Mitigating the Social Impact of the Economic Crisis:
A Review of the Royal Thai Government's Responses
Santosh Mehrotra
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Ph.d. (Cantab.)
Economic Advisor, UNICEF, New York(1)
Executive Summary
The Thai government, in response to the economic crisis, has taken major steps in order to mitigate its social impact. Two major loans have been contracted, one with the Asian Development Bank, and the other with the World Bank, as part of the large external assistance received after the financial crisis of July 1997, specifically in order to address social concerns. This paper attempts at identifying some target groups that might not have been adequately addressed in the loan-related measures, and discusses some potential policy measures to address those specific target groups. It also analyses the proposed Social Investment Facility, in the light of international experience over the last decade with such funds in Asia, Africa and Latin America.
The first point to be noted is that so far in its response, the government has not adopted what may be called a 'target group approach'. In other words, the objective has not been to work through the analytics of the impact of the financial/economic crisis to the possible target groups that might be affected. In other words, target groups may have been identified in the process, but perhaps in a rather ad hoc manner, without a systematic and rigorous analysis. An appropriate and comprehensive policy response must depend upon such target groups being systematically identified through a rigorous analysis.
A second related point that stands out is that the response so far makes no distinction between direct and indirect effects, or first order and second/third order social effects of the economic crisis. There is also the serious question of whether those most directly affected by the economic crisis are the poorest in society. These are questions which require more systematic analysis, which the Social Policy Committee may well wish to commission. It is possible that the SIP in particular might be more effective if a target group approach was to be adopted.
Meanwhile, this paper attempts to locate and discuss a few such target groups.The first such target group consists of drop-outs from the school system. There is evidence that children have begun dropping out from school - more than before, thus adding to a pre-existing problem. The government response so far has been to prepare a project within the ADB loan to give scholarships and loans to drop-outs. Scholarships and loans can indeed be used in a multi-pronged attack on the problem. However, there are other means at the disposal of the government to offset the increase in household costs which lead children from poor families to drop out of school - free school lunch and textbooks. Besides, there are structural problems with the school system, to address which this crisis should be used as an opportunity. Without improved quality in the school in the short to medium term, there can be little hope of limiting drop-outs in a period of public expenditure constraints. The studies so far have identified the pupil-teacher ratio as being too low, and that teachers are not being efficiently utilised. However, the problem may go beyond reforms aimed merely at efficiency gains.
Recommendation: The Social Policy Committee should commission a systematic study, with the objective of identifying potential target groups likely to be affected in the short, medium and long term by the economic crisis. The government would then be in a better position to ensure that social policy responds effectively to monitor the impact on those groups and to mitigate the social impact on those groups.
Thailand's recurrent education budget is unusual in that relative to other developing countries, and even developed countries, a much lower proportion of it goes to wages and salaries: roughly 80 per cent at the primary level, and 70 per cent at the secondary level. Despite what Ministry of Education officials think, these are very low shares by international standards, and there is likely to be scope for some reallocation within the overall budget at each educational level to address the biggest priority and challenge faced by the education system after the economic crisis: an intensification of a pre-existing problem of drop-out.
Given that Thailand's narrow skilled human capital base is a fundamental problem underlying the current economic crisis, addressing the drop-out issue goes to the heart of not only the social impact of the crisis, but also the economic core of the crisis. Without broadening its human capital base, Thailand runs the risk of being reduced to a economic tiger without the claws needed to climb up the product cycle ladder.
Recommendation: The MOE and ONEC need to examine the overall education budget with a view to reallocations in favour of: i. Textbooks, especially for primary pupils; ii. School milk and lunch; and iii. Possibly school uniforms, if the government decides to continue with the current policy of mandatory school uniforms. Loans and Scholarships are already provided for under the ADB loan. However, there may be scope for reducing procedural delays and paper-work relating to applications for scholarships/loans.
Recommendation: SIF funds could be extended to increase the number of Extended Opportunity Schools, as well as to add Upper Secondary classes to some of the Lower Secondary schools - provided teacher salary and other costs can be met by the government. The increase in pupil-teacher ratios envisaged in the ADB loan conditionality may help to release funds to meet these recurrent costs. Meanwhile, SIF funds could be utilised to buy bicycles for the schools, which could be rented out to children coming from the farthest villages to enable them to attend without incurring any transportation costs.
Recommendation: The Thai government needs to examine in detail the nature of the Indonesian interventions to reduce drop-outs in the wake of the crisis, including the social mobilization campaign, to determine their replicability in the Thai context.
Another target group that could be given more attention than has been given so far consists of women who might be now forced to leave the workforce on account of the economic downturn and loss of formal sector employment.Recommendation: In order to shore up family incomes and prevent unemployed women from moving into undesirable activities, the government needs to support more strongly than before women's micro-enterprises. The Council of Ministers will need to ask the Department of Industrial Promotion (DIP) to address the gender constraints in DIP programmes. To help develop the design and marketing skills of women entrepreneurs, DIP needs to facilitate by bringing in the private sector to train women. As big business is likely to move increasingly into sub-contracting to home-based production in many sectors in order to reduce its own costs, the government needs to examine how legal and social protection for home-based production can be improved in accordance with the ILO Convention on Home-based Workers (1996).
A third target group is the educated unemployed, especially those who have just graduated. In the next few years, as the economy bottoms out, there may be little demand for these new entrants to the labour force with little or no work experience. Some proposals are pursued to address these target groups.Recommendation: To give unemployed school-leavers and graduates some form of employment a large-scale volunteer programme needs to be started. SIP funds could be utilised for the purpose. A large-scale social mobilisation may have to precede such a volunteer programme.
The rest of the paper examines the features of the Thai Social Investment Fund, which will become operative from September 1998. The SIF is a demand-driven multi-sectoral fund meant to respond to community driven projects. We discuss the advantages and disadvantages of multi-sectoral programmes, arguing that such programmes should not be avoided but rather confined to a manageable scale. It is also pointed out that demand driven schemes should be accompanied by measures which enhance the capacity of the poor to formulate and present project proposals, and by selection procedures which discriminate in favour of projects which benefit the poor.
The equity of safety nets in the international experience is mixed. The Thai SIF does well to use the instrument of poverty mapping in order to ensure equity in choice of projects. However, formalized pro-poor project selection procedures may still be necessary.
Sustainability in terms of ensuring that the recurrent costs of the projects under the SIF are met is another area of concern. A further concern is that community participation is not always genuine or equitable. Demand driven safety nets should be accompanied by measures to enhance the capacity of NGOs. Safety nets also have had mixed consequences for women. The managers of the Thai SIF would be well advised to keep these issues in view during the life of the fund.
Recommmendation:It may be advisable for the Executive Committee in the case of the Thai SIF to include sectoral specialists on a permanent or ad hoc basis (whichever the government deems fit) in the approval process for projects to address the concerns arising from the multisectorality of the Fund.
Recommendation: The Monitoring and Evaluation Division within the Project Implementation Unit of the SIF in Thailand may have to monitor the income-group composition of applicants for the funds actually allocated. If their evaluations reveal that low-income groups or remote communities or ethnic minorities are not applying for project funds, the Executive Committee of the SIF could take the decision to be proactive in formulating projects intended to assist them.
Recommendation: The recurrent costs of projects under the SIF have to be taken into account by the Executive Committee while approving projects.
Recommendation:There is a case for making the Thai SIF permanent, given the need in the Thai economy for much greater decentralisation and also the need for institutionalising the role of civil society. Moreover, with so much of Thailand's development in the past having been concentrated in the area around Bangkok, the need for greater regional development buttresses the case for a permanent SIF which would give continued impetus to forces of regional development.Recommendation: Both the Executive Committee and the Monitoring and Evaluation Division in the Thai SIF should ensure that communities have genuinely participated in the District Civic Forums, and that NGOs 'representing' communities are not front organisations arisen to gain access to resources.
Recommendation: Women, like the poor and the otherwise marginalised, often suffer from the usual problems in demand-driven schemes of organizing and articulating themselves as effectively as the more privileged. Such a tendency would need to be guarded against by the Executive Committee.
Mitigating the Social Impact of the Economic Crisis
A Review of the Royal Thai Government's Responses
There are some fundamental imbalances in the Thai pattern of development in the last four decades. While agriculture accounts for a mere 10 per cent of GDP, as much as 57 per cent of the labour force is employed in agriculture (47% in industry and 43% in services). Even more importantly, the spatial pattern of the distribution of the population is unusual for a country in which such a small proportion of the total output is accounted for by agriculture - a proportion which is only slightly higher than agriculture's contribution to total output in industrialised countries. As much as 70 per cent of the population lives in rural areas (even though 40% of the income of rural dwellers is derived from non-farm incomes) (NESDB, 1998). In fact, after Bangkok, which unofficially has a population of about 10 million (of a total national population of 60 mn), the next largest town has a population which is barely 2 per cent of that of Bangkok.
