Dr'Pornchai Thiraveja Senior Expert on Fiscal System and Policy Fiscal Policy Office

1
Dr.Pornchai ThiravejaSenior Expert on Fiscal
System and Policy Fiscal
Policy Office Ministry of Finance, Thailand
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Workshop on Addressing Regional Disparity
Thailands Experience and International Lessons
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Presentation outline

• I. Global economic crisis and impacts to Thailand
• II. Economic and social disparities in Thailand
• III. Present and future policies to address
  disparity issues

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I. Global Crisis and Impacts to Thailand
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GDP Components Demand side
GDP current price THB 9,105 Bil GDP constant
price THB 4,370 Bil
20071.6
20082.5
2009-2.4
20073.4
20087.5
2009-28.4
20077.1
20085.4
2009-19.3
20079.2
20080.5
20094.8
20073.4
2008-4.8
20090.5
20070.6
20083.2
2009-16.9
Fiscal Policy Office
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II. Economic and social disparities in Thailand
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Poverty incidence and regional disparity
Poverty incidence has decreased steadily but
cross-regional disparity remains high

• Poverty incidence for whole country ()

• Poverty incidence () by regions in 2007

2.8 Mil. Poor Pers in the North Region
1.5 Mil. Poor Pers in the North Region
Source NESDB

• Poverty incidence reduces from 17.5 to 8.5
  from 1998 to 2007

• North-East region reaches the highest poverty
  incidence of 13.05 in 2007 followed by the
  North region with 12.93 of poverty incidence

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Income inequality
Income distribution has shown large disparity and
remained largely unchanged over the years

• Income share of the population ()

• Gini index by regions from 2004 to 2007
• ( 0 perfect equality , 1 perfect inequality)

Gini index for whole country 0.51 and 0.50 in
2006 and 2007, respectively
Income share owned by 20 of the richest people
Income share attributed to 20 of the poorest
people
Source NESDB

• An intra-regional disparity would contribute to
  higher inter-regional disparity
• Gini index in the North and North-East regions
  remains high, particularly in 2006

• 20 of the richest people own more than 50 of
  the total income
• Only 4 of income share attribute to 20 of
  the poorest people

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Unequal access to financial system
Poor household have difficulty to access to
financial system

• Proportion of households obtaining credits from
  financial system ()

• Proportion of households with no access to
  financial system ()

13.38 Mill. Households
Source Bank of Thailand

• Lowest income households are unlikely to obtain
  credits from financial system
• 5.4 of lowest income households have
  difficulty to access to financial system

• 83.7 of households have access to financial
  credits
• 9.6 of households have no access to the
  credits as a result of non official collateral

10
Highly unequal land ownership and education
Unequal access to land and education across
regions

• Proportion of population with highest educational
  attainment in 2007

• Gini coefficient of land ownership in 2004

( 0 perfect equality , 1 perfect inequality)
100
Source Labor Force Survey
Source WDR,IFAD

• More than 36.4 of population have less than
  elementary education in the North-East region
• Population in Bangkok and metropolis have mainly
  university education

• Land Inequality as a trend to growing inequality
  of production, income and consumption in the
  future

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Unequal access to healthcare and aging society
concerns
High share of labor without social security and
increase in aging population

• Proportion of workers without social security
  ()

• Projection of Old-age Dependency Ratio () to 2030

27.9 Mil.Workers
More than 1/5 of working age
1/5 of working age
Source NESDB
Source Ministry of Labor

• Old-age Dependency ratio follows an increasing
  trend before reaching 74.1 in 2030
• An increase in the dependency ratio can cause
  the fiscal problem for the government

• More than third quarter of the workers have no
  social security at the workplace
• Only a small progress of the social security
  program has been made

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III. Present and future policies to address
disparity issues
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Present policies to address disparity issues
To deal with the global crisis, government has
mobilized expansionary fiscal policy including
supplementary budget in FY2009 as well as planned
fiscal expansion for FY2010.
Supplementary budget THB116.7bn
Tax measures
Utilize Special Financial Institutions (SFI) to
increase credit in the system by THB 300bn
Central government budget THB 1.84trn
Expedite disbursement of budget
SOE investment budget THB 308bn
Local authorities budget THB 366bn
2009 multi-year commitment budget extending to
2010, 2011, 2012 and 2013 are THB 120bn, THB
50bn, THB 10bn and THB 2bn, respectively
Push forward investment projects
Public Infrastructure investment (SP2) plan THB
1.4 trn for 2010 - 2012
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Present policies to address disparity issues
Supplementary budget (SP1) aims to tackle
economic and social issues arising from crisis
Accumulated disbursement Mil. Baht (Mars 09
Aug 09)
Disbursement rate
Budget Items
Low income earner support
18,121
96

