Starting in September of next year, all duty-free shops at Suvarnabhumi airport will be owned and run by one company for a period of 10 years, if the Airports of Thailand (AoT) insists on going ahead with the monopolistic concession model that it has been using since 2006.
That means it will be business as usual at Suvarnabhumi, and the exclusive right to operate the lucrative business empire will be given to one company.
Given that Suvarnabhumi is undergoing an expansion which aims to increase the number of travellers it handles from 57 million a year to around 90 million by 2021, there is huge potential for the underachieving duty-free industry at this major airport.
As the AoT is handling the bidding for new concessions at Suvarnabhumi and three other airports -- Hat Yai, Phuket and Chiang Mai -- it must allow more competition and transparency in the process.
Over the past 13 years, the duty-free contract at Suvarnabhumi has been granted to one operator -- King Power International Group -- which also holds the concession at Don Mueang airport.
Critics have called for the end of the monopoly model, asking the AoT to grant multiple concessions to more operators based on the type of products.
Earlier, the AoT planned to grant a sole concession to one company to handle all of the duty-free operations for all four of the main airports in the country.
After its monopoly model received heavy public criticism, AoT then compromised by having one contract for Suvarnabhumi and another contract for the other three airports. This compromise is far too little, and does not make much difference, given that about 82% of all duty-free revenue comes from Suvarnabhumi.
The AoT has always cited either ease of management or investment attractiveness as the reasons to avoid diversifying the industry and opening it up to more players. But it has underestimated the investment prospects of Suvarnabhumi. For one thing, many domestic and international key players have expressed their interest in taking part in the ongoing bidding.
Some observers even pointed out that the AoT, as the concessionaire, can earn more from opening up the industry. More importantly, drawing in more players will bring about more attractive options and competitive prices for consumers.
In addition to competitiveness, transparency is also vital for the bidding process. The AoT must make sure that as much information as possible about the bidding and bidders is disclosed to the public. This can be done by adopting an integrity pact, as proposed by the private sector, to allow representatives from the public sector to participate in vetting the bidders.
The Public-Private Partnership Act, which requires that regulations and mechanisms related to the bidding process of businesses governed by this law be made more concise, transparent and inclusive, also offers greater transparency for the bidding. Given that there is still a dispute over whether the duty-free business falls under this law, the government has appointed a committee to discuss the matter.
For now, the AoT still has enough time to ensure that the new concessions for airport duty-free operations will maximise the benefits for both the state and consumers. This can be done by diversifying contracts at the airports and allowing greater public scrutiny of the bidding process.
