Regions and Countries

	Table of Contents
p. 14 of 23 BACK | NEXT I. Country Performance Assessment II. Country Operational Strategy III. Sector Strategies A. Agriculture B. Infrastructure C. Social Infrastructure and Environment D. Governance Dimensions of ADB Operations E. Gender Dimensions of ADB Operations F. Private Sector Operations IV. Regional Cooperation V. Donor Activities and Aid Coordination VI. Cofinancing and Catalyzing External Resources VII. ADB’s Operational Program VIII. Economic and Sector Work Program IX. Local Cost Financing

Country Assistance Plans - Thailand : III. Sector Strategies

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C. Social Infrastructure and Environment

1. Urban Development

82. The Government recognizes that, despite achieving impressive economic growth during the 1980s and early 1990s, some issues have been neglected, and need to be addressed urgently. Although poverty levels have fallen to about 13 percent of the population nationwide, much higher rates exist in the regional areas, which suffer from under-investment and the additional burden of the unemployed urban migrants returning to their rural homes following the financial crisis. Poverty levels are as high as 23 percent in several northeastern provinces. The historical dependence of the provincial areas on central Government support for the funding and implementation of urban infrastructure has resulted in weak local governments, with inadequate management skills and systems. This top-down approach has prevented local communities from providing any meaningful input to local development plans and projects. Inadequate pricing policies for sustainable urban environmental management has led to severe environmental degradation, especially during the rapid growth of the 1980s and 1990s. The financial crisis in 1997 impacted adversely on all levels of society, but the urban poor were acutely affected. The agricultural economic base of the rural sector insulated the rural sector to a certain degree from the adverse effects of foreign exchange movements, as indicated by the price of agricultural products today. Not so in the urban sector, where job losses in the manufacturing and industrial sectors pushed a large number of people back into the fringe urban poor society, without recourse to traditional farming. Further, the crisis led to substantially reduced budgetary allocations to provincial areas, the major source of capital investment, almost halting development and seriously threatening the sustainability of existing assets.

83. Government Strategy. The 1997 Constitution sets the legal framework for the right of all people to participate in the decision-making processes affecting their communities, as well as for fiscal and administrative decentralization. The Decentralization Act became effective in November 1999 and the National Decentralization Committee is under formation. The National Decentralization Committee will prepare a plan to implement a decentralized mode of governance, define the institutional relationships between the central and local governments, and improve local tax and revenue mobilization. The Government is expected to continue to rely on sustained rural development and economic growth to reduce poverty, accompanied by income- and employment-generation programs. The Government will concentrate future development efforts in the lower income border areas, especially those in high-potential growth areas most accessible to the Greater Mekong Subregion, and the Indonesia-Malaysia-Thailand Growth Triangle. In keeping with the refocus of political and economic power at the elected local government level, the Government is now emphasizing the concept of area-based urban development, but with sound urban-rural linkages. This model is founded on the concept of local people being involved in decision-making processes related to the development and management of their communities. The Government has now established a National Urban Policy Committee that is developing a national Agenda for Livable Cities, which is aimed at the development of urban areas as “living entities.” The Environment Act of 1992 continues to be a very valid legislative instrument for the control and management of urban wastes, based on the polluter-pays-principle. The Government is currently pilot testing this principle in several cities.

84. ADB Support. The ADB has provided assistance to the urban sector through the provisions of loans and TAs. Loans for the Chonburi and Nong Khai-Udon Thani Water Supply and Sanitation projects are helping to alleviate water shortages in the Eastern Seaboard and Northeastern regions, and are also helping to build capacity in the Provincial Waterworks Authority. The Samut Prakarn Wastewater Management Project is helping to improve the urban environment in the most industrialized and heavily polluted area in Thailand and, with technical assistance, is developing policies for the recovery of costs through direct user charges. The next phase of the ADB’s assistance will demonstrate to the Government how provincial societies can develop within the emerging decentralization framework, and without environmental degradation. The Border Towns Development Project ($100 million) planned for 2001 is expected to serve as a vehicle for improving the poorer regions of the country, and to act as a catalyst for future growth within the Greater Mekong Subregion. This project will be complemented by an ADTA for Capacity Building for Local Governments in Financial Management. This TA would strengthen local governments vis-a-vis their relationships with Central Government, and sustain urban investments through improved local resource mobilization.