On the basis of recent poverty analysis of the Thai population some interesting observations can be made about this rural population. While 11.4 per cent of the total population in 1996 was defined as being poor, in Bangkok and its vicinity barely 0.6 per cent of the population was identified as being poor. While this number will inevitably rise disproportionately due to the impact of urban formal sector unemployment, the share of Bangkok or municipal areas in the total poor would still remain negligible. (2) Even in the so-called 'municipal areas', barely 1.6 per cent of the total population in 1996 was identified as being poor.This fact is of some significance, in that in the wake of the economic crisis, the most attention has focused on the impact of the crisis on those laid off from work in the urban areas. However, in villages nearly 15 per cent of the population was classified in 1996 as being poor. In other words, as in other developing countries, poverty is very much a rural phenomena. In this respect, Thailand stands in sharp contrast to most Latin American countries, which experienced a sharp downturn in output and employment in the 1980s.(3) Poverty in Latin America is largely a urban phenomena, in that most of the poor are in fact located in urban areas.
Together with this serious rural-urban divide has gone the rising inequality of income and expenditure. The Gini coefficient of expenditures shows a rapidly rising inequality: from 35.74 in 1975, to 39.71 in 1981, to 42.62 in 1986, and 45.39 in 1992 (Kakwani, 1996). It is not surprising that one hears that Bangkok has the second largest number of Mercedes Benzes in the world, and the seventh largest number of Volvos (Mechai, 1998).
Bangkok and its environs account for more than 50 per cent of GDP (Economist Intelligence Unit, 1998). At the same time, rural poverty is a serious problem, particularly in the Northeast (25% of the population of that region) and South (15% of the population of the region), and the problem has been exacerbated by the drift of the productive population to Bangkok in search of work, which has left only the very young and the old in many rural areas. This has tended to discourage the economic development of these areas, as have inadequate infrastructure and relative poor quality of health and education provision compared to Bangkok. Thus in villages 71 per cent of the poor population has less than primary education, while that share is 56 per cent in municipal areas.In fact, the share of the non-poor in villages who have less than primary education is greater (63%) than the share of the poor in municipal areas having less than primary education (56%) - which is a remarkable commentary on the opportunities available in the Bangkok area (NESDB, 1998).When taken together with the fact that the quality of education in Thailand has suffered from serious problems for a considerable period of time - as we discuss below and as noted in many studies - the crisis underlines the urgent need to address the problems of education. The educationally disadvantaged rural youth stand out in some ways as an important target group - especially in the light of the recently emerging evidence on dropouts in the wake of the crisis.
The Thai government's response to the economic crisis, with a view to mitigating its social impact has been to contract two loans, one with the Asian Development Bank, and the other with the World Bank and OECF. The first is a social sector loan programme, in order to initiate reform in the Education, Health and Social Welfare sectors. The target groups that might have been overlooked in the latter are addressed in Section 1 of the paper. The second is essentially a Social Investment Fund - a standard safety net device that has been used in many other countries - which we review in the light of international experience with such instruments.(4)
I. A Review of the Social Sector Programme
The $500 million loan from the ADB to the social sector through the Social Sector Program Loan constitutes part of the overall economic restructuring framework agreed between the Government and the IMF. The implementation of the social sector programme and disbursement of Loan funds will also be carried out strictly in the context of the agreement between the Government and the IMF. In other words, there are clear conditionalities built into the ADB loan which will need to be fulfilled to enable the government to withdraw funds from the loan.
There are essentially three broad sectors covered by the ADB loan: labour and social welfare, health and education. In the area of labour and social welfare, policy priorities include: i. The need to support laid-off workers and unemployed; ii. Protection of the poor in the informal sector and rural areas by making poverty programmes more effective; iii. Promotion of private sector investment in training; and iv. Improvement in the competitiveness of the labour force. The government has established the Centre for Assistance to Laid-Off Workers under the existing network of the Ministry of Labour and Social Welfare. CALOW has branches in provincial capitals to register laid-off workers and provide one-stop service in the form of training referral, counselling and placement support. For the protection of laid-off workers, social security coverage for medical care and maternity, disability and death benefits have been extended for 6 months after retrenchment. To protect the poor in the informal sector and rural areas under the policy of financial austerity, the use of the budget for poverty progammes will be made more effective through better targeting. More specifically, the budget allocation method to provinces for poverty programmes will be modified to reflect the incidence of poverty in each province and uniform poverty benchmarks will be adopted.
In the health sector, the loan programme provides for the increase in allocation within the health budget for programmes for the poor (Public Assistance Scheme). The budget for the Voluntary Health Card Scheme for those who are not covered under the health scheme through employment in the formal sector will continue to be protected. Within the budget constraints, the budget focus will shift towards programmes for mothers and children. Specifically, the government will maintain programme coverage for maternal and child health and HIV/AIDS activities including 'Safe Motherhood' activities, essential vaccinations under the Extended Programme of Immunization, and prevention, community development and NGO activities relating to HIV/AIDS. To meet the shortage of health personnel in rural areas, the government will start redeploying health staff to rural areas by March 1999.
According to the Social Sector Loan, the policy priorities in the education sector include: i. Reduction of the incidence of dropouts from the school system due to financial difficulties; ii. Improvement in the quality of priority education programmes through better allocation of resources; iii. Increasing the pupil-teacher ratio at the primary level to 25:1 from its current level of 20:1; iv. Financial and management decentralization to make all levels of education more responsive to societal and community needs; and v. promotion of the private sector in the provision of education and training.
The first point to be noted is that so far in its response, the government has not adopted what may be called a 'target group approach'. In other words, the objective has not been to work through the analytics of the impact of the financial/economic crisis to the possible target groups that might be affected. Correspondingly the ADB loan takes an omnibus sectoral approach, and the MOU between the government and the ADB for the Social Sector Programme Loan states that the loan will be available for reforms in Labour/Social Welfare, Health and Education sectors. The largely World Bank-funded Social Investment Project similarly is meant for government ministries and also for a demand-driven programme of multi-sectoral grants for community projects. In the latter the groups are supposed to identify themselves. Target groups may get identified in the process, but perhaps in a rather ad hoc manner, without a systematic and rigorous approach. An appropriate policy will depend upon such target groups being systematically identified through a rigorous analysis.
A second related point that stands out is that the response so far makes no distinction between direct and indirect effects, or first order and second/third order social effects of the economic crisis. For example, the first order effect will be that due to bankfruptcy and reduced orders, white (eg. banking) and blue collar workers (eg. construction) will be laid off. Their families will be directly affected. But soon some of the laid-off will join the informal sector or migrate to the rural areas. Unless there are labour shortages in the rural areas, the second order effect of the lay-offs will be that wages may tend to fall for all, not just those who return to rural areas. Similarly, in the informal sector in urban areas, new entrants may tend to undercut prices and incomes for those already in the informal sector. Taking another example, the rural poor in the agriculture sector are not immediate victims of the crisis. If anything, it could be argued in principle that due to devlaution of the baht, they would benefit directly from the increase in prices for their exportables. A second order effect would be that the demand for, and wages of, landless labour should rise. The question is, however, whether middlemen/traders corner most of the increased income, or share it with the producers.
There is also the serious question of whether those most directly affected by the economic crisis are the poorest in society, or even whether they would now fall below the poverty line or not, or whether they are perhaps only the most potentially vocal. In other words, are the structurally poor (or the 'old poor') likely to lose out in the new responses to mitigating the immediate social impact of the crisis. These are questions which require more systematic analysis, which the Social Policy Committee may well wish to commission. The sector-based analysis (labour, education, health) that was carried out by the Brooker Group (1998) in the run up to the signing of the ADB loan, excellent though it is, may now have to be extended with a view to systematically identifying target groups - with a view to later policy formulation to address the concerns of those target groups.
Recommendation: The Social Policy Committee should commission a systematic study, with the objective of identifying potential target groups likely to be affected in the short,medium and long term by the economic crisis. The government would then in a better position to ensure that social policy responds effectively to monitor the impact on those groups and to mitigate the social impact on those groups.
