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Regions and Countries Country Partnership Strategy Document
II. Implementation of the Country Strategy and ProgramA. Poverty Reduction14. Between 1988 and 1996, Thailand's poverty incidence dropped from about 33 percent of the population to about 11 percent, translating to more than 1 million people being lifted out of poverty each year. But with the onset of the financial crisis in 1997 an additional 3 million people became poor, with the incidence of poverty climbing to 16 percent in 1999. Thailand's social indicators are given in Appendix 2. 15. Incomes are distributed more unequally in Thailand than in most middle income countries. The crisis has caused the gaps between the rich and poor to widen. The poorest 20 percent of the population received only 3.8 percent of aggregate national income while the richest 20 percent received about 59.0 percent in 1999. Regional inequalities are also pronounced. Inequality dilutes the impact of growth in reducing poverty incidence.16. Historically, reductions in poverty incidence in Thailand have correlated strongly with the aggregate growth of GDP per capita. A 1 percent increase in per capita income has been associated with an average annual proportional reduction in the headcount measure of poverty incidence of about 1.5 percent. But experience also suggests that once growth of per capita income falls below about 3 percent, increases in poverty incidence can occur. The expected slowing of GDP growth to 2-3 percent in 2001 might reasonably be expected to place upward pressure on poverty incidence. Poverty, which is concentrated in rural areas, is the product of a wide range of disadvantages that impede access to needed resources and that limit economic opportunities. The north-northeast region area development loan, programmed for 2002, and the southern region area development loan, programmed for 2004, will help address the needs of Thailand's rural poor. Broader social dimensions of Thailand's poverty problems will be covered in the second social sector reform loan programmed for 2003. B. Thematic Priorities1. Economic Growth17. Thailand’s economy contracted in both 1997 and 1998. While economic growth resumed early in 1999, its pace has been modest compared to the precrisis years. In the near term, growth prospects depend on global economic circumstances and on progress with Thailand’s structural reform agenda. Thailand has yet to complete the process of restructuring its banking and corporate sectors and the momentum of reform has been slowing. Over the longer term, a variety of factors constrain Thailand’s potential growth. In particular, Thailand faces difficult challenges in improving the education and skills of its labor force, upgrading its infrastructure, and developing technological and research competencies. These longer term competitiveness issues will be directly addressed through the science and technology sector development program (SDP) in 2004, and those focused on education and skill development through two loans to support secondary and higher education, in 2002 and 2004, respectively. 2. Human Development18. The well-being of the Thai people has improved significantly since 1986. Thailand ranked 76th among 174 countries in the 1999 human development index of the United Nations Development Programme (UNDP), and is classified as a high human development country. But improvements have been patchy. Educational advances have not kept pace with rapid economic growth (fewer than 20 percent of the Thai labor force have more than primary education). HIV/AIDS has blighted the quality of life for millions of Thais and stretched the public health system. Opportunities for human and economic betterment remain unequally distributed. In particular, the life chances for Thailand’s rural population are worse than for urban inhabitants. The social sector reform program in 2003 will deal with policies to improve health care service delivery in rural areas and address resource needs for maternal and child health programs and HIV/AIDS activities. 3. Gender Development19. Thailand’s female labor force participation is 67 percent (87 percent for males), higher than any other country in East Asia. Thailand also ranks high, 58th among 143 countries, on UNDP's 1999 gender-related development index. These statistics reflect policies that fostered and encouraged human, social, and economic development in Thailand in a way that included women. Notwithstanding this broadly encouraging picture, women still face obstacles to participating fully in economic and broader social life. Although legislation provides equal rights for men and women, women have less access to job opportunities than men and are underrepresented in some areas of economic, political, and community life. Gender issues will be mainstreamed in the programmed education and social sector loans, and will be addressed through advisory technical assistance (TA). 4. Good Governance20. The 1997 Constitution aims to create a more stable social and political system with higher levels of accountability and transparency. Infringements on personal rights and a climate of secrecy in government affairs will be replaced with one of Asia's most liberal codes of individual freedoms. The 1997 Constitution includes a formal role for civil society in shaping national policy. Town meetings held across the country enhanced the understanding of Thailand’s development challenges and provided key inputs for the 9th Plan (para.10). The new constitution has also provided for election and national counter corruption commissions, and an ombudsman and administrative courts with wide-ranging powers. In addition, the Government has established the National Economic and Social Council to provide broad-based feedback on proposed policy and legal reforms. The Government is also committed to tackling the serious problems of corruption that exist in both public and private sectors. 