Bend it like Thaksin: Honestly Wealthy?
In this issue of Money Make Over, the author took an unusual step to look into the portfolio of Thailand 's wealthiest Prime Minister (PM), Thaksin Shinawatra. What kind of advice, can one give to a man who is so wealthy already, you may ask and how did we get hold of this information in the first place? To answer the first question, the PM's wealth is derived from just three companies: Shin Corp., Advance Info Service and Shin Satellite and Thai politics can be very unforgiving when one mixes personal businesses and politics together as one may recall a couple of years ago when one “honest mistake” almost cost him his political career. As for the second question, being a politician these days, one has to be “whiter than white” meaning that your personal life is no longer yours. Everything you own must be disclosed to the Counter Corruption Commission (CCC) and the new Constitution has given the people unprecedented power than ever before. Nowadays, parents can demand to see their children's grade from the schools if they feel that something is not right. Politicians can also come under the same scrutiny in the “new” society. Therefore, by law, the PM, like all other politicians, has to declare his personal asset (including his wife and children under 21 years of age) with the CCC and the information is open to the public who may be interested to see how “unusually” wealthy our politicians are. However, to be fair, our PM was already a wealthy man even before he entered politics. Not only is he a Thai billionaire but also a US billionaire in US$ terms. His name has been in the Forbes' Billionaire List long before Thai Rak Thai was born. Therefore, what was declared with the CCC on October 10, 2002 is noting new but it is quite interesting all the same and the author shall try to offer his humble opinion on how to improve on what has been a remarkable success story of a young police officer called Thaksin Shinawatra.
Current Portfolio: As mentioned earlier, our PM is a US $ billionaire. In Thai Baht, that translates into approximately 40,000,000,000 Baht, give an take a few millions depending on the exchange rate. (Yes that's correct, 10 zeros). To many of us, ordinary Thai citizens, the sum is almost surreal in a country where many people still live below the poverty line or trying to maker ends meet on Baht 170 a day (minimum wage). What we are witnessing must be capitalism in its purest form! However, what is interesting is the fact that the number that was filed with the CCC in the name of “Thaksin Shinawatra” was only Baht 576 million. This is mainly due to the fact that the shares of his flagship, Shin Corp. are now held in the name of his son, Phantongtae and daughter, Phantongtarn, which make them the wealthiest teenagers in Thailand . Based on the latest information, dated October 10, 2002, that was made available to M&W, total wealth of our beloved PM, his wife, Khunying Pojamarn and his youngest daughter came to only Baht 12,381 million.
Loan: What makes the PM's portfolio so uninteresting is that the bulk of his wealth is still very much concentrated in Shin Corp. in a round about way. About 48% of the combined Baht 12 billion portfolio is classified as loans to 10 people and (surprise, surprise!), the biggest borrower is his own son, Phantongtae, with Baht 4 billion followed closely by Khun Bunpoj and Bussaba Damapong with Baht 570 million. And it just so happens that Khun Bunpoj and Khun Phantongtae, are the second and third largest shareholders of Shin Corp. respectively with a combined stake of 24% while the single biggest shareholder is Miss Pintongtae with 15% equity stake. Simply put, our PM still owns 40% of Shin Corp. but using his son and daughter as nominees.
Non-listed Securities: Our PM has about Baht 4.3 billion or 35% of total portfolio in non-listed securities. Some of the names are just nominees for his family members such as OAI Property/Leasing/Estate/Consultant etc. But some of the names are quite interesting such as Rama 9 Hospital and Alpine Golf and Sports Club. However, some of the names that look the most interesting are AIG Asia Direct Investment Fund, RMC Investor LLC and MBI Investor LP. This is something our PM should pay special attention to since these are offshore investments and represent a real diversification for the portfolio.
Land: makes up about 3% of the overall portfolio. Most of the land holdings (108 plots altogether) are in Bangkok area such as Dusit, Lad Praow, Bangkok Noi and Nonburi. Being a northerner, most of the land outside Bangkok are in Chiang Mai and some in Korat, Cha-am and Chumporn
Home Equity: Our PM has 4 main residences worth Baht 324 million. Bangkok residences in Jaran Sanitwong, Green Valley Condo in Chiang Mai and a really lovely seaside home in Cha-am.
Commercial Properties: In addition to the residences that he lives in, the PM and his wife also own another 35 commercial properties in Bangkok and Chonburi. These are mostly condos and town houses.
Cars : Like all rich people around the world, the rules of the game is “you are what you drive”. The PM owns 10 cars comprising of 3 Benz, a BMW, a Ferrari and a Porsche. In addition, our PM also owns 3 Toyotas and 1 Mitsubishi! But recently, rumour has it that he bought 2 new BMWs (one is bullet-proofed and the other is bomb-proofed, worth only Baht 15 million EACH! ), and the most expensive one of all is the Rolls Royce, which is worth only Baht 50 million. All in all, his toys only cost him Baht 134 million. (not even 1% of his total wealth!) As the old saying goes “the difference between men and boys is the price of their toys!” and it looks as if our PM is still very young at heart when it comes to toys for the boys.
Jewelries: Although, our PM only has two wrists and ten fingers, like all of us, but he owns 26 wristwatches and 9 rings! All toll worth about Baht 15 million, which pales in comparison to the contents in Khunying Pojamarn's jewelries box, which was declared with the CCC at Baht 276 million. I supposed diamonds are a girl's best friend and it looks as if Khunying has many best friends indeed!
