Reform of the State Railway of Thailand: The drag of an antiquated pension plan, the need to improve efficiency of operations
By Jon Fernquest
The
problem of how to transform the State
Railway of Thailand into a viable
business operation
is haunting
the
government and taxpayers of Thailand again. Here is an in-depth analysis by veteran Bangkok Post reporter Wichit Chantanusornsiri.
Today's article follows the vocabulary:
State Railway Thailand (SRT) -
the state-owned rail operator of Thailand, การรถไฟแห่งประเทศไทย (See Wikipedia)
haunting - when you continually think and worry about something unpleasant over a long period of time
reform - improvement
drag - slowing something down
antiquated - very old, out-of-date, old-fashioned
a pension, a pension plan - a system that companies have in order to help their employees save for retirement
efficiency, efficiency of operations - getting a lot done with limited resources
transform- change
in-depth analysis - detailed and thorough analysis
veteran - a person with a lot of experience
a reporter - a journalist who researches and presents information to the public in newspapers, magazines, TV, radio, or the internet (See Wikipedia)
veteran reporter - a reporter with a lot of experience
viable business operation - a business that can make a profit and succeed
haunting - when you continually think and worry about something unpleasant over a long period of time
reform - improvement
drag - slowing something down
antiquated - very old, out-of-date, old-fashioned
a pension, a pension plan - a system that companies have in order to help their employees save for retirement
efficiency, efficiency of operations - getting a lot done with limited resources
transform- change
in-depth analysis - detailed and thorough analysis
veteran - a person with a lot of experience
a reporter - a journalist who researches and presents information to the public in newspapers, magazines, TV, radio, or the internet (See Wikipedia)
veteran reporter - a reporter with a lot of experience
viable business operation - a business that can make a profit and succeed
Pension load keeps SRT on slow track
Current and future liabilities at B60bnBy: WICHIT CHANTANUSORNSIRI
13/07/2009
The ageing trains, worn tracks and shoddy, run-down stations are plain enough to see. But the greatest the State Railway of Thailand is hidden from public view, in the form of cancer eating away atpension obligations that cost the state enterprise - and ultimately taxpayers - billions of baht each year.
Pension expenses will cost the SRT 2.77 billion baht this year alone, up from two billion in 2005. In sharp contrast to many companies, pension liabilities for the SRT are not managed through a dedicated fund, but rather booked as an annual expense on the budget.
Finance Ministry officials estimate that reforming the SRT's pension plan would involve setting aside no less than 60 billion baht as a pension fund to cover current and future expenses.
The ministry many years ago pushed for the SRT to overhaul its employee benefits programme, and no longer offers pensions to staff. New workers are paid retirement benefits generated by a separate investment fund.
But 25,700 workers, representing the bulk of the SRT's current workforce of 26,412, remain under the former pension plan, a defined-benefit programme that gives regular payments to retirees until death.
For the civil service and nearly all other state enterprises, retirement costs are managed through the Government Pension Fund, a defined-contribution system that pays a lump-sum on retirement. Payments are based on individual contributions and investment returns made by each worker during the course of their career.
Pension reform
Pension reform is a key element of a proposed restructuring of the SRT.Areepong Bhoocha-oom, the director-general of the State Enterprise Policy Office, said revenues from two new subsidiaries set up under the SRT would be used in part to finance a new pension fund.
The restructuring plan, already approved by the cabinet but fiercely opposed by SRT union workers, will establish two new wholly owned SRT subsidiaries, one to manage train operations and the other to oversee assets and commercial developments.
Dr Areepong said revenues from developing the SRT's 38,600 rai of property not otherwise used for train operations would be a major contributor to the new pension fund.
He noted that pension expenses were projected to reach 4.5 billion baht per year for the SRT by 2027, compared with 2.7 billion in 2008.
Suchatvee Suwansawat, a former SRT director, noted that SRT workers would continue to receive pension payments until 2037.