85. In 2001, an ADTA is proposed to support the Government in Planning for Sustainable Urbanization so that all the key issues of governance, poverty reduction, community participation, quality of life, crime prevention, and environmental protection can be incorporated into future development programs. This will provide guidance and direction not only for the Border Towns Project, but also for the ensuing North-Northeast Region Area Development Project ($100 million) in 2002. Both these projects will utilize the area-based development concept. Working closely with the local governments, procedures and systems will be developed and pilot tested, demonstrating the linkages and working relationships with Central Government counterparts. Financial management systems and cost recovery mechanisms will also be introduced. A Southern Region Area Development Project ($100 million) scheduled for 2003 will extend the operational framework developed under the previous projects into the southern provinces. In addition, a loan for an Economic Corridors Development Project ($150 million) will be provided in 2003. The project would have several different components, including support for physical infrastructure, nodal points such as industrial estates or border towns around which economic production and service activities are clustered, and policies, programs, institutions, agreements, that will facilitate cooperation and allow the clustered economic activities to draw strength from each other through scale economies, externalities, and public goods. All the projects would provide long-term credit financing and capacity building support to participating municipal governments for their priority investment projects.

86. Continuing its assistance in the environmental protection of urban and surrounding areas, a Solidwaste Management Project ($50 million) is scheduled for 2001. The Project will complement the decentralization thrusts of the 1997 Constitution and the ADB’s other interventions, and will demonstrate to local governments how to debt finance waste management services through appropriate cost recovery mechanisms. It will address community concerns regarding landfill locations, Project accessibility for the poor, and measures to protect the environment. The Project will explore and pilot test provincial or regional solid waste management collection systems and disposal facilities, and will address the collection and disposal of all household wastes, including domestically generated hazardous wastes. To prepare for the Project, a SSTA is proposed for late 2000. In addition, a Khon Kaen Water Supply Project ($50 million) will be supported in 2002.

87. Policy Dialogue. The key area for ADB dialogue with the Government on urban development and governance is decentralization. By 2001, the amount of budget allocated directly to local governments will rise from the current level of approximately 14 percent to about 20 percent, and will rise further to 35 percent of total government revenues by 2006. A recently concluded ADB assessment of the Government’s fiscal decentralization plans identified a number of issues and concerns. First, local standards and benchmarks do not exist that would enable the central government to monitor and evaluate local performance in terms of financial management, procurement of goods and services, project management, etc., both during the initial phases of decentralization and on an on-going basis later on. Second, there are overlapping expenditure functions and responsibilities of central and local governments, with the central government agencies still assuming vertical responsibility for most social services and large capital projects. Third, the intergovernmental transfer system should be overhauled so that it better reflects both macroeconomic and decentralization policies as well as local conditions. The assessment concluded that fiscal decentralization should begin with a stronger central ability to monitor its progress and then, later, the central government must honor its commitment to decentralization by following the rules it makes. These issues will figure prominently into ADB plans to support the Government’s urban development initiatives. A further feature of the dialogue will be the urban renewal agenda required to transform Thailand’s urban centers into livable cities, which will promote local cultural and social values, deter crime, and lead to an improved society.