Addressing Some Target Groups
The first order effects of the economic crisis are the easiest to identify, and here we concentrate on these effects. As parental income fall after lay-offs (or employers reduce wages and salaries while attempting to keep workers on the payroll), children of the well-off may shift from private schools to government schools. Among the less well-off, children may drop-out of school either to reduce the burden of household cost to to take up work. We examine the possible responses the government can make to minimise drop-out from school.
A second visible target group consists of women who are both directly and indirectly affected by the fall in employment. It is known that unemployment increased from 499,000 in 1996 to 1,153,000 in 1997, and is expected to reach 4 million in 1998. The informaion available so far suggests that at least as many women have become unemployed as men. The participation of women has been remarkably high in Thailand compared to developing countries. The booming economy enabled this transformation to occur, which was accompanied by massive female migration from rural areas to urban areas - which eroded social cohesion by separating families, but also went hand in hand with a growing commercial sex industry. Unless alternatives to factory employment are found for women,partly to enable them to supplement declining family incomes, there is a risk of young women joining the commercial sex industry - just as there is anecdotal evidence of a growing problem of drug sales and addiction (even among school teachers).
Another group that has been affected directly and almost immediately by the lay-offs and decline in economic activity are the new school-leavers and recent graduates from institutions of tertiary education (the Rajamongol and Rajabhatta institutes, universities). They have little prospect of finding immediate employment, unlike previous years.. Many, if not most, may need to spend a waiting period before finding employment as output and economic activity revives. Thus the new crop of educated unemployed are another fairly obvious target group addressed in this section.
SCHOOL DROP-OUTSThere is a fundamental rationale for focusing on the quality of human capital in the economy. The underlying factors for the current economic crisis lie in the inability of the Thai economy to move up the product cycle ladder when it began to run up against serious competition from neighbouring economies with lower labour costs. A preoccupation with industrial infrastructure rather than human resources left the manufacturing sector with limited capability to employ the technology needed in the transition to higher value-added production. It also created a dependency on inflows of goods - trade accounts for 68 per cent of GDP (compared to 51% in Indonesia and 16% in Japan). A direct result of the increasing import-dependency of the economy as it developed a manufacturing base is that its current account deficit widened from 3.6 per cent of GDP in 1989 to 8.1 per cent of GDP in 1995 and 7.9 per cent in 1996. This deficit created a dependence on short-term capital, destabilising the financial sector and ultimately leaving the economy at the mercy of currency speculators.
The structural problems were highlighted in early 1996, when, with the baht moving with the strengthening dollar, traditional low-cost export industries such as footwear and textiles began to lose market share to a new generation of competitiors from such countries as China, Bangladesh and Vietnam. At the same time, the narrowly based market for skilled labour had experienced tightness, and wage rises had not been commensurate with productivity. Higher technology industries, most of which were highly import-dependent, were unable to fill the gap in the trade deficit. Clearly, if Thailand is to move up the product cycle ladder, its human resource base has to improve.
This analysis of the problem is effectively recognised by the government in its Memorandum of Understanding with the ADB:"It is recognised that ineffective investment in the social sectors and Thailand's weak human resource base have been major contributors to the economic downturn. Thailand's economic competitiveness has declined significantly in recent years as other countries in the region with lower labour costs have begun to open up their economies. In particular, the quality of the labour force and weaknesses in the education system have made it difficult to adopt new technologies and increase productivity. Unless there are significant improvements in the delivery of social services including education, training and health, the country will experience problems in moving to the next stage of economic development."
The problem is that traditionally, until the early 1990s, Thailand has had lower secondary enrolment rates than most other countries in the region - and dropouts will exacerbate this problem. Thus even as late as 1992, Thailand's gross (not net) enrolment ratio at the secondary level was 39 per cent, when Malaysia's was 60, Philippines' 77 and Korea's 91. By 1996 the ratio had risen to 48 in Thailand. Thus even before a drop-out problem worsened, a very large proportion of children of school-going children were not going to school.The problem of drop-outs has to be understood in perspective. From 100 students in P1 in 1992,only 88 stayed in school until P6 in 1997 (Ministry of Finance, et al, 1998). When taken together with the fact that children who live in remote areas, who are handicapped or who migrate frequently are outside the school system altogether, 83 per cent of 6-11 year olds actually reach grade 6 (the end of the primary cycle) (Ministry of Education, 1995). At lower secondary level, from 100 students in M1 in 1995, only 93 stayed until M3 in 1997. Thus those who complete lower secondary education are only 64 per cent of all children in the 12-14 age group. The drop-out rate is very high after the completion of the examination for lower secondary certificate at the end of grade 9.Ministry of Finance, et al (1998) notes that as a result of the economic crisis the number of drop-outs has increased. When comparing the number of students in 1998 with the number in 1997, it can be seen that the total number of students in the school system dropped from 1997 by 3.2 per cent. Normally every year the number rises (eg from 1996 to 1997 the number rose by 1.8 per cent).
In times of economic crisis this phenomena has been observed in other parts of the world as well. In the Central Asian states of the former Soviet Union (FSU), there have been cumulative declines of incomes and output of over 50 per cent between 1991 and 1997, and primary and secondary enrolment rates have declined - even though marginally.(5) In Thailand, primary enrolment is close to universal, while secondary enrolment is much lower than that found in the FSU. Hence Thailand - an economy which is rapidly trying to globalise and compete in the international market for goods embodying a higher level of skill - will suffer more as a result of the increase in drop-outs than perhaps the FSU states. In the 1980s Sub-Saharan Africa suffered a massive decline in income, and with it a significant decline in primary enrolment on average; it fell from 81 per cent to 69 per cent between 1980 and 1990. As in the case of the FSU, this happened as a result of the decline in public expenditures (and worsening of quality of education imparted), a simultaneous increase in private costs, and a reduced likelihood of finding a formal sector job. In other words, a combination of supply and demand side factors thus come together to increase drop-out.
In the Thai case, there is little likelihood yet of the prospects of formal sector jobs increasing in the short run i.e. the next two to three years. The optimistic expectations are for positive economic growth occurring at the start of the new century. Under the circumstances, it is critical that if public expenditures are allowed to drop (especially critical elements within them) it will increase private expenditures, with the inevitable result that we have seen in the FSU and Africa.There are no tuition fees levied at the primary level (grades 1-6) in government schools in Thailand. At the junior secondary level (grades 7-9) tuition fees are levied in government schools at the following rate: science majors - 1200 baht per year; arts majors - 800 baht per year. In not charging fees at the primary level, Thailand is following best practice in international experience. It is like other high-achieving countries in the developing world which managed to universalise primary education early in their development process: Sri Lanka and Kerala state, India, in South Asia; Zimbabwe, Botswana and Mauritius in Sub-Saharan Africa; and Cuba, Costa Rica and Barbados in Latin America and the Caribbean (Mehrotra and Jolly, 1997). In other words, this is a policy that must continue - since we know that direct costs of schooling are negatively correlated with enrolment.
However, in addition to tuition fees, there will always be other indirect costs which parents have to bear. In Thailand, the total annual educational expenses (tuition, stationary, books) and personal expenses (uniforms, food, transportation, special activities) are as follows in government schools (in baht): primary - 1790 and 1789 respectively; lower secondary - 2670 and 2397; higher secondary - 4688 and 2768 (Ministry of Finance, et al, 1998). From a Suan Dusit poll,it was found that 67 per cent of guardians had to pay education commissions, while 64 per cent of the gurdians had to borrow for education from lenders, relatives and friends (Ministry of Finance, et al, 1998). This situation is the opposite of best practice under international experience. There is international experience to suggest that direct and indirect costs be reduced, especially in times of economic crisis,if drop-outs are to be minimised.
In fact many high-achiever countries managed to reduce those indirect costs as well over time. Thus, tuition fees were eliminated in low-income Sri Lanka way back in 1945; a free textbooks scheme and free mid-day meal began operating from the 1950s; free uniforms came in 1991. Mauritius introduced free primary education in the 1950s, and free textbooks at primary level were introduced in 1988. In the case of Thailand it is critical that in the current crisis government education expenditure on the following items is not only maintained, but if possible, increased:
a. Scholarships and loans
b. Free School lunch programme
c. Free Textbooks
d. Free school uniformsThere is a illusion within the government that a significant proportion of the child population is actually receiving these items. According to the Ministry of Education, the allocation criteria for school uniform is that 30 per cent of grade 1-6 students are to receive them: two sets of uniforms per student at 120 baht per set (one trouser/skirt and one shirt); also that about 20 per cent of lower secondary children are supposed to receive them. For textbooks, the budget is supposed to be for a textbook loan programme at the primary level, worth 120 baht ($4) per student per year; and purchase of textbooks for grade 7-9 at 400 baht per student per year.
