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In Thailand, A Rare Peek At His Majesty's Balance Sheet

1/20/2012
Simon Montlake, Forbes Staff

Thailand’s King Bhumibol, who turned 84 last December, is the world’s longest serving ruler. He is also the richest – by a comfortable margin. Last year Forbes estimated his net wealth in excess of $30 billion, beating oil-rich Brunei’s Sultan Bolkiah into second place. A gaggle of Gulf potentates and European royals round out our list. Bhumibol’s top ranking is controversial in Thailand, to say the least. Republicans grumble that the monarchy is wasteful and inefficient. Others are horrified that foreigners have the gall to turn a lens on their deified ruler. Royal courtiers insist that Forbes has it all wrong, that the billions on the balance sheet belong to the crown, not the man. They also contest the property valuations on which much of our estimate is based. Yes, they say, the monarchy is sitting on prime tracts of land in Bangkok and central Thailand. But it leases land and rent properties at subsidized rents that no commercial agency would tolerate. So the king isn’t loaded, just landed (and a value investor, as we’ll see).

A new, semi-official biography, entitled ‘King Bhumibol Adulyadej: A Life’s Work’, provides a peek into the royal money machine. A chapter in the book zeroes in on the Crown Property Bureau (CPB), which manages the crown’s property and investments. It confirms the vast land holdings that Forbes used as the basis of its estimate (drawing on a 2005 Thai academic study). In central Bangkok, the king owns 3,320 acres; town and country holdings stretch to 13,200. However, the book sticks to the CPB’s line that the combined value is less than a third of our estimate for the Bangkok land (which is much simpler to assess). “The value of the crown property is considerable, but putting an exact figure on it is difficult,” it concludes.

Moreover, only 7% of the royal land is leased on a fully commercial basis, with annual rents equivalent to as much as 4% of market value. Some downtown sites are occupied by government ministries and agencies, others by slum housing, markets and shophouses. In 2010, aggregate income from property came to 2.5 billion baht ($80 million at current rates). One prime site is CentralWorld, a shopping mall that was partly torched in 2010 red-shirt riots. Another is the nearby Four Seasons hotel. In total, the CPB says it has 40,000 rental contracts, of which 17,000 are in Bangkok.

Much easier to measure are the crown’s corporate jewels. The CPB holds a 23% stake in Siam Commercial Bank, one of Thailand’s largest with a market cap of $13 billion. It also owns 32% of Siam Cement Group, a $12.6 billion industrial conglomerate. Add those together and you have stock worth $7 billion. In 2010, these companies paid $184 million in dividends to the bureau. In fact, according to the book’s authors, the CPB’s total revenues have averaged 9-11 billion baht a year since 2008. So even when times were hard (Thailand’s economy stalled in 2009), the crown collected a cool $290 million. The book doesn’t mention that the CPB also has a majority holding in German hotel group Kempinski AG. Another unit is Bangkok-based Deves Insurance. In 2008, this and other holdings were valued at $600 million. Even without these unlisted assets, the CPB is the largest corporate group in Thailand.

By comparison, Thailand’s richest entrepreneur, Dhanin Chearavanont, founder of food powerhouse CP Group, is worth $7.4 billion. Bhumibol’s fortune is much larger. That’s why Forbes ranks him as the world’s richest monarch. Yet Bhumibol’s biographers are at pains to point out that the CPB isn’t his personal piggybank (a separate agency handles the royal family’s private assets) and so it’s incorrect to label him as ultra-rich. The assets belong to the crown, not the individual. For now, the fortune is in Bhumibol’s hands. His anointed successor, Crown Prince Vajiralongkorn, will inherit the keys to the safe. In other words, it’s a family enterprise in which the assets are gifted to the next generation.

So what exactly is the CPB? Ah, therein lies a mystery, as the book explains. “It is not part of the palace administration, nor is it a government agency, nor is it a private firm. It is a unique institution.” Got that? Crucially, the bureau pays no business tax, and nor does Thailand have a land tax. Its tax-exempt status is enshrined in law. Yet it’s not a charity or a public agency (or a sovereign wealth fund). It’s not obliged to issue an annual report. It answers only to the king, whose investment strategy isn’t up for public debate. Actually, there’s a lot about the monarchy that isn’t up for debate in Thailand, which is why dozens of people are either in prison or awaiting trial for royal defamation. In this vacuum, Bhumibol’s personality cult has assumed titanic, often absurd, proportions.

One justification for the CPB’s privileged status is that its annual, tax-free income defers the cost of maintaining the monarchy. “Core expenses are covered by the revenue of 9-11 billion baht from the portfolio of assets managed by the Crown Property Bureau,” the book claims. Yet taxpayers are still on the hook for their share of palace expenses. In the 2011 budget, the Bureau of the Royal Household received $84 million. Another department got $15 million. The book notes that once security costs are factored in, the government spends around $194 million a year on the royal family and its courtiers. This is in addition to the CPB’s income (minus its costs). This implies that in an average year, the Thai crown burns through half a billion dollars.

Compare this, if you will, to the profit and loss account of European heads of state. Spain’s constitutional monarchy costs the country $12 million a year; Britain’s much larger royal family gets nearly $50 million, but remits most of its crown property income to the treasury. Last year, it made $358 million from its holdings. British taxpayers can also find out easily where their money is spent (property upkeep, administration, overseas trips, etc). Thailand is another matter entirely, as the king’s biographers note. “The CPB has begun edging towards greater transparency but there remains some way to travel.”