Thailand’s Crown Property Bureau, which manages the assets of the Thai royalty, is the elephant in the country’s economic room, controlling a full 15 percent of its economy and, according to a recent seminar at the Institute of Southeast Asian Studies in Singapore, acting as a significant brake on economic growth.

“Although the quantity of GDP growth in Thailand has been impressive, the quality of Thai capitalist firms has remained poor as most economic growth has stemmed from the monopoly of major Thai business firms tied to the CPB,” said Porphant Ouyyanonta, Visiting Senior Fellow at the institute. “This has resulted in low-value added economic performance coupled with high barriers to entry for new businesses, thus keeping small businesses stagnant and undeveloped.”

The power of the bureau, its role in the economy and the direction of its investments recently has taken on additional weight. King Bhumibol Adulyadej’s health, at age 87, is failing and a new generation is about to come on the scene. The king appoints six members of the bureau’s governing board, with the seventh the sitting finance minister. With Crown Prince Maha Vajiralongkorn regarded as a less than stable potential monarch, those appointments to the property bureau become crucial.

The seminar, which was led in March by Porphant, a professor at Sukhothai Thammarirat Open University in Thailand, examined the role of the Crown Property Bureau, which publishes no accounts and whose size is thus a mystery. A study published in 2005 estimated that the bureau managed Bt1.12 trillion (US$36.91 billion at current exchange rates), making the king the world’s richest monarch, surpassing the wealth of Hassanal Bolkiah, the Sultan of Brunei, and dwarfing that of the British royal family at US$13.9 billion.

Although the common perception is that the Crown Property Bureau is held by the royal family – and indeed its nickname, once given it by the Far Eastern Economic Review, is “the king’s conglomerate" – it is an investment arm of the monarchy and doesn’t belong to the king although it manages the king's property. However, its status is somewhat ambiguous because it also isn’t a government agency. It was established in the 1890s as the Privy Purse Bureau (PPB) within the Ministry of Finance.

The Crown Property Bureau pays no taxes, the subject of growing debate in Thailand over plans by the National Council for Peace and Order – the junta that ended democratic government in a coup on May 22, 2014 – to undertake an ambitious reform of property and inheritance taxes. Under the proposed tax reform, the crown property bureau would have continued to be exempt. That generated considerable resentment because the junta proposed to impose property taxes on farmers, among the country’s poorest rural residents.

As market competition becomes increasingly fierce, according to an answer to a question from the floor at the seminar, continuing to exempt the property bureau and its sprawling business entities from taxation is harmful for the economy “as it skews business competition and deters investors and entrepreneurs from entering the market. The CPB should therefore be taxed and provide assistance to prospective businesses.”

As well as vast amounts of land in central Bangkok and across Thailand, the Crown Property Bureau controls stakes in Siam Commercial Bank and the Siam Cement Group. Probably the most complete record of the bureau is contained in The King Never Smiles by Paul Handley, an authoritative biography of King Bhumibol which was excerpted in Asia Sentinel in 2007, and which pointed out that “the palace became the ideal joint venture partner. Its land was used to build major hotels like the Siam Intercontinental, the Erawan and the Dusit Thani. It held investments in insurance, agribusiness, tires, and textiles.” In all, according to Handley, the bureau held stakes in 40 companies at about the turn of the century as well as 13,300 acres within the city of Bangkok itself and 40,000 acres across the rest of the country.

The family, according to the ISEAS seminar, plays an outsize role in Thailand's economy. But unlike Britain's royal family, whose assets are detailed in annual reports, much about Thailand's royal wealth is not disclosed. The bureau played an important role in purchasing land for commercial development and other economic projects. The bureau’s wealth in 2005 was estimated at 15.8 percent of Thailand’s GDP and 93.6 percent of the Thai government budget.

The CPB suffered losses estimated at US$200 million during the Asian Financial Crisis (AFC) of 1997-98, the bulk of which were incurred by the Siam Cement Group (SCG) and the Siam Commercial Bank (SCB). The CPB received no dividend income from SCG and SCB for five subsequent years. It withstood the fallout of the crisis by raising a huge loan and restructuring without selling off core assets.

Before 1997, according to answers to questions posed at the seminar, Thailand’s economic development was closely tied to a network of family-owned conglomerates, hence patronage to these conglomerates became vital for prospective investors. However after the fall of many major family-owned conglomerates during the 1997-98 AFC, business development in Thailand has liberalized significantly. The CPB resorted to selling many of its business firms, as royal patronage became less important in the face of growing globalization and market competition.