Unfortunately we found in schools visited in Khonkaen province that financial allocation for textbooks at the primary level is not sufficient to ensure that each child has one textbook. This is a situation comparable to that found in African and South Asian countries. Sharing of textbooks is bound to impede learning. It also prevents children from carrying textbooks home in order to do homework. It has not been possible for textbooks to be issued to children on a rental basis at the commencement of the school year, and then returned to the school at the end of the year for the simple reason that the textbooks are not hard-bound, and in the hands of young children they tend to get damaged. However, availability of textbooks was much better at the junior secondary level in the schools visited.We also found that no children were receiving scholarships from government sources.
We also found that while the allocation for school lunch - meant for pre-primary to grade 6 children - was 5 baht per child, the actual cost of the school lunch was 8 baht. Under the circumstances either a small proportion of the children actually got school lunch, or the lunch, when provided to all, was of poor quality.
A simple way of reducing the burden of school uniforms for parents is to ensure that parents are not required to provide for sports and boy scouts/girl guides uniforms, in addition to the regular school uniform. Actually, the school uniform could itself be completely eliminated altogether. Although the MOE has issued directives to principals to be flexible if children do not wear school uniforms, principals have kept those directives under wraps, in order to prevent children not appearing in different colours - (6)some in uniforms, and some without them. If the MOE was willing to discuss this issue openly with school principals, uniforms could be completely eliminated, thus reducing a major item of parental cost. In Malawi when school fees and school uniforms were eliminated in 1994, there was an overwhelming response from parents, with enrolment increasing sharply almost immediately. In a study of five countries, Mehrotra and Delamonica (1998) argue that after school materials (textbooks, stationary), uniforms can be single largest item of private cost for parents.
The overall message is that scholarships for lower secondary children and loans for upper secondary and tertiary students should be increased; the free school lunch and free textbook programmes need additional resources; and the programme to provide school uniforms could be eliminated (by simply eliminating school uniforms as a requirement)to save governmental expenditure and reduce parental costs in one blow.Recommendation: With these proposals in view, the Ministry of Education and the National Education Commission need to examine thoroughly and systematically the budget trends for these items for the last 3 years with a view to examining actual trends in these critical items, and determining how the allocation to these items could be increased.
Thailand's recurrent education budget is unusual in that relative to other developing countries, and even industrialized countries, a much lower proportion of it goes to wages and salaries: roughly 80 per cent at the primary level , and 70 per cent at the secondary level in 1995 and 1996. These are very low shares by international standards, and there is likely to be scope for some reallocation within the budget at each level to address the biggest priority and challenge faced by the education system after the economic crisis: an intensification of a pre-existing problem of drop-out. Within the Ministry of Education, the Departments of Fine Arts (1%), of Physical Education (1.3%), of Religious Affairs (1.5%), and of the Private Education Commission (2.3%), together account for some 6.1 per cent of the ministry's budget (both capital and recurrent) in 1998 (data provided by the MOE). With some pruning in those budgets as well, there may be scope for reallocating finances towards the critical items which can help reduce out-of-pocket costs for parents sending their children to government schools.Recommendation: The MOE and ONEC need to examine the overall education budget with a view to reallocations in favour of: i. Textbooks, especially for primary pupils; ii. School milk and lunch; and iii. Possibly school uniforms, if the government decides to continue with the current policy of mandatory school uniforms. Loans and Scholarships are already provided for under the ADB loan. However, there may be scope for reducing procedural delays and paper-work relating to applications for scholarships/loans.
We were told that many children drop out after primary and especially after lower secondary mainly because the nearest higher secondary school is too far. There may be scope for addressing this problem through the Social Investment Facility (see discussion below in section II). The Government Savings Bank will use SIF funds to provide grants to communities for infrastructure for schools as well as for equipment. Even in the Extended Opportunity Schools (which had extended primary schools into junior secondary schools through the expansion of classrooms a few years ago) quite often children have to come from villages located 6-7 kilometres away.Recommendation: SIF funds could be extended to increase the number of Extended Opportunity Schools, as well as to add Upper Secondary classes to some of the Lower Secondary schools - provided teacher salary and other costs can be met by the government. With the increase in pupil-teacher ratios envisaged in the ADB loan conditionality, funds could be released to meet these recurrent costs. Meanwhile, SIF funds could be utilised to buy bicycles for the schools, which could be rented out to children coming from the farthest villages to enable them to attend without incurring any transportation costs.
There is more recent international experience to draw upon in order to address the problem of increasing drop-outs from school. The Indonesian government, faced with an even deeper economic crisis, has also taken some important measures to address the looming crisis of drop-outs from the school system. There are three or four components of the Indonesian government's strategy to limit dropouts - many of which the Thai government should adopt . First, the government has given directives on reducing the burden on parents by lifting various school fees and uniform requirements. Second, to address the problem 40 per cent of 173,000 primary schools and 40 per cent of the 31,000 junior secondary schools will receive special assistance funds (SAF). Primary schools will receive Rp 2 million and junior secondary schools will receive Rp 4 million in the form of block grants directly to the school - withdrawals of funds will be through the nearest BRI bank - ensuring both speed as well as ease of access. Third, the government plans to further expand existing scholarship programmes, initiated by national, local and community organisations, primarily aimed at poor families in poor areas. About 16 per cent of 9.7 million junior secondary students will receive scholarships, particularly girls. The junior secondary student will receive Rp 240,000 per annum, using a bank redeemable voucher for money withdrawal through their nearest BRI bank. A savings account will be opened in their name and they will be able to withdraw Rp 60,000 each time. To ensure proper management, a Scholarship Manual and a SAF Manual is being produced, so that the funds are properly channeled. Finally, the government is conducting a large scale social mobilization campaign aimed at parents and students to encourage them not to drop out. The mass media (TV, Radio, and the press) is supposed to play a role, and community leaders and relatives and local government officials will put pressure on parents and students, and help track dropouts or potential dropouts.Recommendation: The Thai government needs to examine in detail the nature of the Indonesian interventions, including the social mobilization campaign, to determine their replicability in the Thai context.
A series of other measures could be considered:
- Decentralization of education, administering with school boards and involving parents/guardians in monitoring of learning and faltering of their children is one way of early detection of expected drop-outs and possible intervention.
- Experiential learning and life skills education helps to involve children in the process of education and thus helps to improve the teaching environment and reduce drop-out.
- Curriculum reform to make it relevant to local context is another input to improve quality and reduce drop-out.
- Effectively monitor all children in the village (registered and not registered). BMN data only takes care of children registered in the village. Those children who are born at other places and not registered in the village where they are living are not monitored for education and health purposes.
- Effectively link non-formal education with formal education so that children enrolled in non-formal system (after dropping out of the formal system) can enter the formal system (as Bangladesh has succeeded in doing in the BRAC system).
- Setting up a proper system for tracking of children who drop-out during the year but are said to 'migrate'.
- Involve NGOs to identify children who are in difficult circumstances and did not enrol as they could not afford education.
- Improve child care to enable girls, who would otherwise drop out to help take care of younger siblings, to continue education.
- Eliminate the 6th and 9th grade examinations to prevent drop-outs of those children dropping out after repeating, and introduce continuous assessment.
In the long run, structural issues will have to be addressed. There are serious issues of quality in the Thai school system - explained by minimal teacher training and low motivation (exemplified by moonlighting, in view of a high degree of indebtedness) among teachers. Low quality of teaching plus the high opportunity cost of continuing in education (since wages have risen) underlie the low enrolment rate in Thailand compared to other countries in the region. Improving teacher training and learning is a priority in Thailand (ONEC, 1998; Chulavatnatol, 1997). De-linking teacher salaries from civil service scales may allow incentives based on teacher performance to be built into the remuneration system for teachers - as Singapore and Japan have succeeded in doing (Mehrotra and Buckland, 1998). In the medium to long run, it will be impossible to minimise the pre-existing problem of drop-outs - now exacerbated by the economic crisis - without addressing the poor quality of schooling.