21. The benefits of these ambitious initiatives will only be fully realized with an intensification of efforts to curb ongoing and worrying abuses of power, and a strengthening of capacities at the central and local levels. The mechanics of how to channel and monitor the increased transfers to local governments need to be fully worked out, and legislation identifying which functions will be financed at local levels must be passed. Governance issues are addressed directly in the accountability improvement loan programmed for 2003 and in the advisory TA for strengthening accountability mechanisms in 2002. 5. Private Sector Development22. Successive governments have adopted a variety of measures to encourage private investment and economic activity. The major weakness in the business sector concerns the competitiveness of the “real economy” and the coherence and scope of policies designed to support competitiveness. Restructuring efforts so far have been largely financial, rather than operational. Reflecting this, Thailand’s competitiveness ranking, covering economic performance, government efficiency, business efficiency, and infrastructure, according to the International Institute for Management and Development report of April 2001, declined three places from last year, to 38 out of 49 countries surveyed. The major challenges going forward are to complete the process of restructuring the banking and corporate sectors and to build the capabilities required to compete in world markets. A variety of legislative and judicial changes are also needed to promote an environment that is more conducive to business. Private sector concerns are incorporated in the micro and small enterprise financing loan in 2003 and the science and technology SDP in 2004. 6. Environmental Protection23. Thailand’s rapid economic development of the past four decades has been accompanied by serious neglect of the environment and natural resources. The environment has been significantly degraded to the point where it may now impede further economic development. Shifting cultivation, urban expansion, and limited effectiveness of control over logging continue to result in deforestation and forest degradation. The rapid growth of industrial and agro-industrial production has also resulted in serious air, surface, and groundwater pollution in urban areas. Environmental problems expected to worsen over the medium term include industrial water pollution (especially as industrial production expands to upcountry areas), and solid waste disposal (as regional cities and consumerism continue to grow). Resource use conflicts are on the rise, and environmental problems are compounded because 10 agencies, spread across 6 ministries, share oversight responsibility for the environment. Fortunately, Thailand has attained or is approaching the income level at which, as experience in more advanced countries suggests, a strong national consensus favoring environmental protection emerges and begins to exercise a growing influence on the environmental debate. The Government has now called for closer integration of economic and environmental management objectives, and greater local participation in development planning to ensure improved environmental soundness. The area development loans will pay particular attention to environmental concerns and the rural wastewater treatment plant rehabilitation loan in 2003 addresses directly environmental clean-up concerns. Thailand's environmental indicators are given in Appendix 2. 7. Regional Cooperation24. Thailand has been a pivotal player in the ADB-supported Greater Mekong Subregion (GMS) Program. Thailand is also an active participant in the Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT) and has reached agreement with Bangladesh, India, Myanmar, and Sri Lanka (BIMST-EC) to promote economic ties between countries in the Bay of Bengal area. Agreement has also been reached between Lao People's Democratic Republic, Myanmar, Thailand, and India for the joint promotion of the Mekong-Ganges region in areas such as tourism education and culture. As the economic hub of the GMS, Thailand has been able to establish strong mutual interests with its neighbors. Thailand is emerging as both a market for their produce and as a source of agricultural and other technology and capital. Subregional projects also contribute to balanced growth in Thailand’s lagging regions (north-northeast Thailand in respect of the GMS, and the south in respect of the IMT-GT). Tourism, transport, communications, and energy development are other areas with strong potential. Human Resource Development initiatives with neighboring countries in areas such as health and the environment illustrate other benefits from subregional cooperation. During 2000, a commercial navigation agreement was reached between People's Republic of China, Lao People's Democratic Republic, Myanmar, and Thailand on the use of the upper Mekong River. The area development and economic corridor projects are expected to have positive spillover effects on neighboring economies.
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