11 July 2024

Most of the major political parties campaigning for the general election on May 14 are focusing heavily on reaching out to voters through populist platforms, such as cash handouts, farm and energy subsidies and short-term measures to deal with issues requiring immediate attention.

Thailand’s public sector has long been criticized for being oversized as well as lacking in efficiency and transparency.

As a result of this serious structural shortcoming, as much as 75 percent of annual government revenue gets earmarked for routine spending, such as on salaries and compensation for state officials, operating and utility costs and other maintenance items. For example, the government has budgeted expenditure for fiscal year 2023 at 3.185 trillion baht, but capital spending accounts for only 695 billion baht, equivalent to 21.82 percent of the total budget, while current spending takes away 2.4 trillion baht, or 75.26 percent of total revenue.

Salaries and compensation for state officials alone account for a sizable 40 percent of the total annual budget. A bloated and inefficient bureaucracy has been partly blamed for this high-cost burden.

Pheu Thai expresses intent

The Pheu Thai Party, which is leading opinion polls, has promised to undertake reforms to the public sector if it comes to power. But the policy statement has been short on details, except a commitment to introduce more digital technology to make the public sector more efficient, transparent and less corrupt.

Top executives of the party have also promised to cut military spending and divert that money to finance its digital wallet handout of 10,000 baht for everyone aged above 16 within months of coming to power.

The Move Forward Party is also targeting military spending and has pledged to reduce the size of the armed forces by scrapping conscription.

The two liberal parties have promised to decentralize the public sector by reducing the central government’s administrative ambit and instead giving local governments a larger role. The Move Forward Party has pledged to liberalize the electricity business, which is currently a monopoly under the state-owned Electricity Generating Authority of Thailand (Egat).

Election Commission under fire over poor regulation of populist campaign policies

Reforming the energy sector

Chart Pattana Kla Party is campaigning with a pledge to reform the energy sector in the wake of high oil prices and skyrocketing electricity bills. The party wants to impose a windfall tax on oil refinery companies that are making unusually high profits due to the high crude oil price in the global market, precipitated mostly by the Russia-Ukraine war and the sanctions imposed on Moscow.

The energy sector is controlled almost entirely by two giant state enterprises — PTT and Egat.

The political parties who are a part of the outgoing coalition government have not been very forthcoming on reforming the public sector.

“Reforming the public sector is a long-term issue and most of the political parties may not have the vision for such a challenging task,” says Athiphat Muthitacharoen, an associate professor at Chulalongkorn University’s Faculty of Economics.

They want to quickly implement projects that could be completed in the next four years of their term, he says.

Bloated bureaucracy

Should the next government want to make the public sector lean, they will need to start with downsizing the headcount of state officials. The government will also need to reform the country’s healthcare system if it wants to curb the ballooning expenditure on healthcare for state officials, he says.

Veerathai Santiprabhob, a former central bank governor, also called for the overall reform of the public sector and of state enterprises in particular in order to prevent the draining of taxpayers’ money, as he believes a bloated public sector will consume more public resources.

Thailand undertook major reforms in the wake of the 1997 financial crisis, but the country so far has not been successful in reforming key state enterprises.

The State Railway of Thailand is still carrying a large debt. Thai Airways International is still in the process of business rehabilitation after it filed for bankruptcy protection in 2020. Egat has been blamed partly for the high cost of electricity borne by home-owners and businesses, as it monopolizes the electricity trading market.

Economists have called for the liberalization of electricity generation and transmission, which would mean taking away Egat’s monopoly.

“The production of electricity has to be further liberalized and more small producers or individuals should be allowed to trade in electricity,” says Praipol Koomsup, an independent economist.

Millions of struggling Thai workers eye election promises to ease daily hardship

Excessive regulations

Another key area is the reform of the bureaucratic system and the regulatory regime. Critics blame a laggard bureaucracy and outdated laws and regulations for imposing high costs on both businesses and consumers.

The Thailand Development Research Institute (TDRI), an independent think-tank, projected that a reform of Thailand’s bureaucracy and outdated laws would boost growth of gross domestic product by 0.25 percentage point annually.

Laws and regulations related to licensing imposed a cost of about 200 billion baht. If unnecessary laws would be removed, the private sector could save costs estimated at 130 billion baht annually, which would have been equivalent to 0.8 percent of GDP in 2018.

A Bank of Thailand study published in 2017 found that moves to excise many outdated laws and regulations, or even streamlining them, would save as much as 130 billion baht annually for businesses and ordinary people. The regulatory impositions, such as the complicated licensing process or tax filing procedures, have resulted in high cost for businesses and individual consumers.

High price of inefficiency

During the initial stages of the COVID-19 pandemic, bureaucratic red tape partly caused long delays in vaccine procurement, which have been blamed for preventable deaths and enormous economic losses, according to the TDRI.

Recently critics have blamed the failure in fighting the regular occurrence of forest fires and their direct impact on air quality and public health on the government’s inefficiency.

By Thai PBS World’s Business Desk