Thailand Systematic Country Diagnostic
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Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized DIAGNOSTIC COUNTRY THAILAND SYSTEMATIC PROSPERITY FORALL PROSPERITY AND SECURING REVIVING GROWTH GETTING BACK ON TRACK: REVIVING GROWTH AND SECURING PROSPERITY FOR ALL TABLE OF CONTENTS Missed opportunities: The decade when 55 Thailand struggled to reform and lost its competitive edge Thailand’s lagging regions have fallen 57 EXECUTIVE SUMMARY 12 further behind and represent another untapped potential Pathway 1: Creating more and better jobs 16 Pathway 2: Providing more support to the 18 bottom 40 percent 4.INCLUSION AND POVERTY : 59 Pathway 3: Making growth greener and more 20 IMPRESSIVE PROGRESS BUT resilient CHALLENGES REMAIN Cross-cutting priority: Strengthen the 22 institutional capability of the public sector A. WHAT ARE THE TRENDS IN POVERTY? 60 to implement reform priorities Poverty has fallen precipitously over the past 60 Opportunities to get back on track 23 three decades, but major challenges remain in reducing poverty and inequality Children’s dreams for Thailand 25 Poverty in Thailand can also be seen in 66 non-income dimensions 1.INTRODUCTION 26 Who are the poor and bottom 40 percent in 69 Thailand? B. HOW INCLUSIVE IS GROWTH, AND WHAT 72 FACTORS AFFECT SHARED GROWTH IN 2.COUNTRY CONTEXT 31 THAILAND? The bottom 40 percent have been sharing 72 Distinctive country features affecting 33 in economic growth, although progress has development been uneven Economic growth has been the main force 74 behind poverty reduction and shared prosperity, 3.GROWTH : STELLAR PAST although redistribution is playing a greater role PERFORMANCE BUT RECENT 38 SLOWDOWN. CAN GROWTH The drivers of shared growth changed after 77 the 1997 Asian crisis but not necessarily BE REVIVED? all for the better Historically, growth performance has been 39 A more “healthy” and sustainable change 78 strong that has taken place is the increased role of private transfers in poverty reduction Growth has slowed significantly in recent 42 years, raising concerns about structural The labor market has played a critical role 79 weaknesses in creating shared prosperity, although challenges remain Faltering export growth has also played 47 an important role in the slowdown Government programs have also likely 82 contributed to shared prosperity, although The economy’s weaknesses can also 48 they still leave a significant share of the be attributed to a slump in investment population poor or vulnerable to poverty Getting Back on Track: Reviving Growth and Securing Prosperity for All IV Challenges remain in terms of social 85 C. Make Growth Greener and More Resilient 130 inclusion Manage Thailand’s Natural Resources and 130 Environment 5.HOW SUSTAINABLE IS 90 Reduce Vulnerability to Natural Disasters and 131 THAILAND’S “ECONOMIC Climate Change by Focusing on Better Land Zoning and Management to Reduce the MODEL” AND WHAT ARE Flood-Drought Prone Areas THE RISKS ON THE HORIZON? Promote Energy Efficiency and Clean Energy 132 Restarting the “structural transformation” 91 by Focusing on Implementing Thailand’s Plans engine will be key for productivity growth and and Commitments for Energy Efficiency and further poverty reduction Alternative Energy Thailand will likely grow old before it becomes 93 Strengthen the Institutional Capability of the 133 rich Public Sector to Implement Reform Priorities Lagging regions falling further behind, and a 94 Strengthening the Institutional Capability to: 134 dated safety net represents growing risks to Create More and Better Jobs social cohesion (and political stability) Strengthening the Institutional Capability to: Provide More Support to the bottom 40 percent 135 Environmental and natural resource 95 and to Make Growth Greener and More Resilient degradation and vulnerability to natural disasters and climate change may make growth unsustainable 7.IDENTIFIED DATA 136 AND KNOWLEDGE GAPS 6.POLICY PRIORITIES FOR 101 STRONG, INCLUSIVE, AND SUSTAINABLE GROWTH REFERENCES 139 A. CREATING MORE AND BETTER JOBS 109 ANNEXES 144 Boost Investments in Infrastructure 111 Annex 1: Deep South 144 Increase Competition Through Free Trade 114 Annex 2: Inclusiveness of growth 146 Agreements and Deregulation Annex 3: Example of pathways out of poverty: 150 Improve Firm-Level Competitiveness and 118 a locally led development approach Innovation through Greater Technology Absorption and Innovation Annex 4: Details on the labor market 152 Annex 5: Questionnaire used for consultations 157 B. PROVIDE MORE TARGETED SUPPORT FOR 120 THE BOTTOM 40 PERCENT Improve the Education and Skills of the 120 Workforce Implement Effective Policies to Boost 127 Agricultural Productivity Build Smarter Social Protection Systems, 