Promoting Decentralized Economic Development in Thailand

As in many other countries in Asia, Thailand's national capital, Bangkok, has experienced rapid growth in population in recent years--more than 63 percent of Thailand's urban population reside in the metropolitan area. This rapid growth has been accompanied by rising financial and social costs to support the growing megalopolis. Recognizing that significant economic development opportunities exist in Thailand's other regions, the National Economic and Social Development Board (NESDB) commissioned The Louis Berger Group, Inc. and Southeast Asia Technology, a leading Thai engineering firm, to prepare an Action Plan to encourage decentralized economic development.

The Louis Berger Group (Berger), since 1964, has assisted the government of Thailand to address and implement a number of important economic and physical planning initiatives, including the Sattahip Regional Development Plan, the Northeast Economic Development Plan, the Nationwide Heavy Industries Development Program and the Eastern Seaboard Development Plan. Berger experts have also provided assistance to the NESDB in the preparation of several national development plans that guided Thailand's rapid economic growth--eight percent per annum since 1986, one of the highest rates in the world.

Opportunities for decentralization within Thailand have been profoundly affected by the pace of recent economic and technological change within the country as well as worldwide and regional technological and institutional transformations. Thailand's central location in the rapidly growing East Asian region is opening trade and investment opportunities with neighboring nations as well as the rapidly growing east-west trade. Work on the action plan started with an analysis of these trends and developments and how they impacted and could be utilized to enhance decentralized socioeconomic development in Thailand. The Team addressed environmental problems being experienced in Bangkok and its environs. The survey utilized a geographic information system (GIS) format and combined both national criteria and international standards, and specifically identified high pollution potential establishments and provided relocation guidelines. Decentralization priorities were also established for state enterprises and government functions.

Thailand's Eastern Seaboard--the subject of earlier Louis Berger Group work--was also singled out for special study. Updated population projections were prepared for this rapidly growing region, and future economic and social infrastructure needs identified. A review of existing plans identified priority areas and concerns. Factors influencing industrial and household location decisions in Thailand were assessed, social and cultural amenities critically important in drawing management personnel and skilled laborers from the Bangkok area were identified and a number of supporting investment incentives were recommended. Development priorities were also established for Thailand's southern, northern, northeastern and central regions and for potential urban development poles within these regions. An analysis of the hierarchy and linkages among Thailand's cities and hinterlands gave particular attention to differentiation in urban functions and to the growth of spatially dispersed inter-industry and intra-industry relationships. Attention was also given to the development of dedicated industrial development zones on Thailand's borders in order to take advantage of lower labor costs and to stem the tide of illegal immigration.

Education and training opportunities, particularly in the fields of science and technology, were found to be of critical importance to Thailand as the nation moves into the ranks of the newly industrialized countries. The need for skilled labor in dispersed locations is of particular concern to investors in high-value added, technology-intensive fields. Improvements in the regional human resource development activities such as technical education and training at secondary and tertiary levels were recommended as part of an integrated package of decentralization measures.

The study team's work on the decentralization action plan was carried out in four principal stages, in close collaboration with senior representatives of government agencies, non-profit institutions, the private sector and the general public. Seminars, focus groups and group interviews were utilized to gather viewpoints and keep key constituencies apprised of the team's work. Stage One focused on the team's preliminary findings; Stage Two identified decentralization opportunities and key target groups; Stage Three recommended new institutional arrangements, incentives and improvements in infrastructure; and, finally, Stage Four produced three action plans--one for business and industry, one for government and state enterprises and one for the Eastern Seaboard. Recommendations concerning investment incentives, regulatory frameworks and environmental mitigation were included. The plan for decentralization of state enterprises focussed on bridging gaps between formal policy pronouncements and concrete behavior. Finally, the Eastern Seaboard Plan gave particular attention to infrastructure improvements, residential needs and socio-cultural amenities required as economic and demographic expansion spreads from the seacoast to hinterland areas of the eastern region.

Work on the decentralization action plan was carried out in parallel with the preparation of Thailand's Eighth National Economic and Social Development Plan, and the Team provided background and critical inputs to the Eighth Plan on settlement patterns, industrial dispersal, decentralization of state enterprises and related subjects. In a comparable transport project, Berger experts also provided inputs into the transport sector for the Eighth Plan. In a study for the Office of the Commission for the Management of Road Traffic (OCMRT), the Berger Group provided OCMRT with technical and professional support and assisted in the preparation of the transportation component of Thailand's Eighth Five Year Economic Development Plan, including identifying potential sources for public- and private-sector funding for recommended transportation investment. Berger experts in public investment budgeting, taxation and privatization were brought in, and a report was prepared covering the type and scope of funding options available and the advantages and disadvantages of the available alternative transportation financing strategies.

The team's report was based on a detailed review of transport expenditures over the decade 1985 to 1995, and prior budget experience was evaluated from several perspectives: the level of appropriations, actual expenditures of appropriated funds and the distribution of funds among the various programs and related agencies and departments. Based on this review, forecasts were developed for the expected growth in the budget funds that would be available to the government for the period 1996 to 2011. The forecasts were then compared to the proposed transportation investment needs recommended for the Eighth Plan in order to develop an alternative funding source. A significant gap was identified between investment needs and available funds from national budget sources. The Louis Berger Group Team then reviewed funding options and financial strategies.

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