2. Environment

88. Recent Developments. Like most countries, Thailand has faced environmental challenges for a long time, including excessive deforestation, destruction of critical watersheds, flooding and soil erosion, sedimentation of irrigation reservoirs, cultivation of fragile lands, overfishing, air and water pollution, loss of genetic and biological resources, and underinvestment in rehabilitation, regeneration, and conservation of valuable natural resources. In the past several decades, natural resources have been over-exploited and the environment has been significantly degraded to the point where further economic development may be impeded. Thailand has attained or is approaching the income level at which, as experience in more advanced countries suggests, a strong national consensus favoring environmental sensitivity emerges and begins to exercise a growing influence on the environmental debate. In other words, economic development and the wealth and opportunity it has created have made more affordable the required improvements in environmental protection and natural resource management.

89. Government Strategy. Although the Enhancement and Conservation of National Environmental Quality Act of 1992 has not yet produced significant results, its passage and the establishment and subsequent utilization of the Environment Fund indicate the growing resolve of the Government to restore and protect Thailand’s environment and natural resources. Most institutional improvements at the national level are still in the formative states, however, and in need of significant institutional strengthening. In some cases, as with the degradation of critical watersheds and forests, and the pollution of the lower Chao Phraya River, rehabilitation programs are needed to restore and maintain their beneficial uses. In other cases, effective demand side management programs need to be developed for scarce resources such as water and power. In all cases, economic and environmental considerations must be integrated in Thailand’s development programs and projects. Under the 8th Plan (1997-2001), the Government proposed closer integration of economic and environmental management objectives, and greater local participation in development planning to ensure improved environmental soundness. More recently, provisions have been set in place which require:

• public hearings for projects potentially harmful to the environment
• public access to information, right to lodge complaints, and right to compensation for individuals who are damaged or injured as a result of pollution, and
• Ministry of Science, Technology and Environment environmental officers to be given power to act on public complaints by imposing penalties or forcing polluters to take corrective action.

90. ADB Support. Environmental restoration and protection has been one of the major crosscutting concerns in recent ADB operations in Thailand. The focus of environment-oriented projects in ADB’s program has been on wastewater management, and there are two ongoing projects in this area. The ADB’s strategy in the near term will be to assist capacity-building and institutional strengthening of environmental agencies. In line with the Government’s decentralization initiative, the focus will be shifted from central agencies to regional and local agencies. To mainstream environmental concerns in Thailand’s socio-economic development in the 2001-2003 assistance program, environmental goals will be included as crosscutting operational priorities, wherever appropriate. In fact, four out of nine projects in the 2001-2003 lending pipeline have environmental concerns as the operational priority.

91. Policy Dialogue. ADB will continue to assist the Government in institutionalizing environmental concerns by ensuring that these concerns are incorporated in project designs and development programs. Key issues to be addressed include the need to develop greater environmental understanding and a stronger environmental ethic among the public, supply of trained environmental professional in both the public and private sectors, management of traditional open access to resources, provision of a strong legal basis and institutional framework in the environment sector, and development of the funding and cost recovery mechanisms for environmental programs. Several ongoing loan and TA projects will help address and resolve some of the aforementioned issues. An advisory TA on Mae Moh Power Project: Ex-Post Evaluation will be approved in late 2000, to identify and analyze environmental problems associated with this power project, to formulate solutions to these problems, and to prepare an implementation plan for their resolution. In addition, the final report of an ongoing TA, Promotion of Market based Instruments for Environment Management, will provide suggestions on the most suitable market based instruments for Thailand and how to adopt them for environmental improvement. An Agriculture Sector Program Loan will also provide a basis for managing access and establishing a cost recovery mechanism for water used in the agriculture sector.

3. Education and Training

92. Recent Developments. Thailand’s education and training systems have not adequately responded to labor market needs, which have changed dramatically with rapid growth. As evidenced by the recent erosion of Thailand’s competitive edge in low technology manufacturing, wage rises ranging from 6 to 8 percent per annum in the early-1990s outstripped labor productivity growth. The mismatch of financial resources available for education (particularly in basic and secondary education and the development of highly skilled labor) has been the major constraint to Thailand’s ability to move up the technology ladder.

