Public Expenditure Management

1
Public Expenditure Management Review (PEM/R) in
Thailand Bureau of the Budget 15 December 2006
2
Last year, Thailand commenced our Public
Expenditure Management Program.

• Previous year presentation
• Thai PEM Framework
• Strategic Performance based Budget System
• Decree on Good Governance and Government
  Administrative Plan
• OECD Best Practices for Budget Transparency
• IMF Code of Good Practices on Fiscal Transparency
• Thai PEM Main Focus
• Linkage between national priorities and budgeting
  within the framework of sustainability
• Legal framework and Institutional arrangements
  for public spending
• PEM Review Implementation Plan
• Mid term review in early 2006
• Start with Fiscal Sustainability component

3
Implementation of the Thai PEM abides by the
three fundamental principles of Best Practiced
PEM and covers the whole process of delivering
public services.

• Three Principles
• Maintaining aggregate fiscal discipline
• Allocating public resources in accord with
  strategic priorities
• Promoting the efficient delivery of services
• Coverage
• Formulation of policies
• Planning
• Allocation of resources
• Implementation

4
In the past year, Thailand has made progress in
the five main components of PEM/R.
5
Critical tools have been identified in order to
successfully reach each of the key PEM
objectives.
PEM Objectives
TOOLS
Maintain Long-term Aggregate Fiscal Discipline
Strengthen Strategic Allocation of Resources
Increase Operational Efficiency
Enhance Managerial Flexibility and
Accountability
Enhance Fiscal Transparency
6
Tools for each objective are under various stages
of development some key ones have been
implemented.
PEM Objectives TOOLS Progressive Status Progressive Status Progressive Status Progressive Status Progressive Status
PEM Objectives TOOLS Initiative Design Development Pilot Testing Use in Budget Process Refine Institutionalize
1. Maintain Long-term Aggregate Fiscal Discipline 1.1 MTEF Top Down / Bottom up
1. Maintain Long-term Aggregate Fiscal Discipline 1.2 Fiscal Rules
1. Maintain Long-term Aggregate Fiscal Discipline 1.3 Budget Ceiling
1. Maintain Long-term Aggregate Fiscal Discipline 1.4 Ratio of Capital /Operating Budget
1. Maintain Long-term Aggregate Fiscal Discipline 1.5 Mid Term Review
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MEDIUM-TERM BUDGET PLANNING FRAMEWORK
National Economic and Social Development Plan
Government Policy
Government Administrative Plan
National Investment Plan
Tools for long-term Fiscal Discipline have been
integrated into the Budget Process.
MTEF (Top-Down)
MTEF (Bottom-Up)
Demand of Funds
Supply of Funds
Fiscal Policy Formulation
Fiscal Rules
Annual Budgeting Ceiling
Macro-economic Outlook
ANNUAL BUDGET PLANNING FRAMEWORK
Budget Allocation Strategy
Revenue Forecast
Public Debt and Fiscal Risks
Annual Budget Preparation
8
All key agencies are involved to some degree in
the utilization of various tools to ensure fiscal
sustainability in the budget planning process.
AApprove LLead P Participate
IInitiate R Review SSupport
CURRENT BUDGET PLANNING PROCESS CURRENT BUDGET PLANNING PROCESS CURRENT BUDGET PLANNING PROCESS CURRENT BUDGET PLANNING PROCESS CURRENT BUDGET PLANNING PROCESS CURRENT BUDGET PLANNING PROCESS CURRENT BUDGET PLANNING PROCESS
TASK Cabinet MOF NESDB BOT BOB Line Ministry
1. Macro Fiscal Framework 1. Macro Fiscal Framework 1. Macro Fiscal Framework 1. Macro Fiscal Framework 1. Macro Fiscal Framework 1. Macro Fiscal Framework 1. Macro Fiscal Framework
Prepare baseline economic forecast P/R L P/R P/R
Prepare baseline revenue estimates L P P P/R
Project MTEF and future commitments S L S
Prepare aggregate fiscal targets A L S S
2. Budget Allocation Policy 2. Budget Allocation Policy 2. Budget Allocation Policy 2. Budget Allocation Policy 2. Budget Allocation Policy 2. Budget Allocation Policy 2. Budget Allocation Policy
Develop Govt Adm Plan and set policy themes A S L P I/ S
Define spending priorities A L P
Set public debt, fiscal risk projections, and identification of capital projects A L S P/R
3. Budget Ceilings 3. Budget Ceilings 3. Budget Ceilings 3. Budget Ceilings 3. Budget Ceilings 3. Budget Ceilings 3. Budget Ceilings
Set ministry spending limits A L P
Set departmental spending limits A L P
MOF Ministry of Finance, NESDB National
Economics and Social Development Board, BOT
Bank of Thailand, BOB Bureau of the Budget
9
The Thai Government has abided by a set of
publicly announced Fiscal Rules, and the rules
are consistent with the Sufficiency Economy
policy principle

