Unlocking the potential of regions, fostering multi-level governance and better management of water security are the three strategic priorities for Thailand to achieve faster and more inclusive economic growth, according to the OECD Multi-dimensional Review (MDCR) of the country. This second report builds on the results of an initial assessment that identified the main constraints to Thailand’s development.
“Thailand aspires to become a high-income economy enjoying “security, prosperity and sustainability” by 2037; we hope the MDCR will contribute to policy action for such an achievement.”, said Masamichi Kono, Deputy Secretary-general of the OECD while launching the report today in Bangkok.
Strong growth since the 1970s enabled Thailand to join the group of upper-middle-income economies in the early 2010s. Economic success has brought remarkable social advancement: poverty has dropped from 60% in 1990 to 7% in 2019, while education and health services have considerably expanded and improved. At the same time, however, economic development has taken a toll on the environment and the benefits of prosperity have not been shared evenly nationwide.
According to the MDCR, moving forward, Thailand needs to achieve three transitions that can boost its capabilities to sustain faster and more inclusive economic growth.
The first transition is the shift from a growth dynamics with high structural inequalities and informality to one that focuses on unlocking the full potential of all regions, provinces and municipalities. Innovative regional policies adapted to local contexts can let local stakeholders and entrepreneurs discover untapped potential and cast light on hidden constraints. Such policies would promote technical and vocational schools, universities and local colleges, and encourage investment in intermediate cities, attracting talent and capital outside of Bangkok.
Second, the MDCR suggests that Thailand organises multilevel governance more effectively. The complex and uneven distribution of power and resources across central government bodies and local administrations are at the root of co-ordination issues, poor institutional capacity and local fiscal disparities. To tackle these challenges, Thailand needs to enhance the spending and revenue autonomy of subnational governments (known as LAOs). In order to strengthen the local revenue base, Thailand could reform the property tax and transfer system, in order to grant LAOs at least one important tax base. On the expenditure side, the country could reorganise the current spending assignments between government levels. More capacity is also needed at subnational level to finance infrastructure, as well as to plan and implement territorial development strategies.
Finally, Thailand needs to move from a resource-intensive growth path, prone to costly natural disasters, to a growth model respecting natural resources. An ageing population, economic growth and the looming threats posed by climate change will challenge water security and could hold back Thailand’s growth plans and ambitions. The MDCR suggests that data and information, cohesive policies, strong leadership and better-defined roles, responsibilities and decision-making are necessary to move from a crisis-response to a risk-based approach to water security. In addition, better governance and coordination between local and national authorities on water management is crucial. Thailand should also make better use of economic instruments, such as water charges, and ensure stakeholder management and engagement to facilitate reforms.
Moving towards risk-based management of water security should be part of a broader transformation agenda for climate action. The OECD Investing in Climate, Investing in Growth report shows that Thailand’s long-run growth depends on a climate-compatible policy package promoting better governance, finance and infrastructure. Alongside the MDCR, the OECD Financing Climate Futures: Rethinking Infrastructure report provides guidance to ensure that future investments in Thailand are channelled towards low-emission infrastructure, with tangible benefits for the country and the rest of the world.
A third volume of the MDCR will prioritise policy interventions and propose a framework for measuring policy implementation with a special focus on the North, one of the poorest regions of Thailand.
More about the OECD Multi-dimensional Country Reviews: www.oecd.org/development/mdcr.htm.
For more information or to obtain a copy of the report, journalists are invited to contact Bochra Kriout (Tel.: +33 (0)1 45 24 82 96) at the OECD Development Centre’s Press Office.