128 Focusing on Providing a Safety Net for Poor People Thailand Systematic Country Diagnostic V Figure 8: Thailand has a higher percentage of migrants than 34 the average of its structural peers but less than Malaysia and LIST OF TABLES Singapore Figure 9: Tourism is an important source of revenue for 36 Thailand Figure 10: Labor productivity per full-time equivalent worker 41 (measured in constant 2002 THB) has been much higher in Table 1: Development priorities for ensuring strong, shared, industry and services compared to agriculture and sustainable growth 15 Figure 11: Even in terms of labor productivity per full-time 41 Table 2: Rapid accumulation of capital inputs was the key equivalent paid worker driver of growth, with total factor productivity growth playing a 40 smaller role Figure 12: Labor reallocation was a driver of labor productivity 42 growth in Thailand and the rest of East Asia Table 3: Other countries in the region are achieving more rapid 44 GDP growth than Thailand Figure 13: Investment never fully recovered after the 1997 43 crisis Table 4: The recent slowdown in GDP growth can be attributed mainly to a slowdown in the industry and service sectors 45 Figure 14: With both private and public investment behind the 43 decline Table 5: Average FDI inflows in selected economies (% of GDP) 49 Figure 15: Agricultural prices boomed between 2001 and 46 Table 6: Poverty in Thailand remains predominantly a rural 2012 phenomenon and is concentrated in certain regions (poverty 64 headcount by region, %) Figure 16: The hourly wage premium of a primary and 46 secondary-educated graduate to work in the offfarm Table 7: Proportion of vulnerable groups 65 sector has decreased significantl Table 8: Years of schooling for heads of households 70 Figure 17: The share of medium- and high-tech manufactures 48 Table 9: Decomposition of poverty changes into growth and has remained unchanged (Lall’s Classification redistribution components 74 of Tech Exports, 2007-14) Table 10: Employment by sector 75 Figure 18: Capacity utilization 50 Table 11: Top five priorities emerging from individual Figure 19: Gross corporate profits 50 questionnaires and group discussions: opportunities for 105 Figure 20: Foreign Investment Dedicated to Exports ending poverty and creating more shared prosperity 50 Figure 21: The quality of Thailand’s infrastructure is perceived 52 Table 12: Development priorities for ensuring strong, shared, to have declined vis-à-vis its peers and sustainable growth 106 Figure 22: Thailand’s peers have caught up in terms of the 53 Table 13: Fiscal situation 2009-2014 (% of fiscal year GDP) 111 quality of their roads, ports and airports Table 14: Pre-primary adjusted net enrolment rates in 2014 Figure 23: Thailand’s state-owned enterprise are not 54 (4-5 years old) 125 performing as well as their domestic and international peers Table 15: Pre-primary attendance for 15 year-old students 125 Figure 24: Other countries have been catching up to 55 (pisa 2012 sample) Thailand on multiple dimensions (Global Competitiveness, Score (7=best) Figure 25: World Governance Indicators in 2015, Thailand 56 and peers Figure 26: Regional value-added per capita; and labor 58 LIST OF FIGURES productivity Figure 27: By all measures of poverty, Thailand has made 61 impressive progress in poverty reduction Figure 28: Gini coefficients have been on a downward trend in 63 Thailand (1986-2013) Figure 1: Global competitiveness, score (7=best) 14 Figure 29: Thailand’s gini coefficient declined but remains 64 Figure 2: The differences between labor productivity in relatively unequal compared to many other countries agricultural and non-agricultural sectors are much bigger in 24 Figure 30: Pockets of high poverty are concentrated in the 65 Thailand than elsewhere North, Northeast, and Deep South (2013) Figure 3: Thai labor productivity is comparable to ASEAN-5 24 Figure 31: Poorer provinces lag in multiple dimensions 66 countries but only half of the level in Malaysia and Turkey (UNDP’s Regional Human Achievement Index 2014) (USD ’000/worker) Figure 32: Distribution of Thailand’s 15-year-olds on the 2012 67 Figure 4: Governance indicators, percentile rank, 0 to 100 28 PISA reading assessment Figure 5: Bureaucratic quality 28 Figure 33: Enrolment increased rapidly in the 1990s (and gaps 67 Figure 6: While agriculture’s share of total value-added has were narrowed) but have since stagnated; the gaps between declined, the movement of Thai workers out of agriculture has 33 the poor and non-poor remain wide for post-secondary gross slowed in recent years enrolment Figure 7: Most of Thailand’s international migrants are from 34 neighboring countries Getting Back on Track: Reviving Growth and Securing Prosperity for All VI Figure 34: Building material for walls