93. Although the 8th Plan calls for a sharp upgrading of the educational capacities needed by the emerging skills-oriented economy, recent survey data have indicated a decline in the upper secondary transition rates (the proportion of students moving from lower to upper secondary school dropped from 84.5 percent in 1996 to 81.2 percent in 1998), reversing the favorable trend during the pre-crisis period. Although this small percentage decline may not be particularly alarming, any further reduction in participation in secondary education or a continuing slowdown in the expansion of secondary school would only serve to further undermine Thai competitiveness in the longer-term. In addition, concern has been growing with regard to the quality and relevance of basic and higher education, both of which have lagged behind the needs of a more global and knowledge-based economy. The passage of the National Education Act (NEA) in 1999, however, has enabled the Government to embark on a broad agenda of reforms for the education sector. As stipulated by the NEA, the Education Reform Office was established in early 2000 to oversee the implementation of the reform agenda.

94. Government Strategy. Through the NEA, the Government intends to address structural inefficiencies and other underlying weaknesses of the education sector over a three-year period. The NEA will ensure that the constitutional provision for granting universal access to 12 years of free education will be achieved. At the heart of the strategy is the decentralization of education management to local education areas (LEAs) to improve outcomes through increased community participation. All public universities are to become autonomous while the private sector is expected to become a more active player in the sector. The establishment of quality assurance mechanisms and teaching personnel reforms to ensure the quality and relevance of the education system will accompany the diminished role of central controls.

95. The NEA-backed reform agenda shows the Thai Government’s continuing commitment to improve the quality of life and reduce poverty with the development of a learning society. This is to be achieved through a strong and efficient education sector, which has consistently accounted for the largest share of total Government expenditures (average of 22 percent of annual budget over the past few years). The proposed reforms indicate that the Government took care in drawing lessons from the experience of other countries. However, the proposed three-year implementation schedule (reforms to be completed within 2002) may appear too optimistic as preparatory activities (e.g., pilot decentralization in 12 provinces) have reportedly been delayed. In addition, the costs involved in implementing significant restructuring are expected to be enormous and may create additional fiscal pressure on an economy that is still reeling from the impact of the economic crisis.

96. Decentralization of education management should also be pursued in the context of overall public sector reforms and other governance aspects. It is not clear whether capacity currently exists at the local levels to manage schools and whether financial and accounting systems could be appropriately developed and securely put in place. Central authorities (e.g. Bureau of Budget) will need to adapt to new requirements that accompany such reforms, such as the output-based block grant funding of the education sector. Finally, new institutions to be created under the NEA to tackle quality assurance and financing issues will require additional investments and substantial capacity-building activities.

97. ADB Support. Through TA Education Management and Financing Study, a preliminary sector development plan was prepared and discussed at a seminar organized by Office of the National Education Commission and the Education Reform Office in January 2000. Six priority activities that are crucial to the successful implementation of the reforms were identified:

• designing and testing the school-based management model;
• capacity-building for community leaders;
• delineation of the new LEAs; (iv) designing and testing the organization model for the new LEAs;
• designing the Internal and External Evaluation System; and
• organization of training activities for new entities and teachers.

As a follow-up to the studies under this TA, a PPTA is planned in 2001 to help the Government develop specific activities in line with these reforms to be funded by a proposed Education Sector Development Project ($100 million) in 2002. The Project will focus on assisting the Government implement a sector development plan for basic education in line with the NEA. Priority areas that have been identified for external assistance include:

• education management and decentralization;
• education standards and quality assurance;
• quality improvements in teaching and learning; and
• ICT.

The PPTA will prepare the actual scope for ADB assistance, taking into account the Government ‘s sector development plan and assistance from other external agencies. The Project is expected to have a strong focus on policy reforms and capacity building needs.

98. Policy Dialogue. The Government has yet to specify how much the reform program will cost or its associated financing plan. Issues that need to be clarified include:

• funding arrangements between central agency and local control;
• local capacity at the community and school board levels; and
• adequate capacity at the center to formulate and monitor policies and standards and provide support to the LEAs.

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