• The 2,000 baht "help the nation" cheques handout
  for earners having a monthly income less than
  15,000 Bahts
• Socially secured (8.1 million persons)
• Public sector official (including pensioners
  civil servant) 1.3 million persons

15 years free schooling
87

• Free education for 15 years
• (Estimate of 10 million student)

16,525
Sufficiency Economy funds

• Sufficiency economy philosophy enhancement on
  village (increase funding for 78,358 villages)

33
5,000
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Present policies to address disparity issues SFIs

• Loan growth from the commercial banks have been
  contracted significantly after crisis

Unit Million Baht
(Feb 09 Jun 09)
(Jan 08 Aug 08)
(Oct 08 Jan 08)
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Present policies to address disparity issues SFIs

• On the other hand, loan growth from the SFI have
  been increased significantly after crisis.

Unit Million Baht
BAAC 65
BAAC 65
GSB 23
GHB 12
(Jan 08 Aug 08)
(Feb 09 Jun 09)
(Oct 08 Jan 08)
Source Macro Bureau FPO
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Present policies to address disparity issues SFIs
In 2009H1, commercial banks new loan outstanding
contracted considerably, while the SFIs new loan
outstanding increase considerably as well.
Source Macro Bureau FPO
Although the total commercial banks new
business loan outstanding is contracted around
-237 billion baht, KTBs new loan growth had been
expanding around 50 billion baht In case of
SFIs consumer loan BAACs GSBs and GHBs new
loan outstanding (esp. agriculture loan and
mortgage) have been increasing considerably
during 2009 H1
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Present policies to address disparity issues SFIs
New Loan Target of the 6 SFIs According to Fast
Track Loan Policy
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Present and future policies to address disparity
issues
Government plans for medium-term investment
program (SP2) to enhance economic and social
progress and opportunities for all Thai people.
THB bn
Key Projects
Investment Programs
Total investment THB 1,431bn

• Government to focus on selected projects to
  ensure implementation efficiency
• High impact projects
• Feasibility and engineering design done
• Most required approval obtained
• Achievable within 2010-2011

Implementation Is Key!!

• Committee set up to oversee implementation
• Regular (weekly) working group meetings to follow
  up

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Present and future policies to address disparity
issues
Educational and health improvement to be achieved
under SP2

• Educational Policy

• Healthcare Policy

• National Standard

• Improving school standards
• Bring down a number of schools under national
  standards from 2,930 to zero

• Facilitate the health accessibility for all
• Increase in numbers of external patients at the
  sub-district level from 40 to 60

Investment

• Rise in the quantity of equipment at hospital
• Increase in the number of beds at hospital from
  60,000 to 70,000

• Increasing the quality of IT equipment at school
• A number of students per computer expected to be
  from 38 to 20 persons

• Enhance the student literacy
• Reducing a number of illiterate students from
  160,330 to zero

KPIs

• Enhance the quality of health services

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Future policies to address disparity issues
National Saving Fund
Proposed National Savings Fund

• Compulsory savings fund for elder age (60 years
  old and above), has a defined contribution from
  the government and has a guarantee return.
• Coverage People who havent obtain any
  protection and social security in regard to other
  laws that are between 20 60 years old will
  receive the rights to be a member of the fund
  according to the law.

• What

Why

• Creating an income after retirement
• Increase national saving and support development
  of capital market

How

• The benefits payment from the fund depends on
  (1) the amount of savings in the individual
  account, (2) contribution from the government,
  and (3) the interest return from the management
  of the fund.
• The government guarantees the contribution
  including minimum interest return in regard to
  the economic condition and payments in form of
  pension for life annuity and returns in cash for
  the left-over portion of the accumulated account.
  

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  ???????????????? ????? 42,600 ???????
• ?????????????????????????????????????????????? 15
  ?? ???????????????????????????????? 2552
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  ??????? ????? 139,974 ????????????????????????????
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  42,503 ??????? ????????????? 23.7 ????? 2550

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27
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• ?????????????????????????????????????????
  ???????????????? GDP ?????? ??????????????????????
  ? ? ??????????????????????????
• ?????????????????????? GDP ????????????
  ?????????????????? 16.2 ??????????????????????????
  ??????????????????????? 16.7 ??? 14.8 ???? 2552
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  ????????????? 35.3 44.5 ??? 33.0 ????????

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???????????????? GDP ?? 2000-2005
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Dr.Pornchai ThiravejaSenior Expert on Fiscal
System and Policy Fiscal
Policy Office Ministry of Finance, Thailand