1. Ratio of Public Debts to GDP not more than 50
2. Debt service not exceeding 15
3. Budget Deficit not more than 2 of GDP
4. Annual borrowing not more than 20 of total
   annual budget plus not more than 80 of the
   principle repayment budget
5. Capital expenditure no less than 25 of total
   budget

10
Thai PER will be conducted every two years, at
the beginning and mid-term of the government
cycle.

• to ensure the effectiveness of the review
• to maximize the use of information in policy
  implementation adjustment.

GOVERNMENT CYCLE
Previous Year Hypothesis
Year 1
Year 4
Year 2
Year 3
PER Cycle Starts
PER Mid-Term
PER Cycle Ends
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Results of the first Mid-term review is useful,
but the process is interrupted by unforeseen
circumstances.

• Macro economics assumptions must be scrutinized
  to ensure solid foundations.
• Assumptions of major government policies must be
  realistic.
• Report on Public Debts do not cover all existing
  risks.
• Fiscal decentralization needs to be reviewed
  urgently.
• Financing for Mega Projects must be well-planned.
• Some key issues will increase fiscal pressure
• Income Contingent Loan for education
• Demographic trend of an aging population
• Capitation Rate for healthcare

12
Holistic structure of plans and targets have been
installed from national level down to operational
level.
PEM Objectives TOOLS Progressive Status Progressive Status Progressive Status Progressive Status Progressive Status
PEM Objectives TOOLS Initiative Design Development Pilot Testing Use in Budget Process Refine Institutionalize
2.Strengthen Strategic Allocation of Resources 2.1 National Strategic Target
2.Strengthen Strategic Allocation of Resources 2.2 Ministerial Strategic Plan Budget ceiling
2.Strengthen Strategic Allocation of Resources 2.3 Integrated agenda based Budget Plan
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Public policies are run in three dimensions
simultaneously to effectively drive key policies,
provide public services, and enhance area
specific competitive advantages.
National Economic and Social Development Plan
Government Policy
Government Administrative Plan
Ministry Strategy
Provincial Cluster Strategy
Government Agenda
4-year Operational Plan
4-year Operational Plan
Agenda Based
Annual Operational Plan
Annual Operational Plan
Line Agency Strategy
Provincial Strategy
4-year Operational Plan
4-year Operational Plan
Annual Operational Plan
Annual Operational Plan
Function Based
Area Based
14
Performance indicators become the focus of the
dialogue in budget scrutiny process.
PEM Objectives TOOLS Progressive Status Progressive Status Progressive Status Progressive Status Progressive Status
PEM Objectives TOOLS Initiative Design Development Pilot Testing Use in Budget Process Refine Institutionalize
3. Increase Operational Efficiency 3.1 Service Delivery Target Public Service Agreement
3. Increase Operational Efficiency 3.2 Output Profile
3. Increase Operational Efficiency 3.3 Performance Indicators
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Public Service Agreements between Ministry and
Agency have been signed, but currently they are
not fully enforced.
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Output Profile has been designed to improve the
information structure in the budget process.
Output Profile

• Government Strategic Target
  (Government Administrative Plan)
• Strategic Target (Government Administrative Plan)
  Agenda/Function/Area
• Ministry Service Delivery Target (Expected
  Result)(4-year Operational Plan)
• Agency Service Delivery Target (4-year
  Operational Plan, Annual Operational Plan)
• Agency Mission (4-year Operational Plan, Annual
  Operational Plan)
• Outputs Performance Indicators in each level
  including main responsible person and supporting
  responsible person
• - Ultimate Outcome Key Success Factors
• - Intermediate Outcome KPIs
• - Immediate Outcome KPIs
• - Output (Quantity,Quality,Timeliness,Cost)
• Output/Service Delivery Process (Operational
  plan/Budget Management Plan)
• - Output Target (Agenda, Function, Area)
• - Primary/Secondary/Support Activities
• - Budget

8. Budgeting Management - Budget
Planning - Budget Allocation Plan - Budget
Execution 9. Output Costing 10. Efficient
Resource Management - Key Success Factor and
Constraints - Organization Management System
(Operation Expense) - Organizational Structure
and Human Resource Management (HR
Expense) - Facilities and Investment
Management - Risk Management 11. Performance
Reporting in each level - Performance and budget
used compared to whats indicated in the
plan - Monitoring - Evaluation - Problems,
Obstacles, and Recommendation
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Performance indicators are attached to each
agenda, strategy, tactic, and activities in the
budget documents.

