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Professor Peter G. Warr
Thailandís new Constitution promulgated in 1997 and the Decentralization Act which followed it, specify an ambitious program of decentralization of government expenditures. The share of total government expenditures outlayed by local government authorities is scheduled to increase from around 8 per cent in 2000 to 35 per cent in 2006. The program involves both transfers of revenue from the central government to the local level and the transfer of some taxing powers to the local level as well. The declared purpose of the decentralization is to increase the extent to which local communities have control over the way revenues are appropriated and thus to improve local accountability for public expenditures. Despite this laudable goal, preliminary indications suggest that the program is far too ambitious in the degree of decentralization which is planned.
The nature of Thailandís decentralization process is made clearer by comparison with Indonesia, which is also embarked on an ambitious decentralization program. In Indonesia, a high proportion of government expenditure is to be reallocated to the provincial (kebupaten) level. This means decentralization to about 350 local level government authorities, with average population size over half a million. Considering that Thailandís population is one quarter of Indonesiaís, a similar degree of decentralization would mean devolving a large proportion of expenditures to around 80 local administrative units, corresponding roughly to the number of provinces (changwat).
But Thailandís 76 provincial governments are not democratically elected (provincial governors are appointed from Bangkok) and the decentralization program is not aimed at increasing expenditure significantly at this level. Rather, it is aimed at the tambon level, meaning the 7,000 or so Tambon Administrative Councils. In rural areas, the average popoulation size of these authorities is about 5,000. They are just too small - the average tambon cannot support a high school or the professional administrative staff needed to account properly for the way a large increase in funds is actually being spent.
Massive wastage of public expenditures will result if the Tambon Administrative Councils are unable to manage large increases in expenditures effectively. Local level corruption will also increase in many areas if effective programs of monitoring cannot be implemented in time. The basic problem of low levels of participation in secondary education among Thailandís rural population will not be addressed by the decentralization probram unless local Tambon Administrative Councils are able to group themselves into larger units. This will probably happen if the program proceeds but it will take time and meanwhile a nightmare could result. As the central government transfers revenue to the local level it necessarily transfers functions as well. But the education, health, environmental management and other services now provided by the central government may not be forthcoming from the local level if the Tambon Administrative Councils are inadequately prepared.
WATCHPOINT: Major changes to the pace and nature of the decentralization process will be needed if the decentralization process is to become manageable.
About our company:
AFG Venture Group is an Asia and Australia based corporate advisory and consulting firm with over 20 years experience in creating alliances, relationships and transactions in Australia, South East Asia and India; including a 15 year history of corporate and equities advisory in Australia, undertaking merger, acquisition, divestment, fund raising and consulting for private and public companies.
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