WOMEN AS WORKERS AND ENTREPRENEURS
A most remarkable fact about the Thai labour force, compared to most other developing countries is its feminization. Thai women represent 45 per cent of the active labour force and 68 per cent of all women over 15 are economically active - perhaps one of the highest labour force participation rates outside the former socialist countries. There are historical factors underlying such high labour force participation in modern Thailand. The peasantry, especially those in the North and North-east, at the social base or the village level followed a matrilocal and bilateral kinship system, and women participated equally with men in economic activities.In modern times, young women have been recruited from the countryside into factory work. Studies have shown that women are preferred in factories as they are more easily subjected to control, are often less likely to organize and can be paid lower wages.When it is stated that the Thai economic miracle in the last two decades has been wrought by women, it is no exaggeration. The economic miracle consisted of rapid economic growth which was export-led. Exports have accounted for a third to two-fifth of output in Thailand.Women account for 80 per cent of the total employment in ten of the largest export commodities: canned and frozen fish products, textiles, jewellry, cotton, fabric, footwear, electrical parts, leather goods, frozen goods, and knitwear (Phongpaichit and Baker, 1995). The ten largest exports generated around $37 billion in 1994, a sum as large as the government budget (Thailand in Figures, 1996). The average male worker in manufacturing in the Bangkok area was $250 per month and for women $168 a month (Bell, 1997). (7) Clearly the contribution of women to the economic miracle has been disproportionate.
The evidence now is that in the recession as many women have lost their jobs as men. Some female-dominated sectors have been laying-off workers in large numbers (eg. Thai Mellon in textiles). The financial sector, most directly and seriously affected by the crisis, is heavily dominated by women employees. The big issue, given the relative gender-blindness of many governments, is whether women will receive their due share of the social package that has been put together by the government to mitigate the social impact of the economic crisis. Even more worrying is the prospect of school-leavers and drop-outs joining the already huge commercial sex industry.
In this context it is important to note that 11.2 million Thai women do 'homework' through a putting out system with very low piece wages and no legal protection. Much homework, though not all, is linked to the export industries which have forged the economic miracle. One study has shown that seven out of ten of the leading export industries have linkages with the putting out system in this informal economy (Narumol Nirathorn, 1997).
It is well known that Thai industry tends to be dominated by either large firms or small ones - there is almost a problem of the 'missing middle'. The Ministry of Industry estimates that 98 per cent of the country's business establishments fall under the category of small and medium enterprises.(8)The large enterprises are both domestic as well as foreign, or joint ventures (mainly with Japanese firms). Small firms have rather limited access to capital - it is the large firms mainly that borrowed heavily from banks during the boom period, and were heavily affected by the financial crisis. By and large, there is much scope for government policy to respond to the needs of small firms in general. In particular, there is scope for a more active government response to the needs of women workers being thrown out of work in factory employment, to enable them to set up as micro-entrepreneurs, especially in rural areas and municipal areas other than Bangkok.
In addition to the economic rationale, there is an important social reason why support for micro-enterprises, especially for women, will be particularly welcome to communities. Since the early 1980s women have been migrating in very large numbers from rural to urban areas, especially to Bangkok in search of work, given the the limited education and job opportunities in rural areas. As early as 1982 Phongpaichit noted the 'feminization' trend in the migration stream during 1976-78. That trend of women outnumbering men in migration continued until the early 1990s. This trend is perfectly consistent with the extremely high share of women employees in the fast-growing export industries which led to the economic miracle. During 1976 to 1988 all regions saw more women than men heading toward Bangkok, and the largest proportion was from the poorest region, the North-east (Darunee and Pandey, 1997). This massive exodus indeed lead to improved lives for those remaining behind, as urban-rural remittances of income increased, enabling standards of living in rural areas to rise. This exodus, however, came at the cost of families being split apart, and a loss of social cohesion.
Support for rural industry, especially for small and micro-enterprises run by women, would now allow that social cohesion to return, while allowing incomes to be maintained during a time when formal sector employment is unlikely to rise in the short run. In this sense, the economic crisis is a huge opportunity.
The Eighth National Development Plan (1997-2001) places a strong emphasis on people-centred development, institutional and economic decentralization, and local participation (NESDB, 1997). One of its goals is to enhance human resource development through education and training, encouraging initiative, creativity, entrepreneurial attitudes, and building on the strengths of rural communities. Clearly support for micro-enterprises owned and run by women should fall squarely within the priorities outlined by Eighth Plan - a priority made more urgent by the fall in formal employment opportunities for women during the economic crisis.
The Department of Industrial Promotion (DIP) in the Ministry of Industry is the lead agency for SME promotion and development. DIP provides a range of programmes and services (training, information, financial, consulting and research) that are implemented through its six Bangkok based bureaus and eleven Regional Industrial Promotion Centres. The economic crisis has led to the formulation by DIP of a National Unemployment Policy Plan (December 1997) for job creation and promotion of industries in rural areas.(9)
Micro and small enterprises (MSEs), especialy those run by women, are usually in the informal sector, with no legal and social protection (UNIFEM, 1998), and need all the support that they can get. MSEs are generally characterized by low capitalization and technology, poor access to markets, credit, and low levels of managerial and business skills. Women MSEs in particular are generally low risk, with few assets, high investments of time and energy, but poor financial returns. They vary in size but are generally at the lower end of the small business spectrum. Clearly there is a strong case for much more attention at the level of the Cabinet or Council of Ministers to addressing these weaknesses of MSEs run by women.
Discussions in the DIP indicated that after the economic crisis the trend towards sub-contracting are likely to increase. Thus in the garments industry a switch from employment in factories to sub-contracting to home-based work is already occurring. In addition to garments, the shoe industry is also looking for increased opportunities for sub-contracting.This is part of the attempt by large enterprises at reducing costs. Wages in a factory situation have to be paid at the minimum wage rate of 130 baht per day; there is no such limitation when work is sub-contracted to the home. According to the DIP, if big business sub-contracts through DIP, it will help big business, as DIP provides a rebate on loans from commercial banks. There may well be other advantages: there is a high turnover of labour in the Bangkok area, but labour trained under the auspices of DIP for factories in Khonkaen are still working there.
The problem with a programme for supporting micro-enterprises is that while conditions of work can be monitored in the formal sector, labour inspection becomes a much more difficult task when it comes to small and micro-enterprises. In addition to facing all the usual constraints of small enterprises, women's micro-enterprises are often an extension of women's domestic activities in which production takes place at home. This implies a lack of legal and social protection which makes women MSEs especially vulnerable in the market.
Thus, while we are here promoting the cause of women's MSEs, it is critical to note that the state has a role and a responsibility to ensure that sub-contracting to home-based work - which as we have seen is likely to increase in the wake of the economic crisis - does not lead to conditions of work that are much worse than those prevailing in factories (in which many of these women might have been earlier employed).
It should be particularly noted that in June 1996 a Convention on protecting Home-Based Workers was signed at the ILO in Geneva, after a long and arduous negotiation process between employers, governments and trade unions. Given the very large number (11.2 million women) of home-based workers in Thailand already, and the prospect of those numbers increasing in the near future, the Thai government would need to play an important role in line with the ILO Convention to protect the work conditions of such workers.
Equally importantly, it has been suggested that while government programmes do not deliberately discriminate against women, they are often not targeted to respond to women's needs, emanating from their multiple roles and their disadvantaged situation, they indirectly exclude women entrepreneurs. Strategies are needed to address gender constraints in DIP programmes. Finally, it is often not credit that is a problem for women entrepreneurs, but design and marketing skills - for which DIP needs to facilitate by bringing in the private sector to provide those services to women's groups.
Recommendation: In order to shore up family incomes and prevent unemployed women from moving into undesirable activities, the government needs to support more strongly than before women's micro-enterprises. The Council of Ministers will need to ask the Department of Industrial Promotion (DIP) to address the gender constraints in DIP programmes. To help develop the design and marketing skills of women entrepreneurs, DIP needs to facilitate by bringing in the private sector to train women. As big business is likely to move increasingly into sub-contracting to home-based production in many sectors in order to reduce its own costs, the government needs to examine how legal and social protection for home-based production can be improved in accordance with the ILO Convention on Home-based Workers.
UNEMPLOYED GRADUATES
One target group affected almost immediately by the fall in employment opportunities due to the economic crisis are those youth graduating from general secondary and vocational schools, as well as those coming out of the Rajamongol Institutes and Rajabhatt Institutes, apart from the universities. With a rapidly growing economy in the past decade placement for these graduates was not a problem, regardless of the quality of their training. That is not the case anymore, starting the new academic year 1998. Unemployment figures already appear to have exceeded a total of 2.3 million, up from 1.5 million in 1997. This includes 800,000 new entrants to the labour force.The Social Investment Project (Channel 1, as distinct from the SIF, which is Channel II in the SIP) i.e. funds allocated to the Ministries of the government is intended to address this issue of graduate unemployment through various schemes of public works. Thus Channel I funds are to be allocated to the Bangkok Metropolitan Authority ($14.7 million) for purposes of school renovation, sidewalks, and occupational and vocational training; to the Ministry of Health ($30.4 million) for AIDS care and other schemes; to the Ministry of Industry ($67 million) for rural industrial development, construction of local weirs, foreground dredging, and village roads; and to the Ministry of Labour ($34 million)for training disadvantaged women, skills development and local job training. There may be scope for marrying the availability of these funds and the demand for work from unemployed youths i.e. using these funds to create job opportunities for the young graduates.
