Thai tablet program in limbo

25 Apr 2012

Thailand’s one tablet per child program was once the darling project of the developing world. All eyes were on it to see how ICT on a budget could be used to enhance education.

But with the start of term in mid-May closing in, the procurement has yet to be signed off and the Education Ministry has announced it will go ahead with procurement of traditional paper books for students instead as the project continues to unravel.

The Shinwatra-led Phue Thai government campaigned last July’s general election with a pledge for one tablet per child as well as free nationwide Wi-Fi. That election promise soon was whittled down to one tablet per primary one student and then was to be launched at certain schools before the Prime Minister stepped in at the end of February saying that she wanted the tablets in the hands of all primary one students in time for the May academic semester.

The lowest bid on the project was $78 by a Thai company, Yozzo, that was part of the consortium that won a similar, but much smaller, one tablet per university student project in Laos.

The project proceeded well enough to the point that Yozzo’s executives said that this project might have been the first one in recent history without any graft involved and heaped praise on the ICT Minister for being reasonable and transparent, for a change.

But all that praise was for naught. Yozzo suddenly found themselves excluded for not being Chinese as the project was to be a G2G project with the Chinese government. Later, the G2G requirement was scrapped, but only after the winner, Schenzhen Scope, had already been selected.

Schenzhen Scope had bid $80.

Lack of due process aside, the problems really started in the cabinet meeting on April 10 when the project was put to the cabinet for final approval. Out of the blue, the cabinet wanted to increase the number of tablets from 900,000 to one million and the budget from 1.9 billion baht ($61 million) to 2.4 billion baht ($77 million).

The problem was twofold. Firstly, the approved project could not just be increased and this it would have to be re-submitted for cabinet approval. This delayed the project by another week.

However, the bigger problem was the reason for the increase itself, or lack thereof. No, Thailand did not suddenly see a 100,000 increase in the number of students, but the increase was for breakage and breakdown and a fudge on how some extra units might be used elsewhere in other classes.

The original project was won with the onus being on the vendor to provide swaps under the 2-year warranty under a 5-working-day turnaround SLA. However, the one million number includes a larger buffer stock. So, in other words, the price went up by $16 million for pretty much what was included in the agreement already.

Other last minute changes also include swapping air-freight for sea-freight which makes the timeline even more dubious and the introduction of a 30% bond that was dropped to 5%. No 30% cash guarantee was ever discussed in the MICT-level negotiations and was put in only to be taken out.

This whole non-event could have been avoided if the government had chosen the lowest bidder in the first place and allowed a Thai company to service the country.

On another level, the public spat between the ICT and Education Ministries was played out in the press for all to see. Both Ministries wanted the budget and after the ICT Ministry won it, the education Ministry is all too eager say, “I told you so,” now that things are beginning to fall apart.

Meanwhile, providing connectivity for these tablets hints at another problem and one that more directly affects the telecoms industry. Why should the government be providing free connectivity to compete with private-sector networks in the first place?

The ICT Ministry has instructed state-owned TOT Corporation to provide connectivity with 50,000 Wi-Fi access points spread among 30,000 schools with a budget of 8.5 billion baht ($275 million).

TOT currently holds the concession of Singtel-group’s AIS which is subject to a hefty 30% revenue share and runs out in 2015.

It is this huge concession pie that has stopped any progress on 3G licensing for years with both state owned telcos carpeting bombing the courts with lawsuits in the run-up to the aborted 2010 auction, one of which hit home and forced the courts to cancel the bid.

Even without a termination of concessions, with 3G on 6% (2% licence fee and 4% USO contributions) and 2G on 30%, even for basic voice, 2G would be dead and the concessions would be worthless as all telcos quickly transition to 3G and cheaper fees.

Without concession revenue, TOT would be insolvent.

The frequency allocation act that came into effect on December 20, 2010 set a three-year deadline for the concession to be severed from CAT/TOT and forwarded directly to the regulator for forwarding to the Finance Ministry.

However, while the act said that TOT and CAT would have to forward concession fees to the regulator, it could deduct any costs associated with the concessions, anything ordered by the Ministry of Finance and any USO projects.

Hence, the tablet Wi-Fi project falls sharply into focus. As concession revenues will be severed, TOT is desperate to supplement its income with USO projects that it can simply use its existing revenue share money to pay for without having to go to tender or bid for it.

As time goes by, Thailand can expect to see more projects like this from TOT and CAT, the latter of which will still have a DTAC concession until 2018.

Taking money from concessionaires and wasting it on company cars and fancy new buildings is inefficient, bad but probably legal. Using it to subsidise a service competing against private players is illegal and against Thailand’s WTO commitments. Not that it would come to that. The telcos now realise that they have to give TOT and CAT a lifeline as the last thing they want at this juncture is for the two state-owned telcos to throw a tantrum again.

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