Policy challenges—equity, public investment,
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
. 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
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
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
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