The Crowning Fortune
The Crowning Fortune
Writer : Susan J. Cunningham 08.14.08, 5:00 PM ET
Forbes Magazine dated September 01, 2008
The king of Thailand controls vast wealth. Just how vast wasn’t clear, until some sleuthing by a Bangkok academic and some new openness by the monarchy’s investment arm
The Thai monarchy’s family fortune has always been shrouded in secrecy. Last year FORBES ASIA valued it at a conservative $5 billion. Other estimates have put it at $8 billion. But this year–using an exhaustive academic study of the monarchy’s investment arm, the Crown Property Bureau–FORBES ASIA now values the fortune at $35 billion. This new estimate easily puts King Bhumibol Adulyadej atop our annual list of the world’s richest royals. (http://www.forbes.com/magazines/global/2008/0901/038.html) Last year we ranked him fifth.
The bulk of the bureau’s assets lies in its vast real estate holdings, which make it the country’s largest landowner and include roughly one-third of Bangkok’s central business district. The bureau also holds a 30% stake in the Siam Cement Group and a 25% share of Siam Commercial Bank. The bureau granted an economic historian who is writing a history of the bureau, Porphant Ouyyanont, unprecedented access to its files in 2005. His paper, which was published in the U.K.’s Journal of Contemporary Asia in February, pegged the value of the bureau’s assets at $27.4 billion as of the end of 2005. Since then the assets and the baht have appreciated (though the baht has fallen recently). "Sure, [the estimate] is enormous, but it’s reasonable," he says. "We know the price of land. We know [the market] capitalization [of the companies]." An adviser to the bureau, Aviruth Wongbuddhapitak, said by e-mail that "generally, there is no major inaccuracy" in Porphant’s paper.
Although no one outside the bureau knows precisely where all its real estate is located, the most valuable is in the oldest parts of Bangkok and includes many of the city’s landmarks. From Chinatown, Ratchadamnoen and the old royal city on Ratanakosin Island, the city expanded south along the Chao Phraya River and eastward alongside canals. The bureau now owns government buildings in these areas as well as the riverside sites of the five-star Oriental and Royal Orchid hotels and large plots in the commercial and embassy districts of Silom, Sathorn and Wireless roads. It leases land to the high-end Siam Paragon and CentralWorld shopping plazas, the Suan Lum Night Bazaar, the Queen Sirikit convention center, the Stock Exchange of Thailand and the Sermit and Sinthorn office buildings.
Aviruth says that, in all, the bureau owns 3,493 acres in central Bangkok. Today that land is worth $31 billion, based on land values compiled by a Bangkok consulting firm. Porphant used the data to figure the price of land in 22 prime city zones and then to arrive at a price per acre for the bureau’s land. The bureau values its Bangkok real estate at only $9 billion, but Aviruth says it books the property at cost, not taking into account appreciation over the decades. The bureau’s longtime director-general, Chirayu Isarangkun Na Ayutthaya, declined an interview with forbes asia, but his staff did reply to e-mail queries.
Aviruth says it also owns 12,500 acres in the rest of the country, most likely the land under old marketplaces and in the rice-growing provinces of the Central Plains, along the historical boundaries of the Siamese kingdom. Neither Porphant nor the bureau estimates the value of this land, and it’s not included in our estimate of the king’s wealth.
The bureau allowed Porphant, who’s a professor of economics at Sukhothai Thammathirat Open University north of Bangkok, to examine its records of the rents and fees collected on its land, something no previous researcher had gained access to. (http://www.prachatai.com/05web/upload/HilightNews/document/Porphant%20.pdf) He found that in 2005 the income from the bureau’s properties totaled $56 million, which is $79 million at the current exchange rate. He believes that beginning around 1999 the bureau was able to jack up property income at least fivefold, mostly by getting its commercial tenants to pay higher rents and a higher share of their business’ revenue.
Paul Handley, who spent a decade in Thailand researching the monarchy for his banned 2006 biography of King Bhumibol, The King Never Smiles, says he believes that the bureau is still not charging market rates. That’s because raising them to those levels so quickly would cause serious repercussions, especially for its thousands of low-income tenants. "It still has a below-market-rent mentality for long-term stability goals," he says. "Or, look at it this way: They have no rate-of-return goals on some of their real estate, limited goals on others and nearly commercial on others."
The bureau’s other assets are easier to value. Its 30% share in the Siam Cement Group, the country’s second-largest company, is worth $1.9 billion and its 25% share in Siam Commercial Bank is worth $1.1 billion. As of July it also owns virtually all of Deves Insurance, worth $65 million, and stakes in various other public and private companies that Aviruth says are worth $600 million. Chirayu sits as the chairman of Siam Cement and Deves, and other bureau staffers serve as nonexecutive directors of other companies where the bureau has a stake.
Aside from the bureau’s holdings, the king also has extensive personal investments and landholdings. Porphant did not look at these assets, and no outside analysis could ever do more than guess at their value; they’re not included in forbes asia’s $35 billion estimate. Most of this land was bequeathed to the royal family over the decades, sometimes by farmers who had no heirs and believed the king would use it for a good purpose.
While no outsider can be certain which royals benefit from the bureau’s income other than King Bhumibol and Queen Sirikit, a safe guess is that the list includes their four children; the wife of their only son, Crown Prince Vajiralongkorn; and their five grandchildren living in Thailand. Other likely beneficiaries are the prince’s first wife and the daughter and grandson of the king’s late sister. It’s unclear how much of the money goes to charity because how the income is spent is not made public.
