Latest from Chang Noi: Tales from a notorious swamp

Latest from Chang Noi: Tales from a notorious swamp - The Nation, June 13, 2005
...One company, Italthai Holdings, was given the contract to build the airport. There was no competitive bidding. The same company was to research, design and manage the construction. Critics felt that this was tantamount to a licence to print money. The controversy became so heated that when Sarit died in 1963, the project immediately fell apart.
But great ideas don’t die easily. Sarit’s successors kept trying to kick-start it, and finally succeeded in 1968. Again they selected a company without competitive bidding, this time the US aviation giant Northrop won the day. Again they commissioned the company to both design and construct the airport, and threw in a concession to operate it for 20 years, as well. Again Italthai (renamed Italian-Thai) popped up as Northrop’s local partner...

2Bangkok.com's history of the new Bangkok airport


[2015 note: Like many Thai newspaper articles from the early days of the Thai internet, this article is no longer online. Below is the complete text of the original article.]

Tales from a notorious swamp.
Published on Jun 13, 2005 The Nation

Khunying Jaruvan Maintaka has said that almost every procurement contract for the new airport is problematic. For the past 50 years, the tales emerging from this swamp have all involved authoritarian rule and funny deals.

Almost half a century ago, American advisers suggested the country should have a new commercial airport. Military dictator Sarit Thanarat decided it should be located in Nong Ngu Hao – Cobra Swamp. Nobody seems to know why Sarit made this choice. There was no study of the site’s suitability, no consideration of alternatives. The choice set off a minor orgy of land speculation.

One company, Italthai Holdings, was given the contract to build the airport. There was no competitive bidding. The same company was to research, design and manage the construction. Critics felt that this was tantamount to a licence to print money. The controversy became so heated that when Sarit died in 1963, the project immediately fell apart.

But great ideas don’t die easily. Sarit’s successors kept trying to kick-start it, and finally succeeded in 1968. Again they selected a company without competitive bidding, this time the US aviation giant Northrop won the day. Again they commissioned the company to both design and construct the airport, and threw in a concession to operate it for 20 years, as well. Again Italthai (renamed Italian-Thai) popped up as Northrop’s local partner.

Again controversy surged. The press argued that the deal was a scam. Parliament rejected the project three times. The deal was finalised only after the military strongmen abolished Parliament and went back to dictatorial rule in 1971. And again, it fell apart when dictatorial rule was brought down, this time by the student revolt of 1973. The successor government walked away from the deal. For good measure, Northrop’s banker was accused of improperly financing Nixon’s presidential re-election campaign, and Northrop had to pull out of the deal.

But when military rule returned in the late 1970s, so too did the airport at Cobra Swamp. By 1984 there was a master plan. But there was also an oil crisis and a big budget deficit, so the project was put on ice. When generals returned to power by coup in 1991, the project finally took off. But times had changed. The generals could no longer pick a site and a company at will. From this point on the process involved four main parties or groups of parties, each of which was wreathed in controversy.

First, control of the project was relocated to an independent authority. This idea was conceived in 1991-1992, and finally evolved into the New Bangkok International Airport company (NBIA) in 1995-1996. Although this put some distance between the project and the politicians, the distance was small. A battle royal between the air force and the civilian ministers of Anand Panyarachun’s government ensued over who would appoint and control the authority’s members. From then on, almost every change of Cabinet (and even some reshuffles) was promptly followed by a total revision of the key positions.

Second, design work was allocated to strings of consultant companies. How they wrote the specs was often critical in determining which companies would get the resulting contracts. Although the basic design was put together in the early 1990s, each successive government found reasons to adjust the project so that a new set of consultants could be appointed, and a new set of specs written. Under Chuan I, the project was re-imagined as a hub for the Southeast Asian region. Under Chuan II, grandiose plans were scaled back because of the economic crisis. Under Thaksin Shinawatra, the project was reconceived in a bigger form than ever.

Third, construction and supply contracts have been allocated by competitive bidding, but often this process has been cleverly managed. A ring of major contractors was suspected of sharing out contracts; they formed a queue, predetermined who would win and compensated one another through subcontracts. But sometimes problems could occur.

Italian-Thai won a big contract to build a landfill. Thirteen other companies complained they had been disqualified from the bidding because of the way the specs had been written. The associations of architects and engineers estimated the amount of what they describe as padding in the Bt11.6-billion price submitted by Italian-Thai added up to a cool Bt3.5 billion. The aggrieved companies petitioned the Communications Ministry, the Counter Corruption Commission, and the Council of State.

Eventually the Council of State ruled that the bidding had been improper. But Italian-Thai kept the contract, under which much work had already been done. Only the scale and cost were renegotiated in the downsizing dictated by the economic crisis.

Fourth, financiers also maintained influence. The major battle over the last decade has involved the design and construction of the passenger terminal, for which the Japan Bank for International Cooperation was a major financier. In one bidding round, the five consortiums with no Japanese members all withdrew, leaving the four with Japanese members to fight it out.

But this was a mere skirmish. The struggle over the construction of the terminal became a major war in which all four elements of this new era came into in play. Through a tortuous process, two designs were put forward, each backed by its own coalition of politicians, executives of the NBIA, consultant companies, contractors and financiers. The battle raged back and forth for years amid a blizzard of corruption charges and counter-charges. Eventually, the contract went to ITO, a consortium that includes Italian-Thai as a major partner. This decision was promptly challenged on the grounds that the specs had been biased, the bidding process had skipped several important steps and the level of scrutiny had been inadequate, and because Italian-Thai had a case in the bankruptcy court, which should have disqualified it. Also, the contract seemed full of loopholes, including provisions to reduce the scope of work without reducing the cost.

What kept the project afloat despite all the opposition was the one factor that has marked every significant stage in the airport’s long history: a revival of authoritarian rule. The decline of media freedom, and the general decline of public and institutional scrutiny under Thaksin, made the scandal disappear from sight – but not, of course, from the real world.
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