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Thailand : Average real GDP per capita by region, Public investment
Policy challenges—equity, public investment, and governance Thailand faces several critical policy challenges. One is inequality, which undermines social and political stability with associated risk... s to investor confidence. Inequality is reflected in large rural–urban and regional gaps in incomes and access to social and economic services (Figure 3.30.12). Such structural problems are unlikely to be resolved by ad hoc measures to boost incomes through subsidies and tax concessions. More effective targeting of public investment in social and physical infrastructure will be important to address these concerns. A second issue is inadequate public investment, which dents the country’s competitiveness. Public investment as a ratio to GDP has declined over many years (Figure 3.30.13). The World Economic Forum ranks Thailand 38th of 144 countries in its Global Competitiveness Report 2012–2013 . However, Thailand’s ranking sinks to 46th for infrastructure and lower still for railway, port, and telephone components of infrastructure. Also of concern is the country’s lowly ranking on basic education, at 89th, and on adoption of technology, at 84th. A separate World Bank benchmark that measures the performance of logistics ranked Thailand 38th of 155 countries in 2012, below the PRC and Malaysia. Public investment is needed in transport infrastructure to reduce logistics costs and in water management infrastructure to mitigate the social and economic impacts of climate change and flooding. Increased investment in social infrastructure is needed to ensure equitable improvements in skills and social capital that will boost creativity and productivity to generate sustained gains in living standards.Mobilizing and effectively managing resources to ensure more equitable, efficient, and effective delivery of public services is one of Thailand’s most pressing challenges. The government lacked resources for public investment following the 1997 Asian financial crisis. More recently, political instability has interrupted the planning and implementation of large public investment projects. Moreover, the government prioritized spending on fast-disbursing stimulus programs when the economy slumped during the global financial crisis in 2008–2009 and after the extreme flooding in 2011. Large public finance allocations were directed at incentives for first-time buyers of cars, pay rises for the public service, tax cuts for companies, popular measures such as the diesel fuel subsidy, and subsidized rice purchases from farmers. The government is now beginning to address declines in public investment with significant multiyear programs for water management ($11.7 billion) and transport infrastructure (as much as $67 billion), funded off-budget. However, considerable uncertainty surrounds the pace of implementation. Investment in transport infrastructure aims to reduce logistics costs by 2 percentage points, from about 15% of total production costs. Most of the investment in transport will go to rail networks to improve transport links within Thailand and to neighboring countries. The water management projects are designed to mitigate the social and economic impact of flooding and better manage water resources. While the commitment to increased public investment is a positive development, off-budget programs have the disadvantage of compromising transparency. Instead, increases in budget funding for public investment could be generated by broadening the tax base or phasing out the economic stimulus programs. The government could also consider amending the Public Debt Management Act to raise borrowing limits while maintaining its fiscal sustainability framework to keep public debt below 50% of GDP. This leads to a third challenge: the need to improve public sector management and accountability, and to fight corruption. This will become increasingly important as public investment expenditure rises.Source: National Economic and Social Development Board. http://www.nesdb.go.th (accessed 19 March 2013, CEIC database (accessed 2 April 2013). http://www.ceicdata.com/countrydata?country=TH&dataset=Consumer%20Price%20Index%3A%20Y-o-Y%20Growth
Rank: 1139 of 4890 in Economy
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