There is a proposal that unemployed graduates could be employed as volunteers - while being paid a salary - for participating in such work, financing for which is already available through currently applicable schemes and now through the SIP Channel 1 funds. The scheme would work as follows:(10) Graduates who have taken a loan to complete their studies would be put to work on environmental protection or public works. Assuming they are worth 9000 baht a month, the state pays them 3000 baht a month, while 6000 baht are deducted from their debt. In the process they become good volunteers while paying off their debt. For another group not in debt, they can work for 3000 baht a month, while the remainder of 6000 baht is to be paid after a period of 3-5 years. In one alternative the 6000 baht is paid into a savings bank account every month, which assumes that the authority making the payment has no current liquidity problem. An alternative would be to offer a bond redeemable in 5 years. The government's Bank for Agriculture and Agricultural Cooperatives (BAAC) has apparently already started a similar scheme.
Given that unemployed graduates may not have many alternatives, such a scheme is not necessarily doomed to failure, provided the activities offered are commensurate with the level of years spent by the youth in education. For those from rural areas with only a general secondary or secondary vocational training, public works involving manual labour may be acceptable. However, for university trained youth coming from urban areas the work offered would have to be responsive to their background and expectations.
The international experience with such schemes is limited to volunteers who were enlisted in mass education campaigns, for instance, in Cuba in the 1960s and in Kerala state, India, in the 1980s and 1990s, to work for the spread of literacy. In fact, given the fact that the Thai Ministry of Education has an excellent and very successful programme of Non-Formal Education which addresses the learning needs of adults already in the labour force, there may be some scope for utilizing the services of university graduates in the NFE programme of the Education ministry.
Recommendation: To give unemployed school-leavers and graduates some form of employment a large-scale volunteer programme needs to be started. SIP funds could be utilised for the purpose. A large-scale social mobilisation may have to precede such a volunteer programme.
II. THE SOCIAL INVESTMENT FACILITY: a review in the light of international experience
Since the mid-1980s there have emerged a range of safety nets of the social funds type. Three kinds of social funds have emerged. The Emergency Social Funds are intended to disburse funds from governments to public, private, and voluntary implementing agencies in a rapid manner so as to meet social protection objectives. Unlike Emergency Funds, Social Investment Funds are oriented more towards intermediate and long-range goals of poverty allevation than towards short-term compensation for short-run social strains. Like emergency social funds, they are typically multi-sectoral, largely demand-driven, and administered by autonomous or semi-autonomous bodies specifically created for this purpose. Social Action Programmes are less well-defined than either ESFs or SIFs. They can be short, medium or long term in their intended duration and in their goals. They are usually not predominantly demand-driven, although they sometimes incorporate a demand-driven component. They tend to a greater extent to implement pre-designed social action plans. All three are 'informal' rather than 'formal' in character in the sense that the social protection they provide is through the impact of the specific projects they choose to fund, and there is typically no legally enforceable right to be a beneficiary of such a project.Characteristics of the Thai SIF. The short-term objective of the SIF is to fund activities to increase employment in response to the current economic crisis characterised by increasing unemployment. The long-term development objective is to provide a stimulus and support to Thailand's civil society movement. Adopting a demand-driven approach, it is designed to be a mechanism through which a wide range of community groups can access resources for projects which they have designed. It is interesting that the communities must not request credit from the SIF to fund income-generating activities. Instead the SIF encourages applicants to borrow from commercial institutions. However, communities can request support from SIF to fund activities which could prepare the communities to request and receive loans from commercial institutions. The project menu is divided into 4 sectors:community welfare and safety; community economy; natural resource preservation, culture and tourism promotion; and community capacity building. For example, for primary schools, the building of infrastructure (eg latrines, wells, building renovations), services (training fees, food and lodging expenses) and equipment (eg. library furniture and supplies, sports equipment, bicycles) would be covered.
In order to reach people affected by the economic crisis, as well as the poor, the management unit of SIF will use two kinds of targeting as its criteria, viz. affected area mapping and poverty mapping. The targeted areas where impacts are most severe have been highlighted by the National Economic and Social Development Board. There are about 248 districts with large populations of migrant unemployed labourers and will thus face a large impact. The demand-driven approach should be balanced, according to the Thai SIF, with the consideration of management capacity. Therefore, a poverty scale that ranks the districts on the basis of social and economic indicators will be used for this purpose with high consideration to the project-designing capacities of these areas.
Applications to the SIF may be sponsored by an entity other than the beneficiary community itself. Sponsors play the role of facilitator, assisting applicants which lack the capacity and resources to prepare or design the project, and would be responsible for procuring the works or equipment for project implementation. Sponsors may include line agencies that work with communities, NGOs, businesses, networks of community organizations and academic institutions.
The SIF has been housed under the Government Savings Bank (GSB), which is mandated to promote savings among the people (through its 557 branches) and provide credit services to both retail and wholesale customers. At the local level the communities will be encouraged to submit project proposals through a District Civic Forum, composed of various sectors and organisations located at the district level. Under the NESDB's Eighth Plan the government has stipulated that DCFs be created, independently run and organized by people within their communities. For the first time in the history of Thailand such community vetting of projects will be adopted.
The community is supposed to contribute 10 per cent of the project funds. However, this contribution need not be in cash, and could be contributed in kind or in the form of labour.
Review of Thai SIF in the light of international experience
The Thai SIF is multi-sectoral and demand-driven. In fact the international experience has been that demand-driven Funds have been usually multi-sectoral. Multi-sectoral safety nets may have the advantages that they enable, if well targeted and designed, an integrated approach to social protection and reduction of poverty, as there may exist complementarities of project components which generate positive synergies. However, a disadvantage with multi-sectoral Funds is that they may require greater expertise and administrative capacity on the part of the administrators (in the Thai case the SIF Executive Committee, appointed by the Board of the Government Savings Bank, set up to oversee management and approve fund allocations), who must be prepared to evaluate or design a variety of schemes (Killick, 1995). Single-sector funds, on the other hand, can be administered by a more specialized cadre of technically skilled administrators, which may enhance the quality and efficiency of project design and execution.Recommmendation:It may be advisable for the Executive Committee in the case of the Thai SIF to include sectoral specialists on a permanent or ad hoc basis (whichever the government deems fit) in the approval process for projects to address the concerns arising from the multisectorality of the Fund.
Multi-sectoral programmes (like the Thai SIF) may also be much more prone to becoming diffuse and unmanageable. The lack of clear and simple design in such programmes may create difficulties in monitoring and evaluation. In Thailand although a Monitoring and Evaluation Division is to be created within the Project Implementing Unit (PIU) at the Government Savings Bank, the multi-sectorality of the SIF will test to the limit the M&E skills of that division.
The Thai SIF, is as we seen, a demand-driven Fund. There are many examples of such demand-driven schemes: Bolivia's Emergency Social Fund, Zimbabwe's Social Development Fund, Honduras' Social Investment Fund, and Chile's FOSIS.(11) Some risks inherent in demand-driven programmes should be pointed out. There are many examples of demand-driven schemes having difficulty in reaching the poor because of the lower capacity of the poor to formulate and present projects. Thus in Nicaragua, a predominance of demand-driven projects were located in Managua, the capital, which has less poverty than rural areas (Beneria and Mendoza, 1994).It was observed that fewer project proposals came from poor communities under Bolivia's ESF (Graham, 1996). The ESF tried to correct for this by favouring poorer areas in project selection - something that the Thai SIF also attempts to do. Also, the Thai SIF (like many other Funds in other countries) has tried to address this issue by enabling sponsors (eg. NGOs, etc) to prepare projects on behalf of communities.
Recommendation: The Monitoring and Evaluation Division within the Project Implementation Unit of the SIF in Thailand may have to monitor the income-group composition of applicants for the funds actually allocated. If their evaluations reveal that low-income groups or remote communities or ethnic minorities are not applying for project funds, the Executive Committee of the SIF could take the decision to be proactive in formulating projects intended to assist them.