• National level Achieve knowledge-based society
  for people with solid ethical values and good
  morals
• Ministry level People receive education and
  lifelong learning with quality assurance
• Quantity measurement
• Years of education of the population
• Educational institutions with support for
  strengthening
• Quality measurement
• Target students with compulsory and higher
  education
• External students with ability to apply their
  knowledge
• Agency level
• Quantity number of students/researches in each
  field
• Quality quality of standardized tests,
  employment, ability to continue education

18
The trend to increase managerial flexibility and
accountability continues in the past year PPP is
being tested.
PEM Objectives TOOLS Progressive Status Progressive Status Progressive Status Progressive Status Progressive Status
PEM Objectives TOOLS Initiative Design Development Pilot Testing Use in Budget Process Refine Institutionalize
4.Enhance Managerial Flexibility and Accountability 4.1 Increasing roles of front line manager
4.Enhance Managerial Flexibility and Accountability 4.2 PPP other Public Financial Innovations
4.Enhance Managerial Flexibility and Accountability 4.3 Performance Assessment Rating Tool
4.Enhance Managerial Flexibility and Accountability 4.4 Realignment of Program-Activities-Outputs
19
Front line managers have been given more
authority on operation planning and budget
matters.

• New Draft Budget Procedures Act
• Strategic performance based budget process
• De-concentration Empowering ministries and
  departments
• Comprehensive coverage Good governance
• New Budget regulations
• Flexibility
• Transfer within Budget Plan
• Spending within budget category
• Spending of left-over budget
• Conditions
• Achievement of objectives
• No multi-year commitment
• No new government employment
• No land acquisitions
• Constructions of not more than 10 million baht
• Equipment of not more than 1 million baht
• Reporting

20
PPP has provided lessons learned, and it is now
encouraged for projects that can generate
sufficient cash flow.

• Key issues must be addressed
• Prioritization and preparation of good projects
• True improved value for money
• Well thought of risk/benefits assessment
  transfer
• Actual acceleration of delivery
• Transparent off-budget treatment
• Issues under considerations
• Clear legislation
• Legality to enter contract
• Dispute settlement
• Government institutional capability
• Development of Key Processes
• project viability assessment
• private sector pricing
• Realistic government support

21
Performance Assessment Rating Tool (PART) is
used to ascertain the capabilities of public
agencies.

• Pre evaluation (before budget spending)
• Interim evaluation (during operations)
• Post evaluation (after implementation)

22
Fiscal transparency is enhanced by improved
budget information system on a more integrated
platform.
PEM Objectives TOOLS Progressive Status Progressive Status Progressive Status Progressive Status Progressive Status
PEM Objectives TOOLS Initiative Design Development Pilot Testing Use in Budget Process Refine Institutionalize
5. Enhance Fiscal Transparency 5.1 GFMIS
5. Enhance Fiscal Transparency 5.2 Improved Budget Information System
5. Enhance Fiscal Transparency 5.3 Improved the Format of Budget Document
5. Enhance Fiscal Transparency 5.4 Improved Performance and Financial Reporting
23
BOB ICTs integration with the public sector
platform enhances accessibility for users and
increase transparency overall.
Prime Minister Operation Center
GFMIS
BOB e-Budgeting
BIS (Budget Information System)
www.bb.go.th
EIS (Executive Information System)
Planning
BBOC (BB Operating Center)
Preparation
Evaluation
BBOA (BB Office Automation)
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The Next Step is to ascertain that PEM become
standard operating procedure in the Thai
Budgetary Process, and Thai PEM must continue to
be improved.

• Increase fiscal inter-relationship among
  government agencies in all levels
• Increase roles of government agencies concerning
  Public Expenditure Management Review
• Refine design structure of all PEM Components
  and move forward with the operational plan for
  each PEM component
• Emphasize the Integration of Fiscal
  Sustainability Framework and MTEF in Budget
  Planning process
• Capacity Building and System Support Program