Cash & Others : The official salary of a Thai Prime Minister is only Baht 115,000, which is the lowest among world's leaders with the exception of President Gloria Arroyo of the Philippines . This may be the reason why the PM needs to keep Baht 618 million in bank deposit, Baht 72 million in mutual funds and another Baht 232 million in other liquid assets just in case he needs to buy something like an English Football Club!
As I said earlier, what kind of advice should one give to a man who has already accumulated so much? The Baht 12,381 million that was declared with the CCC is only a fraction of the PM's total wealth, which is held in his son and elder daughter's names (and possibly other nominees?). In fact, 83% of the declared portfolio is made up of loan (48%) and non-listed securities (35%) which makes it quite difficult to analyze given that publicly available information does not tell us very much except the names of the nominee companies. Just out of curiosity, how much interest should a father charge his own son? MLR+ 0.5% or is it better to use Libor + swap rate?
The Jewel of the Crown: What I, personally, find absolutely amazing is not so much how many fast cars or Swiss watches our PM has but what he has done in creating wealth through hard work, risk taking, flawless executions and of course, luck. As the old say goes being smart alone is not enough you have to be lucky too. Within a period of 20+ years, the PM has built from scratch a small computer company into a billion dollar (not Baht) conglomerate. As of July, 2004 the market capitalization of Shin Corp. stood at Baht 109,869 mm.; Advance Info Service: Baht 282,561 mm. and Shin Satellite: Baht 12,439 mm. When you add up just these 3 companies that make up the “Crown Jewel” of the Shinawatra empire, the combined market capitalization came to Baht 387,109 mm. And for those of you that still cannot figure out how much is Baht 387,000 mm. is, here's a simple comparison by using the market capitalization of Thailand's leading corporations: Siam Cement: Baht 283,200 mm.; THAI: Baht 88,463 mm.; PTT + PTTEP: Baht 615,882 mm.; BBL+K-Bank+SCB+KTB: Baht 535,730 mm.
Word of Advice: It is a well-known fact that in politics, there are no real friends and no permanent enemies. Therefore, the PM is going to have to watch his back very carefully. Another “honest mistake” just won't do. The PM has a delicate balancing act to do between managing his personal empire and running the country. Not an easy job for anyone in his position. Therefore, my advice is a simple one, if he chooses to take the moral high ground, he better make sure that he follows through with it.
Proposed Portfolio: By using a hypothetical assumption that our PM is willing to listen to someone else, apart from his wife, for a change, I would like to propose the following changes to his portfolio:
Cash: To most ordinary people, to keep 5% cash level is prudent, but our PM is far from ordinary. Currently, he and his wife has more than 600 million sitting in a bank deposit earning less than 1% interest rate, therefore, I would suggest that about Baht 500 million should go into short-term fixed income funds. Not only are these funds tax-efficient and diversified, they can be used as “near-substitute” for bank accounts. Although, slightly more risky and not as liquid as ordinary bank deposits but saving 15% withholding tax on interest income of Baht 6 million (assuming 1% interest rate) is a strong incentive of almost a million baht.
Non-listed Securities : when you are a PM, politics and personal investment can never go together. No matter what he does, the PM just cannot win. Therefore, I would suggest that he reduces the exposure of non-listed securities to about 5% and put about 5% in any one of the index funds . The real beauty about index funds is that they are fully diversified and low risk. Moreover, the PM cannot be accused of using the power of his position for personal gain because he is investing in the whole stock market not just in any one stock. At the risk of sounding unpatriotic which won't go down too well with the Thai Rak Thai slogan, I would recommend that up to 25% of the portfolio should be kept offshore . This can be done via Foreign Investment Funds (FIFs) or he could retain anyone of the offshore private bankers, who shall be more than happy to service him. There are a couple of reasons for going offshore; the first being that all of is wealth is based in Thailand and it is a good idea to diversify globally; the second reason comes back to politics. By investing offshore, no one can accuse him of being a “monetary dictator” in his own country and I am sure the Governor of the BOT won't mind too much about foreign remittance since, he has already approved up to US$ 200 mm. (Baht 8,000 million) to be invested offshore through FIFs. Out of the 25%, I would put 10% into global equity funds and 15% into hedge funds.
You may have noticed that I didn't mention too much about Fixed Income Funds . This is because it is not his style. Our PM has always been a risk-taker, a big one at that and it is something that he thrives on. Besides, he didn't become rich by investing in government bonds. As for the rest of his portfolio, the Baht 4 billion loan to his son is probably one way of holding the shares of Shin Corp through a nominee. While, the rest of the investment in land, commercial properties and collectibles are just about right. Although, I am sure he has no time to drive all of his 10 cars given the PM's tight schedule and especially with a General Election coming up.
Personal Debt & Life Insurance : According to the CCC declaration, our PM is debt free but I am sure he has several “Platinum” credit cards. As for life insurance, the existing sum insured is about Baht 9 million, which is quite irrelevant. Even if he drops dead tomorrow, I am sure his son and daughter still have enough to live on.
All in all, our PM's portfolio is in a pretty good shape and if he follows our Make Over advice, he will be more diversified with less political liabilities and better off in the long run.