Another risk in demand-driven projects to guard against is that communities asked from social funds what they thought they could receive from them and not necessarily what they felt they most needed. In the demand-driven component of Ghana's PAMSCAD, communities opted for two predominant project forms: junior secondary school buildings, and VIP toilets, which were chosen by community leaders over projects which appeared to be greater community priorities (reliable and safe water supply, and primary school buildings) (Gayi, 1995). A demand-driven Fund can often prove to be mirage as, to ease the administrative burden of selection, project managers often only select projects which conform to a number of pre-determined project types. In Honduras, for instance, the poor in reality have to comply to a pre-established menu of projects if they wish to benefit from ESIF funds (Beneria and Mendoza, 1994). This appears to be a rather common problem which undermines their claim to being truly demand-driven.
However, these remarks are meant to point out the pitfalls often associated with demand-driven safety nets, which managers ought to be aware of, rather than arguments against them. Thus supply-driven schemes, which are often employment generation projects, have been observed to favour the construction of economic infrastructure such as rural roads, whereas preferred outputs in demand-driven schemes tended to be biased more towards social infrastructure and 'small-scale' projects. The former have tended to benefit the non-poor, whereas the latter have tended to benefit the poor. For example, in Chile's employment generation schemes, works projects included such items as an air force aerodrome and an access road from a wealthy area to an airport (Kingsbury, 1994). It should be noted, of course, that employment generation is an important need in the current economic crisis in Thailand, which as we know, is only likely to deepen over the next couple of years. This is particularly the case for workers who are returning from urban areas, where large construction projects have suddenly ground to a halt. Often these construction workers had sold all before migrating from rural to urban areas, so that now when they return they do not all have land to work upon. For them, finding employment is the need of the hour.
Another issue in respect of the Thai SIF is whether it will outrun its course of life of the 3-year loan under which it has been established i.e. the issue of its sustainability. In their early years, these kind of safety nets were 'not intended by their designers to solve the problems of poverty and unemployment - it was expected that adjustment would address these problems'. As it became evident that adjustment alone would not solve the 'structural' problems, however, the mandate of safety nets have increasingly been extended to address these (Zuckerman, 1989). Thus erstwhile temporary funds have become permanent.There are a number of issues in relation to sustainability. The first relates to the recurrent costs related to the works created as a result of SIF projects. In other countries with SIFs, works produced by employment generation programmes (eg. the Maharashtra Employment Generation Scheme, India) generated assets without making adequate provisions for their on-going maintenance. The Thai SIF will allocate funds, as we noted earlier, for infrastructure, equipment and social services. Infrastructure includes, both building and rehabilitating such items as drainage system, piped water connection, latrines, sewerage system, hand dug wells; like infrastructure, equipment too involves recurrent and needs maintenance. Schemes in other countries have taken various approaches to deal with this problem. Madagascar's SIF seeks to reduce its recurrent cost impact by favouring infrastructure rehabilitation over new infrastructure, and by constructing new infrastructure 'only when community groups have demonstrated their willingness to organize maintenance' (World Bank, Madagascar Staff Appraisal Report, Social Fund Project II, cited in Reddy, 1998).
Other approaches have also been adopted to deal with the recurrent costs problem. Malawi's MASAF proposal, anticipating significant recurrent cost implications, suggest an up-front commitment for appropriate budgetary support in respect of supplies and personnel. Sri Lanka's Janasaviya Trust Fund finances recurrent costs of projects, but only for a limited period. It finances 100 per cent of maintenance costs in the first year, 60 per cent in the second year, and only 40 per cent in the third and final year. The Fund also establishes maintenance contracts with community groups which undertake to repair and maintain Fund financed irrigation systems (Grinspun, 1995). Guatemala's SIF collaborates with municipalities in identifying projects as they are held responsible for post-project maintenance. In Honduras, the Emergency Social Fund attempted to select projects with low recurrent costs, give priority to rehabilitation of existing infrastructure over new construction, ensure that central ministries include recurrent costs for new projects in their budgets prior to these being undertaken, undertake projects on a cost-sharing basis with NGOs, and otherwise employ user financing (especially in water projects) (UNCTAD, 1994).
Recommendation: The recurrent costs of projects under the SIF have to be taken into account by the Executive Committee while approving projects.
One issue in sustainability, as we have seen above, is that of recurrent costs of projects started; another issue is the sustainability of the Fund itself and therefore its activities. Many recent safety nets, like the Thai SIF, have relied heavily upon external funding. A survey of recent safety nets found that in Africa, the proportion of external funding varied from 78 to 100 per cent (averaging 88 per cent), and in Latin America (excluding Mexico) from 43 to 95 per cent (averaging 72 per cent), with the remaining costs met primarily by government. Beneficiary financing ranged from zero to 9 per cent in Africa and from zero to 24 per cent in Latin America in Latin America (UNCTAD, 1994). So far there is no government funding involved in the Thai SIF (the World Bank loan providing all the funding), with the beneficiary contribution planned to be 10 per cent.
Broadly speaking, temporary funds have relied more heavily on external funding than those intended to be semi-permanent in nature (Wurgaft, 1992). Where longer-standing funds have been nationally financed, they have sometimes relied upon measures such as earmarked taxes to ensure a sustainable basis for financing, suggesting that even where such safety nets are nationally financed, they can benefit from a stable and reliable basis of financing in order to be sustained. Thus, Costa Rica's FODESAF was institutionalised from its inception through an act of parliament and receives by law five per cent of the wage bill in both private and public sectors and 20 per cent of transactions on most consumer goods (ILO, 1992). A recently started Labour Fund in Poland intended to assist the unemployed is similarly partially financed by a levy on enterprise payrolls (Bernstein and Boughton, 1993). The wide revenue sources of the more longstanding of these schemes may well have contributed to their resilience (both wage and sales taxes in the case of FODESAF, and special taxes on irrigated agricultural land, urban land, and land reveneues (Stewart and van der Hoeven, 1995).
That more permanent funds tend to be to a greater extent nationally financed than temporary funds does not mean that national financing from the outset is associated with more permanent or sustained programmes. Rather, as Wurgaft (1992) argues, 'temporary Funds financed with external resources may be seen as a way of gaining experience and pointing the way for their continuation as permanent Funds which, financed essentially by domestic resources, would gradually broaden their scope and involve the target groups even more deeply'.
Recommendation:There is a case for making the Thai SIF permanent, given the need in the Thai economy for much greater decentralisation and also the need for institutionalising the role of civil society. Moreover, with so much of Thailand's development in the past having been concentrated in the area around Bangkok, the need for greater regional development buttresses the case for a permanent SIF which would give continued impetus to forces of regional development.
The Thai SIF gives a considerable role to community participation and NGO involvement. It has been argued that enabling participation by local organizations is the surest way to ensure thta resources are used effectively, equitably and in keeping with local needs. Graham (1994) argues that strategies that rely on the participation of beneficiearies and the organizations that represent them have the effect of strengthening the capacity of these instititutions, thus giving previously marginalised groups a more effective political voice and making longer-term contributions to poverty reduction. Where such funds do depend upon beneficiaries' participation, it has been argued, such activity may fail to reach the poor. It has been suggested, for example, that many of the flaws of PAMSCAD in Ghana - 'centralised decision-making, high overhead costs, slow implementation of projects, and not reaching the poorest' - could have been remedied by inviting significant NGO input (UNCTAD, 1994). Participation, of course, can also be rather empty. Vivian (1995) finds that in a number of safety nets, participation was largely of a 'ex-post' nature (i.e. consisting in service use rather than design, implementation or supervision) or consisted only of user financing in the form of contributions of cash, labour, or kind.
Sometimes community particpation has been seen as synonymous with the involvement in projects of local NGOs (Ribe and Carvalho, 1990). NGOs are in principle the representatives of communities, but they need not be. Often NGOs represent sectional or even external interests from those of the communities in which they operate. One of the few recent safety nets to make this distinction is Malawi's Social Action Fund, which specifies that "NGOs will be delegates of the community. Communities will have the freedom to choose whichever NGOs they wish to work with", and goes on to specify criteria for validating NGOs as community representatives (MASAF Working Paper, 1995).
Another concern is that NGOs of dubious grassroots credentials proliferate as a result of the availability of funds. A concerted approach to this issue is provided by the proposed guidelines of the Malawi SAF, which require that executing NGOs be properly registered with the government, have requisitie technical and organizational skills with adequate experience in the appropriate field, and have credibility with the beneficary group it intends to work with (MASAF Working Paper, 1995).
