Where the Thai economy is heading under the 2017 budget

opinion September 13, 2016 06:51

By Achara Deboonme



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Thailand is heading towards higher-quality workers, better-equipped special economic zones, improved status of small and medium-sized enterprises (SMEs), more research and development activities, and higher prices for its farm goods.

So says the 2017 budget bill, approved by the National Legislative Assembly last week.

The 2017 bill is the first to allocate budgets according to the strategies of ministries rather than by their tasks.

A total of 45 strategies are listed, under seven main categories – competitiveness, national security and international affairs, human quality, inequality, environment, public management and public services.

The crucial “competitiveness” category encompasses 15 strategies, including:

l Developing target industries

l Promoting SMEs

l Integrating SEZs

l Improving infrastructure and logistics

l Integrating the digital economy

l Promoting R&D

l Boosting tourism revenue

l Ensuring sustainable agriculture

l Promoting innovation

l Adding value to the manufacturing, service, trade and investment sectors

l Promoting economic stability

l Improving productivity and adding value to agricultural produce

l Improving productivity

The total budget for these competitiveness-boosting tasks is Bt323.66 billion, or 13.8 per cent of total public expenditure (Bt2.733 trillion).

Of that amount, two universities get Bt47 million for entrepreneurship programmes. The Board of Investment gets Bt23.87 billion to promote Thai industrial parts suppliers abroad. The Science and Technology Ministry is handed Bt1.1 billion for its innovative startup scheme, to ensure new entrepreneurs are equipped with new technology and innovation.

Regarding SEZs, the Royal Thai Army is allocated Bt25 million to provide security services for an SEZ in Kanchanaburi. The Customs Department will spend Bt1.1 billion in establishing infrastructure at all SEZs. The Public Health Ministry gets a budget of Bt674 million to boost health safety.

On logistics, Bt443.7 million will go to build an airport in Betong, Yala, with another Bt720 million allocated to improve border airports. The State Railway of Thailand gets Bt3.3 billion for a number of projects, including the construction of double-track lines.

On the digital economy, Bt8.5 million goes to the PM’s Office for the training of its civil servants. Meanwhile, registration of farming households takes Bt129 million. The ICT Ministry has been handed Bt2 billion to upgrade telecom infrastructure. The Commerce Ministry will spend Bt33.69 million to ensure more SMEs embrace digital economy. And to boost all Thais’ access to electronic services, the Interior Ministry gets Bt811.7 million. Universities will launch digital economy programmes with a combined budget of Bt159 million.

On R&D, Bt1.99 billion will be allocated for activities aimed to improve the country’s competitiveness. This is on top of Bt788.8 million allocated to the Defence Ministry for research to improve the Army, and Bt1.06 billion to the Agriculture Ministry.

To promote tourism, the Rural Highways Department will upgrade infrastructure with a budget of Bt1.08 billion. The Department of National Parks, Wildlife and Plant Conservation has won Bt59 million to boost Thailand’s eco-tourism capability. Bt38.8 million is allocated for tourism personnel training.

Finally, Bt1 billion has been earmarked to address issues surrounding our ageing society.

This competitiveness-boosting budget amounts to 2.6 per cent of gross domestic product.

That is a huge slice if we consider that 77 per cent of the total budget (Bt2.1 trillion) is fixed expenditure. Bear in mind that the investment budget for the next fiscal year is Bt546 billion or 20 per cent of total budget, compared to 20.3 per cent in the current fiscal year.

That is also close to the central budget – the budget to be allocated at the Cabinet’s discretion – worth Bt340 billion. It is also huge compared to Bt208.3 billion approved for the strategy to enhance national defence capacity.

At Bt2.733 trillion, the total expenditure has increased 0.5 per cent from the current fiscal year. The Education Ministry receives the highest allocation, followed by Defence, Health, Interior, and Transport.

What this budgeting method suggests is that the country is on the 20-year path designated by the junta-designed roadmap.

The new budgeting method seems to have won overwhelming support. Everybody apparently welcomes the fact that, in allocating spending according to strategies, Thailand will continue with a budget deficit. In the 2017 fiscal year, the deficit is set at Bt390 billion. This is equivalent to 2.69 per cent of GDP, compared to 1.9 per cent in the 2015 fiscal year and 2.9 per cent in 2016. The deficits have been continuing for years despite the previous two civilian governments’ promises to run a balanced budget by 2017.

There is common understanding that deficits are necessary to stimulate the economy given fragile global economic conditions. Most also understand that if this budgeting method does not work, they need to be patient.

We also need to be patient and see if these strategies actually lift Thailand’s competitiveness. Thailand ranks 28th among 61 economies, according to the latest ranking by the IMD World Competitiveness Centre, released in May. In 2015, the country dropped one place to 30th.