Fiscal stimulus means more than just budget spending

Fiscal stimulus means more than just budget spending by the central government. We need to also consider overall public sector spending, which includes the central government's non-budgetary spending (eg, financial aid from international organisations and activities of existing revolving funds), as well as spending by local governments and state enterprises.

Local governments, under the Act of Parliament Prescriptive Plan and Process of Decentralisation to Local Government Organisations of 1999, have gradually been delegated more authority and responsibility under their jurisdiction since they are closest to local needs.

However, at present, local governments are constrained, particularly in human resources, with a lack of incentives to draw skilled personnel out of Bangkok, and thus have not been able to contribute fully.

Meanwhile, state enterprises have always played an important role in the Thai economy. They are the government's arm in providing social services and reducing income gaps. They also provide revenue to the government, and invest in large-scale economic and social infrastructures. In fact, state-enterprise investment accounts for almost half of public investment, or around Bt300 billion, each year. A number of mega-projects planned in the near future will also be carried out by state enterprises.

Some of these state enterprises are commercially successful, generating enough profit to finance their own investment, and thus help relieve the burden on the budget and public debt. Nevertheless, some have deep financial problems of accumulated debt and losses, and are unable to generate sufficient income to be sustainable in the long run.

These troubled state enterprises can put a significant burden on the government budget and thus their problems need to be solved quickly and comprehensively. Some losses are caused simply by inefficient operation and management, while others are incurred by their obligations to carry out certain government policies, for example, concessionary prices for low-income groups.

Unfortunately, state-enterprise investment projects are often under-disbursed. Delays sometimes occur from inefficient implementation.

Given the oil crisis and inflation pressures we are facing today, the postponement of some projects from this year to next could mean a significant increase in costs to the projects as well as to the country as a whole. This drawback is well recognised by the government. As a result, its measure to speed up state enterprise investment has materialised. Some state enterprises have already disbursed over 90 per cent of their total investment plan in the first eight months of this fiscal year.

Under current economic conditions, public investment today can shore up the economy and hopefully will draw in private investment in the not-too-distant future.

Pornvipa Tangcharoen-monkong is team executive at the Monetary Policy Group of the Bank of Thailand. Views expressed are the author's own.