Current pension liabilities have a net present value of 50 to 60 billion baht, he said. Overall, future payments to cover the liabilities could run as high as 150 billion baht.
"On the other hand, the pension programme, while certainly a liability for the SRT and the government, does represent a strong incentive for workers," Dr Suchatvee said.
He added that he opposed the idea proposed by the Finance Ministry to shift revenues gained from improved management of assets to cover pension liabilities.
"These assets rightfully belong to the public. Any benefits should be returned to the public, in the form of improved services," Dr Suchatvee said.
He said the SRT's financial problems stemmed from the fact that train fares have not been increased since 1985.
Maintenance spending and track investment has also been woefully inadequate, with more than 1,000 kilometres of rails 20 to 40 years old and in dire need of an overhaul.
The government's 1.43-trillion-baht infrastructure improvement programme includes allocations for 195 billion baht worth of new investment by the SRT from 2010-14.
Authorities hope the investments will not only improve public train services, but help increase rail usage for logistics and cargo. Logistics costs for the country are estimated to cost as much as 20% of gross domestic product each year, more than double that of developed countries such as the US and Japan.
Blame falls largely on the overwhelming dependence on land transport - only 2% of the country's cargo is shipped by train.
Increasing rail usage would significantly reduce overall expenses for companies and the economy. But adoption is contingent on the SRT improving its reliability, coverage and services - a mission the Finance Ministry views as unachievable unless the organisation is reformed.
(Source: Bangkok Post, business, Pension load keeps SRT on slow track, Current and future liabilities at B60bn, WICHIT CHANTANUSORNSIRI, 13/07/2009, link)
the pension load - money that a company must pay to support its pension plan
obligations - things that a person or an organization must do
pension obligations - money that a company must pay to retired people now and in the future
liabilities - amounts of money that are owed by a company or a person
shoddy - made carelessly or badly
plain enough to see - easy to see
cancer eating away at - a big problem, that will eventually cause early death if not treated
In sharp contrast to.... - very different from...
dedicated - used for only one kind of work or for one purpose
a dedicated fund - money used for a special purpose
book an expense - to record an expense in a company's accounting records
booked as an annual expense on the budget - recorded as an expense every year in accounting records
reforming - improving
setting aside - keeping for future use
overhaul - check and make repairs on every part of a machine or system
benefits, employee benefits - extra things an employee gets from a company in addition to salary (health insurance, pension, company car)
retirement benefits - money an employee receives when they retire
an investment fund -
defined-benefit programme - a fixed amount of money that will be paid by a pension plan
defined-contribution system - fixed payments into the pension plan and the amount paid out after retirement can change
retirees - older people who have finished working and are now resting
civil service - government workers
state enterprises - companies owned by the government
Government Pension Fund (GPF) - money invested by the Thai government to pay for the retirement of government employees
a lump-sum - one single payment of money (instead of receiving money in many payments spread over time)
individual contributions - money given each month by employees to the pension plan (money saved for retirement)
reform - improve
proposed restructuring - suggested changes to the organisation
fiercely opposed - really don't agree with!!!!!
manage train operations - manage the day-to-day moving of passengers and goods by trains
oversee assets - manage assets so that company gets a high annual return
commercial developments -
net present value (NPV) - a discounted cash flow, the value of an investment with future cash flows worth less and less (See Wikipedia)
future payments to cover the liabilities -
X stemmed from Y - X was caused by Y
woefully inadequate - not enough, need a lot more
in dire need of Y - have a very urgent need for Y
urgent - must do right now, immediately
allocations - dividing money or resources and giving them out to many people
logistics - planning the supply of materials with transportation and warehouses
cargo - goods carried in a ship, a truck, or an airplane
overwhelming dependence on - has a very great need
adoption - starting to use a new system
X contingent on Y - X will only happen if Y happens
reliability - works without fail
coverage - how far service extends to
