UNDP Poverty Report 2000

A New Poverty-Focused Development Path

In the mid-1990s Thailand embarked on a new development path - to reduce inequality and poverty and to institute a more decentralized and participatory governance structure.

Until the mid-1990s Thailand had one of the highest rates of economic growth in the world - well over 7% a year between 1977 and 1996. Poverty reduction followed suit - with the share of poor dropping from 33% in 1988 to 11% in 1996. But in the wake of the country's financial crisis the share was back up to 13% in 1998.

Lacking effective social protection, about a million Thais were thrown back into poverty. Luckily, many of the urban unemployed could fall back on the "safety net" of their relatives in rural areas because agriculture continued to fare better than industry.

The crisis exposed weaknesses in the Thai development model: the failure to install safeguards against adverse shocks from erratic international capital flows and, especially, to regulate the financial sector, which had fuelled a debt-led investment boom.

The Poor Left Behind

Thais also became convinced that their country's development strategy was not balanced or equitable enough. The poorer rural areas of the country had been spurned, in effect, by the miracle of economic growth. Although the country had a series of development plans after the early 1960s, none made poverty reduction a major objective. Planning focused on growth, assuming that the benefits would seep down to everyone. This rosy assumption seemed close to reality - but only for a while.

Inequality remains a major challenge: throughout the 1990s the share of income going to the poorest 20% of the population stayed below 5%. With prospects for slower growth, lowering inequality will have to assume more importance in efforts to reduce poverty. Already the government's allocations to rural development, particularly in the poorer north and northeast, appear to be moderating inequality.

The Eighth National Economic and Social Development Plan (for 1997 - 2001) charts a more people-centred strategy. It addresses the increasing social and environmental problems of Thailand and begins to tackle poverty. The plan does not include a poverty reduction strategy, but it does set a target of reducing the share of poor to less than 10% by 2001. Just as important, the plan favours reforming the system of public administration to allow more decentralized decision-making and participation.

A National Social Policy Committee, chaired by the prime minister, was set up in 1998 to respond to the needs of vulnerable groups hurt by the financial crisis. Using a new set of deprivation and vulnerability indicators to target its assistance, it gives communities the lead in deciding how to allocate funds.

Reforms to Decentralize

Reforms to decentralize responsibilities and finances to the local level are proceeding. Until recently the central government collected 95% of all revenue and accounted for 93% of all spending, with the poorer regions, such as the northeast, receiving lower per capita expenditures on agriculture, education, health care and other social services. The fiscal and administrative decentralization is beginning to reduce these inequities.

Decentralization to subdistricts, or tambons, has been going on for some years. District councils now elect their own officials and command some resources for roads, water, sewerage and garbage disposal. But not enough local capacity has been built to shoulder these new responsibilities.

UNDP is supporting the devolution of power to local government, by building the capacity of districts to raise their own revenues and decide how to use them. One project is testing decentralization in several local administrations and line agencies.

UNDP is also an active supporter of the Thailand - United Nations Collaborative Action Plan, which in 1996 launched demand-driven initiatives to reduce disparities and poverty and build the capacity of local organizations and communities. Allowed to participate in designing their own development projects, communities have mobilized considerable resources on their own. And "learning networks" have sprung up among communities to spread information on successful activities.

The Thai government has not always provided much social support to vulnerable groups. In 1998 social services accounted for only 12% of the government budget, and only a small part went for direct assistance to the poor.

More Accountability Encouraged

The new Social Investment Fund - backed by the World Bank, Japan and UNDP - targets more assistance to the poor through projects to create jobs and provide social services. The fund reinforces decentralization and participation by directing financing to local governments, civil society organizations and community groups.

Thailand's 1997 constitution also promotes new channels for democracy. For the first time basic laws provide for the accountability of the state to citizens and for greater participation by people in public policy at all levels. Local officials are more independent of the Ministry of Interior. And there is a new independent National Counter-Corruption Commission with prosecutorial powers.

These reforms open opportunities for the poor to organize and advance their interests. Until recently, with government departments fairly autonomous, the privileged tended to have greater access to services - and patronage and corruption spread. Although there is now more formal democracy, traditional power structures still wield great influence, and many poor communities remain politically passive. A more systematic and focused plan to address the continuing problems of poverty and inequality would also greatly advance the country's new people-centred development strategy.