The bureau’s headquarters is housed in a former prince’s palace, an elegant early 20th-century yellow-brick and red-tile mansion in the Dusit district, close to the Chao Phraya River, the parliament buildings and the king and queen’s Chitrlada Palace. Dusit today is still a leafy residential area but at the turn of the last century, it was countryside. At that time King Chulalongkorn built the teak Vimanmek Palace there as a rustic, cooler getaway home, and other mansions for nobility and aristocrats soon followed.
Chirayu has run the bureau since 1987. A palace insider from an aristocratic family, he played high-level squash and earned a doctorate in economics at the Australian National University. He taught economics back home and served as deputy minister of industry before the king tapped him as the bureau’s chief. It’s an unusual animal he oversees, for its goal is not strictly to earn the highest income but to aid the country’s development by investing in key industries and providing below-market-rate housing for low-income citizens. Almost all of his staff of 600 is involved in property management, making the bureau, in effect, a giant landlord. Fewer than ten staffers manage the financial assets. And as the ultimate long-term investor, it isn’t concerned with short-term profits or losses. "Our role is simply to participate in the board room as nonexecutive directors rather than as management," says Aviruth.
From its beginning in 1890 as the Privy Purse Bureau, the Crown Property Bureau had both developmental and investment roles. After the 1932 revolution overturned the absolute monarchy, a civilian government divided up royal properties and grouped much of the land, the Siam Cement conglomerate, Siam Commercial Bank and some other Privy Purse companies into the new Crown Property Bureau. The government kept control of the bureau while the royal family was in exile, but after several coups in the 1940s, royalist supporters were able to strengthen the monarchy and a 1948 law handed control of the bureau back to the crown. The law specifies that the use of the bureau’s assets and income "depends totally on the royal inclination" and that the government cannot seize or transfer them, or tax them. The bureau doesn’t issue an annual report, except to the king.
Porphant’s paper focused on how the bureau handled the 1997 financial crisis. The crisis cut the bureau’s annual income by 75% virtually overnight. To help it recover, the bureau hired a high-powered group of Thai and foreign experts in finance and real estate. Among them were Vichit Surapongchai, a former president of Bangkok Bank and now chairman of Siam Commercial Bank’s executive committee, and Michael Selby, onetime adviser to Brunei’s Prince Jefri. Then it jettisoned its stakes in nearly 400 companies and began raising the rent it charged on its properties. Porphant estimates that by the end of 2005 the bureau’s annual income in baht terms was three times its peak during the 1990s boom, or $280 million at the current exchange rate. Roughly $200 million of that comes from company dividends.
The crisis almost cost the bureau its stake in Siam Commercial. The bank was founded in 1906 by the finance minister of that time, a half-brother of King Chulalongkorn, to compete with European bank branches in what was then Siam. Associated with the royal family ever since, it was listing 34% of its loans as nonperforming by August 1998. Under a program to bolster Thailand’s failing banks, the finance ministry matched $676 million Siam had raised from foreign banks. In return the ministry took a 39% stake, diluting the bureau’s 25% share to 11%. Wary of a state takeover, none of the other big banks chose to participate.
The bank returned to profitability in 2003, and the next year it got its shares back by handing over 192 acres of land west of Victory Monument, a clogged roundabout in the north-central part of downtown. The land’s development value is questionable: It contains a school, a hospital and a division of Mahidol University and is close to the royal palace and a railway station. "This deal was unique," Porphant writes in his paper. Handley, the author who studied the bureau, says it was as close as the bureau has come to borrowing money.
Today the vast size and reach of the bureau is greater than ever, but some see its growing power as a contradiction of the king’s own philosophy. "It is not a little ironic that the monarchy, at the head of Thailand’s biggest business conglomerate, now promotes an inward-looking development strategy," says Kevin Hewison, coeditor of the quarterly journal that published Porphant’s paper. "The king has promoted his idea of the "sufficiency economy," emphasizing small-scale, traditional farming and Buddhist notions of moderation at the very time that the bureau’s companies are expanding industrial production, encouraging consumption through investment in glitzy shopping malls and making large profits."
So why is the bureau opening up its books, at least a crack? In recent years Chirayu, the bureau’s manager, has been disclosing bits and pieces to a few Thai journalists. "By offering up a little now it hopes to protect itself from something worse–perhaps in the same way that the U.K. royal family offered to pay income tax [in 1992]," says Michael Backman, an authority on Asian business networks who put the value of the bureau’s holdings at $8 billion in his 1999 book, Asian Eclipse: Exposing the Dark Side of Business in Asia.
Perhaps, with King Bhumibol now 80 years old, Chirayu and the bureau are preparing for the time when Thailand is ruled by the less predictable Prince Vajiralongkorn, suggests Handley, who twice interviewed the director-general. "I think Chirayu is pretty shrewd," he says. "The finance ministry and business community have always trusted Chirayu’s judgment, but now they must signal to the prince," Handley adds, that he must handle the fortune responsibly. If he doesn’t, Handley says, "Thailand’s economy could be irreversibly damaged."
But bureau adviser Aviruth says simply: "The utmost aim [of the bureau is] to uphold the royal prestige and kindness of the monarchy. We feel that … we should … disclose certain information for the benefit of the public."
The Crown Property Bureau in Thailand and the crisis of 1997
รองศาสตราจารย์ ดร.พอพันธ์ อุยยานนท์, 2549