Recommendation: Both the Executive Committee and the Monitoring and Evaluation Division in the Thai SIF should ensure that communities have genuinely participated in the District Civic Forums, and that NGOs 'representing' communities are not front organisations arising to gain access to resources.
Graham (1996) argues that women should benefit from the move towards demand-driven safety nets, as women tend to have greater political voice in NGOs and community organizations than in other social institutions.Given that the Thai economic miracle has been built by women, it remains a question whether the Thai SIF takes the gender dimension adequately into account in its design. There is some mention in the 'target groups justification' section of the document about supporting networks of women's groups. It is possible that in practice the Thai SIF may reflect the traditional conceptions of the gender division of labour in the pattern of beneficiaries. Thus it has been argued that safety nets target social assistance projects to women while reserving employment and income generation for men (Grinspun, 1995). Clearly such a tendency willneed to be guarded against.Recommendation: Women, like the poor and the otherwise marginalised, often suffer from the usual problems in demand-driven schemes of organizing and articulating themselves as effectively as the more privileged. Such a tendency would need to be guarded against by the Executive Committee.
References
Asian Development Bank, Memorandum of Understanding between the Ministry of Finance, Kingdom of Thailand, and the Asian Development Bank, on the Proposed Social Sector Program Loan, 16 January 1998.Bell, Peter, Thailand's Economic Miracle: Built on the backs of women, in Virada Somswasdi and Sally Theobald (eds)
Beneria, L., and B. Mendoza, "structural adjustment and social emergency funds: the cases of Honduras, Mexico and Nicaragua", The European Journal of Development Research, 7 (1), 1995.
Brooker Group Ltd. Impact of Thailand's Economic Crisis on the Social Sector, report prepared for the NESDB, March 13, 1998.
Darunee Tantiwiramanond and Shashi Pandey, "New opportunities or new inequalities: Development issues and women's lives in Thailand' in Virada and Theobald.
Fortune Indonesia, National Enrolment Campaign 1998-1999. Keep the children in school and maintain the values of Indonesian human resources, Draft Concept Paper for the Government of Indonesia, World Bank, Asian Development Bank, and UNICEF, June 1998.
Government of Thailand, The Eighth National Economic and Social Development Plan (1997-2001), Bangkok, 1997.
Graham, C., Gender issues in poverty alleviation: recent experiences with demand-based programmes in Latin America, Africa and Eastern Europe, Issues in Development, Discussion Paper No. 11, 1996.
Grinspun, A., "Social funds: fertile ground for south-south cooperation," Cooperation South, May (1), 1995.
Kakwani, Nanak, A case-study of Thailand, 1975-92, in Everyone's Miracle? Revisiting Poverty and Inequality in East Aisa, 1996.
Killick, Tony, "Structural adjustment and poverty alleviation: an interpretative survey", Development and Change, 26 (2), 1995.
Mechai Viravaidya, Social impact of the economic crisis and response from civil society organizations, speech at a consultative meeting organized by the Royal Thai government and UNDP, 5 March 1998.
Mehrotra, Santosh, and Richard Jolly, Development with a Human Face. Experiences in Social Achievement and Economic Growth, Clarendon Press, Oxford, 1997.
Ministry of Education, 1995 Education Statistics in Brief, Bangkok 1995.
Ministry of Finance, Ministry of Education, et al, Project to help students affected by the crisis, documents for the Cabinet Meeting, June 1998.
Narumol Nirathorn, "Plight of women homeworkers", in Virada and Theobald(eds)
NESDB, Incators of Well-being and Policy Analysis, a newsletter of the NESDB Development Evaluation Division, vol 2, no. 3, May 1998.
Phongpaichit, Pasuk and Chris Baker, Thailand: Economy and Politics, Kuala Lumpur, Oxford University Press, 1995.
Reddy, Sanjay, "Social Funds in developing countries: recent experiences and lessons" UNICEF Staff Working Papers, EPP-EVL-98-002, 1998.
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Stewart,F. and Rolph van der Hoeven, Social development during periods of structural adjustment in Latin America, Occasional Paper 18, Project on Structural Adjustment, ILO, Geneva, 1994.
The Royal Thai Government Social Investment Project, Social Investment Facility, Working Paper, 12 February 1998.
UNCTAD Secretariat, Standing Committee on Poverty Alleviation, Geneva, 1994.
Virada Somswasdi and Sally Theobald, Women, Gender Relations and Development in Thai Society, Women's Studies Centre, Chiang Mai University, 1997.
Wivian, J., Social safety nets and adjustment in developing countries, Occasional Paper no. 1, UNRISD, Geneva, 1994.
Wurgaft, J., "Social investment funds and economic restructuring in Latin America', International Labour Review, 131 (1), 1992.
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Footnotes
1. Thanks are due to Nadia Mahmud, for valuable discussions and inputs on the education sector issues, and excellent logistical support during the mission. Thanks are also due to Khun Thammarak, Chief Economic Planning Advisor, NESDB, The Royal Thai Government, for the support needed to accomplish the objectives of the mission. The mission (July 24 - 7 August, 1998) was carried out at the request of UNDP and UNICEF for the government's Social Policy Committee.
2. The number of poor in the urban areas will rise disproportionately since the immediate adverse impact of the economic crisis has been felt among the urban unemployed, rather than among the rural poor.
3. Another respect in which Thailand is likely to differ from most of Latin America is that the downturn is not anticipated to last as long as it actually did in the latter - more than a decade. Although recent forecasts by the IMF project a decline longer than originally expected, it is still not expected to last longer than 2-3 years (Ref).
4. The SIF is only one component of the Thai government's Social Investment Plan. The World Bank is the biggest contributor to the 21.6 billion baht SIP, providing 13.5 billion baht. The OECF will lend 5.7 billion baht. Apart from that, 2.3 billion baht will come from project participants. About 44 million baht grant will come from UNDP to support progject management and monitoring and evaluation. The SIP budget is divided in two parts: one is an allocation for government and state enterprise projects; the other is shared by the Social Investment Fund (SIF) and the Regional Urban Development fund (RUDF). The first category, worth 13.2 billion baht, is in the form of grants to government agencies' crisis-response programmes. The second category, worth 6 billion baht, is split between the SIF and the RUDF. SIF monies will be given out in the form of grants while RUDF funds (1.2 billion baht) will take the form of loans, earmarked for municipalities in 14 targeted provinces that were singled out in the Eighth Plan as strategic areas withm a potentially high rate of growth. This paper focuses mainly on the SIF.
5. The revenue base of the FSU state in the wake of the transition to a market economy was so severely eroded that public expenditure shrank by half as a per cent of GDP, sharply reducing their room for manouvre. Thailand has suffered no such calamity yet, and is unlikely to in the near future, and in fact, unlike the FSU states, has attempted to justifiably protect health and education expenditures in the 1998 budget despite the decline in output and incomes. This was helped by the fact that Thailand had a budget surplus before the economic crisis, and has under the Fifth Letter of Intent with the IMF, been permitted a budget deficit to GDP ratio of upto 3 per cent (2% for public enterprise investments and 1.5% for the government).
6. We sought this data from the MOE but they were unable to provide it - suggesting that detailed analysis of these categories has not been carried out recently.
7. In addition to the export earnings from manufacturing contributed by female labour, tourism is one of the largest foreign exchange earners (5.5 per cent of GDP), or 16 per cent of total exports. The commercial sex industry in Thailand is one of the largest in the world: of the 7 million tourists in 1996, 65 per cent were single males on vacation.
8. According to the Ministry of Industry, small-scale industries have a ceiling of 50 employees and invested capital of not more than million baht. Medium scale enterprises employ 50-200 workers and have an invested capital of over 10-100 million baht.
9. Its programmes include: 1. Promotion of Rural Industrial Development Project (PRID); 2. Sub-contracting promotion activities in rural areas; 3. Industrial Village Project; and 4. Regional Entrepreneurship Development Project.
10. The proposal for a volunteer force came from Khun Meechai Viravaidya, Chairperson of the Population and Development Association, Thailand, at a consultative meeting on the social impact of the economic crisis organized by the Royal Thai Government and UNDP, 5 March 1998, Bangkok.
11. In recent years supply-driven Social Funds have been increasingly giving way to demand-driven ones. Supply-driven schemes include the Maharashtra Employment Generation Scheme in India, Chile's Pinochet-era employment schemes (PEM and POJH), and Costa Rica's FODESAF. Zambia's PUSH programme and Ghana's PAMSCAD have both demand and supply-driven features (Stewart and van der Geest, 1994).
Dated: 15May1999
