as well as technical hitches, resulting in protracted delays. In 1997, construction work came to a halt at the height of the Asian financial crisis. The Chavalit Yongchaiyudh administration began taking steps to terminate the concession contract that year. 

 

In 1998, the Cabinet approved a resolution to scrap the deal because the project’s construction work, after seven years, was only 13 per cent completed.

According to the concession contract, any disputes between the government and the private firm were supposed to be settled by a three-person arbitration committee, a mechanism proven later to have put the government at a disadvantage.

 

The government cited the firm’s inability to finish its construction work obligations as the major cause for ending the contract, as evidenced by the snail-pace progress that made it highly unlikely the system’s overall construction would be completed within 10 years as required in the contract.

 

In its defence, Hopewell cited as the main factor for delays the SRT’s failure to hand over land plots along the routes in accordance with the project’s timeline. 

 

Hopewell subsequently sued SRT for compensation of Bt56 billion, while SRT filed a counter-suit seeking Bt200 billion in compensation.

 

Eventually, the arbitration committee, which comprised one member from the government, one from the private sector plus a third person jointly approved by both parties, reached a resolution in favour of the private firm.

 

The case later went to the Administrative Court, which dismissed the arbitration committee’s ruling in 2004 on the basis that its statute of limitations had already expired after a period of five years, counting from 1998 when the contract was terminated.

 

However, Hopewell did not accept the court’s verdict and forwarded the case to the Supreme Administrative Court, which on Tuesday upheld the arbitration committee’s ruling in favour of the firm.

 

As a result, SRT has been ordered to pay Bt11.88 billion plus 7.5 per cent per-annum interest dating back a total of 21 years.

 

Overall, taxpayers should learn a big lesson from this saga, which stemmed from incompetent and corrupt politicians who managed to clinch a multibillion-baht deal with a private firm in the absence of proper check-and-balance mechanisms.

 

Details of the project covering its technical and financial feasibility were never properly vetted by public sector experts and other professionals, resulting in multiple challenges once the contract was signed. In the end, Thai taxpayers are the losers.

 

Source: http://www.nationmultimedia.com/detail/opinion/30368403

 

-- © Copyright The Nation 2019-04-26

[Odysseus123]

Nearly 20 years of stonewalling.

 

When even the East signally failed to hustle the East...

[sammieuk1]

H0pewell will find the backhand works best here whilst the forehand has other duties???? 

[Cadbury]

The Hopewell incident could well be a deja vu of the forthcoming and yet to be decided (envelopes pending) high speed rail system between Don Mueang, Suvarnabhumi and U-Tapao.

Particularly if the debt ridden incompetent State Railway of Thailand is involved. 

[ezzra]

The sad conclusion is that nobody probably has learned anything from the Hopewell saga and that other similar fiascos are in the making as we speak, why? a. this is the Thai way and nature of doing things, and b. it's state money, and state money in most cases is a fair game and grab as much as you can...

[aqua4]

Quote

 

Ordered to pay Bt11.88 billion plus 7.5 per cent per-annum interest dating back a total of 21 years

 

 

That is a hell of an amount of money as that interest would be sky high. The interest would be about 18.71B plus capital of 11.88B which would make it about 30B Baht.

 

 

[chainarong]

And it also has to be factored in that the Minister concerned at the time when the world bank did its arithmetic in 96/97 that the Minister  and family members  were major share holders in the concrete supply company and had enough concrete supply to last one hundred years, that's what brought all this undone, this case has been white washed and it is far removed from from it's originality, the world back shut the project down. 

[Lungstib]

Didn't the same people also bring Thailand the Klong Dan project and the aircraft carrier? Times must have been good. With all that money sloshing about its no wonder the generals got upset and made a comeback. 

[watcharacters]

5 minutes ago, Lungstib said:

Didn't the same people also bring Thailand the Klong Dan project and the aircraft carrier? Times must have been good. With all that money sloshing about its no wonder the generals got upset and made a comeback. 

 

You'd have been pissed off too if there was a stick full of carrots and you couldn't quite reach them.

 

 

[yellowboat]

3 hours ago, webfact said:

Overall, taxpayers should learn a big lesson from this saga, which stemmed from incompetent and corrupt politicians who managed to clinch a multibillion-baht deal with a private firm in the absence of proper check-and-balance mechanisms.

 

Details of the project covering its technical and financial feasibility were never properly vetted by public sector experts and other professionals, resulting in multiple challenges once the contract was signed. In the end, Thai taxpayers are the losers.

Fast forward to present day.   Nothing has changed.   The people who could avoid these problems are being scrutinized by the EC in the hopes that this sort of ineptitude can continue indefinitely. 

[Lupatria]

Burn incense now, things like these won't happen again:

"...Prem has come and said that Prayuth's government is not corrupt!"

[PerkinsCuthbert]

This article is miscategorised, it should be in the entertainment section.

One looks forward to the day when the Chinese come calling for money owed on the high-speed train project, if it ever gets built.

[natway09]

I have already on this forum told the real story.

The SRT got greedy after contracts signed & construction well underway & demanded a one 

of payment of 600 million USD  for "overhead rights" which had never been mentioned before.

Hopewell reassessed their position & as they had just inked a big road contract in China told

SRT to stuff their contract where the monkey stuffed his nuts.

All the "slow progress was because the SRT would not give them access to areas on time as per contract

[hotchilli]

Only one country can do large scale projects like these with Thailand... China

The rest of Asia will be screwed into the floor with over inflated prices & back-handers!

[Srikcir]

10 hours ago, webfact said:

The case later went to the Administrative Court, which dismissed the arbitration committee’s ruling in 2004 on the basis that its statute of limitations had already expired after a period of five years, counting from 1998 when the contract was terminated.

This may have been a mistake by the Court to cite an expiration of a statue of limitations (under Thai law) and dismiss the 3-0 arbitration decision.

 

Without a detailed research into the background of facts, it is a typical requirement under a free trade agreement (FTA) that any disagreement between the contracting parties must be resolved by a binding tribunal arbitration panel wherein each party selects a representative and together select a third member - the article describes such a process.

 

One purpose of an FTA is to insulate both parties from their opposing nation's judicial system which might be politically influenced by that nation's government and, thus, lower the risk of investment by the foreign investor/operator. If there is no sunset rule in the FTA agreement that would define when provisions of the agreement would terminate, there is no statue of limitations. Any sunset date specified by the FTA can exceed the duration of any specific contract deadlines executed under the FTA. No court in either nation to a FTA that is ratified by both nations has standing or authority to resolve any disagreements under a FTA nor alter or terminate the FTA provisions.

 

The fact that the subject arbitration did eventually make a ruling indicates that the time limit of the FTA had not expired despite the government's project contract termination; thus, the arbitration decision was still legal and enforceable under the FTA. The government cannot unilaterally establish a statue of limitations on a FTA project. It must go through the tribunal arbitration process.

 

Fortunately (and coincidentally?), the Supreme Administrative Court reached the same decision as the arbitration panel, albeit at much greater cost to the Thai taxpayers.